PROSPECTUS - CORPORATE BOND FUNDThis Prospectus is issued by Australian Masters Corporate Bond Fund No 5 Limited (ACN 139 247 564) (Company) and is an invitation to apply for Shares

PR

OS

PE

CT

US

MANAGER

DIXON ADVISORY & SUPERANNUATIONSERVICES LIMITED

[ACN 139 247 564]

FOR THE OFFER OF

250,000 fully paid ordinary shares at subscription prices between $97.50 and $100 per share with the ability to accept oversubscriptions.

The investments of

AUSTRALIAN MASTERS CORPORATEBOND FUND No 5 LIMITED

will be managed by

DIXON ADVISORY & SUPERANNUATION SERVICES LIMITED

This offer is not underwritten

DIRECTORY

DIRECTORS

Maximilian Walsh (Chairman)Alex MacLachlanChris BrownDaryl DixonAlan Dixon

COMPANY SECRETARY

Chris Duffi eld

INVESTIGATING ACCOUNTANT

Moore Stephens Sydney Corporate Finance Pty LtdLevel 7, 20 Hunter StreetSydney NSW 2000

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

MANAGER AND ISSUE MANAGER

Dixon Advisory & Superannuation Services LtdAFS Licence Number: 231143Level 15, 100 Pacifi c HighwayNorth Sydney NSW 2060

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

SHARE REGISTRAR

Registries LimitedLevel 7, 207 Kent StreetSydney NSW 2000

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

REGISTERED OFFICE

Level 15, 100 Pacifi c HighwayNorth Sydney NSW 2060

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

AUDITOR

Moore Stephens SydneyLevel 7, 20 Hunter StreetSydney NSW 2000

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

SOLICITORS TO THE OFFER

Watson Mangioni Lawyers Pty LimitedLevel 13, 50 Carrington StreetSydney NSW 2000

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

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS | 1

1. Information for Investors ..........................................................................................................................................1

2. Overview of Corporate Bonds .................................................................................................................................4

3. Overview of the Company .......................................................................................................................................13

4. Investment Objectives and Process .........................................................................................................................16

5. Risks .......................................................................................................................................................................21

6. The Manager ...........................................................................................................................................................25

7. Financial information ................................................................................................................................................27

8. Directors & Corporate Governance ..........................................................................................................................32

9. Further Information about Corporate Bonds ............................................................................................................35

10. Taxation ..................................................................................................................................................................38

11. Investigating Accountant’s Report ...........................................................................................................................42

12. Material Contracts ...................................................................................................................................................45

13. Additional Information ..............................................................................................................................................49

14. Glossary ..................................................................................................................................................................53

TABLE OF CONTENTS

II | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

IMPORTANT NOTICES

ABOUT THIS PROSPECTUS

This Prospectus is issued by Australian Masters Corporate Bond Fund No 5 Limited (ACN 139 247 564) (Company) and is an invitation to apply for Shares in the Company of up to 250,000 Shares at an issue price between $97.50 and $100 per Share. The Company reserves the right to accept oversubscriptions of up to a further 1,250,000 Shares at an issue price per Share of between $97.50 and $100.

This Prospectus is dated 6 October 2009 and has been lodged with the Australian Securities & Investments Commission (ASIC) on that date. No responsibility for the contents of this Prospectus is taken by ASIC or any of its offi cers.

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 this 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 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 this 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, fi nancial situation or any of your particular needs. You should seek independent legal, fi nancial 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.

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 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 refl ected 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 qualifi ed 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/amcbf. The Offer or invitation to which the Electronic Prospectus relates is only available to persons receiving the Electronic Prospectus in Australia.

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.

Applications received during the Tranche 1 Period

Shares issued in respect of Applications received by the Company during the Tranche 1 Period, being the period from the Opening Date until 5pm (Sydney time) on 22 October 2009, will be issued at $97.50 per Share.


Shares issued in respect of Applications received by the Company during the Tranche 2 Period, being the period from 5pm (Sydney time) on 22 October 2009 to 5pm (Sydney time) on 19 November 2009, will be issued at $98.17 per Share.


Shares issued in respect of Applications received by the Company during the Tranche 3 Period, being the period from 5pm (Sydney time) on 19 November 2009 until 5pm (Sydney time) on 17 December 2009, will be issued at $98.83 per Share.


Shares issued in respect of Applications received by the Company during the Tranche 4 Period, being the period from 5pm (Sydney time) on 17 December 2009 until 5pm (Sydney time) on 4 February 2010, will be issued at $100 per Share.

Applications under the Offer must be for a minimum of 100 Shares. The Directors may extend the Offer in accordance with the Corporations Act.

IV | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

APPLICATION FORM

Applications and Application Monies for Shares under the Offer received after 5:00 p.m. (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 “Dixon Advisory Trust Account #7 AMCBF No5 Ltd” 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

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryGPO Box 575Canberra ACT 2601

HAND DELIVERED - CANBERRA

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryLevel 1, 73 Northbourne AvenueCanberra ACT 2601

HAND DELIVERED - SYDNEY

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryLevel 15, 100 Pacifi c Highway North Sydney NSW 2060

HAND DELIVERED - MELBOURNE

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryLevel 2, 250 Victoria ParadeEast Melbourne VIC 3002

WHEN TO APPLY

Completed Applications under the Offer must be received by 5:00 pm (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 David Orr of Dixon Advisory & Superannuation Services Limited on 02 6162 5555.

GLOSSARY OF TERMS

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

CHAIRMAN’S LETTER

6 October 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 5 Limited.

The Company, which is managed by Dixon Advisory & Superannuation Services Limited, has been established to provide Australian retail investors access to the Australian wholesale bond market through a simple, cost effective corporate structure and a buy and hold portfolio management style.

The Company is offering progressive Share issues at different prices over four tranche periods during the time the Offer opens to the closing of the Offer. This staggered issue process is intended to allow the Company time to assemble its portfolio progressively, taking advantage of primary bond issues as and when they occur. The Application Price for Shares in the Tranche 2 Period to the Tranche 4 Period represents a price increase of approximately 9% per annum from the $97.50 Tranche 1 Period issue price (calculated pro-rata from the fi rst day of each tranche period). Pricing of an issue will be determined by reference to the date the Application was received, not the date of issue of the Shares.

See Section 4.4 for details regarding examples of some of the secondary bonds which may be assembled as at the date of this Prospectus as well as examples of recent issues of primary bonds.

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

Debt and equity markets continue to experience signifi cant volatility and the global fi nancial 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.

As the Company will not be listed on the ASX, there may not be a ready market for the Shares and as such, liquidity in the Company is limited. The latest maturity date for bonds in which the Company proposes to invest is 31 December 2015. Therefore investors should be comfortable that they may not be able to dispose of their Shares and may not be able to exit their investment in the Shares until the Company is wound up. This is expected to be at least two months after the last maturity date for bonds in the Portfolio and will be subject to Shareholder approval.

The Company expects to pay two fully franked dividends per year. The Company will 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 fi nal return of capital on or within two months of 31 December 2015, the Company will seek Shareholder approval to voluntarily wind up the Company.

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 WalshChairman

MANAGER’S LETTER

6 October 2009

Dear Investor

The wholesale corporate bond market is not a market many retail investors can directly 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 signifi cant amount to obtain appropriate diversifi cation of risk.

As was the case with the four previous offers undertaken by corporate bond funds managed by Dixon Advisory & Superannuation Services Limited, the Company will provide access for Australian domiciled retail investors to an underlying portfolio of high ranking Australian dollar denominated corporate debt. The Company will hold in its portfolio investment grade, Australian dollar denominated corporate debt issued in Australia by both Australian companies and well known multinational companies and Australian subsidiaries of multinational companies.

Where the strategy used for this Company will differ slightly to the strategy adopted for our previous four corporate bond funds will be in the more active approach to the primary issuance market for corporate bonds.

In the fi rst three corporate bond funds, the focus was entirely on purchasing bonds in the secondary market which were trading at what we considered very attractive prices. This strategy was determined partly by design and partly by circumstance. As just mentioned, bonds in the secondary market were, we believe, exceptionally well priced. A number of large participants in this market became forced or distressed sellers due to the global fi nancial crisis, and we were able to take advantage of this by purchasing high quality corporate bonds cheaply. The counterpoint to this was that the dislocations in the secondary market effectively forced the primary markets to close down. Other than government guaranteed borrowers such as the major banks, corporate bond markets effectively were shut to new issues.

Recently, the freeze in primary markets has begun to thaw, and for Australian Masters Corporate Bond Fund No 4, we were able to participate in this recovery in the market by participating in two new primary issues from the issuers APPF and Holcim, both of which were three year bond issues at rates we consider very attractive compared to their risk. The remaining 83% of Australian Masters Corporate Bond Fund No 4’s investments came from the secondary market.

Since then, there have also been a number of new primary issues by Australian companies, including Leighton Holdings Limited and Wesfarmers Limited.

These new primary issues, together with the general improvement in credit markets, have encouraged us to the view that the primary issuance market for non-ADI issuers is open for business and that we are likely to see more new, attractively priced bonds being issued in the coming months for investment consideration. As such, we are anticipating that we will invest a signifi cant percentage of the proceeds in primary issues with the balance of the fund to be invested in secondary issues. We expect to take a longer period to invest the cash raised, possibly up to a full year, with the last expiry of any bond to be before 31 December 2015.

The Manager believes that, in the current environment, high quality short to medium duration bonds continue to provide an attractive investment opportunity, both on a stand alone basis and relative to general equities, as bonds provide more predictable income and greater capital security than equity investments. The Manager’s view is that a conservative portfolio of bonds offering an average pre-tax yield of over 8% with duration out to between three and fi ve 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.

