ARENA REIT. — Capital/Financing Update 2013

May 29, 2013

Arena REIT ARSN 106 891 641

Arena REIT Offer of Units Product Disclosure Statement

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Arena Investment Management Limited ACN 077 235 879 AFSL 233190 Joint Lead Managers: Morgan Stanley Australia Securities Limited, National Australia Bank Limited Co-Managers: Morgan Stanley Wealth Management Australia Pty Ltd, ANZ Securities Limited

Important notice and disclaimer

(a) The issuer

Arena Investment Management Limited ACN 077 235 879 AFSL 233190 (Arena) is the responsible entity of the Arena REIT ARSN 106 891 641 (Fund). Arena is the issuer of Units in the Fund and of this Product Disclosure Statement (PDS). Units issued pursuant to this Offer are issued on the terms and conditions contained in the Fund’s Constitution and this PDS. Arena reserves the right to change the terms and conditions of this Offer, subject to the Fund’s Constitution, the Corporations Act and the Listing Rules.

(b) Important information

It is important that you read this document carefully and in its entirety prior to making your investment decision with respect to the Offer. In particular, you should pay careful consideration to the risk factors outlined in Section 6 and the tax implications in Section 12 of this PDS as they relate to your personal investment objectives, financial circumstances and needs. The potential tax effects of the Offer will vary between Investors. Other risk factors, both known and unknown to Arena, may exist in addition to those identified in this document which should also be considered in light of your personal circumstances. If you have any queries or uncertainties relating to aspects of this document or the Offer please consult your stockbroker, accountant or other independent financial adviser before deciding whether to invest.

(c) Lodgment and Listing

This PDS was prepared in accordance with the Corporations Act. This PDS is dated 13 May 2013 and was lodged with the Australian Securities and Investments Commission (ASIC) on that date. Arena will apply for the admission of the Fund to the official list of ASX and the quotation of the Units on ASX within 7 days of the date of this PDS. Neither ASIC nor ASX takes any responsibility for the contents of this PDS or the merits of the investment to which this PDS relates.

The fact that ASX may admit the Fund to its official list is not to be taken in any way as an indication of the merits of the Fund.

(d) Not investment advice

An investment in the Fund is subject to investment and other risks, including loss of income and the principal invested. Neither Arena nor the Joint Lead Managers give any guarantee or assurance as to the performance of the Fund or the repayment of capital. The information contained in this PDS is not financial product advice and does not take into account the investment objectives, financial situation and particular needs of each potential investor. Accordingly, before making any investment a prospective investor should read this PDS and any supplementary PDS in full. It

is recommended that before a decision to invest is made prospective investors consult their financial or other professional adviser.

(e) Financial information

Unless otherwise specified, all financial and operational information contained in this PDS is believed to be current as at the date of this PDS.

All currency amounts are in Australian dollars unless otherwise specified.

This PDS includes forecast financial information based on the best estimate assumptions of the Directors of Arena. The PDS includes past financial information. Past performance should not be relied on as indicative of future performance.

Figures, amounts, percentages, estimates, calculations of value and fractions in this PDS are subject to the effect of rounding. Accordingly, the actual calculation of these figures may differ from the figures set out in this PDS.

(f) Electronic PDS

An electronic copy of this PDS may be viewed online by Australian Investors at www.arenainvest.com.au during the Offer Period. If you access the PDS electronically please ensure that you download and read the PDS in its entirety. The Offer to which this PDS relates is available to persons receiving this PDS (electronically or otherwise) in Australia only.

A paper form of this PDS can be obtained, free of charge, during the Offer Period by contacting the Arena Information Line on 1800 008 494 between 8:30 am and 5:00 pm (AEST) Monday to Friday.

Applications for Units in the Fund under this PDS will only be considered if applied for on an Application Form that was included in or accompanied by a copy of this PDS (refer to Section 4 for further information).

The Corporations Act prohibits any person from passing the Application Form on to another person unless it is accompanied by this PDS in its paper form or the complete and unaltered electronic form.

(g) Offer to Australian Investors

This PDS has been prepared to comply with the requirements of Australian law and the Offer is only being made to Australian Retail Investors and institutional Investors in Australia and select other eligible jurisdictions.

This PDS does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation.

Distribution of this PDS outside of Australia (whether electronically or otherwise) may be restricted by law. Persons who receive this PDS outside of Australia are required to observe any such restrictions. Failure to

comply with such restrictions may find you in violation of applicable securities laws.

Unless otherwise agreed with Arena, any person subscribing for Units in the Offer shall by virtue of such subscription be deemed to represent that they are not in a jurisdiction which does not permit the making of an offer or invitation as detailed in this PDS and are not acting for the account or benefit of a person within such jurisdiction.

None of Arena, the Joint Lead Managers, nor any of their respective directors, officers, employees, consultants, agents, partners or advisers accepts any liability or responsibility to determine whether a person is able to participate in the Offer. See Section 4 for further details.

(h) Updated information

Information regarding the Offer may need to be updated from time to time. Any updated information about the Offer that is considered not materially adverse to Investors will be made available on the Arena website at www.arenainvest.com. au and Arena will provide a copy of the updated information free of charge to any eligible investor who requests a copy by contacting the Arena Information Line on 1800 008 494 between 8:30 am and 5:00 pm (AEST) Monday to Friday during the Offer Period.

In accordance with its obligations under the Corporations Act, Arena may issue a supplementary PDS to supplement any relevant information not disclosed in this PDS. You should read any supplementary disclosures made in conjunction with this PDS prior to making any investment decision.

(i) Valuations

Valuations are a prediction of price, not a guarantee of current or future market value. By necessity, valuations require the valuer to make subjective judgments that, even if logical and appropriate, may differ from those made by a purchaser or another valuer. Historically it has been considered that valuers may properly conclude within a range of possible values.

Independent valuations are subject to a number of assumptions and conditions, typically including but not limited to:

• § that all properties are held with good and marketable title, free and clear of any or all liens, encumbrances, restrictions or other impediments of an onerous nature and that utilisation of the land is within the boundaries of the property lines with no trespass or encroachment;

• § responsible ownership and competent property management;

• § absence of any defects in engineering or presence of any hazardous waste and/or toxic material;

3

Arena REIT Product Disclosure Statement

Important notice and disclaimer

• § compliance with all applicable federal, state and local environmental regulations and laws and all applicable zoning and use regulations and restrictions; and

• § absence of any latent or hidden conditions or defects on the property, subsoil or structures.

Property values can change substantially, even over short periods of time, and an independent valuer’s opinion of value could differ significantly if the date of valuation were to change. A high degree of volatility in the market may lead to fluctuations in values over a short period of time.

(j) Forward looking statements

Certain forward-looking statements have been provided in this PDS. These statements can be identified by the use of words such as “anticipate”, “believe”, “expect”, “project”, “forecast”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “target”, ‘’predict’’, “guidance”, “plan” and other similar expressions. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements.

Preparation of these forward-looking statements was undertaken with due care and attention. However, forward-looking statements remain subject to known and unknown risks, uncertainties and other factors, many of which are beyond the control of Arena and its directors, officers, employees, agents and advisers. Consequently, such factors may impact the performance of the Fund such that actual performance differs materially to any performance indicated in the forwardlooking statements.

Some of the risk factors that impact on forward-looking statements in this PDS are set out in Section 6. No assurance can be provided that actual performance will accord with the guidance provided.

Other than as required by law, none of Arena, its respective directors, officers, employees, agents or advisers or any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forwardlooking statements in this PDS will actually occur. You are cautioned not to place undue reliance on those statements.

The forward-looking statements in this PDS reflect the views held only immediately before the date of this PDS, unless otherwise stated. Subject to the Corporations Act, the Listing Rules and any other applicable law, each of Arena, its respective directors, officers, employees, agents and advisers disclaims any duty to disseminate after the date of this PDS any updates or revisions to any such statements to reflect any change in expectations in relation to such statements or any change in events, conditions or circumstances on which any such statement is based.

(k) Photographs, diagrams

Photographs, diagrams and artist’s renderings contained in this PDS that do not have accompanying descriptions are intended for illustrative purposes only.

Diagrams used in this PDS are also intended for illustrative purposes only and may not be drawn to scale.

(l) Disclaimer

No person is authorised to give any information, or to make any representation, in connection with the Offer that is not contained in this PDS.

Any information or representation that is not in this PDS may not be relied on as having been authorised by Arena in connection with the Offer. Except as required by law, and only to the extent so required, neither Arena, nor any other person, warrants or guarantees the future performance of the Fund, the repayment of capital, or any return on any investment made pursuant to this information.

The Joint Lead Managers have not authorised, permitted or caused the issue, lodgement, submission, dispatch or provision of this PDS and do not make or purport to make any statement in this PDS and there is no statement in this PDS which is based on any statement by the Joint Lead Managers. The Joint Lead Managers and their affiliates, officers and employees, to the maximum extent permitted by law, expressly disclaim all liabilities in respect of, make no representations regarding, and take no responsibility for, any part of this PDS and make no representation or warranty as to the currency, accuracy, reliability or completeness of this PDS.

Investments in the Fund do not represent investments in, deposits with or other liabilities of NAB or Morgan Stanley or any other member of the NAB group of companies (NAB Group) or the Morgan Stanley group of companies (Morgan Stanley Group). Neither NAB, Morgan Stanley nor any other member of the NAB Group or Morgan Stanley Group does in any way stand behind the capital value, nor do they guarantee the performance of the investment or the underlying assets in the Fund, or provide a guarantee or assurance in respect of the obligations of Arena or the Fund. The NAB Group and Morgan Stanley Group may also provide debt and treasury and other services to the Fund or its controlled entities. These services are provided in various capacities as a third party provider, and the NAB Group and the Morgan Stanley Group will act if necessary to protect their interests ahead of those of investors and other parties. In acting in their various capacities in connection with the Fund, NAB and Morgan Stanley will have only the duties and responsibilities expressly agreed to by them in the relevant capacity and will not, by virtue of acting in any other capacity, be deemed

to have other duties or responsibilities or be deemed to hold a standard of care other than as expressly provided with respect to each such capacity. Neither NAB (whether in its individual capacity, its capacity as lender to the Fund, as Joint Lead Manager or Underwriter) nor Morgan Stanley (whether in its individual capacity, as Joint Lead Manager or Underwriter) accept any responsibility for any information or errors contained in, or omission from, this PDS and have not conducted due diligence or otherwise separately verified the information contained in this PDS and make no representation, warranty or undertaking, express or implied, as to the accuracy, completeness or suitability of the information contained in this PDS.

(m) International offer restrictions

This document does not constitute an offer of New Units in any jurisdiction in which it would be unlawful. New Units may not be offered or sold in any country outside Australia except to the extent permitted below.

European Economic Area - Belgium, Denmark, Germany, Luxembourg and Netherlands

The information in this document has been prepared on the basis that all offers of New Units will be made pursuant to an exemption under the Directive 2003/71/ EC (“Prospectus Directive”), as amended and implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.

An offer to the public of New Units has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:

• § to any legal entity that is authorized or regulated to operate in the financial markets or whose main business is to invest in financial instruments;

• § to any legal entity that satisfies two of the following three criteria: (i) balance sheet total of at least €20,000,000; (ii) annual net turnover of at least €40,000,000 and (iii) own funds of at least €2,000,000 (as shown on its last annual unconsolidated or consolidated financial statements);

• § to any person or entity who has requested to be treated as a professional client in accordance with the EU Markets in Financial Instruments Directive (Directive 2004/39/EC, “MiFID”); or

• § to any person or entity who is recognised as an eligible counterparty in accordance with Article 24 of the MiFID.

4 Arena REIT Product Disclosure Statement

Hong Kong

WARNING: This document has not been, and will not be, authorized by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the “SFO”). No action has been taken in Hong Kong to authorize this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the New Units have not been and will not be offered or sold in Hong Kong other than to “professional investors” (as defined in the SFO). No advertisement, invitation or document relating to the New Units has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the New Units which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under that ordinance.

The contents of this document have not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the offer. If you are in doubt about any contents of this document, you should obtain independent professional advice.

Japan

The New Units have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the New Units may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires New Units may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of New Units is conditional upon the execution of an agreement to that effect.

New Zealand

This document has not been registered, filed with or approved by any New Zealand regulatory authority under or in accordance with the Securities Act 1978 (New Zealand). The New Units are not being offered or sold in New Zealand, or allotted with a view to being offered for sale in New Zealand, and no person in New Zealand may accept a placement of New Units other than to:

• § persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money; or

• § persons who are each required to (i) pay a minimum subscription price of at least NZ$500,000 for the securities before allotment or (ii) have previously paid a minimum subscription price of at least NZ$500,000 for securities of the Fund (“initial securities”) in a single transaction before the allotment of such initial securities and such allotment was not more than 18 months prior to the date of this document.

Singapore

This document has not been registered as a prospectus with the Monetary Authority of Singapore. This document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the New Units may not be circulated or distributed, nor may the New Units be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except to “institutional investors” (as defined in the Securities and Futures Act, Chapter 289 (the “SFA”)), or otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.

This document has been given to you on the basis that you are an “institutional investor” (as defined under the SFA). In the event that you are not an institutional investor, please return this document immediately. You may not forward or circulate this document to any other person in Singapore.

Any offer is not made to you with a view to the New Units being subsequently offered for sale to any other party. You are advised to acquaint yourself with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.

United Kingdom

Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the New Units. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the New Units may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in

part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.

Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the New Units has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to the Fund.

In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

United States

This document may not be released or distributed in the United States. This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. Any securities described in this document have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws.

(n) Further questions

If you have any queries relating to aspects of this PDS please call the Arena Information Line on 1800 008 494 between 8:30 am and 5:00 pm (AEST) Monday to Friday (excluding public holidays during the Offer Period). Alternatively, you may contact Arena via email at info@arenainvest.com.au.

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Arena REIT Product Disclosure Statement

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Table of Contents

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||||
|---|---|---|
|Important notice and disclaimer|3|
|01:|Chairman’s letter|7|
|02:|Key dates|8|
|03:|Key features of the Fund and the Offer|9|
|04:|Details of the Offer|18|
|05:|Details of the Fund and the Properties|23|
|06:|Risks|32|
|07:|Investment objectives and strategy|38|
|08:|Financial Information|44|
|09:|Investigating Accountant’s Report|54|
|10:|Board and management|59|
|11:|Fees and other costs|64|
|12:|Tax|69|
|13:|Material agreements|72|
|14:|Additional information|81|
|15:|Glossary|85|
|Corporate directory|90|

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6 Arena REIT Product Disclosure Statement

01: Chairman’s letter

Opportunity to invest in Arena REIT, a real estate investment trust that currently owns a portfolio of 177 childcare centre properties in Australia to be listed on ASX.

Dear Investor

On behalf of Arena Investment Management Limited (Arena), the responsible entity for Arena REIT (Fund), I am pleased to present you with the opportunity to invest in Arena REIT. Arena is a leading property funds manager in Australia, currently managing over $1.1 billion in assets and has a strong track record in investing in childcare, healthcare and office assets over the last decade.

Arena REIT was established in 2003 as an unlisted fund and owns a portfolio of 172 childcare centres and 5 childcare centre development land sites valued at $228 million,[1] the majority of which are leased to Goodstart Early Learning Ltd (Goodstart), a non-profit organisation founded by four leading community sector organisations in Australia. An application will be made for Arena REIT to be listed on the ASX.

In conjunction with the Listing, the Fund is undertaking a fully underwritten Offer of 74.3 million New Units to raise a total of $75.0 million at $1.01 per Unit which approximates the current NTA per Unit of the Fund. The Offer proceeds will initially be applied to reduce debt, provide future liquidity to enable funding of the Buyback and Withdrawal Offer described below (if commenced) and capacity for asset acquisition opportunities.

Following Listing, Arena anticipates that there may be some demand from existing Unitholders for liquidity. If Arena determines (in its sole discretion) that there is unsatisfied demand for liquidity to enable existing Unitholders to exit the Fund, the Fund will have capacity to expend up to $20.6 million in buying-back (or redeeming) Units by way of an on-market Buyback (of up to 10% of the Fund’s issued Units prior to the Offer) and/or an off-market Withdrawal Offer.

Whether the Buyback and/or the Withdrawal Offer commence (in whole or part) will depend on Arena’s assessment, in its absolute discretion, of market conditions and the best interests of Unitholders. The timing of commencement, the pricing and the conduct of the Buyback and Withdrawal Offer (if undertaken) will be in accordance with the Constitution, Listing Rules and all applicable laws. No assurance is given that either the Buyback or Withdrawal Offer will be undertaken. Further details are given in Section 4 of this PDS.

Following the Offer, the Fund’s initial Gearing Ratio will be 10%. The Fund has a targeted Gearing Ratio in the range of 35% to 45%, giving it capacity to acquire additional assets with the aim of increasing scale, improving diversification and enhancing returns to Unitholders.

The Fund is forecast to deliver a distribution of 8.2 cents per Unit for the financial year to 30 June 2014. This equates to a forecast distribution yield of 8.12% on the Offer Price. The Fund aims to offer attractive and predictable distributions to Unitholders with earnings growth prospects over the medium to long term.

The Board of Arena has also decided to broaden the investment mandate of the Fund to invest in real estate in addition to childcare centre properties. The Fund intends, over time, to establish a diversified real estate portfolio with relatively long term leases to tenants in sectors such as childcare, education, healthcare and government tenanted facilities. However, the timing and amount of future investments by the Fund cannot be reliably estimated. Therefore, no new property acquisitions are assumed to occur in the Forecast Period.

This PDS contains detailed information about the Offer and the Fund’s operations, financial performance and prospects. You should read this PDS carefully and in its entirety including key risks in Section 6, and seek relevant professional advice before making a decision to invest.

On behalf of the Board, I encourage you to consider this investment opportunity.

Yours sincerely,

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David Ross Chairman Arena Investment Management Limited

1. As at 31 December 2012.

Arena REIT Product Disclosure Statement 7

02: Key dates

PDS lodgement date	Monday, 13 May 2013
Broker Firm Offer and Stakeholder Offer open	Monday, 20 May 2013
Broker Firm Offer and Stakeholder Offer close (5:00pm)	Friday, 7 June 2013
Settlement of Offer	Wednesday, 12 June 2013
Issue of New Units and commencement of deferred settlement trading on ASX	Thursday, 13 June 2013
Despatch of holding statements	Friday, 14 June 2013
Commencement of normal trading	Monday, 17 June 2013

The timetable above is indicative only. Arena, in conjunction with the Joint Lead Managers, reserves the right to amend any or all of these dates and times subject to the Corporations Act, the Listing Rules and other applicable laws, including closing the Offer early, extending the Offer or accepting late Applications either generally or in particular cases, or to withdraw the Offer, without prior notice. The quotation and commencement of trading of the Units is subject to confirmation from ASX.

8 Arena REIT Product Disclosure Statement

03: Key features of the Fund and the Offer

The key features, benefits and risks set out in this Section 3 are a summary only. Investors should read the entire PDS before completing the Application Form as the PDS contains important information about an investment in the Fund. You should also consider seeking relevant professional advice before investing under the Offer.

Key feature	Details	Section
Overview of Fund
Overview of	Arena REIT, managed by Arena Investment Management Limited, comprises	Section 5.1
Fund	172 childcare centres and 5 childcare centre development land sites located in
	Australia, valued at $228 million.2
	The Fund was established as an unlisted fund in 2003 to acquire and develop a
	portfolio of childcare centres. The Fund acquired and developed 216 childcare
	centres over a period of 5 years and has grown to be one of Australia’s largest
	owners of childcare centre properties. The Fund sold its portfolio of 25 childcare
	centres in New Zealand in 2012.
	The Fund aims to generate an attractive and predictable distribution to
	Unitholders, with earnings growth prospects over the medium to long term.
	An application will be made for the Fund to be admitted to the offcial list of ASX
	and for offcial quotation of the Units on ASX within 7 days after the date of this
	PDS.
Property	The initial investment portfolio of the Fund has 177 childcare centre properties,	Sections 5.2
portfolio	comprising 172 childcare centres and 5 childcare centre development land sites	and 13.3
	located throughout Australia.
	The Carrying Value of the portfolio as at 31 December 2012 was $228 million. The
	portfolio has the following key features:
	§ relatively long weighted average lease expiry (WALE) of 8.2 years;2
	§ occupancy rate of 97.7%;3
	§ 66.3%2leased to Goodstart (by value); and
	§ the tenants are responsible, under the Standard Lease for childcare centres
	(summarised in Section 13.3), for all, or substantially all, of the statutory and
	operating outgoings and costs including land tax, insurance, repairs and
	maintenance, including of a capital or structural nature.
Distribution	The Fund intends to distribute a relatively high proportion of its operating earnings	Section 5.12
policy	(excluding non-cash amounts), which will include all taxable income and refects the
	underlying net cash fow from operating activities.
	Distributions are paid on a quarterly basis, generally within 8 weeks of the relevant
	record date.
Gearing Ratio	The Fund’s initial Gearing Ratio will be 10% following the Offer. The Gearing Ratio	Sections 5.9
	will increase to 19% if both the Buyback and Withdrawal Offer are fully completed.	and 8.8
	The Fund has a targeted Gearing Ratio in the range of 35% to 45%.
Fees and other	Arena will receive a management fee that is tiered by the level of the gross value	Section 11
costs	of the Fund’s Assets. A fee of 0.80% pa (excluding GST) is payable based on the
	current gross value of the Fund’s Assets.
	Arena is also entitled to receive other fees as well as reimbursement of its expenses
	for administering and managing the Fund.

