Hamilton Liberty Villas Bundaberg Fund Information Memorandum

T: W: A:

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P:

02 4920 2877 www.hamiltonam.com.au 10 Murray Street Hamilton NSW 2303 PO Box 413 Hamilton NSW 2303

Hamilton Liberty Villas Bundaberg Fund Information Memorandum

Attractive investment returns Forecast distributions:

Target internal rate of return:

Year 1 - 9.02% p.a. rising to 10.33% p.a in Year 5 5 year average - 9.67% p.a 12.45%

Conservative financing Leverage:

42%

Diverse source of revenue Property features:

124 independent living units 1 two bedroom guest suite

Information Memorandum – Wholesale Clients Only Issuer: Hamilton Asset Management Limited ACN: 139 473 699 AFSL: 343546 Dated: 7 December 2017

Important Notices This information memorandum (“IM”) is made in relation to an offer of Units in the Hamilton Liberty Villas Bundaberg Fund (“Fund”). The IM is issued by Hamilton Asset Management Limited ACN 139 473 699 (“Hamilton”). Hamilton holds Australian Financial Services Licence No 343546 The Trustee of the Fund is Liberty Villas Bundaberg Nominees Pty Limited ACN 662 811 643. Hamilton has appointed the Trustee as an Intermediary under an Intermediary Arrangement pursuant to section 911A(2)(b) of the Corporations Act 2001 ("Corporations Act") to issue, vary and dispose of the Units on behalf of Hamilton. This IM is not a disclosure document under the Corporations Act and has been prepared for use by Wholesale Clients only. This document is not required to be and has not been lodged with the Australian Securities and Investments Commission (“ASIC”), and neither ASIC nor any of its officers takes any responsibility for the contents of the IM. No person guarantees any specific rate of return or that you will make a positive return on your investment or retain your capital. Your Decision to Invest This IM is an important document which you should read before making a decision to acquire Units in the Fund ("Units"). A document of this kind cannot however take into account your investment objectives, financial situation or particular needs, and nothing in this IM should be regarded as a recommendation by Hamilton or by any other person concerning an investment in the Fund. Having considered the information in the IM, you should obtain independent financial and taxation advice as to the suitability of an investment in the Fund for you, having regard to your investment objectives, financial situation and particular needs. Applications This IM is available in paper form and in electronic form. If you wish to invest in Units, you must complete the Application Form accompanying the IM and submit it as set out in accordance with the instructions set out in the Application Form. Units will only be issued to you upon receipt and acceptance of a completed Application Form. Restrictions on Distribution of this IM The offer to which this IM relates is only available to persons: 

receiving the IM in Australia; and



who qualify as Wholesale Clients who are Australian residents.

The IM does not constitute an offer of Units in any place in which, or to any person to whom, it would not be lawful to make an offer of Units. The distribution of the IM in jurisdictions outside Australia may be restricted by law, and any person who resides outside Australia and who comes into possession of the IM should seek advice about it and observe any restrictions. Updated Information Updated information relating to this IM will be made available promptly. You can access this information at www.hamiltonam.com.au. Alternatively, you can request a paper copy of this information free of charge from your financial adviser or by contacting Hamilton on 1300 133 836. The information that will be made available by way of updates is information which is subject to change from time to time and is not materially adverse to you. If a change in information is materially adverse to you, Hamilton will replace this IM or iss ue a supplementary IM. Electronic IM Investors who receive this IM in electronic form are entitled to obtain a paper copy of the IM, including the Application Form, without charge. Please contact Hamilton on 1300 133 836. Scheme Registration The Fund is not registered with ASIC pursuant to Chapter 5C of the Corporations Act. At some stage in the future, Hamilton may choose to register the Fund with ASIC. By investing in the Fund, you agree to Hamilton applying for registration with ASIC at some time in the future. Definitions Some expressions used in this IM are defined in the Glossary in Section 9. Unless the context requires otherwise, words used in the IM have the meaning given in the Glossary.

Contents 1.

Executive Summary ................................................................................................................................................... 3

2.

The Property ............................................................................................................................................................. 5 2.1.

Location ............................................................................................................................................................. 5

2.2.

Key Features ...................................................................................................................................................... 5

2.3.

Property Description ......................................................................................................................................... 5

2.4.

Central Community Facility ............................................................................................................................... 5

2.5.

Independent Living Units .................................................................................................................................. 6

2.6.

Rental Retirement Model ................................................................................................................................. 6

2.7.

Occupancy ......................................................................................................................................................... 7

2.8.

Insurance ........................................................................................................................................................... 7

2.9.

2013 Bundaberg Flood ...................................................................................................................................... 8

2.10. Village Management.......................................................................................................................................... 8 3.

4.

5.

6.

Independent Living Units (ILUs) ................................................................................................................................ 9 3.1.

Description of ILUs ............................................................................................................................................ 9

3.2.

Construction Overview ..................................................................................................................................... 9

Why Invest in Bundaberg ........................................................................................................................................ 11 4.1.

Location ........................................................................................................................................................... 11

4.2.

Demographic Analysis ..................................................................................................................................... 12

Financial Information .............................................................................................................................................. 13 5.1

Nature of Units................................................................................................................................................ 18

5.2

Investor Restrictions ....................................................................................................................................... 18

5.3

Taxation........................................................................................................................................................... 18

Fees and Expenses .................................................................................................................................................. 19 6.1.

7.

Risk Factors ............................................................................................................................................................. 21 7.1.

8.

9.

Additional Explanation of Fees and Costs ....................................................................................................... 19 What are the Significant Risks of the Fund? ................................................................................................... 21

Additional Information............................................................................................................................................ 23 8.1.

Cooling off Rights ............................................................................................................................................ 23

8.2.

The Role of the Trustee ................................................................................................................................... 23

8.3.

The Constitution.............................................................................................................................................. 23

8.4.

Related Parties ................................................................................................................................................ 23

8.5.

Alternative Forms of Remuneration ............................................................................................................... 23

8.6.

Collection Statement ...................................................................................................................................... 23

8.6.

Complaints ...................................................................................................................................................... 24

Glossary ................................................................................................................................................................... 25

10. Corporate Directory ................................................................................................................................................ 27

Hamilton Liberty Villas Bundaberg Fund Information Memorandum – Strictly Confidential

1


2

1.