Yours sincerely

Alan DixonManaging DirectorDixon Advisory & Superannuation Services Limited

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS | VII

HIGHLIGHTS OF THE OFFER

Key DatesLodgement of Prospectus with ASIC 6 OCTOBER 2009

Expected expiry of exposure period 13 OCTOBER 2009

Offer to open 13 OCTOBER 2009

Tranche 1 Period closes 5.00PM (AEST) 22 OCTOBER 2009

Tranche 2 Period closes 5.00PM (AEST) 19 NOVEMBER 2009

Tranche 3 Period closes 5.00PM (AEST) 17 DECEMBER 2009

Tranche 4 Period closes (Closing Date) 5.00PM (AEST) 4 FEBRUARY 2010

Expected allotment of Shares ON OR ABOUT 7 DAYS AFTER THE CLOSING DATE FOR EACH TRANCHE PERIOD SUBJECT TO ACHIEVEMENT OF THE MINIMUM SUBSCRIPTION

Expected despatch of share certifi cates ON OR ABOUT 2 BUSINESS DAYS AFTER THE ALLOTMENT OF SHARES UNDER EACH TRANCHE

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 StatisticsMinimum number of Shares available under the Offer 100,000

Minimum proceeds from the Offer

* Calculated based on all Applications being received during the Tranche 1 Period at $97.50 per Share

$9,750,000*

Maximum number of Shares available under the Offer (if no oversubscriptions are taken up) 250,000 SHARES

Maximum number of Shares available under the Offer (if all oversubscriptions are taken up) 1,500,000 SHARES

Issue Price per Share

** Issue price is dependant on the tranche period in which an Application is received – see Section 1.1 for details.

$97.50 - $100.00**

Pro forma Net Asset Value (NAV) per Share if the minimum subscription amount is raised equally in 4 tranches

*** See Section 7.1 for details of how the NAV is calculated.

$97.74***

VIII | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

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 corporate bonds denominated in Australian dollars issued by Australian companies and substantial foreign corporations or their Australian subsidiaries. It is intended to provide Australian 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

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 31 December 2015. Income from the coupon (or interest) payments earned by the Company will be distributed as periodic dividends.

The Manager may take up to a year to invest the cash raised, as in addition to existing secondary market issues, the Company will consider investing in new corporate bonds that are issued in the market over the coming year. This may impact on returns in the fi rst year.

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 fi nal return of capital, the Company is expected to be voluntarily wound-up.

See Sections 2.2, 3.4 and 4.8

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 fi nancial advice services to clients.


AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS | IX

Experienced Board and Manager (continued)

The Manager currently manages a portfolio of interests of 4 similarly structured companies, Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 Limited. It also manages the investment portfolio of Global Resource Masters Fund Limited.

The Manager also has experience in providing comprehensive administration and fi nancial advice services to over 3,000 self-managed superannuation fund clients, with a combined superannuation asset base of approximately $2.5 billion.


Investment Strategy The Manager will implement a disciplined investment process that identifi es 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

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 may 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 31 December 2015.

There is no restriction on the transfer of Shares if you fi nd 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(k)

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, fi nancial distress or liquidation of the counterparty) this may have an effect on the performance of the Company.

See Section 5.1(b)

X | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

Default Risk (continued) In particular, issuers of corporate bonds may be unable to refi nance 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 fi nancial conditions and adverse fi nancial and/or operating performance of the issuer and its related parties. Any such default will have an adverse impact on the fi nancial performance of the Company.

See Section 5.1(b)

Delay in investing cash raised The Company’s investment strategy includes the ability of the Manager to hold cash or delay investments to take advantage of new corporate bond issues. There may not be primary corporate bond issues on terms considered suitable for investment by the Manager immediately or shortly after raising cash under this Prospectus. This may impact on returns to the Company in the fi rst year.

See Section 5.1(c)

Economic Conditions Investment returns are infl uenced 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 global and/or 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 fi nancial performance of the Company.

See Section 5.1(g)

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(d)

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS | XI

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 fi nance 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 fi nancial position and creditworthiness of these entities. Defaults may have a signifi cant effect on the Company.

See Section 5.1(l)

Foreign Corporations There may be greater diffi culty 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 fi nancial and operating requirements, which may differ from those in Australia.

See Sections 5.1(m) and 5.1(n)

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 or the guarantors’ fi nancial position may impact on the credit rating of that issue. This in turn may affect the value of the corporate bonds.

See Section 5.1(o)

Poor Investment Performance The value of the Shares may refl ect 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 fi nancial, 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(q) and 5.1(r)

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 benefi t of those increased interest rates with the funds they invest in the Company.

See Section 5.1(e)

Failure to return capital As the Company does not propose to seek listing on ASX or another fi nancial 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 majority votes of 50% or more cast by Shareholders.

See Section 5.1(f)

XII | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

Offer Summary

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

About The OfferQUESTION ANSWER MORE INFORMATION

Who is the issuer of the Shares and this Prospectus?

Australian Masters Corporate Bond Fund No 5 Limited (ACN 139 247 564).

See Sections 1.1 and 3.1

What is the Offer? The Offer is for Shares at an issue price between $97.50 to $100.00 per Share depending on the tranche period in which an Application is received.

The staggered issue process is intended to allow the Company time to assemble its portfolio progressively, taking advantage of primary issues as and when they occur. The Application Price for Shares in the Tranche 2 Period to the Tranche 4 Period represents a price increase of approximately 9% per annum from the $97.50 Tranche 1 Period issue price (calculated pro-rata from the fi rst day of each tranche period).

Pricing of an issue wil be determined by reference to the date the Application was received, not the date of issue of the Shares.


Shares issued in respect of Applications received by the Company during the Tranche 1 Period, being the period from the Opening Date until 5pm (Sydney time) on 22 October 2009, will be issued at $97.50 per Share.


Shares issued in respect of Applications received by the Company during the Tranche 2 Period, being the period from 5pm (Sydney time) on 22 October 2009 to 5pm (Sydney time) on 19 November 2009, will be issued at $98.17 per Share.


Shares issued in respect of Applications received by the Company during the Tranche 3 Period, being the period from 5pm (Sydney time) on 19 November 2009 until 5pm (Sydney time) on 17 December 2009, will be issued at $98.83 per Share.


Shares issued in respect of Applications received by the Company during the Tranche 4 Period, being the period from 5pm (Sydney time) on 17 December 2009 until 5pm (Sydney time) on 4 February 2010, will be issued at $100 per Share.

See Section 1.1

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS | XIII

QUESTION ANSWER MORE INFORMATION

What is the Offer? (continued) The Company will offer for subscription 250,000 Shares, with the ability to accept oversubscriptions for a further 1,250,000 Shares. The Offer is subject to the Company raising a minimum issue of 100,000 Shares. If this is completed within the Tranche 1 Period (being between the Opening Date and 22 October 2009), this represents gross proceeds of $9,750,000.

It is expected that allotment of Shares under the Offer will take place on or about 7 days after the closing date of each of the tranche periods subject to achievement of the Minimum Subscription. This may mean that no Shares will be allotted in the early tranche periods until the Minimum Subscription is received.

Shares issued under all tranches will comprise the same class of Shares.

Shares will rank equally with all other Shares for all purposes (including dividends) from the date of issue.

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 7.6

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

See Section 5.1(k)

How can I exit my investment in the Company?

The Company intends to purchase bonds with a maturity date no later than 31 December 2015. The Company may seek to return capital to investors following maturity of corporate bonds and intends to return capital to investors each year following the maturity of corporate bonds and 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 31 December 2015. The returns of capital and the winding-up will be subject to Shareholder approval.

See Section 3.4

Is there a cooling-off period? No.

How can further information be obtained?

Please contact David Orr 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, fi nancial adviser, accountant, lawyer or other professional adviser.

XIV | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

About the CompanyQUESTION ANSWER MORE INFORMATION

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 consistent 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 companies. This will be achieved by the appointment of a respected investment manager to implement a disciplined investment process that identifi es, selects and monitors a portfolio of Australian dollar denominated corporate bonds.

See Section 4.1

Who is the Manager? Dixon Advisory & Superannuation Services 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 diversifi ed 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. While the Manager intends to invest only in corporate bonds that meet the investment guidelines set out in Section 4.3, it has the ability to also invest in cash and other Securities.

See Section 4.2

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

The Management Agreement provides for the appointment of the Manager for an initial term expiring on 31 March 2016 to manage the Portfolio and for the payment of a management fee. 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 expiry of the initial term on 3 months’ written notice.

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

See Section 12.1

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS | XV


What fees will the Manager and the Issue Manager receive?

The Manager will receive an annualised management fee of 0.45% (excluding GST), calculated with reference to the value of the Company’s portfolio. The fi rst management fee will be 0.45% per annum (excluding GST) of gross proceeds raised under this Prospectus, and calculated on the gross proceeds raised upon the allotment of Shares for each tranche. The aggregate of these amounts will be payable on the later of 10 Business Days of the date of the fi nal allotment of Shares upon closing of the Offer or when the Company has received suffi cient earnings from its Portfolio to make such payment. Similarly, the management fee for the period 1 July 2010 to 30 June 2011 will be payable in advance on the later of 10 Business Days after 30 June 2010 or when the Company has received suffi cient 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.

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.

See Section 12.1, 12.2 and 13.7

What costs of the Company will be met by the 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 Company will be responsible for the on-going operation costs, such as registry, audit and accounting fees, brokerage and other acquisition and disposal costs of corporate bonds within the Portfolio.

In addition, other costs borne by the Company include those associated with the calling and holding of general meetings, fees payable to ASIC or any other regulatory bodies, insurance premiums, undertaking distributions, returns of capital, share buy-backs or other reductions of capital and with any winding up of the Company.

See Section 12.1 and 12.2

What are the signifi cant potential benefi ts?

There are a number of potential benefi ts of the Offer which are outlined on the fi rst page of the Highlights of the Offer and in Section 3.1.

See Section 3.1

XVI | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS


What are the signifi cant 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 identifi ed in this Prospectus, particularly those identifi ed 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 signifi cant 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 specifi c circumstances prior to making a decision to invest in the Company.

See Section 10

Investing in the CompanyQUESTION ANSWER MORE INFORMATION

Who can participate in the Offer?

Members of the general public who have a registered address in Australia.

See Section 1.6

Can superannuation funds invest?

Yes, subject to the investment mandate of the particular fund and the trustees’ 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 identifi cation 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 4.8

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 of 0.45% (excluding GST) of the gross value of the Portfolio of 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.


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 in four tranches. The staggered issue process is intended to allow the Company time to assemble its portfolio progressively, taking advantage of primary issues as and when they occur. The Application Price for Shares in the Tranche 2 Period to the Tranche 4 Period represents a price increase of approximately 9% per annum from the $97.50 Tranche 1 Period issue price (calculated pro-rata from the fi rst day of each tranche period).

TRANCHE PERIOD AMOUNT

1 From the Opening Date until 5pm (Sydney time) on 22 October 2009 $97.50 per Share

2 From 5pm (Sydney time) on 22 October 2009 to 5pm (Sydney time) on 19 November 2009

$98.17 per Share

3 From 5pm (Sydney time) on 19 November 2009 until 5pm (Sydney time) on 17 December 2009

$98.83 per Share

4 From 5pm (Sydney time) on 17 December 2009 until 5pm (Sydney time) on the Closing Date

$100.00 per Share

Shares issued under all tranches will comprise the same class of Shares.