1. As at 31 December 2012.

2. Weighted by income, as at 31 March 2013.

9

Arena REIT Product Disclosure Statement

03: Key features of the Fund and the Offer

Key feature	Details	Section
Distribution	Forecast distribution of 8.20 cents per Unit for the fnancial year ending 30 June	Sections 8.7
forecast	2014.	to 8.8
	Details of the risks and key asumptions to the Forecasts are set out in Sections 6
	and 8, respectively.
Investment objectives and strategy of the Fund
Investment	The Board has decided to broaden the investment mandate of the Fund. The Fund	Section 7
objectives of	intends over time to establish a diversifed real estate portfolio typically with long
Fund	term leases to tenants in sectors such as childcare, education, healthcare, aged
	care and government tenanted facilities.
	The investment strategy of the Fund is to invest in real estate in Australia featuring
	some or all of the following characteristics:
	§ relatively long remaining lease terms;
	§ premises that have strategic importance for the operations of the tenant;
	§ high credit quality tenants;
	§ leases where the tenants are responsible for all, or substantially all, of the
	statutory and operating outgoings and costs including land tax, insurance and
	repairs and maintenance; and
	§ manageable reversionary property valuation risk which Arena believes can be
	appropriately mitigated through active management.
	However, the timing and amount of future investments by the Fund cannot be
	reliably estimated. Therefore, no new property acquisitions are assumed to occur in
	the Forecast Period.
Investment	The Fund does not have a pre-determined real estate sector allocation. Arena	Section 7
sectors	intends to diversify the portfolio by sector, individual asset and tenants over the
	medium term.
	Arena intends to invest in sectors that are underpinned by supportive macro-
	economic trends including population growth and emerging demographics such as
	an ageing population. Arena believes that the following sectors are likely to provide
	acquisition opportunities that are consistent with the Fund’s investment strategy:
	§ childcare/early learning services;
	§ education – including schools, colleges and universities (and associated facilities);
	§ healthcare – including medical centres, diagnostic facilities, hospitals and aged
	care facilities (and associated facilities); and
	§ facilities with government and other high credit quality tenants.
	The Fund will not invest in operating businesses. The Fund intends to generally
	invest in direct real estate but may from time to time invest in a partial interest, joint
	ventures or property securities where the underlying real estate is consistent with
	the Fund’s investment objectives.

10 Arena REIT Product Disclosure Statement

Key feature	Details	Section
Overview of Offer
What is the	An Offer of 74.3 million Units fully underwritten by the Joint Lead Managers to raise	Section 4
Offer?	$75 million at $1.01 per Unit comprising:
	§ a Broker Firm Offer;
	§ an Institutional Offer; and
	§ a Stakeholder Offer.
Investors entitled	The Broker Firm Offer is open to all Retail Investors who have received a frm	Sections 4.4
to participate in	allocation from their Broker.	- 4.6
the Offer	Certain institutional Investors in Australia will be invited by the Joint Lead Managers
	to participate in the Institutional Offer.
	The Stakeholder Offer is open to all existing Arena REIT Unitholders, investors in
	other funds managed by Arena, Directors of Arena (and their associates) and Arena
	Staff who have a registered address in Australia.
Offer Price	Applicants under the Broker Firm Offer, Institutional Offer and Stakeholder Offer	Section 4.2
	must apply for Units at a fxed price of $1.01 per Unit.
Minimum and	For Applicants applying under the Broker Firm Offer and Stakeholder Offer, the	Section 4.8
maximum	minimum application amount is at least $20,000 and in at least $1,000 increments
application	thereafter.
amount	There is no maximum application amount.
Proceeds of	The Offer proceeds will be used to reduce debt and pay the costs of the Offer and	Section 4.3
Offer	the Listing.
	Following the Offer, the Fund will be able to redraw borrowings to fund the
	Buyback and Withdrawal Offer (if commenced) and asset acquisitions.
Ranking of Units	New Units will rank equally from the date of issue with all existing Units and will	Section 4.10
and distributions	be entitled to receive a frst distribution for the period from the Allotment Date
	(expected to be 13 June 2013) to 30 June 2013, which is forecast to be 0.4 cents per
	Unit.
	Existing Unitholders will also be entitled to receive a distribution for the
	period from 1 April 2013 to the day before the Allotment Date (expected to be
	12 June 2013).
	Thereafter, distributions will be paid on a quarterly basis.
Cooling off	Cooling off rights do not apply to an investment in Units pursuant to the Offer.	Section 14.14

Arena REIT Product Disclosure Statement 11

03: Key features of the Fund and the Offer

Key feature	Details	Section
Key highlights and risks
Key highlights	A geographically diverse portfolio of property assets	Section 5
	§ The Fund owns childcare centres located across all 6 States of Australia and the
	Northern Territory.
	Relatively long term leases to tenants providing a stable income stream
	§ Relatively long WALE of 8.2 years.4
	§ Over 95% of the leases for the Fund’s childcare centres require a minimum 5 year
	notice period prior to termination by the tenant.
	§ Goodstart, the largest tenant, was founded and is owned by four leading
	community sector organisations in Australia, The Benevolent Society, Mission
	Australia, the Brotherhood of St Laurence and Social Ventures Australia.
	§ Current rents are indexed annually to CPI, with substantially all of the leases
	having a minimum increase of 2.5% per annum.
	§ Over 95% of the leases for the Fund’s childcare centres are on the terms of the
	Standard Lease. Under the Standard Lease for childcare centres, (summarised
	in Section 13.3), the tenants are responsible for all, or substantially all, of the
	statutory and operating outgoings and costs including land tax, insurance, repairs
	and maintenance, including of a capital or structural nature.
	Federal Government funding of childcare sector

§ The childcare sector is supported by the Federal Government with a FY2013 budget of $19.9 billion over 4 years in childcare benefits and rebates. § Demand for childcare has been increasing as the population increases through childbirth and immigration. The population of 0 to 4 year olds is forecast to increase from 1.36 million in 2008 to 1.61 million by 2025.

An attractive distribution yield

• § Forecast distribution yield for the Fund is 8.12% on the Offer Price for the full financial year to 30 June 2014.

Conservative capital structure

§ Following the Offer, the Fund’s initial Gearing Ratio will be 10%. The Fund has a targeted Gearing Ratio in the range of 35% to 45%, giving it capacity to undertake the Buyback and Withdrawal Offer and to acquire further real estate.

1. Weighted by income, as at 31 March 2013.

12 Arena REIT Product Disclosure Statement

Key feature	Details	Section
Key risks	Key risks relating to the Fund’s current Assets	Section 6
	Concentration risk
	§ The current portfolio of Arena REIT solely comprises childcare centre properties.
	Adverse events affecting the childcare sector may result in general deterioration
	of tenants’ ability to meet their lease obligations across the portfolio.
	§ 67.8% of the initial portfolio,5by income, is leased to Goodstart. If Goodstart
	does not meet its lease obligations for any reason, this could reduce Arena REIT’s
	income and adversely impact the value of its properties.
	Tenant risk
	§ The Fund relies on tenants to generate the majority of its revenue. These tenants
	are primarily not for proft companies limited by guarantee or private companies.
	If a tenant is affected by fnancial diffculties it may default on its rental or other
	contractual obligations which may result in loss of rental income or losses to the
	value of the Fund’s Properties.
	Government policy risk and changes in law
	§ Childcare operators rely on government funding, which if reduced, may adversely
	impact the underlying demand for childcare services and therefore tenants’
	ability to meet lease obligations. There is a risk that there may be changes in
	legislation, government policy or legal or judicial interpretation relating to the
	childcare sector.

Licensing

• § The provision of childcare services is a regulated activity. There is therefore a risk that if the relevant licence is revoked, no suitably qualified replacement tenant may be found.

Key risks relating to the Fund’s current Assets and future investment strategy

Alternative use risk

• § The risks associated with investing in real estate assets are greater for special purpose facilities such as childcare centres, healthcare facilities and aged care facilities, which may require extensive expenditure and rezoning to be suitable for other commercial purposes.

Acquisition risk

• § The Fund intends to make additional investments to diversify its portfolio, which may include the acquisition of additional childcare centres, or other assets. Future acquisitions may affect the level of future returns to Investors. No acquisitions are assumed to have been made during the periods covered by the forecast financial information contained in this PDS.

For further information on risks in this category and key risks relating to the Offer and the Fund see Section 6.

1. As at 31 March 2013.

Arena REIT Product Disclosure Statement 13

03: Key features of the Fund and the Offer

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Key feature Details Section
Buyback and Withdrawal Offer
Reasons for the The Fund ceased accepting applications for Units and offering regular withdrawal
Buyback and offers in 2008 as a result of prevailing economic conditions associated with the
Withdrawal Offer global financial crisis. It is for this reason that Arena expects that there may be
some demand from existing Unitholders for liquidity.
The Buyback and Withdrawal Offer (if commenced) are intended to provide
liquidity support to Unitholders wishing to exit the Fund.
Buyback and Following Listing, if Arena determines (in its sole discretion) that there is unsatisfied Sections 4.14
Withdrawal Offer demand for liquidity, the Fund may expend up to $20.6 million in buying-back and 4.15
(or redeeming) Units by way of an on-market Buyback (of up to 10% of the Fund’s
issued Units prior to the Offer) and/or an off-market Withdrawal Offer.
The Fund will only purchase Units under the Buyback if:
(a) the trading price of Units on ASX is $1.00 or less; and
(b) the Fund is permitted to do so under the Constitution, Corporations Act,
Listing Rules and securities trading policy of Arena.
The price paid by the Fund under the Buyback may be less than $1.00 per Unit and
is not permitted to be more than the lesser of:
(a) the Withdrawal Price; or
(b) the 5-day volume weighted average price of Units on ASX.
If Arena so determines (in its sole discretion) the Fund may at any time (either alone
or in combination with a Buyback) make an off-market Withdrawal offer to acquire
Units at the Withdrawal Price. The Withdrawal Price will be calculated by reference
to the NTA of the Fund as at the time the Withdrawal Offer closes.
The total maximum amount which may be expended under the Buyback and/or
Withdrawal Offer (if undertaken) is $20.6 million.
Whether the Buyback or Withdrawal Offer proceeds (in whole or in part) will
be determined by Arena at its sole discretion at the relevant time, based on its
assessment of market conditions and the best interests of Unitholders.
The timing of commencement and conduct of the Buyback and the Withdrawal
Offer (if undertaken) will be in accordance with the Constitution, Listing Rules and
all applicable laws. The earliest date on which the Buyback may commence (without
regulatory relief) is after 14 days from the date of Listing (assuming trading in Units
are recorded on ASX on at least 5 days in that period). No assurance is given that
either the Buyback or Withdrawal Offer will proceed.
Costs and underwriting
Costs The costs associated with the Offer and the Listing are expected to total Section 11.5
approximately $3.7 million (including any non-recoverable GST).
Underwriting The Offer has been fully underwritten by the Joint Lead Managers at the Offer Section 13.4
Price.
Taxation implications
Tax implications The acquisition of New Units under the Offer may have Australian taxation Section 12
implications for Investors participating in the Offer. These implications will differ
depending on the individual circumstance of each investor who participates in the
Offer.
Investors should obtain and only rely on their own taxation advice.
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14 Arena REIT Product Disclosure Statement

Key feature	Details	Section
About Arena
About Arena	Arena is a leading property funds manager in Australia, currently managing	Section 10
	over $1.1 billion in assets and has a strong track record in investing in childcare,
	healthcare and offce assets over the last decade.
Directors of	The directors of the Arena Board are:	Section 10
Arena	David Ross, Independent Non-executive Chairman
	David has 30 years’ experience in the real estate and investment management
	sectors.
	He held senior positions with Lend Lease Corporation over a period of 10 years,
	including Global and US Chief Executive Offcer Real Estate Investments (based
	in the US), Chief Executive Offcer Asia Pacifc and Chief Executive Offcer of
	General Property Trust. He was also Chief Operating Offcer of Babcock and Brown,
	responsible for the Group’s corporate and administrative support functions globally.
	David holds a Bachelor of Commerce, a Property Valuation qualifcation and is a
	Graduate of the Australian Institute of Company Directors (GAICD).
	Dennis Wildenburg, Independent Non-executive Director
	Dennis has over 30 years’ experience in the fnancial services and funds
	management industry. He is currently an Independent Director of Investa Wholesale
	Funds Management Limited.
	Dennis is a Chartered Accountant and currently serves as an independent member
	of two compliance committees.
	Simon Parsons, Independent Non-executive Director
	Simon has over 34 years’ experience in the commercial property industry. He is
	presently Managing Director of Parsons Hill Stenhouse Pty Ltd, a commercial
	property practice.
	Simon is a Fellow of the Royal Institution of Chartered Surveyors (RICS) and is a
	member of the RICS Oceania Property Board.
	Simon holds a Master of Science (Real Estate).
	The executive directors of the Arena Board are:
	James Goodwin, Executive Director
	James is Joint Managing Director of Arena and was appointed to the role on 30
	December 2011, following the acquisition of Arena by MSREF VII Global.
	James has extensive experience in property funds management having previously
	spent fve years at Becton Property Group and prior to that, four years at Centro
	Properties Group and three years at Freehills.
	James holds a Bachelor of Laws (Hons), a Bachelor of Arts and a Master of Applied
	Finance.
	Bryce Mitchelson, Executive Director
	Bryce is Joint Managing Director of Arena and joined Arena in May 2009. Bryce was
	appointed as a director of Arena in April 2010.
	Bryce has more than 20 years’ experience in listed and unlisted property funds
	management as well as property investment, development, valuation and real
	estate agency.
	Bryce holds a Bachelor of Economics (Accounting), Bachelor of Business (Property)
	and Graduate Diploma of Applied Finance and Investment.

15

Arena REIT Product Disclosure Statement

03: Key features of the Fund and the Offer

Key feature	Details	Section
Senior executives	The senior executives of Arena are:
of Arena	Gareth Winter, Chief Financial Offcer
	Gareth was appointed Chief Financial Offcer of Arena Investment Management
	in March 2012. Gareth was formerly a Partner at PricewaterhouseCoopers and has
	over 20 years’ professional experience.
	Gareth is a member of the Institute of Chartered Accountants in Australia and holds
	a Bachelor of Commerce (Accounting and Business Finance).
	Peter Hulbert, Head of Legal and Compliance and Company Secretary
	Peter has over 10 years’ experience in corporate and commercial law and 8 years’
	experience in the fnancial services industry.
	Peter holds a Bachelor of Business (Management) and a Bachelor of Laws.
	Robert de Vos, General Manager, Property
	Robert has over 15 years’ property and funds management experience and has
	particular expertise in developing investment management strategies across broad
	portfolios of real estate and real estate securities.
	Prior to joining Arena, Robert held senior roles with Jones Lang LaSalle, Becton
	Property Group and Ceramic Funds Management.
	Vin Harink, Portfolio Manager
	Vin has 34 years’ experience in the property, fnance and service sectors and has
	been responsible for managing the childcare portfolio of the Fund since December
	2008.
	Prior to joining Arena, Vin was Chief Executive Offcer of Austock Property Funds
	Management Ltd and subsidiary entities which managed 4 funds with $850 million
	of funds under management, including childcare funds Australian Education Trust
	and Australian Social Infrastructure Fund.
	Vin is a member of the Institute of Chartered Accountants in Australia and holds a
	Bachelor of Business.
Other information
How to apply	To apply under the Broker Firm Offer, you should follow the instructions received	Sections 4.4
	from your Broker.	- 4.6
	To apply under the Stakeholder Offer, complete and return the Application Form
	enclosed with this PDS.
	Application Forms should be accompanied by the requisite Application Monies.
	The key dates for the Offer are set out in Section 2.
Listing	Arena will apply for the admission of the Fund to the offcial list of ASX and the	Section 2
	offcial quotation of the Units on ASX within 7 days of the date of this PDS. It is	and 4.13
	expected that the New Units will be issued to successful Applicants under the
	Institutional Offer, Broker Firm Offer and Stakeholder Offer on the Allotment Date
	of 13 June 2013.
	The issue of New Units will be conditional upon ASX approval for admission of the
	Fund to the offcial list of ASX.

16 Arena REIT Product Disclosure Statement

Key feature Details	Section
Further If you have further enquiries regarding the Offer, please contact the Offer
information Information Line on 1800 008 494 (toll free within Australia) between 8:30 am and
5:00 pm (AEST) Monday to Friday (excluding public holidays) during the Offer
period.
Key Offer information
Offer Price per New Unit	$1.01
Number of New Units available under Offer	74.3 million
Gross proceeds from Offer	$75 million
Number of Units on issue after Offer	206.3 million
Forecast FY14 distribution yield on Offer Price	8.12%
Pro Forma NTA per Unit6following the Offer	$1.00

1. See Section 8.5 for details.

Arena REIT Product Disclosure Statement 17

04: Details of the Offer

4.1 Underwritten Offer

A total of 74,257,426 New Units are available under the Offer to raise $75 million, at an Offer Price of $1.01 per Unit, comprising:

• § a Broker Firm Offer: refer Section 4.4 below;

• § an Institutional Offer: refer Section 4.5 below; and

• § a Stakeholder Offer: refer Section 4.6 below.

The issue of all New Units under the Offer has been underwritten by the Joint Lead Managers who have entered into an Underwriting Agreement in respect of the management of the Offer. The Underwriting Agreement may be terminated in certain circumstances as set out in Section 13.4.

The allocation of the New Units between the Broker Firm Offer, the Stakeholder Offer and the Institutional Offer will be determined by the Joint Lead Managers in consultation with Arena, having regard to the allocation policy set out in Sections 4.4 and 4.6.

4.2 Offer Price

Applicants under the Offer will be required to apply for New Units at a fixed Offer Price of $1.01 per New Unit.

4.3 Application of proceeds

The proceeds from the Offer will be used to reduce debt and pay the costs and expenses of the Offer and the Listing. Following the Offer, the Fund will be able to redraw borrowings to fund the Buyback and Withdrawal Offer (if commenced) and asset acquisitions.

4.4 Broker Firm Offer

(a) Who may apply?

Retail Investors who receive a firm allocation from their Broker may apply under the Broker Firm Offer.

The Broker Firm Offer is open between 9:00 am (AEST) Monday, 20 May 2013 and 5:00 pm (AEST) Friday, 7 June 2013. Your Broker may impose an earlier Closing Date. Applicants are therefore encouraged to submit their applications as soon as possible. Please contact your Broker for further details.

(b) How to apply?

Applicants under the Broker Firm Offer must lodge their Application Form and Application Monies with the relevant Broker in accordance with the relevant Broker’s directions and within sufficient time to enable processing by the Closing Date of the Broker Firm Offer in order to receive a firm allocation.

You should read this PDS in its entirety, including the risks set out in Section 6.

You should contact your Broker for further instructions about the minimum and maximum application amount and how to obtain a copy of this PDS and Application Form.

The Joint Lead Managers, in consultation with Arena, may determine a person to be eligible to participate in the Broker Firm Offer, and may amend or waive the Broker Firm Offer application procedures.

(c) Allocation policy

The allocation of New Units to Brokers is determined by the Joint Lead Managers, in consultation with Arena.

It will be a matter for the Brokers as to how they make firm allocations among their broker clients, and they (and not Arena or the Joint Lead Managers) will be responsible for ensuring broker clients who have received a firm allocation from them receive the relevant New Units.

4.5 Institutional Offer

The Institutional Offer consisted of an invitation prior to the date of this PDS to certain Investors in Australia to be issued New Units under this PDS. Refer to the “Important notice and disclaimer” Section of this PDS for further information on foreign offering restrictions.

18 Arena REIT Product Disclosure Statement

In accordance with the timetable, settlement of the payment obligations relating to the Institutional Offer is expected to occur on 12 June 2013. New Units issued pursuant to the Institutional Offer will be on the same terms and conditions as New Units issued under the Broker Firm Offer and the Stakeholder Offer. This PDS has therefore also been prepared for the purpose of setting out the terms of the New Units to be issued pursuant to the Institutional Offer.

4.6 Stakeholder Offer

(a) Who may apply?

