1. Self Managed Superannuation Fund (SMSF) Property Loans May 2013

2. Overview This presentation aims to provide: An overview of the legislation changes permitting Self Managed Superannuation Funds (‘SMSFs’) to borrow for the acquisition of investment property The requirements to be met by SMSFs seeking to enter into a gearing arrangements for the purpose of acquiring property as an investment class An overview of the St George Group’s product and servicing offerings to meet SMSFs investment and gearing needs

3. 3 Changes to Legislation permit SMSF’s to borrow In September 2007, the Australian Federal Government amended the Superannuation Industry Supervision Act (SIS Act) permitting Self Managed Super Funds (“SMSF) to pursue geared investment strategies and borrow in prescribed circumstances to purchase assets they would otherwise not be permitted to acquire. What has changed? Why? The changes to legislation enable: Accelerated growth in total assets held by SMSF’s in Australia Greater diversification of investments for improved performance Support Govt strategy to build a self supporting aging population SMSF benefits Enables diversification of investment strategy to include property acquisition Flexible repayment options supporting continued investment diversification Potential to accelerate wealth accumulation Potential to improve returns Gearing & Capital Gains Tax benefits may be realised

4. 4 The Borrowing Structure Trustee SMSF must be a SIS Act compliant SMSF permitted to enter in a gearing arrangement SMSF Trustee borrows for investment purposes only ‘Property Custodian’ Trust (“The Trust”) takes legal ownership of the property ‘Property Custodian’ Trust (“The Trust”) gives a Limited Recourse Mortgage over the property Servicing must be proven based on income derived by the SMSF alone ( Existing income+ proposed rent + annual member contributions) Key Points The SMSF Trustee, when expressly permitted to do so, borrows directly from the Bank. The Trust is a separate entity (registered company requirement is stipulated by St. George) which acts as a ‘property custodian’ and holds the legal title to the property being purchased until the loan is fully repaid by the SMSF. A Trust Arrangement Deed is required to specify the arrangement between the SMSF Trustee and and the Trust acting in the capacity of property custodian The Trust acts as security provider executing a limited recourse mortgage over the property being purchased ( or guarantee and mortgage) For commercial property purchases the Vendor may be a related party (e.g. related family company or an unrelated party) SIS Act prohibits the SMSF Trustee from acquiring residential property from a related party, therefore all residential property purchases must be from unrelated parties on commercial terms Income for servicing must be proven based on servicing capacity of the SMSF only. Lessor of the property will be the custodian.

5. 5 Purpose and Availability Available for: Property acquisition only for: Non specialised commercial properties Residential properties being houses, units, and villas/townhouses Specialised Commercial property (compliant with SIS Act and acceptable under bank policy)* Investment purposes only Loans secured by 1 st Registered Limited Recourse Mortgage only · Not Available for: Acquisition of: Owner occupied residential properties Vacant Land Property Construction Property refurbishment or renovation Low doc applications Refinances Guidelines* Funding for the purchase of specialised commercial property may be considered subject to specific conditions being met: The specialised property asset must be confirmed as complying with the SIS Act Security property is acceptable under standard bank credit policy Property is to be purchased on commercial terms for investment purposes only with formalised lease arrangements Loan term sought is equal to or less than the term of the lease Strictly excludes Aged Care facilities

6. 6 Available products & specifications Commercial Property Commercial Loan Variable (CLV) Commercial Loan Fixed (CLX ) The products are as per standard specifications with the following exceptions: FeesDifferentiated margins and establishment fees are applicable to accommodate the risk associated with limited recourse nature of SMSF lending; Loan AmountMinimum $250k – Maximum unlimited Loan TermMinimum 1 year, Maximum 15 years ( unregulated commercial loan – Commercial property only) Minimum 1 year Maximum 25 years (unregulated Business Loan – residential property only) LVR90% of normal LVR Eg.1. For non-specialised commercial property security the maximum LVR is 65% Eg.2. For permitted residential security the maximum LVR is 72% (90% x 80%) Security Structure/sRestrictions as to property types are imposed for both commercial and residential property and specific security structures are dictated. Servicing Assessment Servicing assessment must be limited to the SMSF existing and proposed incomes only (including member contributions up to ATO non concessional cap/s. Standard CCR policy applies – Guarantee from the Member required – full disclosure of income.) CovenantsSpecific SMSF lending covenants apply relating to commitment cover and LVR maintenance Documentation SMSF specific documentation is to be used in all cases. The documentation provides for limited recourse nature of SMSF lending and is compliant with the SIS Act requirements. Residential Property Business Loan Variable (BLV) Business Loan Fixed (BLX)