Shares will rank equally with all other Shares for all purposes (including dividends) from the date of issue.

Under the Offer, the Company reserves the right to accept oversubscriptions of up to a further 1,250,000 Shares.

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

1.2 | MINIMUM SUBSCRIPTION

The Minimum Subscription for the Offer is the receipt of valid Applications for not less than 100,000 Shares. Based on the Tranche 1 Period offer pricing, this represents gross proceeds of $9,750,000. If this Minimum Subscription is not achieved by the date 4 months after the Opening Date, the Company will repay all money received from Applicants within 7 days from the completion of 4 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 the relevant Application Price.

Applications under the Offer must be for a minimum of 100 Shares.

Applications and Application Monies for Shares under the Offer received after 5:00 p.m. (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 “Dixon Advisory Trust Account #7 AMCBF No5 Ltd” and crossed “Not Negotiable”.

No stamp duty is payable by Applicants.

1. INFORMATION FOR INVESTORS

2 | AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 PROSPECTUS

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

POSTAL

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryGPO Box 575Canberra ACT 2601

HAND DELIVERED - CANBERRA

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryLevel 1, 73 Northbourne AvenueCanberra ACT 2601

HAND DELIVERED - SYDNEY

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryLevel 15, 100 Pacifi c Highway North Sydney NSW 2060

HAND DELIVERED - MELBOURNE

Australian Masters Corporate Bond Fund No 5 Limited Share Offerc/- Dixon AdvisoryLevel 2, 250 Victoria ParadeEast Melbourne VIC 3002

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.

The Issue Manager holds an appropriate AFS 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 7 days after the closing date of each of the tranche periods subject to achievement of the Minimum Subscription. This may mean that no Shares will be allotted in the early tranche periods until the Minimum Subscription is received. In such cases Applications will be held by the Issue Manager until the Minimum Subscription is received. Pricing of an issue will be determined by reference to the date the Application was received, not the date of issue of the Shares.

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 confi dential basis; and

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

(iii) related bodies corporate (as that term is defi ned 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 identifi cation information from Applicants. The Company reserves the right to reject any Application from an Applicant who fails to provide identifi cation information upon request.


2.1 | CORPORATE BONDS

The Company has been established to undertake direct investment in Investment Grade corporate bonds denominated in Australian dollars and 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 fi xed periods specifi ed in the terms of issue. Issuers seeking funds from the public through bond issues usually announce the issues through the fi nancial 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 fi xed 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 reward returns in the opinion of the Investment Committee. Section 2.8 contains a list of potential issuers. This list is not exhaustive. Some corporate bonds not listed in Section 2.8 may be included in the fi nal Portfolio of the Company. Conversely, issuers of corporate bonds listed in Section 2.8 may not be included in the fi nal 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 profi ts 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 fi rst 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:

SE

NIO

RIT

Y � H

IGH

ER

SECURED DEBT LOW

ER

EX

PE

CT

ED

RA

TE

OF �

INV

ES

TM

EN

T R

ET

UR

N

UNSECURED DEBT

SUBORDINATED DEBT

LOW

ER

HYBRID SECURITIES HIG

HE

R

PREFERENCE SHARES

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.

2. OVERVIEW OF CORPORATE BONDS


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.

Based on the most recent information from the Reserve Bank of Australia, the value of Australian dollar denominated corporate bonds on issue in Australia (including bonds issued by international corporations in Australia and their subsidiaries) as at 27 August 2009 is approximately $387 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 down-grade 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 down-graded below Investment Grade during the period it is held.

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 (and so may be acquired without approval from the Board), 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 suitability of the corporate bond for investment.

The Company has not included in this Prospectus the credit rating issued by any ratings agency for any particular corporate bond. The Company was not required to, and so has not, obtained the consent of any credit rating agency to the inclusion of general information regarding credit ratings in this Prospectus.

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 fl uctuate 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 fl uctuate 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 specifi c 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 fi nancing 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 1985 – 2008. 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 1985–2008

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

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

AAA

AA

A

BBB

All investment grade

Source: Standard & Poor’s – Australian & New Zealand 2008 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 fi nancial crisis has had a signifi cant 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”

Australian dollar denominated corporate bonds issued 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 entities is conducted outside Australia. As a result, assessment of the creditworthiness of the offshore operations may be more diffi cult as laws, reporting obligations, accounting standards and policies and fi nancial and operating requirements may differ from those of equivalent Australian operations.

Kangaroo bonds represent a substantial part of the corporate bond market in Australia. Based on the most recent information from the RBA as at 27 August 2009, approximately 27% 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. The Portfolio may include Australian dollar denominated corporate bonds currently on issue or corporate bonds yet to be issued. Examples of international and Australian issuers whose corporate bonds may be considered for inclusion in the Portfolio include those listed below.

Wesfarmers Limited

Wesfarmers Limited (Wesfarmers) is one of Australia’s largest listed companies and employers. Its diverse business operations cover the following: supermarkets, department stores, home improvement and offi ce supplies; coal mining; energy; insurance; chemicals and fertilisers; and industrial and safety products. The Coles, K-Mart and Target divisions of Wesfarmers were formed in November 2007 as a result of the acquisition of the Coles Group.

As at the date of this Prospectus, Wesfarmers had a market capitalisation on ASX of approximately $27 billion. Wesfarmers’ total assets as at 30 June 2009 were $39.3 billion, including $2.1 billion in cash. Total liabilities were $15 billion including $6.1 billion in loans and borrowings. Wesfarmers signifi cantly reduced the group’s outstanding debt obligations during the second half of fi scal 2009 through a $4.6 billion equity raising in February 2009 and through a more conservative dividend-payout policy.

Wesfarmers’ total revenue for the 2008/09 fi nancial year was $51 billion; EBITDA was $4 billion with a net profi t after tax of $1.5 billion. Cash fl ow from operating activities over the same period was $3 billion. During the year an interim dividend of 50 cents per share and a fi nal dividend of 60 cents per share were declared.

Wesfarmers recently issued fi xed rate and fl oating rate bonds raising $500 million in September 2009. This issue was priced at 260 basis points above the bank bill swap rate.

Leighton Holdings Ltd

Leighton Holdings Ltd (Leighton) is Australia’s largest contracting and project development group, encompassing six 100%-owned trading entities: Thiess Contractors; Leighton Contractors; John Holland; Leighton Asia; Leighton International; and Leighton Properties. Leighton’s major shareholder is Germany-based Hochtief, a major construction and contracting company controlled by various institutional investors. Hochtief holds 55% of Leighton, but does not exert direct management control over Leighton, retaining a minority presence on its board.

As at the date of this Prospectus, Leighton’s current market capitalisation on ASX was approximately $11 billion. As at 30 June 2009, Leighton had total assets of $7.7 billion, cash of $666 million and total borrowings of $1.3 billion. In September 2008, Leighton’s completed a $700 million equity raising. It also completed a US$280 million private placement of 5, 7 and 10 year guaranteed senior notes in October 2008.

In the fi nancial year of 2009, Leighton reported total revenue of $18.3 billion, operating profi t after tax of $610 million, profi t after tax and minority interests of $440 million. Leighton group’s cash fl ow from operating activities for the 2009 fi nancial year was $876 million. Leighton declared a fully franked fi nal dividend of 55 cents per share and also declared an interim dividend of 60 cents per share earlier in the year.

In August 2009 Leighton completed a $280 million 5-year medium term notes issue to institutional investors priced at the rate of 9.5%.


Holcim Ltd

Holcim Ltd (Holcim) is a global company employing over 83,000 people. It was founded and is headquartered in Switzerland. Core businesses include the manufacture and distribution of cement, and the production, processing and distribution of aggregates (crushed stone, gravel and sand), ready-mix concrete and asphalt. The company also offers consulting, research, trading, engineering and other services. Earlier in 2009 Holcim Group took over full ownership of Cemex Australia including the 25% stake in Cement Australia.

The market capitalisation of Holcim as at the date of this Prospectus was approximately CHF 24 billion. As at 30 June 2009, Holcim had total assets of CHF 47.7 billion with CHF 3.6 billion in cash. Total long term liabilities totaled CHF 13.9 billion, including a variety of bonds that were issued in 2009 with maturity dates ranging from 2009 until 2017. Since the beginning of 2009, debt totalling CHF 5 billion has been refi nanced. At an extraordinary general meeting held in July 2009, shareholders voted to increase the company’s equity base by CHF 2.1 billion through a rights issue to repay bridge fi nancing related to its earlier acquisition of Cemex Australia.

Operating EBITDA for the January to June half year period in 2009 was CHF 2.1 billion with net income of CHF 787 million. Cash fl ow from operating activities over the same period was CHF 805 million.

Holcim issued corporate bonds in Australia through Holcim Finance Australia. It issued $500 million of fi xed rate notes in August 2009, maturing in August 2012.

DEXUS Property Group

Formerly known as DB RREEF Trust, DEXUS Property Group (Dexus) acquired Deutsche Bank’s 50% interest in the management company, DB RREEF Funds Management Ltd, for $130 million on 21 February 2008 and rebranded the company to DEXUS Property Group. The acquisition fully internalised the management structure.

Dexus is one of the largest property groups listed on the ASX. It owns, develops and manages 257 offi ce industrial and retail properties worldwide.

Dexus’ business has 2 main divisions, a $7.9 billion direct property portfolio, through which it owns manages and develops high quality offi ce and industrial assets in Australia and select international markets, and a $5.6 billion third party property funds management business, through which it develops and manages Australian offi ce, industrial and retail properties on behalf of third party investors.

As at the date of this Prospectus, Dexus’ current market capitalisation was $4.03 billion. As at 30 June 2009, Dexus had total assets of $8.4 billion, with $120 million in cash and $2.5 billion in debt. During fi scal year 2009, Dexus raised a total of $1 billion of equity. In accordance with its distribution policy to pay out 70% of funds from operations, Dexus distributed 7.3 cents per share in fi nancial year 2009.

For the fi nancial year of 2009 EBIT was $512 million with profi t after tax and minority interests of $341 million. However, after non-cash items net profi t was negative $1.4 billion, mainly due to the negative revaluation of investment properties.

On 20 July 2009, Dexus raised $160 million in domestic fl oating rate notes maturing in 2014 priced at 450 basis points above the swap rate.