Executive Summary

Name of Trust

Hamilton Liberty Villas Bundaberg Property Fund

Trustee

Liberty Villas Bundaberg Nominees Proprietary Limited ACN 662 811 643 as Intermediary for Hamilton Asset Management Limited ACN 139 473 699 AFSL 3435456

Offer Opening Date

7 December 2017

Total Offer Amount

$9,060,000

Forecast Term

5 years

st

Forecast 1 Years Distribution

9.02% p.a.

Forecast Internal Rate of Return (IRR)

12.45% p.a.

Address

3 Ovens Street Bundaberg, Queensland 4670

Real Property Description

Lot 2, RP 904981

Site Area

19,750 square metres (approximately)

Zoning

Residential A

Description

Retirement Village 124 air conditioned independent living units 1 two bedroom guest suite

Improvements

Purpose built central community facility incorporating a spacious recreation room flowing onto a large undercover deck, kitchen, library, managers office, consulting room and amenities

Car Parking

58 car spaces

Construction

November 2006 (refurbished 2014/2015)

Property Manager

Liberty Villas Management Pty Limited ACN 623 114 107 or as otherwise nominated by the Trustee from time to time Exit is expected to be by sale of the Property at the end of the term of the Fund.

Exit strategy

No Redemption

Whilst it is intended the Property will be held for the Fund Term, the Trustee will regularly examine exit opportunities during the Fund Term which are considered in the best interests of the Investors, including an exit of the Property earlier than the forecast 5 year term of the Fund. It is not expected that there be redemption of any Units prior to the date of termination of the Fund when the Property is sold.


3


4

2.

The Property

2.1.

Location

The Property is located in Bundaberg, Queensland. Bundaberg is approximately 360 kilometres north of Brisbane and only a few kilometres from the eastern coast of Australia. The Property itself is 3 kilometres from the Bundaberg central business district (“Bundaberg CBD”). Facilities within walking distance of the Property include the Millaquin Markets, post office, a general practitioner, pharmacy, ne wsagency, the East End Hotel and the East Bundaberg Sports Club. There is a public bus stop within 200 metres of the Property and the Princess Street Shopping Centre within 500 metres of the Property. The Bundaberg CBD, along with hospitals and main shopping precincts are just a few minutes drive away.

2.2.

Key Features

Key features of the Village are:           

124 independent living units ("ILUs"). 2 bedroom guest suite. Air conditioned one bedroom ILUs for singles or couples. Secure access to the Property through a single entry and exit point. Purpose built community facility incorporating a spacious recreation room flowing onto a large undercover deck, kitchen, library, manager’s office, consulting room and amenities. Heated swimming pool. 58 car spaces. Bus for the exclusive use of residents to frequent shopping precincts as well as special excursions and day trips. Extensive open space throughout the Property. Feature quadrangle for active and passive recreation. A 24 hour emergency call system for security and peace of mind.

2.3.

Property Description

Property address

3 Ovens Street, Bundaberg East, Queensland, 4670

Title reference

Lot 2, RP 904981

Site area

19,750 square metres (approx.)

Zoning

Residential A

Topography

Generally level with a sunken feature landscape area in the centre also serving as a storm water management system

Improvements

124 ILUs and a central community facility incorporating an additional two bedroom hospitality suite

Building completion date

November 2006 (Refurbished 2014 / 2015)

Unit occupancy

123 ILUs (99.19%) occupied as at 26 November 2017 with 13 potential residents on the waiting list.

2.4.

Central Community Facility

The Property includes a purpose built modern building featuring a spacious recreational area, large under cover deck overlook ing feature quadrangle, lock up garage, administration office, consulting room, public amenities, library, communal lounge area and kitchen with servery. Above these facilities is a two bedroom hospitality suite. The suite is accessed via internal stairs and includes a large combined lounge dining area with access to covered balcony, kitchen, two bedrooms with built in robes, bathroom and laundry area. Scope exists to use the


5

accommodation on a casual basis for families wishing to visit the complex. In addition to these facilities, there is a heated swimming pool for residents and their guests to enjoy.

2.5.

Independent Living Units

The ILUs at Liberty Villa offers air conditioned accommodation for singles or couples. Each ILU measures approximately 40 square metres and contains a 24 hour emergency call system. The ILUs are configured as follows:     

Lounge / dining area. Kitchenette. Bedroom with built in robe. Private courtyard. Bathroom with laundry space.

All ILUs were refurbished in 2014/2015.

2.6.

Rental Retirement Model

Liberty Villa’s operates in accordance with the classic “rental retirement” model, and is designed to attract retirees who are eligible for the Commonwealth Government aged pension as well as rental assistance. There is a requirement for a normal rental bond (that is refunded if the ILU is left in good condition on exit) but otherwise no entry fee, no ongoing services fees (as all costs are included in the rent), no minimum period of occupancy, and no exit fees when tenants move out. As such, there are virtually no barriers to entry for tenants to move in. Other than the provision of a 24 hour emergency call system, no medical support, allied health services, meals or other services are provided by the Property Manager. Accordingly, no undue stress is placed on the Property Manager as residents are typically quite healthy and independent. Rental rates are reviewed every six months following increases in pension rates. Residents will pay 100% of the Commonwealth Government rental assistance together with a portion of the base pension. As at 30 June 2017, the singles rate was $274 per week and the rate for couples was $318 per week.

The Trustee intends to undertake a cost benefit analysis to determine whether the provision of additional facilities and services will result in a higher yield to the investors.


6

2.7.

Occupancy

The graph below shows occupancy since October 2014 representing the period since refurbishment works commenced. As at 26 November 2017 there were 123 out of 124 ILUs occupied (99.19%). The Property has operated at 100% occupancy with a waiting list previously and there is an expectation that this should continue in future. However, for the purpose of financial forecasting contained in this IM, we have assumed an average occupancy of 95%.

2.8.

Insurance

The Trustee will to maintain adequate insurance coverage where insurance is available on commercial terms. The following is a summary of the initial insurance coverage on the Property that the Trustee proposes to obtain. 

 

Industrial Special Risks  Building - $11,000,000  Contents - $400,000  Loss of Rent $1,700,000  Excess for Building, Contents and Loss of Rent - $1,000  Flood sub limit - $5,000,000  Excess for Flood - $450,000 Public and Products Liability - $20,000,000 with a $1,000 excess Motor Vehicle – village bus insured for market value with a $500 excess

This is consistent with the level of the existing insurance cover.


