1. “Charging interest through equity to make property investment cash flow positive.” PFG Cash Flow Manager Loans

2. Cyclical Market or Conveyor Belt?

3. The ideal investment property finance package would:  Match your mortgage payment monthly with your rent.  Capitalise any excess owing to your mortgage balance.  Allow you to keep your earned income for yourself/your family.  Effectively, share the risks of property investment with you - without sharing the rewards.

4. The 5 year hibernation strategy. FOR SALE $500K YOUR CASH YOUR LOAN YR 1 FOR SALE $735K $253K $482K YR 5 $100K $400K FOR SALE $500K $100K $400K + Assumes 8% per annum growth

5. Capitalising interest to build a portfolio faster  The interest rate of 9.70% is higher than the banks’ SVR. However the client’s cash flow position is improved by capitalising a portion of this rate. A 0.50% rate reduction applies after 4 years.  Add 0.45% to the applicable interest rate for Lo Doc loans, with the capitalised portion remaining the same. Year Interest Paid by Client Variable Interest Capitalised Fixed Schedule Total Applicable Interest Rate LVR after Capitalised Interest Settlement 80.00% End Yr 15.70%4.00%9.70%83.90% End Yr 26.70%3.00%9.70%86.50% End Yr 37.70%2.00%9.70%88.25% End Yr 48.70%1.00%9.70%89.30% End Yr 59.20%0.00%9.20%89.30%

6. Comparison With Pro Pack Cash Flow ManagerPro Pack Loan Monthly Difference Year Interest paid Mortgage Balance CFM Interest Mortgage Balance Interest @ 8.67% LVR Cash Flow Loan Settlement $406,300 $ 400,000 81.21% End Yr 15.70%$422,853 $23,588$ 400,000 $34,68083.90% $ 924 End Yr 26.70%$435,715$28.724$ 400,000$34,68086.50% $ 496 End Yr 37.70%$444,509 $33,859$ 400,000$34,68088.25% $ 68 End Yr 48.70%$448,975 $38,850$ 400,000$34,68089.30%-$ 347 End Yr 59.20%$448,975 $41,306$ 400,000$34,68089.30%-$ 552  Property value $500,000 @ 80% LVR. Initial loan $400,000.  1.57% of establishment costs capitalised onto Cash Flow Loan.

7. Rollover to stay positive longer Cash Flow Manager LoanPro Pack Loan Monthly Difference Year Interest Rate Mortgage Balance CFM Interest Mortgage Balance Interest @ 8.67% LVR Cash Flow Loan Settlement $406,300 $400,000 81.57% End Yr 15.70%$422,853$21,933$400,000$34,68078.31%$924 End Yr 26.70%$435,715$27,009$400,000$34,68074.71%$496 Rollover $400,000 80.00% End Yr 35.70%$488,200$25,323$400,000$ 34,68077.51%$620 End Yr 46.70%$503,049$31,183$400,000$ 34,68073.95%$126 End Yr 57.20%$513,203$34,207$400,000$ 34,68069.86%-$156 Example assumes a property increase of 5.0% p.a. At the end of the second year the borrower exercises the right to rollover within the loan. The Interest capitalisation restarts and the period with cashflow advantage over the traditional loan extends until the beginning of year 5, when the rate reduction kicks in.

8. What Actually Happens ? Assuming 8% pa capital growth; 4% pa rental income and tax deductions on interest at 40% Yearly valuation LVRInterest rate paid Interest paid Rent received Negative gearing Monthly cash flow $500,000 81.24% $540,000 78.45%5.70% $23,588$20,000$8,057$371 $583,200 74.85%6.70%$28,724$21,600$7,994$72 $629,856 70.71%7.70% $33,859$23,328$7,730($233) $680,24466.13%8.70% $38,850$25,194$7,249($604) $734,66866.13%9.20% $41,306$27,210$9,611($800)  Note: Positive cash flow yr. 1 and 2 totals $6,048 – available for wealth creation or home loan reduction.