Australian Prime Property Fund Retail

Australian Prime Property Fund (APPF) Retail is a $3.1 billion wholesale-unlisted fund with an investment portfolio which includes interests in major regional shopping centres. The fund is managed by Lend Lease Real Estate Investment Ltd, part of the Lend Lease group.

APPF Retail had total assets of $3.0 billion with $16 million in cash as at 30 June 2009. Total borrowings amounted to $239 million. All debt maturities for APPF Retail are greater than 3 years.

Revenue from ordinary activities was $240 million as at 30 June 2009. They recorded a net income of $14.8 million. They distributed $80.97 of income per ordinary unit.

On 21 July 2009 APPF Retail announced completion of a new $250 million, three year medium term note issue. The issue was priced at a rate of 8.25%.


Bank of America Corporation

Bank of America Corporation (BAC) is the holding corporation for the Bank of America group. BAC accepts deposits and offers banking, investing, asset management, and other fi nancial and risk-management products and services. BAC also has a mortgage lending subsidiary and an investment banking and securities brokerage subsidiary.

BAC announced the acquisition of Merrill Lynch & Co. on 15 September 2008, having previously acquired Countrywide Financial Corporation (announced 1 July 2008).

BAC is the second largest US bank by market capitalisation. As at the date of the Prospectus, BAC had a market capitalisation on the New York Stock Exchange of approximately US$146 billion. BAC have total assets $2.3 trillion, including US$140 billion in cash, long term debt of US$447 billion and shorter term borrowings of US$465 billion.

For the 6 months ended June 2009, total revenue was US$68.5 billion with net income of US$7.4 billion.

Since the onset of the global fi nancial crisis, BAC has received a total of US$45 billion from the US Treasury as well as a guarantee of up to $118 billion in assets by the US Government. BAC is currently seeking to extricate itself from the guarantee program by agreeing to pay $425 million to the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation. BAC is also seeking to leave the Temporary Liquidity Guarantee Program.

Stockland Trust Management Limited

Stockland Trust Management Limited (Stockland) is a global property development and investment management group, founded in 1952. It holds a diversifi ed 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 remains primarily focussed on the Australian market which generated 99% of operating profi t in the fi nancial year ending 2008.

As at the date of this Prospectus, Stockland had a market capitalisation on ASX of approximately $9 billion. Stockland had total assets of $14.4 billion with $1.2 billion in cash as at 30 June 2009. Stockland employs a variety of fi nancing arrangements including bank facilities totalling $1.7 billion maturing in 2010, 2011 and 2014, and medium term notes totalling $2.8 billion maturing between 2011 and 2035.

Total revenue for fi nancial year 2009 was $1.8 billion resulting in a net loss for the year of $1.8 billion. Net cash fl ow from operating activities was $601.7 million. Total liabilities were $5.7 billion of which $3 billion is debt.

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 corporate bond. Factors other than risk can also affect credit spreads, including supply and demand factors driven by structural changes in the market.

Historically government issued bonds have been used to approximate a risk free asset. The global fi nancial crisis and the Australian Government guarantee for banks have 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 but since March 2009 have begun to tighten. By historical standards, the widening of credit spreads in the previous 2 years has been severe. The graph on page 10 illustrates the historical average spread for corporate bonds with credit ratings ranging from BBB to AAA.


AUSTRALIAN CORPORATE SPREADS

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On a simplistic view, the current spreads between Australian government bonds and Investment Grade corporate bonds imply that there is currently signifi cantly 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 fi nancial 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 justifi ed by default risk and consequently that Investment Grade corporate bonds are offering an attractive opportunity for investors in the current credit market.

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 through two components – the risk free component, which is refl ected in the swap rate and which is indicative of the current interest rate environment, and the credit spread, which is the additional yield an investor is receiving for taking on a specifi c company’s credit.

Interest rate swaps are used as the base from 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 graph on the next page shows the three year swap rate (3YR BBSW) in the period 7 December 2001 to 25 September 2009 and the overall yields of each of Australian bonds rated ‘AAA’, ‘AA’, ‘A’ and ‘BBB’.


AUSTRALIAN CORPORATE YIELDS

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As described in Section 2.9, corporate bond spreads had expanded to around their widest point in this interest rate cycle in March 2009 but have started to tighten ever since. Given that the total yield on a bond is the addition of the risk free or swap rate and the credit spread of that bond, given a fi xed risk free or swap rate, the widening of credit spreads should be associated with an increase in total yield.

However, the current environment has seen the Reserve Bank of Australia lowering the offi cial cash rate aggressively, which corresponds with a reduction in the risk free or swap 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 fi xed 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 signifi cant value from a credit spread perspective.


2.11 | RECENT ISSUANCES

Since the peak of the global fi nancial crisis, market conditions have improved leading to greater investor confi dence. This has re-opened the corporate bond market as an avenue for some companies to raise capital.

Below is a table of substantive bond issues undertaken by corporations other than Australian ADIs in the 2009 calendar year up to the date of this Prospectus.

ISSUERISSUEDATE

SIZE ($M)

MATURITYDATE

ISSUE YIELD TYPE

Wesfarmers Limited 4/09/2009 500 11/09/2014 8.25%BBSW + 260bps

FixedFloating

Leighton Holdings Ltd 6/08/2009 230 28/07/2014 9.50% Fixed

Holcim Finance (Australia) Pty Ltd

4/08/2009 500 07/08/2012 8.50% Fixed

Australian Prime Property Fund Retail

21/07/2009 250 30/07/2012 8.25% Fixed

DEXUS Property Group 20/07/2009 160 28/07/2014 BBSW + 450bps Floating

Volkswagen AG* 19/06/2009 100 24/06/2011 7.00% Fixed

Tabcorp Holdings Ltd 12/06/2009 150 01/05/2014 BBSW + 425bps Floating

*Due to the shorter term maturity and lower yield of this bond, it is unlikely to be considered for the Portfolio

While bonds issued by non Government guaranteed corporations still need to be priced at higher levels to secure interest from investors, this level has substantially fallen as 2009 has progressed. This has meant some of the non-ADI issuers that were fi nding it more attractive to obtain funding through equity raisings or distressed asset sales have returned to the bond market.

With an increasing choice and volume of high quality corporate issues, the Manager believes that high quality 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 diffi culty for corporations to refi nance 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 refi nancing risk where possible.


3. OVERVIEW OF THE COMPANY

3.1 | ABOUT THE COMPANY

Australian Masters Corporate Bond Fund No 5 Limited is a company, not a managed investment scheme. Investors will hold Shares in the Company and will receive the benefi t of profi ts 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 diffi culties in gaining access to a diversifi ed exposure of Australian dollar denominated corporate bonds. Reasons for this include:

Australian dollar denominated corporate bonds trade in the OTC Market with relatively few institutions prepared to make a • market for retail investors.

Standard minimum parcel size in this market is $500,000 and preferred trading is in multiples of more than $1,000,000 per bond.•

Alternative structured offerings are often traded by an active manager, which can lead to a higher Management Expense • Ratio (MER) by increasing transaction fees. (See Section 3.5 for further details).

Alternative structured offerings are usually ‘open ended’ which can be less effi cient because the managers can be forced to • buy and sell bonds at unsuitable times.

There were four issues of Australian corporate bonds offered directly to retail clients since March 2009. Tabcorp Holdings Limited issued 5 year unsecured debt securities and AMP Group Financial Services Limited issued 10 year subordinated debt securities. Two smaller issues from Brookfi eld Secured Bonds Series A Issuer Limited (a wholly owned subsidiary of Brookfi eld Asset Management) with a 3 year $57 million issue in June 2009 and in late September 2009 Heritage Building Society Limited have announced a subordinated debt transaction, to raise approximately $30 million.These four issues are the fi rst retail corporate bond issues completed in Australia since an issue in the early 1990s by Telecom (now Telstra Corporation Limited). While these four new issues are positive for retail investors, the Company and the Manager are of the opinion that these issues are not commensurate with the returns being provided in the OTC Market for similar bonds.

The number of bonds currently available to Australian retail investors (four) is extremely limited, compared to the OTC Market. The Company intends to create a portfolio comprising of 5 to 20 of these bonds available in the OTC Market which provides diversifi cation and therefore risk management advantages over investing in four retail issues. For more information about corporate bonds trading on the OTC Market see Section 9.2.

Key advantages of investing in the Company include:

Diversifi ed exposure to high ranking corporate bonds issued by well recognised Australian and international corporations • and their subsidiaries.

An attractive, targeted yield to maturity on all corporate bonds. The Company targets buying corporate bonds so that the • average yield of bonds in the Portfolio is approximately 8% p.a.

Access to consistent cash fl ow through fully franked dividend payments and capital returns.•

A low MER of around 0.45% per annum with the Manager bearing all costs of making the Offer. (See Section 3.5 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. 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 a static corporate bond portfolio receive the benefi t of diversifi cation and access to investments that are traditionally not available to retail investors. The Company provides investors with an opportunity to manage risks associated with diversifi cation by investing across a number of bonds which may have differing risk profi les and maturity dates. The Company provides investors with an opportunity to gain exposure to a diversifi ed portfolio of investments that may otherwise be diffi cult to obtain due to standard bond parcel sizes of $500,000 or more. However, this investment strategy will also carry with it diminished liquidity (see Sections 5.1(k) and 3.4 for details).

3.3 | PROGRESSIVE ISSUES OF SHARES AND SUBSCRIPTION FOR BONDS

Predecessor bond funds managed by the Manager confi ned themselves to the purchase of corporate bonds in the secondary market. In contrast, it is proposed that the Company will acquire corporate bonds by subscribing for primary issues and the secondary purchase of bonds traded OTC. The Company and the Manager consider that opportunities for subscriptions for corporate bonds at attractive prices will be signifi cant in the short term. As a result, the Company may hold signifi cant levels of cash as it considers options for primary subscriptions of corporate bonds.

In recognition of the fact that not all cash raised pursuant to the Prospectus will be employed immediately to acquire corporate bonds, the Company has structured the Offer to permit progressive issues of Shares. In this way, potential investors may defer subscribing for Shares. The pricing of the Application Price for Shares will increase over each of the 4 tranches of proposed issues. The Application Price for Shares in the Tranche 2 Period to the Tranche 4 Period represents a price increase of approximately 9% per annum from the $97.50 Tranche 1 Period issue price (calculated pro-rata from the fi rst day of each tranche period). Pricing of an issue will be determined by reference to the date the Application was received, not the date of issue of the Shares.

3.4 | 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 31 December 2015.

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. If a capital return is not approved, excess cash will be retained by the Company or utilised as the Board considers appropriate, until such time as a return of capital is again recommended by the Board and approved by Shareholders.