The Stakeholder Offer is open to all existing Arena REIT Unitholders, investors in other funds managed by Arena, Directors of Arena (and their associates) and Arena Staff who have a registered address in Australia.

Up to $2 million of New Units have been allocated to Directors of Arena (and their associates) and Arena Staff.

The Stakeholder Offer is open from 9:00 am (AEST) Monday, 20 May 2013 to 5:00 pm (AEST) Friday, 7 June 2013.

(b) How to apply?

Before you decide to apply for New Units under the Offer, you should consider whether an investment in New Units is appropriate for you in light of your particular investment objectives and circumstances. If you are in doubt as to the course you should follow, you should seek appropriate professional advice before making an investment decision.

You should read this PDS in its entirety, including the risks set out in Section 6.

Applications under the Stakeholder Offer by existing Arena REIT Unitholders must be made on the personalised Application Form accompanying this PDS in accordance with the instructions set out on that form. It is important that Unitholders verify any pre-filled information as accurate and current. Please complete all parts in block letters.

All other applications under the Stakeholder Offer must be made on the standard Application Form accompanying this PDS in accordance with the instructions set out on that form.

Application amount

The payment to be made on application is indicated in whole dollar amounts.

Investor details

You must enter the full names(s) and title(s) of all legal entities that are to be recorded as the registered holders. At least one full given name and surname is required for natural persons.

Contact details

You must provide a valid mailing address for all future correspondence from Arena in relation to your holding in the Fund. Only one address may be recorded. Arena requests that you provide a valid email address which will be used for sending reports and distribution and taxation statements.

Tax file number

You may enter the TFN, exemption code or ABN (if applicable) for each applicant. Collection of TFNs is authorised by taxation laws. It is not compulsory to provide your TFN. However, if you do not do so, tax may be deducted from your quarterly distributions at the highest marginal tax rate plus levies.

Payment methods

Please note that cash will not be accepted and receipts for payments will not be issued.

Cheque details

Please provide details of all cheques accompanying your application form. Cheque(s) must be crossed ‘Not negotiable’ and made payable to:

Arena REIT Application Account

Payment must be made in Australian currency. Cheques not properly drawn may be rejected. Cheques will generally be deposited on the day of receipt.

Please clip or pin your cheques to the application form – do not use staples.

Arena REIT Product Disclosure Statement 19

04: Details of the Offer

Payment using BPAY[®]

Existing Unitholders may pay using BPAY[®] . The personalised Application Form which accompanies this PDS for existing Unitholders contains your personalised BPAY[®] details.

To pay via BPAY[®] please contact your participating financial institution. If paying by BPAY[®] you do not need to return the Application Form. By paying by BPAY[®] , you will be deemed to have completed an Application Form for the number of Units in the Fund with an aggregate Offer Price equal to the amount of your payment received. You will also be taken to have made the statements contained in the Application Form, in particular those set out in the “Acknowledgements” section.

Applicants should be aware of their financial institution’s cut-off time (the time payment must be made to be processed overnight) and ensure payment is processed by their financial institution on or before the Business Day prior to the Closing Date. BPAY[®] Applications will only be regarded as accepted if payment is received by the Registry from your financial institution prior to 5:00pm (AEST) on the Closing Date.

Distribution payment details

Please provide us with details of your bank account for distribution payment, which must relate to an Australian Bank, Credit Union or Building Society. It is Arena’s policy to pay distributions only by direct credit to your nominated bank account.

(c) Allocation policy

The Joint Lead Managers, in consultation with Arena, will determine the allocation of New Units under the Stakeholder Offer and may reject any application, or allocate fewer New Units than applied for, in its absolute discretion. This discretion includes:

• § the right to aggregate any Applications which it believes to be multiple Applications from the same person; and

• § the right to treat any Application which is for more than $250,000, or which is from a person whom it believes may be an institutional Investor, as an Application by the Institutional Investor under the Institutional Offer or to reject the Application.

Should the dollar amount of your final allocation of New Units be less than the Application Monies received, the surplus Application Monies received will be refunded to you in accordance with Section 4.12.

4.7 Underwriting

Arena and the Joint Lead Managers have entered into an Underwriting Agreement in respect of the management of the Offer.

A summary of the Underwriting Agreement is contained in Section 13.4, including the circumstances under which the Underwriting Agreement may be terminated.

4.8 Minimum and maximum application amount

For Applicants applying under the Broker Firm Offer and the Stakeholder Offer, the minimum application amount is at least $20,000 and in at least $1,000 increments thereafter. There is no maximum application amount. Your Broker may impose a higher minimum application amount.

4.9 Offer discretion

Arena reserves the right to:

• § close the Offer or any part of it early;

• § extend the Offer or any part of it;

• § accept late Applications either generally or in particular cases;

• § reject any Application;

• § allocate any Applicant fewer New Units than applied for; and

• § terminate the Offer.

Any amendment to the Offer timetable will be announced to the market through ASX and will be made with the prior written consent of the Joint Lead Managers.

20 Arena REIT Product Disclosure Statement

4.10 Ranking of Units and distributions

New Units will rank equally from the date of issue with all existing Units and will be entitled to receive a first distribution for the period from the Allotment Date (expected to be 13 June 2013) to 30 June 2013, which is forecast to be 0.4 cents per Unit.

Existing Unitholders will also be entitled to receive a distribution for the period 1 April 2013 to the day before the Allotment Date of the New Units (expected to be 12 June 2013).

Thereafter, distributions will be paid on a quarterly basis. The Fund’s distribution policy is summarised in Section 5.12.

4.11 Offer costs

No brokerage or commission is payable by Applicants upon acquisition of the New Units under the Offer. Various fees in relation to the Offer may be payable by the Fund to the Joint Lead Managers. See Section 11 for further details.

4.12 Return of Application Monies

Pending the issue of New Units to an Investor, Application Monies will be held in a trust account that complies with the Corporations Act. No interest will be paid on Application Monies for the period from receipt until the issue of New Units occurs. Similarly, no interest will be paid to any Investor whose application (or part of an application) is returned by us unfilled.

Arena may, in its absolute discretion, reject in whole or in part any application. Refund cheques will be sent following completion of the Offer or as otherwise applicable in the circumstances outlined above. Arena does not need to give any reason for rejection.

In exceptional circumstances, where it is considered to be in the best interest of Unitholders, the processing of all Applications may be suspended.

4.13 Listing

(a) Application for ASX listing and quotation

Arena will apply for the admission of the Fund to the official list of ASX and the official quotation of the Units within 7 days after the date of this PDS. Subject to approval of the Listing by ASX, normal trading of the Units is anticipated to commence on Monday, 17 June 2013.

(b) CHESS and issuer sponsored holdings

This PDS has been prepared in support of an application for the admission of the Fund to the official list of the ASX and the official quotation of the Units on the ASX.

The ASX has an automated transfer and settlement system for transactions in securities quoted on the ASX called the Clearing House Electronic Sub-register System (CHESS). Under CHESS, transfers are effected in a paperless form and certificates or transfer forms are not issued or required.

In accordance with the Listing Rules and the ASTC Settlement Rules, Arena will maintain:

• § an electronic CHESS sub-register (for Unitholders who are participants in CHESS or are sponsored by such a participant); and

• § an electronic issuer sponsored sub register (for all other Unitholders).

Investors can choose to have their holdings registered in one of these two sub-registers, which together make up Arena’s register of Unitholders.

At least 2 trading days prior to the commencement of normal trading of the Units on the ASX, all Investors will be sent an issuer sponsored statement that sets out the number of Units that are registered in their name. This holding statement will also provide details of an Investor’s Holder Identification Number (HIN).

An Investor who wishes to have Units sponsored by a CHESS participant should forward their issuer sponsored statement and HIN (upon receipt) to their broker who will transfer their holding onto the CHESS sub register.

Arena REIT Product Disclosure Statement 21

04: Details of the Offer

4.14 Buyback

The on-market Buyback is intended to provide liquidity support to Unitholders who may wish to exit their unitholding in the Fund, following Listing.

Under the Buyback, the Fund may acquire a maximum of 13.2 million Units (equivalent to 10% of the Fund’s issued Units prior to the Offer) at a price up to $1.00 per Unit which represents the pro forma NTA per Unit following the Offer. The Fund will only purchase Units under the Buyback if:

• (a) The trading price of Units on ASX is $1.00 or less; and

• (b) The Fund is permitted to do so under the Constitution, Corporations Act, Listing Rules and securities trading policy of Arena.

The price paid by the Fund under the Buyback may be less than $1.00 per Unit and is not permitted to be more than the lesser of:

• (a) the Withdrawal Price; or

• (b) the 5-day volume weighted average price of Units on ASX.

The earliest date on which Units may be purchased under the Buyback (without regulatory relief) is after 14 days from the date of Listing (assuming trading in Units are recorded on the ASX on at least 5 days in that period).

Unitholders may participate in the Buyback (if undertaken) via selling their Units on ASX.

Whether Arena decides to proceed with the Buyback (in whole or part) will depend on its assessment, in its sole discretion, of market conditions and the best interests of Unitholders. No assurance is given that the Buyback will proceed.

4.15 Withdrawal Offer

The Fund may at any time (either alone or in combination with a Buyback) decide (in its sole discretion) to make an off-market Withdrawal Offer to redeem Units at the then prevailing Withdrawal Price. The Withdrawal Price will be calculated by reference to the NTA of the Fund at the time the Withdrawal Offer closes.

The total maximum amount which may be expended under the Buyback and/or Withdrawal Offer (if commenced) is $20.6 million.

Whether Arena decides to proceed with the Withdrawal Offer (in whole or part) will depends on its assessment, in its absolute discretion, of market conditions and the best interest of Unitholders. No assurance is given that the Withdrawal Offer will proceed.

4.16 Further enquiries

If you have further enquiries regarding the Offer, please contact the Offer Information Line on 1800 008 494 (toll free within Australia) between 8:30 am and 5:00 pm (AEST) Monday to Friday (excluding public holidays) during the Offer Period.

If you have queries or uncertainties relating to any matter you should consult your stockbroker, accountant or other financial adviser before deciding whether to invest.

22 Arena REIT Product Disclosure Statement

05: Details of the Fund and the Properties

5.1 Overview of the Fund

Arena REIT owns a portfolio of 177 childcare centre properties, comprising 172 childcare centres and 5 childcare centre development sites, located throughout Australia with a Carrying Value of $228 million as at 31 December 2012.

The Fund was established in 2003, as an unlisted fund, to acquire and develop a portfolio of childcare centres. The Fund acquired and developed 216 childcare centres over a period of 5 years and has grown to be one of Australia’s largest owners of childcare centre properties. The Fund sold its portfolio of 25 childcare centres in New Zealand in 2012.

The Fund ceased accepting applications for Units and offering regular withdrawal offers in 2008 as a result of prevailing economic conditions associated with the global financial crisis. As a result, Unitholders have not had access to liquidity from the Fund for an extended period of time. The Fund has continued to pay distributions to Unitholders since inception.

5.2 Portfolio overview

(a) A geographically diversified portfolio of childcare centre properties

The current portfolio is geographically diversified across the metropolitan and regional areas of Australia with the 3 largest States by population accounting for 78.9% of the portfolio, by value.

(b) Relatively long term leases

Arena REIT’s current earnings are underpinned by relatively long term leases with a WALE, as at 31 March 2013, of 8.2 years. Over 95% of the Fund’s childcare centres have leases which are based on the Standard Lease (summarised in Section 13.3) with an initial 15 year term plus options to extend for two further 5 year periods. Tenants on the Standard Lease are required to provide 5 years’ notice of their intention to take up each of the two 5 year option periods or terminate the lease.

The largest tenant, Goodstart, is owned by four leading community sector organisations in Australia, The Benevolent Society, Mission Australia, the Brotherhood of St Laurence and Social Ventures Australia. Goodstart leases represent 67.8% of the Fund’s income.[7]

See Section 5.4 for more information about Goodstart.

(c) Triple net leases

The current tenants are responsible for all, or substantially all, of the statutory and operating outgoings and costs including land tax, insurance, repairs and maintenance, including of a capital or structural nature under the Standard Lease for childcare centres 0.5% (summarised in Section 13.3).

==> picture [318 x 255] intentionally omitted <==

----- Start of picture text -----

0.5%
NT
1 Centre
35.5%
QLD
58 Centres
14.2%
NSW
14.8% 30 Centres
WA
22 Centres 2.6%
SA
4 Centres 29.2%
VIC
3.2% 51 Centres
TAS
6 Centres
----- End of picture text -----

(d) An attractive distribution yield

Arena has forecast a distribution yield for the Fund of 8.12% on the Offer Price for the full financial year to 30 June 2014.

(e) Location of Properties

The Fund owns 177 childcare centre properties (including 5 development sites) located throughout Australia. The Fund’s portfolio comprises childcare centres and development sites located in six States and the Northern Territory. Set out below is a map of the location of the childcare centres, showing percentage of value of the portfolio (as at 31 December 2012).

1. As at 31 March 2013.

Arena REIT Product Disclosure Statement 23

05: Details of the Fund and the Properties

The majority of the portfolio is located in metropolitan areas and was purpose built in the last 10 years. The composition of the portfolio, by number of centres, is shown in the following table.

Other property characteristics
Location	Metropolitan	59.6%
	Regional/Country	40.4%
Type of construction	Purpose built centre	91.3%
	Converted building	8.7%
Age of building	Built pre-2000	33.1%
	Built post-2000	66.9%

	Number of	Carrying Value	Rent (pa)	% Passing
	Properties1	($’000)1, 2	$’000	Yield2
Operating childcare centres
Queensland	56	$75,120	$7,622	10.15%
New South Wales	30	$31,865	$3,067	9.62%
Victoria	51	$65,555	$6,004	9.16%
Tasmania	6	$7,280	$712	9.78%
South Australia	4	$5,875	$534	9.09%
Western Australia	22	$33,130	$2,860	8.63%
Northern Territory	1	$1,060	$114	10.73%
Sub-Total	170	$219,885	$20,913	9.51%
Vacant centres - for sale or lease	2	$1,360
Sub-Total childcare centres	172	$221,245
Other property
Murarrie offce component		$3,200	$327	10.23%
Development land	5	$3,095
Development expenditure		$398
Sub-total other property	5	$6,693
Total property portfolio	177	$227,938	$21,240

Notes:

1. As at 31 December 2012.

2. Passing Yield means the annual rent divided by the Carrying Value expressed as a percentage. The Carrying Value of the property is the amount determined by the Directors. Arena may determine the requirement for an independent valuation at any time but has adopted a valuation program that provides for each property to be independently valued on a periodic basis by a suitably qualified valuer, at least once every three years. Changes in market conditions may necessitate more frequent independent valuations of properties. The Fund’s valuation policy is summarised in Section 5.11.

24 Arena REIT Product Disclosure Statement

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At top and above: 6A Chartwell Crescent, Derrimut, VIC.

25

Arena REIT Product Disclosure Statement

05: Details of the Fund and the Properties

In addition to two properties that were vacant at 31 December 2012, the leases for a further five properties have come to an end, or are about to come to an end as a result of Goodstart exercising its rights under an arrangement entered into at the time Goodstart took an assignment of the leases from ABC Learning. There are no other leases that provide the tenant with rights to terminate the leases before the end of the respective initial lease terms.

One of these properties has since been re-leased and a further property is expected to be sold in the near term at a price consistent with its Carrying Value. The Fund intends to lease or sell the remaining five vacant properties.

5.3 Tenant allocation

As at 31 March 2013, the Fund’s properties were leased to 27 tenants with a summary of the top 3 tenants of the Fund set out in the table below.

Tenant	Centres	% of portfolio,	Information
		by value
Goodstart	114	66.3%	See Section 5.4.
Preschool Services	11	5.5%	Preschool Services Australia is a privately owned childcare
Australia			operator.
Nurture One	8	3.5%	Nurture One is a privately owned childcare operator that
			operates 19 childcare centres in Australia.

5.4 Goodstart

Goodstart is the major tenant with 66.3% of the portfolio, by value (as at 31 March 2013).

A syndicate of leading community sector organisations – The Benevolent Society, the Brotherhood of St Laurence, Mission Australia and Social Ventures Australia – came together in 2009 to form Goodstart. It was incorporated on 13 October 2009 as a not-for-profit organisation in the form of a company limited by guarantee. On 27 December 2009, Goodstart entered into a contract to acquire some 669 childcare centres previously operated by ABC Learning. Following the completion of the assignment of leases from ABC Learning, Goodstart commenced operations on 30 May 2010.

As at 30 June 2012, Goodstart operated 655 early learning centres. There are approximately 6,200 long day care centres in Australia, of which Goodstart has a 10.6% market share. Goodstart has approximately 15,000 staff supporting over 61,000 families and 73,000 children attending their 655 centres around Australia.

Goodstart’s financial statements for the year ended 30 June 2012 disclosed total revenue of $736.4 million, earnings before depreciation, interest, tax and amortisation of $42.8 million, borrowings of $94 million and total equity of $20.8 million.

5.5 Lease Expiry

As at 31 March 2013, the Fund had a WALE of 8.2 years, comprising the following lease expiry profile (by annualised rental income):

Lease Expiry Profile (as at 31 March 2013)

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25
20
15
10
5
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Financial year of expiry
% of Annualised rent
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26 Arena REIT Product Disclosure Statement

The lease profile, on the previous page, reflects the end date of the initial lease terms for all 166 leased centres and the office space at Murarrie. The Standard Lease requires the tenant to provide 5 years’ notice of their intention to take up each of the two 5 year option periods or terminate the lease. There are 33 leases where the tenants are required to provide such notices in the 2014 financial year. Arena has not received any indication that these leases will be terminated.

5.6 Typical childcare centre owned by the Fund

Building description	Childcare Facilities providing long day care accommodation for 40 - 150 children.
	The buildings are typically designed to accommodate children from 6 weeks to 5
	years of age.
Typical confguration	Internal:Typically 4 - 6 activity rooms that cater for different age groups with direct
	access to external play areas. Centres catering for 0-1 year olds will also have a
	nursery. Feature entry & foyer, reception area, administration area, centre hallway,
	toilets for varying ages, shower, preparation areas, kitchen (commercially ftted),
	ancillary staff area, storage rooms, toilets including 1 disabled toilet. Education
	and Care Regulations require at least 3.25 square metres of unencumbered indoor
	space for each child.
	External:Shade cloths to sandpits and general play areas, awning covered
	verandas adjoining external play areas, grass and rubber matting to external play
	areas, child proof fencing throughout, paving, landscaping, lighting and signage.
	Education and Care Regulations require at least 7 square metres of unencumbered
	outdoor space for each child.
	Ancillary:on-site car parking spaces (required by planning regulations) in marked
	bays (including 1 disabled) - Typically 15 - 20.
Regulatory compliance	Tenants are responsible for meeting all legislative requirements including building
	services, occupational health and safety, essential services compliance audits and
	childcare provider and service approvals.
Location	Typically located in residential and commercial locations featuring medium to high
	traffc areas, good accessibility and public transport. Often located near primary
	schools and on main roads.
Underlying zoning	Approximately 70% of the Fund’s sites are zoned residential with the remainder
	being a mix of commercial or general use.
Alternative use	Residential or professional facilities (eg medical centre).
Land size	Average size of 2,600 square metres. Ranges from 1,000 to 4,500 square metres.
Building size	Average size of 540 square metres. Ranges from 250 to 950 square metres.
(Gross building area)
Lease term	Initial lease term of 15 years under the Standard Lease.
Average rent per centre	$123,400 per annum
Average passing	9.51% per annum
portfolio yield

Arena REIT Product Disclosure Statement 27

05: Details of the Fund and the Properties

5.7 Property developments

The Fund currently owns 5 development sites. The Fund intends to sell two of the sites that are located in regional Victoria. The Fund is in the process of developing childcare centres on the remaining three development sites as well as building a second childcare centre on an existing property - Augustine Heights. Details of the sites to be developed are set out in the table below. Please refer to Section 6.2 for risks associated with developments.

Location	Childcare	Total	Tenant	Completion
	places	estimated cost1	committed	due
Mernda - VIC	122	$2.7 million	Yes	May 2013
Maddingley – VIC	96	$2.3 million	Yes	Dec 2013
Griffen – QLD	75	$1.8 million	Pending	Dec 2013
Augustine Heights – QLD	75	$1.1 million	Yes	Dec 2013

Notes:

1. Includes cost of land and capital expenditure already incurred. Please refer to Section 8.6 for the costs to complete the development.

5.8 Major Unitholder

MSREF VII Global indirectly holds 26.9 million Units in the Fund (approximately 20.4% of the Fund prior to the Offer) and does not intend to participate in the Offer which will cause its holding to reduce to approximately 13.2% of the Fund following the Offer. MSREF VII Global has agreed to escrow its Units for a period of 6 months from the date of Listing of the Fund.

