360 Capital Residual Stock Fund - Product Disclosure Statement

360 Capital Residual Stock Fund PRODUCT DISCLOSURE STATEMENT | OCTOBER 2020

Responsible Entity: 360 Capital FM Limited (ABN 15 090 664 396) AFSL (221474) 360 Capital Residual Stock Fund | Product Disclosure Statement

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Important Notice

Responsible Entity and Issuer The Offer contained in this Product Disclosure Statement (PDS) is an invitation to apply for fully paid Units in the 360 Capital Residual Stock Fund ARSN 645 169 517 (Fund) Responsible Entity 360 Capital FM Limited (ACN 090 664 396 AFSL 221474) is the responsible entity (Responsible Entity) and custodian of the Fund and is the issuer of this PDS for the purposes of Chapter 7 of the Corporations Act. The Responsible Entity can be contacted on +61 8 8405 8860 or email investor.relations@360capital.com.au.

The Responsible Entity has entered into an investment management agreement (IMA) with AMF Finance Pty Ltd (ACN 120 390 749) (Investment Manager), appointing the Investment Manager to provide investment services to the Fund, pursuant to the terms of the IMA. See Section 10.2 of this PDS for further information on the IMA. PDS Date This PDS is dated 26 October 2020 (PDS Date). ASIC and their respective officers do not take any responsibility for the contents of this PDS or the merits of the investment to which this PDS relates.

Note to Applicants The information contained in this PDS is not financial product advice and does not take into account your objectives, financial situation or particular needs. This PDS should not be construed as financial, taxation, legal or other advice. No person is authorised to give any information or to make any representation in connection with the Offer or Units described in this PDS. Any information or representation not contained in this PDS may not be relied on as having been authorised by the Responsible Entity in connection with the Offer.

This PDS is important and should be read in its entirety prior to deciding whether to invest in the Units offered. There are risks associated with an investment in the Units, which must be regarded as a speculative investment. Some of the key risks that should be considered are set out in Section 6. You should carefully consider these risks in light of your personal circumstances (including financial and tax issues). There may also be risks in addition to these that should be considered in light of your personal circumstances.

If you do not fully understand this PDS or are in doubt as to how to deal with it, you should seek professional guidance from your lawyer, accountant or other professional adviser before deciding whether to invest in the Units.

No person named in this PDS warrants or guarantees the Fund’s performance, the repayment of capital by the Fund or any return on investment made pursuant to this PDS. No offer where offer would be illegal This PDS does not constitute an offer or invitation to apply for Units in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the Units or the Offer or to otherwise permit a public offering of the Units, in any jurisdiction outside Australia and New Zealand. The Offer is not being extended to

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any investor outside Australia and New Zealand. The distribution of this PDS (including in electronic form) outside Australia and New Zealand may be restricted by law and persons who come into possession of this PDS outside Australia and New Zealand should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

Notice to United States residents The Units being offered pursuant to this PDS have not been registered under the United States Securities Act of 1933, as amended (US Securities Act) or any US state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration under the US Securities Act and applicable state securities laws. This PDS does not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale of the Units in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful under applicable law, including the US Securities Act. In addition, any hedging transactions involving the Units may not be conducted unless in compliance with the US Securities Act. Financial information and amounts All financial amounts contained in this PDS are expressed in Australian dollars and rounded to the nearest $’000 (thousand) unless otherwise stated. Some numerical figures included in this PDS have been subject to rounding adjustments. Any discrepancies between totals and sums of components in tables contained in this PDS are due to rounding.

Disclaimer No person is authorised by the Responsible Entity to give any information or make any representation in connection with the Offer that is not contained in the PDS. Only information or representations contained in this PDS may be relied on as having been authorised by the Responsible Entity or its Directors or any other person in connection with the Offer. The business, financial condition, results of operations and prospects of the Fund may have changed since the PDS Date.

This PDS contains forward-looking statements concerning the Fund’s business, operations, financial performance and condition as well as the Fund’s plans, objectives and expectations for its business, operations, financial performance and condition. Any statements contained in this PDS that are not of historical facts may be deemed to be forward-looking statements. You can identify these statements by words such as “aim”, “anticipate”, “assume”, “believe”, “could”, “due”, “estimate”, “expect”, “goal”, “intend”, “may”, “objective”, “plan”, “predict”, “potential”, “positioned”, “should”, “target”, “will”, “would” and other similar expressions that are predictions of or indicate future events and future trends.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Fund’s business and the industry in which the Fund operates and management’s beliefs and assumptions. These forwardlooking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors, many of which are beyond the Responsible Entity’s control. As a result, any or all of the Responsible Entity’s forward-looking statements in this PDS may turn out to be inaccurate. Factors that may cause such differences or make

such statements inaccurate include, but are not limited to, the risk factors described in Section 6. Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements set out in this PDS and are cautioned not to place undue reliance on such forwardlooking statements.

These forward-looking statements speak only as at the PDS Date.

Unless required by law, the Responsible Entity does not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks the Responsible Entity describes in the reports to be sent to investors from time to time after the PDS Date.

Cautionary note regarding industry and market data This PDS contains statistics, data and other information relating to markets, market sizes, market shares, market positions and other industry data pertaining to market. Investors should note that market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of actual market conditions. There is no assurance that any of the forecasts contained in reports, surveys and research of third parties which are referred to in this PDS will be achieved. The Responsible Entity has not independently verified this information. Forecasts and estimates involve risks and uncertainties and are subject to change based on various factors, including the risk factors in Section 6.

Obtaining a copy of the PDS A hard copy of this PDS will be available for Australian residents free of charge and can be obtained by contacting the 360 Capital Residual Stock Fund Information Line on 1300 082 130 between 8.30am and 5.00pm AEDT, Monday to Friday (excluding public holidays). If you are eligible to participate in the Offer and are calling from outside Australia, please call +61 2 8016 2884.

This PDS will be made available in electronic form on the Fund Website: www.360capitalforms.com.au/360-capital-residualstock-fund. Information contained on www.360capital.com.au, other than the PDS, does not form part of this PDS. The Offer constituted by this PDS in electronic form is available only to persons receiving this PDS in electronic form within Australia and New Zealand. Hard copy and electronic versions of the PDS are generally not available to persons in other jurisdictions (including the United States).

Persons who access the electronic version of this PDS should ensure that they download and read the entire PDS. If unsure about the completeness of this PDS received electronically, or a print out of it, you should contact the Fund on the above Fund Offer Information Line.

Applications for the Units under this PDS may only be made on either a printed copy of the Application Form attached to or via the electronic Application Form attached to the electronic version of this PDS, available at www.360capital.com.au.

Application Form Applications for the Units under this PDS may only be made via the electronic Application Form at the online application portal www.360capitalforms.com.au/360-capital-residual-stock-fund to the electronic version of this PDS, available on the Fund Website.

The Corporations Act prohibits any person from passing the Application Form on to another person unless it is attached to a hard copy of the PDS or the complete and unaltered electronic version of the PDS. The Responsible Entity is entitled to refuse Applications for the Units under this PDS if it believes that the Applicant did not receive the Offer in Australia or New Zealand.

Cooling off rights Direct Investors who are not Wholesale Clients have a 14 day cooling off period. Cooling off rights do not apply to Indirect Investors that invest through an IDPS. Privacy The Responsible Entity, the Fund and the Registry on its behalf may collect, hold, use and disclose personal information to process your Application, service your needs as a Unitholder, provide facilities and services that you request and carry out appropriate administration of your investment. This means that the Fund will need to collect your personal information (for example, your name, address and details of the Units that you hold). Under the Corporations Act some of this information must be included in the Fund’s unit register, which will be accessible by the public.

The Responsible Entity will only use and/or disclose your personal information for the purposes for which it was collected, other related purposes and as permitted or required by law. If you do not wish to provide this information, the Responsible Entity and the Registry may not be able to process your Application.

The Responsible Entity and the Registry may also share your personal information with agents and service providers of the Fund or others who provide services on the Fund’s behalf, some of which may be located outside of Australia where personal information may not receive the same level of protection as that afforded under Australian law.

For more details on how the Responsible Entity collects, stores, uses and discloses your information, please read the Fund’s Privacy Policy located at www.360capital.com.au. Alternatively, you can contact the Offer Information Line by telephone on 1300 082 130 (within Australia) or +61 2 8016 2884 (outside Australia) from 8:30am to 5:30pm AEST, Monday to Friday (excluding public holidays) and you will be sent a copy of its Privacy Policy free of charge. It is recommended that you obtain a copy of this Privacy Policy and read it carefully before making an investment decision.

By completing an Application Form or authorising a broker to do so on your behalf, or by providing the Responsible Entity with your personal information, you agree to this information being collected, held, used and disclosed as set out in this PDS and the Fund’s Privacy Policy (located at www.360capital.com.au).

The Fund’s Privacy Policy also contains information about how you can access and seek correction of your personal information, complain about a breach by the Responsible Entity of the Australian privacy laws, and how the Responsible Entity will deal with your complaint.

The Responsible Entity aims to ensure that the personal information it retains about you is accurate, complete and up-todate. To assist with this, please contact the Responsible Entity or the Registry if any of the details you have provided change.

360 Capital Residual Stock Fund | Product Disclosure Statement

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Important Notice (continued)

Definitions, abbreviations and time

Warning Statement

Defined terms and abbreviations used in this PDS (unless specified otherwise) are explained in Section 13. All references to time in this PDS refer to Australian Eastern Standard Time (AEDT) unless stated otherwise.

This Offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act and regulations made under that Act. In New Zealand, this is subpart 6 of Part 9 of the Financial Markets Conduct Act 2013 and Part 9 of the Financial Markets Conduct Regulations 2014.

Updated Information Information regarding the Offer may need to be updated from time to time. Any updated information that is considered not materially adverse to Unitholders will be made available on the Fund Website www.360capital.com.au, and the Responsible Entity will provide a copy of the updated information free of charge to any Unitholder who requests a copy by contacting the offer information line on 1300 082 130 within Australia or +61 2 8016 2884 from outside Australia.

In accordance with its obligations under the Corporations Act, the Responsible Entity may issue a supplementary or replacement PDS to supplement or replace any relevant information not disclosed in this PDS. A copy of any supplementary product disclosure statement and other information regarding the Fund will be made available on the Fund Website and a printed copy will be available from the Responsible Entity free of charge upon request. You should read any supplementary or replacement disclosure(s) in conjunction with this PDS prior to making any investment decision.

Continuous disclosure In accordance with ASIC Regulatory Guide 198 ‘Unlisted disclosing entities: Continuous disclosure obligations’, the Responsible Entity advises that it will fulfil its continuous disclosure requirements by way of website disclosure which complies with ASIC’s good practice guidance. Unitholders may access material information regarding the Fund from the Fund Website.

Photographs, data and diagrams Photographs and diagrams used in this PDS which do not have any descriptions are for illustration only and should not be interpreted to mean that any person shown endorses this PDS or its contents or that the assets shown in them are owned by the Fund.

Diagrams used in the PDS are illustrative only and may not be drawn to scale and may not accurately reflect the final appearance of the subject matter which it depicts.

Unless otherwise stated, all data contained in charts, graphs and tables is based on information available as at 26 October 2020.

Fund Website Any references to documents included on the Fund’s website are provided for convenience only, and none of the documents or other information on the Fund Website, or any other website referred to in this PDS, is incorporated in this PDS by reference.

New Zealand Investors Important Additional Information If you are a New Zealand Unitholder, 360 Capital FM Limited is required to provide the following additional information to you under New Zealand law.

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This Offer and the content of the offer document are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act 2001 (Cth) and the regulations made under that Act set out how the offer must be made.

There are differences in how financial products are regulated under Australian law. For example, the disclosure of fees for managed investment schemes is different under the Australian regime.

The rights, remedies, and compensation arrangements available to New Zealand investors in Australian financial products may differ from the rights, remedies, and compensation arrangements for New Zealand financial products.

Both the Australian and New Zealand financial markets regulators have enforcement responsibilities in relation to this Offer. If you need to make a complaint about this Offer, please contact the Financial Markets Authority, New Zealand (http:// www.fma.govt.nz).

The Australian and New Zealand regulators will work together to settle your complaint.

The taxation treatment of Australian financial products is not the same as for New Zealand financial products.

If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser.

Additional Warning Statement: Currency Exchange Risk The Offer may involve a currency exchange risk. The currency for the financial products is not New Zealand dollars. The value of the financial products will go up or down according to changes in the exchange rate between that currency and New Zealand dollars.

These changes may be significant.

If you expect the financial products to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars.

Additional Warning Statement: Dispute Resolution Process The dispute resolution process described in this offer document is available only in Australia and is not available in New Zealand.

Contents

1. Key Features

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2. Investment Manager’s Letter

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3. Investment Summary

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4. About the Fund and the Offer

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5. The Responsible Entity, Investment Manager and Key People

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6. Risks

33

7. Fees and Costs

37

8. Financial Information

41

9. Taxation

46

10. Key Documents and Material Contracts

52

11. Corporate Governance and Fund Policies

56

12. Additional Information

57

13. Glossary

60

14. How to Apply & Application Portal

62

15. Corporate Directory

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360 Capital Residual EnhancedStock Income Fund Fund | Product | Product Disclosure Disclosure Statement Statement

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Section 1 : Key Features

Key Features Fund name

360 Capital Residual Stock Fund ARSN 645 169 517

Initial Term

The period ending 31 March 2024

Target Return1

6.00% p.a. (net of fees)

Minimum application amount

$2,000

Minimum additional investment

$1,000

Unit price

Calculated monthly

Distribution Frequency

Monthly from March 2021

Responsible Entity Management Fee (p.a.)

0.05% of Gross Asset Value

Investment Manager Management Fee (p.a.)

0.60% of Deployed Capital

Distributions

Expected monthly, at the discretion of the Responsible Entity

Initial Offer

The period between 26 October 2020 and 31 March 2021.

1 The Target Return is an example only and may not be achieved. Future returns are not guaranteed and a loss of principal may occur.

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 2 : Investment Manager’s Letter

Dear Investor, We are very pleased to bring this new investment opportunity to market and invite you to become a unitholder in an unlisted Fund known as 360 Capital Residual Stock Fund (the Fund).

The Fund is a pooled investment offering access to the attractive returns available from investments in loans secured by registered first mortgages held over Australian property. The purpose of the loans will be to refinance completed residential development projects including apartments and townhouses. The Fund aims to provide Investors a monthly distribution based on the net returns from loans and cash held by the Fund.

Continued regulatory constraints placed on banks is driving the natural maturity and evolution of the Australian and New Zealand private debt markets, which presents an opportunity for alternative financiers to continue to grow their foothold and market share in the real estate debt markets.

The Fund is seeking to raise up to $50 million through the issue of Units in the Fund at an initial Offer Price of $1.00 per Unit.

360 Capital Residual Stock Fund will offer Unitholders: • Target Return of 6% per annum distribution yield; • Distributions paid monthly from month commencing 31 March 2021; • Diversified exposure to a portfolio of well secured, senior loans to completed, individually titled residential apartment and townhouses throughout Australian metropolitan markets; • Defensive investment through the Investment Manager’s selection process, policies and risk protocols to seek to minimise capital volatility; • Proven leadership team with more than 20 years’ operating experienced in funds management, debt and equity real estate investment and risk management.

The Responsible Entity is a wholly owned subsidiary of the 360 Capital Group, an ASX-listed alternative asset investment and funds management group concentrating on strategic and active investment management of alternative assets (ASX:TGP). As at the date of the PDS, the 360 Capital Group has a market capitalisation of approximately $194 million and manages listed and unlisted funds on behalf of investors.

The Fund will be managed by AMF Finance Pty Ltd (Investment Manager) which is a joint venture within the 360 Capital Group.

Over the coming months 360 Capital Group intends to repurpose the listed Velocity Property Group (VP7), subject to shareholder approval, into a stapled entity called 360 Capital Finance Group. 360 Capital Finance Group will have three key business lines including Commercial Real Estate Lending, Loan Origination, and Investment Management of Commercial Real Estate Loans.

Once this entity is established, the Responsible Entity plans to transfer the Management of 360 Capital Residual Stock Fund to 360 Capital Finance Group subject to securityholders approval.

The Responsible Entity has appointed James Quigley as the Fund Manager. James brings more than 25 years’ experience in real estate investment, funds management and transactions across Australia. James has significant experience managing funds, both unlisted and listed, delivering strong returns for investors and originating and executing transactions across all real estate asset classes. James has a track record across a well-diversified range of national and international property and private equity real estate groups. Prior to joining the 360 Capital Group, James spent time at Fortius Funds Management, LaSalle Investment Management, Morgan Stanley Real Estate Investing, Mirvac and Lend Lease.

This PDS contains detailed information about the Offer and the 360 Capital Group’s investment strategy, its operations, financial performance and prospects. You should read this PDS carefully and in its entirety, including Section 7, which sets out fees and other costs associated with investing in the Fund, and Section 6, which sets out potential risks associated with investing in the Fund. In addition, you should consider seeking relevant professional advice before making a decision to apply for Units.

We have an Investor Relations team and product specialists available during business hours to answer any questions you may have. You may reach them by free call to +61 8 8405 8860 between 8:30am and 5:00pm (AEDT). Further information in relation to the Fund is available at www.360capital.com.au or alternatively you can email investor.relations@360capital.com.au Thank you for your consideration of this opportunity to invest in the Fund. We look forward to welcoming you as a Unitholder of the Fund.

Yours sincerely, Mr James Quigley Fund Manager 360 Capital Residual Stock Fund

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Section 3 : Investment Summary

The information set out in this Section 3 is intended to be a summary only and should be read in conjunction with the more detailed information appearing elsewhere in this PDS. In deciding whether to apply for Units under this Offer, you should read this PDS carefully and in its entirety. If you are in doubt as to the course you should follow, please consult your professional advisers.

3.1 About the Fund Answer

More information

What is the Fund?

Question

The Fund will be an unlisted registered managed investment scheme and structured as a unit trust.

Section 4

What is the Fund’s investment strategy?

The Fund’s investment strategy is to drive secure income returns through the investment in a diversified portfolio of well secured, senior loans to completed, individually titled residential apartment and townhouses throughout Australian metropolitan markets.

The Investment Manager will actively originate and manage the Fund’s loans, seeking to optimise return through taking advantage of market inefficiencies driven by ongoing change in traditional real estate debt markets.

What are the key attributes of the Fund?

The Fund offers Unitholders:

Section 4.3

• Target return of 6% per annum distribution yield; • Expected distributions paid monthly from 31 March 2021; • Defensive investment through the Investment Manager’s selection process, policies and risk protocols to seek to minimise capital volatility; • Proven leadership team with more than 20 years’ operating experienced in funds management, real estate debt and equity investing and risk management.

What are the withdrawal arrangements?

The Fund will have a term of three years from the close of the Initial Offer and an option to extend for up to two years by approval of the Responsible Entity.

Section 4.15

Units generally cannot be redeemed, and the Responsible Entity does not intend to allow redemptions. However, the Responsible Entity may, in its absolute discretion, upon receipt of a request from a Unitholder, allow redemption of Units. Redemption amounts will be determined in accordance with the Fund Constitution.

Will the Fund be listed?

The Responsible Entity does not currently intend to apply to the ASX for admission to the Official List. However, the Responsible Entity reserves the right to apply for admission to the Official List in the future.

Section 4.22.3

What will the Fund use the proceeds raised from the Offer for?

Proceeds of the Offer will be used to invest in a diversified portfolio of loans in accordance with the investment strategy.

Section 4.3

How will the Fund implement its investment strategy?

The Fund will originate and source loans through a variety of channels including the resources and network of the 360 Capital team including two loan origination businesses – one operated by the Investment Manager and the other one operated by Dealt.

Section 4

Will the Fund borrow money?

The Fund may secure third party debt facilities for the purpose of funding residual stock loans.

Sections 4.6 and 6.2.13

Will the Fund invest in assets overseas?

No, the Fund will only invest in loans in Australian metropolitan markets.

Section 4.3

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 3 : Investment Summary (continued)

Answer

More information

What is the valuation policy?

Question

The NAV of the Fund is expected to be calculated monthly (although the Responsible Entity retains the discretion to calculate the NAV of the Fund quarterly or otherwise) by deducting from the total value of the assets of the Fund all liabilities, which includes declared but unpaid distributions, calculated in accordance with the AAS.

Sections 4.6 and 4.12

How will the Fund report to Unitholders?

For accounting and reporting purposes, the Fund will operate on a financial year basis, with a year end of 30 June. The Fund will formally report to Unitholders on a half yearly basis as at 30 June and 31 December.

Section 11.4

Will any related party have a significant interest in the Fund?