7

2.9.

2013 Bundaberg Flood

In January 2013, Bundaberg experienced the worst flooding in its history. Although the Property is located on reasonably high ground, the Property did sustain some damage and has since been refurbished and occupancy has been restored to over 90%. The Property was unaffected by the 2010 flood event. The table below shows the historical flood levels of the Burnett River at Bundaberg:

Flood Event

River height in metres*

Jan 1890

9.04

Feb 1893

8.91

Feb 1942

8.48

Jul 1954

7.26

Feb 1971

6.70

Jan 1974

3.78

May 1983

3.88

Mar 1992

3.24

Dec 2010

7.92

Jan 2013

9.53

* All heights are in metres on flood gauges and are approximations Source:

Australian Government Bureau of Meteorology (2016), Burnett Flood Warning System for the Burnett River: Flood Classifications, retrieved from: http://www.bom.gov.au/qld/flood/brochures/burnett/burnett.shtml, 11 October 2017.

Following the January 2013 flood event, the Bundaberg Regional Council developed a Burnett River Floodplain Action Plan (the "Flood Plan"). The Flood Plan contains seven key mitigation projects which have been completed:       

Mt Perry Road Evacuation route Fairymead Road Evacuation route Technology Park Levee Extension of Bartholdt Drive (Branyan) as Evacuation route – 1150 people benefit Finalisation of inner road work in North Bundaberg Installation of early warning technology in the Burnett River and Kolan River Development of online flood mapping tools to provide residents with visual impacts that increasing Burnett River heights will have on their individual properties

Source:

Bundaberg Regional Council (2012) “What has been invested in flood mitigation?” Fact sheet, retrieved from: http://www.bundaberg.qld.gov.au/files/flood-mitigation-fact-sheet.pdf, 21 November 2017.

2.10.

Village Management

The Property Manager will provide day to day management services in relation to the Property, including:   

Supervision of the village manager, landscaping and maintenance personnel who are responsible for the day to day operation of the Property. Marketing and lease management. Financial administration.


8

3.

Independent Living Units (ILUs)

3.1.

Description of ILUs

All ILUs are fully tiled and air conditioned and consist of a living area adjoining the galley style kitchen which has a double sink, microwave area, oven with four hot plates and all ILUs come supplied with an upright fridge / freezer. Adjoining the kitchen is the bedroom area which has a large built in wardrobe and good sized linen cupboard. The large ensuite bathroom is also fitted with a laundry tub in one corner that is plumbed with taps for a washing machine. The outdoor patio area is fenced and contains a clothes line that can be folded away when not in use. All doors and windows in the ILUs are security screened and the bathrooms are fitted with hand rails in the shower and next to the toilet. All ILUs were refurbished in 2014/2015 including new air-conditioning, kitchenettes, painting as well as some tiling. In addition, ILUs are fitted with the Vitalcall emergency system that gives residents access to help 24 hours per day. A typical layout of an ILU is shown on page 11 of this IM.

3.2.

Construction Overview

Floors

Reinforced concrete

External Walls

Brick veneer

Internal Walls

Plasterboard lined timber frame

Window Frames

Aluminium

Ceilings

Plasterboard

Roof

Colourbond over pitched timber framework


9

A Typical Plan of an ILU:


10

4.

Why Invest in Bundaberg

4.1.

Location

The Property is located in Bundaberg, approximately 360 kilometres North of Brisbane in Queensland. Situated in the Bundaberg Local Government Area, the Property is located off Skyring Street in Bundaberg East, approximately 3 kilometres from the Bundaberg CBD. Bundaberg East has a vast array of amenities on hand with an established community feel. Within walking distance (less than half a kilometre) of the property is the East Bundaberg Sports Club which encompasses sporting fields, tennis courts, playground facilities and serves as a distribution centre for the local “Meals on Wheels” not-for-profit organisation. The main thoroughfare into Bundaberg from the South West is Takalvan Street – where Bundaberg Public Hospital is able to be found approximately 4.4 kilometres away from the Property. The Mater Private Hospital is situated on Bourbong Street which is in close proximity to the aforementioned public hospital. The Millaquin Markets, a general practitioner, pharmacy, newsagency and the East End Hotel can also be found within walking distance of the Property, as can the Princess Street Shopping Centre less than 500 metres away. Public transport is readily available in the vicinity of the Property, with a bus stop within 200 metres which services the local area. Services to the greater metropolitan area, including Brisbane and the North Coast railway line (serving as the main rail corridor between Sydney to Brisbane) are also available from the Bundaberg railway station approximately 3.5 kilometres West of the Property. 4.1.1.

Regional Overview

The Coral Coast Region, which encompasses Bundaberg, spans over 6,000 square kilometres and is situated approximately four hours North of Brisbane – the capital of Queensland. Diversity can be found in the natural resources and facilities located in the area, all within offshore, coastal, riverine, city, rural and protected environments encompassing the topography throughout. Bundaberg City serves as the hub of this dynamic and unique region – centrally located on the Burnett River, at the Southern tip of the Great Barrier Reef. The area is known for it’s proximity to Mon Repos Turtle Rookery and Bundaberg Rum Distillery, as well as its connection to the famous aviator Bert Hinkler. Bundaberg boasts a temperate climate with affordable, relaxed lifestyle living and modern amenities including shopping, sport ing and social facilities, along with an abundance of world class tourist destinations and economic opportunities. Serving as a commercial, service and distribution centre for the region, Bundaberg has easy access to vital services and infrastructure including three major hospitals (public and private), and educational institutions – public schools and colleges, along with major campuses of Central Queensland University and the Institute of Technical and Further Education (TAFE). As a regional business hub for Queensland, Bundaberg City services approximately 100,000 people and features an array of shopping centres, sporting facilities, cultural and tourist attractions to cater to residents and visitors alike. In recent times, conferences and major events have been staged in the area, particularly given the presence of an active professional and business community who liaise with one another and strive to build a strong and sustainable regional economy for the area.


11

4.2.

Demographic Analysis

As at the 2016 Census, the Bundaberg Local Government Area had an estimated population of approximately 92,897 people, which accounted for 2.0% of the population of Queensland at that time. The table below highlights the figures of population growth and generational change – that being the aging of the population – between the time period of 2006 to 2016. Forecast population projections are also highlighted, for the ten year period between 2021 to 2031, as prepared by the Australian Bureau of Statistics for the Federal Department of Health and Ageing. 4.2.1.