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 liquidators’ 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. If the voluntary wind-up resolution is not approved, any assets held will be retained by the Company and the Board will consider what options are, at the time, available to the Company in the Shareholders’ best interests.

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 excess cash can be returned to shareholders through either dividends or capital return. The Manager will ensure suffi cient cash is retained only to the extent that it is required to meet tax liabilities, the Manager’s fees and other costs and as required by relevant laws and regulations.

3.5 | OPERATING EXPENSES OF THE COMPANY

Keeping operating expenses as low as possible maximises the potential returns to investors, as even relatively small differences in operating expenses between investments can impact on the overall return, particularly for medium to long-term investors. Investors should note that the higher the expenses of the Company, the greater the impact on the return of their Shares.


The Company will have a MER of around 0.45% per annum. 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:

invest in a portfolio of underlying corporate bonds;•

manage the cash position of the Company;•

monitor the Portfolio of underlying corporate bonds; and•

make any necessary changes to the underlying Portfolio of corporate bonds.•

Some expenses of the Company include:

a) accounting and tax advice fees;

b) audit and registry fees;

c) all stamp duties, fi nancial 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;

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

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

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

g) all costs including commissions and brokerage incurred in connection with the acquisition or sale of any of the Company’s investments or proposed investments; and

h) any software licensing or software subscription fees in connection with risk monitoring and investment research specifi cally in relation to the Porfolio incurred by the Manager approved by the Board.

By incurring these costs, the operating costs for the years in which these events occur will be more than 0.45% per annum.

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

3.6 | 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 and lodgement 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:

To provide to investors a high rate of income and consistent fully franked dividends and the potential to receive capital • returns throughout the life of the Company.

To minimise default risk by investing in Investment Grade Australian dollar denominated corporate bonds issued by quality • Australian companies, foreign corporations or their Australian subsidiaries.

To minimise costs of the Company.•

4.2 | INVESTMENT PHILOSOPHY AND FOCUS

The Company and the Manager believe that the fi xed 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:

To invest in a diversifi ed portfolio of underlying Investment Grade corporate bonds, that provide high returns and can be held • to maturity.

To provide investors with consistent income via the Company’s dividend policy.•

To actively manage the cash component of the portfolio and return excess cash to investors as soon as practical.•

The Manager will implement a disciplined investment process that identifi es, 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:

Australian dollar denominated corporate bonds issued by established Australian companies, foreign corporations and their • Australian subsidiaries.

Credit rating of “BBB-” or higher on all underlying corporate bonds.•

Maturity date no later than 31 December 2015. •

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 purpose of this Prospectus, the Manager and the Company consider that corporate bonds with a BBB- or higher grading are “Investment Grade”. See Section 2.4 for more details.

Investments that may be made by the Manager are limited to the following:

a) cash; and

b) Securities, including, specifi cally corporate debt securities; and

c) any other fi nancial products with which the Manager may use in the management of the Company’s Portfolio in accordance with the Manager’s AFS Licence, or where the Manager itself acts as authorised representative of a third party holding an AFS Licence, that third party’s AFS Licence.

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.

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 may take up to a year to invest the cash raised. It will focus on new corporate bonds that are issued in the market over the coming year as well as existing secondary market issues.

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 portfolio of Australian Masters Corporate Bond Fund No 4 Limited is presented below. Australian Masters Corporate Bond Fund No 4 Limited has a similar investment mandate to that proposed for the Company, however bonds in the portfolio of the Company may have a maturity date up to 31 December 2015 compared with 31 December 2012 for Australian Masters Corporate Bond Fund No 4 Limited. The table below sets out the portfolio of bonds acquired by Australian Masters Corporate Bond Fund No 4 Limited over the period 17 March 2009 to 29 April 2009. The yield to maturity at which the bonds were purchased is shown in column A.

ISSUERMATURITY DATE

OF BONDS

A. YIELD TO MATURITY WHEN

PURCHASED

B. CURRENT INDICATIVE YIELD

TO MATURITY

Stockland 16/06/2011 8.5% 7.6%

Energy Partnership Gas 29/07/2011 8.7% 8.0%

HSBC Finance 22/09/2011 9.4% 8.9%

Sydney Airport Finance 21/11/2011 8.3% 8.6%

AMEX 05/12/2011 8.8% 7.6%

Aust Prime Property Fund 30/07/2012 8.3% 8.6%

Holcim Finance (Australia) Pty Ltd

07/08/2012 8.6% 7.7%

Energy Partnership Gas* 29/07/2011 10.2% 8.3%

HSBC Finance Corporation*

22/09/2011 12.7% 8.3%

AMEX* 05/12/2011 9.8% 8.6%

Citigroup* 13/02/2012 10.3% 8.4%

Merrill Lynch* 16/02/2012 9.7% 8.5%

Broadcast Australia Finance*

09/07/2012 10.0% 8.8%

Morgan Stanley* 08/08/2012 9.5% 9.0%

GE Capital* 17/08/2012 9.1% 8.7%

GE Capital* 03/12/2012 9.2% 9.2%

* Denotes bond is a fl oating rate note. All other bonds are fi xed rate bonds.


The yields in column B generally refl ect the yields to maturity of the above bonds available for purchase on the OTC Market as at the date of this Prospectus. However volatility in the fi nancial markets remains high. The above yields are illustrative only and not a forecast as to potential returns on the Portfolio. Due to the recent turbulence in fi nancial markets, the yield to maturity offered by a diversifi ed portfolio of Australian dollar denominated corporate bonds has experienced signifi cant volatility with a substantial decrease in recent months after an extended period of relatively high rates.

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 fi nal yield received by investors due to timing differences, the payment of foreign withholding tax which may reduce the Company’s ability to pay fully franked dividends 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 will be achieved when the Manager is investing the Portfolio or that suffi cient 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 fl ow, maturity profi le, 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 regularly on 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 specifi c 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:

Diversifi cation limits – the Company must have a portfolio of underlying corporate bonds issued by at least 5 different • companies once fully invested.

Bond criteria – underlying corporate bonds must meet all of the key investment criteria set out in Section 4.3.•

Portfolio construction limits – no more than 25% exposure to any single company with A rating or above and no more than • 15% exposure to any single company with a BBB or a BBB- rating.

Cash management limits – the Manager is to place all cash in the most appropriate short dated term deposit or at call • account and shall return excess cash to Shareholders during the next dividend payment period. Suffi cient 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 six months, at its discretion. As permitted in the Company’s investment strategy, the Manager may take up to a year to invest cash raised. This may impact on the returns of the Company in its fi rst year.

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 costs incurred by the Company and the Manager.) The Company will adhere to relevant laws and accounting standards when determining profi ts available for distribution.

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 fi nal repayment amount from the longest dated underlying corporate bond and the return of the bulk of those proceeds to Shareholders by way of the fi nal capital return, the Board will seek to voluntarily wind-up the Company. The Company will retain suffi cient 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 benefi cial 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.

4.12 | WORKED EXAMPLE

The following is an example only of potential returns to investors. It is not intended to be defi nitive nor is it a forecast of returns for investors. The Company anticipates that it will pay expenses for the ordinary operation of the Company (assuming there are no extraordinary actions, such as litigation involving the Company or the holding of extraordinary general meetings), of approximately $43,000 per annum, representing 43 cents per Share if the minimum subscription of 100,000 Shares is raised under the Offer. This cost, per Share, will reduce as the amount raised under the Offer increases.


The Company will also pay an annual management fee of 0.45% (excluding GST) of the value of the Company’s Portfolio, equivalent to a maximum of 45 cents per Share, assuming there is no change to the value of the Portfolio. Further, the Company will initially pay to the Issue Manager a handling fee of 1% (excluding GST) of Application Monies provided with Application Forms bearing its stamp and a structuring fee of 0.25% (excluding GST) of the gross proceeds raised under this Prospectus. Assuming that a subscription of 100,000 Shares is achieved and that all Application Forms bear the Issue Manager’s stamp, the handling fee and the structuring fee are equivalent to a maximum of $1 and a maximum of 25 cents per Share respectively.


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 fl uctuation 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 fi xed 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, fi nancial 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 denominated in Australian dollars and issued by Australian companies, foreign corporations and their Australian subsidiaries.

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 refl ect 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 signifi cant risks associated with the Company. There may be other risks associated with the Company.

A) MARKET RISK

Investment returns are infl uenced by market factors. In particular, bond market prices have in recent times experienced wide fl uctuations, which in many cases may refl ect a diverse range of non-entity specifi c infl uences 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 maintenance of the Company’s investments.

B) 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, fi nancial 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 refi nance 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 fi nancial conditions and adverse fi nancial and/or operating performance of the issuer and its related parties. Any such default will have an adverse impact on the fi nancial performance of the Company.

C) POTENTIAL DELAY IN INVESTING CASH RAISED

The Company’s investment strategy includes the ability of the Manager to hold cash or delay investments to take advantage of new corporate bond issues, with the risk being that there may not be any attractive issues to invest in immediately or shortly after raising of the cash under this Prospectus. This may impact on returns to the Company in the fi rst year. If the capital raised is not invested in bonds immediately, the Manager expects that the yield that may be achieved by investing the cash at call with an Australian ADI will be signifi cantly below the expected yield for investments in bonds.

D) 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 defi ciency 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 returns on an investment in the Company are likely to decrease and the Company may be wound-up earlier than anticipated under this Prospectus.

E) 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 fi xed 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.

F) FAILURE TO RETURN CAPITAL

As the Company does not propose to seek listing on ASX or another fi nancial 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 of 50% or more 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.

G) 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 global and/or 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.

H) PERFORMANCE OF OTHER ASSET CLASSES

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

I) SIZE AND PORTFOLIO

The size of the Portfolio will affect the risk profi le of the Portfolio. The Company may not be able to diversify its investments and so manage its risks as effi ciently 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 diversifi cation of investments and other factors.

J) RELIANCE ON MANAGER

A few key people are being relied upon to maintain the operations of the Manager. There can be no guarantee as to their continuity of service. However, replacement of suitably skilled and experienced personnel should not prove too diffi cult should the need arise.


K) 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.

L) 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 fi nance 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 fi nancial position and creditworthiness of these entities. Defaults may have a signifi cant effect on the Company.

M) DIFFERENT 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 diffi cult 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.

N) 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 diffi cult 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 Australia-based entities.

O) 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 or the guarantor’s fi nancial position may impact on the credit rating of that issue. This in turn may affect the value of the corporate bonds.