No

Sections 4.6, 12.2 and 12.3

Will the Fund pay distributions? Distributions are expected to be made monthly at the Responsible Entity’s discretion from the month ending 31 March 2021 (subject to deployment of the Fund’s cash balances)

Section 4.11

Are distributions guaranteed?

Distributions are not guaranteed and are at the discretion of the Responsible Entity.

Section 4.11

Who is the issuer of the Units and this PDS?

360 Capital FM Limited is the responsible entity of the Fund and is the issuer of Units and this PDS.

Sections 5.1 and 5.2

3.2 About the Responsible Entity Answer

More information

Who is the Responsible Entity of the Fund?

Question

360 Capital FM Limited

Sections 4.10 and 5.2

Who are the Directors of the Responsible Entity?

• Tony Pitt, Managing Director

Section 5.2

• David van Aanholt, Independent Chairman • Graham Lenzner, Non-Executive Director • John Ballhausen, Non-Executive Director • Andrew Moffat, Non-Executive Director

What are the key responsibilities of the Responsible Entity?

Fiduciary role ensuring compliance and governance of the Fund in accordance with the Constitution, transaction documents and the law:

Sections 10.1, 11, 12.6, 12.13

• Issue offering documentation • Appointment and monitoring of service providers • Liaison with ASIC

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What fees will the Responsible Entity receive?

The Responsible Entity will be paid a Fee of 0.05% p.a. of Fund GAV.

Sections 7.1 and 7.3

Who is 360 Capital FM Limited??

360 Capital FM Limited is a wholly owned entity within the 360 Capital Group. Section 5 provides detail of the 360 Capital Group including the Board and Management Team.

Section 5

3.3 About the Investment Manager Question

Answer

More information

Who is the Investment Manager of the Fund?

The Investment Manager of the Fund will be AMF Finance Pty Ltd (ACN 120 390 749)

Sections 4.9 and 5.3

Who are the Directors of the Investment Manager?

• Tony Pitt, Executive Director

Section 5.3

• Glenn Butterworth, Executive Director • James Storey, Executive Director

Who are the senior executives of the Investment Manager?

Section 5.3

• Tony Pitt – Managing Director • James Storey, Head of Real Assets • James Quigley, Fund Manager • Glenn Butterworth, Chief Financial Officer

What are the key responsibilities of the Investment Manager in respect of the Fund?

The Investment Manager will provide services including but not limited to:

Section 10.2

• Overseeing the Fund’s investment strategy; • Actively managing and supervising the Fund’s portfolio of investments; • Developing origination and divestment strategies; and • Investment evaluation, implementation and portfolio monitoring.

What is the term of the Investment Management Agreement for the Fund?

The Investment Manager has entered into a IMA with the Responsible Entity for the management of the Fund.

Sections 10.2

What fees will the Investment Manager receive from the Fund?

Management Fee The Investment Manager will be paid a Management Fee of 0.60% p.a. of Deployed Capital..

Sections 7.1 and 7.3

Will the Fund have a Credit Committee?

Yes the Investment Manager has established a Credit Committee to assess and endorse all investments.

Sections 4.7 and 5.3

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 3 : Investment Summary (continued)

3.4 Overview of the Offer Question

Answer

What is the Offer?

This PDS is for an offer of Units in the Fund.

What is the price per Unit?

Units will be issued at a price $1.00 for the first six months of the Offer or until the Responsible Entity has raised $50 million (whichever occurs first) and will then be issued at NAV per Unit

How is the Offer term structured?

The Offer will be open from 26 October 2020 to 31 March 2020. The close date can be extended at the discretion of the Responsible Entity.

Who can participate in the Offer?

This offer is open to Retail Clients and Wholesale Clients.

How can I apply?

Details on how to apply, including an Application Form, are set out in Section 14 and in the online Application Form itself.

Is there a cooling off period?

Cooling off rights apply to an investment in the Units by Direct Investors who are not Wholesale Clients

How will the proceeds of the Offer be used?

Proceeds from the Offer will be used to invest in the debt strategy outlined by the Investment Manager.

Is there a minimum subscription amount?

Yes, there is a minimum subscription amount of $10 million.

What are the key risks associated with an investment in the Fund?

By way of summary, key risks include: • Credit default risk – the risk that a borrower will default; • Interest rate risk – the risk market interest rates change may reduce the Fund’s return compared with other investments; • Early repayment risk – the risk of early repayment of a loan reducing the Fund return; • Risk of non-performing loans – the risk that loans do not perform as expected; • Subordination risk – the risk that a Fund loan ranks behind other creditors for payment; • Covenant risk – the risk that a loan may not provide for or anticipate certain circumstances; • Implementation of investment strategy – the risk that the Investment Manager is unable to implement the investment strategy or implement the investment strategy in the optimal manner; • Investment Manager risk – the risk that the Investment Manager does not perform; • Dependence on key personnel - the risk that key personnel in the Investment Manager depart; • Dilution risk – the risk that subsequent capital raisings may dilute investors; • Conflict of interest risk – the risk that conflicts of interest may cause the Investment Manager not to manage the Fund in the optimal manner; • Currency and exchange rate risk – the risk that the currency exchange rate movements may adversely affect the performance of the Fund; and • General fundamental exposures – the risk that economic and market conditions adversely affect the Fund and the performance of its loan investments.

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More information

3.5 Financial and Operating Information Question What will be the gearing of the Fund?

Answer

More information

The Investment Manager may secure debt facilities with third party lenders for the purpose of funding residual stock loans.

Section 4.21

The maximum level of leverage within the Fund will be limited to 50% of GAV. What are the tax implications of making an investment in the Fund?

Participation in the Offer may have taxation implications for investors. These implications will differ depending on the individual circumstances of each Unitholder who participates in the Offer.

Section 9

An analysis of income tax implications applicable to investors is outlined in Section 10. The advice is general in nature and investors should seek and only rely upon their own professional taxation advice in relation to their own position.

3.6 Corporate Governance Question

Answer

More information

What are the governance arrangements for the Fund and who will be responsible for them?

The Responsible Entity and Investment Manager have established governance arrangements to ensure that the Fund is effectively managed in a manner that is properly focused on its investment objectives and the interests of Unitholders as well as conforming to regulatory and ethical requirements.

Section 11

Will the Fund hold annual general meetings?

The Fund is not required to hold annual general meetings. General meetings will be held by the Fund when required.

Section 10.1

Answer

More information

What are the fees and costs associated with the Offer?

Total expenses (which include establishment costs professional advisory fees, printing costs and other expenses) in relation to the Offer are expected to be approximately $145,000 subject to the total raising amount.

Section 7.3.2

Who will bear the Offer Costs?

360 Capital Group Limited will bear the fees and costs associated with the Offer.

Section 7.3.2

Is there any broker commission or stamp duty payable

by Applications?

No brokerage, commission or stamp duty is payable by Applicants who apply for Units under the Offer.

Section 4.22.2

3.7 Offer Costs Question

3.8 Other information Question Where can I find out further information about the Offer?

Answer

More information

If you would like more information or have any questions relating to the Offer, you can visit https://www.360capitalforms.com.au/360capital-residual-stock-fund or contact the Responsible Entity on 1300 082 130 (free call within Australia) or +61 2 8016 2884 (from outside Australia).

Sections 12.6 and 12.13

If you are uncertain as to whether an investment in the Fund is suitable for you, please contact your financial adviser, accountant, lawyer or other professional adviser.

What procedures are in place to deal with complaints?

If you have a complaint, please contact the Responsible Entity on 1300 082 130 (free call from within Australia) or +61 2 8016 2884 (from outside Australia) or email investor.relations@360capital.com.au.

Section 12.13

If you are dissatisfied with our response, you can lodge a complaint with AFCA, who provides fair and independent financial services complaint resolution that is free to consumers.

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 4 : About the Fund and the Offer

4.1

Overview

The Fund is a closed ended unit trust that is registered with ASIC as a managed investment scheme. The Fund has been established for the purpose of lending to a diversified portfolio of completed individually titled, apartments and townhouses throughout metropolitan Australia consistent with the Fund investment strategy which are secured by first mortgages over real property in favour of the Fund. The income from the loans made by the Fund is combined with income from cash holdings and any other investments to generate monthly distributions to investors. All loans are held by a wholly owned Sub-Trust of the Fund (see section 4.5 below). As Investors leave the day to day investment decisions to the Investment Manager, the experience of the Investment Manager and its ability to manage the Fund’s loans and the Fund’s liquidity position is key to the success of the Fund. See Section 5 for further details about 360 Capital’s experience, governance structure and role in operating the Fund.

4.2 Investment Objective The investment objective of the Fund is to generate a return to investors of 6% p.a. (net of fees, costs and taxes incurred by the Fund), paid monthly (Target Return)1. The Fund aims to achieve this by providing loan facilities to completed apartments and townhouses, diversified by borrower, geography and maturity.

The Responsible Entity will aim to achieve the Fund’s investment objectives through the application of active origination across the 360 Capital Group’s multiple platforms, founded on a strong base of risk management and due diligence processes, developed by the 360 Capital Group over the last 15 years.

4.3 Investment Strategy There is significant residential supply currently under construction across Australian capital cities. This future supply coincides with reduced consumer sentiment and tightening in residential (consumer) mortgage lending, a dynamic which has resulted in a significant number of developments reaching completion with no immediate purchasers.

Market conditions have created an opportunity to provide registered mortgage financing to completed residential apartment and townhouse stock at conservative Loan to Value (“LTV”) ratios and superior risk adjusted returns. The investments will be made in quality projects and proven locations matched with appropriate sell-down strategies.

Through active origination and management, the Fund aims to invest in a portfolio of loan assets. This strategy aims to exploit market inefficiencies (and an associated funding gap) driven by increased capital adequacy requirements on traditional bank lenders and increasing risk and compliance costs. In addition to this dynamic, there is an increase in borrower demand for alternative sources of debt capital.

The Fund intends to access the residential development loan market through the following loan strategy. The Fund will invest in registered senior secured loans which rank first in security over cash flow, assets and payments. Loans will be made directly to borrowers. Loans will only be made for completed residential apartments and townhouses where titles have issued. The Fund will be able to invest in all capital cities (other than Darwin and Hobart) and regional cities with a population of more than 200,000 people throughout Australia.

The Fund does not intend to source loans in the secondary market.

4.4 Fund Rationale The Australian CRE (Commercial Real Estate) debt market is dominated by the “Big 4” Australian banks, which are regulated by the Australian Prudential Regulation Authority (APRA). Due to regulatory tightening from APRA, the banks have had to reduce lending, particularly to the real estate development activity.

As a result of these market conditions, the non-bank lending sector is growing.

Currently, the market share of CRE debt held by banks is approximately 80%. It is expected that this share will decline to 60% over time, creating a $30b+ opportunity for non-bank lenders1, such as the 360 Capital Group.

A $30bn opportunity

The non-bank lending market is set to double

Banks 80%

Banks 60%

Non-Banks 20%

Non-Banks 40%

Goldman Sachs Research, Residential Round Table Discussion, May 2017 1 The Target Return is an example only and may not be achieved. Future returns are not guaranteed and a loss of principal may occur.

14

Due to regulatory restraints and market conditions outlined above, 360 Capital Group expects market conditions to continue to remain conducive for debt instruments secured by and / or related to CRE.

(refer to section 4.3 above) and will otherwise be managed and administered in a manner that is consistent with this PDS. References to the Fund and its investments should be read as referring to the Fund’s investments via the Sub-Trust.

Accordingly, 360 Capital Group has established the Fund to provide investors with:

The Responsible Entity may from time to time establish additional sub-trusts for the purposes of making investments in which case all references in this PDS to the Sub-Trust shall be taken to mean all of the Fund’s sub-trusts.

• Strong risk-adjusted returns; • The Fund is targeting a 6% per annum distribution over the term. Monthly distributions of income (subject to cash availability and future cash flow requirements); and • Adequate diversification and ensure effective risk control and mitigation across all debt instruments.

Notwithstanding the dislocation in the credit market and the impacts of the COVID-19 Pandemic, Australia remains an attractive investment proposition as evidenced by long term stable macro-economic conditions, population growth fuelling future credit growth, safe investment harbour as one of the six safest investment destinations globally according to Dun & Bradstreet and high interest rates relative to other countries.

4.5 Fund structure A diagram showing how the Fund is structured (including the flow of cash through the structure) with the corporate entities that operate and govern the Fund is shown below.

The Fund structure aims to deliver expense and operational efficiencies which deliver improved fiscal outcomes in portfolio management.

The below diagram depicts the current structure of the Fund. The Fund will be an unlisted registered managed investment scheme and structured as a unit trust which will then invest via a further managed investment scheme of which the Responsible Entity is the trustee and the Investment Manager is the investment manager (Sub-Trust). The Sub-Trust will make the investments in line with the strategy of the Fund as set out in this PDS

Endorsement

Credit Committee

Endorsement

4.6 RG 45 benchmarks and

disclosure report ASIC has developed eight benchmarks and disclosure principles for unlisted mortgage funds, such as the Fund’s wholly owned sub-trust. This is Regulatory Guide 45 – Mortgage Schemes: Improving disclosure for retail investors, which is aimed at assisting investors understand the risks of investing in mortgage funds and whether such investments are suitable for them.

For the purpose of this PDS, the Investment Manager has prepared information relating to each benchmark, including the extent to which the Fund meets each benchmark (and if not, why not), and made disclosures against the disclosure principles in a separate document, referred to in this PDS as the RG 45 Report.

The information and statements in that document are taken to be included in this PDS and the RG 45 Report will be available on our website atwww.360capitalforms.com.au/360-capital-residualstock-fund.

A paper copy of the RG 45 Report may be obtained from 360 Capital on request, at no charge. Investors are encouraged to read the RG 45 Report (and any updates, as referred to below) before making a decision as to making, retaining or withdrawing an investment in the Fund.

The material below outlines briefly the information as to the benchmarks and disclosure principles contained in the RG 45 Report which forms part of this PDS.

Investment Management Board

Approval AMF Finance Pty Ltd Investment Manager

Investment Management Agreement Unit Holders

360 CAPITAL RESIDUAL STOCK FUND

360 Capital FM Limited Responsible Entity and Custodian

Constitution

360 Capital Residual Stock Sub-Trust

Trustee

360 Capital Residual Stock Fund | Product Disclosure Statement

15

Section 4 : About the Fund and the Offer (continued)

RG 45 Liquidity – Benchmark 1 and Disclosure Principle 1

EXPLANATION

INVESTMENT MANAGER’S RESPONSE

Liquidity of a mortgage fund may be a risk as the underlying assets of such a fund may not be easily realised within the required period of time and there can be a mismatch between such a fund’s cash flows and the amount and size of withdrawal requests received from investors.

The Investment Manager will meet the benchmark.

Benchmark 1 and Disclosure Principle 1 address the Fund’s liquidity; i.e. the ability to satisfy its expenses, liabilities and other cash flow needs (such as meeting withdrawal requests), including the preparation of 12 month cash flow estimates that are approved by the Directors at least every three months.

The RG 45 Report will disclose information about the current and future prospects of liquidity of the Fund, any significant risk factors that may affect liquidity and the Fund’s policy on balancing the maturity of the Fund’s loans with the maturity of its liabilities.

Scheme borrowing – Benchmark 2 and Disclosure Principle 2

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.

Benchmark 2 and Disclosure Principle 2 address the Fund’s policy on borrowing, including the Fund’s actual and intended borrowing as well as its policy on borrowing. Details of any borrowing facilities in place and for what purposes any borrowings would be used are required to be disclosed.

Loan Portfolio diversification – Benchmark 3 and Disclosure Principle 3

Lack of diversification in a mortgage fund’s loan book may mean that an adverse event affecting one borrower or type of loan will simultaneously affect the majority of borrowers and therefore put the overall portfolio at greater risk.

Benchmark 3 and Disclosure Principle 3 address the Fund’s lending practices and portfolio risk, including concentration risk.

Related party transactions – Benchmark 4 and Disclosure Principle 4

There is an increased risk that related party transactions are less likely to be made on arm’s length commercial terms and that the responsible entity will not monitor them as robustly as those involving unrelated parties.

The Investment Manager may not meet the benchmark. The Fund may borrow to expand the capital base of the Fund. Refer Section 4.21

The Investment Manager will not meet the benchmark. It does meet the benchmark as to securing loans by registered first mortgages, but the Investment Manager does not meet that part of the benchmark which requires that the Fund has no single loan and no single borrower that exceeds 5% of the Fund’s assets. This is due to the fact the Fund has not commenced investing and will take to time to build a diversified portfolio (albeit limited to residential property) that may meet this benchmark.

The Investment Manager meets the benchmark in that it does not lend to related parties.

Benchmark 4 and Disclosure Principle 4 address the risks associated The Investment Manager and Dealt are both loan with related party lending, investments and transactions, including originators to the Fund which details of any related party transactions. is a related party transaction.

Disclosure Principle 4 also requires disclosure of details about all The Investment Manager will types of related party transactions. not meet the benchmark in this respect.

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RG 45 Valuation policy – Benchmark 5 and Disclosure Principle 5

EXPLANATION

INVESTMENT MANAGER’S RESPONSE

If valuations are not properly prepared or conducted by a qualified and experienced valuer, it is difficult to assess the risk exposure associated with a loan and to monitor loan to valuation ratios on a continuing basis.

The Investment Manager meets the benchmark.

Benchmark 5 and Disclosure Principle 5 address the Fund’s valuation practices, including when an independent valuation is required.

The RG 45 Report will disclose the important features of its valuation policy. Further information as to the Investment Manager’s valuation policy and practices is in Section 4.12.

Lending principles – Loan to valuation ratios – Benchmark 6 and Disclosure Principle 6

Mortgage funds that lend at a higher loan-to-valuation ratio are more vulnerable to risk of an adverse change in market conditions where the security obtained from borrowers becomes insufficient to cover the loan.

Benchmark 6 and Disclosure Principle 6 address the Fund’s lending practices, including the loan to valuation ratios.

The RG 45 Report will contain information as to the maximum and target portfolio weighted average loan-to-valuation ratios for the Fund and additional matters relating to loans for property development. Further information as to the Investment Manager’s lending practices and LVRs is in Sections 4.2, 4.5 and 4.6.

Distribution practices – Benchmark 7 and Disclosure Principle 7

Where distributions are not sourced solely from a mortgage fund’s income, there is a risk that these distribution practices may not be sustainable over the long term.

Benchmark 7 and Disclosure Principle 7 address the transparency of the Fund’s distribution practices, including whether current distributions are paid from scheme borrowings, and disclosure of the source of distributions.

The Investment Manager meets the benchmark in that where the loan relates to property development the Fund does not, at the time of approval of a loan, lend more than 70% on the basis of the latest ‘as if complete’ valuation of the security and in all other cases not more than 80% on the basis of the latest market valuation of the security.

The Investment Manager meets the benchmark in that it will not pay current distributions from Fund borrowings.

The RG 45 Report will disclose the source of distributions, discloses that distribution rates may vary from time to time, and includes information as to capitalisation of interest, and the sustainability of distributions to Investors from sources other than income received in the relevant distribution period. Further information as to distributions is in Section 4.11.

Withdrawal arrangements – Benchmark 8 and Disclosure Principle 8

If a mortgage fund promotes a short withdrawal period (although the maximum period provided in the constitution is much longer) there is a risk that investors do not fully appreciate that their right of withdrawal may be refused until a longer period of time has elapsed than that represented.

Benchmark 8 and Disclosure Principle 8 address the transparency of the Investment Manager’s approach to withdrawal of investments when the Fund is liquid and when the Fund is non-liquid.

The RG 45 Report will disclose the withdrawal arrangements for the Fund, as does this PDS (see Section 4.15).

The Fund, which is an illiquid scheme, does not meet the benchmark.

Units generally cannot be redeemed, and the Responsible Entity does not intend to allow redemptions.

However, the Responsible Entity may, in its absolute discretion, upon receipt of a request from a Unitholder, allow redemption of Units.

Redemption amounts will be determined in accordance with the Constitution.

360 Capital Residual Stock Fund | Product Disclosure Statement

17

Section 4 : About the Fund and the Offer (continued)

The RG 45 Report is stated as at the date of this PDS, unless otherwise specified, and may change during the currency of this PDS. All financial and statistical data is based on figures as at 26 October 2020 unless otherwise stated. The information in the RG 45 Report will be updated at least semi-annually and if there is a significant adverse change.

The RG 45 Report and subsequent updates will be available on our website at www.360capitalforms.com.au/360-capitalresidual-stock-fund and a paper copy available to Investors free of charge on request.

