prospectus - corporate bond fund · ii | australian masters corporate bond fund no 3 prospectus...

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REPLACEMENT PROSPECTUS

FOR THE OFFER OF

250,000 fully paid ordinary shares at an offer price of $100.00 per ordinary share to raise up to $25,000,000 with the ability to accept oversubscriptions.

The investments of

AUSTRAliAn MASTERS CORPORATE BOnd FUnd no 3 liMiTEd

will be managed by

dixOn AdviSORy & SUPERAnnUATiOn SERviCES PTy lTd

This offer is not underwritten

iSSUE MAnAGER

[ACn 134 738 524]

Directors

Maximilian Walsh (Chairman) Alex MacLachlan Chris Brown Daryl Dixon Alan Dixon

company secretary

Chris Duffield

investigating accountant

Moore Stephens Sydney Corporate Finance Pty Ltd Level 7, 20 Hunter Street Sydney NSW 2000

Telephone: +61 2 8236 7700 Facsimile: +61 2 9233 4636 Website: www.moorestephens.com.au

manager anD issue manager

Dixon Advisory & Superannuation Services Pty Ltd AFS Licence Number: 231143 Level 15, 100 Pacific Highway North Sydney NSW 2060

Telephone: +61 2 6162 5555 Facsimile: +61 2 6162 5550 Website: www.dixon.com.au

share registrar

Registries Limited Level 7, 207 Kent Street Sydney NSW 2000

Telephone: 1300 737 760 (Australia) Telephone: +61 2 9290 9600 Facsimile: +61 2 9279 0664 Website: www.registries.com.au

registereD office

Level 15, 100 Pacific Highway North Sydney NSW 2060

Telephone: +61 2 6162 5555 Facsimile: +61 2 6162 5550 Website: www.dixon.com.au/amcbf3

auDitor

Moore Stephens Sydney Level 7, 20 Hunter Street Sydney NSW 2000

Telephone: +61 2 8236 7700 Facsimile: +61 2 9233 4636 Website: www.moorestephens.com.au

solicitors to the offer

Watson Mangioni Lawyers Pty Limited Level 13, 50 Carrington Street Sydney NSW 2000

Telephone: +61 2 9262 6666 Facsimile: +61 2 9262 2626 Website: www.wmlaw.com.au

diRECTORy

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | I

1. Information for Investors 1

2. Overview of Corporate Bonds 3

3. Overview of the Company 10

4. Investment Objectives and Process 13

5. Risks 17

6. The Manager 20

7. Financial Information 21

8. Directors and Corporate Governance 24

9. Further Information About Corporate Bonds 27

10. Taxation 29

11. Investigating Accountant’s Report 33

12. Material Contracts 36

13. Additional Information 39

14. Glossary 42

TABLE OF CONTENTS

II | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

About this ProsPectus

This Prospectus is issued by Australian Masters Corporate Bond Fund No 3 Limited (ACN 134 738 524) (Company) and contains an invitation to apply for Shares in the Company to raise up to $25,000,000 at an issue price per Share of $100.00. The Company reserves the right to accept oversubscriptions to raise a further $50,000,000 of Shares at an issue price per Share of $100.00

This Prospectus is dated 9 February 2009 and has been lodged with the Australian Securities & Investments Commission (ASIC) on that date. It is a replacement prospectus which replaces a prospectus dated 5 February 2009 and lodged with ASIC on that date (Original Prospectus). No responsibility for the contents of this Prospectus is taken by the ASIC or any of its officers.

This document is important and requires your immediate attention. It should be read in its entirety. You may wish to consult your professional adviser about its contents.

No Shares will be issued on the basis of this Prospectus later than the expiry date of this Prospectus, being the date 13 months after the date of the Original Prospectus.

Licensed deALers

Offers under this Prospectus will be made pursuant to an arrangement between the Company and Australian Financial Services Licensees (Licensees) pursuant to Section 911A(2)(b) of the Corporations Act. The Company will only authorise Licensees to make offers to people to arrange for the issue of Shares by the Company under the Prospectus and the Company will only issue Shares in accordance with such offers if they are accepted.

Dixon Advisory & Superannuation Services Pty Limited (Issue Manager) will deposit and deal with the Application Monies pursuant to this Prospectus. Any Application Form received which does not bear a Licensee’s stamp will be forwarded to the Issue Manager.

The Issue Manager’s function should not be considered as an endorsement of the Offer nor a recommendation of the suitability of the Offer for any investor. The Issue Manager does not guarantee the success or performance of the Company or the returns (if any) to be received by investors. Neither the Issue Manager nor any other Licensee is responsible for, or caused the issue of, this Prospectus. The Company reserves the right to enter into similar arrangements to those with the Issue Manager with other Licensees.

The Company will pay a handling fee equal to 1% of the Application Monies provided with Application Forms bearing a Licensee’s stamp. The Issue Manager may stamp all unstamped Applications and receive a 1% handling fee on such Applications.

exPosure Period

The Corporations Act prohibits the issue of Shares in the period of seven days after the date of lodgement of the Original Prospectus with ASIC. This period may be extended by ASIC by up to a further seven days. This period is an exposure period to enable this Prospectus to be examined by market participants prior to the raising of funds. Applications received during the exposure period will not be processed until after the expiry of that period. No preference will be conferred on Applications received during the exposure period.

investment decision

Applicants should read this Prospectus in its entirety before deciding to apply for Shares. This Prospectus does not take into account your individual investment objectives, financial situation or any of your particular needs. You should seek independent legal, financial and taxation advice before making a decision whether to invest in the Company.

An investment in an unlisted entity carries risks. An outline of some of the risks that apply to an investment in the Company is set out in Section 5. Applicants are urged to consider this Section of the Prospectus carefully before deciding to apply for Shares.

No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained or taken to be contained may not be relied on as having been authorised by the Company in connection with the Offer.

IMPORTANT NOTICES

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | III

ForwArd Looking stAtements

This Prospectus contains forward looking statements. Forward looking statements are not based on historical facts, but are based on current expectations of future results or events. These forward looking statements are subject to risks, uncertainties and assumptions which could cause actual results or events to differ materially from the expectations described in such forward looking statements. While the Company believes that the expectations reflected in the forward looking statements in this Prospectus are reasonable, no assurance can be given that such expectations will prove to be correct. The risk factors set out in Section 5, as well as other matters as yet not known to the Company or not currently considered material by Company, may cause actual results or events to be materially different from those expressed, implied or projected in any forward looking statements. Any forward looking statement contained in this Prospectus is qualified by this cautionary statement.

eLectronic ProsPectus

An electronic version of this Prospectus (Electronic Prospectus) can be downloaded from the website of the Issue Manager, www.dixon.com.au/amcbf3. The Offer or invitation to which the Electronic Prospectus relates is only available to persons receiving the Electronic Prospectus in Australia and New Zealand.

The Company will send you a copy of the paper Prospectus and paper Application Form free of charge if you ask during the application period.

If you download the Electronic Prospectus, please ensure that you have received the entire Prospectus accompanied by the Application Form. The Shares offered under the Offer to which the Electronic Prospectus relates will only be issued on receipt of a printed copy of the Application Form.

how to APPLy

An Application for Shares under the Offer can only be made by completing and lodging the Application Form attached at the back of this Prospectus. Detailed instructions on completing the Application Form can be found on the back of the Application Form.

Shares issued in respect of Applications received by the Company will be issued at $100.00 per Share.

Applications under the Offer must be for a minimum of $10,000. The Directors may extend the Offer in accordance with the Corporations Act.

APPLicAtion Form

Applications and Application Monies for Shares under the Offer received after 5:00pm (Sydney time) on the Closing Date will not be accepted and will be returned to potential investors.

Applications must be accompanied by payment in Australian currency.

Cheques in respect of Applications should be made payable to “Australian Masters Corporate Bond Fund No 3 Limited” and crossed “Not Negotiable”.

No stamp duty is payable by Applicants.

Completed Application Forms, together with Application Monies, should be forwarded to the following address:

POSTAL HAND DELIVERED Australian Masters Corporate Bond Fund No 3 Australian Masters Corporate Bond Fund No 3 Limited Share Offer Limited Share Offer c/- Dixon Advisory & Superannuation Services Pty Limited c/- Dixon Advisory & Superannuation Services Pty Limited GPO Box 575 Level 1, 73 Northbourne Avenue Canberra ACT 2601 Canberra ACT 2600

IV | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

when to APPLy

Completed Applications under the Offer must be received by 5:00pm (Sydney time) on the Closing Date. the directors may close the offer at any time after expiry of the exposure period without prior notice or extend the period of the offer in accordance with the corporations Act.

The Directors reserve the right to allocate any lesser number of Shares than those for which the Applicant has applied. Where the number of Shares allotted is fewer than the number applied for, surplus Application Monies will be refunded with interest.

enquiries

Investors with questions on how to complete the Application Forms or who require additional copies of the Prospectus should contact:

Chris Duffield Dixon Advisory & Superannuation Services Pty Limited Telephone: +61 2 6162 5555

gLossAry oF terms

Defined terms and abbreviations included in the text of this Prospectus are set out in the Glossary in Section 14.

wArning stAtement For new ZeALAnd investors pursuant to regulation 13(d) of the securities (mutual recognition of securities offerings-Australia)

regulations 2008 (sr2008/153)

1. 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 2001 and Regulations. In New Zealand, this is Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings—Australia) Regulations 2008.

2. 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 and Regulations (Australia) set out how the offer must be made.

3. There are differences in how securities are regulated under Australian law. For example, the disclosure of fees for collective investment schemes is different under the Australian regime.

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

5. Both the Australian and New Zealand securities regulators have enforcement responsibilities in relation to this offer. If you need to make a complaint about this offer, please contact the Securities Commission, Wellington, New Zealand. The Australian and New Zealand regulators will work together to settle your complaint.

6. The taxation treatment of Australian securities is not the same as for New Zealand securities.

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

8. The offer may involve a currency exchange risk. The currency for the securities is not in New Zealand dollars. The value of the securities will go up or down according to the changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant.

9. If you expect the securities 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 dollars.

9 February 2009

Dear Investor

As Chairman of the Board of Directors, I am pleased to invite you to become a Shareholder in Australian Masters Corporate Bond Fund No 3 Limited.

The Company has been established to provide Australian retail investors access to the Australian wholesale bond market through a simple, cost effective corporate structure.

The corporate bond market is not a market many retail investors can access due to minimum investment restrictions. Further, a prudent portfolio contains many bonds, not just a single bond. As a result, an investor would normally need to invest a significant amount to obtain appropriate diversification of risk.

As was the case with Australian Masters Corporate Bond Fund No 1 Limited and Australian Masters Corporate Bond Fund No 2 Limited, this company will provide access for Australian and New Zealand domiciled retail investors to an underlying portfolio of high ranking corporate debt. Unlike these companies, Australian Masters Corporate Bond Fund No 3 Limited will also hold in its portfolio corporate debt issued in Australia by well known multinational companies and Australian subsidiaries of multinational companies. These bonds, known as kangaroo bonds, are denominated in Australian dollars and carry equivalent investment grade ratings as the bonds in the Portfolio issued by Australian companies.

The Company is managed by Dixon Advisory & Superannuation Services Pty Limited.

The Company intends to employ a static portfolio management style, selecting a portfolio of high quality bonds denominated in Australian dollars from Australian issuers.

The Company expects to pay two fully franked dividends per year. The Company will also seek Shareholder approval to execute capital returns from time to time, passing capital proceeds derived from the maturity of bonds back to investors. Following the final return of capital on or about the 3rd anniversary of the date of this Prospectus, the Company will seek Shareholder approval to voluntarily wind up the Company.

The Company has been established to take advantage of the current pricing of those bonds. Aggressive easing by the Reserve Bank of Australia has imposed downward pressure on corporate bond yields. Further action is expected. The Manager believes that the bonds provide more predictable income and greater capital security than equity. The Manager’s view is that a conservative Portfolio offering an average yield of around 8.5% with duration out to three years can presently be assembled. See Section 4.4 for details regarding a sample portfolio which may be assembled as at the date of this Prospectus and a discussion of factors that may constrain the available yield on such a portfolio.

The directors of the Company, Alex MacLachlan, Chris Brown, Daryl Dixon, Alan Dixon and I will be responsible for reviewing the selection of the Company’s portfolio of bonds selected by the Manager. See Section 6.3 for details.

Debt and equity markets continue to experience significant volatility and the global financial system continues to experience stress. While this may be perceived as presenting an investment opportunity, investments in the Company remain exposed to certain risks. Some of the risks associated with making an investment in Shares, and indirectly in corporate debt securities through your investment in the Company, are set out in Section 5.

I encourage you to read this Prospectus carefully before making your investment decision, as it contains detailed information about the Company and the offer of Shares to investors.

I look forward to welcoming you as a Shareholder of the Company.

Yours sincerely

maximilian walsh Chairman

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | VII

Key Dates

Lodgement of replacement prospectus with ASIC 9 FebruAry 2009

Expected expiry of exposure period 12 FebruAry 2009

Offer to open 12 FebruAry 2009

Offer to close 5.00pm (Aest) 25 FebruAry 2009

Expected allotment of Shares 4 mArch 2009

Expected despatch of share certificates 6 mArch 2009

The above dates are indicative only and may vary, subject to the requirements of the Corporations Act. The Company reserves the right to extend the Offer or close the Offer at any time after expiry of the exposure period.

Key Offer Statistics

Minimum number of Shares available under the Offer 100,000

Minimum proceeds from the Offer $10,000,000

Maximum proceeds from the Offer (if no oversubscriptions are taken up) $25,000,000

Maximum proceeds from the Offer (if all oversubscriptions are taken up) $75,000,000

Issue Price per Share $100.00

Pro forma Net Tangible Asset (NTA) backing per Share if the minimum subscription amount is raised. *See Section 7.1 for details of how the NTA is calculated.

$99.10*

Key Investment Highlights

Below is a summary of the key highlights of the Offer. This is a summary only and should be read in light of the other information in this Prospectus, particularly the risks that are summarised on the following pages.

Access to the Australian corporate bond market

The Company has been established to undertake direct investment in Australian issued corporate bonds denominated in Australian dollars issued by Australian companies and substantial foreign corporations or their Australian subsidiaries. It is intended to provide Australian and New Zealand retail investors access to the Australian wholesale corporate bond market through a simple, cost effective structure and take advantage of the current pricing of high quality corporate bonds.

The Company’s objectives are to achieve a high rate of income to investors through fully franked dividends, minimise default risk by investing in Investment Grade corporate bonds issued by quality Australian companies, foreign corporations and their Australian subsidiaries, provide consistent income payments and capital returns throughout the life of the Company and minimise costs.

See Sections 2.3 and 3

HIgHLIgHTS OF THE OFFER

VIII | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

Returns and exit path Corporate bonds are debt instruments with a face value, maturity date and coupon return. Typically, the coupon rate is payable in 6 monthly instalments and the maturity date is between 1 and 10 years from the issue date. The Company does not propose to invest in corporate bonds with a maturity date later than 29 February 2012. During that period, income from the coupon (or interest) payments will be earned by the Company and the Company expects to declare periodic dividends.

As the Portfolio of corporate bonds matures, the proceeds from the maturing bonds are intended to be returned to Shareholders by way of returns of capital approved by Shareholders and, following the final return of capital, the Company is expected to be voluntarily wound-up.

See Sections 2.2 and 3.3

Experienced Board and Manager

The Board will comprise Maximilian Walsh, Alex MacLachlan, Chris Brown, Daryl Dixon and Alan Dixon. Each member of the Board has experience in providing comprehensive financial advice services to clients.

The Manager currently manages a portfolio of interests of two similarly structured companies, Australian Masters Corporate Bond Fund No 1 Limited and Australian Masters Corporate Bond Fund No 2 Limited. It also manages the investment portfolio of Global Resource Masters Fund Limited.

The Manager also has experience in providing comprehensive administration and financial advice services to over 2,700 self-managed superannuation fund clients, with a combined superannuation asset base of $2.5 billion.

See Sections 6.1, 6.2 and 8

Investment Strategy The Manager will implement a disciplined investment process that identifies and selects a portfolio of Australian dollar denominated corporate bonds. The Board will review information, research and analysis compiled by the Manager. While it is proposed that the portfolio will be static in nature, the Manager will monitor the portfolio and retain the authority to trade the underlying corporate bonds if, in the opinion of the Manager, it is the most appropriate course of action to take.

See Section 4.3

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | IX

Key Investment Risks

The key risks highlighted below, together with other risks, are more particularly described in Section 5.

Liquidity The Company will not be listed on the ASX. There will not be a ready market for the Shares. It is intended that the Portfolio will be held to maturity of the underlying corporate bonds. The latest maturity date for bonds in which the Company proposes to invest is 29 February 2012.

There is no restriction on the transfer of Shares if you find your own buyer. Investors should be comfortable that they need to hold their Shares and may not be able to exit their investment in the Shares until the Company is wound up.

See Section 5.1(i)

Default Risk If counterparties to contracts with the Company such as issuers of corporate bonds do not meet their responsibilities (including as a result of the insolvency, financial distress or liquidation of the counterparty) this may have an effect on the performance of the Company.

In particular, issuers of corporate bonds may be unable to refinance corporate debt on maturity of bonds and so may default on repayment of principal on maturity. Issuers may also be unable to pay interest on corporate bonds due to, among other things, adverse financial conditions and adverse financial and/or operating performance of the issuer and its related parties. Any such default will have an adverse impact on the financial performance of the Company.