A summary of the terms of the Escrow Agreement between the Fund and MSREF VII Global is contained in Section 13.5.

MSREF VII Global is managed by a member of the Morgan Stanley Group. Morgan Stanley Australia Securities Limited, which is also a member of the Morgan Stanley Group, is a Joint Lead Manager. A summary of the terms of the Underwriting Agreement is contained in Section 13.4.

5.9 Financial risk management

Arena has a financial risk management policy which addresses the financial risks associated with managing the Fund, including management of debt facilities and related covenants and management of interest rate risk.

Arena adopts the following approach to managing financial risk:

• § maintaining headroom relative to key financial covenants;

• § diversifying lender risk by having two or more financiers with a strong credit rating;

• § maintaining sufficient liquidity to meet the Funds objectives; and

• § where possible, reducing refinancing risk by having staggered debt maturities (or managing debt refinancing well in advance of debt expiry).

The Fund has a targeted Gearing Ratio in the range of 35% to 45%. This range is lower than the covenant under the Debt Facility which requires the Fund to have a loan to value ratio of less than or equal to 50% (see Section 5.10).

It is Arena’s policy to minimise the volatility of the Fund’s future earnings from movements in interest rates. Arena has an interest rate risk management policy that sets out recommended hedging levels and hedging tenor. The amount hedged is also determined by the Debt Facility which requires the Fund to comply with its interest rate risk management policy (approved by the ANZ or NAB) or to have a minimum of 65% of drawn debt to be hedged against movements in interest rates for at least one year. Arena’s policy requires a minimum of 65% of drawn debt to be hedged against movements in interest rates for at least two years.

Arena’s counterparty to the Fund’s interest rate hedges will also be a party to the Fund’s debt facility which minimises credit risk. Presently, the counterparty to all the Fund’s interest rate hedges is NAB. The Fund’s compliance with the interest rate risk management policy is reported quarterly to the Arena Board.

28 Arena REIT Product Disclosure Statement

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At top and above: 17 David John Drive, Tarneit, VIC.

Arena REIT Product Disclosure Statement 29

05: Details of the Fund and the Properties

Arena actively manages and monitors these risks, particularly in relation to the loan to value ratio and interest cover ratio covenants under the Debt Facility. The policy requires a quarterly report to be provided to the Arena Board in respect of the forecast loan to value ratio and interest cover ratio based on the latest fund cash flows, valuations and debt forecasts. Arena provides actual covenant performance certificates on a quarterly basis to the lenders to the Fund.

The Fund’s financial risk management policy will continue to be reviewed in the context of any future indebtedness and the prevailing market conditions. The Board will continue to monitor the appropriateness of this policy to ensure that it meets the ongoing objectives of the Fund and is in the best interests of Unitholders.

5.10 Debt Facility of the Fund

The Fund has entered into the Debt Facility with NAB and ANZ, expiring in June 2016.

The Debt Facility may be used by the Fund for eligible purposes which include:

• (a) the acquisition of properties in accordance with the Fund’s investment strategy;

• (b) the development or refurbishment of existing properties;

• (c) fitout or incentive costs in respect of any properties;

• (d) the working capital requirements of the Fund; and

• (e) funding the proposed Buyback and Withdrawal Offer up to a maximum of $25 million.

The Debt Facility may be drawn down at any time and may be drawn upon multiple times.

Under the Debt Facility, the Fund is required to maintain:

• § a loan to value ratio of less than 50%. The Fund’s loan to value ratio is calculated by dividing the amount owing under the Debt Facility by the aggregate value of the Properties of the Fund (based on the most recent independent valuations), and

• § an interest cover ratio of more than 2.0 times. The Fund’s interest cover ratio is the ratio of operating profit (excluding non-cash items such as property or derivative valuations) of the Fund divided by the interest cost for that period.

Following the Offer, the Fund will have a Gearing Ratio of 10% and an interest cover ratio of 12 times for FY14 Forecast.

The Debt Facility requires the Fund to obtain consent from its lenders, for acquisitions that are greater than 20% of the value of the Properties of the Fund (based on the most recent independent valuations).

Arena expects that the Fund will be able to comply with the covenants under the Debt Facility.

NAB is also a Joint Lead Manager in respect of the Offer and the Debt Facility will be repaid (in part) from the proceeds of the Offer as described in this PDS.

A summary of the terms of the Debt Facility is contained in Section 13.2.

5.11 Valuation policy

The Carrying Value of the Properties will be reviewed by the Directors every six months prior to each reporting date. The Directors’ assessment of fair value will be periodically assessed by reference to an independent valuation.

The Carrying Value of the Property will be the amount determined by the Directors. Arena may determine the requirement for an independent valuation at any time but has adopted a valuation program that provides for each Property to be independently valued on a periodic basis by a suitably qualified valuer, at least once every three years. Properties that were last independently valued with a value of $5 million or more will be independently valued at least annually. Changes in market conditions may necessitate more frequent independent valuations of Properties. The valuation of Properties under development is on an as is basis.

Independent valuations are performed by a qualified valuer who is registered with an appropriate professional body and has a minimum of five years’ relevant experience. All independent valuations comply with relevant industry standards and codes.

30 Arena REIT Product Disclosure Statement

5.12 Distribution policy

The Fund intends to distribute a relatively high proportion of its operating earnings (excluding non-cash amounts), which will include all taxable income and reflects the underlying net cash flow from operating activities. The underlying net cash flow from operating activities of the Fund generally consists of rental income paid less the expenses of the Fund, including management fees and interest.

The Fund’s distribution will be formulated with regard to a range of factors including:

• § general business and financial conditions;

• § the certainty of the Fund’s cash flow;

• § the average lease duration and the timing of significant lease expiries;

• § medium term capital expenditure requirements of the portfolio of the Fund;

• § taxation considerations;

• § working capital requirements; and

• § other factors that the Directors consider relevant.

Distributions will be paid on a quarterly basis with distribution periods ending on 31 March, 30 June, 30 September and 31 December each year.

Distribution will generally be paid within 8 weeks of the relevant record date.

The Fund will not offer distribution re-investment upon Listing because the Constitution currently does not provide for Units to be issued by reference to the ASX quoted price.

5.13 Reporting

The Fund operates on a June financial year end basis for accounting and financial reporting purposes.

Formal financial reporting will be provided to Unitholders at 31 December (interim) and 30 June (full year) each year commencing with 30 June 2013 in accordance with the Corporations Act. These reports will detail (among other things) the following:

• § an income statement, balance sheet and statement of cash flows for the period;

• § the amount of distributions declared and paid for the period;

• § significant activities undertaken over the period; and

• § portfolio updates (including valuations of the Properties).

Arena REIT Product Disclosure Statement 31

06: Risks

Before investing, you should consider whether the Units are suitable given your personal investment objectives. If you require further information regarding the appropriateness or potential risks of this investment, you should seek appropriate financial advice.

All investments involve risk and there are many factors that can impact on the performance of an investment. This summary details some of the major risks that you should be aware of when investing in the Fund. Unitholders should be aware that the list of risks described below is not exhaustive.

6.1 Key risks relating to the Fund’s current Assets

(a) Concentration risk

The initial portfolio of Arena REIT is 100% invested in childcare centres and childcare centre development sites. Adverse events to the childcare property sector may result in general deterioration of tenants’ ability to meet their lease obligations across the portfolio or to future growth prospects of the current portfolio.

67.8% of the initial portfolio (as at 31 March 2013) is leased to Goodstart, by income. Any material deterioration in its operating performance may result in Goodstart not meeting its lease obligations which could reduce Arena REIT’s income.

(b) Tenant risk

The Fund relies on tenants to generate the majority of its revenue. These tenants are primarily not for profit companies limited by guarantee or private companies. If a tenant is affected by financial difficulties it may default on its rental or other contractual obligations which may result in loss of rental income or losses to the value of the Fund’s Properties. Under the Standard Lease, tenants are required to provide an unconditional and irrevocable bank guarantee, which must not expire until at least six months after the ultimate expiry date of the lease, for an amount equivalent to six months’ rent (plus GST) as security for its performance under the lease. Please refer to Section 13.3 for details of the bank guarantees required under the Standard Lease and the leases with Goodstart.

(c) Licensing

The provision of childcare services is a regulated activity. There is therefore a risk that if the relevant licence is revoked, no suitably qualified replacement tenant may be found.

(d) Government policy risk and change in law

Childcare operators rely heavily on government funding which, if reduced, may adversely impact the underlying demand for childcare services and therefore tenants’ ability to meet lease obligations and/or their demand for childcare properties. There is a risk that there may be changes in legislation, government policies or legal or judicial interpretation relating to the childcare sector.

6.2 Key risks relating to the Fund’s current Assets and future investment strategy

(a) Alternative use risk

The risks associated with investing in property assets can be greater for special purpose facilities such as childcare centres, healthcare facilities and aged care facilities, which may require extensive expenditure and rezoning to be suitable for other commercial purposes. The Fund’s performance depends in part on the demand for childcare centres in Australia. Most childcare centres would require extensive expenditure and rezoning to be suitable for other commercial purposes.

(b) Acquisitions and divestments

The Fund intends to make additional acquisitions of assets in accordance with the investment strategy. Future acquisitions may affect forecast distributions or any tax deferred portions of income returns. The value of the freehold interests in the properties may vary as a consequence of general property market conditions, the property market, or factors specific to an individual property. Decreases in value of the freehold interest may result in a decrease in the value at which Units trade on the ASX. The Fund may be required to sell one or more properties, which may result in a capital loss.

32 Arena REIT Product Disclosure Statement

(c) Re-leasing and vacancy

There is a risk that the Fund may not be able to negotiate suitable lease extensions with existing tenants or replace outgoing tenants with new tenants on substantially the same terms. The Fund could also incur additional costs associated with re-leasing the properties. Re-leasing the properties would depend on numerous market conditions and financial considerations prevalent at that time.

This risk may be partially mitigated by the structure of the Standard Lease for childcare centres which requires tenants to provide Arena with a five year notice period if they wish to terminate the lease.

(d) Rental income

Distributions made by the Fund are largely dependent upon the rents received from its property portfolio and expenses incurred during operations. Arena has made a number of assumptions in relation to the level of rental income the Fund will receive as described in Section 8. However, rental income may differ from those assumptions and may be affected by a number of factors, including:

• (i) overall macroeconomic conditions;

• (ii) competition from other childcare centres;

• (iii) the financial condition of tenants;

• (iv) increase in rental arrears and vacancy periods;

• (v) changes in government policies relating to the subsidies received by childcare centre operators; and

• (vi) supply and demand in the property market.

(e) Property valuations

The value of the property assets held directly by the Fund and which it may hold in the future is affected by a number of risks which, without limitation, include:

• (i) changes in market rental rates;

• (ii) fluctuating tenancy levels due to market forces;

• (iii) a downturn in the value of a property or in the property market in general;

• (iv) pricing or competition policies of any competing properties or tenants;

• (v) risk of tenants defaulting;

• (vi) increased competition from new or existing properties;

• (vii) increases in supply or falls in demand for property in the relevant sectors; and

• (viii) general economic conditions, such as interest rates.

Changes in the property market, especially changes in the valuation of properties and in market rents, may adversely affect the Fund’s income and distributions and the price of the Fund’s Units.

In addition, the independent valuations of the Properties are the best estimates of the independent valuers at the time of undertaking the valuation and may not reflect the actual price a property would realise if sold. The independent valuations are subject to a number of assumptions which may prove to be inaccurate.

(f) Development risk

In certain circumstances, the Fund may be exposed to development risk, resulting from the development of new properties, the refurbishment of existing properties or additions and extensions to existing properties.

Arena REIT Product Disclosure Statement 33

06: Risks

Property development carries a number of risks, including:

• (i) issues surrounding applications for planning approvals from local authorities which can result in delays or require amendments to plans both of which may result in increased costs;

• (ii) breach of contract by building contractors; and

• (iii) unforeseen circumstances which cause project delays or increases to building costs.

A number of factors affect the earnings, cash flows and valuations of commercial property developments, including construction costs, scheduled completion dates and securing tenants at estimated rental income.

(g) Property liquidity

Property assets are by their nature illiquid investments. The Fund may not be able to realise the assets within a short period of time or may not be able to realise assets at valuation. This may affect the Fund’s net asset value or trading price per Unit.

(h) Asset risk

The Properties held by the Fund may be damaged or destroyed by flood, fire, earthquake or other disaster. Whilst Arena insures the Properties against such risks, insurance coverage may prove to be insufficient or not available in some circumstances.

(i) Environmental issues

As with any property, there is a risk that one of the Properties may be contaminated now or in the future. Government environmental authorities may require such contamination be remediated. There is always a residual risk that the Fund may be required to undertake any such remediation at its own cost. Such an event would adversely impact upon the Fund’s financial performance.

In addition, environmental laws impose penalties for environmental damage and contamination which can be material in size.

Exposure to hazardous substance at a Property within the portfolio could result in personal injury claims. Such a claim could prove greater than the value of the contaminated Property.

An environmental issue may also result in interruptions to the operations of a Property, including the closure of the Property. Any lost income caused by such an interruption to operations may not be recoverable.

(j) Occupational health and safety

There is a risk that liability arising from occupational health and safety matters at a Property may be attributable to Arena as the landlord instead of, or as well as, the tenant. To the extent that any liabilities may be borne by the Fund, this may impact upon the financial performance of the Fund (to the extent not covered by insurance). In addition, penalties may be imposed upon Arena which may have an adverse impact on the Fund and/or Arena.

(k) Capital expenditure

The forecast capital expenditure represents Arena’s current best estimate of the associated costs in maintaining the existing portfolio in accordance with the assumptions and methodology set out in Section 8. Capital expenditure may exceed the current forecasts which could lead to increased funding costs and potentially lower distributions.

(l) Insurance

The Fund maintains a range of insurances relating to its properties with policy specifications and insured limits that it believes to be customary in the industry. However, potential losses of a catastrophic nature such as those arising from earthquakes, terrorism or severe flooding may be uninsurable or not insurable on reasonable financial terms, may not be insured at full replacement costs or may be subject to large excesses.

The nature and cost of insurance has been based upon the best estimate of likely circumstances. However, various factors may influence premiums to a greater extent than those forecast, which may in turn have a negative impact on the net income of the Fund.

34 Arena REIT Product Disclosure Statement

6.3 Key risks related to the Offer

(a) Economic and market conditions

A number of factors affect the performance of the equity market, which could affect the price at which Units trade on the ASX. Among other things, movements on international and domestic stock markets, interest rates, exchange rates, inflation and inflationary expectations and overall economic conditions, economic cycles, investor sentiment, political events and levels of economic growth, both domestically and internationally as well as government taxation and other policy changes may affect the demand for, and price of Units. Trading prices can be volatile and volatility can be caused by general market risks such as those that have been mentioned.

Recently, equity markets have become more volatile, with volatility in some markets at very high levels. Investing in or being invested through periods of such highly volatile conditions implies a greater level of risk for Investors than an investment in a more stable market. Units may trade at or below the Offer Price or NTA including as a result of any of the factors that have been mentioned, and factors such as those mentioned may also affect the income, expenses and liquidity of the Fund. Additionally, equity markets can experience price and volume fluctuations that may be unrelated or disproportionate to the operating performance of the Fund.

(b) Trading liquidity

Following Listing of the Fund on the ASX, there is no guarantee that an active trading market will develop for the Units. Liquidity of the Units will be dependent on the relative volume of buyers and sellers in the market at any given time. Some existing Unitholders may not want, or be able to continue to own their units once the Fund is listed. Additionally, large Unitholders choosing to trade out of their positions at discounts to prevailing market prices may also affect the market. The escrow restrictions which apply to the (currently) 20.41% holding of Units in the Fund held by Citrus Subsidiary Trust, the largest Unitholder in the Fund, for the Escrow Period described in Section 13.5, will cease to apply after the end of the Escrow Period.

These factors may result in Unitholders receiving a price less than the Offer Price.

(c) Forecast distributions

No assurances can be provided in relation to the payment of future distributions. Future determinations as to the payment of distributions by the Fund will be at the discretion of Arena and will depend upon the availability of profits, the operating results and financial conditions of the Fund, future capital requirements, covenants in relevant debt facilities, general business and financial conditions and other factors considered relevant by Arena.

No assurance can be given in relation to the level of tax deferral of future distributions. Tax deferred capacity will depend upon the amount of tax depreciation available and other factors. See Section 8 for further details regarding the tax deferred status of forecast distributions.

(d) Financial information and forecasts

The forward looking statements, opinions and estimates provided in this PDS, including the financial forecasts provided, rely on various contingencies and assumptions, some of which are described in Section 8. Various factors and risks, both known and unknown, many of which are outside the control of Arena, may impact upon the performance of the Fund and cause actual performance to vary significantly from expected results. There can be no guarantee Arena will achieve its stated objectives or that forward looking statements or forecasts will eventuate.

(e) Dilution risk

As the Fund issues Units to new Investors, existing Unitholders’ proportional beneficial ownership in the underlying assets of the Fund may be reduced.

(f) Funding

The Fund’s ability to raise funds from either debt or equity sources in the future depends on a number of factors, including, the state of debt and equity markets, the general economic and political climate and the performance, reputation and financial strength of the Fund and Arena. The Constitution of the Fund currently provides for the issue of Units only at a price calculated by reference to NTA, not the market price of Units on ASX. It is proposed that the Constitution of the Fund be amended, as set out in Section 13.1(n).

Arena REIT Product Disclosure Statement 35

06: Risks

6.4 Other risks related to the Fund and property fund investments

(a) Interest rates

Unfavourable movements in interest rates relating to the Fund’s Debt Facility could lead to increased interest expense, to the extent that interest rates are not hedged. This could impact the level of distributions available to Unitholders.

(b) Banking obligation risk

Under its Debt Facility, the Fund is subject to a number of undertakings and covenants, including in relation to gearing levels and interest cover ratios. An event of default would occur if the Fund fails to maintain these financial covenants. This may be caused by unfavourable movements in interest rates (to the extent interest rates are not hedged) or deterioration in the income or the value of the Fund’s Properties. In the event that an event of default occurs, the lender may require immediate repayment of the Debt Facility. Arena may need to dispose of assets for less than valuation, raise additional equity or reduce or suspend distributions in order to repay the Debt Facility, if this occurs.

(c) Financing

There is a risk that the Fund may not be able to refinance its Debt Facility and/or interest rate hedges before expiry or may not be able to refinance them on substantially the same terms as the existing facility or hedge instruments. Possible increases in the interest rate, the cost of interest rate hedges and the level of financial covenants required by lenders may adversely impact on the operational and financial results of the Fund and the level of distributions available to Unitholders.

(d) Gearing

The Fund’s gearing level will magnify the effects of any changes in interest rates or changes in property values or performance measures. If the level of gearing increases over the term of the Debt Facility, this may affect the ability of Arena to refinance the Fund’s Debt Facility.

(e) Personnel risk

Arena is owned by Citrus, which is owned and controlled by MSREF VII Global. The Fund relies upon the expertise, experience and strategies of the key executive directors and management of Arena. In the event that their services were no longer available, or if Arena ceased to be owned and controlled by MSREF VII Global, this may affect the management and financial performance of the Fund and therefore returns to Unitholders.

(f) Litigation

The Fund may in the ordinary course of business be involved in possible litigation and disputes (for example, tenancy disputes, development disputes, occupational health and safety claims or third party claims). A material or costly dispute or litigation may adversely affect the operational and financial results of the Fund.

(g) Change of responsible entity

There is a risk that Arena may be removed as the responsible entity of the Fund. A change of responsible entity may constitute a default under the Fund’s material agreements, which may result in a right for the counterparty to terminate the agreement. A change in responsible entity does not constitute an event of default under the existing Standard Lease.

(h) Compliance

The Fund is a managed investment scheme which means Arena is subject to strict regulatory and compliance arrangements under the Corporations Act and ASIC policy. If Arena fails to comply with the conditions of its Australian Financial Services Licence, then ASIC may take action to suspend or revoke the licence, which in turn could adversely impact the Fund.

36 Arena REIT Product Disclosure Statement

(i) Tax and stamp duty

The information in this PDS assumes that the Fund will not be subject to tax on its net income before that net income is distributed to Unitholders. However, the Fund would lose this “flow through” status if:

• § there was a legislative change which removed the “flow through” status of property trusts; or

• § the Fund engaged in activities which lead to it being taxed on its net income at the corporate tax rate for Australian income tax purposes.

Depending on Unitholders’ individual circumstances, a loss of the Fund’s tax transparency may adversely affect the after tax investment returns.

In addition, the taxation treatment for Unitholders is dependent upon the tax law as currently enacted in Australia. Changes in tax or stamp duty law or changes in the way tax or stamp duty law is expected to be interpreted in Australia may adversely impact the Fund’s returns, the distributions made to Unitholders or the outcomes outlined in Section 12.