4.7 Investment process Implementation of the Fund’s strategy, investment origination, portfolio construction, policies and risk protocols, will be consistent with that of established processes of the 360 Capital Group.

The 360 Capital Group maintains a disciplined approach to capital management and risk-adjusted investment determinations, leveraging the skills of investment professionals across broad divisional capabilities in Real Assets, Private Equity and Public Equity. The 360 Capital Group ultimately maintains a philosophy of high-conviction investing, providing a competitive advantage in speed of execution and value creation.

In investing in mid-market corporate loans, the Fund maintains focus on the following governing principles: Diversification: Loans diversified by, geography, borrower, credit profile and maturity.

Risk Management: Ensuring appropriate return for risk, coupled with a robust due diligence process.

Capital Preservation: Focus on ongoing loan monitoring and servicing, minimising risk of capital loss.

360 Capital Group has two lending origination platforms, AMF Finance Pty Limited established in 2017 and Digital Software Solutions Pty Ltd trading as Dealt (Dealt) established in 2018 to become 360 Capital’s institutional grade Non-Bank commercial real estate credit platforms.

The 360 Capital Group leverages its deep market knowledge and experience to achieve superior investment performance and strong risk-adjusted returns. Set out below is a description of the key elements of the investment process.

Opportunity Sourcing

The Investment Manager’s access to deal flow is generated through: • Itself and Dealt; • Referrals from third party intermediaries and banks; • Relationships with key industry participants; and • Referrals or opportunities brought to 360 Capital Group by virtue of its market reputation.

Loan Submission

Once an opportunity is identified, it is evaluated, and a decision is made whether to pursue / allocate additional resources to it or not.

360 Capital Group implements a consistent approach to due diligence which includes a highly detailed and thorough analysis of each opportunity’s strategy, risk profile, exit and repayment options and wider portfolio impacts, including financing, tax and structuring risks.

The screening process will, amongst other aspects, consider: • the track record, background and recent financial statements and /or tax returns of the borrower; • property due diligence matters including valuations, leases, asset quality, planning schemes, environmental and heritage issues, market comparables and feasibility analysis; • the risk profile of the opportunity and LTV limits; and • identify clearly defined repayment options.

Detailed Project Review

If an opportunity is of interest, the Investment Manager conducts a detailed project review, focusing on: • Review of Valuation report; • Review of Quantity Surveyor report; • Pre-sale / pre-lease review; • Financial assessment; • Veda / credit check; and • Site inspection.

18

Credit Paper

Legal

Once an opportunity has received support a credit paper is prepared to be submitted to the Credit Committee for approval.

Once the Credit Committee and Responsible Entity has approved the opportunity, due diligence and documentation is completed in concert with 360 Capital Group lawyers and other consultants as required.

The credit paper describing the opportunity, investment analysis and forecasts under a range of scenarios and the results of due diligence.

The 360 Capital Group Credit Committee consists of highly experienced professionals, whose personal biographies are set out over the page.

Following this process, the documentation is executed in preparation for financial close.

Typically, such documentation includes: • Mortgage document; • Facility documentation; and

Credit Approval

The credit paper is presented to the Credit Committee who will review the proposed transaction and assess creditworthiness of the credit application. If all 3 members unanimously agree, the Credit Committee will provide their endorsement to the Credit Committee.

The Credit Committee will also have the ability to review and amend the terms, conditions, structure and pricing of any proposed opportunity.

Investment Manager Approval

The credit paper, along with the investment recommendation is presented to the Responsible Entity which will then decide whether to proceed with the opportunity.

The Responsible Entity considers a range of matters, including the appropriateness of the opportunity, compliance within the mandated Investment Strategy and return expectations.

As part of their approval and endorsement, the Responsible Entity will also consider among other things: • impact of the investment on overall Fund returns;

• Credit enhancements, including guarantees, and additional collateral / PPSR charges.

Financial Close and Post Investment Monitoring

360 Capital Group continues to pro-actively monitor every investment, applying its in-depth understanding of both the market and the underlying property, in order to mitigate potential risks and provide ongoing experience and expertise where possible to ensure successful project delivery and repayment of the loan.

Specifically, 360 Capital Group will: • perform periodic reviews of each investment against performance expectations and risk metrics; • undertake regular site visits and asset inspections in addition to regular communications with borrowers and other key stakeholders; • monitor key deliverables and assessment of compliance with specific investment milestones; and • recommend and implement any appropriate investment management action

• capital availability within the Fund, including the amount and timing of any future funding requirements; • risk profile of the proposed opportunity; • timing impacts of the investment in context of the overall fund term; • consistency of the investment opportunity with 360 Capital Group’s market and economic outlook; and • consistency with the Fund’s mandated Investment Strategy.

The Responsible Entity will also have the ability to review and amend the terms, conditions and pricing of any proposed opportunity.

360 Capital Residual Stock Fund | Product Disclosure Statement

19

Section 4 : About the Fund and the Offer (continued)

4.8 Target Portfolio Construction Geographic Restrictions

Track Record Case Studies

➊ ➋ ➌

Metro areas population >200,000

12-18 months

Target Interest Rate

➍ ➎

Security

➏

First mortgage and, where possible, personal guarantees will be sought

Typical Loan Size Loan to Value Ratio Target Loan Tenor

$10m to 50m 65% Loan to value ratio (LTV) for the weighted portfolio, 70% LTV on an individual loan

6.0% to 90% p.a. capitalising monthly, plus application fee of 1.0%-1.5% (plus GST)

4.9 Track Record of the Manager

Mezzanine Construction of pre-leased hotel in Perth, WA Net Realisation: $76.0m

Since 2017, 360 Capital Group through its loan origination businesses AMF Finance Pty Ltd (the Investment Manager) and Dealt, has originated over $220m in loans and continues to have a strong pipeline of deals.

Selected CRE debt transactions have been specified in the table below.

Facility Amount: $7.6m (70% LVR / 78% LTC) Interest Rate: 15% p.a.

Line Fee: n/a

Sector

Type

Facility Limit

Security

Term

LVR

IRR

Internal Rate of Return (IRR): 16.8% p.a.

Hotel

Mezzanine

$7.6m

2nd Mortgage

24 months

70%

16.8

Term: 24 months

Medical

Senior

$9.3m

1st Mortgage

18 months

71%

14.6

Repaid via refinance

Accommodation

Senior

$8.0m

1st Mortgage

13 months

70%

15.1

Hotel

Senior

$36.3m

1st Mortgage

9 months

68%

16.8

Residential

Senior

$8.2m

1st Mortgage

7 months

49%

13.5

Residential

Senior

$31.8m

1st Mortgage

24 months

68%

15.4

Residential

Senior

$9.7m

1st Mortgage

18 months

44%

58.3

Residential

Senior

$4.7m

1st Mortgage

12 months

58%

10.5

Education

Senior

$23.1m

1st Mortgage

12 months

65%

11.5

Education

Senior

$19.8m

1st Mortgage

24 months

65%

11.7 Progressively drawn senior Development of 94 apartments in Western Sydney Net Realisation: $46.7m Facility Amount: $31.8m (68% LVR / 79% LTC) Interest Rate: 8% p.a.

Line Fee: 2% p.a.

Internal Rate of Return (IRR): 15.4% p.a.

Term: 24 months Repaid partly via settlement of sales and residual debt via refinance

20

Progressively drawn senior

Progressively drawn senior

Progressively drawn senior

Cash advance senior

Development of 2,396sqm (GLA) medical centre in Sunbury, VIC

Development of 28 room residential accommodation facility in Coogee, NSW

Development of 162 room 4-star hotel in Melbourne CBD

Construction of 30 residential apartments in Western Sydney

Net Realisation: $13.0m

Net Realisation: $11.4m

Net Realisation: $53.0m

Net Realisation: $6.8m

Facility Amount: $9.3m

Facility Amount: $8.0m

Facility Amount: $36.3m

Facility Amount: $8.2m

(71.2% LVR)

(70% LVR / 80% LTC)

(68.4% LVR)

(48.9% LVR)

Interest Rate: 12% p.a.

Interest Rate: 10% p.a.

Interest Rate: 11% p.a.

Interest Rate: 10% p.a.

Line Fee: n/a

Line Fee: 2% p.a.

Line Fee: 2% p.a.

Line Fee: n/a

Internal Rate of Return (IRR): 14.6% p.a.

Internal Rate of Return (IRR): 15.1% p.a.

Internal Rate of Return (IRR): 16.8% p.a.

Internal Rate of Return (IRR): 13.5% p.a.

Term: 18 months

Term: 20 months

Term: 12.5 months

Term: 10 months

Repaid via refinance

Repaid via refinance

Repaid via refinance with term debt at practical completion

Repaid via settlement of sales

Progressively drawn senior

Cash advance senior

Cash advance senior

Cash advance senior

Development of 27 townhouses in Greenway, ACT

Medium density complex comprising 22 luxury apartments in New Farm, QLD

Bridging facility for portfolio of seven (7) childcare assets leased to Affinity Education

Bridging facility for a 300 place childcare centre, Gregory Hills, NSW

Net Realisation: $13.5m

Net Realisation: $8.0m

Current Valuation: $35.7m

Net Realisation: $30.5m

Facility Amount: $9.7m

Facility Amount: $4.7m

Facility Amount: $23.14m

Facility Amount: $19.8m

(72% LVR)

(58% LVR)

(65% LVR)

(65% LVR)

Interest Rate: 10% p.a.

Interest Rate: 9% p.a.

Interest Rate: 10% p.a.

Interest Rate: 10% p.a.

Line Fee: 2% p.a.

Line Fee: n/a

Line Fee: n/a

Line Fee: n/a

Internal Rate of Return (IRR): 58.3% p.a.

Internal Rate of Return (IRR): 10.5% p.a.

Internal Rate of Return (IRR): 11.5% p.a.

Internal Rate of Return (IRR): 11.7% p.a.

Term: 6 months

Term: 12 months

Term: 10 months

Term: 9 months

Repaid via settlement proceeds1

Repaid via settlement proceeds

Repaid via refinance

Repaid via refinance

1 Construction loan went into default and the owner sold the as is site to exit the loan.

360 Capital Residual Stock Fund | Product Disclosure Statement

21

Section 4 : About the Fund and the Offer (continued)

4.10 The Responsible Entity The Responsible Entity of the Fund is 360 Capital FM Limited (ABN 15 090 664 396, AFSL 221 474), a member of the 360 Capital Group.

The 360 Capital Group is an ASX-listed (ASX:TGP), investment and funds management group concentrating on strategic investment and active management of alternative assets. As at the date of this PDS, the 360 Capital Group has a market capitalisation of approximately $194 million and manages listed and unlisted funds on behalf of investors.

The 360 Capital Group senior management team has an average of 20 years’ experience across the Australian real estate, banking, finance and funds management sectors. The staff and Directors of 360 Capital Group own in excess of 34% of the 360 Capital Group’s securities and the 360 Capital Group has a philosophy of co-investment in the funds it manages.

Please see Section 5.2 for Responsible Entity Board biographies.

4.11 Distribution policy The Responsible Entity has full discretion with regard to the distribution policy for the Fund and has the objective of paying regular monthly distributions to Unitholders. In some circumstances, the Responsible Entity may also pay distributions at other times. It is also the Responsible Entity’s distribution policy to distribute 100% of the distributable income on an annual basis.

It is expected that Unitholders will begin receiving monthly distributions from 31 March 2021.

The Responsible Entity can provide no guarantee as to the extent of distributions, as these will depend on a number of factors including earnings, financial conditions, future prospects and other factors the Investment Manager deems relevant.

Distributions received by Unitholders are generally regarded as assessable income and calculated based on distributable income attributable to the Units at the end of the distribution period divided by the number of Units on issue. Distributions received by Unitholders will be primarily comprised of ordinary income rather than capital gains for Australian tax purposes. Unitholders should review the Taxation summary set out in Section 9.

4.12 Valuation policy The NAV of the Fund is expected to be calculated monthly in line with its unit pricing policy. This is calculated by deducting all liabilities, which includes declared but unpaid distributions, from the total value of the assets of the Fund, calculated in accordance with the Australian Accounting Standards (AAS).

The valuation methods applied by the Responsible Entity to value the Fund’s assets and liabilities must be consistent with the range of ordinary commercial practice for valuing them and represent its assessment of current market value.

The Fund’s valuation policy requires valuations of the Responsible Entity’s investments to be based on a fair market valuation process designed in accordance with fair value principles as outlined in the International Financial Reporting Standards (IFRS).

IFRS defines fair value as the “price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

22

between market participants at the measurement date”.

The Fund’s valuation policy may be amended due to changes in best industry practice, regulations and accounting rules.

For debt and equity securities that are not valued on the market, the fair value is determined in good faith. In determining the fair value of these investments, 360 Capital Group will typically apply widely recognised market and income valuation methodologies including, but not limited to, earnings and multiple analyses, discounted cash flow methods and third-party valuations. In order to determine a fair value, these methods are applied to the latest information provided by the underlying investment or other business counterparties (e.g. debt agents).

Debt investments that are not valued using market quotations are anticipated to be revalued on a monthly basis, while equity securities that are not valued using market quotations, are anticipated to be valued quarterly. Interest accruals on debt instruments are calculated on a monthly basis in accordance with the frequency of the NAV calculation of the Fund.

Valuations of individual real estate loans (Refer also to Current RG 45 Report – Benchmark 5 and Disclosure Principle 5 – Valuation policy.)

360 Capital Residual Stock Fund requires valuations to be prepared by an independent, qualified, and registered valuer prior to advancing loan funds against a property being offered as security.

In all cases, 360 Capital Residual Stock Fund requires the valuation to meet a variety of conditions, including the following criteria: i.

All external valuations must be performed by a qualified valuer on 360 Capital Residual Stock Fund’s approved panel.

ii. The valuer must be a member of an appropriate professional body in the state or territory where the mortgaged property is situated and have a minimum of 5 years experience in valuing the type of property they are being instructed to value. iii. 360 Capital Residual Stock Fund prefers to instruct the valuer, however if not, the valuation must be addressed or assigned to 360 Capital Residual Stock Fund for mortgage purposes under 360 Capital Residual Stock Fund’s standard instructions. iv. The panel valuer must be independent of the borrower and 360 Capital Residual Stock Fund and ensure a conflict of interest does not exist. v. The report must comment as to whether the mortgaged property represents satisfactory security for mortgage purposes, as appropriate. vi. Valuers must include a statement in their valuation reports as to whether the valuation complies with all relevant industry standards and codes. vii. The valuer must be instructed to prepare the valuation report in a format which clearly sets out the primary methodology used and, if so requested, a secondary check valuation methodology, in accordance with the instructions.

Valuation currency requirements All valuations must not be more than four months old as at the date of approval of the original loan and must be updated: 1. Annually at the cost of the borrower; 2. within two months after the Credit Committee or 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 loan covenant (if required); and 3. for any other reason determined by the Credit Committee.

At the discretion of the Credit Committee, valuations may also be obtained when the following occurs: • a material change in the terms of the loan, including as to the amount, duration, or interest rate on renewal; • information is discovered that leads the Investment Manager to believe that there may be a variation in the security value; • a material change in the nature of the building/property; • a material change in the tenancy profile of a building; • a request to vary directorship or ownership of the borrower or a guarantor company (or its associates); or • the valuation undertaken for funding is in excess of 90 days old as at the time of approval of the new loan.

In determining whether there needs to be a new valuation when a loan is being extended, or there is an increase in the amount of the borrowing, or a change in the interest rate, the Investment Manager may take into account a number of factors such as the borrower’s loan history, the amount of the loan outstanding, the duration of the extension, and other information from local agents and valuers such as recent sales and settlements.

4.14 Unit Pricing The Unit price will be calculated at the end of each calendar month in accordance with the Fund’s unit pricing policy. For the most recent Unit price, refer to the Fund Website. The Unit price is derived from the NAV per Unit adjusted for accrued fees and capitalised and unamortised costs and expenses. The NAV is based on the value of the gross assets of the Fund less the liabilities. The Responsible Entity may include in the Unit price provisions and adjustments, including for future liabilities.

Expenses that may be capitalised (depending on the underlying accounting treatment of the investment) are all those relating to the acquisition of investments such as advisory and legal costs.

The price applicable to acquire Units (the Entry Price) is fixed at $1.00 for the first six months of the Offer or until the Responsible Entity has raised $50 million (whichever occurs first) and thereafter is calculated as the Unit price plus any Buy Spread (Entry Price). As at the date of this PDS there is a 0.25% Buy Spread for Units (which will apply once the above initial period expires). This Buy Spread may change from time to time. If the Responsible Entity accepts a withdrawal request from a Unitholder to redeem Units then the price at which they will be redeemed (the Exit Price) is the Unit price less any Sell Spread to reflect the costs and expenses anticipated with selling the investments of the Fund calculated as at the date of the redemption. As at the date of this PDS, there is a 0.25% Sell Spread for Units. This Sell Spread may change from time to time.

The prevailing Unit price, Entry Price and Exit Price will be published on the Fund Website. In the event that the Responsible Entity changes the Buy Spread or the Sell Spread, Unitholders will be notified on the Fund Website.

4.13 The Investment Manager

4.15 Redemptions

The Responsible Entity will delegate the investment management of the Fund to the Investment Manager pursuant to the IMA.

The Fund will have a term of three years from the close of the Initial Offer and an option to extend for up to two years by approval of the Responsible Entity.

The Investment Manager is AMF Finance Pty Ltd. The board of directors and executive leadership team of the Investment Manager, along with their biographies, are set out in Section 5.

The IMA is summarised in Section 10.2. Key terms include: • The IMA sets out the services to be provided by the Investment Manager, these include: – Overseeing the investment strategy; – Providing administrative support to assist and ensure the maintenance of the Fund’s corporate and statutory records and compliance with the Corporations Act; – Actively managing and supervising the Fund’s investments; – Developing acquisition and divestment strategies; and – Investment evaluation and implementation; • Other than where there is a Cause Event the Investment Manager is appointed for a minimum term of 3 years. Where there is a Cause Event the Investment Manager may be removed at any time by Special Resolution on 60 days notice.

Units generally cannot be redeemed during the Fund term, and the Responsible Entity does not propose to offer any liquidity mechanism for Unitholders.

However, the Responsible Entity may, in its absolute discretion, upon receipt of a withdrawal request from a Unitholder, redeem that Unitholder’s Units for the Exit Price and the Responsible Entity will endeavor to pay the Exit Price to the Unitholder when reasonable practicable to do so (noting that under the Constitution the Responsible Entity has 12 months to do so).

The Responsible Entity may cancel, defer, scale back or suspend any withdrawal request and redemptions where it believes that, having regard to the number of outstanding withdrawal requests the nature of the Fund’s assets and other relevant circumstances, it would be in the best interest of the remaining Unitholders to do so or in other exceptional circumstances.

• The Investment Manager is entitled to a Management Fee, refer to Section 7.

360 Capital Residual Stock Fund | Product Disclosure Statement

23

Section 4 : About the Fund and the Offer (continued)

4.16 Capital management The Responsible Entity will periodically review the capital structure of the Fund and, where considered appropriate, undertake capital management initiatives which may involve the issue of other Units (through bonus options issues, placement, pro-rata issues, etc.) or the buy-back of Units.

4.17 Changes to Investment Strategy It is expected that the Fund’s investment strategy will be implemented as detailed in this PDS. The Investment Manager reserves the right to change the Fund’s investment strategy should it be in the best interests of Unitholders, subject to any approval it may require under the IMA.

4.18 Fees Refer to Section 7 for a summary of the fees applicable to the Fund.

4.19 Loan monitoring and defaults

or arrears (For further information as to defaults and arrears refer to Current RG 45 Report – Disclosure Principle 3 – Loan portfolio and diversification.)

The performance of all loans made by the Fund will be regularly monitored by the Investment Manager with respect to the timely payment of interest, adherence to ongoing reporting requirements and specific loan covenants. The Credit Committee meets on a quarterly basis or more frequently as required. The Investment Manager reports on loans (in default and the current status of other loans) at these meetings.

The Investment Manager monitors any loans in default/arrears.

The Investment Manager may treat a loan as in arrears, where for example, there is non-payment of principal or interest after the due date for payment. The Investment Manager may treat a loan as in default, where for example, there is non-adherence to the conditions of the loan agreement, such as the need to have adequate insurance in place. If a borrower defaults or is in arrears then the property used as security may be sold and the proceeds used to repay the loan made by the Fund along with any outstanding interest and costs incurred.