Population aged over 65 years Historical 2006

2011

Forecast 2016

2021

2026

2031

Bundaberg (R) – Local Government Area Total Population

45,802

89,810

92,897

103,281

111,104

119,050

Population over 65

8,810

17,592

21,514

25,820

30,554

35,239

Proportion over 65

19.2%

19.6%

23.2%

25.0%

27.5%

29.6%

3,904,534

4,332,739

4,703,193

5,586,698

6,209,292

6,850,500

Population over 65

482,892

568,986

717,947

955,325

1,148,719

1,356,399

Proportion over 65

12.4%

13.1%

15.3%

17.1%

18.5%

19.8%

Queensland Total Population

Source:

ABS Bundaberg and Queensland Census of Housing and Population Data 2006, 2011, 2016; Queensland Government population projections, 2015 edition; Australian Bureau of Statistics, Regional population growth, Australia, 2013-14, (Cat no. 3218.0); Bundaberg Population Projections for 2021, 2026 and 2031 (thematic maps) prepared by the Queensland Government Statistician’s Office; ABS Population Projections for Queensland 2021, 2026 and 2031.

Based on the above projections, the generational change in the next 15 years is anticipated to be higher in the Bundaberg Local Government Area (“LGA”) as compared to the rest of Queensland. As a result, it is projected that the proportion of population aged over 65 will increase from current 23.2% (21,514 people) up to 29.6% (35,239 people) by 2031. This significant projected increase will be the main driver for the demand for seniors living accommodation.


12

5.

Financial Information

Set out below are the forecast financial statements for the operation of the Fund. The annualised returns have been re-scaled to a period of one year for comparability. Actual returns in the 2018 financial year will be from the date of settlement to 30 June 2018. The forecasted financial statements in this IM are: -

-

predictive in character; may be affected by inaccurate assumptions or by known or unknown risks and uncertainties; and may differ materially from results ultimately achieved.

The material assumptions upon which the forecasts are based are set out below. Internal Rate of Return Cash Flows Year

Note

Issue of Units

Year 1

Year 2

Year 3

Year 4

Year 5

(9,060,010)

-

-

-

-

816,841

845,593

874,935

905,021

936,022

Sale proceeds of investment property

-

-

-

-

14,241,110

Selling costs

-

-

-

-

(142,411)

Debt repayment net of working capital

-

-

-

-

(4,936,557)

Performance fee

-

-

-

-

(242,800)

(8,243,169)

845,593

874,935

905,021

9,855,353

Distributions

Cash flow for IRR Pre – tax internal rate of return

Forecast distribution


12.45% p.a.

9.02% p.a.

9.33% p.a.

9.66% p.a.

9.99% p.a.

10.33% p.a.

13

Statements of Financial Position Year

Note

Pro forma

Year 1

Year 2

Year 3

Year 4

Year 5

Cash and cash equivalents

502,443

558,393

447,097

463,948

482,181

501,725

Total current assets

502,443

558,393

447,097

463,948

482,181

501,725

51,317

41,054

30,790

20,527

10,263

-

13,854,650

13,854,650

13,854,650

13,854,650

13,854,650

13,854,650

14,408,410

14,454,097

14,332,537

14,339,125

14,347,094

14,356,375

-

245,052

253,678

262,481

271,506

280,807

-

45,687

42,341

40,126

39,070

39,050

-

290,739

296,019

302,607

310,576

319,857

5,439,000

5,439,000

5,439,000

5,439,000

5,439,000

5,439,000

Total non current liabilities

5,439,000

5,439,000

5,439,000

5,439,000

5,439,000

5,439,000

Total liabilities

5,439,000

5,729,739

5,735,019

5,741,607

5,749,576

5,758,857

Net assets

8,969,410

8,724,358

8,597,518

8,597,518

8,597,518

8,597,518

8,969,410

8,152,569

7,729,772

7,729,772

7,729,772

7,729,772

-

571,789

867,746

867,746

867,746

867,746

8,969,410

8,724,358

8,597,518

8,597,518

8,597,518

8,597,518

Assets Current assets

Borrowing costs Investment property

7

Total assets Current liabilities Provision for income tax Provision for refurbishment

8

Total current liabilities Non current liabilities Interest bearing liabilities

9

Unit holders funds Units on issue Undistributed profit Total Investors funds

10


14

Income Statement Year

Note

Year 1

Year 2

Year 3

Year 4

Year 5

Income Rents received

1

1,753,295

1,797,401

1,842,617

1,888,970

1,936,490

Other income

2

81,201

81,201

81,201

81,201

81,201

1,834,496

1,878,602

1,923,818

1,970,171

2,017,691

Expenses Property expenses

3

594,998

609,699

624,905

640,493

656,318

Fund expenses

4

162,199

162,853

163,520

164,200

164,894

757,197

772,552

788,425

804,693

821,212

1,077,299

1,106,050

1,135,393

1,165,478

1,196,479

260,457

260,457

260,457

260,457

260,457

816,842

845,593

874,936

905,021

936,022

245,052

253,678

262,480

271,506

280,806

571,790

591,915

612,456

633,515

655,216

Total operating expenses Operating profit before finance costs and income tax Finance costs

5

Operating profit before tax Income tax expense

6

Operating profit after tax


15

Cash Flow Statement Year

Note

Year 1

Year 2

Year 3

Year 4

Year 5

-

558,392

447,096

463,947

482,180

Issue of Units

9,060,010

-

-

-

-

Interest bearing liabilities

5,439,000

-

-

-

-

(13,854,650)

-

-

-

-

Borrowing costs

(51,317)

-

-

-

-

Equity raising fee

(90,600)

-

-

-

-

Cash flow from operations

1,122,984

1,152,704

1,183,177

1,214,422

1,246,459

Financing costs

(250,194)

(250,194)

(250,194)

(250,194)

(250,194)

Income tax paid

-

(245,052)

(253,678)

(262,480)

(271,506)

Capital expenditure

-

(50,000)

(50,000)

(50,000)

(50,000)

(816,841)

(718,754)

(612,454)

(633,515)

(655,215)

558,392

447,096

463,947

482,180

501,724

816,841

422,796

-

-

-

Income

-

295,957

612,454

633,515

655,215

Franking credits

-

126,840

262,481

271,506

280,807

816,841

845,593

874,935

905,021

936,022

9.02% p.a.