Arena REIT Product Disclosure Statement 37

07: Investment objectives and strategy

This Section details the investment objectives and strategy of the Fund. This Section also provides an overview of the real estate investment sectors in which the Fund presently invests, or intends to invest in the future in accordance with the investment objectives and strategy.

7.1 Overview

The Fund’s objective is to generate an attractive and predictable distribution to Unitholders with earnings growth prospects over the medium to long term.

The investment strategy of the Fund is to invest in real estate in Australia featuring some or all of the following characteristics:

• § relatively long remaining lease term;

• § premises that have strategic importance for the operations of the tenant, such as where the properties have been purpose-built for the tenant or use (e.g. hospitals or childcare centres);

• § high credit quality tenants;

• § leases where the tenants are responsible for all, or substantially all, of the statutory and operating outgoings and costs including land tax, insurance and repairs and maintenance; and

• § manageable reversionary property valuation risk which Arena believes can be appropriately mitigated through active management.

In accordance with this investment strategy, the Fund intends over time to establish a diversified real estate portfolio characterised by relatively long term leases to tenants in sectors such as childcare, education, healthcare, aged care and government tenanted facilities. The Fund does not have a pre-determined real estate sector allocation. Arena intends to diversify the portfolio by sector, individual asset and tenant over the medium term.

The Fund will not invest in operating businesses. The Fund intends to generally invest in direct real estate but may from time to time invest in a partial interest, joint ventures or property securities where the underlying real estate is consistent with the Fund’s investment objectives.

7.2 Real estate investment sectors

The Fund’s existing childcare centre portfolio is characterised by leases with the following characteristics:

• § relatively long lease term on commencement, typically 15 years;

• § annual rental increases of CPI or a minimum of 2.5%; and

• § triple net leases where the tenant is typically responsible for all, or substantially all, of the statutory and operating outgoings and costs of operating the asset including land tax, insurance, repairs and maintenance, including of a capital or structure nature.

In the real estate sector, longer lease terms and triple net leases are more typical of special purpose assets where both the tenant and landlord prefer certainty of tenure given the increased alternative use risk for the landlord (as compared with more generic commercial property) and the potential value impact on the value of a tenant’s business without access to special purpose premises.

Arena considers that the following special purpose real estate sectors may satisfy the Fund’s investment objectives:

• § childcare assets;

• § healthcare assets, including medical centres, diagnostic facilities, hospitals and aged care facilities; and

• § education assets, such as schools and universities.

Arena currently also manages a portfolio of medical centres leased to Primary Healthcare. This portfolio shares similar characteristics to the Fund’s current childcare assets including a relatively long lease term on commencement, annual CPI or fixed increases and leases where the tenant is responsible for substantially all of the statutory and operating outgoings and costs relating to the asset including land tax, insurance, repairs and maintenance (including costs relating to any failed plant and equipment). Arena REIT intends to pursue similar investment opportunities in the healthcare sector but may also explore the opportunity to invest in hospitals and aged care facilities.

At this stage investment opportunities in the education sector are less well defined as the development of this real estate sector remains relatively immature. However, Arena considers that there may be an opportunity to invest in

38 Arena REIT Product Disclosure Statement

school and university assets through long term sale and lease back arrangements. Arena has commenced discussions with a leading Australian university relating to a potential sale and leaseback opportunity; however these discussions remain at a preliminary and incomplete stage.

Arena may also consider investment opportunities leased to high credit quality and government tenants on long term lease arrangements where it satisfies the Fund’s objective of generating an attractive and predictable distribution to Unitholders and is considered in the best interests of Unitholders to do so.

The timing and amount of future investments by the Fund cannot be reliably estimated. Therefore, no new property acquisitions are assumed to occur in the Forecast Period.

7.3 Childcare sector

The Childcare sector is an integral component of the education sector, principally aimed at pre-school children (0-4 year olds).

Type of Formal Child Care (2011)

Childcare is typically distinguished between formal and informal care. Formal care usually refers to childcare provided for a fee by an external party, with informal care normally provided by relatives.

==> picture [488 x 178] intentionally omitted <==

----- Start of picture text -----

4.3% 0.9%
care. Formal care usually refers to childcare provided for a fee by an
external party, with informal care normally provided by relatives. Occasional care Before and/or after school care
Formal childcare services in Australia are delivered via four streams 12.1%
of providers, where centre-based Long Day Care (LDC) is by far Family day
the largest component. LDC services are provided in a specialised care
childcare centre which provides educational, care and recreational 82.7%
programs. LDC is 82.7% of the market (2011) and represents all 1Long day care
childcare centre properties owned by Arena REIT. [8]
The sector serves as a critical social infrastructure in Australia, and
a key tool for government to increase workplace participation rates
with significant economic benefits.
Arena believes childcare property is an attractive sector for real
estate investment for the following reasons:
----- End of picture text -----

(a) Favourable macro fundamentals

The total number of LDC centres has grown at a pace of 2.0% to 6.5% p.a. in the last 10 years, driven by positive demographics shifts and increased service utilisation.[9]

• § Australia’s population of children aged 0-4 is projected to continue to grow steadily at approximately 1% per annum, from circa 1.36 million in 2008 to 1.61 million in 2025, an 18% increase over that period, providing a base level of support for growth in the childcare industry.[10]

• § Between 1996 and 2011, the proportion of children aged up to four years old who used formal childcare increased from 24% to 37%.[11] During the same period, the use of LDC by children aged up to four years old is estimated to have increased from around 13% in 1996 to 31%.[12]

• § The average weekly hours in childcare has also been increasing consistently. In September 2005 the average weekly hours of a child attending long day care was 19 hours but this has risen to 27.2 hours in June 2012.[13]

• § The long term trend to higher workforce participation, particularly by women, is a key contributor to demand for childcare services. In June 2008, of children where both parents were employed and living together, 53% usually attended childcare. This increased to 59% where the mother worked full time and to 70% for single parent families.[14]

(b) Long term leases

Childcare centre property leases typically provide a long-term stable income stream to the landlord. In addition, tenants typically bear all operating expenses including outgoings, insurance, as well as repairs and maintenance.

1. Australian Bureau of Statistics, “Childcare Education and Care”.

2. Department of Education, Employment and Workplace Relations.

3. Australian Bureau of Statistics, “Population Data”.

4. Australian Bureau of Statistics, “Childcare Education and Care”.

5. Australian Bureau of Statistics, “Childcare Education and Care”.

6. Department of Education, Employment and Workplace Relations.

7. Australian Bureau of Statistics, “Childcare Education and Care”.

39

Arena REIT Product Disclosure Statement

07: Investment objectives and strategy

(c) Government funding support

Given the social importance of childcare, the sector receives a significant amount of government funding in the form of both benefits and rebates. These include a means tested Childcare Benefit as well as the Childcare Rebate.

Total government funding represents 40% to 45% of total industry revenue.[15]

Government support for the sector is expected to continue with the 2012-13 budget forward estimates providing for government funding to increase to $5.5 billion in 2015-16, or an annual growth rate of 6% – 8% per annum.[16]

(d) Tenants

The sector received some support from the Federal Government following the collapse of ABC Learning. In November 2008, ABC Learning, the tenant to 94% of the Fund’s childcare centre properties went into receivership. The impact on the childcare sector and the wider economy was immediately recognised with the Federal Government providing funding to the receivers and managers to keep all centres open until 31 December 2008.

The collapse of ABC Learning, whilst a significant event in the childcare sector, highlighted the importance of the sector to the Australian economy resulting in the Federal Government’s immediate involvement with funding and support. Arena believes that the transition of a significant number of centres from ABC Learning to new operators was also an endorsement by the industry of the long term sustainability of the sector.

7.4 Healthcare sector

Arena and its affiliates have a long track record managing investment funds that invest in and develop medical facilities. To date, Arena and its affiliates have established the following healthcare investment vehicles which have a combined value in excess of $300 million:

• § Essential Healthcare Trust (established in 2002);

• § Sydney Healthcare Trust (established in 2002);

• § PHC Darlinghurst Syndicate and Trust and BSH Joint Venture (established in 2001); and

• § Pacific Private Property Trust (established in 2000).

In particular, the Essential Healthcare Trust progressively purchased a portfolio of 13 medical facilities including 8 general medical and surgical hospitals. The portfolio consisted of 886 overnight beds, 29 operating theatres and had a combined value of circa $190 million. The Essential Healthcare Trust partnered with Healthe Care Australia (the hospital operator) and over the period of ownership initiated capital works projects at Lingard Private Hospital, Belmont Private Hospital, Maitland Private Hospital, North West Private Hospital, South Eastern Private Hospital and Palm Beach Currumbin Clinic with combined value of $39 million. The entire portfolio was sold in December 2010 to New Zealand listed healthcare REIT Vital Healthcare Property Trust.

Healthcare services in Australia are delivered across a broad range of health infrastructure facilities. These include medical/surgical hospitals, day procedure centres, medical consulting suites, psychiatric facilities, laboratories and primary care medical clinics.

Healthcare is one of the largest industries in Australia, which generated approximately $121 billion turnover or 9.4% of gross domestic product in 2009 - 2010.[17]

The healthcare sector meets a number of Arena REIT’s investment criteria:

(a) Positive long term macro fundamentals

The healthcare services industry is relatively non-cyclical and driven by need with demand for both public and private healthcare services underpinned by:

• § The ageing of Australia’s population, where the proportion of the Australian population that is over the age of 65 is forecast to rise from 14% to 23% by 2056.[18] As government funded Medicare ensures all Australians have access to free or low-cost health and hospital care, this demographic trend will create growing demand for healthcare services.

• IBISWorld, “Childcare Services in Australia”.

• Department of Education, Employment and Workplace Relations.

• Australian Institute of Health and Welfare, “Australia’s Health 2012”.

• Private Health Insurance Administration Council, “Membership and Coverage, June 2012”.

40 Arena REIT Product Disclosure Statement

• § Steady growth of private health insurance, driving demand for private hospitals, which funds approximately 12% of total health expenditure nationally. As at 30 June 2012, 46.8% of the population (10.59 million) held private health insurance.[19]

(b) Long term leases

Healthcare property is a well-established real estate asset class globally. In Australia, healthcare property is considered critical to the tenant’s ongoing business operations, and as a result, lease tenure often ranges between 10 and 25 years with long dated extension options.

(c) Asset class performance

As at 31 December 2012, the IPD[20] Australian Healthcare Index displayed a compound annual return of 10.1% since 30 June 2007. This significantly outperformed the traditional property sectors, including both IPD Unlisted Property Fund Index and ASX 200 REIT Total Return Index, which only returned 4.2% p.a. and -9.9% p.a. respectively during the same period.

Asset Class Historical Performance

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----- Start of picture text -----

IPD Healthcare Index IPD Unlisted Property Fund Index ASX 200 REIT Total Return Index
200
150
100
50
0
June 2007 June 2008 June 2009 June 2010 June 2011 June 2012
----- End of picture text -----

The above performance translates into a moderate or even negative correlation measure of 0.71 to IPD Unlisted Property Fund Index and -0.54 to ASX 200 REIT Total Return Index, which underpins the strong diversification benefit of healthcare property investments.

(d) Tenant quality

In 2011-12, there were 1,345 hospitals in Australia (753 public and 592 private).[21] Public hospitals are generally considered high-grade due to their government ownership.

Private hospitals are operated by both for-profit and not-for-profit private organisations, the profitability of which depend on the preferred provider agreements with the relevant private health funds and the support of the referring practitioners.

Major hospital operators are in a stronger position to negotiate superior funding arrangements with health insurance funds and are also more capable of providing the resources required by practitioners.

Medical centres deliver an integrated service to provide patients with convenient and affordable access to a comprehensive range of medical services. Government funding represents a key support of the sector given that the majority of the medical services are bulk billed via the Medicare system.

1. Australian Bureau of Statistics “Population Projections”.

2. Investment Property Database Ltd, a leading provider of analytical services, indices and market information to the real estate industry. 21. Australian Institute of Health and Welfare, “Australia’s Hospitals 2011-12 at a glance”.

41

Arena REIT Product Disclosure Statement

07: Investment objectives and strategy

7.5 Education sector

The education industry provides services from preschool through to tertiary education in general, but excludes childcare. In 2012-13, total industry revenue was reported to be $111.6 billion, which is forecast to grow at 4.1% in the next 5 years to reach $136.4 billion by 2018.[22]

Investments in education properties are considered likely to be consistent with Arena REIT’s investment strategy, given:

(a) Positive long term macro fundamentals

• § Favourable demographic trends where population aged between five and 15 is forecast to grow at 1.2% p.a. between 2013 and 2020.[23] Australia has a compulsory education system for children aged between five and 15, growth of this population segment and its flow-on effect is expected to underpin the sector’s long term demand.

• § Higher education qualifications are becoming more important for employment in an increasingly knowledge-based economy increasing demand for education.

• § The industry exhibits counter cyclical revenue, where student retention rates typically increase during a weaker economic environment, as young students pursue higher education opportunities and mature-age students seek re-education.

(b) Lease structure

Unlike childcare and healthcare, there has been limited precedence of leasing activities of education properties in Australia, as most schools and universities own their properties on or off campus.

This provides scope for Arena REIT to actively explore potential sale and leaseback opportunities with high quality education providers for long-term lease structures that fit with its investment strategy.

(c) Tenant quality

Education service in Australia is delivered through a diverse set of providers, including preschool, school, higher education (universities and TAFE) and non-vocational education. As at 2012-13, schools are the largest industry earning 56% of total sector revenue.[24]

Education providers e.g. schools and universities are generally considered high quality credits due to the implicit government guarantees given their social importance. In addition, government funding represents a large source of income to the sector.

1. IBISWorld, “Education and Training in Australia”.

2. Australian Bureau of Statistics, “Population Data”.

3. IBISWorld, “Education and Training in Australia”.

42 Arena REIT Product Disclosure Statement

==> picture [596 x 382] intentionally omitted <==

==> picture [596 x 366] intentionally omitted <==

At top and above: 76-84 Baden Powell Drive, Tarneit, VIC.

Arena REIT Product Disclosure Statement 43

08: Financial Information

8.1 Introduction

The financial information contained in this Section includes historical and forecast financial information for the Fund comprising:

• § The Pro Forma Historical Income Statements of the Fund for the years ending 30 June 2011 and 30 June 2012 representing actual operating results derived from the Fund’s audited financial statements.

• § The Forecasts (covering the Forecast Period):

• the pro forma forecast income statement for the year ending 30 June 2013 (the FY13 Forecast), representing actual results derived from the Fund’s reviewed financial statements for the half year ended 31 December 2012 plus a pro forma forecast for the 6 month period 1 January 2013 to 30 June 2013; and

• the pro forma forecast income statement for the financial year ending 30 June 2014 (the FY14 Forecast).

• § The Fund’s historical balance sheet as at 31 December 2012 adjusted for certain transactions and the completion of the Offer (the Pro Forma Balance Sheet).

Collectively, the Financial Information.

The Financial Information should be read in conjunction with Arena’s key assumptions used in the preparation of the Financial Information set out in Section 8.6 and the risk factors in Section 6. The Financial Information assumes the completion of the following transactions:

• § a capital raising of $75.0 million and the payment of $3.7 million (including any non-recoverable GST) of associated equity raising and Listing costs;

• § a restructure of the Fund’s debt facility and interest rate swaps, to be completed on or about the Allotment Date, with estimated total expenditure of $2.0 million to be funded from the Fund’s existing cash reserves.

A breakdown of the sources and uses of the Offer Proceeds is shown in the table below:

Sources	($ million)	Uses	($ million)
Issue of New Units	75.0	Repayment of borrowings	71.3
		Equity raising costs	3.7
Total	75.0	Total	75.0

8.2 Basis of preparation

The Directors of Arena are responsible for the preparation of the Financial Information. The Financial Information has been prepared in accordance with the recognition and measurement principles contained in Australian Accounting Standards and other mandatory professional reporting requirements in Australia, except where otherwise disclosed.

The Financial Information is presented in an abbreviated format and does not contain all the disclosures provided in an annual report prepared in accordance with the Corporations Act.

Investors should refer to the Fund’s financial reports for the half year ended 31 December 2012 and the years ended 30 June 2011 and 30 June 2012 for more detailed financial disclosures, accounting policy information and commentary on the historical financial performance of the Fund (available at www.arenainvest.com.au).

PricewaterhouseCoopers Securities Ltd has prepared an Investigating Accountant’s Report in respect of the Financial Information. This report is included in Section 9. Investors should note the scope and limitations of that report.

44 Arena REIT Product Disclosure Statement

8.2.1 Pro Forma Historical Income Statement Information

The Pro Forma Historical Income Statement information has been derived from the audited financial statements of the Fund for the relevant historical period.

The Pro Forma Historical Income Statements presented have been adjusted to remove the operating results from the Fund’s New Zealand asset portfolio which was sold in April 2012. The New Zealand portfolio comprised 5% of the investment property value of the Fund and including the relevant historical information in respect of the portfolio would mean the historical financial information is not directly comparable with the Forecasts.

The Pro Forma Historical Income Statements have been presented before interest expense and borrowing costs and fair value movements from the mark-to-market revaluations of interest rate swaps and investment property.

The Fund’s debt facility terms and related borrowing costs materially changed following the sale of the New Zealand portfolio and are not comparable to the Debt Facility presented in the Forecasts due to significant differences in gearing levels, financier margins and covenant terms. Accordingly, this Information has not been included in the historical financial information presented.

The fair value movement in the mark-to-market of interest rate swaps and property revaluations have also been excluded from the historical financial information presented as there are no equivalent items in the Forecasts and consequently inclusion of these items would mean the historical financial information is not directly comparable with the Forecasts.

8.2.2 Forecast Financial Information

Arena has prepared the Forecasts based upon various assumptions. Due care and attention has been given to the preparation of the Forecasts and the assumptions represent Arena’s best estimate of anticipated future transactions and events based on information and documentation available at the date of issue of this PDS. Arena considers the Forecasts to be reasonable and that there is a reasonable basis for the preparation of the Forecasts. Investors should appreciate that forecasts by their very nature are subject to uncertainties which may be outside of the control of Arena or may not be capable of being foreseen or accurately predicted. As such, actual results may differ from the Forecasts and such differences may be material. There can be no guarantee or assurance that the Forecasts will be achieved.

Investors are advised to review the best estimate assumptions set out in Section 8.6, the sensitivity analysis set out in Section 8.8, the risk factors set out in Section 6 and other relevant information set out within this PDS.

Investors should note that the Forecasts exclude non-cash fair value adjustments for the mark-to-market of interest rate swaps used for hedging interest rate risk and from the revaluation of investment properties.

These non-cash fair market value movements are excluded from the forecasts as Arena does not believe there is a reasonable basis to forecast these items due to external market factors such as future capitalisation rates, property yields, general market conditions and market interest rates which are outside of its control. Non-cash fair market value movements are also excluded from the Fund’s underlying earnings used by Arena to determine distributions to Unitholders.

8.2.3 Pro Forma Balance Sheet

The Pro Forma Balance Sheet information has been prepared as if the Offer and other transactions disclosed in Section 8.1 had occurred on 31 December 2012 and is compiled from the historical balance sheet extracted from the Fund’s reviewed 31 December 2012 financial statements adjusted for the effect of certain transactions post 31 December 2012 as described in Section 8.1, as well as completion of the Offer.