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In the event that a borrower is in default or in arrears the following actions will be considered: • where a loan is in arrears more than seven days, the borrower will be contacted to arrange collection of the arrears; • any loan in arrears more than 30 days (unless otherwise determined by the Credit Committee or the Board) may be placed in the hands of the Fund’s solicitors to commence recovery procedures; • enforcement proceedings may commence in accordance with the following process: – the mortgagee may become a ‘mortgagee in possession’ or appoint a suitably qualified administrator; – a new valuation of the secured property may be sought; and – the underlying security may be placed on the market for sale or, depending on the nature of the security and where it is deemed to be in the best interests of the Fund.

• The Credit Committee will monitor the progress of the enforcement proceedings and any other action taken by the Investment Manager in connection with the default or arrears.

4.20 Denomination The Fund will be Australian dollar denominated.

4.21 Gearing The Investment Manager does not currently intend for the Fund to have borrowings (sometimes referred to as gearing or leverage).

However, the Investment Manager may secure finance facilities for the Fund to lend on senior residual residential loans. This includes the ability to undertake investment activities and to meet demands under revolving loan facilities or undrawn commitments.

The maximum level of leverage within the Fund will be limited to 50% of GAV.

4.22 Details of the Offer 4.22.1

Description of the Offer

The Responsible Entity is seeking to raise equity for the Fund to acquire assets that satisfy the investment strategy. Refer to Section 4.3.

The Responsible Entity may, in its discretion, accept or reject applications in whole or in part or issue fewer Units than are applied for.

The new Units will rank equally in all respects with all other Units issued by the Fund. The rights and liabilities attaching to Units are detailed in the Constitution and a summary of the major provisions is set out in Section 10.1.

4.22.2

Terms and conditions of the Offer

Topic

Summary

What is the type of Ordinary Units in the Fund. security being offered?

4.22.3

ASX Listing

The Responsible Entity does not currently intend to apply to the ASX for admission to the Official List. However, the Responsible Entity reserves the right to apply for admission to the Official List in the future.

4.22.4

Acknowledgements

Each Applicant under the Offer agrees to be bound by the terms of the Constitution and the terms and conditions of the Offer: a) acknowledged having personally received a printed or electronic copy of the PDS (and any supplementary or replacement PDS) and the Application Form and having read them all in full; b) declared that all details and statements in their Application Form are complete and accurate; c) declared that the Applicant(s), if a natural person, is/are over 18 years of age;

What are the rights attaching to the Units?

Refer to Section 10.1

d) acknowledged that, once the Responsible Entity receives an Application Form, it may not be withdrawn and an Application Form is an irrevocable acceptance of the Offer;

What is the Unit price?

The Unit price will be calculated monthly in accordance with the Fund's pricing policy.

Refer to Section 4.14.

e) applied for the number of Units at the Australian dollar amount shown on the front of the Application Form;

What is the minimum Application size?

The minimum Application size is $2,000 worth of Units in aggregate and increments of $1,000 thereafter.

f) agreed to being allocated the number of Units applied for (or a lower number allocated in a way described in this PDS), or no Units at all;

When will I receive Units?

Successful Applicants under the Offer will be issued Units at the end of each calendar month at the prevailing Entry Price. If your completed Application Form and Application Amount is received before or at 2pm AEDT on the last Business Day of the calendar month your Units will be allotted at the Entry Price applicable at the end of the relevant month. If your completed Application Form or Application Amount is received after 2pm AEDT on the last Business Day of the calendar month the Responsible Entity will apply the Entry Price for the next calendar month.

You will not receive any interest on your Application Monies.

g) authorised the Responsible Entity and its respective officers or agents, to do anything on behalf of the Applicant(s) necessary for Units to be allocated to the Applicant(s), including to act on instructions received by the Registry upon using the contact details in the Application Form;

Are there any brokerage, commission or stamp duty considerations?

No brokerage, commission or stamp duty is payable by Applicants on acquisition of Units under the Offer.

Are there any tax implications?

The taxation consequences of an investment in the Fund will depend upon the Unitholder’s particular circumstances. Unitholder should make their own enquiries about the taxation consequences of an investment in the Fund. Refer to Section 9.

h) acknowledged that the Fund may not pay distributions, or that any distributions paid may not be franked; i) acknowledged that the information contained in this PDS (or any supplementary or replacement PDS) is not financial product advice or a recommendation that Units are suitable for the Applicant(s), given the investment objectives, financial situation or particular needs (including financial and tax issues) of the Applicant(s); and j) acknowledged and agreed that the Offer may be withdrawn or suspended by the Responsible Entity or may otherwise not proceed in the circumstances described in this PDS. 4.22.5

Source and Use of Funds

Refer to Section 8 for further details. If proceeds of the $50.0 million are raised under the Offer they will be applied as follows:

USE OF FUNDS

AMOUNT ($’000)

Investment allocation

49,855

Offer costs

145

Total

50,000

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 5 : The Responsible Entity, Investment Manager and Key People

5.1

360 Capital Group

360 Capital Group was established in 2006 as an investment and funds management company focused on the Australian real estate markets. In accordance with our investment objectives and strategy, we invest across the capital stack, strategically investing in both public and private opportunities across direct real estate assets, property securities, CRE, and various corporate-level real estate transactions.

In December 2010, the 360 Capital Group took control of a $1.1 billion property platform and subsequently recapitalised, repositioned and wound up some of the funds. Furthermore, the 360 Capital Group listed three funds and refinanced the entire platform as part of an asset stabilisation program.

In 2013, 360 Capital Group listed on the Australian Securities Exchange (ASX: TGP). In 2016, the 360 Capital Group sold most of its investment funds management platform comprising $1.4 billion in funds under management and its co-investments in each of these funds for circa $300m.

Over its history, the 360 Capital Group has been involved in over $3.0 billion of real estate transactions. The 360 Capital Group is a high conviction investor, we actively manage our investments and are aligned with our investors with approximately 34% of the 360 Capital Group owned by staff and directors. Our focus is on shareholder/ investor returns and we are patient with our investment approach, recognising investment cycles and manage our capital to capitalise on these economic trends.

�

26

360 Capital Residual Stock Fund | Product Disclosure Statement

27

Section 5 : The Responsible Entity, Investment Manager and Key People (continued)

5.2 The Board of Directors The Responsible Entity Board has a broad range of experience in property and financial services combined with financial and commercial expertise. Details of the current Board are set out below:

David van Aanholt Chairman & Independent Director

Tony Pitt Managing Director

Andrew Moffat Independent Non-Executive Director

John Ballhausen Independent Non-Executive Director

David has over 30 years’ experience in the property and funds management industry. Prior to establishing his own property group in 2007, David worked for the ASX listed Goodman Group where he was the Chief Executive Officer (Asia Pacific) and was responsible for Goodman’s operations in Australia, New Zealand, Hong Kong and Singapore. Prior to working for Goodman David held senior roles Paladin Australia and CDH Properties (acquired by KPMG). David holds a Bachelor of Business (Land Economy), a Post Graduate Diploma in Management, a Master’s in Business Administration and he is a Fellow of the Australian Property Institute.

Tony is a founding Director of 360 Capital and has worked in the property and property funds management industries for over 20 years. As Managing Director, Tony is responsible for the Group’s investments strategic direction and overall Group strategy. He has overseen the IPO on the ASX of three AREITs since 2012 as well as the creation of various unlisted funds, undertaken various corporate acquisitions and disposals, mergers and acquisitions and the ASX listing of 360 Capital Group.

Andrew has in excess of 20 years of corporate and investment banking experience, including serving as a director of Equity Capital markets and Advisory for BNP Paribas Equities (Australia) Limited. Andrew is the sole principal of Cowoso Capital Pty Ltd, a company providing corporate advisory services.

John is a financial services professional with over 35 years’ experience. He is a founder of Quay Fund Services Limited providing trustee and responsible entity services to fund managers. He is also a non-executive director of Arctic Intelligence.

David is a non-executive Director and Chairman of Kennard’s Self Storage Group and a Councillor at the University of New England where he sits on the Audit and Risk, Finance and Infrastructure, Innovation and Remuneration Committees.

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Tony has formerly held numerous senior roles and directorships at Mirvac Group, James Fielding Group and Paladin Australia. He also held positions at Jones Lang LaSalle and CB Richard Ellis.

He graduated from Curtin University with a Bachelor of Commerce (Property), has a Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australasia.

Andrew’s past public company directorships include itX Group Limited, Infomedia Limited, Rubik Financial Limited and Chairman of Pacific Star Network.

John founded Rimcorp Property Limited and became its Managing Director. In 2008, Rimcorp was successfully sold with approximately $100 million in funds under management spread over four registered property schemes. Before 2002 John held the position of Chief Investment Officer with HIH Insurance, with responsibility for more than $3 billion of funds across fixed interest, equities and property asset classes. John has a Bachelor of Commerce from the University of NSW, is a Fellow of the Financial Services Institute of Australasia and a Graduate of the Australian Institute of Company Directors.

5.3

The Investment Manager Board

Graham Lenzner Independent Non-Executive Director

Tony Pitt Managing Director

Graham has had a career spanning four decades, with particular emphasis on funds management and financial markets. Graham was an Executive Director of the Armstrong Jones Group for 12 years, the last four years as Joint Managing Director. Other previous roles include Finance and Deputy Managing Director of Aquila Steel, General Manager Finance and Investments of MMI Insurance Limited.

Graham has served on the Board of a number of public and private companies. He is currently Chairman of TZ Limited.

See biography on the opposite page.

Glenn Butterworth Chief Financial Officer

James Storey Head of Real Assets

Glenn Butterworth is a key executive within the business and is responsible for all 360 Capital’s financial management activities. Glenn has over 25 years’ experience and joined 360 Capital from Mirvac where he spent 11 years, most recently as Financial Controller of the Mirvac’s Investment Division where he was responsible for Mirvac Property Fund, listed and wholesale managed funds and partnership structures and has a wealth of transactional and financial management experience.

Glenn is a Chartered Accountant and holds a Bachelor of Commerce and commenced his career at Deloitte.

James has 15 years’ experience in real estate funds management with significant experience investing across debt, equity and corporate transactions.

James was the Fund Manager of the 360 Capital Office Fund (ASX: TOF) and 360 Capital Industrial Fund (ASX: TIX) with a combined gross assets of over A$1.1b and is currently the Head of Real Assets and Fund Manager of 360 Capital REIT (ASX:TOT). James is also non-executive director of Velocity Property Group (ASX: VP7).

Prior to his tenure at 360 Capital, James held the role of Investment Manager at Brookfield Office Properties, Senior Analyst at Valad Property Group and worked for Ernst & Young within its Transaction Advisory Services team.

James has a Bachelor of Business (Property Economics) from the University of Western Sydney and a graduate certificate of applied finance and investment. He is also a licensed real estate agent and qualified valuer.

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 5 : The Responsible Entity, Investment Manager and Key People (continued)

5.3 The Management Team

James Storey Head of Real Assets

James Quigley Fund Manager

Glenn Butterworth Chief Financial Officer

See biography on page 29.

James has more than 25 years’ experience in real estate investment, funds management and transactions across Australia. James has significant experience managing funds both unlisted and listed delivering strong returns for investors and originating and executing transactions across all real estate asset classes. James has a track record across a well-diversified range of national and international property and private equity real estate groups.

See biography on page 29.

Prior to joining the 360 Capital Group, James spent time at Fortius Funds Management, LaSalle Investment Management, Morgan Stanley Real Estate Investing, Mirvac and Lend Lease.

James holds a Bachelor of Applied Science (Property Resource Management) from the University of South Australia and a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia.

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Genevieve Noughton Transaction Manager

Fraser Matthews Business Development Manager

Ainslie Ebejer Group Financial Controller

Genevieve has over 8 years’ experience across real estate development and construction finance, loan origination and financial planning.

Fraser has worked with 360 Capital since 2015, having significant experience across real estate debt transaction origination and capital raising.

Fraser has previously held the roles of Portfolio Manager at Young Group in London and Private Client Manager at the Bank of Scotland. Fraser has a BA, majoring in Economic History and Political Science from the Australian National University and a Diploma of Financial Planning.

Ainslie joined 360 Capital in June 2014 and is responsible for the finance function of the 360 Capital Group, in a role covering management and statutory reporting, compliance, treasury control and taxation. Ainslie has over 10 years’ experience in investment and asset management. Previously at Mirvac for 4 years, Ainslie was part of the finance team responsible for the Mirvac Property Trust, and prior to this she worked for the prestigious asset management firm Harrods Estates in London. Ainslie is a qualified Chartered Accountant, holding a Bachelor of Commerce (Accounting & Finance) from the University of Wollongong and a Graduate Diploma of Chartered Accounting.

Prior to her current role, Genevieve was Risk and Compliance manager at Lambert Capital, a family office located in Melbourne.

Genevieve has a Bachelor of Business majoring in Economics and Finance at RMIT University and an advanced diploma in Financial Planning.

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 5 : The Responsible Entity, Investment Manager and Key People (continued)

5.3 Credit Committee

Andrew Moffat Independent Non-Executive Director

Ian Harrison Independent Credit Committee Member

Brett Palmer Independent Credit Committee Member

Andrew has in excess of 20 years of corporate and investment banking experience, including serving as a director of Equity Capital markets and Advisory for BNP Paribas Equities (Australia) Limited.

Andrew is the sole principal of Cowoso Capital Pty Ltd, a company providing corporate advisory services.

Ian is a senior commercial banking executive with experience in property and non- property sectors. Prior to joining 360 Capital, Ian was with St George Business Bank for 23 years, most recently as Executive Manager Property Finance NSW. Prior to that, Ian was an Executive Manager Northern Region and earlier held roles as Senior Relationship Manager also with St George. He has a Bachelor of Economics from Macquarie University.

Brett has a career spanning 35 years in Banking, Insurance, Risk Management, and Consulting. He has held Chief Risk Officer roles at 4 ASX listed entities in Infrastructure / Energy, Retail, Telecommunications and Agribusiness. He holds various qualifications, is a graduate of the Australian Institute of Company Directors and is a Certified Practicing Accountant.

Andrew’s past public company directorships include itX Group Limited, Infomedia Limited, Rubik Financial Limited and Chairman of Pacific Star Network.

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Section 6 : Risks

This Section 6 describes what the Responsible Entity believes to be the major risks associated with an investment in the Fund. It does not purport to be an exhaustive list of every risk that may be associated with an investment in the Fund now or in the future.

The consequences associated with each risk are partially or completely outside the control of the Responsible Entity and, if they were to eventuate, may adversely affect the future operating performance of, and the value of an investment in, the Fund.

Before applying for Units, you should satisfy yourself that you have a sufficient understanding of the risks described in this Section 6 and consider whether the Units are a suitable investment for you, having regard to your own investment objectives, financial circumstances and taxation position.

If you do not understand any part of this PDS or are in any doubt as to whether to invest in the Units, you should seek advice from your broker, solicitor, accountant, tax adviser or other independent and qualified professional adviser before deciding whether to invest in the Fund.

6.1

Risks specific to the Investment Strategy

6.1.1

Credit default risk

There are various factors which could adversely impact the ability of credit counterparties that have borrowed funds, to fulfil their payment obligations or which may cause other events of default.

These include but are not limited to changes in financial and other market conditions, interest rates, government regulations or other policies, the macro-economic environment, changes in law and taxation, natural disasters, terrorism, social unrest and civil disturbances.

As a result, borrowers may not fulfil their payment or other obligations in full, or at all, and/or may cause, or fail to rectify, other events of default under the loan. The Fund may, in these circumstances, suffer from reduced income and therefore have a reduced ability to pay distributions, as well as be required to exercise any contractual rights of enforcement that it has against the borrower, in order to recover its investment. As such, there is no guarantee that the Fund will be able to recover its investment, which may adversely impact an investment in the Fund.

6.1.2

Interest rate risk

As a lender of debt facilities, the Fund may be exposed to fluctuations in interest rates. Central bank interest rates (RBA cash rate and RBNZ cash rate) are correlated to base rates, which are used as a basis to price corporate loans. Accordingly, any movement in interest rates may have an adverse effect on the Fund’s financial performance and position.

6.1.3

Early repayment risk

The Fund will have exposure to private credit loans with a range of maturities, and it is possible that any of these loans may be repaid earlier than anticipated. The extent of borrowers prepaying or refinancing their debt facilities, whether contractual or at their election, may be subject to general market conditions, borrower financial capacity amongst other factors, which may result in early repayment of principal, resulting in a lower return to the Fund than originally forecast.

6.1.4

Risk of non-performing loans (NPLs)

Loan investments made by the Fund may become nonperforming for a variety of reasons, including non-payment of principal or interest, as well as non-financial breaches by borrower. Such NPLs may require a substantial amount of workout negotiations and/or restructuring which may entail, among other things, substantial irrecoverable costs, a substantial reduction in the interest paid, a substantial write-down of the principal of the loan and/or a substantial change in the terms, conditions and covenants. However, even if a restructure of the NPL were to be successfully accomplished, there is potential risk that, upon maturity replacement “take-out” financing will not be available.

It is possible that the Fund may find it necessary or desirable to pursue (either itself of or through the appropriate counterparty) enforcement of an underlying security. Any enforcement process can be lengthy and expensive, which could have a material negative impact on the Fund’s anticipated return.

6.1.5

Subordination risk

Certain subordinate or mezzanine investments to which the Fund may have exposure to, could typically be subordinated to or rank behind other senior credit providers. The ability of the Fund as a provider of such loans, to influence the borrower especially during periods of financial distress or following insolvency, is likely to be substantially less than that of senior creditors. In many cases, the remedies available in relation to breach of loan terms, including the ability to foreclose on any collateral securing such loan investments, will be subject to the rights of any senior lenders and contractual inter-creditor provisions.

In addition, certain subordinated loans which the Fund may have exposure to, may not be protected by financial covenants. As a result, the Fund may not be able to take the steps necessary to protect its investments in a timely manner or at all, which could reduce Investor distribution payments and/or returns.

If the Fund is wound-up, Unitholders will rank behind secured and unsecured creditors of the Fund. If there is a shortfall of funds on winding-up, Unitholders will receive less than the NTA per Unit.

6.1.6

Covenant risk

Covenants are often put in place by lenders to protect themselves from borrowers defaulting on their obligations due to financial underperformance. Where lending markets become competitive between credit providers, the level of covenant reporting in loan documents may be significantly reduced or not provided at all.

Such loans are referred to as “covenant lite”.

Investments to which the Fund could have exposure, may be made on such terms, which can carry more risk to the lender than traditional loans. As a result, the Fund may be exposed to a greater level of risk, which could adversely impact investment performance.

6.1.7

Implementation of investment strategy

There is no guarantee that the implementation of the investment strategy will yield the Target Return. In addition, until the Fund is fully invested, the Fund may not meet the investment target and the Fund’s loan portfolio may not satisfy the indicative investment strategy, including diversification.

360 Capital Residual Stock Fund | Product Disclosure Statement

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Section 6 : Risks (continued)

6.2 Risks specific to an investment

in the Fund 6.2.1

Investment Manager risk

By investing in the Fund, investment decisions are delegated to the Investment Manager. The performance of the Fund is affected by the performance of the Investment Manager and that of the external service providers engaged by the Investment Manager and is therefore not assured. However, the Investment Manager is bound to operate within the terms of the IMA. 6.2.2

Dependence on key personnel

The Investment Manager depends on the skills and experience of its staff and employees. With only a small number of employees, it is essential that appropriately skilled staff be available in sufficient numbers to support the Investment Manager’s business. The Investment Manager requires staff to have a variety of skills and expertise, some of which may be considered niche specialties in which there are limited practitioners available for recruitment.

While the Investment Manager has initiatives to mitigate this risk, the loss of key staff may have a negative impact on the Investment Manager. The loss of key staff to a competitor may amplify this impact.

6.2.3 Dilution Potential capital raisings undertaken in future by the Fund, may dilute the holdings of Unitholders. In the normal course of managing the Fund, the Investment Manager seeks to distribute income to Unitholders and to provide the potential for capital growth.

6.2.4

Distributions may vary

The ability of the Fund to pay distributions is dependent upon the Fund having sufficient cash resources and distributable income.

Amongst other matters, variances in the costs of operating the Fund may affect the level of income available for distribution, as well as the timing of distributions. As the Fund’s investment mandate is opportunistic and not definitive, it is not possible to quantify income and capital returns of any new investments.

6.2.5

Liquidity risk

If it becomes necessary for the Fund to dispose of one or more of its investments, there is a risk that the Fund may not be able to realise sufficient assets in a timely manner or at an optimal sale price. This may adversely affect the NTA per Unit as well as the ability of the Responsible Entity to implement Unitholder withdrawal requests.

6.2.6

General fundamental exposures

Underlying risks in investments may include changes in Australian and international economic conditions, inflation, changes in interest rates, changes in equity market conditions, environmental concerns, regulatory/compliance issues, geopolitical instability or changes in investor sentiment.