P) RESTRUCTURING RISK

Some issuers or parent companies of issuers in whose bonds the Company invests may undergo corporate restructurings that could have a negative impact on the ability of the issuing entity to service its bond obligations.

Q) NO OPERATING OR PERFORMANCE HISTORY OF THE COMPANY

The Company has no fi nancial, 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.

R) LIMITED OPERATING OR PERFORMANCE HISTORY OF THE MANAGER

While the Manager has extensive experience in providing fi nancial advice, stock brokering services, corporate fi nance and mortgage and investment services, the Manager has a more limited experience in managing a corporate bond portfolio.

S) 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.

T) 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.

U) INDUSTRY RISK

There are a number of industry risk factors that may affect 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, fi nancial advice to over 3,000 self-managed super fund clients with a combined superannuation asset base in excess of $2.5 billion. The Manager is in the top fi ve companies in Australia in terms of the number of self-managed super funds under administration. The Manager provides fi nancial advisory services, has a full service stock broking division, a corporate fi nance 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, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 Limited. These companies completed issues of shares to raise approximately $54 million in May 2008, approximately $35 million in September 2008, approximately $40 million in February 2009 and approximately $72 million in June 2009 respectively. The investment mandates of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 Limited are broadly consistent with that of the Manager for the Company although the maximum term of bonds for the portfolios for the other companies differ. 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, Australian Masters Corporate Bond Fund No 2 Limited and Australian Masters Corporate Bond Fund No 3 Limited, market conditions for fi nancial 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, 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. Further, in view of the limited time and different market conditions since acquisition of the portfolio for Australian Masters Corporate Bond Fund No 4 Limited, the Manager does not consider the performance data of that particular portfolio to date to be relevant to the decision of an investor whether to participate in the Offer under this Prospectus.

The following is given for informational purposes only and is not a forecast as to the potential performance of the Company:

The average actual yield to maturity for bonds purchased for the portfolio of Australian Masters Corporate Bond Fund No 1 • Limited was 9.64% at the time of purchase of the investments comprising the portfolio. Australian Masters Corporate Bond Fund No 1 Limited has paid gross dividends of $7.60 (including a $2.28 franking credit) per Share since incorporation.

The average actual yield to maturity for bonds purchased for the portfolio of Australian Masters Corporate Bond Fund No 2 • Limited was 8.45% at the time of purchase of the investments comprising the portfolio. Australian Masters Corporate Bond Fund No 2 Limited has paid gross dividends of $5.03 (including a $1.51 franking credit) per Share since incorporation.

The average actual yield to maturity for bonds purchased for the portfolio of Australian Masters Corporate Bond Fund No 3 • Limited was 11.05% at the time of purchase of the investments comprising the portfolio. Australian Masters Corporate Bond Fund No 3 Limited has paid a gross dividend of $2.83 (including $0.85 franking credit) per Share since incorporation.

The average actual yield to maturity for bonds purchased for the portfolio of Australian Masters Corporate Bond Fund No 4 • Limited was 9.40% at the time of purchase of the investments comprising the portfolio. Australian Masters Corporate Bond Fund No 4 Limited has not yet paid any dividends as shares were allotted recently in June 2009. See Section 4.4 for details of the current portfolio of Australian Masters Corporate Bond Fund No 4 Limited.

Past performance is not a guarantee of future performance.

There have been no defaults to date by any of the issuers of corporate bonds comprising these companies’ portfolios. At the time that these investments were made, market conditions differed from current conditions. Interest rates have fallen since 2008 as globally, central banks have been aggressively cutting interest rates. In contrast, credit spreads have generally remained wide by historical standards, refl ecting the limited availability of debt fi nance.

Investors should note that the average actual yields to maturity of the bonds in the portfolios for Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 Limited are illustrative only and not a forecast as to potential returns on the Portfolio of the Company.


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 as at the date of this Prospectus. The company has a market capitalisation on ASX of $81 million.

6.3 | ROLE OF THE MANAGER

The key personnel of the Manager with primary 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:

Construct the initial portfolio of underlying corporate bonds in accordance with Section 4 of this Prospectus.•

Review information, research and analysis compiled by the Manager with respect to the ongoing monitoring of the • underlying portfolio and, if appropriate, make required adjustments.

Ensure the cash component of portfolio is managed and in the most appropriate account.•

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 fi rst 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 fi nancial 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 refl ect the actual position and balances as at the date of this Prospectus or at the completion of the Issue.

ASSETS / LIABILITIES

MINIMUM SUBSCRIPTION OF

100,000 SHARES ISSUED ($)

MAXIMUM SUBSCRIPTION OF


WITH OVER SUBSCRIPTION

TOTAL OF 1,500,000 SHARES

ISSUED ($)

ASSETS

Cash (1) 9,736,138 24,340,343 146,042,052

Deferred Tax Asset 37,909 94,772 568,635

LIABILITIES - - -

NET ASSETS / EQUITY 9,774,047 24,435,115 146,610,687

NAV PER SHARE 97.74 97.74 97.74

Note: Numbers may not add due to rounding(1) Cash raised assumes that the Company issues Shares equally in all 4 tranches, no interest income is earned during the Offer period and no

management fees are paid during the Offer period.

The NAV per Share is sensitive to the number of Shares issued in each tranche. The table above assumes that the Company issues an equal number of Shares in all 4 tranches. See Section 7.4 for a sensitivity analysis.


7.2 | CASH

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

MINIMUM SUBSCRIPTION OF


MAXIMUM SUBSCRIPTION OF


WITH OVER SUBSCRIPTION

TOTAL OF 1,500,000 SHARES ISSUED ($)

Initial Subscriber Shares – at $1 each 1 1 1

Proceeds of Prospectus Offer at:

Tranche 1 - $97.50 per Share 2,437,500 6,093,750 36,562,500



Tranche 4 - $100 per Share 2,500,000 6,250,000 37,500,000

Total 9,862,501 24,656,251 147,937,501

Costs of the Offer 126,363 315,908 1,895,449

Estimated Net Cash Position 9,736,138 24,340,343 146,042,052

Note: Numbers may not add due to rounding

7.3 | ASSUMPTIONS

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

Application of the proposed accounting policies and notes to the accounts set out in Section 7.5;•

In the pro forma balance sheet entitled “Minimum Subscription of 100,000 shares issued”, reference is made to subscription • of 100,000 Shares in 4 equal tranches of 25,000 ordinary shares per tranche by Applicants under this Prospectus;

In the pro forma balance sheet entitled “Maximum Subscription of 250,000 shares issued”, reference is made to subscription • of 250,000 Shares in 4 equal tranches of 62,500 ordinary shares per tranche by Applicants under this Prospectus;

In the pro forma balance sheet entitled “With Over Subscription Total of 1,500,000 shares issued”, reference is made to • subscription of 1,500,000 Shares in 4 equal tranches of 375,000 ordinary shares per tranche by Applicants under this Prospectus;

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);

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 benefi ts of the tax deduction can be applied;

Any interest earned by the Company during the offer period has not been taken into account; and•

The fi rst management fee is due on the completion of each tranche. We have not included the management fees payable in • the pro-forma balance sheet due to the following:

- Management fees relate to cost of managing the business and is not related to the offer of shares; and

- Management fees for all 4 tranches are not payable until within 10 days of the date of fi nal allotment of shares upon closing of the Offer or such later date that the Company has received suffi cient earnings from its Portfolio to make such payment.


7.4 | SENSITIVITY ANALYSIS

The NAV per Share is sensitive to the number of Shares issued in each tranche period. The table below provides an indication of the pro forma NAV per Share under certain hypothetical scenarios. It should be noted that the scenarios considered below are not meant to be indicative of the full range of scenarios that can occur. In addition, it is possible that more than one variable may move concurrently, giving rise to cumulative or offsetting effects, so care should be taken in interpreting this information.

SCENARIOS

COMPANY ISSUES:

REVISED PRO FORMA COMPANY NAV PER

SHARE ($)

DIFFERENCE TO PRO FORMA COMPANY NAV

PER SHARE ($)

• 70% of total Shares issued during tranche 1; and

• 10% of total Shares issued during tranches 2, 3 & 4.97.07 (0.67)

• 40% of total Shares issued during tranche 1;

• 25% of total Shares issued during both tranches 2 & 3; and

• 10% of total Shares issued during tranche 4.

97.37 (0.37)

• 50% of total Shares issued during tranche 1;


• No Shares are issued during tranche 4.

97.12 (0.62)

• No Shares are issued during tranche 1;


• 50% of total Shares issued during tranche 4.

98.36 0.62

7.5 | PROPOSED ACCOUNTING POLICIES AND NOTES TO ACCOUNTS

A summary of signifi cant accounting policies which have been adopted in the preparation of the pro forma fi nancial information set out in Section 7.1 or which will be adopted and applied in preparation of the fi nancial statements of the Company for the period ended 30 June 2010 and subsequent years is set out as follows:

BASIS OF PREPARATION

The fi nancial report is a general purpose fi nancial 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 modifi ed for inclusion in the Prospectus).

The fi nancial report covers Australian Masters Corporate Bond Fund No 5 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 fi nancial report containing relevant and reliable information about transactions, events and conditions to which they apply.

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


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

ACCOUNTING POLICIES

A) FINANCIAL INSTRUMENTS

Recognition and Initial Measurement

Financial instruments, incorporating fi nancial assets and fi nancial liabilities, are recognised when the Company becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for fi nancial 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 classifi ed as at fair value through profi t and loss.

Derecognition

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

Classifi cation and subsequent measurement: Held-to-maturity investments

These investments have fi xed maturities, and it is the 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 arm’s 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 fi nancial 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 profi t 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 fi nancial 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 profi t 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 refl ects 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 profi t will be available against which the benefi ts 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 signifi cant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

D) SHARE CAPITAL

Ordinary shares are classifi ed 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 profi t 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 Offi ce. In these circumstances the irrecoverable 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 fl ows are presented in the cash fl ow statement on a gross basis, except for the GST component of investing and fi nancing activities, which are disclosed as operating cash fl ows.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The Directors evaluate estimates and judgments incorporated into the fi nancial 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.

7.6 | 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 4.1.


8. DIRECTORS & CORPORATE GOVERNANCE

8.1 | MAXIMILIAN WALSH - CHAIRMANMAXIMILIAN WALSH 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, Australian Masters Corporate Bond Fund No 3 Limited, Australian Masters Corporate Bond Fund No 4 Limited, Asian Masters Fund Limited, Global Resource Masters Fund Limited and Deputy Chairman of Dixon Advisory & Superannuation Services Limited.