Arena REIT Product Disclosure Statement 45

08: Financial Information

8.3 Pro Forma Historical and Forecast Income Statements

$ million	FY11 Historical1 FY12 Historical1 FY13 Forecast1,2 FY14 Forecast1,2 19.3 19.5 20.4 20.9 1.4 1.0 0.4 0.2 0.3 0.6 0.6 - (2.2) (2.3) (2.4) (1.9) (0.6) (0.6) (0.7) (0.5) 18.2 18.2 18.3 18.7 (7.6) (1.6) 10.7 17.1 (0.4) 0.8 (0.2) - 11.1 16.9 135.7 206.3 8.1 8.2 8.0 8.2 7.92% 8.12% 50% 28%	FY11 Historical1 FY12 Historical1 FY13 Forecast1,2 FY14 Forecast1,2 19.3 19.5 20.4 20.9 1.4 1.0 0.4 0.2 0.3 0.6 0.6 - (2.2) (2.3) (2.4) (1.9) (0.6) (0.6) (0.7) (0.5) 18.2 18.2 18.3 18.7 (7.6) (1.6) 10.7 17.1 (0.4) 0.8 (0.2) - 11.1 16.9 135.7 206.3 8.1 8.2 8.0 8.2 7.92% 8.12% 50% 28%	FY11 Historical1 FY12 Historical1 FY13 Forecast1,2 FY14 Forecast1,2 19.3 19.5 20.4 20.9 1.4 1.0 0.4 0.2 0.3 0.6 0.6 - (2.2) (2.3) (2.4) (1.9) (0.6) (0.6) (0.7) (0.5) 18.2 18.2 18.3 18.7 (7.6) (1.6) 10.7 17.1 (0.4) 0.8 (0.2) - 11.1 16.9 135.7 206.3 8.1 8.2 8.0 8.2 7.92% 8.12% 50% 28%
Income
Net property income3	19.3	19.5	20.4
Straight lining of rental income5	1.4	1.0	0.4
Other income	0.3	0.6	0.6
Expenses
Management fees	(2.2)	(2.3)	(2.4)
Other operating expenses	(0.6)	(0.6)	(0.7)
EBIT 1	18.2	18.2	18.3
Net interest and borrowing costs4			(7.6)
Net operating proft excluding fair value adjustments			10.7
Non-distributable income and expenses: - Straight-lining of future fxed rental increases5 - Write-off of capitalised borrowing costs4			(0.4) 0.8
Net operating proft available for distribution 6, 7			11.1
Weighted average number of Units on Issue (million)8			135.7
Underlying Earnings per Unit (EPU) (cents) 6			8.1
Distribution per Unit (cents)7			8.0
Cash distribution yield 9			7.92%
Tax deferred component 10			50%

Notes:

1. Refer to Section 8.2 for the basis of preparation of the Pro Forma Historical Income Statements and Forecasts. Actual results for the 1st half of FY13 are shown in Section 8.9.

2. Refer to Section 8.6 for information on key assumptions used in preparing the Forecasts.

3. Net property income reflects gross rental income less property expenses. For comparability with the Forecasts, the FY11 and FY12 net Property Income presented has been adjusted from that presented in the Fund’s annual financial statements to eliminate income from the Fund’s New Zealand portfolio sold in April 2012. Refer to the reconciliation of Statutory Reported Net Profit to the Pro Forma Historical Income Statements in Section 8.4.

4. The FY13 Forecast includes the write-off of $0.8 million in carry-forward capitalised borrowing costs (balance as at 31 March 2013) in relation to the Fund’s previous debt facility, the terms of which have been materially revised, with effect on or about the Allotment Date. The write-off is added back for the purpose of determining underlying earnings for the FY13 distribution to Unitholders.

5. Reflects the non-cash income from the straight-lining of future fixed rental increases per Australian Accounting Standards which are excluded in determining net operating profit available for distribution. FY11 and FY12 straight lining of rental income have been restated to be on a basis consistent with the Forecasts. Refer to the reconciliation of Pro Forma Income Statements to Reported Statutory Net Profit in Section 8.4.

6. Underlying earnings is the net operating profit available for distribution representing the Fund’s net income from which cash distributions will be determined. In addition to the items noted above, this excludes the movement in fair market value from the revaluation of interest rate swaps and investment property.

7. The Fund’s net cash flow from operating activities is expected to be substantially the same as net operating income over the course of a reporting period as operating cashflow generally occurs within the 30 day period prior to or following the relevant transaction being recognised in the income statement.

8. Based on an Allotment Date for New Units of 13 June 2013.

9. Represents the forecast cash distribution calculated as a percentage of the Offer Price.

10. Percentage of tax deferred distribution expected to be tax deferred. Refer to Section 12 for more information about the tax implications of being a Unitholder in the Fund.

46 Arena REIT Product Disclosure Statement

8.4 Reconciliation of Pro Forma Historical Income Statements to reported statutory net profit

The Pro Forma Historical Income Statements are reconciled to the historical reported net profit of the Fund in the table below.

			FY13
			1st Half
$ million	FY111	FY121	Actual2
Net operating proft available for distribution			5.2
Straight lining of rental income4			0.4
Net interest and borrowing costs			3.6
EBIT	18.2	18.2	9.2
Reconciliation adjustments:
Net income of New Zealand portfolio3	1.1	1.0	-
Net interest and borrowing costs	(10.4)	(9.5)	(3.6)
Change in fair value of investment property4	6.2	8.4	0.1
Change in fair value of other investments	1.6	1.4	1.4
Change in fair value of interest rate swaps	1.4	(4.2)	(0.3)
Other	(0.1)	0.4	-
Reported statutory net proft	18.0	15.7	6.8

Notes:

1. FY11 and FY12 are reconciled from EBIT as presented in Section 8.3.

2. FY13 1st half actual is reconciled from a net operating profit available for distribution as this reflects the presentation of the FY13 Forecast presented in Section 8.3.

3. As noted in Section 8.2.1 and Section 8.3, the New Zealand portfolio was sold in April 2012.

4. Investment property revaluations are presented net of the effect from straight lining of rental income.

Arena REIT Product Disclosure Statement 47

08: Financial Information

8.5 Historical and Pro Forma Balance Sheet

$ million	Actual 31 Dec 2012 Pro Forma adjustments for events subsequent to 31 Dec 20121 Adjusted 31 Dec 2012 Effect of the revised Debt Facility & hedging2 Effect of the Offer3 Pro Forma 31 Dec 2012 13.8 (5.7) 8.1 (2.0) - 6.1 1.2 - 1.2 - - 1.2 227.9 - 227.9 - - 227.9 242.9 (5.7) 237.2 (2.0) - 235.2 (3.1) - (3.1) - - (3.1) (2.6) - (2.6) - - (2.6) (100.3) 5.7 (94.6) (0.5) 71.3 (23.8) (2.3) - (2.3) 2.3 - - (108.3) 5.7 (102.6) 1.8 71.3 (29.5) 134.6 - 134.6 (0.2) 71.3 205.7 134.6 - 134.6 (0.2) 71.3 205.7 132.08 - 132.08 - 74.26 206.34 $1.02 $1.02 $1.00 42% 40% 10%	Actual 31 Dec 2012 Pro Forma adjustments for events subsequent to 31 Dec 20121 Adjusted 31 Dec 2012 Effect of the revised Debt Facility & hedging2 Effect of the Offer3 Pro Forma 31 Dec 2012 13.8 (5.7) 8.1 (2.0) - 6.1 1.2 - 1.2 - - 1.2 227.9 - 227.9 - - 227.9 242.9 (5.7) 237.2 (2.0) - 235.2 (3.1) - (3.1) - - (3.1) (2.6) - (2.6) - - (2.6) (100.3) 5.7 (94.6) (0.5) 71.3 (23.8) (2.3) - (2.3) 2.3 - - (108.3) 5.7 (102.6) 1.8 71.3 (29.5) 134.6 - 134.6 (0.2) 71.3 205.7 134.6 - 134.6 (0.2) 71.3 205.7 132.08 - 132.08 - 74.26 206.34 $1.02 $1.02 $1.00 42% 40% 10%	Actual 31 Dec 2012 Pro Forma adjustments for events subsequent to 31 Dec 20121 Adjusted 31 Dec 2012 Effect of the revised Debt Facility & hedging2 Effect of the Offer3 Pro Forma 31 Dec 2012 13.8 (5.7) 8.1 (2.0) - 6.1 1.2 - 1.2 - - 1.2 227.9 - 227.9 - - 227.9 242.9 (5.7) 237.2 (2.0) - 235.2 (3.1) - (3.1) - - (3.1) (2.6) - (2.6) - - (2.6) (100.3) 5.7 (94.6) (0.5) 71.3 (23.8) (2.3) - (2.3) 2.3 - - (108.3) 5.7 (102.6) 1.8 71.3 (29.5) 134.6 - 134.6 (0.2) 71.3 205.7 134.6 - 134.6 (0.2) 71.3 205.7 132.08 - 132.08 - 74.26 206.34 $1.02 $1.02 $1.00 42% 40% 10%	Actual 31 Dec 2012 Pro Forma adjustments for events subsequent to 31 Dec 20121 Adjusted 31 Dec 2012 Effect of the revised Debt Facility & hedging2 Effect of the Offer3 Pro Forma 31 Dec 2012 13.8 (5.7) 8.1 (2.0) - 6.1 1.2 - 1.2 - - 1.2 227.9 - 227.9 - - 227.9 242.9 (5.7) 237.2 (2.0) - 235.2 (3.1) - (3.1) - - (3.1) (2.6) - (2.6) - - (2.6) (100.3) 5.7 (94.6) (0.5) 71.3 (23.8) (2.3) - (2.3) 2.3 - - (108.3) 5.7 (102.6) 1.8 71.3 (29.5) 134.6 - 134.6 (0.2) 71.3 205.7 134.6 - 134.6 (0.2) 71.3 205.7 132.08 - 132.08 - 74.26 206.34 $1.02 $1.02 $1.00 42% 40% 10%	Actual 31 Dec 2012 Pro Forma adjustments for events subsequent to 31 Dec 20121 Adjusted 31 Dec 2012 Effect of the revised Debt Facility & hedging2 Effect of the Offer3 Pro Forma 31 Dec 2012 13.8 (5.7) 8.1 (2.0) - 6.1 1.2 - 1.2 - - 1.2 227.9 - 227.9 - - 227.9 242.9 (5.7) 237.2 (2.0) - 235.2 (3.1) - (3.1) - - (3.1) (2.6) - (2.6) - - (2.6) (100.3) 5.7 (94.6) (0.5) 71.3 (23.8) (2.3) - (2.3) 2.3 - - (108.3) 5.7 (102.6) 1.8 71.3 (29.5) 134.6 - 134.6 (0.2) 71.3 205.7 134.6 - 134.6 (0.2) 71.3 205.7 132.08 - 132.08 - 74.26 206.34 $1.02 $1.02 $1.00 42% 40% 10%
Cash	13.8	(5.7)	8.1	(2.0)	-
Trade and other receivables	1.2	-	1.2	-	-
Investment properties	227.9	-	227.9	-	-
Total Assets	242.9	(5.7)	237.2	(2.0)	-
Trade and other payables	(3.1)	-	(3.1)	-	-
Distribution payable	(2.6)	-	(2.6)	-	-
Borrowings (non-current)4	(100.3)	5.7	(94.6)	(0.5)	71.3
Interest rate swaps	(2.3)	-	(2.3)	2.3	-
Total Liabilities	(108.3)	5.7	(102.6)	1.8	71.3
Net Assets	134.6	-	134.6	(0.2)	71.3
Unitholders’ Equity	134.6	-	134.6	(0.2)	71.3
Number of Units on Issue (millions)	132.08	-	132.08	-	74.26
NTA per Unit	$1.02		$1.02
Gearing Ratio5	42%		40%

Notes

1. Pro forma adjustment to the Fund’s 31 December 2012 historical balance sheet:

2. $5.7 million of cash was used to repay bank debt in January 2013.

3. The effect of restructuring the Debt Facility and interest rate swaps:

4. Interest rate swaps with a fair value of $2.3 million at 31 December 2012 are assumed to be cancelled for a payment of $1.6 million (based on a valuation as at 31 March 2013) from existing cash reserves on or about the Allotment Date.

5. Capitalised borrowing costs of $0.9 million are written-off (balance at 31 December 2012).

6. Up-front debt facility costs of $0.4 million for the revised Debt Facility are paid on or about the Allotment Date.

7. Impact of the Offer and use of proceeds:

8. Equity contributions of $71.3 million (net of $3.7 million equity raising costs).

9. $71.3 million used to repay drawn debt.

10. Interest bearing liabilities are shown net of capitalised borrowing costs.

11. Gearing Ratio calculated as drawn debt / total Assets.

48 Arena REIT Product Disclosure Statement

8.6 Key assumptions used in preparing the Financial Information

(a) General Assumptions

General assumptions used in preparing the Forecasts regarding the general economic and regulatory environment in which the Fund operates.

• § CPI assumed to be an average of 2.5% per annum;

• § no material change in the competitive environment affecting the Fund; and

• § no material change in applicable regulations or legislation affecting the Fund.

(b) Net property income

Net property income comprises rental income net of property expenses. Property expenses consist of rates, taxes on vacant property, property portfolio management and valuation and other property expenses.

Rental income has been forecast on a property by property basis based on existing leases and assumptions in relation to future rental increases. Annual rent reviews in the Forecast Period occur at the minimum amount in each lease, generally 2.5% p.a. The Forecasts assume all existing leases are enforceable and are performing in accordance with their terms.

Property expenses have been forecast based on existing contracts and assumptions for future costs.

(c) Leasing and vacancy

No childcare centre leases are scheduled to expire during the FY14 Forecast period. Two vacant properties are assumed to be leased from December 2013 at rates similar to equivalent properties in the Fund’s portfolio.

(d) Property acquisitions and disposals

No new property acquisitions are assumed to occur in the Forecast Period. While the Fund will consider new investment opportunities on an on-going basis which are consistent with its investment mandate, the timing and amount of future investments cannot be reliably estimated.

The Fund has identified a small number of properties with a book value at 31 December 2012 of $3.7 million to be sold in FY14 as part of its property portfolio management process. These properties are forecast to realise their book value with proceeds used to repay debt.

(e) Capital expenditure

The Fund’s obligation in respect of capital expenditure is presently limited to vacant properties and new developments. The Fund has four childcare centres in development on land already acquired by the Fund. Allowance has been made in the Forecast Period for capital expenditure of $0.4 million in the FY13 Forecast and $3.3 million in the FY14 Forecast to complete existing developments.

The Forecasts assume that no other capital expenditure is incurred.

(f) Management fees

While the Fund is listed on ASX, Arena will waive a portion of its entitlement to management fees in accordance with the tiered fee structure set out in Section 11. The assumed rate for the FY14 Forecast is 0.80% of the gross asset value of the Fund. Management fees are calculated and paid monthly.

(g) Other operating expenses

The Fund will incur operating expenses including ASX listing fees, registry fees, asset custodian fees, insurance, legal, audit and tax compliance fees, investor reporting costs and other miscellaneous expenses. These costs have been forecast by taking into account factors likely to influence the level of these expenses including the Fund’s market capitalisation and gross assets.

Arena REIT Product Disclosure Statement 49

08: Financial Information

(h) Borrowings

The Fund has entered into the Debt Facility with NAB and ANZ with a limit of $110 million and a three year term (refer to Sections 5.10 and 13.2 for further information).

The Debt Facility is forecast to be drawn to $24.2 million on completion of the Offer resulting in a Gearing Ratio of 10% per the Pro Forma Balance Sheet. This compares to a targeted Gearing Ratio in the range of 35% to 40% (refer to Section 5.9).

The undrawn component of the revised Debt Facility can be used for agreed purposes which include capital expenditure for development of new assets, the acquisition of income producing properties and funding the proposed Buyback and Withdrawal Offer.

(i) Net interest and borrowing costs

Interest on the revised Debt Facility consists of fixed line fees and margin and a floating base rate determined via reference to the floating bank bill rate. The Fund uses interest rate swaps to hedge movements in floating interest rates. As at 31 March 2013, the Fund had interest rate swaps covering 90% of the drawn bank debt at a fixed rate of 4.0%.

Following the completion of the Offer, the Fund’s debt is expected to be drawn to $24.2 million. Accordingly, the Fund intends to restructure its interest rate swap book to cover at least 80% of the drawn debt for at least a three year term at an assumed fixed interest rate of 3.50%. This restructure may occur prior to Allotment Date and based on market interest rates as at 31 March 2013, the cost of restructuring the existing interest rate swaps is estimated to be $1.6 million. The actual cost of restructuring the swaps will be dependent on interest rates prevailing at the time and may require a higher or lower cash payment.

(j) Valuation of investment properties

The Fund’s investment property portfolio is independently valued on a rolling basis over a three year period. At 31 March 2013, 73% of the portfolio has been independently valued in the previous 12 months. The valuation of Properties under development is on an as is basis.

The investment property portfolio has an average passing income yield of 9.5% based on the Carrying Value of the Properties.

No revaluation of the investment properties has been assumed in the Forecasts as future valuations cannot be reliably forecast as they will be subject to market forces outside of the control of the Fund.

(k) Offer costs

Equity raising costs of $3.7 million are recognised directly in equity and will be funded from the Offer proceeds.

(l) Taxation

The Fund is not liable to pay Australian income tax on the basis that Unitholders will be presently entitled to net income of the Fund during the Forecast Period. Hence, no allowance for income tax has been made by the Fund.

(m) Future capital raisings

Other than the Offer, no further capital raisings are assumed to occur during the Forecast Period. The Fund may engage in future capital raisings to fund future activities, such as new asset acquisitions.

8.7 Forecast distribution guidance

Unitholders will be entitled to a distribution if they are on the register of Unitholders on the relevant record date. Distributions are expected to be paid within 8 weeks following the end of each quarterly distribution period.

The forecast distribution per Unit for the period from Allotment Date to 30 June 2013 is anticipated to be 0.4 cents per Unit. Total distribution to Unitholders for the 12 month period ending 30 June 2013 is anticipated to be 8.0 cents per Unit.

The forecast distribution for the 12 month period ending 30 June 2014 is anticipated to be 8.2 cents per Unit.

50 Arena REIT Product Disclosure Statement

8.8 Sensitivity analysis on the financial information

A summary of the possible impact of movements in certain key assumptions on the FY14 Forecast and Pro Forma Balance Sheet is set out below. However, it should be noted that the disclosed changes in the key assumptions are not intended to be indicative of the complete range of variations that may occur. Sensitivities on the FY13 Forecast are not provided as the period is substantially complete at the time of the Offer.

Care should be taken in interpreting these sensitivities as they consider movements on an isolated basis, whereas in reality the effects of movements may be offset or compounded by movements in other variables. Furthermore, in the normal course of business, management would be expected to respond to any adverse changes in these key variables to minimise the net effect on financial performance.

(a) General sensitivities on the FY14 Forecast

	FY14 Forecast ($ million)	FY14 Forecast EPU (cents)
Net operating proft available for distribution	16.9	8.2
Incremental impact from change in assumption
Change in CPI1	+ 0.09 / - 0.00	+ 0.05 / -0.00
Change in investment property value2	+ / - 0.10	+ / - 0.05
Change in foating interest Rates3	+ / - 0.00	+ / - 0.00
Change in fxed interest Rates4	+ / - 0.10	+ / - 0.05
Change in operating expenses5	+ / - 0.05	+ / - 0.03

Notes 1. Assumes a 50 basis point change in CPI. 2. Assumes a 5% change in investment property value. 3.Assumes a 50 basis point change in floating interest rates. 4. Assumes a 50 basis point change in fixed interest rates. 5. Assumes a 10% change in property and Fund operating expenses (excludes statutory charges such as rates and taxes).

(b) Buyback and Withdrawal Offer

Arena may (in its sole discretion) decide to expend up to $20.6 million following the completion of the Offer in buying back (or redeeming) Units by way of an on-market Buyback (of up to 10% of the Fund’s issued Units prior to the Offer) and/or an off-market Withdrawal Offer (refer to Sections 4.14 and 4.15). The Forecasts assume that no Units are cancelled through the Buyback or Withdrawal Offer as the ability to acquire Units within the proposed pricing limits cannot be reliably forecast.

The following table illustrates the sensitivity of the FY14 Forecast EPU and Pro Forma Balance Sheet Gearing Ratio from the Buyback and Withdrawal Offer. It is assumed for the purposes of the sensitivity that the Buyback and Withdrawal Offer are entirely funded with debt, occur with effect on 1 July 2013 and are priced at $1.00 per Unit, being the Fund’s NTA per the Pro-Forma Balance Sheet following the completion of the Offer. The Fund does not intend to purchase Units at a price greater than NTA per Unit.

	Cumulative	FY14	Pro Forma
	expenditure	Forecast EPU	Balance Sheet
	($ million)	(cents)	Gearing Ratio2
Base Case: No Buyback	Nil	8.20	10%
			Cumulative change
		Cumulative Change in	in Pro Forma Balance
		EPU (cents)1	Sheet Gearing Ratio
50% of Buyback completed	6.6	+0.16	+ 3%
100% of Buyback completed	13.2	+0.29	+ 6%
100% of Withdrawal Offer also completed	20.6	+0.48	+ 9%

Notes 1. The EPU effect is presented on an annualised basis. 2. Gearing Ratio calculated as drawn debt / total Assets.

Arena REIT Product Disclosure Statement 51

08: Financial Information

8.9 FY13 Forecast

The FY13 Forecast consists of 6 months actual results to 31 December 2012 derived from the audit reviewed financial statements of the Fund for the half-year ended 31 December 2012 and a 6 month forecast for the period 1 January 2013 to 30 June 2013.

The FY13 Forecast is separated into the respective half year period in the table below.