34

6.2.7

Trading price of Units if the Fund is listed

It is not currently intended to list the Fund on the ASX. However, if the decision is made to list on the ASX the Fund may be exposed to additional risks. If listed, the market price of the Units will fluctuate due to numerous factors including general movements in interest rates, the Australian and international general investment markets, economic conditions, global geo-political events and hostilities, investor perceptions and other factors that may affect the financial performance and position of the Fund.

The price of the Units may also fluctuate due to changes in the market rating of the Units relative to other listed and unlisted investments, other investment options such as debentures or interest-bearing deposits and investor sentiment towards the Fund.

There can be no guarantee that liquidity will be maintained, and the number of potential buyers or sellers of the Units on the ASX at any given time may vary. This may increase the volatility of the market price at which holders are able to buy or sell Units.

Unitholders who wish to sell their Units may be unable to do so at a price acceptable to them. The market price of the Units could trade on the ASX at a discount to NTA per Unit.

6.2.8

Conflict of interest risk

Both the Responsible Entity and the Investment Manager are members of the 360 Capital Group, as is Dealt. As a result, potential conflicts of interest may arise during the ordinary course of business. Although the Responsible Entity and the Investment Manager have implemented policies, and the arrangement is structured in such a way to best manage such conflicts, there can be no assurance that these systems and procedures will mitigate such risks.

Please refer to Section 11 for further information on Corporate Governance.

6.2.9

No operating performance history of the Fund

The Fund is a newly formed entity with no financial, operating or performance history and no track record, which could be used by an investor to make an assessment of the ability of the Responsible Entity or the Investment Manager to achieve the investment objective of the Fund. The information in this PDS about the investment objective of the Fund are not projections nor the result of any simulated future performance. There is a risk the Fund’s investment objective will not be achieved.

6.2.10

Availability of suitable investment opportunities

The performance of the Fund is to a large extent dependent on the ability of the senior management team within the Investment Manager to identify and source suitable investment opportunities.

Such opportunities are subject to market conditions and other factors outside the control of the senior management team.

Failure of the Investment Manager to identify, source and enter into suitable investments will adversely affect returns available to the Fund.

6.2.11

Competitive landscape and action of others

The Fund will operate in a competitive landscape alongside other issuers of private credit strategies with competing product offerings and geographic presence. In addition, the Fund may face competition from new entrants into the private credit market from competitors that may have significant advantages including greater name recognition, longer operating history, lower operating costs, pre-existing relationships with current or potential customers and greater financial, marketing and other resources.

If competitor product offerings are perceived to be superior to the Fund’s, or competitors are able to offer more competitive offers, the Fund may lose existing or potential customers, which may materially adverse the performance of the Fund.

6.2.12

Due diligence on investments

Some loan investments by the Fund may be made based on limited due diligence conducted only in respect of publicly available information. This may increase the risk of individual loan investments and could lead to material adverse effects on the performance of the Fund.

6.2.13

Leverage and cash management risk

The Fund may itself borrow to increase the capital it has available to lend to borrowers. If the Fund does borrow the Responsible Entity will target a maximum loan to value ratio of 50% of GAV. The Fund’s potential use of borrowing would be predominantly for short term working capital and liquidity purposes, including the support of investment activity, this creates certain additional risks which can increase the potential loss to Unitholders.

Where the Fund borrows money to support its investment activity, and in the event the Fund is not able to repay its finance provider, the Fund may be required to forfeit its assets in order to repay the debt owed. Further, where the Fund offers draw down facilities, and it does not have the cash available to meet its obligations, the Fund may be required to fund such shortfall by either borrowing or selling the loan in the secondary market (which may be at a loss to the market value of the loan). This situation may arise where the Fund experiences defaults in the portfolio or fails to manage its cash management appropriately.

6.2.14

Regulatory environment

The Fund may be exposed to changes in regulations and legislation in domestic and foreign markets which it participates including but not limited to accounting, investments and taxation.

Any of these changes may adversely impact either the Fund, the Fund’s investments or an investment in the Fund.

6.2.15

Valuation risk

The value of the portfolio may be determined based on valuations provided by the Investment Manager in addition to third-party valuers. Given the Fund’s investment strategy, the Fund may have exposure to debt investments where publicly accessible market values may not be available, and the Investment Manager will have to rely on internal policies and procedures and their reasonable judgement to determine the fair value of such investments.

No assurance can be given to the value determined by the Investment Manager and its affiliates or third-party administrators, will represent the value that will be realised by the Fund.

360 Capital Residual Stock Fund | Product Disclosure Statement

35

Section 6 : Risks (continued)

6.3 General investment risks 6.3.1

Unit trading liquidity

There is currently no public market through which the Units of the Fund may be sold. There can be no guarantee that an active market in the Units will develop or that the price of the Units will increase.

6.3.2

Bribery, corruption, or other improper acts

The Investment Manager, the Responsible Entity or the Fund may incur fines or penalties, damage to its reputation or suffer other adverse consequences, if its Directors, officers, employees, consultants, agents, service providers or business partners (as applicable) violate, or are alleged to have violated, anti-bribery and corruption laws in any of the jurisdictions in which it operates.

Each of the Investment Manager, the Responsible Entity or the Fund cannot guarantee that its internal policies and controls will be effective in each case, to ensure that it is protected from reckless or criminal acts committed by its Directors, officers, employees, consultants, agents, service providers or business partners (as applicable) that would violate Australian laws or the laws of any other country in which the Investment Manager, the Responsible Entity or the Fund operate.

Any such improper actions could subject the Investment Manager, the Responsible Entity or the Fund to civil or criminal investigations in Australia or overseas, could lead to substantial civil or criminal monetary and non-monetary penalties, and could damage the reputation of the Investment Manager, the Responsible Entity or the Fund. Even the allegation or appearance of improper or illegal actions could damage the reputation of the Investment Manager, the Responsible Entity or the Fund and result in significant expenditures in investigating and responding to such actions and may in turn have an adverse effect on future financial performance and position.

6.3.3

Litigation

In the ordinary course of operations, the Fund or the Responsible Entity may be involved in disputes and possible litigation.

These may include but are not limited to, disputes in relation to contractual obligations and any legal claims or third-party losses.

It is possible that a material or costly dispute, or litigation could affect the value of the assets or expected income of the Fund, which may have an adverse effect on an investment in the Fund.

6.3.4

Legal and regulatory matters

There is the risk that changes in any law, regulation or government policy affecting the Fund’s operations (which may or may not have a retrospective effect) will have an effect on the asset portfolio and/or the Fund’s performance. This may include changes to taxation regimes.

36

6.3.5

Forward-looking statements

There can be no guarantee that the assumptions and contingencies on which the forward-looking statements, opinions and estimates are based will ultimately prove to be valid or accurate. The forward-looking statements, opinions and estimates depend on various factors, many of which are outside the control of the Responsible Entity and Investment Manager.

6.3.6

Tax rules

There may be tax implications for Unitholders arising from investing in the Fund, the receipt of distributions (if any) and capital returns from the Fund, and on any disposal of Units. In addition, an investment in the Units involves tax considerations that may differ for each Unitholder.

Tax law is complex and is subject to regular change. Changes in tax law, including various proposed but as yet not enacted changes in tax law may adversely impact the Fund’s future financial performance and position. Resulting changes in tax arrangements in addition, future changes to other laws and regulations or accounting standards, which apply to the Fund from time to time, could materially adversely affect the Fund’s future financial performance and position.

6.3.7

No guarantee in respect of investment

The above list of risk factors should not be taken as an exhaustive list of the risks faced by the Fund or by investors in the Fund. The above factors, and others not specifically referred to above, may materially affect the financial performance or position of the Fund and the value of the Units under the Offer. The Units issued under the Offer carry no guarantee in respect of profitability, dividends, return of capital.

6.3.8

Pandemic Risk

While the impact of COVID-19 is not able to be forecast, there is a risk that the broad economic conditions caused by the pandemic may adversely affect the Fund, including the value of the assets of the Fund, the Fund’s earnings and income distributions, the liquidity of the Fund (if there is an increase in redemption requests) or changes to legislation, regulations and government policies.

The ongoing value of the assets of the Fund are influenced by many factors, including those arising from COVID-19.

Section 7 : Fees and Costs

DID YOU KNOW? Small differences in both investment performance and fees and costs can have a substantial impact on your long-term returns.

For example, total annual fees and costs of 2% of your account balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000).

You should consider whether features such as superior investment performance or the provision of better member

7.1

services justify higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial adviser.

TO FIND OUT MORE If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website (www.moneysmart.gov.au) has a managed funds fee calculator to help you check out different fee options.

Fees and other costs

This Section 7 shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the assets of the Fund as a whole.

Taxes are set out in Section 9 of this PDS. Unless stated otherwise, all fees and costs set out in this Section 7 are expressed inclusive of GST, less the maximum reduced input tax credits claimable by the Fund.

You should read all the information about fees and costs as it is important to understand their impact on your investment.

Type of fee or cost

Amount

How and when paid

Fees when your money moves in or out of the Fund Establishment fee The fee to open your investment

Nil

Not applicable.

Contribution fee The fee on each amount contributed to your investment by you

Nil

Not applicable.

Withdrawal fee The fee on each amount you take out of your investment

Nil

Not applicable.

Exit fee The fee to close your investment

Nil

Not applicable.

Responsible Entity Management Fee Equal to 0.05% per annum of the GAV of the Fund during the year; plus

The Responsible Entity Management Fee is calculated and accrued on a daily basis and paid to the Responsible Entity monthly in arrears from the assets of the Fund.

Investment Manager Management Fee Equal to 0.62% per annum of the Deployed Capital of the Fund

The Investment Manager Management Fee is calculated and accrued daily and paid to the Investment Manager monthly in arrears from the assets of the Fund.

Recoverable Expenses Estimated to be 0.04% per annum of the NAV of the Fund; plus.

Recoverable expenses are reimbursable to the Responsible Entity, and generally deducted from the Fund’s assets when they are incurred from time to time.

Indirect Costs2 Estimated to be 0.22% per annum of the NAV of the Fund.

Indirect costs will be recovered from the assets of the Fund once they are incurred.

These costs are reflected in the returns generated in an underlying asset and reflected in the NAV of the Fund.

Nil

Not applicable.

Management costs1 The fees and costs for managing your investment

Service fees Switching fee The fee changing investment options

1 Please refer to Section 7.3 “Additional explanation of fees and other costs” for more information. Certain additional fees and costs may apply, such as transactional and operational costs or the termination fee that may be payable to the Investment Manager. All costs assume that the gross proceeds of $50 million is achieved under the Offer.

2 The indirect costs are estimated costs calculated on the basis of the Responsible Entity’s reasonable estimate. Actual indirect costs may differ materially from the estimated indirect costs. Refer to Section 7.3.1.4 for more information.

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37

Section 7 : Fees and Costs (continued)

7.2

Example of annual fees and costs

The following table gives an example of how the fees and costs for the Fund can affect your investment over a one year period. You should use this table to compare this product with other managed investment products.

Example

Balance of $50,000 with a contribution of $50,000 during the year1

Contribution fees

Nil

PLUS Management costs Comprised of the Responsible Entity Management Fee, the Investment Manager Management Fee, Recoverable Expenses and Indirect Costs2

0.93% calculated against the NAV of the Fund

EQUALS Cost of Fund

Nil 3

And for every $50,000 you have invested in the Fund, you will be charged $465 each year.

If you had an investment of $50,000 in the Fund at the beginning of the year and you invested an additional $5,000 during that year, you would be charged fees of between $465 and $512 for that year.

What it costs you will depend on the fees you negotiate.

* Additional fees may apply. This example does not include other fees and costs that may apply to an individual investor such as transactional or operational costs, or the termination fee that may be payable to the Investment Manager. See Sections 7.3.4 and 7.3.7 below for more information.

1 This table assumes that a total of $50,000 is invested under the Offer. If you were to invest $50,000 in Units subsequent to the Offer, the amount of fees applicable to that investment may differ if a greater or lesser number of Units are acquired. This table also assumes that the additional $5,000 worth of Units are acquired at the same price as the original $50,000 worth of Units.

2 The indirect costs are estimated costs calculated on the basis of the Responsible Entity’s reasonable estimate. Actual indirect costs may differ materially from the estimated indirect costs. Refer to Section 7.3.1.4 for more information.

3 The Investment Manager Management fee is 0.60% per annum of the Deployed Capital of the Fund.

38

7.3

Additional explanation of fees and costs

All costs assume that gross proceeds of $50 million are achieved and employed immediately under the Offer.

7.3.1

Management costs

The management costs are the fees and costs charged for the management and administration of the Fund, as well as an estimate of all ordinary expenses recoverable by the Responsible Entity in operating the Fund and payable. Management costs also include estimated indirect costs. Management costs reduce the NAV of the Fund and are reflected in the NAV per Unit.

7.3.1.1

Responsible Entity Management Fee

Responsible Entity is entitled to a Management Fee of 0.05% p.a. (exclusive of GST) of the gross value of the assets of the Fund1 during the relevant year for its role in managing and administering the Fund which equates to 0.05% of the NAV of the Fund. The Responsible Entity Management Fee may be paid out of income or capital.

7.3.1.2

Investment Manager Management Fee

The Investment Manager is entitled to a Management Fee for providing services under the IMA, equivalent to 0.60% p.a. of the Deployed Capital of the Fund plus the net amount of GST of 0.02% (totaling 0.62%), which equates to 0.62% p.a. of the NAV of the Fund1, calculated and accrued daily, and paid to the Investment Manager monthly in arrears out of the Fund’s assets.

7.3.1.3

Recoverable expenses and abnormal or extraordinary expenses

Recoverable expenses are incurred in relation to the ordinary and everyday expenses incurred in operating and administering the Fund and are deducted from the assets of the Fund as and when they are incurred. These include, but are not limited to: • costs incurred by the Responsible Entity in accordance with the Constitution;

costs or irregular expenses that may occur from time to time).

7.3.1.4

Indirect Costs

In general, indirect costs are any amounts that directly or indirectly reduce the returns on the Units that are paid from the Fund (other than the Management Fees, ongoing expenses and transactional and operational costs), or the amount or value of the income or assets of the Fund (including any underlying asset of the Fund).

The Responsible Entity estimates indirect costs for the Fund to be 0.22% p.a. of the NAV of the Fund.

The amount of indirect costs set out in the fees and costs table (Section 7.2) are an estimate in respect of the financial year ending 30 June 2021 (adjusted to reflect a 12-month period). The indirect costs are based on the Responsible Entity’s reasonable estimates of indirect costs, and are based on the assumptions noted above, however, actual indirect costs for future years may differ. Indirect costs are deducted from the returns on your investment in the Fund or the Fund’s assets as a whole. They are reflected in the NAV per Unit and are not an additional cost to Unitholders. Details of any future changes to indirect costs may be provided on the Fund’s Website.

7.3.2

Offer Costs

The one off costs associated with the Offer (including registration, advertising, advisory, legal, accounting, tax and administrative fees; and any other applicable costs associated with the Offer (Offer Costs) are estimated to be $145,000 (net of recoverable GST). For the avoidance of doubt these costs are one off and incurred prior to the issue of Units under the Offer. These one-off costs equate to 0.29% of the NAV of the Fund. The dollar value of these net costs based on an average account balance of $50,000 is $145.

Under the Constitution, the Responsible Entity is entitled to pay the Offer Costs out of the Fund’s assets.

7.3.3

Fees to related parties

• audit fees;

Members of the 360 Capital Group may also earn additional fees in relation to services with the Fund engages them to undertake from time to time on an arm’s-length basis. Currently no such service arrangements exist.

• legal fees;

7.3.4

• independent consulting and report preparation fees;

The Fund may incur certain transactional and operational costs associated with the operation of the Fund. These include: brokerage, settlement costs, clearing costs, stamp duty and other government taxes or charges, as well as costs such as due diligence costs, OTC derivative hedging costs and include the transaction costs incurred by the underlying assets of the Fund.

• compliance committee costs;

• asset custody expenses; and • bank fees, government fees and taxes.

The Responsible Entity estimates that the Fund will incur expenses of approximately 0.04% of the NAV of the Fund per annum. The estimate has been included in the tables set out in Sections 7.1 and 7.2.

In addition to ordinary expenses described above, the Responsible Entity reserves the right to recover abnormal or extraordinary expenses out of the Fund, under the Fund Constitution. Abnormal or extraordinary expenses are any costs or expenses incurred outside the normal day-to-day operation and administration of the Fund (such as costs of Unitholder meetings, legal advice/proceedings, indemnity claims, restructuring costs, costs associated with Unit pricing errors or any other unforeseen

Transactional and Operational Costs

These costs may be paid for by the Fund when they are incurred and may vary depending on the number and frequency of Fund transactions.

It is anticipated that the transactional and operational costs will be approximately 0% of the NAV of the Fund (inclusive of GST, less RITC) adjusted to reflect a 12-month period. This is because such costs are usually borne by borrowers. Actual transactional and operational costs may vary materially from the estimate.

1 This reflects that there is no gearing.

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39

Section 7 : Fees and Costs (continued)

7.3.5

Buy Spread and Sell Spread

The Buy Spread and Sell Spread is a fee to recover transaction costs incurred by the Fund and its underlying investments when acquiring and selling investments. The Buy Spread and Sell Spread are an additional cost to Unitholders but are held in the Fund and are not passed through to the Responsible Entity or the Investment Manager.

As at the date of this PDS, the Buy Spread is 0.25% and the Sell Spread is 0.25%. This amount may change from time to time as buy/sell spreads vary depending on the nature of the charges and the volume and types of assets being bought and sold.

The prevailing Buy Spread and Sell Spread will be published on the Fund website. The dollar value of the Buy Spread on an application of $50,000 is $125. The dollar value of the Sell Spread on a withdrawal of $50,000 is $125.

The transaction costs for the Fund are not able to be accurately estimated at this point in time as they will be determined by, among other factors, the amount of capital raised and the types of loans entered into. Details of any future changes to transaction costs (including the Buy Spread and Sell Spread) will be published on the Fund Website.

7.3.6

Total fees and costs

Based on the estimated costs outlined in this Section 7, the estimated total of the amounts for management costs and net transactional and operational costs is estimated as 0.93% per annum of the NAV of the Fund. The dollar figure of these estimated total management costs and net transaction costs based on an investment balance of $50,000 is $465.

7.3.7

Potential fees in certain circumstances

The Investment Manager may be entitled to further fees and expenses payable out of the Fund’s assets in circumstances where the IMA is terminated.

7.3.8

Sub-Trust Structure

The Fund invests via one or more managed investment scheme Sub-Trusts (refer to Section 4.5). Neither the Responsible Entity nor the Investment Manager charge a fee in connection with the Fund’s investment in the Sub-Trust. All fees are charged at the Fund level. All fees and costs referred to in this PDS are inclusive of the fees and costs of the Sub-Trust. Accordingly, the interposed Sub-Trust does not result in additional fees and costs to Unitholders in addition to those set out in this PDS. 7.3.9 Tax In addition to the fees and costs described in this Section 7, Unitholders should also consider the government taxes and other duties that may apply to an investment in the Fund.

Refer Section 9.

7.3.10

Adviser Fees

No commissions will be paid by the Responsible Entity to financial advisers. You may incur a fee for the advice provided to you by your adviser, but this does not represent a fee that the Responsible Entity has charged you for investing in the Fund and is not an amount paid out of the assets of the Fund. The Responsible Entity recommends that you check with your adviser if you will be charged a fee for the provision of their advice.

40

7.3.11

Borrower fees

The Investment Manager is entitled to charge and retain establishment fees on loans made by the Fund. These fees are charged to the borrower and are not a cost of the Fund. These fees are typically between 1-2% of the facility limit.

The Investment Manager may receive additional fees from the borrowers of the relevant loans of the Fund. These fees will not be paid from the assets of the Fund but will be paid by the borrower to the Fund. These fees will not be a cost to the Fund and in certain circumstances may be retained within the Fund.

7.3.12

Can fees be different for different Unitholders?

The Investment Manager and the Responsible Entity may, from time to time, negotiate a different fee arrangement (by way of a rebate of fees or reduced fees) with certain Wholesale Clients or otherwise in accordance with ASIC requirements. Any fee rebates will be paid out of the assets of the Investment Manager or the Responsible Entity (as applicable) and will not be paid from the assets of the Fund. The size of the investment and other relevant factors may be taken into account.

The terms of these arrangements are at the discretion of the Investment Manager and the Responsible Entity (as applicable).

The contact details of the Investment Manager and the Responsible Entity are contained in Section 15.