9.33% p.a.

9.66% p.a.

9.99% p.a.

10.33% p.a.

Opening cash at bank

Property acquisition costs

Distributions paid Closing cash at bank

Forecast distribution components Capital return

Total Forecast distribution

The Fund is likely to meet the definition of a public trading trust under the Tax Act, and accordingly will be taxed as a company. For this reason, it will generally be the Trustees' policy, that whenever it has insufficient franking credits to frank income distributions, which is likely to be the case in the initial years, the distributions will be paid as a return of capital. Note 1   

Rents received Rent has been based on current rental rates of $274.00 per week for singles and $318.00 per couple. Occupancy has been forecast at 95% however the current occupancy rate is 99.19%. Rental rates have been assumed to increase at the rate of 2.5% per annum.

The percentage of couples currently occupying the Property is approximately is 10.0%. The financial forecasts have assumed this number will continue into the future. The higher the percentage of couples, the higher the rental income and conversely, the lower the percentage of couples, the lower the rental returns. Note 2

Other income

Other income the Fund will be expected to receive, consists of rental of the guest suite, collection of electricity on which the Village makes a margin and interest received upon working capital balances.


16

Note 3     Note 4

Property expenses The first year of expenses have been based on historical rates supplied by the present owners. Expenses have been assumed to increase at the rate of 2.5% per annum. Some expenses are fixed e.g. statutory expenses and insurance, while others will vary in line with occupancy levels, e.g. villa ge management fee and energy. The current village management fee is $2.68 including GST per day per occupied ILU. Fund expenses

Includes the manager’s fees and expense recovery. Note 5

Finance costs

An interest rate of 4.60% per annum has been applied for the duration of the cash flow forecast. Quoted variable and fixed term rates up to three years are currently below 5.1% per annum. Note 6

Income tax

The Fund is likely to be classified as a public trading trust and as such will be taxed as a company. Income tax has been provided at 30% on the estimated taxable income of the Fund. Note 7

Investment property

Investment Property This consists of the costs of purchase of the Property and costs involved in its acquisition Commencing

Year 1

Year 2

Year 3

Year 4

Year 5

$

$

$

$

$

$

-

13,854,650

13,854,650

13,854,650

13,854,650

13,854,650

12,950,000

-

-

-

-

-

Stamp duty

725,150

-

-

-

-

-

Acquisition fee

129,500

-

-

-

-

-

50,000

-

-

-

-

-

13,854,650

13,854,650

13,854,650

13,854,650

13,854,650

13,854,650

Opening balance Purchase price

Due diligence and legal expenses Total

Note 8 – Provision for refurbishment A sinking fund will be established to accumulate at the rate of 2.5% of rental income, which is considered adequate in light of recent refurbishment activities. Note 9

Interest bearing liabilities

Bank Facility The Trustee has received an offer from an Australian bank to provide a non-recourse finance facility on the following terms:   

Loan Amount – approximately $5,439,000 Term – five years Indicative interest rates – variable rates estimated to be between 4.17% p.a. and 4.42% p.a. – 3 year fixed rate of 4.70% p.a. The final rate payable by the Fund will depend upon the final mix of the variable and fixed components. The Trustee intends to fix at least 50% of the Funds borrowings for 3 years. For the purpose of forecasting operating cash flow, a rate of 4.60% p.a. has been used.



Principal Reductions – the facility is interest only for the 5 year term of the loan.


17

 

Security – first ranking mortgage over the Property and the first registered general security agreement over the assets of the Fund. Conditions Precedent – standard conditions precedent for loans of this nature apply, including a site inspection and bank valuation by an approved valuer, external legal review of the legal structure and operating bank account to be opened.

Note 10 Issued Units Units on issue

Number of issued Units

Commencing

Year 1

Year 2

Year 3

Year 4

Year 5

9,060,000

9,060,000

9,060,000

9,060,000

9,060,000

9,060,000

$

$

$

$

$

$

8,969,410

8,152,569

7,729,772

7,729,772

7,729,772

10

-

-

-

-

-

9,060,000

-

-

-

-

-

(90,600)

-

-

-

-

-

(816,841)

(422,797)

-

-

-

8,152,569

7,729,772

7,729,772

7,729,772

7,729,772

Opening balance Issued Units Units issued pursuant to offer Equity raising fee Capital return Total

5.1

8,969,410

Nature of Units

The Units will be issued at an application price of $1.00 per Unit. The Fund commences when the first Units are issued. The Trustee may commence termination of the Fund in accordance with the Constitution. The Trustee will hold the assets of the Fund for the Investors in accordance with the Constitution and may elect for the assets of the Fund to be held by a custodian. The beneficial interest in the Fund is divided into Units. Subject to the terms of issue of classes of Units (if any), each Unit confers an equal undivided interest in the assets of the Fund and a partly paid Unit (if any) confers an interest of the same nature which is proportionate according to the amount of the price paid on Application with respect to the Unit. Units may be consolidated or divided as determined by the Trustee.

5.2

Investor Restrictions

An Investor must not interfere with any rights or powers of the Trustee including exercising a right in relation to an asset of the Fund, lodging a caveat or other notice affecting an asset of the Fund, claiming any interest in an asset of the Fund or request for an asset of the Fund to be transferred to it.

5.3

Taxation

Investors should obtain their own tax advice before investing in the Fund. The Trustee does not provide financial or tax advice, nor has it obtained taxation advice specific to this offer subject to this IM. As such, this IM cannot address taxation issues which may be relevant to any investor. Each investor must take full and sole responsibility for their investment in the Fund, the associated taxation implications arising from the investment and any changes in those taxation implications during the course of the investment Goods and services tax Due to the Property being residential in nature, there will be limited opportunities to claim input tax credits. This has been taken into account in the above operating cash flow.


18

6.

Fees and Expenses

The table below outlines the fees and other costs that you may be charged. These fees and costs may be deducted from your money or from the returns on your investment or from the Fund assets as a whole. The fees can be changed in accordance with the Constitution. The maximum fees that can be charged are specified in the Constitution. You should read all of the information about fees and charges, as it is important to understand their impact on your investment.

Type of Fee or Cost

Amount

How and When Paid

Acquisition Fee

1.00% (ex. GST) of the purchase price of the Property.