See Section 5.1(b)

Economic Conditions Investment returns are influenced by market factors. Current markets continue to experience unusually high levels of volatility. As a result, future earnings of the Company and the earnings and capital appreciation of the Company’s investments cannot be predicted with any certainty.

See Section 5.1(a)

Financial Market Volatility A fall in global equity markets or downturn in Australian business conditions may mean that the interest or payment due on maturity of the corporate bonds may not be able to be paid by one or more of the issuing companies. In this event the yield on the investment will be lower than expected and/or the Company may not be repaid the full amount of its investment, adversely impacting on the financial performance of the Company.

See Section 5.1(f)

Corporate Bond Terms The terms of the corporate bonds that comprise the Portfolio are likely to be unsecured obligations of the issuers. As unsecured obligations, it is likely that secured debt obligations of the issuers will rank ahead of the Company’s investment in the corporate bonds and therefore in a default event, the secured lenders would be repaid prior to the corporate bonds being repaid.

An investment in corporate bonds is an investment in a wholesale investment product and therefore it is not regulated nor subject to the same protections that an investment in an underlying retail product would have.

The corporate bond terms may allow the issuer to repay the corporate bond at their election. This may occur, particularly if interest rates drop during the corporate bond term. If this occurs the return on an investment in the Company is likely to decrease.

See Section 5.1(c)

X | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

Offshore Operations Risk Issuers or parent companies of issuers that have substantial offshore operations may have agreements with foreign entities. Future government actions in the relevant country or region concerning the economy, government intervention in that country’s banking and finance sector, dealing with foreign entities, repatriation of funds, changes to corporate policies, taxation policies, environmental policies and change in political conditions could have an impact on the financial position and creditworthiness of these entities. Defaults may have a significant effect on the Company.

See Section 5.1(j)

Foreign Corporations There may be greater difficulty in assessing a foreign corporation’s or their Australian subsidiary’s accounts and creditworthiness due to possible differences in accounting standards, laws, reporting obligations and policies and financial and operating requirements, which may differ from those in Australia.

See Sections 5.1(k) and 5.1(l)

Parent Guarantors For Australian dollar denominated corporate bonds issued by Australian subsidiaries of foreign corporations which are guaranteed by their parent corporation and to which credit ratings depend on such guarantee, any changes to the guarantee arrangements may impact on the credit rating of that issue. This in turn may affect the value of the corporate bonds.

See Section 5.1(m)

Poor Investment Performance

The value of the Shares may reflect the performance of the corporate bonds selected by the Manager. There can be no certainty that the Manager will select corporate bonds that will generate returns to the satisfaction of the investor.

See Section 5.1

Performance History The Company has no financial, operating or performance history.

While the Manager has extensive experience in managing investments of self-managed superannuation fund clients and managing equity portfolios, the Manager has a more limited experience in the role of a corporate bond portfolio manager.

See Sections 6.2, 5.1(n) and 5.1(o)

Interest Rate Increases If interest rates in Australia increase above present levels, by investing in the Company, which is an illiquid investment, investors will have foregone the opportunity to receive the benefit of those increased interest rates with the funds they invest in the Company.

See Section 5.1(d)

Failure to Return Capital As the Company does not propose to seek listing on ASX or another financial market, opportunities for investors to exit their investment are limited. The Company’s strategy to return capital to Shareholders following maturity of the corporate bonds held depends on the requisite majority votes cast by Shareholders.

See Section 5.1(e)

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | XI

Offer Summary

This is a summary only. This Prospectus should be read in full before making any decision to apply for Shares.

About The Offer

question Answer more inFormAtion

Who is the issuer of the Shares and this Prospectus?

Australian Masters Corporate Bond Fund No 3 Limited (ACN 134 738 524).

See Sections 1.1 and 3.1

What is the Offer? The Offer is for Shares at $100.00 per Share. The Company will offer to issue 250,000 Shares, raising gross proceeds of $25,000,000, with the ability to accept oversubscriptions for a further 500,000 Shares.

The Offer is subject to the Company raising a minimum of $10,000,000.

See Section 1.1

What is the purpose of the Offer? The Company is seeking to raise funds for the purpose of investing in corporate bond securities.

The net proceeds of the Offer will be used by the Company to undertake investments consistent with its investment objectives and guidelines.

See Section 3.2 and 7.5

How liquid will my investment be? The Company will not be listed on the ASX. There will not be a ready market for the Shares.

See Section 5.1(i)

How can I exit my investment in the Company?

The Company intends to purchase bonds with a maturity date no later than 29 February 2012. The Company intends to return capital to investors following maturity of corporate bonds and intends to undertake a voluntary winding-up after the last of the corporate bonds held in the Portfolio matures, which is expected to be put to shareholders on or about the 3rd anniversary of the date of the Prospectus. The returns of capital and the winding-up will be subject to Shareholder approval.

See Section 3.3

Is there a cooling-off period? No

How can further information be obtained?

Please contact Chris Duffield on 02 6162 5555 if you have questions relating to the Offer.

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

XII | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

About the Company


What will the Company invest in? The Company will invest in Australian issued corporate bonds denominated in Australian dollars issued by Australian companies and substantial foreign corporations or their Australian subsidiaries.

See Section 2.1

What is the Company’s investment objective?

The Company’s investment objective is to establish a portfolio of bonds to generate a high rate of income and minimise costs. This in turn will allow the Company to provide to investors fully franked dividends and capital returns throughout the life of the Company. The Company will seek to minimise default risk by investing in Investment Grade corporate bonds issued by quality corporations. This will be achieved by the appointment of a respected investment manager to implement a disciplined investment process that identifies, selects and monitors a portfolio of Australian dollar denominated corporate bonds.

See Section 4.1

Who is the Investment Manager? Dixon Advisory & Superannuation Services Pty Limited (ACN 103 071 665) (AFS Licence: 231143).

See Section 6

Are there any independent directors? No. All of the Directors of the Company are associated with the Manager.

What is the investment philosophy and focus?

The Company’s strategy is to invest in and hold to maturity a diversified portfolio of underlying Investment Grade corporate bonds that provide high returns and provide investors with consistent income via the Company’s dividend policy. The Manager will manage the cash component of the Portfolio and return excess cash to investors as soon as possible.

See Section 4.2

What are the key terms of the Management Agreement between the Investment Manager and the Company?

The Management Agreement provides for the appointment of the Manager for an initial term of 4 years to manage the Portfolio and for the payment of a management fee. The Management Agreement terminates automatically on the winding up of the Company. Unless terminated during the initial term, the Management Agreement will be automatically extended for successive further terms of 1 year each. The Company may terminate the Management Agreement after the initial 4 year period on 3 months written notice.

The Manager will be responsible for the provision of the financial services under the Management Agreement.

See Section 12.1

What fees will the Manager and Issue Manager receive?

The Manager will receive an annualised management fee of 0.35% (excluding GST), calculated with reference to the value of the Company’s portfolio. The first management fee will be 0.35% per annum (excluding GST) of gross proceeds raised under this

See Section 12.1, 12.2 and 13.7

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | XIII


Prospectus and will be payable on the later of 10 Business Days after 31 March 2009 or when the Company has received sufficient earnings from its Portfolio to make such payment. Subsequent management fees will be payable annually in advance within 10 Business Days of each 30 June during the term of the Management Agreement from 30 June 2009.

For the performance of its obligations under the Issue Manager Agreement, the Issue Manager will charge:

a) a handling fee equal to 1% (excluding GST) of the Application Monies provided with Application Forms bearing its stamp. The Issue Manager may stamp all unstamped Applications and receive a 1% handling fee on such Applications; and

b) a structuring fee of 0.25% (excluding GST) of the gross proceeds raised under this Prospectus.

What costs of the Company will be met by the Manager and Issue Manager?

The Issue Manager will meet all start-up costs of the Company such as legal, accounting, marketing and all associated costs of the Offer under this Prospectus.

The Manager will meet the on-going operation costs of running the Company, such as registry, audit and accounting fees.

See Section 12.1 and 12.2

What are the significant potential benefits?

There are a number of potential benefits of the Offer which are outlined on the first page of the Highlights of the Offer and in Section 3.1.

See Section 3.1

What are the significant risks? An investment in the Company involves a number of risks. While the Directors and Manager intend to use prudent management techniques to minimise the risks to Shareholders, no assurances can be given by the Company as to the success or otherwise of its business. The performance of the Company is not guaranteed by the Company, the Manager, the Issue Manager or any adviser to the Company.

Investors should consider the risk factors identified in this prospectus, particularly those identified in Section 5, before applying for Shares.

See Section 5

What is the Company’s gearing level? At the time of the Offer the Company will have no borrowings and the Company does not intend to gear the Portfolio.

See Section 4.9

What are the significant tax implications of investing in the Company?

Some tax implications of investing in the Company are outlined in Section 10. Investors should seek tax advice based on their own specific circumstances prior to making a decision to invest in the Company.

See Section 10

XIV | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

Investing in the Company


Who can participate in the Offer? Members of the general public who have a registered address in Australia or New Zealand.

See Section 1.6

Can superannuation funds invest? Yes, subject to the investment mandate of the particular fund and the trustee’s general powers and duties.

How do I apply for Shares? The procedures for making an investment in the Company are described in Section 1.3.

The Issue Manager may be required to obtain identification information from Applicants. The Company reserves the right to reject an Application if that information is not provided upon request.

See Section 1.3

Will the Company pay dividends and when can I expect them?

To the extent it is able, the Company will pay dividends on a 6 monthly basis.

See Section 4.7

What are the fees and costs of the Offer?

The Issue Manager will charge a structuring fee of 0.25% (excluding GST) of the gross proceeds raised under this Prospectus, for the performance of its obligations under the Issue Manager Agreement.

The Manager will charge an annual management fee equal to 0.35% (excluding GST) of the gross value of the Portfolio of the Company. The Manager will bear the on-going operation costs of running the Company, such as registry, audit and accounting fees, however, brokerage and other acquisition and disposal costs of corporate bonds within the Portfolio will be borne by the Company.

The Company will pay a handling fee equal to 1% (excluding GST) of the Application Monies provided with Application Forms bearing a Licensee’s stamp. The Issue Manager may receive this handling fee.

See Sections 12.1, 12.2 and 13.8

Is the Offer Underwritten No

AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS | 1

This is a summary only. This Prospectus should be read in full before making any decision to apply for Shares.

1.1 | the oFFer

The Company will offer for subscription 250,000 Shares. The Offer comprises an offer of Shares at $100.00 per Share. To participate in the Offer, your Application Form must be received by the Share Registry by 5:00pm (Sydney time) on the Closing Date.

Under the Offer, the Company reserves the right to accept oversubscriptions of up to a further 500,000 Shares at $100.00 per Share.

The Offer will only be made to members of the general public who have a registered address in Australia or New Zealand.

1.2 | minimum subscriPtion

The Minimum Subscription for the Offer is $10,000,000, being receipt of valid Applications for not less than 100,000 Shares. If this Minimum Subscription is not achieved by the date 3 months after the Opening Date, the Company will repay all money received from Applicants within 7 days from the completion of 3 months.

1.3 | APPLicAtions

APPLICATION FORM Applications under the Offer must be made and will only be accepted on the Application Form issued with and attached to this Prospectus.

Shares issued in respect of Applications received by the Company will be issued at $100.00 per Share.

Applications under the Offer must be for a minimum of $10,000.

Applications and Application Monies for Shares under the Offer received after 5:00pm (Sydney time) on the Closing Date will not be accepted and will be returned to potential investors. The Directors may extend the Closing Date. Applications must be accompanied by payment in Australian currency.

Cheques in respect of Applications should be made payable to “Australian Masters Corporate Bond Fund No 3 Limited” and crossed “Not Negotiable”.

No stamp duty is payable by Applicants.

Completed Application Forms, together with Application Monies, should be forwarded to the following address:

POSTAL HAND DELIVERED Australian Masters Corporate Bond Fund No 3 Australian Masters Corporate Bond Fund No 3 Limited Share Offer Limited Share Offer c/- Dixon Advisory & Superannuation Services Pty Limited c/- Dixon Advisory & Superannuation Services Pty Limited GPO Box 575 Level 1, 73 Northbourne Avenue Canberra ACT 2601 Canberra ACT 2600

A binding contract to issue Shares will only be formed at the time Shares are allotted to Applicants.

Application Forms will be accepted at any time after the issue of this Prospectus and prior to the expiry date of this Prospectus.

The Directors may close the Offer at any time after expiry of the exposure period without prior notice or extend the period of the Offer in accordance with the Corporations Act.

1.4 | Licensed deALers

Offers under this Prospectus will be made pursuant to an arrangement between the Company and Australian Financial Services Licensees (Licensees) pursuant to Section 911A(2)(b) of the Corporations Act. The Company will only authorise Licensees to make offers to people to arrange for the issue of Shares by the Company under the Prospectus and the Company will only issue Shares in accordance with such offers if they are accepted. The Company has entered into such an agreement with the Issue Manager.

1. INFORMATION FOR INvESTORS

2 | AUSTRALIAN MASTERS CORPORATE BOND FUND No 3 PROSPECTUS

The Issue Manager holds an appropriate Licence. The Issue Manager will deposit and deal with the Application Monies pursuant to this Prospectus.

The Company will pay handling fees equal to 1% (excluding GST) of the gross proceeds raised under this Prospectus to Licensees (including the Issue Manager) who submit Application Forms bearing that Licensee’s stamp.

1.5 | ALLotment

No allotment of Shares will be made until the Minimum Subscription has been received. It is expected that allotment of the Shares under the Offer will take place on or about 4 March 2009. Application Monies will be held in a separate account until allotment. This account will be established and kept by the Issue Manager on behalf of the Applicant. The Issue Manager may retain any interest earned on the Application Monies held on trust pending the issue of Shares to successful Applicants.

The Application constitutes an offer by the Applicant to subscribe for Shares on the terms and subject to the conditions set out in this Prospectus. Where the number of Shares allotted is less than the number applied for or where no allotment is made, the surplus Application Monies will be returned by cheque within 7 days of the Closing Date. The Issue Manager will pay all interest earned on such refunded Application Monies to Applicants.

The Board of the Company reserves the right to accept or reject any Application, including for any oversubscriptions, in its absolute discretion.

1.6 | overseAs shArehoLders

The Offer does not constitute an offer in any place in which, or to any person to whom, it would be unlawful to make such an offer.

1.7 | PrivAcy

When you apply to invest in the Company, you acknowledge and agree that:

(a) you are required to provide the Company with certain personal information to:

(i) facilitate the assessment of an Application;

(ii) enable the Company to assess the needs of Applicants and provide appropriate facilities and services for Applicants; and

(iii) carry out appropriate administration;

(b) the Company may be required to disclose this information to:

(i) third parties who carry out functions on behalf of the Company, including marketing and administration functions, on a confidential basis; and

(ii) third parties if that disclosure is required by law; and

(iii) related bodies corporate (as that term is defined in the Corporations Act) which carry out functions on behalf of the Company.

Under the Privacy Act 1988 (as amended), Applicants may request access to their personal information held by (or on behalf of) the Company. Applicants may request access to personal information by telephoning or writing to the Manager.

A copy of the privacy policy of the Company is available to Applicants on request.

1.8 | Anti-money LAundering / counter-terrorism FinAncing Act 2006

The Company or the Issue Manager may be required under the Anti-Money Laundering/Counter-Terrorism Financing Act 2006 (Cth) or any other law to obtain identification information from Applicants. The Company reserves the right to reject any Application from an Applicant who fails to provide identification information upon request.


2. OvERvIEw OF CORPORATE BONDS

2.1 | corPorAte bonds

The Company has been established to undertake direct investment in Investment Grade corporate bonds denominated in Australian dollars, issued in Australia by Australian and international issuers and Australian subsidiaries of international issuers. A corporate bond is a debt security.

Bonds are issued by governments, companies and other entities and individuals in return for cash from lenders and investors. The issuer (or borrower) pays interest to the investor (or lender) through the life of the bond at fixed periods specified in the terms of issue. Issuers seeking funds from the public through bond issues usually announce the issues through the financial press and electronic media, and spell out the details of the corporate bond issue in an offer document available from stockbrokers and banks. Corporate bonds are generally medium to long term fixed interest securities with a term of more than 1 year.

The intention of the Company is to invest in corporate bonds that offer attractive risk adjusted returns in the opinion of the Investment Committee. This will involve investing in corporate bonds issued in Australia, denominated in Australian dollars by Australian issuers and international issuers or their Australian subsidiaries.

Section 2.7 contains a list of potential issuers. This list is not exhaustive. Some corporate bonds not listed in Section 2.7 may be included in the final Portfolio of the Company. Conversely, issuers of corporate bonds listed in Section 2.7 may not be included in the final portfolio of the Company.

See Section 9.1 for information regarding the regulation of corporate bond issues.

2.2 | bond terms

A corporate bond is usually structured as having a face value amount, which the issuer as borrower undertakes to repay to the investor on the maturity date. In addition to this, as mentioned above, an interest coupon is typically payable to the investor on a six monthly basis.

Interest payments and repayment of the face value on maturity are contractual obligations of the issuer and are not subject to there being available profits or the directors of the board of the issuer approving the payment. In the event that a payment is missed, the investor may have certain default event rights and, in the case of secured corporate bonds, these rights may include the appointment of a receiver to take control of the assets of the issuer to effect repayment of the corporate bonds.