7.3.13

Can the fees change

All fees in this PDS can change. Reasons for a change may include changing economic conditions and changes in regulation.

Fees may also change due to an increase in GST payable or a change to RITCs entitled to be claimed by the Fund.

Any estimates of fees and costs in this PDS are based on information available as at the date of this PDS. As such, the actual fees and costs may differ and are subject to change from time to time. The Constitution sets the maximum amount the Responsible Entity can charge for fees. If the Responsible Entity wishes to raise fees above the amounts allowed for in the Constitution, the Responsible Entity would need to amend the Constitution in accordance with the Corporations Act and the relevant provisions in the Constitution.

The Responsible Entity can change the fees referred to in this PDS without consent, subject to the maximum fee amounts specified in the Constitution. The Responsible Entity will give Unitholders at least 30 days’ advanced notice of any proposed change to these fees, if applicable.

Section 8 : Financial Information

8.1 Introduction The Fund is a managed investment scheme which was registered with ASIC on 21 October 2020. The Fund was established in connection with the Offer and has not undertaken any trading activities to date. Refer to Section 4 for further information.

Directors’ material assumptions in the preparation of the Pro Forma Historical Financial Information

The Pro Forma Historical Financial Information has been prepared by the Responsible Entity on the basis of the following assumptions:

This Section 8 contains a summary of the financial information of the Fund, which includes: (a) The unaudited pro forma statement of financial position as at the date of this PDS (Pro Forma Historical Financial Information) (see Section 8.2);

a) Application of the significant accounting policies set out in Section 8.6;

(b) Directors’ material assumptions used in the preparation of the Pro Forma Historical Financial Information (see Section 8.3); (c) Capital structure of the Fund on completion of the Offer (see Section 8.4); (d) Pro Forma cash of the Fund (see Section 8.5); and (e) Significant accounting policies of the Fund (see Section 8.6).

b) The column headed “Pro Forma Historical Financial Information” has been prepared on the basis of subscriptions for 50 million Units by Applicants under this PDS at an issue price of $1.00 per Unit; and c) The initial costs and expenses to establish the Offer (refer to 7.3.2) are to be paid by the Fund and capitalised in equity.

8.4 Pro Forma capital structure

The information in this Section 8 should also be read in conjunction with the risk factors set out in Section 6 and other information contained in this PDS.

Set out below is the anticipated capital structure of the Fund on completion of the Offer.

8.2 Pro Forma Historical

Financial Information

Pro Forma Historical Financial Information

The Pro Forma Historical Financial Information set out below is unaudited and has been prepared to illustrate the financial position of the Fund following completion of the Offer as if such events had occurred as at the date of this PDS. The Pro Forma Historical Financial Information is intended to be illustrative only and will not reflect the actual position and balances as at the date of this PDS or at the completion of the Offer. The Pro Forma Historical Financial Information has been prepared in accordance with the principles and significant accounting policies set out in Section 8.6.

Pro Forma Statement of Financial Position

8.3

Pro Forma Historical Financial Information

50,000,000

Units1 NAV per Unit

1 Any Units issued upon initial settlement of the Fund will be automatically redeemed on the allotment date in accordance with the Constitution.

2 NAV per Unit is calculated as the Fund’s net asset position attributable to Unitholders in the Pro Forma Historical Financial Information in Section 8.2 divided by the corresponding number of Units subscribed.

8.5 Pro Forma cash Set out below is a reconciliation of the Pro Forma cash balance under the Offer.

Pro Forma Historical Financial Information

($’000)

Assets

($’000) Proceeds of the Offer

Cash

49,855

Offer Costs

Total Assets

49,855

Estimated net cash position

Liabilities Liabilities

–

Total Liabilities

–

Equity

$0.997

2

Issued Equity

49,855

Total Equity

49,855

Net Assets attributable to Unitholders

49,855

50,000

(145) 49,855

The proceeds of the Offer will be used to execute the Investment Strategy, outlined in Section 4.3.

8.6 Significant accounting policies A summary of significant accounting policies that have been adopted in the preparation of the unaudited Pro Forma Historical Financial Information set out in Section 8.2, and which will be applied prospectively in the preparation of the financial statements of the Fund for the financial year ending 30 June each year, is set out as follows.

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41

Section 8 : Financial Information (continued)

8.6.1

Basis of preparation

The Pro Forma Historical Financial Information has been prepared in accordance with the recognition and measurement principles contained in Australian Accounting Standards (AAS) and interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and the Corporations Act. AAS sets out an accounting framework that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with AAS ensures that the Pro Forma Historical Financial Information and notes also comply with the recognition and measurement requirements of International Financial Reporting Standards (“IFRS”).

The financial information presented in this PDS is presented in an abbreviated form and does not contain all of the presentation and disclosures that are usually provided in an annual report prepared in accordance with AAS. The Pro Forma Historical Financial Information has been prepared on the basis of the assumptions outlined in Section 8.3.

8.6.2

Functional and presentation currency

The Pro Forma Historical Financial Information is presented in Australian dollars, which is the Fund’s functional currency.

8.6.3

Use of estimates and judgements

The preparation of the Pro Forma Historical Financial Information requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The Responsible Entity will make judgements, estimates and assumptions associated with the measurement of the Fund’s financial assets, including estimating the loss allowance for assets measured at amortised cost and in measuring fair value. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

8.6.4 Consolidation Controlled entities The consolidated financial statements will comprise the financial statements of the Fund and its subsidiaries. Subsidiaries are entities (including Sub-Trust’s and structured entities) over which the Fund has control. Subsidiaries will be consolidated under AASB10 and IFRS10 on the basis that the Fund has control and the Fund will prepare consolidated financial statements.

Control is achieved when the Fund: i.

42

has the power over each respective investee;

ii. is exposed, or has rights, to variable returns from its involvement with the investee; and iii. has the ability to use its power to affect its returns.

The Responsible Entity will reassess whether or not the Fund controls each respective investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Fund has less than a majority of voting rights of in a investee, the Responsible Entity considers that the Fund has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Responsible Entity considers all relevant facts and circumstances in assessing whether or not the Fund’s voting rights in each respective investee are sufficient to give it power, including: i.

the size of the Fund’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

ii. potential voting rights held by the Fund, other vote holders or other parties; iii. rights arising from other contractual arrangements; and iv. any additional facts and circumstances that indicate that the Fund has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Fund obtains control over the subsidiary and ceases when the Fund loses control of the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Fund and to the non‑controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Fund and to the non‑controlling interests even if this results in the non‑controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Fund’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members are eliminated on consolidation.

8.6.5

Financial Instruments

(i) Classification Financial assets The Fund classifies its financial assets as subsequently measured at amortised cost, measured at fair value through other comprehensive income or measured at fair value through profit or loss on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. a) Financial assets measured at fair value through profit or loss

A financial asset is measured at fair value through profit or loss if: i. its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding; or

ii. it is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell; or iii. at initial recognition, it is irrevocably designated as measured at fair value through profit or loss when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. b) Financial assets measured at fair value through other comprehensive income A financial asset is measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by collecting the contractual cash flows as well as selling financial assets, and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. c) Financial assets measured at amortised cost A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial liabilities a) Financial liabilities measured at amortised cost

This category includes all financial liabilities that will subsequently be measured at amortised cost. The Fund includes short-term payables in this category.

comprehensive income.

Financial assets and liabilities, other than those classified as at fair value through profit or loss, are subsequently measured using the effective interest method and financial assets are subject to impairment. Gains and losses are recognised in profit or loss when the asset or liability is derecognised, modified or impaired. (v) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Fund.

The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price without any deduction for transaction costs.

For all other financial instruments not traded in an active market, the fair value is determined using valuation techniques deemed to be appropriate in the circumstances. Valuation techniques include the market approach (i.e. using recent arm’s length market transactions, adjusted as necessary, and reference to the current market value of another instrument that is substantially the same) and the income approach (i.e. discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible).

(ii) Recognition and derecognition

(vi) Fair value hierarchy

The Fund recognises a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace are recognised on the trade date, i.e. the date that the Fund commits to purchase or sell the asset.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or the Fund has transferred substantially all the risks and rewards of ownership.

Financial liabilities are derecognised when the obligations under the liabilities are discharged. (iii) Initial measurement Financial assets and financial liabilities held at fair value through profit or loss are recorded in the statement of financial position at fair value. All transaction costs for such instruments are recognised directly in profit or loss.

Financial assets and liabilities (other than those classified as at fair value through profit or loss) are measured initially at their fair value plus/minus any directly attributable incremental costs of acquisition or issue. (iv) Subsequent measurement After initial measurement, the Fund measures financial instruments which are classified as at fair value through profit or loss at fair value. Subsequent changes in the fair value of those financial instruments are recorded in the statement of

i.

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities. ii. Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. iii. Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Assessing the significance of a particular input requires judgement, considering factors specific to the asset or liability. (vii) Impairment At each reporting date, the Fund shall measure the loss allowance on financial assets at amortised cost at an amount equal to the lifetime expected credit losses if the credit risk has increased significantly since initial recognition. If, at the reporting date, the credit risk has not increased significantly since initial recognition, the Fund shall measure the loss allowance at an amount equal to 12-month expected credit losses. Significant financial difficulties of the counter party, probability that the counter party will enter bankruptcy or financial reorganisation, and default in payments are all considered indicators that credit loss has increased significantly. If the credit risk increases to the point

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43

Section 8 : Financial Information (continued)

that it is considered to be credit impaired, interest income will be calculated based on the gross carrying amount adjusted for the loss allowance.

8.6.6

Net assets attributable to Unitholders – Equity

The Responsible Entity does not currently intend for the Units in the Fund to be listed on the ASX. The Units issued by the Fund have been classified as equity.

8.6.7

Investment income

Interest income is recognised in the statement of comprehensive income for all interest-bearing financial instruments using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial instrument. When calculating the effective interest rate, the Fund estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, including transaction costs and all other premiums or discounts.

Other income is brought to account on an accruals basis.

8.6.8 Expenses All expenses are recognised in the statement of comprehensive income on an accruals basis.

Interest expense, if any, is recognised in the statement of comprehensive income as it accrues, using the effective interest method.

8.6.9 Distributions The Fund will distribute its income, in accordance with the Fund’s Constitution, to Unitholders by cash. Distributions to Unitholders are recognised directly in equity and presented in the statement of changes in equity. A distribution payable is recognised in the statement of financial position where the amount remains unpaid at the reporting date.

8.6.10

Australian Income Tax

The Responsible Entity of the Fund intends to make an election to be an Attribution Managed Investment Trust (AMIT) where the Fund is eligible to do so. Investors will be advised if this election is made.

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Under current income tax legislation, the Fund should not be subject to income tax provided that in relation to each financial year either Unitholders are made presently entitled to all of the net income/taxable income of the Fund (if the Fund is not an AMIT) or all of the taxable income and tax offsets of the Fund are fully attributed to Unitholders (if the Fund is an AMIT).

8.6.11

Australian Goods and Services Tax (GST)

The Fund will be registered for GST. The issue or redemption of Units in the Fund will not be subject to GST. The Fund may be required to pay GST on management and other fees, charges, costs and expenses incurred by the Fund. However, the Fund may be entitled to input tax credits and reduced input tax credits in respect of the GST incurred.

Revenues, expenses and assets are recognised net of the amount of GST, unless GST incurred is not recoverable from the ATO. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

8.6.12

Cash and cash equivalents

Cash and cash equivalents includes cash at bank, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

8.6.13

Foreign currency translation

Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised as net foreign exchange gains/(losses) in the statement of comprehensive income.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined. Translation differences on assets and liabilities carried at fair value are reported in the statement of comprehensive income within net gains/(losses) on financial instruments held at fair value.

8.6.14 Derivatives In the normal course of business, the Fund may enter into transactions in various derivative financial instruments with certain risks. A derivative is a financial instrument or other contract which is settled at a future date and whose value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable.

Derivative financial instruments require no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. Derivative transactions include many different instruments, such as forwards, futures, options and swaps. Derivatives are considered to be part of the investment process and the use of derivatives may form part of the Fund’s portfolio management. If derivatives are entered into by the Fund, a decision on whether to apply hedge accounting will be made at that time.

8.6.15

Earnings per Unit

Earnings per Unit are calculated by dividing the profit or loss of the Fund by the weighted average number of Units outstanding during the financial period.

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Section 9 : Taxation

Australia A summary of the general Australian taxation considerations for the Fund and Unitholders in the Fund is set out below. The taxation information provided below is intended only as a brief guide. The information applies only to current and prospective Unitholders of the Fund who: •

are Australian tax resident individuals;

•

are subject to Australian tax (that is, are not exempt from Australian tax); and

•

hold their investments on capital account.

This summary does not consider the Australian tax considerations that may be relevant for: •

Unitholders in the Fund who are not Australian tax resident individuals, including financial institutions, insurance/life insurance companies, partnerships, tax exempt organisations or temporary residents;

•

Unitholders who hold (or will hold) units in the Fund as trading stock or on revenue account, or who are exempt from Australian income tax, or are subject to the Taxation of Financial Arrangements (TOFA) rules in Division 230 of the Income Tax Assessment Act 1997;

•

Dealers in the Units;

•

Australian residents who hold their Units as part of an enterprise carried on at or through a permanent establishment in a foreign country;

•

Unitholders who change their tax residence while holding Units; or

•

Unitholders who invest indirectly into the Fund through directed portfolio services, master funds or other portfolio administration services.

The comments below are based on the relevant taxation laws in the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, A New Tax System (Goods & Services Tax) Act 1999, the Income Tax Rates Act 1986 and the Taxation Administration Act 1953 (referred to collectively herein as the Australian Tax Act) as at the date of this document and the associated administrative instruments, except where otherwise indicated.

The information below is based on existing tax law and established interpretations as at the date of this PDS. The taxation of unit trusts such as those that make up the Fund can be complex and may change over time. Accordingly, Unitholders are recommended to seek professional taxation advice in relation to their own position.

Australia is in the process of major tax reform. It is possible that future legislation or changes made to the administration interpretation of the existing law will affect the matters considered in this summary.

The information contained in this document does not constitute “financial product advice” within the meaning of the Corporations Act 2001 (Cth) (Corporations Act). To the extent that this document contains any information about a “financial product” within the meaning of the Corporations Act, taxation is only one of the matters that must be considered when making a decision about the relevant financial product. This summary has been prepared for general circulation and does not take into account the objectives, financial situation or needs of any recipient of the PDS.

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Accordingly, any recipient should before acting on this material, consider taking independent financial advice from a person who is licensed to provide financial product advice under the Corporations Act.

9.1

Taxation of the Fund

General The income tax treatment of the Fund and its Unitholders depends on whether the Fund qualifies, firstly, as a Managed Investment Trust (MIT) and secondly, as an Attribution Managed Investment Trust (AMIT) and elects for tax treatment under the AMIT tax regime.

The Responsible Entity expects that the Fund will qualify as a MIT as well as an AMIT and intends to make the irrevocable election for the Fund and Unitholders to be taxed under the AMIT tax regime. In broad terms, this means that the Responsible Entity of the Fund should generally not be liable to pay income tax on the net (i.e. taxable) income of the Fund on the basis that all of the taxable income and tax offsets of the Fund are fully attributed to Unitholders (if the Fund is an AMIT and is not a public trading trust).

If the Fund does not fall within the AMIT rules, the general taxation rules on trusts will apply to the Fund such that the Fund should be treated as a ‘flow through’ entity for income tax purposes.

Accordingly, the Responsible Entity of the Fund should generally not be liable to pay income tax on the net (i.e. taxable) income of the Fund on the basis that the Unitholders will have a present entitlement to all of the income of the Fund (if the Fund is not an AMIT or a public trading trust).

Consequently, the Unitholders should be the persons who will be taxed on the taxable income of the Fund.

Public Trading Trust Rules The taxation treatment for the Fund will also depend on whether the Fund is a “public trading trust” under Division 6C of the Income Tax Assessment Act 1936 during a particular income year. In order to be treated as a public trading trust for a particular income year, the Fund must be both a public unit trust and a trading trust for that income year.

Generally, a unit trust is a public unit trust in relation to a year of income if any of the following are satisfied at any time during the year: (a) any of the units were listed for quotation in the official list of a stock exchange in Australia or elsewhere; (b) any of the units were offered to the public; (c) the units in the trust were held by not fewer than 50 persons; or (d) units carrying entitlement to 20% or more of the income or property of the trust are effectively owned by ‘exempt entities’.

On the basis that the Units in the Fund will be offered to the public, the Fund will be a public unit trust and this summary has been prepared on this basis.

A unit trust is a trading trust if at any time during the income year, the trustee carried on or was able to control a ‘trading business’.

A trading business is any activity other than ‘eligible investment business’. Broadly, eligible investment business includes investing

or trading in all or any of a number of categories of debt securities and derivatives, or investing in land for the primary purpose of deriving rental income.

The Responsible Entity expects that the Fund should not derive income other than from an eligible investment business for income tax purposes. Therefore, the Fund should not be regarded as a public trading trust. It is important to note that the requirements for a public trading trust are ongoing so that the tax position of the Fund in any year will depend on the actual operations in that year.

As discussed above, provided the Fund continues to fall outside the public trading trust rules in Division 6C, the Fund should not be liable to tax in its own right.

MIT and AMIT Aspects

included in each Unitholder’s annual tax statement referred to as an ‘AMIT Member Annual Statement’ (AMMA).

Taxation of Financial Arrangements (TOFA) The TOFA rules may apply to financial arrangements (e.g. loans that are debt interests for tax purposes) held by the Fund when calculating the assessable income of the Fund. Broadly, the TOFA rules may require certain gains and losses (including gains and losses on disposals) on financial arrangements to be recognized on an accruals basis (where the gains/losses are sufficiently certain) or realisation basis, on revenue account, unless a specific TOFA elective methodology is adopted. Given the intended Fund size, the TOFA rules should not automatically apply to the Fund but may apply in the future and if the Responsible Entity elects for the Fund to enter the TOFA regime.

As mentioned above, the Fund is expected to qualify as a MIT for Australian tax purposes. For the Fund to qualify as a MIT in relation to an income year, the Fund must satisfy a number of conditions including conditions relating to being widely held by Unitholders.

The Responsible Entity expects that the Fund should satisfy the conditions for the Fund to be a MIT including the widely held conditions.

Tax Losses

If eligible, the Trusts may elect to become an AMIT. The Responsible Entity intends to make an election for the Fund to be an AMIT, where it is able to do so. This summary has been prepared on the basis that the election is made.

Any unutilised net capital losses should be able to be carried forward and offset against future capital gains derived by the Fund. There are generally no restrictions on utilising carried forward net capital losses incurred by a trust.

On the basis that the Responsible Entity elects for the Fund to enter into the AMIT regime, the following will apply:

9.2 Taxation of Australian Tax Resident Unitholders

(a) Attribution on a fair and reasonable basis

Each year, the Fund’s ‘determined trust components’ of assessable income, exempt income, non-assessable non-exempt income and tax offsets (i.e. tax credits) will be ‘attributed’ to Unitholders on a ‘fair and reasonable’ basis, having regard to their income and capital entitlements under the constituent documents and certain other secondary information.

(b) ‘Unders’ or ‘Overs’ timing adjustments

Where the determined trust components of the Fund for a year are revised in a subsequent year (e.g. due to actual amounts differing to the estimates of income, gains/losses or expenses used in determining the amounts attributed to unit holders), then ‘unders’ and overs’ may arise. ‘Unders’ and ‘overs’ will generally be carried forward and adjusted as timing differences in the year of discovery, as opposed to amendments being required to tax statements of the relevant income year (although the Responsible Entity is able to choose to do so).

(c) Cost base adjustments

Where the distributions made by the Fund are less than (or more than) certain tax components attributed to Unitholders, then the tax cost base of a Unitholder’s Units may be increased (or decreased). Upward cost base adjustments are an additional feature provided by the AMIT regime and are intended to mitigate double taxation. In certain circumstances, capital gains may be specifically allocated to Unitholders (e.g. where a large redemption triggers capital gains in the Fund).

Details of the net annual tax cost base adjustment will be

Where a revenue loss or net capital loss is incurred by the Fund, the loss must be quarantined within the trust and cannot be allocated to Unitholders for tax purposes. Instead, revenue tax losses should be able to be carried forward and offset against assessable income derived by the Fund in future years subject to satisfying the relevant trust loss recoupment tests.

On the basis that the Fund elects to be an AMIT, then the AMIT provisions require the taxable income of the Fund to be attributed to Unitholders on a fair and reasonable basis, having regard to their income and capital entitlements under the Constituent documents of the Fund. For each year that the Fund is an AMIT, the Responsible Entity will seek to allocate the taxable income of the Fund to Unitholders on a fair and reasonable basis.