This fee is paid from the Fund assets upon settlement of the Property.

Equity Raising Fee

1.00% (ex. GST) of the total equity raised.

This fee is paid upon the issue of Units.

Management Fee

1.00% (ex. GST) of the gross asset value of the Fund.

This fee is calculated and to be paid within 14 days of the end of each month for which it is calculated.

Performance Fee

20% of the amount by which the internal rate of return for Investors exceeds an internal rate of return of 10% per annum.

If payable, this fee is paid at the time the excess return is realised including but not limited to any of the following events: upon the sale of the Property, a restructure of the Fund, an effective exit providing the Investors the opportunity to redeem some or all of their Units, or a capital return.

Expense Recovery

0.25% per annum (ex. GST) of the Fund's gross asset value (estimate only).

This is an estimate of the Fund expenses which we will recover from the Fund as they are incurred. This is an estimate only. Actual expenses recovered may be more or less.

Village Management Fee

$2.68 per day (inc. GST) per occupied ILU increased by CPI.

This fee is accrued daily, invoiced fortnightly and paid monthly in arrears to the Property Manager as an operating expense of the Property

6.1.

Additional Explanation of Fees and Costs

6.1.1.

Acquisition Fee

This is the fee for purchasing any real property asset on behalf of the Fund. 6.1.2.

Equity Raising Fee

This is the fee for the raising of equity for the Fund including through collection of Application Monies contributed for Units in the Fund. 6.1.3.

Management Fee

This is the fee for operating the Fund and managing its investments.

6.1.5.

Performance Fee

This fee is calculated in accordance with the below formula:

A = [(B – C) x 0.20] - D where: A

is the Performance Fee (but only where A is a positive value);

B

is the value of the total of all income and capital distributions paid or to be paid prior to the relevant calculation date;

C

is the anticipated return which is the amount representing a notional 10% pre-tax internal rate of return on the subscription amount (being the total amount of all instalments of the application price of $1.00 per unit, paid or payable by the Investors up to but not including the calculation date).

D

is the aggregate of Performance Fees already paid or accrued on any prior calculation date.

For the avoidance of doubt, where A is a negative value, no Performance Fee is payable.


19

6.1.6.

Expense Recovery

The Trustee may recover all expenses incurred in relation to the proper performance of its duties. The Constitution does not place any limit on the amount of the expenses that can be paid from the Fund. We currently estimate expense recoveries of 0.25% per annum exclusive of goods and services tax. This estimate includes all the normal operating expenses of operating the Fund, for example, the costs of Fund promotion (including offer documents, advertising, promotional material and printing), registry services, accounts and audit, taxation advice, external consultants, compliance, insurance, stationery, communications and postage. Nor does this estimate include any allowance for any abnormal expenses (such as the costs of holding investor meetings, legal advice and legal proceedings and termination costs). We currently expect these costs to be insignificant over the term of the Fund.

6.1.7.

Government Charges

All Government taxes such as stamp duties and goods and services tax will be deducted from the Fund or your investment as is appropriate.

6.1.8.

Village Management Fee

This is the fee for running the day to day operations of the Property to be paid to the Property Manager.


20

7.

Risk Factors

7.1.

What are the Significant Risks of the Fund?

All investments are subject to risk. This means the value of your investment and the income from the investment may rise or fall. Before making an investment decision, it is important to understand the risks that can affect the value of your investment. While it is not possible to identify every risk of investing in the Fund, the risks identified below are significant risks that may affect your investment.

Type of Risk

Description

Property Revenue

The Fund’s forecast income is largely dependent upon the tenants paying rent in accordance with the terms of their leases. There is a risk that the tenants may default on a lease or that the Fund does not provide agreed minimum service standards, either of which could result in a reduction in rental income for the Fund, and additional expenses associated with re-leasing the tenancy or enforcement action. Vacancy periods may adversely impact on the Fund’s net income and distributions, the Fund’s ability to comply with its debt covenants, the Property’s capital value and potentially the value per Unit.

Market Conditions

The purchase price and ongoing value of the property are influenced by changes in real estate market conditions, such as increases in supply or falls in demand in any of the real estate market sectors, or a change in the capitalisation rates considered appropriate by valuers or otherwise generally applied in the market.

Property Liquidity

Direct property investments are by their nature illiquid investments. It may be difficult for the Trustee to dispose of the property either prior to or at the conclusion of the investment term in a timely manner or at an optimal sale price. This may affect the Trustee’s ability to return capital to Investors and may reduce the value per Unit.

Natural Phenomena, Terrorist Attacks or Force Majeure Events

There is a risk that natural phenomena (including climate change and flooding), terrorist attacks or force majeure events may affect the Property. There are certain events for which insurance cover is not available or for which the Fund does not have cover. If the Fund is affected by an event for which it has no insurance cover, this would result in a loss of capital and a reduction to the value per Unit and overall Investor returns. An event of this type could also result in an increase in insurance premiums. Property income or valuations of the Property could be adversely affected by:

Property Contamination

 

discovery of an environmental contamination; or incorrect assessment of costs associated with an environmental contamination or with property preservation.

This risk may occur irrespective of whether the contamination was caused by the Fund or prior owners.

Fund Liquidity

The Fund does not allow any redemptions under normal circumstances, and investors’ investments are therefore illiquid. The Trustee retains the right to provide some liquidity to Investors, and will advise Investors of its intention to do so and its policy for redemptions if it is able to or elects to provide liquidity. Investors should note that there is no guarantee that their monies will remain invested in the Fund for at least five years and that they may have their Units compulsorily redeemed prior to the conclusion of the Fund’s initial five-year term. For example:

Investment Horizon

 

Property Value and Sale Price

if the Total Offer Amount is not achieved by the date the Trustee determines to close the Offer, the Trustee may determine not to proceed with the offer; or while it is not the current intention of the Trustee to dispose of the Property, if the Trustee considers it appropriate to take advantage of a strong selling opportunity, it may sell the Property prior to the conclusion of the Fund’s initial five-year term to maximise returns to Investors.

The value of a property is influenced by many factors including but not limited to supply, demand, capitalisation rates, rentals, lease terms, property markets and economic conditions. There is no guarantee that the Property will achieve a capital gain on sale or will achieve a price sufficient to offset the expenses of the Fund to enable Investors to recover their initial investment or that the value of the Property will not fall as a result of the assumptions on which the relevant valuations are based proving to be incorrect.