Secured debt, such as secured corporate bonds, are the highest ranking debt in the security structure of a company. In the event of a credit default by an issuer, secured debt followed by unsecured debt is repaid first before subordinated debt, mezzanine debt and, in the event of any surplus assets being available, hybrid equity, preference equity and ordinary equity.

In a liquidation of a company, the company’s assets are returned to investors in order of seniority. The diagram below provides an example of the ranking of some common forms of debt and equity:

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oF 4

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subordinAted debt

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he

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ordinAry shAres

Corporate bonds are typically structured as either secured, unsecured or subordinated debt, being among the highest ranking securities issued by a company.

2.3 | the corPorAte bond mArket

Ordinarily, corporate bonds are not issued under a prospectus. Retail investors may not acquire a corporate bond unless the corporate bond is issued under a prospectus or until 12 months after the issue date of the corporate bond. Further, the terms of issue of corporate bonds often restrict trading in bonds to institutional or other wholesale investors.

$

$ $ $


Trading among wholesale investors is permitted without a prospectus. As a wholesale investor, the Company will be able to subscribe for or purchase such corporate bonds. While the Company proposes to employ a static portfolio style of investment, it will also be able to sell such corporate bonds to institutional or other wholesale investors.

See Section 9.2 for further information regarding the “over-the-counter” (OTC) trading system of the corporate bond market.

As at 29 January 2009, the value of Australian dollar denominated corporate bonds on issue in Australia (including bonds issued by international corporations in Australia and their subsidiaries) exceeded $300 billion.

2.4 | understAnding credit rAtings

Debt securities are commonly provided a credit rating or opinion. These ratings are prepared by third party credit rating agencies and represent an assessment of the ability of an issuer of bonds to meet its obligations, including its ability to pay interest and to repay the principal.

Credit rating agencies generally adopt differing terminology to indicate their ratings for particular issues. For the purposes of assessing whether a bond is of Investment Grade, the Company and the Manager will adopt the Standard & Poor’s rating system. For these purposes, the Company and the Manager will consider corporate bonds with a Standard & Poor’s ratings of AAA, AA, A or BBB (all + or –) as Investment Grade. The Manager is permitted to invest in corporate bonds with such ratings, or equivalent ratings from other ratings agencies if the bonds are not rated by Standard & Poor’s at the time of their acquisition by the Company.

Ratings assigned by the ratings agencies represent their opinions of the quality of the debt securities they undertake to rate, but not the market risk of such securities. It should be emphasised that ratings are general and are not absolute standards of quality. Nor do they constitute an assessment of the value of a corporate bond as an investment, either in absolute terms or in comparison to any other asset class. Such ratings are applied to both domestic and international issues.

A ratings agency may downgrade the rating on any product at any time. The Manager may, but is not required to, sell or take any action in respect of a corporate bond forming part of the Portfolio if it is downgraded below Investment Grade during the period it is held. In addition, the Manager may trade a corporate bond forming part of the Portfolio where the Manager considers it appropriate including when the Manager’s assessment of the issuer has changed even if a ratings agency has not downgraded the rating on that bond.

While the Manager and the Company will consider the Standard & Poor’s credit rating when assessing whether a potential investment of the Company is Investment Grade, the Manager and the Company do not endorse the credit rating applied by Standard & Poor’s and will undertake their own assessment of the issuer and the value of the corporate bond for investment.

See Section 9.3 for further details regarding Standard & Poor’s credit rating system.

2.5 | risk And yieLd

The prices at which corporate bonds trade generally varies inversely with changes in prevailing interest rates. If interest rates rise, the prices at which bonds may be purchased generally fall; if interest rates fall, bond prices generally rise. Shorter-term bonds are generally less sensitive to interest rate changes than longer-term bonds; thus, for a given change in interest rates, the market prices of shorter-maturity corporate bonds generally fluctuate less than the market prices of longer-maturity corporate bonds. Corporate bonds with shorter maturities generally offer lower yields than bonds with longer maturities, assuming all other factors, including credit quality, are equal.

Generally, lower-grade bonds provide a higher yield than higher-grade bonds of similar maturity but are subject to greater risks, such as greater credit risk, greater market risk and volatility, greater liquidity concerns and potentially greater manager risk. Credit risk refers to an issuer’s ability to make timely payments of interest and principal.

While all corporate bonds fluctuate inversely with changes in interest rates, the prices of lower-grade bonds generally are less sensitive to changes in interest rates and are more sensitive to specific issuer developments or real or perceived general adverse economic changes than higher grade securities. A projection of an economic downturn, for example, could cause a decline in prices of lower grade securities because the advent of a recession could lessen the ability of a highly leveraged company to make principal and interest payments on its senior securities or obtain additional financing when necessary.

2.6 | historicAL deFAuLt rAtes

Investment grade securities in the Australian market have historically had low default rates.


The following chart shows average cumulative defaults experienced by corporate bonds with the various Standard & Poor’s rated classes and maturity periods in which the Manager is permitted to invest without approval from the Company, as a percentage of issuance for the period 1989 – 2006. This chart indicates defaults on Australian dollar denominated bonds issued by Australian companies, foreign corporations and their Australian subsidiaries:

AustrALiAn & new ZeALAnd cumuLAtive AverAge deFAuLt rAtes 1989–2006

Source: Standard & Poor’s – Australian & New Zealand 2006 Annual Default & Rating Transitions Study

Investors are reminded that past performance is not necessarily a reliable indicator of future performance. In particular, economic conditions may vary so that future default rates exceed historical default rates. The current global financial crisis has had a significant adverse impact on the ability of corporations to raise debt, either by the issue of further corporate bonds or conventional senior debt. This may have an impact on default rates for corporations whose corporate bonds mature throughout the duration of the crisis. See Section 2.11 for details.

2.7 | “kAngAroo bonds”

Corporate bonds issued in Australia by non-Australian corporations or Australian subsidiaries of such foreign corporations are commonly referred to as “kangaroo bonds”. Often international corporations which have operations in Australia elect to raise funds for these operations in the Australian corporate bond market by issuing bonds denominated in Australian dollars. It is also common for foreign issuers with access to another capital market outside of their own to raise capital in the Australian corporate bond market. These international corporations may look to diversify their holdings and improve their overall currency exposures by using kangaroo bonds to raise funds in Australian dollars.

The obligations of these foreign corporations or their Australian subsidiaries under Australian issued bonds are commonly guaranteed by a parent corporation with substantial offshore operations.

Kangaroo bonds are usually issued on the same terms as bonds issued by Australian entities and are subject to the same regulation under the Corporations Act 2001 and Australian law generally. The principal difference from resident-issued corporate bonds is that a substantial part of the operations of the issuer or its parent guarantors and related group entitles is conducted outside Australia. As a result, assessment of the creditworthiness of the offshore operations may be more difficult as laws, reporting obligations, accounting standards and policies and financial and operating requirements may differ from those of equivalent Australian operations.

Kangaroo bonds represent a substantial part of the corporate bond market in Australia. As at 29 January 2009, approximately one third of all corporate bonds on issue in Australia had been made available by non-resident corporations.

2.8 | PotentiAL issuers

Due to the transaction size demanded of the corporate bond market, issuance is restricted in the most part to large capitalisation companies. As at the date of this Prospectus, the Manager has not formed a view as to the corporate bonds in which the Company will invest following completion of the issue. Examples of international and Australian issuers whose

5.0%

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AAA

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All investment grade

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6


corporate bonds may be considered for inclusion in the Portfolio and the band of Standard & Poor’s credit ratings for corporate bonds issued by these companies currently traded include those listed below.

Please note that the below list is included by way of example only, and that future corporate bond issues by the companies below may attract different ratings to those specified below. Additionally, the Company may from time to time invest in corporate bonds issued by these entities that have lower ratings than the S&P Rating Senior Bond identified below, but in all cases the Company will invest in Investment Grade corporate bonds.

ge capital Australia Funding Pty Limited GE Australia Capital Funding Pty Limited is a 100% owned and guaranteed Australian subsidiary of General Electric Capital Corporation (GECC), which in turn is a 100% owned subsidiary of General Electric Corporation (GE), a multinational conglomerate.

Corporate bonds issued by GE Australia Funding Pty Limited currently available for purchase by the Company have a S&P rating of AAA.

GE is a diversified technology, media and financial services corporation. The corporation offers products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products. GE has a current market capitalisation of US$122 billion.

bank of America corporation Bank of America Corporation (BAC) is the holding corporation for the Bank of America group. It accepts deposits and offers banking, investing, asset management, and other financial and risk-management products and services. The company has a mortgage lending subsidiary, and an investment banking and securities brokerage subsidiary. The corporation has a current market capitalisation of US$38 billion.

Corporate bonds issued by Bank of America Corporation currently available for purchase by the Company have a S&P rating of A+.

BAC announced the acquisition of Merrill Lynch & Co. on 15 September 2008, having previously acquired Countrywide Financial Corporation (effected on 1 July 2008). BAC is the third largest US bank by market capitalisation.

BAC received a US$138 billion package from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the US Treasury on 16 January 2009. US$20 billion will be received in the form of a preferred stock capital injection, and the remaining US$118 million as a guarantee on certain assets. Under the agreement the guarantee will cover residential assets for 10 years and other assets for a period of 5 years. BAC will bear the first US$10 billion in losses. Additional losses up to a further US$10 billion will be shared with the FDIC, the US Treasury, and the Federal Reserve covering 90% of the losses with BAC bearing 10%.

bos international (Australia) Limited BOS International (Australia) Limited is guaranteed by immediate UK parent corporation, Bank of Scotland Plc. In 2001 Bank of Scotland Plc merged with Halifax to become HBOS Plc (HBOS), with Bank of Scotland remaining the prime operating bank of the group. HBOS was recently acquired by Lloyds TSB Group Plc. with formal completion on 19 January 2009. Lloyds Banking Group (Lloyds) has a current market capitalisation of GBP8 billion.

Corporate bonds issued by BOS International (Australia) Limited currently available for purchase by the Company have a S&P rating of AA-.

The merger of Lloyds and HBOS has created the largest branch network in the UK market and results in the combined group having a market share of 35% of the current account market and 28% of mortgages and a market share of between one quarter and one third across most other business lines including retail deposits, consumer credit, business banking, general insurance and life insurance.

Following recent capital injections, Lloyds is now 43% owned by the UK Government.

Publishing & broadcasting (Finance) Limited Publishing & Broadcasting (Finance) Limited is guaranteed by Crown Limited (Crown). Post the spin-off of Publishing and Broadcasting Ltd’s media business, Crown is a pure international gaming company. Assets of Crown include Australian casinos (monopoly assets of Crown Casino and Burswood Casino), Macau exposure through its interest in Melco PBL Entertainment (Macau) Ltd and development assets, which include associate interests in two Las Vegas properties, Aspinall’s JV in the UK, a Canadian JV with Macquarie Group and a 50% interest in Betfair Australasia. Crown continues to generate the majority of its earnings from its domestic monopoly casino assets. Crown’s current market capitalisation is AU$4.1 billion.


Corporate bonds issued by Publishing & Broadcasting (Finance) Limited currently available for purchase by the Company have a S&P rating of BBB.

Crown has recently completed a AU$300 million equity raising and extended its debt maturity profile through a number of new bilateral loans totalling AU$1.6 billion (equivalent) of AUD and USD loans. This has resulted in Crown having no debt maturing prior to FY2012. Crown currently has net debt of AU$180 million pending the settlement of the Cannery Casino Resorts acquisition in the US.

stockland trust management Limited Bonds are issued by Stockland Trust Management Limited in its capacity as responsible entity of the Stockland Trust and are guaranteed by Stockland Corporation Limited. The trust and corporation form the listed (stapled) Stockland Group. Bonds therefore have the backing of the assets of the trust and corporation.

Corporate bonds issued by Stockland Finance currently available for purchase by the Company have a S&P rating of A-.

Stockland is a global property development and investment management group, founded in 1952. It holds a diversified portfolio of retail, commercial and industrial investment properties across Australia, UK and Europe together with a UK based property company, an Australian retirement communities portfolio and an extensive residential land bank and development pipeline. Stockland is one of the highest rated trusts in the Australian property market with a market capitalisation of AU$5.95 billion. Stockland remains primarily focussed on the Australian market which generated 99% of operating profit in the financial year ending 2008.

Stockland has stated that it currently has gearing (total liabilities to total tangible assets) of 39.3%, well below the group’s 45% covenant level in line with the group target of <40%. Total debt to total tangible assets is 32%, in the middle of the group’s stated 25-35% target range.

2.9 | historicAL credit sPreAds

A credit spread is the difference between the yield on a particular credit instrument and the yield of a risk free asset with equivalent duration. Credit spread represents the additional yield investors in a market require to take on the risk of a particular credit instrument, such as a bond. Historically government issued bonds have been used to approximate a risk free asset. The global financial crisis and the Australian Government guarantee for banks has recently impacted on the market perception of the value of “risk free assets”. See discussion in Section 2.11 for details.

Since August 2007, credit spreads on Investment Grade Australian dollar denominated corporate bonds have widened substantially from their historical trading range. The graph below illustrates the historical average spread for corporate bonds with credit ratings ranging from BBB to AAA.

AustrALiAn corPorAte bond sPreAds

Source: The graph has been complied using trading data sourced from Bloomberg as at 23 January 2009. Note that Bloomberg has not provided its consent to the inclusion of trading

data attributed to it in this Prospectus.

AAA

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By historical standards, the current widening of credit spreads has been severe. Credit spreads are generally considered to represent the additional premium an investor requires to take on the risk of investing in an asset which is not risk free. Factors other than risk can also affect the price of corporate bonds, including supply and demand factors driven by structural changes in the market.

On a simplistic view, the current spreads between Australian government bonds and Investment Grade corporate bonds imply that there is currently significantly increased risk in investing in Investment Grade corporate bonds. It is the Manager’s view that although default risk on interest or principal payment has increased due to the global financial crisis, the probability of such an event remains low for the issuers of Investment Grade corporate bonds. The Manager believes supply and demand dynamics have pushed credit spreads wider than can be justified by default risk and consequently that Investment Grade corporate bonds are offering an attractive opportunity for investors in the current credit market. See Section 2.11 for further information.

From September 2008 the US and UK governments have embarked on an intervention program in an attempt to arrest deteriorating conditions in the banking sector and the finance sector generally. The Manager believes that while this has presented largely negative results for equity and hybrid equity holders in the recipient companies, government action has strengthened the position of senior bondholders as the funding provided by these governments does not dilute the interests of bondholders.

Investors should recognise that every investment carries risks. Default in principal or interest payments by any one or more of the issuers of the corporate bonds that comprise the Portfolio will lead to decreased yields for the Portfolio and a decrease in the value of an investor’s investment. Investors should carefully read Section 5, which details some of the risks in investing in the Company.

2.10 | current bond yieLds

Total bond yields are generally assessed on the basis of two components. The risk free component is reflected in the swap rate which is indicative of the current interest rate environment. In addition there is the credit spread, which is the additional yield an investor is receiving for taking on a specific company’s credit.

Interest rate swaps are used as the base at which to compare the yields of different securities. The overall yield of a corporate bond is the relevant interest rate swap plus the spread. When interest rate swaps decrease, the yields of other instruments typically also decrease.

The below graph shows the three year swap rate (3YR BBSW) in the period 1 January 2002 to 23 January 2009 and the overall yields of each of Australian bonds rated ‘AAA’, ‘AA’, ‘A’ and ‘BBB’.

AggregAte bond yieLds comPAred to swAP rAte

Source: The graph has been complied using trading data sourced from Bloomberg as at 23 January 2009.

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The graph in Section 2.9 shows corporate bond spreads have expanded to their widest point in this interest rate cycle. As described in Section 2.9, the total yield on a bond is the addition of the risk free rate and the credit spread of that bond. As such, the widening of credit spreads is associated with an increase in total yield, all else being equal. The current environment however has seen the Reserve Bank of Australia lowering the official cash rate, which corresponds with a reduction in the risk free rate. This movement has a counteracting force to the widening credit spreads, lowering the overall yield bond investors can expect. The above graph illustrates how the average total yield on bonds of various credit ratings have changed as a result of the two effects of widening credit spreads and a falling risk free rate.

Importantly, alternative investment options in the fixed interest class (for example, at call cash and term deposits) have also seen a substantial reduction in return characteristics to investors.

The principal value the Manager is aiming to exploit is the unusually wide credit spreads currently in the market. It is the Manager’s view that the market continues to show significant value from a credit spread perspective.

2.11 | imPAct oF the gLobAL FinAnciAL crisis

Since August 2007, global credit conditions have deteriorated considerably. Due mainly to the de-leveraging of global financial corporations and in particular, investment banks, and general uncertainty regarding the global economic outlook, liquidity in debt markets both in Australia and overseas has diminished substantially in recent months.

Nevertheless, there has been a near record volume of Australian dollar denominated wholesale corporate bonds issued in the Australian debt market in both December 2008 and January 2009 with in excess of $14 billion raised in that period. However these bonds, which have all been issued by Australian banks, have used the Australian Government guarantee and so are perceived as representing a lower credit risk than other non-guaranteed issuance.

The issuance of bonds which have the Australian Government guarantee has also impacted on the pricing of corporate bonds more generally and the profile of debt raisings. Corporate bonds which have the guarantee are presently trading at around 100 to 110 basis points above the three year swap rate, thereby effectively increasing the rate which is considered by the bond market to be free of risk.