Unitholders will be subject to tax on the taxable income of the Fund that is attributed to them. Unitholders will receive an AMMA tax statement after the end of each financial year providing them with details of the amounts that have been attributed to them by the Fund to assist in the preparation of their tax return.

Attributed amounts from the Fund may include various components, the taxation treatment of which may differ. For example, an attributed amount from the Fund to Unitholders may include Australian interest and other income components, a foreign income component (including foreign income tax offsets, if relevant), as well as net capital gains.

Difference between cash and tax amounts For a given income year, Unitholders could receive cash distributions that are greater or less than the taxable amounts reported to them.

Broadly, where the cash amount distributed exceeds the taxable income attributed to a Unitholder, the Unitholder’s tax cost base in its Units is reduced by the amount of the excess. If the cost base is reduced to zero, further reductions are assessable as a realised capital gain to the Unitholder. Conversely, when the taxable

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Section 9 : Taxation (continued)

income attributed to a Unitholder exceeds the cash amount distributed, to mitigate double taxation, under the AMIT regime, the Unitholder’s tax cost base is increased accordingly.

The net annual tax cost base adjustment amount (the AMIT cost base net amount) will be detailed in an AMMA tax statement, which will be sent annually to Unitholders after year-end.

Disposal of assets by the Fund On the basis that the assets to be held by the Fund should be debt interests for Australian tax purposes, the CGT rules are expected to have limited application. However, where an asset that is subject to the CGT regime is owned by the Fund for at least 12 months is disposed of, the Fund will receive a 50% CGT discount on the capital gain realized (subject to the ‘Proposed Law Changes’ outlined below). Where a trust distribution includes a capital gain component, it may include: •

•

A discount capital gain – amounts attributed of a character relating to “discounted capital gains” represents assessable net capital gains that have been subject to a 50% CGT discount at the Fund level. A CGT discount may be available for certain resident investors, such as individuals and superannuation funds, and Unitholders should make adjustments for this component as relevant in the calculation of their net capital gains from all other sources; and An AMIT CGT gross up amount – this component represents the additional amount treated as a capital gain (due to the 50% CGT discount). Note: the AMIT CGT gross up amount should not be included in your assessable income, however the AMIT CGT gross up amount will be factored into the calculation of the net annual tax cost base adjustment amount of your Units as discussed above.

Proposed Law Changes Under proposals announced in the 2018-19 Budget on 8 May 2018 (and the revised commencement date announced in the July 2020 Economic and Fiscal Update), the Government intends to prevent MITs and AMITs from applying discount capital gains treatment at the trust level. This measure is intended to apply on or after three months after the date of Royal Assent of the enabling legislation (although draft legislation to enact this measure has yet to be released). If this measure is enacted and the Fund qualifies as a MIT in respect of a financial year (whether or not it is also an AMIT), the Responsible Entity of the Fund will attribute gross capital gains, with discount capital gains treatment then being applied only at the investor level, if applicable.

Disposal of Units in the Fund Broadly, an Australian resident Unitholder will derive a capital gain on the disposal of Units to the extent that the capital proceeds received on disposal exceeds the CGT cost base of the Units held.

A Unitholder will incur a capital loss on the disposal of Units to the extent that the capital proceeds on disposal are less than the CGT reduced cost base of the Units held. A CGT discount may be available for certain resident investors, such as individuals and superannuation funds who have held their Units for greater than 12 months.

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Australian Taxation for New Zealand Resident Investors Distributions Attribution components that are comprised of interest will generally be subject to a 10% final withholding tax on payment to non-resident Unitholders. Given that the assets of the Fund will be largely debt interests, it is expected that interest will be the main tax component attributed to Unitholders.

In addition, on the basis that the Fund is a withholding MIT, distributions that are made that qualify as ‘fund payments’ (a defined term) will be subject to specific withholding tax rules. A fund payment is broadly any payment or ‘deemed payment’ by the trustee of the Fund to investors that is Australian sourced ‘other’ income (i.e. other than dividend, interest or royalties) or a capital gain from ‘taxable Australian property’.

The trustee will generally be required to withhold from fund payments made to non-resident investors at a rate of 15% for investors that provide an address or place of payment for the distribution in an information exchange country (such as New Zealand), or otherwise at a rate of 30%.

Disposal of Units in the Fund by New Zealand Resident Investors Any capital gain or capital loss from the disposal of Units by an investor who is a non-Australian resident should only be taxable (or recognised in the case of a capital loss) where their Units are considered to be ‘taxable Australian property’. Broadly, a Unit should be considered ‘taxable Australian property’ where the investor, alongside any associates, owns or owned 10% of the issued Units and where the market value of the Fund’s assets (both direct and indirect) that are taxable Australian real property exceeds the sum of the market values of its assets that are not taxable Australian real property (in which case the Units would be considered to be an ‘indirect Australian real property interest’).

Tax File Numbers and Australian Business Numbers A Unitholder need not quote a Tax File Number (TFN) when applying for Units in the Fund. However, if a TFN not quoted, or no appropriate TFN exemption information is provided, tax is required to be deducted from any income distribution entitlement at the highest marginal tax rate plus Medicare levy (currently 47 per cent). Unitholders that hold their Units as part of their business may quote their Australian Business Number instead of their TFN. Goods and Services Tax (GST) The acquisition and/or disposal of Units is not subject to GST. Generally, GST incurred on costs relating to the issue, acquisition or disposal of Units should not be recoverable in full. However, Unitholders are recommended to seek professional taxation advice in relation to their own position.

Stamp Duty No stamp duty should be payable by Unitholders on their acquisition of Units. In relation to any subsequent dealing in Units, the stamp duty implications will depend on the nature of the Fund and its investments at the relevant time. On this basis, Investors should make their own enquiries about the stamp duty implications of a future dealing in the Fund at the relevant time.

Foreign Account Tax Compliance Act (FATCA) In compliance with the US income tax rules commonly referred to as the FATCA and the Intergovernmental Agreement signed with the Australian Government in relation to FATCA, the Fund will be required to provide information to the ATO in relation to: • Unitholders who are individuals that are US citizens or tax residents (US persons); • Unitholders which are specified US entities or passive non-financial entities controlled by US persons.

TThe Fund is intending to conduct its appropriate due diligence (as required) to collect information about Unitholders (and their controlling persons as appropriate). The Fund reserves the right not the open an account, where the Unitholders do not provide appropriate information to the Fund.

Common reporting standards (CRS) The CRS is the single global standard for the collection of financial account information of Unitholders (and their controlling persons, where applicable) and the reporting and exchange of financial account information of certain Unitholders (and their controlling persons, where applicable) who have tax residency of a foreign jurisdiction. The CRS is similar to FATCA, whereby the Fund will need to collect information, including the tax residency of each Unitholder (subject to limited exceptions at the Responsible Entity’s determination), and report to the ATO similar financial account information of certain Unitholders (and their controlling persons, as applicable) who have tax residency of a foreign

jurisdiction. The Fund reserves the right not to open an account, where the Unitholders do not provide appropriate information to the Fund. The ATO may exchange this information with the participating foreign tax authorities of those non-residents.

By making an Application for Units, each prospective Unitholder agrees to provide the required information (related to its and its controlling persons, if applicable, tax residency and related information) requested by the Responsible Entity, on behalf of the Fund, in order to comply with the FATCA and CRS regimes and upon becoming a Unitholder, to update the Responsible Entity promptly if there is any change to this information provided.

New Zealand Taxation of New Zealand resident Unitholders The summary below is based on the relevant New Zealand tax law in force, established interpretations of that law and understanding of the practice of the relevant tax authority at the time of issue of this PDS. The precise implications of ownership or disposal of the Unitholders will depend upon each Unitholder’s specific circumstances. It is recommended that all New Zealand tax resident Unitholders consult their own independent tax advisers regarding the income tax and GST consequences of acquiring, owning and disposing of Units, having regard to their specific circumstances.

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Section 9 : Taxation (continued)

New Zealand GST

Tax treatment under FIF Regime

The issue and redemption of Units in the Fund will not be subject to New Zealand GST.

Under the FIF regime, a Unitholder will generally be deemed to derive taxable income equal to 5% of the market value of the Units held at the beginning of the income year (fair dividend rate, or FDR method).

Income Tax For New Zealand tax purposes, the Fund, being an Australian unit trust, is deemed to be a company. New Zealand resident investors are treated as holding shares in an Australian resident company.

Any profits from selling or redeeming the Units and any dividends or redemption proceeds received are disregarded (except as described in the following paragraphs).

The summary set out below assumes that you and your associates do not together hold 10% or more of the total Units on issue in the Fund.

If a Unitholder buys and later sells Units in the same income year, then the Unitholder may have additional taxable income equal to either:

Unitholders will be taxed on their Units under one of two regimes: the ordinary tax regime or the Foreign Investment Fund (FIF) regime.

• the actual gain from the Units both bought and sold during the income year (including any distributions received on those units) (actual gain method). For this purpose, the last Unit acquired is deemed to be the first sold; or

De Minimis Threshold Unitholders that are natural persons (and certain trusts) that hold Units in the Fund as well as other offshore equities (that are not in ASX listed Australian resident companies) that have a total cost of NZ$50,000 or less have a choice whether to be subject to the ordinary tax regime or the FIF regime.

Tax Treatment under the Ordinary Tax Regime

• 5% of the difference between the greatest number of Units the Unitholder held at any time during the income year and the number of Units held at the beginning or end of the year (whichever produces the smaller difference), multiplied by the average cost of all Units acquired by the Unitholder during the income year (peak holding method).

• Any distributions will be dividend income for the Unitholder;

The Unitholder must apply the method which produces the lesser amount of additional income when applied consistently to all of their FIF interests bought and sold in the same income year.

• Withdrawal by redemption of Units will give rise to dividend income for the Unitholder equal to the difference between:

There are a number of different versions of this method used by Unitholders that are managed funds.

Under the ordinary tax regime:

– the redemption proceeds; and – the average issue price of all the Units multiplied by the number of the Unitholder’s Units which are redeemed; and In addition to tax on dividends, a Unitholder will be taxed on any gains from the sale or redemption of Units only if the Unitholder acquired the Units either: • for the purpose of disposal; • as part of a profit making scheme or undertaking; or • as part of a business in respect of which the sale of such investments is an ordinary incident.

Amounts taxed as dividends will not also be taxed as gains from sale.

If an Unitholder is a natural person or a family trust and its actual realised and unrealised return together with distributions and dividends from their total portfolio of offshore equities (excluding ASX listed Australian resident companies) is lower than the amount calculated under the FDR method described above, then the Unitholder can elect to be taxed on their actual realised and unrealised returns – including distributions and dividends (the comparative value or CV method). If chosen, this method must be applied across all the Unitholder’s offshore equities (excluding ASX listed Australian resident companies).

It is noted that the application by a Unitholder of a certain method for calculating taxable income under the FIF regime in respect of Units held in the Fund may have implications for other investments that the Unitholder holds that are also subject to the FIF regime.

A Unitholder will also need to make certain elections in respect of how amounts are converted to New Zealand dollars.

The FIF regime described above is subject to various exceptions and there are various restrictions as to the availability of methods for calculating income from FIF interests. Unitholders may not be able to apply the FDR method if they have entered into NZ dollar hedges in relation to their investment in the Fund. Unitholders should seek specific tax advice if they believe the FIF regime may apply to them.

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Section 10 : Key Documents and Material Contracts

10.1 Constitution of the Fund The Fund is governed by the Constitution and applicable laws. A summary of the key rights and obligations attaching to the Units and a description of the material provisions of the Constitution, are set out below.

This summary is not exhaustive, nor does it constitute a definitive statement of the terms of the Constitution. The rights and obligations attaching to ownership of Units are also governed by the Corporations Act and general law which are not discussed in full. If you invest in the Fund, you will be bound by the terms of the Constitution. A copy of the Constitution is available, free of charge, on request from the Responsible Entity. Please consider the Constitution and this PDS before investing in the Fund.

The constitution of the Sub-Trust will be on the same terms as the Constitution except that no fees will be charged.

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Units

The beneficial interests in the Fund is divided into units. A unit confers on the unitholder an undivided beneficial interest in the assets of the Fund as a whole, subject to Fund liabilities and not in parts or single assets. A unitholder holds a Unit subject to the rights, restrictions and obligations attaching to that Unit.

Unit Pricing

The Constitution makes provision for the issue price for Units.

No Redemption of Rights

Unitholder’s have no redemption rights. A buy-back may be implemented at the discretion of the Responsible Entity and must satisfy the Corporations Act.

Amendments to Constitution

Subject to the Corporations Act, the Constitution may be amended by a special resolution (as defined in the Corporations Act). Alternatively, the Responsible Entity can amend the Constitution if the Responsible Entity reasonably considers that the amendment will not adversely affect unitholder’s rights.

Liability of Unitholders

Subject to any separate agreement of acknowledgement by a unitholder or any tax amount arising in connection with a unitholder as set out in the Constitution, the liability of each Unitholder is stated in the Constitution to be limited to the amount unpaid (if any) in relation to the Unitholder’s subscription for their Units.

Responsible Entity's powers and duties

The Responsible Entity has all the legal capacity and powers both inside and outside Australia in respect of the Fund, that it is possible under the law to confer on a trustee and as though the Responsible Entity were an individual, who is the absolute owner of the assets of the Fund and acting in their personal capacity.

The Responsible Entity may appoint agents or delegates

The Responsible Entity may authorise any person to act as its agent or delegate, to assist with its duties and functions. The Responsible Entity may include in the authorisation, provisions to protect and assist those dealing with the agent or delegate as the Responsible Entity thinks fit.

The Responsible Entity has discretion in deciding how and when to exercise its powers

Subject to the law, the Responsible Entity may determine whether to exercise and, if so, the manner, mode and time of exercise of its duties, powers and discretions in its absolute discretion.

Entitlement to fees/ expense reimbursement

The Responsible Entity is entitled to be paid a fee as provided for in the Constitution (see Section 7.3.1.1) and to recover expenses from Fund assets, that are incurred by it in performing its role in connection with the Fund, subject in each case to the proper performance of its duties.

Responsible Entity's indemnity

The Responsible Entity is indemnified out of the assets of the Fund and can be reimbursed for any liability incurred by it, in its own capacity or through a delegate in relation to the proper performance of any of its duties in relation to the operation, administration and management of the Fund or otherwise in connection with the Fund.

Small holdings

In certain circumstances the Responsible Entity may sell any units held by a unitholder that is a less than marketable parcel, as provided in the applicable Constitution.

Meetings

Meetings may be convened and conducted in accordance with the Corporations Act and the Constitution. A resolution by a unitholder will bind all unitholders whether or not they voted or were present at the meeting, or whether or not they signed the resolution.

Distributions/ reinvestment

The Constitution provide for the Responsible Entity to make distributions and the Responsible Entity may decide whether to permit the unitholders to reinvest some or all of any distribution to acquire Units.

Section 10 : Corporate Governance and Fund Policies (continued)

Removal and retirement of the Responsible Entity

The Responsible Entity may voluntarily or compulsorily retire as permitted by law, which includes by calling a meeting of unitholders to pass a resolution with respect to appointing a new responsible entity. Unitholders may also call a meeting to vote on a resolution to remove the Responsible Entity.

Termination of the Fund

The unitholders may terminate the Fund through a special resolution as defined in the Constitution.

Alternatively, the Fund terminates at the earliest of a date determined by the Responsible Entity acting on a recommendation from the Investment Manager (or where no Investment Manager is appointed, the date determined by the Responsible Entity in its discretion) and advised to unitholders by notice in writing or the date on which the Fund otherwise terminates in accordance with the applicable Constitution.

ASX Listing Rules

If the decision is made to list the Fund and it is subsequently admitted to the Official List of the ASX, then, despite anything in the Constitution, if the ASX Listing Rules prohibit an act being done, that act must not be done. Nothing in the Constitution prevents an act being done that the ASX Listing Rules requires to be done. If the ASX Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be). If the ASX Listing Rules require the Constitution to contain a provision or not to contain a provision, the Constitution is deemed to contain that provision or not to contain that provision (as the case may be). If any provision of the Constitution is or becomes inconsistent with the Listing Rules, the Constitution is deemed not to contain that provision to the extent of the inconsistency.

Reorganisation Proposal

The Responsible Entity may at any time, without further reference to or further approval from Unitholders, do everything it reasonably considers to be needed or desirable to implement a reorganisation proposal, which includes: •

a transaction which enables all Unitholders to realise all or a substantial portion of their investment in the Fund;

•

a proposal to consolidate, divide or convert Units in a ratio determined by the Responsible Entity;

•

a proposal for stapling or a proposal for cessation of stapling;

•

a proposal that each Unitholder should exchange their Units for an equivalent value of units in the a trust of which the Responsible Entity is also the trustee and of which the only assets will, following the implementation of the proposal, be all of the Units on issue at that time;

•

a proposal whereby a written offer to transfer or redeem some or all of their Units is made to Unitholders or to specific Unitholders in consideration of any or all of the issue or transfer of units in another trust, or interests of whatever nature in or in relation to another entity; a cash payment; or a transfer of Fund assets;

•

a listing that does not involve an initial public offer; or

•

any other proposal to reorganise or restructure the capital of the Fund and, if relevant, any stapled entity, in any way.

If the Responsible Entity determines to enter into a reorganisation proposal, then the Responsible Entity has power to do all things which it considers necessary, desirable or reasonably incidental to give effect to the relevant proposal.

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10.2 Investment Management Agreement The Responsible Entity has appointed the Investment Manager on an exclusive basis, to be the manager of the Fund and has entered into the IMA. A summary only of the material terms of the IMA are set out below.

The investment management agreement in respect of the Sub-Trust will be on the same terms as the IMA except that no fees will be charged.

Parties

The Responsible Entity and the Investment Manager

Services

The services include: • Overseeing the Fund’s investment strategy; • Actively managing and supervising the Fund’s investments; • Developing acquisition and divestment strategies; and • Investment evaluation and implementation.

Term

The initial term of the IMA is 3 years.

The Unitholders may, by Special Resolution, remove the Investment Manager by written notice in any of the following circumstances: • gross negligence that has a material adverse effect on the Fund or which constitutes willful misconduct, fraud or bad faith of the relevant entity in connection with its obligations under the IMA; • insolvency of the Investment Manager; • the Investment Manager ceases to carry on business in relation to its activities as an investment manager; or • unremedied material breach of a provision of the IMA, by the Investment Manager, which is not remedied that causes a material adverse effect on the Fund, (each a Cause Event) provided the Unitholders have, by Special Resolution, approved a replacement.

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Fees

Management Fee The Investment Manager will be paid a Management Fee of 0.60% p.a. of Deployed Capital. The Investment Manager may (subject to any applicable laws) elect to take part or all of the Management Fee in Units. The Management Fee may be paid out of income or capital.

Expense Recovery

The Investment Manager is entitled to recover all taxes, costs charges and expenses properly incurred in connection with it carrying out its functions under the IMA, including in connection with the investment and management of the assets of the Fund.

Powers and discretions

In carrying out its functions under the IMA, the Investment Manager has the powers of a natural person to deal with the assets of the Fund.

Section 10 : Key Documents and Material Contracts (continued)

Effect of Termination

In circumstances where the Investment Manager has been removed for a Cause Event, the following must be paid: • any accrued (as at the date of removal) and unpaid fees and other monies payable to the Responsible Entity or the Investment Manager (as the case may be); • all charges and expenses incurred in enacting a handover to a replacement; and • all Offer Costs not already reimbursed.

Indemnity

The Responsible Entity will indemnify the Investment Manager for any loss it suffers in connection with the proper performance by it under the IMA. The Investment Manager will indemnify the Fund for any loss arising as a result of its default.

Conflicts

The Investment Manager may provide services to other entities in conflict with its obligations under the IMA. However, the Investment Manager must maintain policies and procedures for the purposes of managing any such potential conflicts.

Retirement

The Investment Manager may retire on 60 days’ notice to the Fund.

Amendment

Subject to any relevant laws, the IMA may be amended by the written agreement between the Responsible Entity and the Investment Manager.

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Section 11 : Corporate governance and fund policies

11.1 Corporate Governance Responsibility for the Fund’s proper corporate governance rests with the Responsible Entity. The Responsible Entity’s guiding principle in meeting this responsibility is to act honestly, in good faith and in the best interests of the Fund as a whole.

The Responsible Entity has entered into the IMA with the Investment Manager pursuant to which the Investment Manager will provide certain investment management services to the Fund.