21

Type of Risk

Description The Fund will be geared. Gearing will magnify the effect of any movements (both gains and losses) in the value of the Property. Higher gearing may also adversely affect the ability of the Fund to comply with its debt covenants.

Gearing

Diversification

A breach of a debt facility covenant may also result in a debt financier enforcing its security over the relevant assets. The financier may require repayment of the facility, possibly prior to its expected expiry. This could result in an early sale of the Property at a less than optimal sale price, for instance, in a depressed market, additional equity being required, or distributions being reduced or suspended to be used to repay the borrowings. Generally, the more diversified a portfolio, the lower the impact that an adverse event affecting one property will have on the income or capital value of an investment. The Fund will own a single property and so is not diversified by investment class, geographic location of properties or exposure to different property sectors. There is a risk that a debt facility or an interest rate hedge (i.e. fixing the interest rate) may not be available on the same terms upon extension or refinancing, or when new finance or hedging strategies are sought.

Debt Facility and Interest Rates

There is also a risk that interest rates may rise. These risks may have a material, adverse impact on the Fund’s activities, financial position and distributions. If the borrowings are refinanced, the terms (including fees and the interest rate margin payable) may be less favourable than those applying to the prevailing borrowings.

Economy and Market Conditions

There is the risk that changes in the economy and market conditions may affect asset returns and values, which in turn result in reduced distributions and may decrease the value per Unit. The overall investment performance of the Fund may be affected by changing economic or property market conditions. These may include movements in interest rates, exchange rates, securities markets, inflation, consumer spending, employment and the performance of individual local, state, national and international economies. Any losses incurred due to uninsured risks may adversely affect the performance of the Fund. Increases in insurance premiums may also affect the performance of the Fund.

Insurance

Insurance premium increases could occur, for example, if the Fund claims under any insurance policy for significant losses in respect of the Property. Any failure by the company or companies providing insurance (or any reinsurance) may adversely affect the Fund’s ability to make claims under its insurance. Also, most insurance policies have a minimum excess. There may be changes to the Fund at any time, including (but not limited to):

Fund and Regulatory Risks



closure or termination of the Fund;



changing the Fund; or



changing the rules that govern the Fund (e.g. changing fees, notice periods or withdrawal processes).

There is also the risk that the value or tax treatment of either the Fund itself or investments of the Fund, or the effectiveness of the Fund's trading or investment strategy may be adversely affected by changes in government (including taxation) policies, regulations and laws, or changes in generally accepted accounting policies or valuation methods. In some cases these things can occur without prior notice to the Investors.


22

8.

Additional Information

8.1.

Cooling off Rights

No cooling off rights apply to the issue of Units.

8.2.

The Role of the Trustee

Liberty Villas Bundaberg Nominees Proprietary Limited is the trustee of the Fund. The Trustee is regulated principally by ASIC under the Corporations Act and is also subject to the general law as it applies to trusts and trustees.

8.3.

The Constitution

The rights and obligations of investors are governed by the Constitution of the Fund and this IM, but are also affected by the general law relating to trusts and, where applicable, the Corporations Act, exemptions and declarations issued by ASIC. To the extent that there is any inconsistency between the IM and the Constitution, the terms of the Constitution shall prevail. The Constitution grants the Trustee rights to be paid fees and expenses and be indemnified from the Fund. It governs (amongst other things) the Trustee's powers (which are very broad), investor meetings and Unit issue, pricing and withdrawal, as well as what happens if the Fund terminates. The Constitution limits the Trustee’s need to compensate you if things go wrong. Generally, the Trustee is not liable in equity, contract, tort or otherwise to investors for any loss suffered in any way relating to the Fund. The Constitution also contains a provision that it alone is the source of the relationship between you and the Trustee and not any other laws (except, of course, those laws that cannot be excluded). The Trustee must have investor approval to make changes to the Constitution which adversely affect investors’ rights. You can obtain a free copy of the Fund’s Constitution by calling the Trustee.

8.4.

Related Parties

The Trustee has appointed Rees Pritchard Investor Services Pty Limited, a related party of the Trustee and Hamilton, as the administrator for the Fund. The Trustee will pay the administrator a fee for acting as administrator. These services are charged at ordinary market rates. This fee is not an additional fee, but is included in the Expense Recovery Fee described in Section 6. The Trustee intends to appoint Liberty Villas Management Pty Limited a related party of the Trustee and Hamilton as the Property Manager. The fees for these services will be charged at ordinary market rates, and are described in Section 6 as Village Management Fee.

8.5.

Alternative Forms of Remuneration

Subject to the Corporations Act, Hamilton or the Trustee may from time to time enter into arrangements with other parties under which we may make payments to such parties in return for promoting the Fund. Any such payments will be made by Hamilton or the Trustee out of their own resources, and not out of the Fund. You should refer to relevant disclosure documents provided by your financial adviser in which details of any payments are set out.

8.6.

Collection Statement

Hamilton collects personal information from you in order to administer your investment, to liaise with your financial adviser and to conduct research. Hamilton may also tell you about other products and services offered, or distributed, by Hamilton. You should advise Hamilton if you do not want your personal information to be used in this way. You may request to access your personal information we hold. If you think that records kept by Hamilton are wrong or out of date – particularly your address or email address – please contact Hamilton. In order to meet the requirements of anti-money laundering, counter-terrorism and taxation legislation, Hamilton may require further information from you as to your identity or source of funds. If you do not provide this information within the requested timeframe, Hamilton may not be able to process your transactions. Hamilton will not share any personal information that we have about you unless:


23



you agree;



the law requires or permits Hamilton to, or a regulator requests;



Hamilton considered that they need the information; or



to administer your investment.

Hamilton may disclose your personal information to certain regulatory authorities. If you do not provide Hamilton with your contact details and other personal information that we ask for, we may not be able to have or keep you as an investor. Hamilton's privacy policy can be found at www.hamiltonam.com.au and contains information about how you can request to access or correct your personal information or complain about our handling of your personal information and how we will deal with a complaint.

8.6.