Max will be the Chairman of the Board. It is expected that Board meetings will initially be held monthly 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 MACLACHLANALEX MACLACHLAN, BA (CORNELL), MBA (WHARTON); NON EXECUTIVE DIRECTOR

Alex MacLachlan is Managing Director, Funds Management of Dixon Advisory & Superannuation Services Limited and Managing Director of Global Resource Masters Fund Limited. He is also a director of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 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 monthly 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 BROWNCHRIS BROWN, BCHEM ENG HONS (SYD UNI), BCOM (SYD UNI); NON EXECUTIVE DIRECTOR

Chris Brown is Managing Director, Strategy of Dixon Advisory & Superannuation Services Limited. He is also a director of Australian Masters Corporate Bond Fund No 1 Limited, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 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 fi nancial 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 mergers & acquisitions along with capital markets 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 honours and a Bachelor of Commerce both from Sydney University.

Chris will attend Board meetings. It is expected that Board meetings will initially be held monthly 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.


8.4 | DARYL DIXONDARYL DIXON MA (HONS) (CAMBRIDGE), BA (HONS) (UQ); NON EXECUTIVE DIRECTOR

Daryl 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 fi nancial expert, particularly in the area of superannuation.

Daryl is Executive Chairman of Dixon Advisory & Superannuation Services Limited a fi nancial advisory fi rm 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, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 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 monthly and, after establishment of the Portfolio, at least quarterly and more frequently when required. It is anticipated that board meetings 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 DIXONALAN DIXON BCOM (ANU) CA; NON EXECUTIVE DIRECTOR

Alan has been providing fi nancial 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 Limited. Dixon Advisory & Superannuation Services Limited provides a complete suite of fi nancial services, employs over 240 people and has over $2.5 billion of funds under administration across over 3,000 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, Australian Masters Corporate Bond Fund No 2 Limited, Australian Masters Corporate Bond Fund No 3 Limited and Australian Masters Corporate Bond Fund No 4 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 monthly 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.


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:

Be entitled to obtain independent professional or other advice at the cost of the Company, unless the Board • determines otherwise.

Be entitled to obtain such resources and information from the Company including direct access to employees of and • advisers to the Company as they might require.

Operate in accordance with terms of reference established by the Board. •


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 benefi t of undertakings given by the issuer for the benefi t of bond holders. Such a trust deed includes undertakings as to the conduct of business of the issuer and fi nancial 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 benefi t of a prospectus or other detailed disclosure document regulated by the Corporations Act and will not receive the benefi t of an approved trust deed in a form otherwise required by the Corporations Act.

9.2 | TRADING ON THE OTC MARKET

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

However, an OTC Market does not provide the benefi ts available to a regulated fi nancial market such as the ASX. In particular:

Issuers of corporate bonds to wholesale investors are not subject to any continuous disclosure or periodic reporting • obligations 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 fi nancial and operating information regarding the issuer. However, there is no general statutory obligations to provide information in relation to such corporate bonds.

Unlike the ASX and other licensed fi nancial markets, there is no formal reporting procedure under which the price and • volume 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 fi nancial market operator such as the ASX.

OTC trading of wholesale corporate bonds is not subject to a market regulation imposed under the Corporations Act. Unlike • the ASX, there is no specifi c 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 (S&P) credit rating system to assess whether an investment may be made in a corporate bond without approval from the Company.

The Manager and the Company do not endorse any rating issued by S&P and will undertake their own assessment of the issue of a corporate bond and the suitability of the corporate bond for investment.

Debt security credit rating is a current opinion of the creditworthiness of an obligor with respect to a specifi c fi nancial obligation, a specifi c class of fi nancial obligations, or a specifi c fi nancial 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 fi nancial 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.

9. FURTHER INFORMATION ABOUT CORPORATE BONDS


The issue credit rating is not a recommendation to purchase, sell, or hold a fi nancial 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 fi nancial 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 fi nancial 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 fi nancial 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 fi nancial commitment on the obligation.

BB, B, CCC, CC, AND C

Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having signifi cant 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, fi nancial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its fi nancial 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 fi nancial commitment on the obligation. Adverse business, fi nancial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its fi nancial commitment on the obligation.

CCC

An obligation rated ‘CCC’ is currently vulnerable to non-payment, and is dependent upon favourable business, fi nancial, and economic conditions for the obligor to meet its fi nancial commitment on the obligation. In the event of adverse business, fi nancial, or economic conditions, the obligor is not likely to have the capacity to meet its fi nancial 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 fi led 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 fi ling of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardised.

PLUS (+) OR MINUS (-)

The ratings from ‘AA’ to ‘CCC’ may be modifi ed 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 insuffi cient 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 adviser about their specifi c taxation circumstances.

10.1 | COMPANY TAXATION

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

FOREIGN SOURCE INCOME

Where the Company derives income from foreign sources, that income may be subject to foreign withholding tax under the relevant tax legislation of the country where the income is sourced. Where foreign withholding tax has been imposed on the foreign source income, the Australian taxation rules may allow the Company a foreign tax credit for the withholding tax already paid. Any foreign tax credits the Company is allowed may be applied to reduce the tax payable by the company under the Australian income tax laws. Where the tax payable under the Australian income tax laws is reduced, it may reduce the Company’s ability to pay fully franked dividends to the shareholders. Therefore, the Company may have to pay some unfranked dividends to shareholders, and it is possible that a portion of foreign source income will effectively be taxed twice (once at the foreign source and again in the hands of shareholders).

TAXATION OF FINANCIAL ARRANGEMENTS (TOFA) RULES

New rules have been introduced which set out the method by which gains and losses from fi nancial arrangements are brought to account for tax purposes.

Whilst the new TOFA rules do not apply to a fi nancial arrangement that is constituted by a share in a company held by an individual investor in these circumstances, the new TOFA rules may apply in respect of the company’s investment in the various securities that the company is proposing to acquire. This may affect the calculation of the taxable income of the company.

GOODS AND SERVICES TAX

The company is registered for GST. The issue and withdrawal of shares in the company and the receipt of dividends will not be subject to GST. GST is payable on some ongoing expenses, however the company may be able to claim input tax credits or reduced input tax credits of at least 75% of the GST paid, depending on the precise nature of the expenses.

The Government is currently reviewing the provisions in the GST legislation that deal with the application of GST to fi nancial supplies, such as securities. This may affect the current GST treatment, particularly the level of input tax credits that can be claimed.

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 defi ned 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 Offi ce 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.

STAMP DUTY

The issue or withdrawal of shares should not attract any stamp duty. Stamp duty may be payable on the transfer of shares, however, investors should confi rm the stamp duty consequences of transferring shares with their tax advisor.

FINANCIAL SERVICES GUIDE 6 October 2009

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 fi nancial services to wholesale and retail clients as an authorised representative of the Licence Holder:

• Financial product advice in relation to securities, interests in managed investment schemes, government debentures, stocks or bonds, deposit and payment products, life products, retirement savings accounts and superannuation (collectively “Authorised Financial Products”); and

• Applying for, varying or disposing of a fi nancial product on behalf of another person in respect of Authorised Financial Products.

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. 5 Limited (the “Entity”).

3. General Financial Product Advice

The fi nancial product advice provided in our Report is known as “general advice” because it does not take into account your personal objectives, fi nancial 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, fi nancial situation or needs. You may wish to obtain personal fi nancial 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 Ltd, the Manager. Our fee for the Report is based on a time cost or fi xed 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 benefi ts 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 benefi ts to any parties or person for referring customers to us in connection 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 fi nancial interest in the outcome of this share issue of Australian Masters Corporate Bond Fund No. 5 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 $13,000 will be received. No pecuniary or other benefi t, 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 fi rm 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 Offi cer 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.

6 October 2009

The DirectorsAustralian Masters Corporate Bond Fund No. 5 LimitedLevel 15, 100 Pacifi c HighwayNorth 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 6 October 2009 relating to the offer by Australian Masters Corporate Bond Fund No. 5 Limited ACN 139 247 564 (“the Company”) of up to 250,000 fully paid ordinary shares at an offer price of $97.50 per share during Tranche 1, $98.17 per share during Tranche 2, $98.83 per share during Tranche 3 and $100 per share during Tranche 4. Further, the Company has established a provision for acceptance of oversubscription for a further 1,250,000 fully paid ordinary shares at various offer prices stated above.

The minimum shares offered under this Prospectus are 100,000 ordinary shares which would raise $9,750,000 based on the offer price of $97.50 per share during Tranche 1. If this Minimum number of 100,000 ordinary shares are not subscribed to within 4 months from the Opening Date, the Company will repay all money received from Applicants within 7 days from the completion of 4 months.

The Offer is not underwritten.

Expressions defi ned in the Prospectus have the same meaning in this Report.

BACKGROUND

The Company was incorporated in Australia as a public company on 3 September 2009 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 an opportunity to invest in the Australian dollar denominated corporate bond market.

The investments of the Company will be managed by Dixon Advisory & Superannuation Services Ltd (“the Manager”). The Manager has been in existence since December 2002 and provides a comprehensive administration service and where requested fi nancial advice to over 3,000 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:

• To provide to investors a high rate of income and consistent fully franked dividends and the potential to receive capital returns throughout the life of the Company;

• To minimise default risk by investing in Australian dollar denominated corporate bonds issued by quality Australian companies, foreign companies or their Australian subsidiaries; and

• To minimise costs of the Company.

11. INVESTIGATING ACCOUNTANT’S REPORT

The Company intends to invest the proceeds of the Prospectus offering in a diversifi ed portfolio of underlying investment grade corporate bonds, as discussed in Section 2 of the Prospectus.

SCOPE

This Report deals with the prospective pro-forma fi nancial information included in Section 7 of the Prospectus.

The pro-forma Balance Sheets have been prepared to illustrate the fi nancial position of the Company on completion of the issue and have been prepared on the basis of the assumptions, notes and accounting policies as discussed 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 fi nancial 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 fi nancial 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 fi nancial 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 2405 “Review of Historical Financial Information Other than a Financial Report”. 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 based 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 Accounting Interpretations) and other authoritative pronouncements of the Australian Accounting Standards Board, and the accounting policies adopted and summarised in Section 7.5 of the Prospectus; 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 signifi cant matters that might be identifi ed 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 fi nancial information has not been properly prepared so as to present fairly, in all material respects, the pro-forma fi nancial position of the Company;

b. Methodology, assumptions and material accounting policies adopted and summarised at Sections 7.3 and 7.5 of the Prospectus do not form a reasonable basis for the pro-forma fi nancial 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 our 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 fi nancial interest in the outcome of this share issue of Australian Masters Corporate Bond Fund No. 5 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 $13,000 will be received. No pecuniary or other benefi t, 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 Sydney Corporate Finance Pty Limited, Moore Stephens Sydney Pty Limited and a partner of Moore Stephens Sydney, Chartered Accountants. Mr Whiddett is a fellow 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 LTD

SCOTT WHIDDETTDirector


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 fi nd 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 fi rst obtaining the approval of the Company.