The Responsible Entity, with reliance upon the Investment Manager, will monitor the operational and financial position and performance of the Fund. The Directors of the Responsible Entity are committed to implementing high standards of corporate governance in operating the Fund.

Accordingly, the Responsible Entity has created a framework for managing the Fund, including adopting relevant internal controls, risk management processes and corporate governance policies and practices, which it believes are appropriate for the Fund’s business and which are designed to promote the responsible management and conduct of the Fund. Under the IMA, the Investment Manager agrees to assist the Responsible Entity to comply with all relevant laws, including the Listing Rules and the Corporations Act. The Responsible Entity is a wholly-owned subsidiary of 360 Capital Group.

The Responsible Entity is reliant on 360 Capital Group for access to adequate resources, including directors, management, staff, functional support (such as company secretarial, responsible managers, legal, compliance and risk, finance) and financial resources. 360 Capital Group has made such resources available to the Responsible Entity.

11.2 Corporate Governance Policies The Responsible Entity has adopted the following policies and charters, which have been prepared having regard to the ASX Corporate Governance Principles and Recommendations.

• Code of Conduct – This policy sets out the standards of ethical behaviors and integrity that the Responsible Entity expects of its Directors, officers and any employees.

• Continuous Disclosure – The Fund must comply with the continuous disclosure requirements of the Corporations Act to ensure the Fund discloses any information concerning the Fund which is not generally available and which a reasonable person would expect to have a material effect on the price or value of the Units. This policy sets out the Fund’s procedures and measures which are designed to ensure that the Fund complies with its continuous disclosure obligations.

• Risk Framework – This framework is designed to assist the Fund to identify, evaluate, monitor and manage risks affecting the Fund’s business.

• Securities Trading Policy – This policy is designed to maintain investor confidence in the integrity of the Responsible Entity’s internal controls and procedures and in particular to provide guidance to Directors, executives and any employees on avoiding any conflicts of interest or breaches of insider trading laws.

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• Communications Policy – This policy sets out the practices which the Fund will implement to ensure effective and efficient communication with its Unitholders.

• Diversity Policy – This policy sets out the Fund’s objectives for achieving diversity amongst its Directors, executives and any employees.

• Compliance Plan – Sets out the procedures for the Responsible Entity to comply with the Corporations Act and the Constitution. This plan is overseen by the Board and the Responsible Entity’s compliance with it is audited annually.

• Compliance Committee – The Board comprises a majority of independent members (in accordance with 601JA of the Corporations Act). Accordingly, there is no Compliance Committee. The Board considers breaches arising during the course of the operation of the Fund, any audit issues raised, and reports of managers, key employees and service providers throughout the reporting year. Provision is made in the Board’s ordinary meeting agenda for the consideration of critical compliance and risk management issues as they arise.

Standard compliance and risk management reporting to the Board occurs on a quarterly basis, generally in February, June, August and November of each year.

11.3 Risk management and

use of derivatives The Fund may be exposed to foreign currency risk arising from investment in New Zealand dollar (NZD) denominated assets.

Accordingly, a portion of distribution income attributable to the Fund may fluctuate in line with a change in AUD/NZD exchange rates.

The Fund may enter into derivatives to facilitate foreign currency hedging to manage AUD/NZD exchange rate risk. The Fund will not enter into derivative products for any speculative purposes.

The Fund will always ensure that it will have sufficient cash to meet any derivative obligations.

11.4 Reporting to Unitholders For accounting and reporting purposes, the Fund will operate on a financial year basis, with a year end of 30 June. The Fund will formally report to Unitholders on a semi-annual basis as at 30 June and 31 December. Amongst other things, the report will detail: • the amount of distributions for the period; • the NAV per Unit at the end of the reporting period; • the significant activities during the period; and • a general portfolio update.

Section 12 : Additional Information

12.1 Fund Auditor The Responsible Entity is required to appoint an auditor to the Fund within one month after the day the Fund is registered with ASIC. Ernst & Young has been appointed by the Responsible Entity as the independent auditor of the Fund’s financial statements.

12.2 Related Party Interests Other than as set out in this PDS, there are no existing arrangements and there are no currently proposed transactions in which the Responsible Entity was, or is to be, a participant and in which any related party had or will have, a direct or indirect material interest.

The IMA and other material agreements set out in Section 10 have been entered into on arm’s length terms between the applicable entities. The Responsible Entity and the Investment Manager may use the services of related parties in the management of the Fund and pay fees for their services. All related party transactions will be conducted on arm’s length normal commercial terms and conditions.

From time to time the Responsible Entity, the Investment Manager, their related bodies corporate or their Directors and employees may hold Units in the Fund.

12.3 Interests of Responsible

Entity and Investment

Manager Directors This Section 12.3 sets out the nature and extent of the interest and fees of certain persons involved in the Offer. Other than as set out below or elsewhere in this PDS: a) no Director or proposed Director holds at the date of this PDS, or held at any time during the last two years before the date of lodgement of this PDS with ASIC, any interest in: • the formation or promotion of the Fund; or • any property acquired or proposed to be acquired by the Fund in connection with its formation or in connection with the Offer; or • the Offer; and b) no amounts have been paid or agreed to be paid by any person, and no benefits have been given or agreed to be given by any person: • to a Director or proposed Director, to induce him to become, or to qualify as, a Director; or • for services provided by a Director or proposed Director, in connection with the formation or promotion of the Fund or in connection with the Offer.

12.4 Consents The persons listed in the following table have given their written consent and have not, before the date of this PDS, withdrawn their written consent to: • be named in this PDS in the form and context in which they are named;

• the inclusion of their respective reports or statements noted next to their names in the form and context in which they are included in this PDS; and • the inclusion of other statements in this PDS, which are based on or referable to statements made in those reports or statements, or which are based or referable to other statements made by those persons in the form and context in which they are included.

Name of person

Named as

PricewaterhouseCoopers

Provider of taxation services in relation to the Offer involving the review of Section 9

Andrews & Holm Lawyers

Legal Advisor

Boardroom Limited

Registry

Ernst & Young

Auditor of the Fund

Each of the parties referred to in this Section 12.4: • has not authorised or caused the issue of this PDS; • does not make, or purport to make, any statement in this PDS other than as specified in this Section 12.4; • has not made any statement on which a statement in this PDS is based, other than as specified in this Section 12.4; and • to the maximum extent permitted by law, expressly disclaims all liability in respect of, makes no representation regarding, and takes no responsibility for, any part of this PDS other than the reference to its name and the statement • or report (if any) included in this PDS with the consent of that party, as specified in this Section 12.4.

12.5 Director’s Consents Each Director of the Responsible Entity has consented to the lodgement with ASIC and issue of this PDS.

12.6 Accessing information about

the Fund The Responsible Entity will provide regular communication to Unitholders. The Fund will have a dedicated section on the 360 Capital website (www.360capital.com.au), which provides up to date information on the Fund, including access to half- year and annual reports and distribution information.

As a disclosing entity, the Fund is subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC in relation to the Fund may be obtained from, or inspected at, an ASIC office. You have a right to obtain a copy of the following documents: • the annual financial report most recently lodged with ASIC by the Fund; • any half year financial report most recently lodged with ASIC by the Fund; and • any continuous disclosure notices given by the Fund after lodgement of that annual report and before the date of this PDS.

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12.7 Investor Considerations Before you decide to participate in this Offer, you should consider whether the Units to be issued are a suitable investment for you.

There are general risks associated with any investment in the financial markets.

If you are in doubt as to participation in the Offer, you should seek advice on the matters contained in this PDS from a stockbroker, solicitor, accountant or other professional adviser.

The potential tax effects relating to the Offer will vary between investors.

12.8 Cooling Off Rights Direct Investors who are not classified as Wholesale Clients have a 14-day cooling off period. Cooling off rights do not apply to Indirect Investors that invest through an IDPS. For each eligible Direct Investor, their 14-day period commences on the earlier of the date they receive their confirmation notice or the end of the fifth day after their Units are allotted. If an eligible Direct Investor cancels their investment during this period, the amount repaid to them may be adjusted in accordance with the Corporations Act to reflect any increase or decrease in the value of their investment, any tax or duties payable by the Responsible Entity and administration expenses and transaction costs associated with the acquisition and termination of their investment. The right to cooling off terminates immediately if an eligible Direct Investor exercises a right or power under the terms of the Fund, such as selling part of their investment. For any subsequent contributions made under the terms of an existing agreement, the right to cooling off does not apply.

12.9 ESG Policy The Responsible Entity will follow the 360 Capital Group’s approach to environmental, social and governance (ESG) issues.

360 Capital Group takes a systematic approach to integrating ESG labour and ethical factors in the selection, retention or realisation of investments relating to the Fund. 360 Capital Group’s objective for integrating ESG factors into its investment processes are to: • Ensure the companies and assets into which it invests on behalf of its clients’, respect and ideally benefit, their stakeholders, society and the environment; and • Enhance investment returns and protect value for its clients.

With respect to any loans the Fund will provide to New Zealand borrowers only, the Responsible Entity and Investment Manager will adopt a responsible investment framework to ensure its investments comply with relevant local and international laws, including adherence to international protocols. Investment professionals consider the potential ethical or reputational risk of a given investment, including in key topic areas such as labour rights, environmental management, bribery and corruption, and excluding investments according to the framework referenced below.

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360 Capital Group looks at a range of ESG standards and uses a range of tools and methodologies to assist it with decision making. The 360 Capital Group bases its judgement regarding ESG factors on its own research as well as third party research, respecting that ESG topics are often diverse and vary over time.

Further information on 360 Capital Group’s ESG policies can be found on our website www.360capital.com.au.

12.10 Legal proceedings The Fund, the Responsible Entity and the Investment Manager are not engaged in any litigation at the date of this PDS, and as far as the Responsible Entity is aware, no litigation involving the Fund, the Responsible Entity or the Investment Manager is pending or threatened.

12.11 Anti-money laundering and Counter-terrorism financing Notwithstanding any other provision of this PDS, each Unitholder agrees to provide any information and documents reasonably requested by the Responsible Entity to comply with the AntiMoney Laundering and Counter-Terrorism Financing Act 2006 (Cth) and any other applicable anti-money laundering or counterterrorism financing laws of any country including, without limitation, any applicable laws imposing “know your customer” or other identification checks or procedures to which the Responsible Entity is subject, pursuant to the laws of any country in respect of the Fund (AML/CTF Laws).

Australia’s AML/CTF laws require the Responsible Entity to adopt and maintain an AML/CTF program. A fundamental part of the AML/CTF program is that the Responsible Entity knows certain information about Unitholders in the Fund. To meet this legal requirement, we need to collect certain identification information and documentation (KYC Documents) from new Unitholders. Processing of Applications will be delayed or refused if Unitholders do not provide the applicable KYC Documents when requested. Under the AML/CTF laws, the Responsible Entity is required to submit regulatory reports to AUSTRAC. This may include the disclosure of your personal information. The Responsible Entity may not be able to tell you when this occurs.

If the Responsible Entity forms the view that, in its reasonable opinion, it is required to disclose information to any person in order to comply with its obligations under the AML/CTF Laws, to the extent permitted by law, each Unitholder agrees that such disclosure will not be a breach of any obligation or duty, whether such obligation or duty is imposed by contract or law, owed by that party to any other responsible entity or Unitholder, and that party will be released from any claim made against them in respect of such disclosure.

12.12 Governing Law This PDS and the contracts that arise from the acceptance of Applications under the Offer are governed by the laws applicable in New South Wales, Australia and each Applicant submits to the non-exclusive jurisdiction of the courts of New South Wales, Australia.

Section 12 : Additional Information (continued)

12.13 Customer service and complaints The Responsible Entity is committed to striving for excellence in relation to its products and services, and wants to ensure that it responds to investors’ concerns as quickly and efficiently as possible. Despite its best endeavours, the Responsible Entity realises that complaints will occur from time to time and, to this end, has in place comprehensive complaints resolution processes to ensure they are resolved with minimum inconvenience to all parties.

If you have a complaint, please contact the Responsible Entity on 1300 082 130 (free call from within Australia) or +61 2 8016 2884 (from outside Australia) or email investor.relations@360capital.com.au.

We will either try to resolve your complaint or put you in contact with someone who is better placed to resolve the complaint. If you are not satisfied with the response you receive or if you wish to submit a written complaint, you may write to us at: The Complaints Officer 360 Capital FM Limited Level 8, 56 Pitt Street Sydney NSW 2000 Please provide the detail and reason for your complaint and we will attempt to resolve the matter and respond within 45 days of receipt.

If you are dissatisfied with our response, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA), who provides fair and independent financial services complaint resolution that is free to consumers.

Address: Australian Financial Complaints Authority GPO Box 3, Melbourne Vic 3001 Telephone: 1800 931 678 (free call) Email: info@afca.org.au Website: www.afca.org.au The external dispute resolution body is established to assist you in resolving your complaint, where you have been unable to do so with us. However, it is important that you contact us first. Time limits apply to lodging a complaint with AFCA. These time limits can be found on the AFCA website.

12.14 Privacy and use of

personal information You do not need to give us any personal information requested in the Application Form or in any other document or communication relating to the products or services we supply you. However, without this information, we may not be able to process your Application or provide you with an appropriate level of service.

By completing the Application Form, you agree to the 360 Capital Group: • collecting, holding and using your personal information to process your Application as well as administering and managing the Fund. This includes monitoring, auditing and evaluating the Fund, modelling data, testing data, communicating with you and dealing with any complaints or enquiries; • providing your personal information to other entities in the 360 Capital Group, as well as to external service providers situated in Australia or offshore, which provide services in connection with the Fund provided they agree to treat your information in accordance with the Privacy Act 1988 (Cth) (Privacy Act). These may include for example, mail houses or professional advisers; • using your personal information to offer products or services that may be of interest to you, unless you request us not to (including for the purposes of the Spam Act 2003 (Cth), via commercial emails); • supplying your financial adviser with information about your investment if a financial adviser’s stamp appears on an Application Form or there is evidence of their status; and disclosing your personal information to other parties if we believe that the law requires or permits us to do so, or to any person proposing to acquire an interest in our business, provided they agree to treat your information in accordance with the Privacy Act. Other entities in the 360 Capital Group may use your personal information to offer products or services that may be of interest to you unless you request us not to allow this. Should you not wish to receive this information, please email investor. relations@360capital.com.au.

We will not sell your personal information to other organisations to enable them, to offer products or services to you.

Information you provide in an Application Form is collated by Boardroom Pty Limited as the Fund’s Registry provider. The Registry’s Privacy Policy can be viewed on its website www. boardroomlimited.com.au Under the Privacy Act, you may request access to any of your personal information that we hold. You can contact us to make a request relating to the privacy of your personal information by contacting: The Privacy Officer 360 Capital FM Limited Level 8, 56 Pitt Street Sydney NSW 2000 A copy of the 360 Capital’s Privacy Policy can be found at www.360capital.com.au

12.15 Statement of Directors The Directors of the Responsible Entity believe that, on completion of the Offer, the Fund will have sufficient working capital to carry out its objectives as stated in this PDS.

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Section 13 : Glossary of defined terms

60

Term

Definition

$ or A$ or AUD or dollars or cents

Australian currency

360 Capital Group

The stapled entity comprised of 360 Capital Group Limited (ACN 113 569 136) and 360 Capital Investment Trust (ARSN 104 552 598)

AAS

Australian Accounting Standards

AEDT

Australian Eastern Daylight Time

AFCA

Australian Financial Complaints Authority

AFSL

Australian Financial Services Licence

AMIT

Attribution Managed Investment Trust

AML/CTF Laws

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and any other applicable anti-money laundering or counter-terrorism financing laws of any country including, without limitation, any applicable laws imposing “know your customer� or other identification checks or procedures to which the Responsible Entity is subject, pursuant to the laws of any country in respect of the Fund

Applicant

A person who subscribes for Units under the Offer

Application

An application to subscribe for Units under the Offer, made by an Applicant using the Application Form online

Application Amount

Monies paid by an Applicant in respect of their Application for Units

Application Form

The electronic application form in connection with this PDS

Application Monies

Monies paid by an Applicant in respect of their Application for Units in the Fund

ASIC

Australian Securities and Investments Commission

ASX

ASX Limited (ACN 008 624 691) or the market operated by it as the context requires

ATO

Australian Taxation Office

Board

The board of Directors of the Responsible Entity

Business Day

A day other than a Saturday or Sunday, on which trading banks are open for general banking business in Sydney

Buy Spread

The estimate of transaction costs associated with buying investments. The Entry Price at investment can differ from the Unit price because of the Buy Spread

Cause Event

As defined in Section 10.2

CGT

Capital Gains Tax

Constitution

The Constitution of the Fund as amended from time to time

Corporations Act

Corporations Act 2001 (Cth)

CRE

Commercial real estate

Credit Committee

As defined in Section 5.4

Dealt

Digital Software Solutions Pty Ltd trading as Dealt.

Deployed Capital

Investors funds that are currently deployed in approved residual stock loans

Direct Investor

An applicant who invests in the Fund directly and not via an IDPS

Director

A director of the Responsible Entity

Entry Price

The price at which a Unit is issued at a point in time

Exit Price

The price at which a Unit is redeemed at a point in time

Financial Information

The financial information described as Financial Information in Section 8

Fund

360 Capital Residual Stock Fund ARSN 645 169 517

Fund Website

www.360capital.com.au

GAV

Gross Asset Value

GST

Goods and services tax (Australia)

IDPS

Investor directed portfolio service. An IDPS is provided by an IDPS Operator, which makes investments into products on behalf of its clients and provides a reporting service to these investors. Some master trusts and wrap accounts are examples of IDPS arrangements

IDPS Operator

The trustee, custodian or operator of an IDPS

IFRS

International Financial Reporting Standards

IMA

The investment management agreement between the Responsible Entity, as responsible entity of the Fund and the Investment Manager

Indirect Investor

An Applicant who invests in the Fund through an IDPS by directing their IDPS Operator to acquire Units on their behalf

Initial Offer

The period between 26 October 2020 and 31 March 2020.

Initial Term

Means the period ending December2023

Section 13 : Glossary of defined terms

Term

Definition

Investment Management Board

As defined in Section 5.3

Investment Manager

AMF Finance Pty Ltd (ACN 120 390 749) as investment manager of the Fund

IRR

Internal Rate of Return

Management Fee

Fee which the Responsible Entity and Investment Manager (as applicable) is entitled to for its role in managing and administering the Fund

M&A

Mergers and acquisitions

Minimum Application Amount

$2,000 (and in increments of $1,000 thereafter)

MIT

Managed Investment Trust

NAV

Net Asset Value

NBFI

Non-bank Financial Institutions

NBLI

Non-bank Lending Institutions

NTA

Net Tangible Assets

New Zealand Unitholder

Unitholders based in New Zealand

Offer

The offer of Units under this PDS

Offer Costs

As defined in Section 7.3.2

Official List

The official list of the ASX

PDS

Product Disclosure Statement (this document)

PDS Date

26 October 2020

PricewaterhouseCoopers

PricewaterhouseCoopers (ABN 52 780 433 757)

Privacy Act

Privacy Act 1988 (Cth)

RBA

Reserve Bank of Australia

Registry

Boardroom Pty Limited (ACN 003 209 836)

Responsible Entity

360 Capital FM Limited (ACN 090 664 396)

Retail Client

A retail client for the purposes of Section 761G of the Corporations Act

Sell Spread

The estimate of transaction costs associated with selling investments. The Exit Price at withdrawal can differ from the Unit price because of the Sell Spread

Special Resolution

A resolution passed by the holders of 75% of the units of the Fund

Unit

A Unit in the Fund

Sub-Trust

As defined in section 4.5

Unitholder

The holder of a Unit in the Fund

TFN

Tax File Number

US Securities Act

means United States Securities Act of 1933

Wholesale Client

A wholesale client for the purposes of Section 761G of the Corporations Act

Velocity Property Group

Velocity Property Group Limited: ASX code VP7

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Section 14 : How to Apply & Application portal

To invest in the Fund, you must complete the application via the online application portal. This application portal can be accessed via www.360capitalforms.com.au/360-capital-residual-stock-fund The Responsible Entity is not obliged to accept any application and may reject any application without giving reasons.

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Section 15 : Corporate Directory

Investment Manager AMF Finance Pty Ltd Level 8, 56 Pitt Street, Sydney NSW 2000 Tel (02) 8405 8860

Responsible Entity 360 Capital FM Limited Level 8, 56 Pitt Street, Sydney NSW 2000, Tel (02) 8405 8860

Auditor Ernst & Young

Legal Adviser Andrews & Holm Lawyers Pty Ltd

Tax Adviser Price Waterhouse Coopers

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Identifying strategic investment opportunities.

360capital.com.au

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