In this environment, bonds issued by other corporations would need to be priced at higher levels to secure interest from investors. As a result, many non-bank corporations are presently finding it more attractive to obtain funding through traditional direct senior lending, equity raisings or, in limited cases, asset sales rather than through the corporate bond market.

In view of the record level of spreads between the swap rate and bond yields to maturity and continuing economic stimulus measures adopted by governments across the world, the Manager believes that Investment Grade corporate bonds are offering an attractive opportunity for investors who are willing to buy high quality bonds and to hold them to maturity.

It is important to note that a further substantial deterioration of economic conditions will likely increase the difficulty for corporations to refinance debt with an attendant increased risk of default. The Manager is mindful of such risk and will seek to use comprehensive individual company analysis when selecting the Portfolio to minimise exposure to refinancing risk where possible.


3. OvERvIEw OF THE COMPANy

3.1 | About the comPAny

Australian Masters Corporate Bond Fund No 3 Limited is a company, not a managed investment scheme. Investors will hold Shares in the Company and will receive the benefit of profits generated by the Company by way of dividends rather than distributions (see Section 4.8 for details of the Company’s proposed dividend policy).

The Company has been set up to invest in Australian dollar denominated corporate bonds issued in Australia. It has been established to provide Australian investors with the opportunity to gain exposure to high ranking corporate debt of quality Australian companies, international corporations and their Australian subsidiaries using a static corporate bond portfolio style of investment.

Australian retail investors in the past have encountered difficulties in gaining access to a diversified exposure of Australian dollar denominated corporate bonds. Reasons for this include:

• AustraliandollardenominatedcorporatebondstradeintheOTCmarketwithrelativelyfewinstitutionspreparedtomakeamarket for retail investors.

• Standardminimumparcelsizeinthismarketis$500,000andpreferredtradingisinmultiplesofmorethan$1,000,000perbond.

• Alternativestructuredofferingsareoftentradedbyanactivemanager,whichcanleadtoahigherManagementExpenseRatio(MER) by increasing transaction fees. (See Section 3.4 for further details)

• Alternativestructuredofferingsareusually‘openended’whichcanbelessefficientbecausethemanagerscanbeforcedtobuy and sell bonds at unsuitable times.

Key advantages of investing in the Company include:

• DiversifiedexposuretohighrankingcorporatebondsissuedbywellrecognisedAustralianandinternationalcorporationsandtheir subsidiaries.

• Anattractive,targetedyieldtomaturityonallcorporatebonds.TheCompanytargetsbuyingcorporatebondssothattheaverage yield of bonds in the Portfolio is approximately 8.5% p.a.

• Accesstoconsistentcashflowthroughfullyfrankeddividendpaymentsandcapitalreturns.

• AlowMERofaround0.35%perannumwiththeManagerbearingregistry,accountingandauditcostsandthecostsofmaking the Offer. (See Section 3.4 for further details).

3.2 | whAt is A stAtic corPorAte bond PortFoLio-styLe oF investment?

Generally an investment company raises capital from shareholders, applies capital raised to make direct equity investments and actively manages the portfolio.

In contrast, the Company will invest in a static portfolio of corporate bonds. Capital raised from Applicants will be applied to acquire a portfolio of Australian dollar denominated corporate bonds issued by major Australian companies, foreign corporations and their Australian subsidiaries. While the Manager retains the authority to trade the underlying corporate bonds, it is intended that these bonds will be held until maturity. By keeping a static portfolio, the Manager will be minimising the costs associated with running the Company, allowing for a very low management expense ratio. The Company and the Manager believe that given current market conditions, buying a portfolio of corporate bonds and holding them until maturity will provide investors with an attractive risk-adjusted return.

Investors in such a static corporate bond portfolio receive the benefit of diversification and access to investments that are traditionally not available to retail investors. The Company provides investors with an opportunity to manage risks associated with diversification by investing across a number of bonds which may have differing risk profiles and maturity dates. The Company provides investors with an opportunity to gain exposure to investments that may otherwise be difficult to obtain due to standard bond parcel sizes of $500,000 or more. However, this investment strategy will also carry with it diminished liquidity.

3.3 | return oF cAPitAL/exit strAtegy

The Company intends to return cash to Shareholders when the underlying corporate bonds mature. This will be effected by way of capital returns undertaken from time to time and when the Company winds up following the maturity of the longest dated underlying corporate bond, being no later than 29 February 2012.


Undertaking a capital return will be subject to Shareholders in general meeting approving the capital return by ordinary resolution and otherwise in accordance with Corporations Act procedures. Although it is anticipated that the capital return will be recommended by the Board there is no guarantee that the Shareholders will approve the capital return.

Undertaking a voluntary winding-up of the Company following the capital return will be subject to Shareholders in general meeting approving the winding up by special resolution (being 75% of votes cast being in favour of the resolution) and otherwise in accordance with Corporations Act requirements. It is anticipated that professional advisors’ fees required to effect a solvent voluntary winding-up of the Company will be in the order of $15,000 (plus GST and disbursements). Although it is anticipated that the voluntary winding-up of the Company will be recommended by the Board, there is no guarantee that the Shareholders will approve the voluntary wind-up resolution.

As dividends are expected to be paid semi-annually, the Manager will attempt to place excess cash in short-dated high yielding term deposits and at call accounts. Cash will be managed to maximise the return until the next dividend date when excess cash will be returned to investors. The Manager will ensure sufficient cash is retained only to the extent that it is required to meet tax liabilities, the Manager’s fees and other costs.

3.4 | mer oF the comPAny

The Management Expense Ratio is calculated by taking the total of all fees deducted and all expenses paid or recovered from the Company and expressing this as a percentage of the value of the assets of the Company. Keeping the MER as low as possible maximises the potential returns to investors, as even relatively small differences in the MER between investments can impact on the overall return, particularly for medium to the long-term investors.

Some of the expenses of the Company include:

a) all stamp duties, financial institutions duty, bank account debits tax and taxes incurred in connection with the acquisition or sale of any of the Company’s investments or proposed investments, receipt of income or other investments of the entitlements from the Portfolio;

b) costs of calling and holding general meetings of the Company;

c) fees payable to ASIC or any other regulatory body;

d) outgoings in relation to the Portfolio (for example, insurance premiums, rates, levies, duties and taxes); and

e) costs such as commissions and brokerage incurred in connection with the acquisition or sale of any of the Company’s investments or proposed investments.

For further details of the Company’s expenses, see Section 12.1.

The Company will have a MER of around 0.35% per annum while it operates under normal conditions and disregarding the costs associated with the expected capital returns and voluntary winding up. This management fee payable to the Manager under the Management Agreement is payable by the Company for the ongoing management of the Company. In return for this fee the Manager will:

• investinaportfolioofunderlyingcorporatebonds;

• managethecashpositionoftheCompany;

• monitorthePortfolioofunderlyingcorporatebonds;

• makeanynecessarychangestotheunderlyingPortfolioofcorporatebonds;and

• coverauditor,registryandoffercoststhatwouldotherwisebepayablebytheCompany.

By requiring the Manager to pay various costs set out under Section 12.1, the Company is limiting its exposure to unexpected expenses that may arise in operating the Company and reducing the risk of the consequent erosion to the net asset backing of the Company.

The Company will, however, be required to pay other costs, for example, legal costs in bringing or defending any claim, the costs of undertaking the proposed capital returns and voluntary winding up referred to in Section 3.3, which will include adviser fees and the costs of calling and holding the general meetings to approve the capital returns and winding up. By incurring these costs, the MER for the years in which these events occur will be more than 0.35% per annum.


3.5 | hAndLing Fee And structuring Fee

The Company will pay to the Issue Manager a handling fee of 1% (excluding GST) of the Application Monies provided with Application Forms bearing its stamp and a Structuring Fee of 0.25% of the gross proceeds raised under this Prospectus. The Issue Manager Agreement provides for the above fees to be payable to the Manager in consideration for acting as issue manager to the Offer and for assuming all costs and expenses associated with the Offer (being the initial arrangements required for ordinary operation of the Company) including costs, fees and expenses incurred in relation to:

a) preparation of the Prospectus and obtaining all advisory services including legal and accounting services;

b) initial share registry fees;

c) typesetting and graphic design; and

d) printing.

See Section 12.2 for more details.


4. INvESTMENT OBjECTIvES AND PROCESS

4.1 | investment objectives

The 3 key investment objectives of the Company are:

• TominimisecostsoftheCompany.

• Toprovidetoinvestorsahighrateofincomeandconsistentfullyfrankeddividendsandthepotentialtoreceivecapitalreturns throughout the life of the Company.

• TominimisedefaultriskbyinvestinginInvestmentGradeAustraliandollardenominatedcorporatebondsissuedbyqualityAustralian companies, foreign corporations and their Australian subsidiaries.

4.2 | investment PhiLosoPhy And Focus

The Company and the Manager believe that the fixed interest market for corporate bonds is delivering attractive yields to maturity.

Given the above, the investment philosophy and focus of the Company and the Manager is:

• Toinvestinadiversifiedportfolioofunderlyinginvestmentgradecorporatebonds,thatprovidehighreturnsandcanbeheldto maturity.

• ToprovideinvestorswithconsistentincomeviatheCompany’sdividendpolicy.

• Toactivelymanagethecashcomponentoftheportfolioandreturnexcesscashtoinvestorsassoonaspractical.

The Manager will implement a disciplined investment process that identifies, selects and actively monitors a portfolio of Australian dollar denominated corporate bonds. While it is proposed that the portfolio will be static in nature (with bonds held until maturity), the Manager retains the authority to trade the underlying corporate bonds if, in the opinion of the Board, it is the most appropriate course of action to be taken.

4.3 | Permitted investments And strAtegy

Under the Management Agreement, the Manager is permitted to undertake investments on behalf of the Company in consultation with the Company’s Board and in accordance with the Corporations Act, the investment policies and any written guidelines issued by the Board from time to time. The initial investment policies, guidelines and criteria issued by the Board are summarised in this Section 4.3.

The Manager proposes to select corporate bonds that comply with the following investment criteria:

• CorporatebondsissuedbyestablishedAustraliancompanies,foreigncorporationsandtheirAustraliansubsidiaries.

• Creditratingof“BBB-“orhigheronallunderlyingcorporatebonds.

• Maturitydatenolaterthan29February2012.

A credit rating of BBB- or higher does not guarantee the performance of the issuer of the corresponding corporate bond. The issuer may not be able to meet its interest payment obligations as and when they fall due and may be unable to repay some or all of the face value of the corporate bond on maturity.

For the purposes of this Prospectus, the Manager and the Company consider that corporate bonds with a BBB- or higher grading are “Investment Grade”.

If the Manager is unable to identify corporate bonds that meet the criteria at attractive prices, the Manager may elect to hold cash, term deposits and cash equivalents including interests in cash management trusts.

Under the Management Agreement, the Manager may only undertake investments in accordance with the above criteria and pursuant to its powers as outlined in Section 6.4.

The Manager is authorised by the AFS Licence under which it operates to deal in each of the above investments. An expansion of authorised investments may require the Manager to obtain a corresponding expansion of the authorisations of its AFS Licence.

The Manager will aim to ensure the Company is fully invested within 20 Business Days of Shares being issued under this Prospectus.


4.4 | sAmPLe PortFoLio comPosition

The initial portfolio of investments will depend on prevailing market conditions and the availability of the underlying corporate bonds when Application Monies have been received by the Company. Due to the current volatility of the corporate bond market, an accurate indication of the Portfolio composition cannot be given.

For illustrative purposes only, the below represents a sample of possible investments satisfying the Investment Grade criteria available for acquisition on and their respective yield to maturity as at 23 January 2009:

issuer mAturity oF bond yieLd to mAturity (p.a.) s&P rAting

GE Capital Australia Funding Pty Limited 15 November 2011 9.86% AAA

Bank of America Corporation 15 June 2011 7.00% A+

HBOS International (Australia) Limited 19 October 2011 7.80% AA

Publishing & Broadcasting (Finance) Limited 6 May 2011 10.37% BBB

Stockland Trust Management Limited 16 June 2011 10.81% A-

Due to the recent turbulence in financial markets, the yield to maturity offered by Australian dollar denominated corporate bonds has experienced significant volatility with a substantial decrease in recent months after an extended period of relatively high rates.

The indicative yields set out above are illustrative only and are not a forecast as to potential returns on the Portfolio. Investors should note that the Company will be required to pay tax on the interest income that it receives, and although this will be passed on to investors to the extent possible through the payment of franked dividends, this may create a reduction in the final yield received by investors due to timing differences and the ability of investors to realise the value of the franking credits. Investors are reminded that past performance is not necessarily a reliable indicator of future performance. Due to market volatility there can be no assurance that the yields indicated above will be achieved when the Manager is investing the Portfolio or that sufficient bonds could be acquired to attain the yields stated.

4.5 | investment Process

The Manager will be responsible for reviewing the investment universe to identify and establish a relationship with the appropriate market makers who deal in corporate bonds.

Following the receipt of Application Monies and issue of Shares under the Offer, the Manager will request each market maker to propose a set of investments that adhere to the investment criteria of the Company. The Manager will model this information, with particular regard to cash flow, maturity profile, credit quality, single company exposure, industry exposure and total yield to maturity.

The Manager will then submit a report to the Board comprising details of the investment opportunities available. The Board will review the report and select the preferred set of corporate bonds.

The Manager is charged with the responsibility of executing the Board’s investment decisions. The Manager will liaise with market makers to negotiate the optimal pricing for all of the Company’s investments and attempt to secure the selected corporate bonds.

The Manager will report to the Board on at least a daily basis the progress in establishing the desired investments, and the availability of any new investment opportunities, until the portfolio is fully invested.

The Manager will be responsible for collecting all interest income that is paid by the underlying portfolio and directing this to the appropriate at call cash account, or from time to time, short dated term deposits.

The Manager will be responsible for monitoring the performance and risk parameters of investments and keeping the Board apprised of any market and/or company specific related developments that may impact on the investment.


4.6 | risk mAnAgement

The Manager and the Board will apply strict risk management protocols, including portfolio restrictions as follows:

• Diversificationlimits–theCompanymusthaveaportfolioofunderlyingcorporatebondsissuedbyatleast5differentcompanies once fully invested.

• Bondcriteria–underlyingcorporatebondsmustmeetallofthekeyinvestmentcriteriasetoutinSection4.3.

• Portfolioconstructionlimits–nomorethan25%exposuretoanysinglecompanywithAratingoraboveandnomorethan15% exposure to any single company with a BBB or a BBB- rating.

• Cashmanagementlimits–theManageristoplaceallcashinthemostappropriateshortdatedtermdepositoratcallaccount and shall return excess cash to Shareholders during the next dividend payment period. Sufficient cash to pay management fees and other costs will be retained in the Portfolio.

4.7 | chAnges to the investment strAtegy

The investment policies, guidelines, and strategy outlined in this Section 4 are expected to be implemented for at least an initial 12 month period. Thereafter, the Company and the Manager will consult with regard to implementing any changes to these policies, strategies and guidelines.

4.8 | dividend PoLicy

The Board intends to declare and distribute fully franked dividends every 6 months, at its discretion. As a default, the Board intends to make dividend payments to Shareholders with the proceeds of interest payments available for distribution, after allowing for tax and other costs, as soon as practical after they have been paid to the Company. (See Section 12.1 setting out the cost incurred by the Company and the Manager).

Any dividends declared by the Company will be franked to the extent that available franking credits permit. The underlying corporate bonds in which the Company proposes to invest will provide regular interest payments to the Company. These interest payments will be taxed in accordance with Australian taxation law. The effect of the Company paying tax is that, to the extent that such tax is paid, Australian franking credits may be generated. The Company intends to make these franking credits available to Shareholders, under Australian corporate law, by distributing them with declared dividends.

The Company intends to return cash to Shareholders when the underlying corporate bonds mature by way of a capital return. Any such capital return will correspond with a six monthly dividend payment. A capital return cannot occur unless and until the Shareholders in general meeting approve the terms of such capital return.

The Manager anticipates there will be a capital return when the Company winds up, following the maturity of the longest dated underlying corporate bond.

It is anticipated that following the receipt of the final repayment amount from the longest dated underlying corporate bond and the return of the bulk of those proceeds to Shareholders by way of the final capital return, the Board will seek to voluntarily wind-up the Company. The Company will retain sufficient money to pay the costs of that voluntary winding-up.

There will be no dividend reinvestment plan.

4.9 | geAring PoLicy

The Company does not presently intend to gear the Portfolio.

Circumstances may occur whereby short term borrowing is deemed beneficial and, should this eventuate, the Company may borrow. The Company intends that borrowing and non-debt liabilities will be limited to 10% of the total tangible assets of the Company.


4.10 | cAPitAL mAnAgement

At the date of this Prospectus, the Company has no intention to raise further capital in the future. As underlying investments mature, the Company intends to return capital to Shareholders to the extent that excess capital is available.

4.11 | net tAngibLe Asset rePorts to shArehoLders

The Manager intends to provide investors with quarterly performance updates in addition to the Annual Report and Half-yearly report of the Company. In order to minimise costs, the Manager will provide those documents to investors in electronic form unless a particular investor requires paper copies.