	FY13	FY13
	1st half	2nd half	FY13
$ million	actual1	Forecast	Forecast
Income
Net property income	9.9	10.5	20.4
Straight lining of rental income	0.4	-	0.4
Other income	0.3	0.3	0.6
Expenses
Management fees	(1.2)	(1.2)	(2.4)
Other operating expenses	(0.2)	(0.5)	(0.7)
EBIT	9.2	9.1	18.3
Net interest and borrowing costs	(3.6)	(4.0)	(7.6)
Net operating proft excluding fair value adjustments	5.6	5.1	10.7
Non distributable income and expenses
- straight lining of rental income	(0.4)	-	(0.4)
- write-off of capitalised borrowing costs	-	0.8	0.8
Net operating proft available for distribution	5.2	5.9	11.1
Weighted average number of Units on issue (million)	132.1	139.5	135.7
Underlying earnings per Unit (EPU) (cents)	3.95	4.23	8.14
Distribution per Unit (cents)	3.75	4.25	8.00

Notes

1. FY13 1st half actual is derived from the Fund’s half-year financial report for the period ended 31 December 2012. Net operating profit available for distribution is reconciled to the net profit reported in the Fund’s half-year financial report in Section 8.4.

8.10 Significant accounting policies

The following significant accounting policies have been extracted from the Fund’s annual financial report for the year ending 30 June 2012. The preparation of financial information requires the application of accounting policies. The selection of accounting policies requires judgement and the application of policies requires estimates and assumptions to be applied. Actual results may differ to those derived from the application of accounting policies where actual outcomes vary to assumptions and estimates made.

The significant accounting policies described below apply judgement and estimates which could impact the reported results of operations in future financial periods.

52 Arena REIT Product Disclosure Statement

(a) Property rental income

Rental income from operating leases is recognised as income on a straight-line basis over the lease term. Where a lease has fixed annual increases, the total rent receivable over the operating lease is recognised as revenue on a straight-line basis over the lease term. This recognition results in more income being recognised early in the lease term and less late in the lease term compared to the lease conditions. The difference between the lease income recognised and the actual lease payments received is shown within the fair value of the investment property on the Balance Sheet of the Fund.

When the Fund provides lease incentives to tenants, the cost of the incentives are recognised over the lease term, on a straight-line basis, as a reduction in rental income.

(b) Investment property

Investment property is real estate investments held to earn long-term rental income and for capital appreciation. Investment properties are carried at fair value with changes in fair value recorded in the income statement. Investment properties are not depreciated.

The basis of the valuation of investment properties is fair value, being the amounts for which the properties could be exchanged between willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases.

(c) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the profit and loss over the period of the borrowings using the effective interest rate. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired.

Borrowings are classified as current liabilities unless the fund has an unconditional right to defer settlement of the liability for at least 12 months. Borrowing costs are expensed unless incurred for the construction of a qualifying asset where during the time of construction borrowing costs are capitalised.

(d) Financial instruments

Derivative financial instruments such interest rate swaps are designated as financial instruments at fair value through profit or loss. The Fund does not designate any derivatives as hedges in a hedging relationship.

Financial instruments are recognised on the date the Fund becomes party to the contractual agreement (trade date). Financial instruments at fair value through profit or loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profit or loss are measured at fair value with changes in their fair value recognised in profit or loss.

Arena REIT Product Disclosure Statement 53

09: Investigating Accountant’s Report

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The Directors Arena Investment Management Limited as Responsible Entity for Arena REIT Level 20, 600 Bourke Street Melbourne VIC 3000

13 May 2013

Dear Directors

Subject: Investigating Accountant’s Report on Historical and Forecast Financial Information and Financial Services Guide

We have prepared this report on certain historical and forecast financial information of Arena REIT (the Fund ) for inclusion in a Product Disclosure Statement dated on or about 13 May 2013 (the PDS ), relating to the proposed issue and sale of units in the Fund and listing on the Australian Securities Exchange (the Issue ).

Expressions defined in the PDS have the same meaning in this report.

The nature of this report is such that it should be given by an entity which holds an Australian financial services licence under the Corporations Act 2001. PricewaterhouseCoopers Securities Ltd, which is wholly owned by PricewaterhouseCoopers, holds the appropriate Australian financial services licence. This report is both an Investigating Accountant’s Report, the scope of which is set out below, and a Financial Services Guide, as attached at Appendix A.

Background

Arena Investment Management Limited (the Responsible Entity) as responsible entity for the Fund will apply for admission of the Fund to the Official List of ASX and quotation of units of the Fund on the ASX under ASX code ARF. Upon ASX approval for admission of the Fund to the Official List of ASX, Arena as Responsible Entity for the Fund proposes to offer approximately 74 million new units in the Fund.

Scope

Arena as Responsible Entity for the Fund has requested PricewaterhouseCoopers Securities Ltd prepare this investigating accountant’s report (the Report ) covering the following information:

Historical financial information

(a) the historical pro forma income statements of the Fund for the years ended 30 June 2011 and 30 June 2012;

(b) the historical balance sheet of the Fund as at 31 December 2012 and the pro forma balance sheet of the Fund as at 31 December 2012 (the Pro Forma Balance Sheet ) which assumes completion of the proposed transactions disclosed in Section 8 of the PDS (the Pro Forma Transactions ),

(collectively, the Historical Financial Information ); and

54 Arena REIT Product Disclosure Statement

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Forecast financial information (c) the forecast income statements of the Fund for the years ending 30 June 2013 and 30 June 2014 (the Forecasts ). This Report has been prepared for inclusion in the PDS. We disclaim any assumption of responsibility for any reliance on this Report or on the Forecasts to which this Report relates for any purposes other than the purpose for which it was prepared. Scope of review of Historical Financial Information The Historical Financial Information set out in Section 8 of the PDS has been derived from the audited financial statements of the Fund. The financial statements were audited by PricewaterhouseCoopers who issued an unqualified audit opinion on them. The Historical Financial Information incorporates such pro forma transactions and adjustments as the Directors of the Responsible Entity considered necessary to present the Historical Financial Information on a basis consistent with the Forecasts. The Directors of the Responsible Entity are responsible for the preparation of the Historical Financial Information, including the determination of the Pro Forma Transactions and adjustments. We have conducted our review of the Historical Financial Information in accordance with Australian Auditing Standards applicable to review engagements. We made such inquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances including:  an analytical review of the audited financial performance of the Fund for the relevant historical period;  a review of work papers, accounting records and other documents;  a review of the adjustments made to the Historical Financial Information;  a review of the assumptions (which include the Pro Forma Transactions) used to compile the Pro Forma Balance Sheet;  a comparison of consistency in application of the recognition and measurement principles under Australian Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Fund disclosed in Section 8 of the PDS; and  enquiry of Directors, management and others. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Historical Financial Information.

Review statement on Historical Financial Information

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

• the Pro Forma Balance Sheet has not been properly prepared on the basis of the Pro Forma Transactions;

• the Pro Forma Transactions do not form a reasonable basis for the Pro Forma Balance Sheet;

(2)

Arena REIT Product Disclosure Statement 55

09: Investigating Accountant’s Report

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 the Historical Financial Information, as set out in Section 8 of the PDS, does not present fairly: (a) the historical pro forma income statements of the Fund for the years ended 30 June 2011 and 30 June 2012; (b) the historical balance sheet of the Fund as at 31 December 2012; and (c) the Pro Forma Balance Sheet of the Fund as at 31 December 2012 assuming completion of the Pro Forma Transactions, in accordance with the recognition and measurement principles prescribed under Australian Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Fund disclosed in Section 8 of the PDS. Scope of review of Forecasts The Forecasts are set out in Section 8 of the PDS. The Directors of the Responsible Entity are responsible for the preparation and presentation of the Forecasts, including the best estimate assumptions (which include the Pro Forma Transactions), on which they are based. Our review of the best estimate assumptions underlying the Forecasts was conducted in accordance with Australian Auditing Standards applicable to review engagements. Our procedures consisted primarily of enquiry and comparison and other such analytical review procedures we considered necessary to form an opinion as to whether anything has come to our attention which causes us to believe that: (a) the best estimate assumptions do not provide a reasonable basis for the Forecasts; (b) in all material respects, the Forecasts are not properly prepared on the basis of the best estimate assumptions and presented fairly in accordance with the recognition and measurement principles prescribed in Australian Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies of the Fund disclosed in Section 8 of the PDS; or (c) the Forecasts are unreasonable. The Forecasts have been prepared by the Directors of the Responsible Entity to provide investors with a guide to the Fund’s potential future financial performance based upon the achievement of certain economic, operating, development and trading assumptions about future events and actions that have not yet occurred and may not necessarily occur. There is a considerable degree of subjective judgement involved in the preparation of Forecasts. Actual results may vary materially from the Forecasts and the variation may be materially positive or negative. Accordingly, investors should have regard to the description of investment risks set out in Section 6 of the PDS. Our review of the Forecasts and the best estimate assumptions upon which the Forecasts are based is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards. A review of this nature provides less assurance than an audit. We have not performed an audit and we do not express an audit opinion on the Forecasts included in the PDS.

Review statement on the Forecasts

Based on our review of the Forecasts, which is not an audit, and the reasonableness of the best estimate assumptions giving rise to the Forecasts, nothing has come to our attention which causes us to believe that:

(3)

56 Arena REIT Product Disclosure Statement

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(a) the best estimate assumptions set out in Section 8 of the PDS do not provide a reasonable basis for the preparation of the Forecasts; (b) in all material respects, the Forecasts are not properly prepared on the basis of the best estimate assumptions and presented fairly in accordance with the recognition and measurement principles prescribed in Australian Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies of the Fund disclosed in Section 8 of the PDS; or (c) the Forecasts are unreasonable. The best estimate assumptions set out in Section 8 of the PDS are subject to significant uncertainties and contingencies often outside the control of the Fund. If events do not occur as assumed, actual results and distributions achieved by the Fund may vary significantly from the Forecasts. Accordingly, we do not confirm or guarantee the achievement of the Forecasts, as future events, by their very nature, are not capable of independent substantiation. 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 material transactions or events outside of the ordinary course of business of the Fund 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. Independence or disclosure of interest PricewaterhouseCoopers Securities Ltd does not have any interest in the outcome of the Issue other than the preparation of this Report and participation in due diligence procedures for which normal professional fees will be received. Liability PricewaterhouseCoopers Securities Ltd has consented to the inclusion of this Report in the PDS in the form and context in which it is included. The liability of PricewaterhouseCoopers Securities Ltd is limited to the inclusion of this Report in the PDS. PricewaterhouseCoopers Securities Ltd makes no representation regarding, and has no liability for, any other statements or other material in, or any omissions from, the PDS. Financial Services Guide We have included our Financial Services Guide as Appendix A to our Report. The Financial Services Guide is designed to assist retail clients in their use of any general financial product advice in our Report. Yours faithfully Andy Welsh Authorised Representative of PricewaterhouseCoopers Securities Ltd

(4)

Arena REIT Product Disclosure Statement 57

09: Investigating Accountant’s Report

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Appendix A – Financial Services Guide

PRICEWATERHOUSECOOPERS SECURITIES LTD FINANCIAL SERVICES GUIDE This Financial Services Guide is dated 13 May 2013 1. About us 5. Fees, commissions and other benefits we may receive PricewaterhouseCoopers Securities Ltd (ABN 54 003 311 PwC Securities charges fees to produce reports, including 617, Australian Financial Services Licence no 244572) (" PwC this Report. These fees are negotiated and agreed with the Securities ") has been engaged by Arena Investment entity who engages PwC Securities to provide a report. Fees Management Limited (“Arena”) as Responsible Entity of the are charged on an hourly basis or as a fixed amount Arena REIT (the “Fund”) to provide a report in the form of an depending on the terms of the agreement with the person Investigating Accountant's Report in relation to the Fund’s Pro who engages us. In the preparation of this Report our fees Forma Forecast Financial Information ( the “Report ”) for are charged on an hourly basis and as at the date of this inclusion in the Product Disclosure Statement dated 13 May Report amount to $95,000. 2013 relating to the proposed issue and sale of units in the Fund. Directors or employees of PwC Securities, PricewaterhouseCoopers, or other associated entities, may You have not engaged us directly but have been provided receive partnership distributions, salary or wages from with a copy of the Report as a retail client because of your PricewaterhouseCoopers. connection to the matters set out in the Report. 6. Associations with issuers of financial products 2. This Financial Services Guide PwC Securities and its authorised representatives, This Financial Services Guide (" FSG ") is designed to assist employees and associates may from time to time have retail clients in their use of any general financial product relationships with the issuers of financial products. For advice contained in the Report. This FSG contains example, PricewaterhouseCoopers may be the auditor of, or information about PwC Securities generally, the financial provide financial services to, the issuer of a financial product services we are licensed to provide, the remuneration we and PwC Securities may provide financial services to the may receive in connection with the preparation of the Report, issuer of a financial product in the ordinary course of its and how complaints against us will be dealt with. business. PricewaterhouseCoopers is the auditor of Arena Investment Management Limited and the Fund. 3. Financial services we are licensed to provide 7. Complaints Our Australian financial services licence allows us to provide a broad range of services, including providing financial If you have a complaint, please raise it with us first, using the product advice in relation to various financial products such contact details listed below. We will endeavour to as securities, interests in managed investment schemes, satisfactorily resolve your complaint in a timely manner. In derivatives, superannuation products, foreign exchange addition, a copy of our internal complaints handling procedure contracts, insurance products, life products, managed is available upon request. investment schemes, government debentures, stocks or bonds, and deposit products. If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are 4. General financial product advice entitled to have your matter referred to the Financial Ombudsman Service (" FOS "), an external complaints The Report contains only general financial product advice. It resolution service.780 808. You will not be charged for using the FOS service.FOS can be contacted by calling 1300 was prepared without taking into account your personal objectives, financial situation or needs. 8. Contact Details You should consider your own objectives, financial situation and needs when assessing the suitability of the Report to PwC Securities can be contacted by sending a letter to the your situation. You may wish to obtain personal financial following address: product advice from the holder of an Australian Financial Services Licence to assist you in this assessment. Andy Welsh Authorised Representative Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006

(5)

58 Arena REIT Product Disclosure Statement

10: Board and management

10.1 Responsible entity of the Fund

Arena is the responsible entity of the Fund.

Arena’s powers, rights and liabilities in relation to the Fund are governed by the Corporations Act and the Constitution. Arena is required to act in the best interests of Unitholders. The Constitution is summarised in Section 10.3(b).

Arena is owned by Citrus, which is owned and controlled by MSREF VII Global. Citrus employs each of Arena’s executives and staff whose services are provided to Arena under a services agreement.

10.2 Board and management overview

(a) Board profiles

David Ross (Independent Non-executive Chairman – appointed 4 October 2012)

David has 30 years’ experience in the real estate and investment management sectors.

He held senior positions with Lend Lease Corporation over a period of 10 years, including Global and US Chief Executive Officer Real Estate Investments (based in the US), Chief Executive Officer Asia Pacific and Chief Executive Officer of General Property Trust. He was also Chief Operating Officer of Babcock and Brown, responsible for the Group’s corporate and administrative support functions globally. Prior to this, Mr Ross worked with Jones Lang Wooton, Richard Ellis and Armstrong Jones. He has also chaired and acted as an executive and non-executive director on a variety of external and subsidiary company boards.

David brings leadership experience to Arena across the full range of financial, operating and strategic planning functions from ASX listed global property and investment management organisations.

David holds a Bachelor of Commerce, a Property Valuation qualification and is a Graduate of the Australian Institute of Company Directors (GAICD).

Dennis Wildenburg (Independent Non-executive Director – appointed 30 December 2011)

Dennis has over 30 years’ experience in the financial services and funds management industry. He is currently an Independent Director of Investa Wholesale Funds Management Limited and has been a Director of MLC Funds Management Limited and an Associate Director of Hill Samuel Australia Limited (now Macquarie Group Limited).

Dennis gained his property experience working with the Lend Lease Group where he was a Director of the company that managed GPT. In more recent times he has served on the Board of Property Funds Australia Limited and the Investment Committee of the Mirvac PFA Diversified Property Trust. Dennis is a Chartered Accountant and currently serves as an independent member of two compliance committees.

Simon Parsons (Independent Non-executive Director – appointed 5 April 2012)

Simon has over 34 years’ experience in the commercial property industry. He has previously held senior positions and directorships in a range of leading property-focused companies including Property Investment Research Pty Ltd, Colliers International Limited, Jones Lang Wootton (now Jones Lang La Salle) and is presently Managing Director of Parsons Hill Stenhouse Pty Ltd, a commercial property practice.

Simon is a Fellow of the Royal Institution of Chartered Surveyors (RICS) and is a member of the RICS Oceania Property Board. He is also a Fellow of the Australian Property Institute (API) and the Australian Institute of Company Directors (AICD). He holds a Master of Science (Real Estate) and an estate agent’s license.

James Goodwin (Executive Director – appointed 30 December 2011)

James is Joint Managing Director of Arena and was appointed to the role on 30 December 2011, following the acquisition of Arena by MSREF VII Global.

James has extensive experience in property funds management having previously spent five years at Becton Property Group and prior to that, four years at Centro Properties Group. He has particular experience in corporate finance including debt and equity raising, treasury and financial risk management, mergers and acquisitions, and corporate strategy.

James holds a Bachelor of Laws (Hons), a Bachelor of Arts and a Master of Applied Finance.

Arena REIT Product Disclosure Statement 59

10: Board and management

Bryce Mitchelson (Executive Director – appointed 8 April 2010)

Bryce is Joint Managing Director of Arena and joined Arena in May 2009. Bryce was appointed as a director of Arena in April 2010. Bryce has more than 20 years’ experience in listed and unlisted property funds management as well as property investment, development, valuation and real estate agency.

Prior to joining Arena, Bryce worked in various funds management roles including at Centro Properties Group and Heine Management Limited. He currently sits on the Victorian Professional Board of the Australian Property Institute.

Bryce holds a Bachelor of Economics (Accounting), Bachelor of Business (Property) and Graduate Diploma of Applied Finance and Investment as well as other property valuation and agency qualifications.

Independent non-executive Directors

The Arena Board consists of five Directors, with three independent non-executive Directors. The independent non-executive Directors are not affected by any of the following business relationships that could or be reasonably perceived to materially affect the exercise of independent judgement:

• § being a substantial shareholder of Arena or an officer of, or otherwise associated directly with, a substantial shareholder of Arena;

• § being employed, or being previously employed in an executive capacity by Arena or another group member, and there being a period of less than least three years between ceasing such employment and serving on the Arena Board;

• § being a principal of a material professional adviser or a material consultant to Arena or another group member, or an employee materially associated with the service provided within the last three years;

• § being a material supplier or customer of Arena or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer has a material contractual relationship with Arena or another group member other than as a director.

(b) Management profiles

Gareth Winter (Chief Financial Officer)

Gareth was appointed Chief Financial Officer of Arena Investment Management in March 2012. Gareth was formerly a Partner at PricewaterhouseCoopers and has over 20 years’ professional experience. Throughout his professional career Gareth specialised in advising the listed and unlisted property and infrastructure funds management sector on corporate finance, capital management, risk management, transaction structuring and financial systems and reporting. Gareth is a member of the Institute of Chartered Accountants in Australia and holds a Bachelor of Commerce (Accounting and Business Finance).

Vin Harink (Portfolio Manager)

Vin has 34 years’ experience in the property, finance and service sectors and has been responsible for managing the childcare portfolio of the Fund since December 2008.

Prior to joining Arena, Vin was Chief Executive Officer of Austock Property Funds Management Ltd and subsidiary entities which managed 4 funds with $850 million of funds under management, including childcare funds Australian Education Trust and Australian Social Infrastructure Fund. He also has more than 20 years’ experience in corporate finance, mergers & acquisitions and capital markets as a Director of Austock Corporate Finance Ltd, Deloitte Corporate Finance Ltd and KPMG Corporate Finance Pty Ltd. Vin is a member of the Institute of Chartered Accountants in Australia and holds a Bachelor of Business.

Peter Hulbert (Head of Legal and Compliance and Company Secretary)

Peter is responsible for providing strategic legal advice to the Board and management of Arena and overseeing the legal and compliance function. Peter has over 10 years’ experience in corporate and commercial law and 8 years’ experience in the financial services industry. Peter commenced his legal career at Blake Dawson Waldron (now known as Ashurst) and has extensive experience in corporate governance, financial services regulation, commercial law, mergers and acquisitions and managing outsourced service providers.

Peter holds a Bachelor of Business (Management) and a Bachelor of Laws.

60 Arena REIT Product Disclosure Statement

Robert de Vos (General Manager, Property)

Robert joined Arena in August 2012 and is responsible for Arena’s asset management programs, acquisitions, developments and divestments.

Robert has over 15 years’ property and funds management experience and has particular expertise in developing investment management strategies across broad portfolios of real estate and real estate securities.

Prior to joining Arena, Robert held senior roles with Jones Lang LaSalle, Becton Property Group and Ceramic Funds Management.