9. What actually happens when you rollover? (again assuming 5% pa capital growth; 4% pa rental income and tax deductions on interest at 40%) End of Year ValuationLVRInterest Rate Paid Interest Paid Rent Received Negative Gearing Monthly Cash Flow 1$540,00078.45%5.70%$23,588$20,000$7,395$372 2$583,20074.85%6.70%$28,724$21,600$7,994$72 Rollover 3$629,85677.70%5.70%$27,234$23,328$9,207$441 4$680,24474.14%6.70%$33,163$25,194$9,127$96 5$734,66470.03%7.20%$36,553$27,210$7,799$128 6$793,43765.02%8.20%$40,130$29,387$6,126$385 7$856,91259.14%9.20%$45,399$31,737$5,346$693  Result: Cash flow positive for 4 years to the total tune of $11,772 PLUS $30,845 in Cash Out at rollover.

10. Summary of AAR Tax Opinion  The interest which is paid and the interest which is capitalized are both tax deductible. [Reference: FC of T v Australian Guarantee Corporation Limited 84 ATC 8642 (Full Federal Court); Coles Myer Finance Limited v FC of T 93 ATC 4214 (High Court); and Taxation Ruling TR94/26].  The interest on interest is also tax deductible. [Reference: In the full Federal Court decision in Hart & Anor v FC of T 2002 ATC 4608)].  If the borrower’s purpose of choosing the Cash Flow Mortgage is to deferring cash outlays for a period rather than creating tax deductions, then it’s not considered tax avoidance. [Reference: Anti-avoidance provisions known as Part IVA].  It is unlikely that the ATO would issue a Product Ruling to this product, just like any other residential mortgage products in the market. This is because the borrowers may use the loan funds differently for their own purpose, without the knowledge of exactly what each borrower does with the loan funds, it is almost impossible for the ATO to give a ruling. However, each individual borrower can seek a private binding ruling in relation to their own particular circumstances should they have any concern themselves.

11. Residential CFM – Summary of Terms  Maximum Loan Amount: $1,000,000 per security; $7,500,000 per borrower group.  Any metro, major regional centre or coastal location.  LVR: 80% of valuation or purchase price (whichever is the lesser).  Est. costs – Up to 2% of the property value can be capitalised on top of LVR.  Interest Rate to borrower: 9.70%p.a. (full doc)  Add 0.45% for Lo Doc (self certification) loans – available to 1 day ABN’s.  Rate Discount: 0.50% pa after 4 years, subject to satisfactory conduct  Rollover: At borrowers request after 24 months, subject to valuation and 0.50% rollover fee. DEF schedule does not restart.  Term: 30 years, 5 years interest only.  Redraw: Minimum: $500; 2 free per month; $175/redraw thereafter.

12. Residential CFM Fees  Valuation Fee:  Loans < $750,000: $375  Loans > $750,000 to <$1,250,000: $500  Risk Fee:  Full Doc: 1.25% of the loan amount  Lo Doc: 1.75% of the loan amount  Legal Fee/Settlement Fee: $1100 plus disbursements, payable at settlement.  Title Insurance: 0.05% of the loan amount, payable at settlement.  All fees can be capitalised to the loan to a maximum of 2.00% of the security value. So starting LVR can be as high as 82%.  Deferred Establishment Fees: Payable if more than 50% of the loan amount is repaid within any year during the first 5 years:  Yr 1 –3.50%; Yr 2 –2.50%; Yr 3 –2.00%; Yr 4 –1.00%; Yr 5 – 0.50%  CFM loans are now available at 84% (plus fees) with a capitalisation period of 2 years.

13.  You bought 2 investment properties.  You turned $100k into $253k equity.  You took out $30k cash to reduce your home loan or invest.  All without sacrificing your income or your family’s lifestyle. Sum Up: What your client can achieve in 5 years with PFG’s CFM - while hibernating.