5. RISKS

5.1 | generAL risk FActors

The value of securities can change considerably over time and the value of your investment can increase and decrease with the value of the Portfolio. The fluctuation in value is known as volatility and the level of volatility depends on the type of investment. Generally, in order of risk of asset classes, shares are the riskiest, then fixed interest, then cash. As with most investments, performance is not guaranteed. These risks may result in loss of income and principal invested.

You can do some things to reduce the impact of risk. First, get professional advice suited to your investment objectives, financial situation and particular needs. Nothing in this Prospectus can replace or offer that. Secondly, invest for at least the time frame recommended by your professional adviser.

The Company’s investments will be concentrated in Investment Grade corporate bonds issued by Australian companies and denominated in Australian dollars.

The Company, Manager and Issue Manager do not guarantee the return of capital nor any rate of return in terms of income or capital or investment performance of the Company. The value of the Shares will reflect the performance of the corporate bonds selected by the Manager. There can be no certainty that the Manager will select corporate bonds that will generate returns to the satisfaction of the investor.

It is not possible to identify every risk associated with investing in the Company, however, the following provides a list of significant risks associated with the Company. There may be other risks associated with the Company.

a) ECONOMIC CONDITIONS Investment returns are influenced by market factors. In particular, bond market prices have in recent times experienced wide fluctuations, which in many cases may reflect a diverse range of non-entity specific influences including changes in the economic (e.g. changes in interest rates), legislative and political environment, as well as changes in investor sentiment. In addition, exogenous shocks, natural disasters and acts of terrorism can (and sometimes do) add to bond market volatility as well as impact directly on individual entities. As a result, no guarantee can be given in respect of the future earnings of the Company or the earnings and capital appreciation of the Company’s investments.

b) DEFAULT RISK The strategies of the Company rely on the successful performance of contracts with external counterparties, including issuers of securities to which the Company, and/or underlying investment funds, may have investment exposure. There is a risk that these counterparties may not meet their responsibilities, including as a result of the insolvency, financial distress or liquidation of the counterparty.

In particular, issuers of corporate bonds may be unable to refinance corporate debt on maturity of bonds and so may default on repayment of principal on maturity. Issuers may also be unable to pay interest on corporate bonds due, among other things, to adverse financial conditions and adverse financial and/or operating performance of the issuer and its related parties. Any such default will have an adverse impact on the financial performance of the Company.

c) CORPORATE BOND TERMS The terms of the corporate bonds that comprise the Portfolio are likely to be unsecured obligations of the issuers. As unsecured obligations, it is likely that secured debt obligations of the issuers will rank ahead of the Company’s investment in the corporate bonds and therefore in a default event, the secured lenders would be repaid prior to the corporate bonds being repaid. There may be a deficiency in assets of the issuer which may result in some or all of the obligations to the Company being unable to be met.

As an investment in corporate bonds is an investment in a wholesale investment product it is not regulated and subject to the same protections that an investment in an underlying retail product would have. By way of example, there is no obligation under the Corporations Act for the issuer to appoint a trustee to look after the interests of investors in corporate bonds as there would be for a retail unsecured note or debenture issue.

The corporate bond terms may allow the issuer to repay the corporate bond at their election. This may occur, particularly if interest rates drop during the corporate bond term. If this occurs the return on an investment in the Company is likely to decrease and the Company may be wound-up earlier than anticipated under this Prospectus.

d) INTEREST RATES Any variation in short and long term interest rates could materially effect the operating results of the Company.

As the Portfolio will consist of fixed interest corporate bonds acquired shortly after the allotment of Shares under the Prospectus and as they will be an illiquid investment, any subsequent increase in interest rates in Australia may mean that better yields could be achievable from investments in other products.


e) FAILURE TO RETURN CAPITAL As the Company does not propose to seek listing on ASX or another financial market, opportunities for investors to exit their investment are limited. The principal exit path for Shareholders comprises progressive reductions of capital as corporate bonds mature.

The Company’s strategy to return capital to Shareholders following the maturity of the corporate bonds held depends on the requisite majority of votes cast by Shareholders in favour of each return of capital being achieved. The decision of Shareholders to vote in favour of such resolution is a decision for each Shareholder and is not able to be controlled by the Company or the Manager. Consequently, it is not certain that the proposed capital returns will be undertaken, in which case Shareholders may not be able to realise their interest in the Company.

f) FINANCIAL MARKET VOLATILITY A fall in global equity markets, global bond markets or lack of change in the value of the Australian dollar against other major currencies may discourage investors from moving money into or out of the corporate bond market. This may have a negative effect on the price at which bonds trade.

Further, a fall in global equity markets or downturn in Australian business conditions may mean that the interest or payment due on maturity of the corporate bonds may not be able to be paid by one or more of the issue companies. In this event, the yield on the investment will be lower than expected and/or an investor may not be repaid the full amount of their investment.

g) PERFORMANCE OF OTHER ASSET CLASSES Good performance (or anticipated performance) with other assets classes can encourage individuals to divert money away from bond markets. This may have a negative impact on the price at which bonds trade.

h) SIZE AND PORTFOLIO The size of the Portfolio will affect the risk profile of the Portfolio. The Company may not be able to diversify its investments and so manage its risks as efficiently if it achieves the minimum subscription under this Offer than if it secures a greater level of acceptance. However, the risk of loss of investments included in the Portfolio will not necessarily be reduced if the level of acceptance under this Offer exceeds the minimum subscription. Effective risk management depends on a range of factors including diversification of investments and other factors.

i) LIqUIDITY RISK As the company is unlisted, there is no active or liquid secondary market in which the Shares can be bought and sold, and there is no assurance that a Shareholder will be able to locate a willing buyer for the Shares. Even if a willing buyer is located, the buyer may not be prepared to pay the full value of the Share to the Shareholder who wishes to sell their investment, and any amount paid by the buyer may be less than the value that would have been achieved if there had been an active secondary market in which the Shares could have been traded.

j) OFFSHORE OPERATIONS RISK Some issuers or parent companies of issuers in whose bonds the Company will invest have substantial offshore operations. Future government actions in the relevant country or region concerning the economy, government intervention in that country’s banking and finance sector, dealing with foreign entities, repatriation of funds, changes to corporate policies, taxation policies, environmental policies and change in political conditions could have an impact on the financial position and creditworthiness of these entities. Defaults may have a significant adverse effect on the Company.

k) DIFFERING ACCOUNTING STANDARDS Investment in bonds issued by non-Australian corporations or subsidiaries of non-Australian corporations may carry comparatively greater risk for the Company than Australian issuers.

It may be more difficult for the Manager to assess a foreign corporation’s accounts and creditworthiness due to possible differences in accounting standards adopted in that corporation’s jurisdiction compared with the recognised Australian accounting standards which the Manager is familiar with.

l) DIFFERENT SECURITIES MARKET REGULATION AND LAW Foreign corporations may be subject to continuous disclosure obligations and laws that differ from those which govern Australian companies. This may have an impact on the level, type and quality of disclosure, transparency and management of a corporation whose substantial operations are conducted outside of Australia. This may make it more difficult for the Manager to assess the creditworthiness of the offshore operations and so expose the Company to comparatively greater risk than investing in corporate bonds issued by Australian-based entities.


m) PARENT GUARANTORS For Australian dollar denominated corporate bonds issued by Australian subsidiaries of foreign corporations which are guaranteed by their parent corporation and to which credit ratings depend on such guarantee, any changes to the guarantee arrangements may impact on the credit rating of that issue. This in turn may affect the value of the corporate bonds.

n) NO OPERATING OR PERFORMANCE HISTORY OF THE COMPANY The Company has no financial, operating or performance history.

The information in this Prospectus about the investment objectives of the Company are not forecasts, projections or the result of any simulation of future performance. There is a risk that the Company’s investment objectives will not be achieved.

o) LIMITED PERFORMANCE HISTORY OF THE MANAGER While the Manager has extensive experience in providing financial advice, stock brokering services, corporate finance and mortgage and investment services, the Manager has a more limited experience in managing a corporate bond portfolio.

p) TAXATION RISK Tax laws (including Australian tax laws) are in a continual state of change and reform which may affect the Company and Shareholders.

Tax liabilities are the responsibility of each individual Shareholder. The Company is not responsible either for taxation or penalties incurred by Shareholders. Shareholders should consult their own taxation advisers to ascertain the tax implications of their investment.

q) REGULATORY RISK The Company is exposed to the risk of changes to applicable laws or their interpretation, which may have a negative effect on the Company, its investments or returns to Shareholders or the risk of non-compliance with reporting or other legal obligations.

r) INDUSTRY RISK There are a number of industry risk factors that may effect the future operation or performance of the Company. These factors are outside the control of the Company. Such factors include increased regulatory and compliance costs and variations in legislation and government policies generally.

5.2 | investor considerAtions

Before deciding to subscribe for Shares, Applicants should consider whether Shares are a suitable investment.

There may be tax implications arising from the application for Shares, the receipt of dividends (both franked and unfranked) from the Company, and the disposal of Shares. Applicants should carefully consider these tax implications and obtain advice from an accountant or other professional tax adviser in relation to the application of tax legislation.

If you are in doubt as to whether you should subscribe for Shares you should seek advice on the matters contained in this Prospectus from a stockbroker, solicitor, accountant or other professional adviser immediately.


6. THE MANAgER

6.1 | business oF the mAnAger

The Manager holds Australian Financial Services Licence Number 231143.

The Manager provides a comprehensive administration service and, where requested, financial advice to over 2,700 self-managed super fund clients with a combined superannuation asset base in excess of $2.5 billion. The Manager is in the top five companies in Australia in terms of the number of self-managed super funds under administration. The Manager provides financial advisory services, has a full service stock broking division, a corporate finance division, estate planning, mortgage service and a personal insurance service.

6.2 | PerFormAnce history

The Manager currently manages a portfolio of interests of Australian Masters Corporate Bond Fund No 1 Limited and Australian Masters Corporate Bond Fund No 2 Limited. These companies completed issues of shares to raise approximately $54 million in May 2008 and approximately $35 million in September 2008, respectively. The investment mandates of these companies are broadly consistent with that of the Manager for the Company although the maximum term of Investment Grade bonds for the portfolio for Australian Masters Corporate Bond Fund No 1 Limited is 6 years rather than 3 years for the Company. Funds raised for these companies are fully invested.

At the time of the initial public offerings for shares in Australian Masters Corporate Bond Fund No 1 Limited and Australian Masters Corporate Bond Fund No 2 Limited, market conditions for financial markets generally and the corporate bond market in particular differed from current conditions. In addition, both the yield for investments and credit spread for corporate bonds available at the time of investment by those companies differ from those presently prevailing. In view of this and the limited time since acquisition of the portfolios, the Manager does not consider the performance data of those portfolios to date to be relevant to the decision of an investor whether to participate in the Offer under this Prospectus.

In addition, the Manager is also currently managing the investment portfolio of Global Resource Masters Fund Limited, an ASX listed investment company adopting a “fund of funds” investment approach. The company gives Australian investors the opportunity to gain access to leading global fund products and managers specialising in the natural resource sector. The company recently completed an issue of shares to raise approximately $45 million in January 2009.

6.3 | roLe oF the mAnAger

The key personnel of the Manager with primarily responsibility for the Portfolio of the Company will be Maximilian Walsh, Alex MacLachlan, Chris Brown, Daryl Dixon and Alan Dixon.

The primary role of the Manager is to:

• ConstructtheinitialportfolioofunderlyingcorporatebondsinaccordancewithSection4ofthisprospectus.

• Reviewinformation,researchandanalysiscompiledbytheManagerwithrespecttotheongoingmonitoringoftheunderlying portfolio and, if appropriate, make required adjustments.

• Ensurethecashcomponentofportfolioismanagedandinthemostappropriateaccount.

6.4 | Powers oF the mAnAger

The Manager is not permitted to make or implement any investment decisions in respect of an investment with a value in excess of $2,000,000 without first obtaining the approval of the Company.

Subject to the above, the Manager has the discretion to manage the Portfolio in accordance with the investment strategy set out in Section 4. The Manager must seek approval from the Company if it wishes to undertake a proposed investment that is not consistent with the investment strategy or if it wishes to amend the investment strategy.

The Manager must comply with all proper and reasonable directions and instructions given to it by the Company. However the Company cannot require the Manager to undertake duties not imposed on the Manager by the Management Agreement, to act contrary to the Management Agreement or in a manner which in the reasonable opinion of the Manager will, or is likely to result in a breach by the Manager of the terms of the Management Agreement.


7. FINANCIAL INFORMATION

7.1 | Pro FormA bALAnce sheet

The pro forma balance sheets set out below have been prepared to illustrate the financial position of the Company following completion of the Issue and expenditure of funds associated with the Offer. These pro forma balance sheets are intended to be illustrative only and will not reflect the actual position and balances as at the date of this Prospectus or at the completion of the Issue.

Assets/LiAbiLitiesminimum subscriPtion

$10,000,000 rAised ($)mAximum subscriPtion

$25,000,000 rAised ($) over subscriPtion $75,000,000 rAised ($)

ASSETS

Cash 9,871,876 24,679,689 74,039,064

Deferred Tax Asset 38,438 96,093 288,281

LIABILITIES – – –

NET ASSETS/EqUITY 9,910,314 24,775,782 74,327,345

NAV per Share 99.10 99.10 99.10

7.2 | cAsh

A reconciliation of the pro forma cash balance is as follows:

minimum subscriPtion $10,000,000 rAised ($)

mAximum subscriPtion $25,000,000 rAised ($)

over subscriPtion $75,000,000 rAised ($)

Initial Subscriber Shares – at $1 each

1 1 1

Proceeds of Prospectus Offer – at $100 each

10,000,000 25,000,000 75,000,000

Costs of the Offer – refer to Section 7.3(e)

(128,125) (320,312) (960,937)

Estimated Net Cash Position 9,871,876 24,679,689 74,039,064

7.3 | AssumPtions

The pro forma balance sheets have been prepared on the basis of the following assumptions:

a) Application of the proposed accounting policies and notes to the accounts set out in Section 7.4;

b) In the pro forma balance sheet entitled “Minimum Subscription $10,000,000 raised”, reference is made to subscription of 100,000 ordinary shares by Applicants under this Prospectus;

c) In the pro forma balance sheet entitled “Maximum Subscription $25,000,000 raised”, reference is made to subscription of 250,000 ordinary shares by Applicants under this Prospectus;

d) In the pro forma balance sheet entitled “Over Subscription $75,000,000 raised”, reference is made to subscription of 750,000 ordinary shares by Applicants under this Prospectus;

e) Initial expenses related to the Issue to be paid by the Company includes a structuring fee of 0.25% and a handling fee of 1% in respect of all funds raised (plus GST as applicable);

f) The deferred tax asset is calculated by applying a 30% tax rate to the costs of the Offer which are deductible over 5 years provided the Company complies with the conditions of deductibility imposed by the law. Deferred tax asset recognition assumes that it is probable that there will be future taxable income against which the benefits of the tax deduction can be applied; and

g) The first Management Fee is not payable until the later of 31 March 2009 or when the Company has received sufficient earnings from its Portfolio to make such payment.


7.4 | ProPosed Accounting PoLicies And notes to Accounts

A summary of significant accounting policies which have been adopted in the preparation of the pro forma financial information set out in Section 7.1 or which will be adopted and applied in preparation of the financial statements of the Company for the period ended 30 June 2009 and subsequent years is set out as follows:

bAsis oF PrePArAtion The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 (as modified for inclusion in the Prospectus).

The financial report covers Australian Masters Corporate Bond Fund No 3 Limited which is a public company, incorporated and domiciled in Australia.

rePorting bAsis And conventions Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply.

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Material accounting policies adopted in the preparation of the financial report are presented below.

Accounting PoLicies

a) FINANCIAL INSTRUMENTS

Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the Company becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus directly attributable transaction costs where the instrument is not classified as at fair value through profit and loss.

Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the Company no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire.

Classification and subsequent measurement: Held-to-maturity investments These investments have fixed maturities, and it is Company’s intention to hold these investments to maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment losses.

Fair value Fair value is determined based on the bid price for all quoted investments in an active market. Valuation techniques are applied to determine the fair value for all unlisted securities and securities in markets that are not active, including recent arms length transactions, reference to similar instruments and valuation techniques commonly used by market participants.

Impairment At each reporting date, the entity assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the income statement.

b) CASH AND CASH EqUIVALENTS Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.


c) INCOME TAX The income tax expense comprises current and deferred tax.

Current income tax expense is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Current and deferred tax expense (income) is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

d) SHARE CAPITAL Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

e) REVENUE Interest income is recognised as it accrues in profit or loss, using the effective interest method.

f) GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

criticAL Accounting estimAtes And judgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company.

7.5 | Proceeds oF the issue

The proceeds of the Issue will be used for investment opportunities that meet the Company’s investment objectives as set out in Section 4.


8.1 | mAximiLiAn wALsh — chAirmAn

AM. BEC (SYDNEY); NON EXECUTIVE CHAIRMAN Max is regarded as one of Australia’s leading economists and business journalists. He has specialised in the areas of business, economics and politics in a journalistic career spanning nearly 50 years.

He has been editor and managing editor of The Australian Financial Review and Editor-in-Chief of The Bulletin. He also served on the board of Northern Star TV (predecessor to Channel Ten) and is presently Chairman of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Asian Masters Fund Limited, Global Resource Masters Fund Limited and Deputy Chairman of Dixon Advisory and Superannuation Services Pty Limited.