Complaints

If you have a complaint or concern, please contact Hamilton either by phone or in writing. Hamilton will always acknowledge any written complaint within 14 days of receipt and will attempt to resolve the complaint within 45 days. Contact details are: Hamilton Asset Management Limited PO Box 402 Hamilton NSW 2303 Telephone 02 4920 2877 If you are not satisfied with a response provided by the Privacy Officer in relation to a privacy complaint or concern, alternative avenues may be available to you including the Office of the Australian Information Commissioner (OAIC) – www.oaic.gov.au


24

9.

Glossary

Terms used in this Product Disclosure Statement have the following meanings: Term

Meaning

AFSL

Australian financial services licence

Applicant

a person who submits an Application

Application

an application for Units under this IM

Application Form

the application form accompanying this IM

Application Monies

monies lodged with an Application

ASIC

the Australian Securities and Investments Commission

Banking Day

means a day other than a Saturday or Sunday on which banks are open for general banking business in Brisbane, Melbourne, Sydney and Newcastle

Constitution

The trust deed governing the Fund, as amended from time to time

Corporations Act

Corporations Act 2001 (Cth), and its regulations, as amended from time to time

CPI

is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services representative of consumption expenditure by resident households in the eight State/Territory capital cities in Australia.

Fund Administrator

Rees Pritchard Investor Services Pty Limited ACN 147 393 271

Fund

Hamilton Liberty Villas Bundaberg Property Fund

Gross Asset Value

market price of an asset before transaction costs & taxes

Hamilton

Hamilton Asset Management Limited ACN 139 473 699 AFSL No. 343546

ILU

Independent living unit

Investor

a holder of Units

IM

This information memorandum, as replaced, amended or updated from time to time

LGA

Local government area

Net Asset Value

the value of the assets of the Fund (as defined in the Constitution) less the value of the liabilities of the Fund (as defined in the Constitution)

Performance Fee

the performance fee charged by Hamilton, as set out in Section 6 Any of the following investors will be a “Politically Exposed Person”: 1)

Politically Exposed Person

2)

an individual who holds a prominent public position or function in a government body or an international organisation, including: a) Head of State or head of a country or government; or b) government minister or equivalent senior politician; or c) senior government official; or d) Judge of the High Court of Australia, the Federal Court of Australia or a Supreme Court of a State or Territory, or a Judge of a court of equivalent seniority in a foreign country or international organisation; or e) governor of a central bank or any other position that has comparable influence to the Governor of the Reserve Bank of Australia; or f) senior foreign representative, ambassador, or high commissioner; or g) high-ranking member of the armed forces; or h) board chair, chief executive, or chief financial officer of, or any other position that has comparable influence in, any State enterprise or international organisation; and an individual who is an immediate family member of a person referred to in 1) above including: a) a spouse; or b) a de facto partner; or c) a child and a child’s spouse or de facto partner; or d) a parent; and


25

Term

Meaning 3)

an individual who is a close associate of a person referred to in 1) above, which means any individual who is known (having regard to information that is public or readily available) to have: a) joint beneficial ownership of a legal entity or legal arrangement with a person referred to in 1) above; or b) sole beneficial ownership of a legal entity or legal arrangement that is known to exist for the benefit of a person described in 1) above.

Property

Liberty Villas, 3 Ovens Street, Bundaberg, Queensland 4670

Property Manager

Liberty Villas Management Pty Limited ACN 623 114 107 or as otherwise nominated by the Trustee from time to time

Trustee

Liberty Villas Bundaberg Nominees Proprietary Limited ACN 622 811 643

Unit

a unit in the Fund Any of the following investors will be a “Wholesale Client”: 

a person that invests $500,000 or more Note: One may aggregate amounts invested at or about the same time by the person, an associate of the person or a body corporate controlled and wholly owned by the person, in products within the same class offered by the same issuer “Superannuation-sourced monies” cannot form part of the $500,000. Superannuation sourced monies are monies which the applicant knows the superannuation trustee will pay to a person as a superannuation lump sum or has been paid as an eligible termination payment or lump sum superannuation benefit during the previous 6 months



a person that can demonstrate, by way of an accountant’s certificate that is not more than 2 years old, that the person has net assets of at least $2.5 million or a gross income for each of the last 2 financial years of at least $250,000 Note: In determining whether the person has net assets of at least $2.5 million, the net assets or gross income (as relevant) of a company or trust controlled by the person may be included. If the person qualifies as a wholesale client under this test, then a company or trust controlled by the person who has a certificate from a qualified accountant is also a wholesale client (regardless of the financial position of the company or trust). an AFSL holder a person who is regulated by APRA, other than a trustee of a superannuation fund, an approved deposit fund, a pooled superannuation trust or a public sector superannuation scheme a person registered as a body under the Financial Corporations Act 1974 (Cth) a person who is the trustee of a superannuation fund, an approved deposit fund, a pooled superannuation trust or a public sector superannuation scheme and the fund, trust or scheme has net assets of at least $10 million a person that has or controls gross assets of at least $10 million (including any assets held by an associate or under a trust that the person manages) a person who is a listed entity, or a related body corporate of a listed entity a person who is an exempt public authority a person who is a body corporate or an unincorporated body that carries on a business of investment in financial products, interests in land or other investments, and for those purposes invests funds received following an offer or invitation to the public where the terms of the offer provided for the funds subscribed to be invested for those purposes a related body corporate of any body corporate that is a wholesale client a person who is a foreign entity that, if established or incorporated in Australia, would be covered by one of the preceding categories of wholesale client (apart from the first two categories) a person that is a business other than a small business Note generally a business is a small business if it employs less than 20 people. However, a manufacturing business is a small business if it employs less than 100 people

 

Wholesale Clients

 

   

  



a person that an AFSL holder is satisfied has previous experience in using financial services and investing in financial products that allows the person to assess the merits, value and risks of the investment (amongst other things), and the AFSL holder gives the person a statement of its reasons for being satisfied as to those matters and the person signs an acknowledgement


26

10.

Corporate Directory Steven Pritchard

Directors of the Trustee

Enzo Pirillo Brett Hall

Company Secretary

Enzo Pirillo Level 1 10 Murray Street Hamilton NSW 2303

Registered Office of Trustee

Telephone +61 2 4920 2877 Facsimile +61 2 4920 2878 Email: [email protected] Web: www.hamiltonam.com.au Rees Pritchard Investor Services Pty Limited Level 1 10 Murray Street

Fund Administrators

Hamilton. NSW. 2303 Telephone +61 2 4920 2877 Facsimile +61 2 4920 2878 Email: [email protected]


27