7. 7 Pricing  Investment plans preparation and advice  Property Valuation – Standard residential/commercial valuation rates apply  Preparation of loan and security documentation by an external Panel Solicitor  Structure compliance costs including: - vetting of Trust Deeds/Trust arrangements - confirmations of compliance with the SIS Act  Independent financial advice  Independent legal advice  Settlement Fee of $200 must be collected  Facility Drawdown fee of $100 to be collected on drawdown date  Early Repayment Administration Fee of $200 per repayment (for fixed rate loans)  Loan Transfer Fee (from/to Variable Rate from/to Fixed) $200 payable per transfer Additional costs payable by the borrower  Must include minimum establishment fee of $1500 or 0.25% whichever is greater  Standard service/line fees to apply  All external documentation costs to be met by the borrower  Govt registration and stamp duty costs apply

8. 8 Servicing & Repayment Options Assessing Servicing Capacity Servicing is to be assessed using the SMSF income sources only Strictly no third party incomes allowed ( potential to breach ATO requirements) Repayments for the facilities can be: Interest only terms up to 5 years are available Interest only, paid monthly in arrears Interest in advance for a maximum period on 12 months Principal & Interest paid monthly in arrears Variable – Additional repayments can be made throughout the term without penalty. Fixed – Additional repayments made during the fixed rate period may incur penalty charges SMSF IncomeAssessed on the last 3 years tax returns / financial reports Subject to confirmation of continuing returns on investments PLUS Rental Income80% of proposed rental income from the purchase property PLUS Member Contributions 80% of member contributions Subject to assessment of family business trading results/ financial reports and confirmation of capacity to continue to meet obligation of member contributions. Must be no more than the non- concessional CAP as dictated by the ATO Repayment Options  Capitalisation of interest is prohibited

9. 9 Security Acceptable Security Unacceptable Security Additional Security? Security is to be taken in terms of standard policy Strictly to include;  1 st registered limited recourse mortgage over commercial/residential property  Guarantee limited for facility supported by 1 st registered mortgage Guarantees are not mandatory. If Gtee is to be taken the Guarantors right of indemnity against the SMSF and SMSF Trustee and ‘property custodian’ are expressly excluded  2 nd or subsequent registered mortgages  Full recourse mortgage from SMSF or ‘Property Custodian’ Trust  Vacant Land  Company Title  Property under construction  Rural  Charge or M/- over any other assets owned by the SMSF  Specialised Residential Property including boarding houses, retirement village units  Specialised Commercial property excluded from Exceptions guidelines Whilst it is preferable to have stand alone security structures, additional security can be taken from related entities on the basis: The additional Security is not required to support servicing, i.e. Servicing is assessed excluding external related party income Any third party security should prudently be limited in recourse and the security provider should waive rights of indemnity and contribution. Specific policy requirements for taking third party security are met. Specific pre-conditions are included in relation to third party security provision.

10. Covenants and Conditions CovenantsMinimum Commitment Cover Ratio of 1.50 times Must maintain LVR requirements for the term of the facility Bank reserves the right to revalue security property (at the customer’s cost) at any time during the loan term Any breach will constitute an event of default Standard Pre- Conditions SMSF must provide a declaration of being compliant with the SIS Act SMSF must make declaration that gearing in property meets the SMSF investment strategy requirements SMSF Trust Deed must be vetted by panel solicitor Trust Arrangement Deed (SMSF & Security Custodian) must be vetted by panel solicitor Independent legal advice must be obtained by the borrower being the SMSF Trustee prior to assessment Independent legal advice must be obtained by guarantors including the Security Custodian Independent financial advice must be obtained by the borrower being the SMSF Trustee Independent financial advice must be obtained by guarantors including the Security Custodian Post Settlement Conditions Additional Security Pre-Conditions Annual certification of continued compliance with SIS Act SMSF must provide copy of Annual Financial Reports and Tax Returns in support of annual facility review. Pre-conditions are dictated by the entity providing additional security

11. 11 Where can I go for further information? BankSA Business Banking Centre Business Development Manager Barbara Jones M: 0412158187