Max will be the Chairman of the Board. It is expected that Board meetings will initially be held fortnightly and, after establishment of the Portfolio, at least quarterly and more frequently as required. His commitment of time to these activities will depend on a number of factors including the size of the Portfolio, the spread of investments in the Portfolio and the state of investment of the Portfolio.

8.2 | ALex mAcLAchLAn

BA (CORNELL), MBA (WHARTON); NON EXECUTIVE DIRECTOR Alex MacLachlan is Managing Director, Funds Management of Dixon Advisory & Superannuation Services Pty Limited and Managing Director of Global Resource Masters Fund Limited.

Prior to joining the Manager, Alex was an investment banker specialising in the natural resources sector, most recently serving as Head of Energy, Australasia, for UBS AG in Sydney and prior to that as an investment banker at Credit Suisse First Boston. During his career as an investment banker, Alex advised many of Australia’s and the world’s leading natural resources companies, working on over $100 billion in announced mergers and acquisitions and capital markets transactions for over 30 leading Australian and international natural resources companies.

Before specialising in natural resources investment banking, Alex worked in the Japanese Government Bond derivatives markets in London, New York and Sydney. Alex has a Bachelor of Arts from Cornell University and a Masters of Business Administration from The Wharton School, University of Pennsylvania.

Alex will attend Board meetings. It is expected that Board meetings will initially be held fortnightly and, after establishment of the Portfolio, at least quarterly and more frequently as required. His commitment of time to these activities will depend on a number of factors including the size of the Portfolio, the spread of investments in the Portfolio and the state of investment of the Portfolio.

8.3 | chris brown

BCHEM ENG HONS (SYD UNI), BCOM (SYD UNI); NON EXECUTIVE DIRECTOR Chris Brown is Managing Director, Strategy of Dixon Advisory Limited.

Prior to joining the Manager, Chris was an Executive Director at UBS AG in the Investment Banking Division in Sydney. Over his 8 years at UBS he provided capital markets and mergers & acquisitions advice to many different public and private companies in Australia and overseas. Chris specialised in providing this advice to industrial, utility, infrastructure, property and financial companies. Chris spent several years in the UBS Mergers & Acquisitions Group in New York working on transactions in chemicals, healthcare, consumer products, media, telecoms, technology, insurance and utilities. Prior

to joining UBS, Chris also worked in the Investment Banking Division of ABN AMRO where he focused on providing advice to companies in the Australian property sector.

Before his career in investment banking, Chris worked for a Sydney based property funds management company and a chemical engineering and design company. Chris has a Bachelor of Chemical Engineering with 1st class honors and a Bachelor of Commerce both from Sydney University.

Chris will attend Board meetings. It is expected that Board meetings will initially be held fortnightly then, after establishment of the Portfolio, at least quarterly and more frequently as required. His commitment of time to these activities will depend on a number of factors including the size of the Portfolio, the spread of investments in the Portfolio and the state of investment of the Portfolio.

8. DIRECTORS AND CORPORATE gOvERNANCE


8.4 | dAryL dixon

MA (HONS) (CAMBRIDGE), BA (HONS) (Uq); NON EXECUTIVE DIRECTOR DDaryl is a graduate in economics of Cambridge and queensland Universities. He is now the Executive Chairman of Dixon Advisory Limited. Daryl has extensive experience in the areas of taxation, retirement incomes and social welfare policy. He is known in Australia as a leading financial expert, particularly in the area of superannuation.

Daryl is Executive Chairman of Dixon Advisory & Superannuation Services Pty Limited a financial advisory firm which has now over $2.5 billion of funds under administration. He has special expertise in personal and self managed super fund strategies, as well as extensive experience as a direct share investor in his own right.

Daryl is a director of Australian Masters Corporate Bond Fund No 1 Limited and Australian Masters Corporate Bond Fund No 2 Limited. He is also a director of Asian Masters Fund Limited, Global Resource Masters Fund Limited and HCF Life and has worked previously for the International Monetary Fund, the Federal Treasury, Department of Finance and the Social Welfare Policy Secretariat. He was a member of the Fraser government’s Occupational Superannuation Task Force.

Daryl will attend Board meetings. It is expected that Board meetings will initially be held fortnightly and, after establishment of the Portfolio, at least quarterly and more frequently when required. It is anticipated that board meeting will be held on a monthly basis. His commitment of time to these activities will depend on a number of factors including the size of the Portfolio, the spread of investments in the Portfolio and the state of investment of the Portfolio.

8.5 | ALAn dixon

BCOM (ANU) CA; NON EXECUTIVE DIRECTOR Alan has been providing financial advisory services to corporations, institutions and individuals for the last 13 years. Until December 2000, he worked for various investment banks, including ABN AMRO (where he was an Associate Director in Mergers and Acquisitions and Equity Capital Markets) and Ord Minnett Corporate Finance. Since January 2001, he has operated as Managing Director of Dixon Advisory & Superannuation Services Pty Limited. Dixon Advisory & Superannuation Services Pty Limited provides a complete suite of financial services, employs over 240 people and has over $2.5 billion of funds under administration across over 2,700 self managed super funds. Alan has a Bachelor of Commerce from the Australian National University and is a Member of the Institute of Chartered Accountants in Australia.

Alan is a director of Australian Masters Corporate Bond Fund No 1 Limited and Australian Masters Corporate Bond Fund No 2 Limited. Alan is also a non executive director of Asian Masters Fund Limited and Global Resource Masters Fund Limited.

Alan will attend Board meetings. It is expected that Board meetings will initially be held fortnightly and, after establishment of the Portfolio, at least quarterly and more frequently when required. His commitment of time to these activities will depend on a number of factors including the size of the Portfolio, the spread of investments in the Portfolio and the state of investment of the Portfolio.

8.6 | no indePendent directors

All of the members of the Board are persons connected with the Manager and are involved in the management of the business of the Manager. There are no independent Directors on the Board of the Company.

While it is generally considered desirable for a public company to have one or more independent directors, given the relatively static nature of the Portfolio to be held and rigid investment strategy, the Board believes that it is not necessary for the Company to have an independent director.

8.7 | corPorAte governAnce PoLicies

The Board has the responsibility of ensuring the Company is properly managed so as to protect and enhance Shareholders’ interests in a manner that is consistent with the Company’s responsibility to meet its obligations to all parties with which it interacts. To this end, the Board has adopted what it believes to be appropriate corporate governance policies and practices having regard to its size and the nature of activities.

8. DIRECTORS AND CORPORATE gOvERNANCE


The main corporate governance policies are summarised below.

APPOINTMENT AND RETIREMENT OF DIRECTORS It is the Board’s policy to determine the terms and conditions relating to the appointment and retirement of Directors on a case-by-case basis and in conformity with the requirements of the Corporations Act.

DIRECTORS’ ACCESS TO INDEPENDENT PROFESSIONAL ADVICE It is the Board’s policy that any committees established by the Board should:

• BeentitledtoobtainindependentprofessionalorotheradviceatthecostoftheCompany,unlesstheBoarddeterminesotherwise.

• BeentitledtoobtainsuchresourcesandinformationfromtheCompanyincludingdirectaccesstoemployeesofandadvisers to the Company as they might require.

• OperateinaccordancewithtermsofreferenceestablishedbytheBoard.


9. FURTHER INFORMATION ABOUT CORPORATE BONDS

9.1 | reguLAtion oF corPorAte bonds

Corporate bonds are characterised as debentures for the purposes of the Corporations Act and so are regulated in the same way as shares and other securities.

Generally, corporate bonds may only be issued to retail investors where the issuer has made available a prospectus or other disclosure document satisfying the detailed disclosure obligations imposed by the Corporations Act. In addition, an issuer making available corporate bonds to retail investors must also execute a trust deed with a trustee, approved by the ASIC, who holds the benefit of undertakings given by the issuer for the benefit of bond holders. Such a trust deed includes undertakings as to the conduct of business of the issuer and financial reporting.

Due to the administrative burden and cost of complying with regulatory restrictions for such an issue to retail investors, many issuers elect to make bonds available only to wholesale investors. Generally, this is effected by ensuring that bonds may only be acquired in parcels with a minimum subscription price or purchase price of $500,000.

While the Company reserves the right to acquire corporate bonds made available to retail investors, it is expected that the majority of bonds to be purchased by the Company will be bonds made available only to institutional or other wholesale investors. As a result, the Company will not receive the benefit of a prospectus or other detailed disclosure document regulated by the Corporations Act and will not receive the benefit of an approved trust deed in a form otherwise required by the Corporations Act.

9.2 | otc trAding

Corporate bonds issued to wholesale investors are generally not quoted on the ASX or other regulated financial market. Rather, such bonds are traded in an informal fashion through an “over-the-counter” (OTC) trading system by major investment banking houses. Historically, there has been a significant degree of liquidity in such OTC trading.

However, an OTC trading system does not provide the benefits available to a regulated financial market such as the ASX. In particular:

• Issuersofcorporatebondstowholesaleinvestorsarenotsubjecttoanycontinuousdisclosureorperiodicreportingobligations supervised by a regulated market operator. Many, but not all, issuers are listed on the ASX which does impose reporting obligations on issuers. The terms of issue of the corporate bonds may also require disclosure of financial and operating information regarding the issuer. However, there is no general statutory obligations to provide information in relation to such corporate bonds.

• UnliketheASXandotherlicensedfinancialmarkets,thereisnoformalreportingprocedureunderwhichthepriceandvolume of OTC traded corporate bonds must be made available to prospective purchasers. Investment Banks engaged in trading in wholesale corporate bonds generally make available information regarding the trading in wholesale corporate bonds on a regular basis. However, the reporting of such trading is not regulated by the Corporations Act or the trading rules of an external financial market operator such as the ASX.

• OTCtradingofwholesalecorporatebondsisnotsubjecttoamarketregulationimposedundertheCorporationsAct.Unlikethe ASX, there is no specific criminal or civil offences associated with improper dealing in wholesale OTC traded corporate bonds, including market rigging and market manipulation. Trading is only subject to general market regulation through restrictions on engaging in false and misleading conduct.

9.3 | stAndArd & Poor’s credit rAtings

The Company and the Manager will apply the Standard & Poor’s credit rating system to assess whether an investment may be made in a corporate bond without approval from the Company.

Debt security credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion evaluates the obligor’s capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.

The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.


AAA An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

AA An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

A An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, AND C Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB An obligation rated ‘BB’ is less vulnerable to non-payment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

B An obligation rated ‘B’ is more vulnerable to non-payment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

CCC An obligation rated ‘CCC’ is currently vulnerable to non-payment, and is dependent upon favourable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC An obligation rated ‘CC’ is currently highly vulnerable to non-payment.

C A subordinated debt or preferred stock obligation rated ‘C’ is currently highly vulnerable to non payment. The ‘C’ rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A ‘C’ also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.

D An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

NR This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.


10. TAxATION

This only provides a general overview of the income tax consequences for the Company and the investors who hold their investment on capital account. It is not intended to be a detailed analysis of all such issues. Individual investors should consult their own taxation advisor about their specific taxation circumstances.

10.1 | comPAny tAxAtion

The Company will be subject to Australian income tax on its worldwide income as an Australian resident company.

10.2 | investor tAxAtion

Shareholders in a public company are generally taxed on dividends received and are subject to the income tax upon the disposal of their shares in the Company.

DIVIDENDS Dividends received by an Australian resident shareholder (either directly or indirectly through a partnership of trust) are included in the taxable income of the shareholder.

To the extent that dividends are franked, the imputation credits attached to the franked dividend are also included in the taxable income of the shareholder. Shareholders are then entitled to a tax credit equivalent to the imputation credit received. Withholding tax may be withheld from unfranked dividends paid to non-residents.

Where Shareholders receive franked dividends from the Company, the Shares in the Company need to be held ‘at risk’ (as defined by the Income Tax Assessment Act) for a period of 45 days before being entitled to franking credits.

GAINS FROM DISPOSAL OF SHARES IN THE COMPANY Where Shares in the Company are acquired on revenue account by a Shareholder, any gain or loss on sale is taxable as ordinary income.

Where Shares in the Company are acquired on capital account by a Shareholder, any gain or loss on sale is taxed in accordance with the capital gains tax (CGT) rules. Where Shares in the Company are held for more than 12 months, a CGT discount of 50% should be available to individual shareholders (33.33% for superannuation funds).

Any CGT loss incurred is quarantined and only able to be offset against capital gains derived by the taxpayer.

SHARE BUYBACK/CAPITAL REDUCTIONS The Company intends to return surplus capital to Shareholders by way of capital reduction/ share buyback. Depending on the circumstances surrounding the capital reduction/share buyback some of the capital returned to Shareholders could be treated as dividend, or as a capital gain.

The amount of the capital reduction/share buyback that could be recognised as a dividend/capital gain is the retained earnings of the Company that could be apportioned to the capital reduction/share buyback. Given the Company’s dividend policy is to pay interest income as dividends as soon as practical it is likely that the retained earnings will be relatively low at the time of any capital reduction/share buyback.

As far as possible, the Directors intend to structure the capital returns so that none of the amount returned is treated as dividend/capital gain and to obtain a class ruling from the Australian Taxation Office prior to the capital returns. If this class ruling is not in the Company’s favour a small amount of the capital return could be treated as an unfranked dividend or a capital gain.

9 February 2009

FinAnciAL services guide

1. moore stephens sydney corporate Finance Pty Ltd

Moore Stephens Sydney Corporate Finance Pty Ltd (“Moore Stephens”) is an authorised representative of Moore Stephens Sydney Pty Limited (“Licence Holder”) in relation to Australian Financial Services Licence No. 236886 (“AFSL”).

Moore Stephens may provide the following financial services to wholesale and retail clients as an authorised representative of the Licence Holder:

• Financialproductadviceinrelationtosecurities,interestsinmanagedinvestmentschemes,governmentdebentures,stocks or bonds, deposit and payment products, life products, retirement savings accounts and superannuation (collectively “Authorised Financial Products”); and

• Applyingfor,varyingordisposingofafinancialproductonbehalfofanotherpersoninrespectofAuthorisedFinancialProducts.

2. Financial services guide

The Corporations Act 2001 requires Moore Stephens to provide this Financial Services Guide (“FSG”) in connection with its provision of an Investigating Accountant’s Report (“Report”) which is included in the Prospectus provided by Australian Masters Corporate Bond Fund No 3 Limited (the “Entity”).

3. general Financial Product Advice

The financial product advice provided in our Report is known as “general advice” because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our Report is appropriate for you, having regard to your own personal objectives, financial situation or needs. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment.

4. remuneration

Moore Stephens’ client is the Entity to which it provides the Report. Moore Stephens receives its remuneration from the Entity or Dixon Advisory & Superannuation Services Pty Ltd, the Manager. Our fee for the Report is based on a time cost or fixed fee basis. This fee has been agreed in writing with the party who engaged us. Neither Moore Stephens nor its Directors and employees, nor any related bodies corporate (including the Licence Holder) receive any commissions or other benefits in connection with the preparation of this Report, except for the fees referred to above.

All our employees receive a salary. Employees may be eligible for bonuses based on overall productivity and contribution to the operation of Moore Stephens or related entities but any bonuses are not directly connected with any assignment and in particular not directly related to the engagement for which our Report was provided.

We do not pay commissions or provide any other benefits to any parties or person for referring customers to us in connections with the reports that we are licensed to provide.

5. independence

Moore Stephens is required to be independent of the Entity. The following information in relation to the independence of Moore Stephens is stated in our Report.

Neither Moore Stephens, Moore Stephens Sydney Pty Limited, any Director thereof, nor any individual involved in the preparation of the Report have any financial interest in the outcome of this share issue of Australian Masters Corporate Bond Fund No 3 Limited, other than a fee in connection with the preparation of our Report and participation in due diligence


procedures for which professional fees in the order of $12,800 will be received. No pecuniary or other benefit, direct or indirect, has been received by Moore Stephens, Moore Stephens Sydney Pty Limited, their Directors or employees, or related bodies corporate for or in connection with the preparation of this Report.

Moore Stephens Sydney, a chartered accounting firm associated with Moore Stephens will act as auditors to the Entity.

6. complaints resolution

Moore Stephens is only responsible for its Report and this FSG. Complaints or questions about the Prospectus should not be directed to Moore Stephens which is not responsible for that document.

Both Moore Stephens and the Licence Holder may be contacted as follows:

By phone: (02) 8236 7700

By fax: (02) 9233 4636

By mail: GPO Box 473 SYDNEY NSW 2001

If you have a complaint about Moore Stephens’ Report or this FSG you should take the following steps:

1. Contact the Enquiries and Complaints Officer of the Licence Holder on (02) 8236 7700 or send a written complaint to the Licence Holder at Level 7, 20 Hunter Street, Sydney NSW 2000. We will try and resolve your complaint quickly and fairly.

2. If you still do not get a satisfactory outcome, you have the right to complain to the Financial Industry Complaints Service at PO Box 579 Collins St West, Melbourne, Victoria 8007 or call on 1300 78 08 08. We are a member of this scheme.

3. The Australian Securities & Investments Commission (ASIC) also has a freecall Infoline on 1300 300 630 which you may use to make a complaint and obtain information about your rights.

The Licence Holder, as holder of the AFSL, gives authority to Moore Stephens to distribute this FSG.