Investments that may be made by the Manager are limited to the following:

(a) cash; and

(b) Securities, including, specifi cally corporate debt securities; and

(c) any other fi nancial products with which the Manager may use in the management of the Company’s Portfolio in accordance with the Manager’s AFS Licence, or where the Manager itself acts as authorised representative of a third party holding an AFS Licence, that third party’s AFS Licence.

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.

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 benefi t of the Manager) a Management Fee equivalent to:

12. MATERIAL CONTRACTS


(i) in respect of the period from the Commencement Date to 30 June 2010, 0.45% per annum of the gross proceeds raised under this Prospectus (including any supplementary prospectus) as at the relevant allotment date for each tranche and calculated on a pro rata basis. By way of example, if gross proceeds were:

(A) $10,000,000 for tranche 1 as at the Commencement Date and the Commencement Date was 1 January 2010, the Management Fee for the period from the Commencement Date to 30 June 2010 would be $22,192; and

(B) a further $10,000,000 for tranche 2 on the tranche 2 allotment date of 1 February 2010, the Management Fee for the period from the tranche 2 allotment date to 30 June 2010 would be approximately an additional $18,370; and

(C) a further $10,000,000 for tranche 3 on the tranche 3 allotment date of 1 March 2010, the Management Fee for the period from the tranche 3 allotment date to 30 June 2010 would be approximately $14,918; and

(D) a further $10,000,000 for tranche 4 on the tranche 4 allotment date of 1 April 2010, the Management Fee for the period from the tranche 4 allotment date to 30 June 2010 would be approximately $11,096.

(ii) in respect of the balance of the term of the Management Agreement, 0.45% 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 the date of fi nal allotment of shares upon closing of the Offer or such later date that the Company has received suffi cient earnings from its Portfolio to make such payment.

In respect of the period from 1 July 2010 to 30 June 2011, the amount payable under (ii) is payable by the Company to the Manager in advance within 10 Business Days of 30 June 2010 or such later date that the Company has received suffi cient earnings from its Portfolio to make such payment. In respect of the balance of the term of the Management Agreement, the amount payable under (ii) is payable by the Company to the Manager in advance within 10 Business Days of each 30 June.

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, fi nancial 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;

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

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

(j) all accounting services, taxation advice and audit costs of the Company whether or not in relation to the Portfolio;

(k) costs associated with maintaining a share register; and

(l) any software licensing or software subscription fees in connection with risk monitoring and investment research specifi cally in relation to the Portfolio by the Manager approved by the Board.

TERM

The Management Agreement is for an initial period (Initial Term) commencing on the Commencement Date and expiring on 31 March 2016, 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 fi rst 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 notifi ed 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.

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 offi cers, employees or agents acting under the Management Agreement or on account of any bona fi de investment decision made by the Manager or its offi cers 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 offi cers 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 offi cers 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:

preparation and lodgement of the Prospectus and obtaining all advisory services including legal and accounting services;•

initial share registry fees;•

typesetting and graphic design; 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; 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 date of the fi nal allotment 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 offi cer 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 offi cers’ policy of insurance for the period that he or she is a Director and for a period of 7 years after the offi cer ceases to be a Director.


13.1 | INCORPORATION

The Company was incorporated on 3 September 2009.

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 offi ce hours at the registered offi ce 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 fi nancial 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. ADDITIONAL INFORMATION


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 0.45% 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 Issue Manager will receive a one-off Structuring Fee of 0.25% 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% 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 using sample fi gures for the amount of capital raised under the Offer:

SHARES ISSUEDGROSS

PROCEEDS*STRUCTURING FEE (EXCLUDING GST)

HANDLING FEE(EXCLUDING GST)

100,000 $9,862,500 $27,253 $101,091

250,000 $24,656,250 $63,182 $252,727

1,500,000 $147,937,500 $379,090 $1,516,359

* Assuming that the Company issues Shares equally in all 4 tranches.

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.

SHARES ISSUEDASIC FEES (GST FREE)

LEGAL AND ACCOUNTING FEES(EXCLUDING GST)

OTHER COSTS(EXCLUDING GST)

100,000

$2,010 $33,000

$50,000

250,000 $52,000

1,500,000 $98,000

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 signifi cant effect on the fi nancial 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 specifi cally 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 specifi cally 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 specifi cally 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 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 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 Limited has not been involved in the preparation of any part of this Prospectus and specifi cally 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 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 specifi cally 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 fi rm 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 $20,000 (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 fi nancial matters. In respect of this work, the Manager estimates it will pay up to $13,000 (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 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 fi rms 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 $6,750 (excluding GST and disbursements) to Registries Limited.


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

ADI an Australian deposit taking institution

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 the issue price for each Share, dependent on the tranche period in which an Application is received – see Section 1.1 of this Prospectus

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

ASIC Australian Securities & Investments Commission

ASX ASX Limited

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

CLOSING DATE 4 February 2010

COMPANY Australian Masters Corporate Bond Fund No 5 Limited (ACN 139 247 564)

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 MANAGER Dixon Advisory & Superannuation Services Limited (ACN 103 071 665) (AFS Licence Number: 231143)

ISSUE MANAGER AGREEMENT the issue manager agreement between the Company and the Issue Manager dated on or about the date of this Prospectus

MANAGEMENT AGREEMENT the management agreement between the Company and the Manager dated on or about the date of this Prospectus

MANAGER OR DIXON ADVISORY Dixon Advisory & Superannuation Services Limited (ACN 103 071 665) (AFS Licence Number: 231143)

MER Management Expense Ratio. See Section 3.5 of this Prospectus

MINIMUM SUBSCRIPTION a minimum subscription of 100,000 Shares

OFFER the offer of up to 250,000 Shares (with the ability to receive oversubscriptions for a further 1,250,000 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 13 October 2009

OTC MARKET see Section 9.2 of this Prospectus

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

PROSPECTUS this prospectus dated 6 October 2009 as modifi ed or varied by any supplementary prospectus made by the Company and lodged with ASIC from time to time

14. GLOSSARY


SECURITIES has the same meaning as in Section 92(3) 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

TRANCHE 1 PERIOD the period from the Opening Date until 5pm (Sydney time) on 22 October 2009

TRANCHE 2 PERIOD the period from 5pm (Sydney time) on 22 October 2009 to 5pm (Sydney time) on 19 November 2009

TRANCHE 3 PERIOD the period from 5pm (Sydney time) on 19 November 2009 to 5pm (Sydney time) on 17 December 2009

TRANCHE 4 PERIOD the period from 5pm (Sydney time) on 17 December 2009 to the Closing Date

APPLICATION FORMAUSTRALIAN MASTERS CORPORATE BOND FUND No 5 LIMITED

ATTACH CHEQUE/S HERE

ACN 139 247 564

Fill out this Application Form if you want to apply for shares in Australian Masters Corporate Bond Fund No 5 Limited.

• Please read the prospectus dated 6 October 2009.

• Follow the instructions to complete this Application Form (see reverse).

• Print clearly in capital letters using black or blue pen.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 5 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.

C Total Amount Payable*B Price

$$@ per Share =

D 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

E Postal Address

Number/Street Name

Suburb/Town State Postcode

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

Applicant 1 Applicant 2

Applicant 3 Exemption Category

G 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$

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

J Shareholder CommunicationsAll correspondence will be sent electronically unless legally required otherwise or unless the box below is ticked.

Printed copy of shareholder communications required

K Annual ReportsAnnual 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 Limited? YES NO

Tranche Open Close Price ($)

T1 13 Oct 2009 22 Oct 2009 5PM 97.50

T2 22 Oct 2009 5PM 19 Nov 2009 5PM 98.17

T3 19 Nov 2009 5PM 17 Dec 2009 5PM 98.83

T4 17 Dec 2009 5PM 04 Feb 2010 5PM 100.00

OFFER DATES (unless closed earlier or extended)

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 If applying for Shares insert the number of Shares for which you wish to subscribe at Item A (not less than 100.)

B The price is dependent on the date this Application Form is received by Dixon Advisory.

Tranche Open Close Price ($)

T1 13 Oct 2009 22 Oct 2009 5PM 97.50

T2 22 Oct 2009 5PM 19 Nov 2009 5PM 98.17

T3 19 Nov 2009 5PM 17 Dec 2009 5PM 98.83

T4 17 Dec 2009 5PM 04 Feb 2010 5PM 100.00

C Multiply A & B to calculate the total for Shares and enter the $ Amount at Item C.

D Write your full name. Initials are not acceptable for fi rst names.

E 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.

F Enter your Australian tax fi le 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.

G Complete cheque details as requested. Make your cheque payable to “Dixon Advisory Trust Account #7 AMCBF No5 Ltd” cross it and mark it “Not Negotiable”. Cheques must be made in Australian currency, and cheques must be drawn on an Australian Bank.

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

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

J & K

The Company encourages you to receive Shareholder correspondence and the Annual Report electronically. The benefi t to Shareholders are in the potential cost savings and the faster delivery of information. The benefi ts 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 Smith Pty Limited<J Smith Super Fund A/C>

John Smith Superannuation Fund

LODGEMENT

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

Australian Masters Corporate Bond Fund No 5 Limited Share Offer c/- Dixon Advisory

POSTAL

GPO Box 575 Canberra ACT 2601

HAND DELIVERED

Canberra: Level 1, 73 Northbourne Avenue, Canberra ACT 2601Sydney: Level 15, 100 Pacifi c Highway, North Sydney NSW 2060Melbourne: Level 2, 250 Victoria Parade, East Melbourne VIC 3002

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 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)

THIS PROSPECTUS

has been approved by unanimous resolution of the Directors of

AUSTRALIAN MASTERS CORPORATE BOND FUND No 5 LIMITED

Dated: 6 October 2009

Maximilian Walsh CHAIRMAN

Documents

PROSPECTUS - CORPORATE BOND FUNDThis Prospectus is issued by Australian Masters Corporate Bond Fund No 5 Limited (ACN 139 247 564) (Company) and is an invitation to apply for Shares