Moore Stephens Sydney Corporate Finance Pty Limited ABN 77 122 561 184Level 7, 20 Hunter Street, Sydney NSW 2000GPO Box 473, Sydney NSW 2001Tel: +61 2 8236 7700 Fax: +61 2 9233 4636 Web: www.moorestephens.com.auAuthorised Representative of Moore Stephens Sydney Pty Ltd, AFS Licence No. 236 886.Moore Stephens Sydney Corporate Finance Pty Limited ABN 77 122 561 184, an affiliate of Moore Stephens Sydney Pty Limited ABN 34 098 199 118.Moore Stephens Sydney Pty Limited is an independent member of Moore Stephens International Limited - members in principal cities throughout the world.

9 February 2009

The Directors Australian Masters Corporate Bond Fund No 3 Limited Level 15, 100 Pacific Highway North Sydney NSW 2060

Dear Sirs

introduction

This Report has been prepared by Moore Stephens Sydney Corporate Finance Pty Ltd (“Moore Stephens”) for inclusion in a Prospectus to be dated on or about 9 February 2009 relating to the offer by Australian Masters Corporate Bond Fund No. 3 Limited ACN 134 738 524 (“the Company”) of up to 250,000 fully paid ordinary shares at an offer price of $100 each to raise up to $25,000,000 before the costs of offer. Further, the Company has established a provision for acceptance of oversubscription for a further 500,000 fully paid ordinary shares at an offer price of $100 each which, if received, would raise an additional $50,000,000.

The minimum shares offered under this Prospectus are 100,000 ordinary shares at an offer price of $100 each to raise $10,000,000. If this Minimum Subscription of $10,000,000 is not achieved within 3 months from the Opening Date, the Company will repay all money received from applicants within 7 days from that date or such later date as may be permitted by the Corporations Act with the consent of ASIC.

The Offer is not underwritten.

Expressions defined in the Prospectus have the same meaning in this Report.

bAckground

The Company was incorporated in Australia as a public company on 23 December 2008 with 1 ordinary share issued for $1 and has not traded or issued shares since incorporation. The share is held by Mr Maximilian Walsh.

The Company has been established to provide Australian retail investors access to the Australian dollar denominated Corporate Bond market.

The investments of the Company will be managed by Dixon Advisory & Superannuation Services Pty Ltd (“the Manager”). The Manager has been in existence since December 2002 and provides a comprehensive administration service and where requested financial advice to over 2,700 self-managed super funds under administration. The Manager will receive management fees as set out in Section 12.1 of the Prospectus.

The Company has been set up with the following 3 key investment objectives:

• TominimisecostsoftheCompany;

• Toprovidetoinvestorsahighrateofincomeandfullyfrankeddividendsandthepotentialtoreceivecapitalreturnsthroughout the life of the Company; and

• TominimisedefaultriskbyinvestinginInvestmentGradeAustraliandollardenominatedcorporatebondsissuedbyquality Australian companies, foreign companies and their Australian subsidiaries.

The Company intends to invest the proceeds of the Prospectus offering in a diversified portfolio of underlying investment grade Corporate Bonds, as set out in Section 2 of the Prospectus.

11. INvESTIgATINg ACCOUNTANT’S REPORT

33


scoPe

This Report deals with the prospective financial information included in Section 7 of the Prospectus.

The pro forma Balance Sheets have been prepared to illustrate the financial position of the Company on completion of the issue and have been prepared on the basis of the assumptions, notes and accounting policies as set out in Section 7 of the Prospectus.

The Directors are not making any forecasts for earnings of the Company.

We disclaim any responsibility for any reliance on this Report or the financial information to which it relates for any purpose other than that for which it was prepared. This Report should be read in conjunction with the full Prospectus.

resPonsibiLities

The Directors of the Company are responsible for the preparation and fair presentation of the pro forma Balance Sheets including the assumptions, notes and accounting policies on which they are based.

review oF FinAnciAL inFormAtion

We have conducted an independent review of the pro forma financial information included in Section 7 of the Prospectus in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the pro forma financial information is not presented fairly, in all material respects, in accordance with the methodology, assumptions and material accounting policies adopted and summarised at Section 7 of the Prospectus.

Our review has been conducted in accordance with the Standard on Review Engagements ASRE 2400 “Review of a Financial Report Performed by an Assurance Practitioner Who is Not the Auditor of the Entity”. We have made such enquires and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances, which were limited primarily to:

a. Review of relevant working papers detailing the adjustments and the assumptions on which they were made and other documentation, as appropriate;

b. Review of adjustments made to the pro forma Balance Sheets and related notes;

c. Consideration of the consistency in application of the recognition and measurement principles prescribed in Australian Accounting Standards (including Australian Interpretations), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001; and

d. Enquiry of the Company’s Directors, management and others.

A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

review stAtement on Pro FormA FinAnciAL inFormAtion

Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the:

a. Pro forma financial information has not been properly prepared so as to present fairly, in all material respects, the pro forma financial position of the Company;

b. Methodology, assumptions and material accounting policies adopted and summarised at Sections 7.3 and 7.4 of the Prospectus do not form a reasonable basis for the pro forma information; and

c. Assumptions, notes, accounting policies and estimated expenses of the offer made by Directors do not provide a reasonable basis for the preparation of the pro forma Balance Sheets.


LegAL Proceedings

To the best of Moore Stephens’ knowledge and belief, there are no material legal proceedings outstanding or currently being undertaken not otherwise disclosed in this report which would cause the information included in the report to be misleading.

subsequent events

Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief no other material transactions or events outside of the ordinary business of the Company have come to our attention that would require comment on, or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive.

sources oF inFormAtion

We have made enquiries of the Directors of the Company and other parties as considered necessary during the course of our analysis. We have also referred to the Prospectus and material documents which relate to the operations of the Company.

We have no reason to believe the information supplied is not reliable.

decLArAtions

Moore Stephens has prepared this Report for inclusion in the Prospectus and has participated in due diligence procedures. We have not acted in any other capacity in relation to the Prospectus, and have not been involved in the preparation of any part thereof. Our associated partnership, Moore Stephens Sydney, is the appointed auditor of the Company and will receive fees for performing audit services. At the date of this report, no audit services have been performed.

Neither Moore Stephens, Moore Stephens Sydney Pty Limited, any Director thereof, nor any individual involved in the preparation of the Report have any financial interest in the outcome of this share issue of Australian Masters Corporate Bond Fund No 3 Limited, other than a fee in connection with the preparation of our Report and participation in due diligence procedures for which professional fees in the order of $12,800 will be received. No pecuniary or other benefit, direct or indirect, has been received by Moore Stephens, Moore Stephens Sydney Pty Limited, their Directors or employees, or related bodies corporate for or in connection with the preparation of this Report.

This Report has been prepared on behalf of Moore Stephens by Scott Melville Whiddett, who is a Director of Moore Stephens and a partner of Moore Stephens Sydney, Charted Accountants. Mr Whiddett is an associate of the Institute of Chartered Accountants and a Registered Company Auditor. Mr Whiddett has over 18 years of experience including audit of public companies, detection of fraud, valuations, economic loss calculations, due diligence and the preparation of Independent Expert’s Reports.

Yours faithfully,

moore stePhens sydney corPorAte FinAnce Pty Limited

s. m. whiddett Director


12. MATERIAL CONTRACTS

The Directors consider that the material contracts described below and elsewhere in this Prospectus are the contracts which an investor would reasonably regard as material and which investors and their professional advisers would reasonably expect to find described in this Prospectus for the purpose of making an informed assessment of the Offer.

This report only contains a summary of the material contracts and their substantive terms.

12.1 | mAnAgement Agreement

The Company has appointed the Manager to manage the Portfolio of the Company and the Manager will manage and supervise all investments for the term of the Management Agreement.

POWERS OF MANAGER Subject to the Corporations Act, the Company’s investment policies and any written guidelines issued by the Company from time to time, the Manager will, from time to time and on and from the date the Company allots and issues not less than 100,000 Shares pursuant to the Offer (Commencement Date), manage the Portfolio and the investments on behalf of the Company.

The Manager is not permitted to make or implement any investment decisions in respect of an investment with a value in excess of $2,000,000 without first obtaining the approval of the Company.

Subject to the above, the Manager has the discretion to manage the Portfolio and to do all things considered necessary or desirable in relation to the Portfolio, including:

a) the investigation of, negotiation for, acquisition of, or disposal of, every investment;

b) to sell, realise or deal with all or any of the investments or to vary, convert, exchange or add other investments in lieu of those investments;

c) if any investments are redeemed, or the capital paid on it is wholly or partly repaid by the entity by which that investment was created or issued, to convert that investment into some other investment or accept repayment of the capital paid or advanced on the investment and any other monies payable in connection with that redemption or repayment and to invest any of those monies in the purchase of investments to be added to the Portfolio;

d) to retain or sell any Security or other property received by the Company by way of bonus, or in lieu of, or in satisfaction of, a dividend in respect of any investments or from the amalgamation or reconstruction of any company.

The Manager must comply with all proper and reasonable directions and instructions given to it by the Company. However the Company cannot require the Manager to undertake duties not imposed on the Manager by the Management Agreement to act contrary to the Management Agreement or in a manner which in the reasonable opinion of the Manager will, or is likely to result in a breach by the Manager of the terms of the Management Agreement.

VALUATION The Manager must arrange for the calculation of the value of the Portfolio at least every 6 months.

MANAGEMENT FEE In return for the performance of its duties as Manager of the Company, the Manager is entitled to be paid, and the Company must pay to the Manager, (which remuneration is to be retained for the use and benefit of the Manager) a Management Fee equivalent to:

i) in respect of the period from the Commencement Date to 30 June 2009, 0.35% per annum of the gross proceeds raised under this Prospectus. By way of example, if gross proceeds were $50,000,000 and the date of issue of Shares was 1 January 2009, the Management Fee for the period to 30 June 2009 would be $87,500; and

ii) in respect of the balance of the term of the Management Agreement, 0.35% per annum of the value of the Portfolio, payable in advance and calculated on the basis of the value of the Portfolio on 30 June each year. If 30 June in any year during the term of the Management Agreement does not fall on a Business Day, the relevant date for calculation will be the Business Day before 30 June.

The amount payable under (i) is payable by the Company to the Manager within 10 Business Days of 31 March 2009 or such later date that the Company has received sufficient earnings from its Portfolio to make such payment.

The amount payable under (ii) is payable by the Company to the Manager in advance within 10 Business Days of each 30 June on and from 30 June 2009 during the term of the Management Agreement.

If the Management Agreement is terminated part way through an annual period the Manager is not required to pay to the Company or account for any part of a Management Fee that has been paid to the Manager.


EXPENSES The Company is liable for and must pay out of the Portfolio (or if paid by the Manager, reimburse the Manager out of the Portfolio) the following fees, costs and expenses when properly incurred in connection with the investment and management of the Portfolio, the acquisition, disposal or maintenance of any Investment or performance of the Manager’s obligations under this Agreement:

a) all stamp duties, financial institutions duty, bank account debits tax and taxes incurred by the Company or the Manager (or both) in connection with: i) the acquisition and negotiation of any Investment or Proposed Investment;

ii) any sale or proposed sale, transfer, exchange, replacement or other dealing or proposed dealing with or disposal or proposed disposal of any Investment;

iii) the receipt of income or other entitlements from the Investments of the Portfolio; iv) the engagement of any custodian to hold any Investment on behalf of the Company; and

b) the costs of calling and holding general meetings of the Company;

c) fees payable to ASIC or any other regulatory body;

d) outgoings in relation to the Portfolio such as insurance premiums, rates, levies, duties and taxes;

e) all costs, legal fees, fees, disbursements and expenses, commissions and brokerage incurred by the Company or the Manager (or both) in connection with:

(i) the acquisition and negotiation of any Investment or Proposed Investment; ii) any sale or proposed sale, transfer, exchange, replacement or other dealing or proposed dealing with or disposal or

proposed disposal of any Investment; iii) the engagement of any custodian to hold any Investment on behalf of the Company; and

f) independent legal advice obtained by the Directors of the Company in accordance with the Company’s corporate governance policy;

g) the costs associated with undertaking distributions, returns of capital, share buy-backs or other reductions of capital; and

h) the costs associated with any winding up of the Company.

The Manager is liable for the following fees, costs and expenses when properly incurred in connection with the investment and management of the Portfolio or performance of the Manager’s obligations under this Agreement:

a) fees payable to the Approved Valuer for valuations undertaken under the Management Agreement;

b) all accounting and audit costs of the Company whether or not in relation to the Portfolio; and

c) costs associated with maintaining a share register.

The Manager must bear the cost of, and is not entitled to be reimbursed by the Company in respect of its internal labour costs in connection with the performance of its obligations under this Agreement.

TERM The Management Agreement is for an initial period (Initial Term) commencing on the Commencement Date and expiring on the date 4 years after the Commencement Date, unless terminated earlier in accordance with its terms. The Management Agreement will be automatically extended upon the expiry of the Initial Term for a further term of 1 year and, if not terminated earlier, on each subsequent anniversary of the expiry of the Initial Term.

TERMINATION The Manager may terminate the Management Agreement at any time after the first anniversary of the Commencement Date by giving to the Company at least 6 months’ written notice. The Company may remove the Manager and terminate the Management Agreement after the expiration of the Initial Term on 3 months’ prior written notice.

The Company may immediately terminate the Management Agreement on the occurrence of any of the following:

a) an insolvency event occurs with respect to the Manager;

b) the Manager breaches its obligations under the Management Agreement in a material respect and the breach cannot be remedied, or if it can be remedied, the Manager does not remedy that breach within 30 days after the Company has notified the Manager in writing to remedy the breach;


c) the value of the Portfolio falls to a level below $1,000,000 and a notice of meeting for the Company is sent to Shareholders which includes a resolution to seek approval to voluntarily wind-up the Company;

d) the Manager persistently fails to ensure that investments made on behalf of the Company are consistent with the Company’s investment strategy; or

e) the licence under which the Manager performs its obligations is suspended for a period of not less than 1 month or cancelled at any time and the Manager fails to obtain an authorisation enabling it to perform its obligations under the Agreement from a third party holder of a licence.

The Management Agreement automatically terminates on the winding up of the Company.

COMPANY INDEMNITY The Company must indemnify the Manager against any losses or liabilities reasonably incurred by the Manager arising out of, or in connection with, and any costs, charges and expenses (including legal expenses on a solicitor/own client basis) incurred in connection with the Manager or any of its officers, employees or agents acting under the Management Agreement or on account of any bona fide investment decision made by the Manager or its officers or agents except insofar as any loss, liability, cost, charge or expense is caused by the negligence, default, fraud or dishonesty of the Manager or its officers or employees. This obligation continues after the termination of the Management Agreement.

MANAGER INDEMNITY The Manager must indemnify the Company against any losses or liabilities reasonably incurred by the Company arising out of, or in connection with, and any costs, charges and expenses incurred in connection with any negligence, default, fraud or dishonesty of the Manager or its officers or supervised agents. This obligation continues after the termination of the Management Agreement.

12.2 | issue mAnAger Agreement

The Company has appointed the Issue Manager to act as issue manager of the issue under this Prospectus for the purposes of section 911A(2)(b)(ii) of the Corporations Act.

In return for acting as the issue manager for the Offer and for assuming all costs associated with preparing and structuring the initial arrangements required for ordinary operation of the Company including costs incurred for the following:

• preparationoftheProspectusandobtainingalladvisoryservicesincludinglegalandaccountingservices;

• initialshareregistryfees;

• typesettingandgraphicdesing;and

• printing,

the Issue Manager is entitled to be paid:

a) a handling fee equivalent to 1% (excluding GST) of the Application Monies provided with Application Forms bearing its stamp. The Issue Manager may stamp all unstamped Applications and receive a 1% handling fee on such Applications (Handling Fee); and

b) a structuring fee equivalent to 0.25% (excluding GST) of the gross proceeds raised under the Prospectus (Structuring Fee).

The Handling Fee and Structuring Fee are one-off payments and are payable to the Issue Manager within 14 days of the issue of Shares under this Prospectus.

12.3 | director Protection deeds

The Company has agreed to provide access to board papers and minutes to current and former Directors of the Company while they are Directors and for a period of 7 years from when they cease to be Directors.

The Company has agreed to indemnify, to the extent permitted by the Corporations Act, each officer in respect of certain liabilities, which the Director may incur as a result of, or by reason of (whether solely or in part), being or acting as a Director of the Company. The Company has also agreed to maintain in favour of each Director a directors’ and officers’ policy of insurance for the period that he or she is a Director and for a period of 7 years after the officer ceases to be a Director.


13. ADDITIONAL INFORMATION

13.1 | incorPorAtion

The Company was incorporated on 23 December 2008.

13.2 | bALAnce dAte

The accounts for the Company will be made up to 30 June annually.

13.3 | comPAny tAx stAtus

The Company will be taxed as a public company.

13.4 | rights AttAching to the shAres

Immediately after issue and allotment, the Shares will be fully paid ordinary shares in the capital of the Company. There will be no liability on the part of Shareholders for any calls.

Detailed provisions relating to the rights attaching to the Shares are set out in the Company’s constitution and the Corporations Act. A copy of the constitution can be inspected during office hours at the registered office of the Company.

The detailed provisions relating to the rights attaching to Shares under the constitution and the Corporations Act are summarised below:

Each Share confers on its holder:

a) the right to receive notice of and to attend general meetings of the Company and to receive all financial statements, notices and documents required to be sent to them under the constitution, the Corporations Act;

b) the right to vote at a general meeting of Shareholders (whether present in person or by any representative, proxy or attorney) on a show of hands (1 vote per Shareholder) and on a poll (1 vote per Share on which there is no money due and payable) subject to the rights and restrictions on voting which may attach to or be imposed on Shares (at present there are none);

c) the right to receive dividends, according to the amount paid up or credited as paid on the Share;

d) the right to receive, in kind, the whole or any part of the Company’s property in a winding up (with the consent of members by special resolution); and

e) subject to the Corporations Act, Shares are fully transferable.

The rights attaching to Shares may be varied with the approval of Shareholders in general meeting by special resolution.

13.5 | mAtters reLevAnt to the directors

Except as set out in this Prospectus, there are no interests that exist at the date of this Prospectus and there were no interests that existed within 2 years before the date of this Prospectus that are or were interests of a Director or a proposed Director in the promotion of the Company or in any property proposed to be acquired by the Company in connection with its formation or promotion. Further, except as set out in this Prospectus, there have been no amounts paid or agreed to be paid to a Director in cash or Securities or otherwise by any persons either to induce him to become or qualify him as a Director or otherwise for services rendered by him in connection with the promotion or formation of the Company.

Maximilian Walsh, Chairman of the Company, holds 1 Share in the Company. No other Director or an Associate of a Director holds any interest in any Security in the Company.

It is the intention of all the Directors to apply for Shares via this Prospectus. However, at the date of this Prospectus, no Director has made a determination as to how many Shares he will be applying for under this Prospectus.

13.6 | remunerAtion oF directors

Under the Company’s constitution, each Director may be paid remuneration for ordinary services performed as a Director. However, the Directors have agreed not to be paid any remuneration for the services they perform as Director.


13.7 | reLAted PArty trAnsActions

As at the date of this Prospectus, the Company is a party to the following transactions with related parties and future related parties:

a) Messrs Maximilian Walsh, Daryl Dixon and Alan Dixon are Directors of the Company and of the Issue Manager and Manager. Alex MacLachlan is a Director of the Company and Managing Director, Funds Management of the Issue Manager and Manager. Chris Brown is a Director of the Company and Managing Director, Strategy of the Issue Manager and Manager. In connection with the provision of services as Issue Manager, the Issue Manager is entitled to receive handling fees of 1% of all funds received in respect of Applications lodged bearing its stamp and may retain any interest earned on the Application Monies held on trust pending the issue of Shares to successful Applicants. Also, it will receive a Structuring Fee of 0.25% of the gross proceeds raised under the Prospectus. The Manager is entitled to receive a management fee of 0.35% per annum of the gross value of the Portfolio;

b) each Director has entered into a director protection deed with the Company. See Section 12.3.

13.8 | exPenses oF the oFFer

The Manager will receive a one-off Structuring Fee of 0.25% (excluding GST) of the gross proceeds raised under this Prospectus and will assume all the associated costs of preparing and structuring the initial arrangements required for the ordinary operation of the Company along with the expenses of the Offer. The Company will also pay a Handling Fee equal to 1% (excluding GST) of the Application Monies provided with Application Forms bearing a Licensee’s stamp. The Issue Manager may receive this Handling Fee. The table below sets out these expenses:

structuring Fee hAndLing Fee

$10,000,000 Issue $25,000 $100,000

$25,000,000 Issue $62,500 $250,000

$75,000,000 Issue $187,500 $750,000

The expenses of the Offer that have been paid or are payable by the Issue Manager are estimated below, according to the amount of funds raised on the Issue. Accordingly these costs will not be deducted from the proceeds of the Offer.

Asic Fees LegAL And Accounting Fees other costs

$10,000,000 Issue

$2,010 $27,800

$17,700

$25,000,000 Issue $19,200

$75,000,000 Issue $22,200

13.9 | LegAL Proceedings

The Company is not and has not been, during the 12 months preceding the date of this Prospectus, involved in any legal or arbitration proceedings which have had a significant effect on the financial position on the Company. As far as the Directors are aware, no such proceedings are threatened against the Company.

13.10 | consents And resPonsibiLity stAtements

watson mangioni Lawyers Pty Limited has given, and before lodgement of the paper Prospectus and the issue of the electronic Prospectus has not withdrawn, its written consent to be named as solicitors to the Offer in the form and context in which it is so named.

watson mangioni Lawyers Pty Limited has only been involved in the preparation of that part of the Prospectus where they are named as solicitors to the Offer. Watson Mangioni Lawyers Pty Limited specifically disclaims liability to any person in the event of any omission from, or any false or misleading statement included elsewhere in this Prospectus. While Watson Mangioni Lawyers Pty Limited has provided advice to the Directors in relation to the issue of the Prospectus and the conduct of due diligence enquiries by the Company and the Directors, Watson Mangioni Lawyers Pty Limited has not authorised or caused the issue of the Prospectus and takes no responsibility for its contents.


moore stephens sydney corporate Finance Pty Limited has given, and before lodgement of the paper Prospectus and the issue of the electronic Prospectus has not withdrawn, its written consent to being named in this Prospectus as investigating accountant to the Company in the form and context in which it is so named and the inclusion of its investigating accountant’s report in the form and context in which it appears in this Prospectus.

moore stephens sydney corporate Finance Pty Limited has not been involved in the preparation of any part of this Prospectus (other than its investigating accountant’s report) and specifically disclaims liability to any person in the event of omission from, or a false or misleading statement included in this Prospectus except in its investigating accountant’s report. Moore Stephens Sydney Corporate Finance Pty Limited has not authorised or caused the issue of this Prospectus and takes no responsibility for its contents except its investigating accountant’s report.

moore stephens sydney has given, and before lodgement of the paper Prospectus and the issue of the electronic Prospectus has not withdrawn, its written consent to being named in this Prospectus as auditor to the Company in the form and context in which it is so named.

moore stephens sydney has not been involved in the preparation of any part of this Prospectus and specifically disclaims liability to any person in the event of omission from, or a false or misleading statement included in this Prospectus. Moore Stephens Sydney has not authorised or caused the issue of this Prospectus and takes no responsibility for its contents.

dixon Advisory & superannuation services Pty Limited has given, and before lodgement of the paper Prospectus and the issue of the electronic Prospectus has not withdrawn, its written consent to being named in the Prospectus as manager of the Portfolio of the Company in the form and context in which it so named.

dixon Advisory & superannuation services Pty Limited has given, and before lodgement of the paper Prospectus and the issue of the electronic Prospectus has not withdrawn, its written consent to being named in the Prospectus as the issue manager for the Company in the form and context in which it so named.

dixon Advisory & superannuation services Pty Limited has not been involved in the preparation of any part of this Prospectus and specifically disclaims liability to any person in the event of omission from, or a false or misleading statement included in the Prospectus. Dixon Advisory & Superannuation Services Pty Limited has not authorised or caused the issue of this Prospectus and takes no responsibility for its contents.

registries Limited has given, and before lodgement of the paper Prospectus and the issue of the electronic Prospectus has not withdrawn, its written consent to being named in the Prospectus as the share registrar for the Company in the form and context in which it so named.

registries Limited has not been involved in the preparation of any part of this Prospectus and specifically disclaims liability to any person in the event of omission from, or a false or misleading statement included in the Prospectus. Registries Limited has not authorised or caused the issue of this Prospectus and takes no responsibility for its contents.

13.11 | interests oF exPerts

Other than as set out below or elsewhere in this Prospectus, no expert nor any firm in which such expert is a partner or employee has any interest in the promotion of or any property proposed to be acquired by the Company.

Watson Mangioni Lawyers Pty Limited have acted as solicitors to the Offer and have performed work in relation to negotiating certain of the material contracts, preparing the due diligence program and performing due diligence enquiries on legal matters. In respect of this Prospectus, the Manager estimates that it will pay amounts totalling approximately $15,000 (excluding GST, service fees and disbursements) to Watson Mangioni Lawyers Pty Limited.

Moore Stephens Sydney Corporate Finance Pty Limited has prepared the investigating accountant’s report included in this Prospectus and have also performed work in relation to the due diligence enquiries on financial matters. In respect of this work, the Manager estimates it will pay up to $12,800 (excluding GST and disbursements) to Moore Stephens Sydney Corporate Finance Pty Limited. The associated partnership, Moore Stephens Sydney, is also the appointed auditor of the Company.

Dixon Advisory & Superannuation Services Pty Limited, in its capacity as Issue Manager, will receive a 1% handling fee in respect of all funds received in respect of Applications lodged bearing its stamp and may retain any interest earned on the Application Monies held on trust pending the issue of Shares to successful Applicants.

Certain partners, directors and employees of the above firms may subscribe for Shares in the context of the Offer.

Registries Limited has acted as share registrar to the Offer. In respect of this Prospectus, the Manager estimates that it will pay amounts totalling approximately $6,000 (excluding GST and disbursements) to Registries Limited.


Terms and abbreviations used in this Prospectus have the following meaning:

APPLicAnt a person who submits an Application

APPLicAtion an application for Shares pursuant to this Prospectus

APPLicAtion Form an application form in the form attached to this Prospectus

APPLicAtion monies the Application Price multiplied by the number of Shares applied for

APPLicAtion Price $100.00 for each Share

AssociAte has the meaning given by Division 2 of the Corporations Act

Asic Australian Securities & Investments Commission

Asx ASX Limited

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

cLosing dAte 25 February 2009

comPAny Australian Masters Corporate Bond Fund No 3 Limited (ACN 134 738 524)

directors or boArd the board of directors of the Company

investment grAde see Section 2.4 of this Prospectus

issue the issue of Shares in accordance with this Prospectus

issue mAnAgerDixon Advisory & Superannuation Services Pty Limited (ACN 103 071 665) (AFS Licence Number: 231143)

mAnAgement Agreementthe management agreement between the Company and the Manager dated on or about the date of this Prospectus

mAnAger or dixon AdvisoryDixon Advisory & Superannuation Services Pty Limited (ACN 103 071 665) (AFS Licence Number: 231143)

mer Management Expense Ratio. See Section 3.4 of this Prospectus

minimum subscriPtiona minimum subscription of $10,000,000, being receipt of valid Applications for not less than 100,000 Shares

oFFerthe offer of up to 250,000 Shares (with the ability to receive oversubscriptions for a further 500,000 Shares) to Applicants whose Applications and Application Monies are received by the Company by 5:00pm (Sydney time) on the Closing Date

oPening dAte expected to be 12 February 2009

PortFoLio the portfolio of investments of the Company from time to time

ProsPectusthis replacement prospectus dated 9 February 2009 as modified or varied by any supplementary prospectus made by the Company and lodged with the ASIC from time to time

securities has the same meaning as in Section 92 of the Corporations Act

shAre a fully paid ordinary share in the capital of the Company

shAre registry Registries Limited (ACN 003 209 836)

shArehoLder a registered holder of a Share

14. gLOSSARy

APPLICATION FORMAUSTRALIAN MASTERS CORPORATE BOND FUND No 3 LIMITED

ATTACH CHEqUE/S HERE

ACN 134 738 524

Fill out this Application Form if you want to apply for shares in Australian Masters Corporate Bond Fund No 3 Limited.

• Pleasereadthereplacementprospectusdated9February2009.

• FollowtheinstructionstocompletethisApplicationForm(seereverse).

• Printclearlyincapitallettersusingblackorbluepen.

oFFer cLoses 25 FebruAry 2009 (unless closed earlier or extended)

broker code Adviser code

broker reference – stamp only

By submitting this Application Form, I/We declare that this Application Form is completed and lodged according to the Prospectus and the instructions on the reverse of the Application Form and declare that all details and statements made by me/us are complete and accurate. I/We agree to be bound by the constitution of Australian Masters Corporate Bond Fund No 3 Limited. I/We received the electronic Prospectus together with the Application Form or a print out of them. I/We represent, warrant and undertake to the Company that our subscription for the above Shares will not cause the Company or me/us to violate the laws of Australia or any other jurisdiction which may be applicable to this subscription for Shares in the Company.

A Number of Shares applied for*

*Minimum of 100 Shares to be applied for.

B Total Amount Payable*

$@ A$100.00 per share =

C Write the name/s you wish to register the shares in (see reverse for instructions)

Title Full Name

APPLicAnt 2 or Account designation Title Full Name

APPLicAnt 3 or Account designation Title Full Name

APPLicAnt 1

D Postal Address

Number/Street Name

Suburb/Town State Postcode

E Enter your Tax File Number/s, ABN, or exemption category

Applicant 1 Applicant 2

Applicant 3 Exemption Category

F Please enter details of the cheque/s that accompany this Application Form:

Drawer Chq No. BSB No. Acc No. A$

Drawer Chq No. BSB No. Acc No. A$

totAL A$

g Contact telephone number (daytime/work/mobile) H Email Address

I Shareholder Communications All correspondence will be sent electronically unless legally required otherwise or unless the box below is ticked.

Printed copy of shareholder communications required

j Annual Reports Annual Reports will be published on the Company’s website. If you still wish to receive a copy free of charge, select one of the following:

Electronic copy (emailed) Printed copy (posted)

imPortAnt PLeAse note: The Company or the Issue Manager may be required under the Anti-Money Laundering/Counter-Terrorism Financing Act 2006 (Cth) or any other law to obtain identification information from Applicants. The Company reserves the right to reject any Application from an Applicant who fails to provide identification information upon request.

Are you an existing client of Dixon Advisory & Superannuation Services Pty Limited? yes no

gUIDE TO THE APPLICATION FORMyou shouLd reAd the ProsPectus cAreFuLLy beFore comPLeting this APPLicAtion Form.

Please complete all relevant sections of the appropriate Application Form using BLOCK LETTERS. These instructions are cross-referenced to each section of the Application Form.

A & b If applying for Shares insert the number of Shares for which you wish to subscribe at item A (not less than 100.) Multiply by 100.00 AUD to calculate the total for Shares and enter the $Amount at item b.

c Write your full name. Initials are not acceptable for first names.

d Enter your postal address for all correspondence. All communications to you from the Company will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.

e Enter your Australian tax file number (“TFN”) or ABN or exemption category, if you are an Australian resident. Where applicable, please enter the TFN/ABN of each joint Applicant. Collection of TFN’s is authorised by taxation laws. quotation of your TFN is not compulsory and will not affect your Application Form.

F Complete cheque details as requested. Make your cheque payable to “Australian masters corporate bond Fund no 3 Limited” cross it and mark it “not negotiable”. Cheques must be made in Australian currency, and cheques must be drawn on an Australian Bank.

g Enter your telephone number so we may contact you regarding your Application Form or Application.

h Enter your email address so we may contact you regarding your Application Form or Application or other correspondence.

i & j The Company encourages you to receive Shareholder correspondence and the Annual Report electronically. The benefit to Shareholders are in the potential cost savings and the faster delivery of information. The benefits to the environment are also substantial.

correct Forms oF registrAbLe titLe

Note that ONLY legal entities can hold the Shares. The Application must be in the name of a natural person/s, companies or other legal entities acceptable to the Company. At least one full given name and surname is required for each natural person.

Examples of the correct form of registrable title are set out below.

tyPe oF investorcorrect Form oF registrAbLe titLe

incorrect Form oF registrAbLe titLe

individuAL Mr John David Smith J D Smith

comPAny ABC Pty Ltd ABC P/L or ABC Co

joint hoLdings Mr John David Smith & Mrs Mary Jane Smith John David & Mary Jane Smith

trusts Mr John David Smith <J D Smith Family A/C>

John Smith Family Trust

deceAsed estAtes Mr Michael Peter Smith <Est Lte John Smith A/C>

John Smith (deceased)

PArtnershiPs Mr John David Smith & Mr Ian Lee Smith John Smith & Son

cLubs/unincorPorAted bodies

Mr John David Smith <Smith Investment A/C>

Smith Investment Club

suPerAnnuAtion Funds John Smtih Pty Limited <J Smith Super Fund A/C>

John Smith Superannuation Fund

Lodgement

Mail your completed Application Form with cheque/s attached to the following address:

PostAL: hAnd deLivered: Australian Masters Corporate Bond Fund No 3 Australian Masters Corporate Bond Fund No 3 Limited Share Offer Limited Share Offer c/- Dixon Advisory & Superannuation Services Pty Limited c/- Dixon Advisory & Superannuation Services Pty Limited GPO Box 575 Level 1, 73 Northbourne Avenue Canberra ACT 2601 Canberra ACT 2600

It is not necessary to sign or otherwise execute the Application Form. If you have any questions as to how to complete the Application Form, please contact Dixon Advisory & Superannuation Services Pty Ltd on +61 2 6162 5555.

Privacy Statement: Registries Limited advises that Chapter 2C of the Corporations Act 2001 (Cth) requires information about you as a shareholder (including your name, address and details of the shares you hold) to be included in the public register of the entity in which you hold shares. Information is collected to administer your share holding and if some or all of the information is not collected then it might not be possible to administer your share holdings. Your personal information may be disclosed to the entity in which you hold shares. You can obtain access to your personal information by contacting us at the address or telephone number shown on the Application Form. Our privacy policy is available on our website (http://www.registriesltd.com.au/help/share_privacy.html)

PR

OS

PE

CTU

STHiS REPlACEMEnT PROSPECTUS

has been approved by unanimous resolution of the directors of

AUSTRAliAn MASTERS CORPORATE BOnd FUnd no 3 liMiTEd

dated: 9 February 2009

MAxiMiliAn WAlSH CHAiRMAn

prospectus - corporate bond fund · ii | australian masters corporate bond fund no 3 prospectus...

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