10.3 Corporate governance

The Arena Board is responsible for the overall corporate governance of Arena and the Fund, including implementing appropriate policies and procedures in order for Arena to fulfil its functions effectively and responsibly. The Arena Board recognises the role and importance of good corporate governance. Arena’s corporate governance framework is supported by the high quality and experienced Arena Board. The Arena Board is integral to the determination of appropriate corporate governance arrangements for Arena and the Fund and to the continual monitoring of those arrangements.

Arena has policies in place to ensure that the Fund meets all applicable standards in accordance with the ASX Listing Rules.

The corporate governance framework implemented by Arena in respect of the Fund is underpinned by the ASX Guidelines. The ASX Listing Rules require listed entities to disclose the extent of their compliance with the ASX Guidelines and to explain why they have not adopted a particular ASX Guideline if they consider it is inappropriate to do so in their particular circumstances. Accordingly, the Fund will be required to report its compliance against the ASX Guidelines in its application for Listing and on an ongoing basis in its annual report.

(a) Board roles and responsibilities

Under the Arena Board charter, it is the function of the Arena Board to oversee development of the long term growth and strategy of the entities managed by Arena. In performing its functions in respect of the Fund, the Arena Board will endeavour to ensure that the business of the Fund is effectively managed in accordance with high standards of corporate governance and applicable laws. Some of the key responsibilities of the Arena Board are to:

• (i) set objectives, goals and strategic direction with a view to maximising investor value;

• (ii) approve and monitor progress of major capital expenditure, capital management, acquisitions and divestments;

• (iii) monitor the implementation of the highest business standards and codes of ethical behaviour;

• (iv) review, ratify and monitor systems of risk management, internal compliance and control, codes of conduct and external compliance; and

• (v) monitor financial and other reporting.

(b) Constitution and compliance plan

The Fund is a registered managed investment scheme and the rights and obligations of Arena as responsible entity of the Fund and Unitholders are governed by the Constitution.

As the responsible entity of the Fund, Arena must comply with all obligations set out in the Constitution and the Corporations Act. Arena is also subject to duties including duties to act in the best interests of the Unitholders, act honestly, exercise care and diligence, and treat Unitholders of the same class equally. In order to ensure compliance with the Constitution and the Corporations Act, Arena has adopted a compliance plan which sets out the measures Arena will apply in operating the Fund.

Some of the provisions of the Constitution are discussed and summarised in Section 13.1 of this PDS. You can inspect a copy at our office at any time between 8:30 am and 5:00 pm on a business day in Melbourne or request a free copy by contacting Arena.

Arena REIT Product Disclosure Statement 61

10: Board and management

(c) Continuous disclosure policy

Arena is committed to communicating relevant material information about the Fund to Unitholders and must comply with the Fund’s continuous disclosure obligations to the market pursuant to the ASX Listing Rules and the Corporations Act.

The Arena Board has established a continuous disclosure committee to assist the Arena Board in discharging the Fund’s continuous disclosure responsibilities in a timely and efficient manner. The continuous disclosure committee will:

• (i) consider information that potentially requires disclosure;

• (ii) determine what information needs to be disclosed;

• (iii) co-ordinate the actual form of disclosure with the relevant members of management where necessary; and

• (iv) liaise with the appropriate departments to distribute continuous disclosure notices to the ASX, publish notices on the Fund’s website and, where appropriate, disseminate notices directly to Unitholders.

The continuous disclosure policy is available on the Arena website at www.arenainvest.com.au.

(d) Communications policy

The Arena Board has also adopted a communications policy which sets out the range of methods, forums and publications through which Arena will fulfil its commitment to communicating information to Unitholders and other stakeholders.

(e) Diversity

The Arena Board acknowledges the importance of diversity in broadening perspective and innovative capability and is committed to embrace, encourage and value the contribution of all employees irrespective of difference.

(f) Board committees

The Arena Board may establish formally constituted committees and may delegate any of its powers to a committee or committees.

The Arena Board has established an Audit Committee to assist the Arena Board in overseeing the integrity of the Fund’s financial reporting, internal financial controls, financial procedures and policies and the independence of external auditors. The Audit Committee will report to the Arena Board on all matters relevant to the Audit Committee’s role and responsibilities and ensure the Arena Board is aware of matters which may significantly impact the financial condition or affairs of the Fund.

The key roles and responsibilities of the Audit Committee include reviewing:

• (i) the financial reporting processes;

• (ii) the system of internal financial controls; and

• (iii) the audit process.

All members of the Audit Committee must be non-executive directors, with a majority being independent directors. The chairperson will be an independent director appointed by the Arena Board but will not be the Chairman of the Arena Board. The Audit Committee will meet with external auditors where appropriate from time to time to review the existing external audit arrangements and the scope of the audit.

Further information on the Audit Committee is provided on the Arena website at www.arenainvest.com.au.

The ASX Guidelines recommend the establishment of a board nomination committee. However given the sole shareholder of Arena will appoint directors to the Arena Board in accordance with Arena’s constitution and the Corporations Act, it is not intended that a board nomination committee will be established.

The ASX Guidelines also recommend the establishment of a remuneration committee. As the Fund will not be included in the S&P / ASX 300 Index at the time of Listing, it is not required by the Listing Rules to establish a remuneration committee. Remuneration of Arena as responsible entity of the Fund is governed by the Constitution (as described in Section 11 of this PDS). Accordingly, it is considered unnecessary to establish and maintain a remuneration committee.

62 Arena REIT Product Disclosure Statement

(g) Code of conduct

The Arena Board has established a code of conduct which applies to all Arena Staff and sets out how Arena expects those staff to conduct themselves. The code is underpinned by the following values:

• § actions must be governed by the highest standards of integrity and fairness;

• § decisions must be made in accordance with the spirit and letter of applicable law; and

• § Arena’s business must be conducted honestly and ethically, with our best skills and judgment, and for the benefit of unitholders, employees, shareholders and Arena.

(h) Risk management

Arena has adopted a risk management policy and framework which assists Arena achieve the Fund’s objectives through thorough and competent strategic decision making.

Through the risk management policy and framework, Arena’s risk management internal control system incorporates the guidelines described in the Australian/New Zealand Standard on Risk Management (AS/NZS ISO 31000:2009).

The Board has ultimate responsibility for overseeing the risk management framework and for approving and monitoring compliance with the framework. The Board receives a quarterly risk report on all critical and high assessed risks and the Joint Managing Directors have overall responsibility for the risks facing the Fund and are supported by management.

Arena REIT Product Disclosure Statement 63

11: Fees and other costs

11.1 Consumer advisory warning

Under Australian Government regulations, all product disclosure statements are required to include the following standard consumer advisory warning as set out below. It is not specific to information on fees and costs in this Fund.

Consumer advisory warning

Did you know?

Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns.

For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000).

You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs.

You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial adviser.

To find out more

If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website (www.fido.asic.gov.au) has a managed investment fee calculator to help you check out different fee options.

11.2 Fees and other costs in prescribed form

This Section shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the Fund Assets as a whole. The fees and costs are provided inclusive of GST less a full input tax credit or reduced input tax credit, as applicable. You should read all information about fees and costs as it is important to understand their impact on your investment.

Type of fee or cost	Amount	How and when paid
Fees when your money moves in or out of the Fund
Establishment fee	Nil	Not applicable
The fee to open your investment.
Contribution fee	Up to 5% of Application Monies	Arena has waived its entitlement to this fee
The fee on each amount	paid to acquire the New Units.	in respect of the New Units issued under the
contributed to your investment.		Offer and while the Fund is listed on ASX.
Withdrawal fee	Nil	Not applicable
The fee on each amount you take
out of your investment.
Termination fee	Nil	Not applicable
The fee to close your investment.

64 Arena REIT Product Disclosure Statement

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----- Start of picture text -----

Type of fee or cost Amount How and when paid
Management costs (the fees and costs for managing your investment) [1]
Ongoing management Approximately 1.05% per annum of The management fee accrues on a daily basis
costs the gross value of the Fund’s Assets and is calculated and paid monthly in arrears
comprising: out of the Fund’s Assets.
§
management fee of up to 0.80% per Expenses are reimbursable to Arena from
annum [2] of the gross value of the Fund’s the Fund’s Assets when incurred from time to
Assets; and time.
§
expenses relating to the proper
performance of Arena’s duties in
connection with the Fund estimated to
be approximately 0.25% per annum of
the gross value of the Fund’s Assets.
Acquisition fee 1.00% of the value of any real property The acquisition fee is paid by the Fund on
acquired by the Fund. [3] completion of the acquisition of the real
property asset.
Disposal fee 1.00% of the gross sale price of each real The disposal fee is paid by the Fund on
property asset, provided the gross sale completion of the sale of the real property
price exceeds the purchase price of that asset.
asset. The disposal fee is also payable on the
merger or amalgamation of the Fund with
another managed investment scheme. The
sale price of the real property asset is deemed
to equal the value of the real properties as at
the date of the merger as determined by an
approved valuer appointed by Arena.
Performance fee An additional 1.00% of the gross sale The performance fee is paid by the Fund on
price in the event the gross sale price completion of the sale of the real property
of the real property asset exceeds the asset.
purchase price of that asset by more than
The performance fee is also payable on the
20%.
merger or amalgamation of the Fund with
another managed investment scheme. The
sale price of the real property asset is deemed
to equal the value of the real properties as at
the date of the merger or amalgamation as
determined by an approved valuer appointed
by Arena.
Service fees
Investment switching Nil Not applicable
fee
The fee for changing
investment options.
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Notes

1. See ‘Additional explanation of fees and costs’ in this Section for further details.

2. 2 . This proportion is based on the current gross value of the Fund’s Assets. Arena is entitled to a higher fee under the Constitution, but will waive its entitlement to the higher management fee while the Fund is listed on ASX. See ‘Additional explanation of fees and costs’ in this Section for further details of the management fee structure.

3. Arena is entitled to a higher fee under the Constitution, but will waive its entitlement to the higher acquisition fee while the Fund is listed on ASX. See ‘Additional explanation of fees and costs’ in this Section for further details.

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Arena REIT Product Disclosure Statement

11: Fees and other costs

11.3 Example of annual fees and costs

This table gives an example of how the fees and costs in the Fund can affect your investment over a one year period. You should use this table to compare this product with other managed investment products.

Example		Balance of $50,000 with a contribution of $5,000 during the year
Contribution fees	Nil	Nil
PlusManagement costs	1.05%1	For every $50,000 you have invested you will be charged $525 each year
		pertaining to management costs
EqualsCost of Fund		If you had an investment of $50,000 at the begining of the year and
		you invested an additional $5,000 at the start of the year, you would
		be charged fees of $577.50 for that year

Notes

1. This figure represents the indirect cost ratio of the Fund determined for the financial year ending 30 June 2012. The indirect cost ratio is the ratio of the Fund’s management costs as a proportion of the Fund’s Assets. Performance fees, acquisition or disposal fees or abnormal expenses may also be incurred but they are not included because they are not typical ongoing costs and may fluctuate. See ‘Indirect Cost Ratio’ under ‘Additional explanation of fees and costs’ in this Section for further details.

11.4 Additional explanation of fees and costs

(a) Management costs

Following is further information on the management costs section in the table at Section 11.2.

(i) Management fee

Arena, for its role in managing and administering the Fund, will be paid a tiered management fee as set out below:

Tier (gross value of the Fund’s		Example: gross value of Fund’s Assets is
Assets)	Fee	$700 million
Portion of the gross value of the	0.80% of gross value of the
Fund’s Assets up to $400 million	Fund’s Assets up to $400 million	$3.2 million
Portion of the gross value
of the Fund’s Assets greater	0.70% of gross value of the Fund’s
than $400 million and up to	Assets greater than $400 million
$950 million	and up to $950 million	$2.1 million
Portion of the gross value of	0.60% of gross value of the
the Fund’s Assets greater than	Fund’s Assets greater than
$950 million	$950 million	nil
	0.76% of gross value of the
Total	Fund’s Assets	$5.3 million

(ii) Expense recoveries

Arena is entitled to recover all expenses properly incurred in managing and administering the Fund, including in relation to the following:

• § Fund costs incurred by Arena in accordance with the Constitution including: compliance committee costs, costs of engaging advisors, such as legal advisors, auditors and other independent consultants; and

§ asset custody expenses.

Arena is entitled to recover all such expenses, including expenses incurred by Arena or its associate in providing professional services to the Fund, such as asset management and custodial services. If charged, these expenses will be charged on an arm’s length basis in accordance with the market rates for those services at the relevant time.

Arena estimates that the Fund will incur expenses of approximately 0.25% per annum of the gross value of the Fund’s Assets. This estimate has been included in the table set out in Section 11.2.

66 Arena REIT Product Disclosure Statement

(iii) Acquisition fee

This is the fee for identifying, negotiating and attending to the acquisition of real property. The amount charged is 1.00% of the value of any real property acquired by the Fund. This fee is paid by the Fund, on completion of the acquisition of the real property asset.

(iv) Disposal fee and performance fee

This is the fee for negotiating and attending to the disposal of the Fund’s real estate, or in relation to negotiating and attending to the merger or amalgamation of the Fund with another managed investment scheme. The amount charged is 1.00% of the gross sale price of each real property asset provided the gross sale price exceeds the purchase price of that asset.

In the event that the gross sale price of the Fund’s real estate exceeds the purchase price by more than 20%, Arena will charge 2.00% of the gross sale price of the real property asset.

(b) Fees under the Constitution

Under the Constitution, Arena is technically entitled to charge the following maximum fees:

Type of fee or cost	Entitlement under the Constitution
Ongoing management fee	Up to 1.00% per annum of the gross value of the Fund’s Assets.
Acquisition fee	Up to 2.50% of the value of any real property acquired by the Fund.
Disposal fee	Up to 1.00% of the gross sale price of any real property of the Fund provided the
	gross sale price exceeds the purchase price for that real property.
	Up to 2.00% of the gross sale price of any real property of the Fund provided the
	gross sale price exceeds the purchase price of that real property by more than 20%.

However, Arena has committed to charging only the fees as set out in the table at Section 11.2 while the Fund is listed on ASX.

Arena will not increase the fees up to the maximum fees permitted by the Constitution without seeking the approval of Unitholders.

(c) Indirect cost ratio

The indirect cost ratio is the ratio of the annual ongoing management costs of the Fund to the total average net Assets of the Fund. The 1.05% per annum shown in the ‘Example of annual fees and costs for this Fund’ table in this Section is a measure of the annual costs charged against the net Assets of the Fund determined for financial year ending 30 June 2012.

The Indirect Cost Ratio increases as the gearing level increases, and will decrease when the gearing level decreases.

(d) Goods and services tax

Unless otherwise stated, all fees in this Section of the PDS are inclusive of GST and less a full input tax credit or reduced input tax credit, as applicable. For additional information in relation to the taxation implications of an investment in the Fund please see Section 12.

(e) Adviser remuneration

No upfront or trail commission will be paid to advisers by the Fund in respect of the Application for New Units.

Arena REIT Product Disclosure Statement 67

11: Fees and other costs

11.5 Fees and costs associated with the Offer

The following table sets out the fees and expenses associated with the Offer. These expenses are one-off in nature and have not been included in ongoing management fees and other costs as set out in Section 11.2.

Type of fee or cost	Amount	How and when paid
Underwriting and Offer	$2.8 million, comprising 3.75% of the	Payable to the Joint Lead Managers from the
management fee	underwritten amount of $75 million,	Assets of the Fund on completion of the Offer
	plus out of pocket expenses
Other Transaction	$0.9 million	Payable to various third parties, including
expenses		ASX, lawyers, accountants, printers, and other
		professional services providers from the Assets
		of the Fund

68 Arena REIT Product Disclosure Statement

12: Tax

12.1 Taxation implications for Unitholders

This summary comprises a brief guide to the Australian income tax, GST and stamp duty consequences for Unitholders in the Fund. This summary is necessarily general in nature and does not attempt to address all of the Australian income tax, GST and stamp duty consequences relevant to Unitholders.

This summary considers the consequences for a Unitholder who is an Australian resident individual, company (other than life insurance company) or complying superannuation fund for income tax purposes and who holds their Units on capital account. It is not relevant to taxpayers who:

• § are not resident in Australia;

• § are exempt from income tax in Australia;

• § invest or trade in Units in the ordinary course of their business; or

• § are subject to Division 230 of the Income Tax Assessment Act 1997 (Cth) (i.e. Taxation of Financial Arrangements).

The income tax treatment and consequences of an investment in the Fund will vary depending on the particular circumstances of each Unitholder. Unitholders should obtain, and only rely upon, their own independent taxation advice, having regard to their specific circumstances, about the consequences of investing in the Fund.

This summary is based on current judicial and administrative interpretations of the Income Tax Assessment Act 1997 (Cth), Income Tax Assessment Act 1936 (Cth), Taxation Administration Act 1953 (Cth) (collectively referred to as the Tax Act), the GST Law and relevant stamp duty legislation. However, Unitholders should be aware that the ultimate interpretation of the tax law rests with the courts, and that the law, and the way that the ATO and State Revenue Offices administer the law, may change over time.

12.2 Tax status of the Fund

A unit trust is subject to tax at the corporate tax rate if it is classified as a ‘corporate unit trust’ under Division 6B or a ‘public trading trust’ under Division 6C of Part III of the Tax Act. Based on the Fund’s circumstances and operations, the Fund should not be characterised as either a corporate unit trust or a public trading trust. The same conclusions should apply in future income tax years but note that the Division 6C test for a public trading trust is undertaken on a yearly basis and looks at the activities of the trust and any entities it controls at all times in each income year.

On the basis of the anticipated investments the Fund will undertake, the Fund should continue to be treated as a “flow-through” entity for income tax purposes.

12.3 Investment in New Units

Where an Investor subscribes for New Units in the Fund the Investor’s tax cost base in the New Units subscribed for should be equal to the amount paid by the Investor to subscribe for New Units, plus any incidental costs incurred by the Investor in subscribing for the New Units.

12.4 Distributions paid to Unitholders

Distributions received by Unitholders from the Fund will retain the character that the receipt had in the hands of the Fund. Unitholders will be required to include in their assessable income their proportionate share of the net income of the Fund in the year in which entitlement to the income of the Fund arises. Distributions of net income for the June quarter must be included as taxable income for the financial year ending that June, even though a Unitholder may not receive the distribution until August.

Unitholders should wait until receipt of a tax statement from the Fund each year before completing their income tax return. The tax statement will provide Unitholders with full details of the distributions and net income paid to the Unitholder during the income year.

12.5 Fund’s net income

The income of the Fund should include rental income derived from the Assets of the Fund.

Any management fees paid by the Fund to Arena and generally other routine expenses should reduce the income of the Fund.

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Arena REIT Product Disclosure Statement

12: Tax

12.6 Capital distributions

A Unitholder may receive a distribution from the Fund that exceeds the Unitholder’s share of the net income (taxable income) of the Fund. This excess distribution is called a tax deferred distribution and may arise due to different accounting and taxation treatments of certain income and expense items of the Fund.

If a Unitholder receives a tax deferred amount, the Unitholder is required to reduce the tax cost base of the Units by the relevant amount. Where the tax deferred distribution exceeds the tax cost base of the Unit, a capital gain will arise equal to the excess amount. A Unitholder may be entitled to claim the CGT discount on a capital gain (please see below for details of the CGT discount).

12.7 Fund disposal of property

If the Fund disposes of one of its investment properties the disposal should be on capital account. The Fund will derive a capital gain to the extent that the consideration received on disposal exceeds the tax cost base of the property. The Fund will incur a capital loss on the disposal of a property to the extent that the consideration on disposal is less than the reduced tax cost base of the property.

To the extent that there is a capital gain, and the property has been held for greater than 12 months, the Fund should apply the CGT discount to reduce the capital gain included in its net income (please see below for details of the CGT discount) by 50%. If the Fund incurs a capital loss, it can carry the loss forward to recoup against future capital gains. The Fund is not able to distribute the loss to Unitholders.

12.8 Distributions to Unitholders

Any capital gain distributed to Unitholders should be grossed up to its pre-discount amount and any current or prior year capital losses may be applied to reduce the gain. To the extent that a Unitholder is entitled to a CGT discount, the discount should be applied to the net gain (please see below for details of the CGT discount).

12.9 Disposal of Units

A Unitholder will derive a capital gain on the disposal of their Units to the extent that the consideration received on disposal exceeds the tax cost base of the Units. A Unitholder will incur a capital loss on the disposal of a Unit to the extent that the consideration on disposal is less than the reduced tax cost base of the Units.

As stated above, cost base adjustments may be required (and capital gains may arise) where the Fund makes a tax deferred distribution.

Capital gains and capital losses arising in a financial year are added together to determine whether a Unitholder has derived a net capital gain or incurred a net capital loss in a year.

If a Unitholder derives a net capital gain in a year, this amount is, subject to the comments below, included in the Unitholder’s assessable income. If a Unitholder incurs a net capital loss in a year, this amount is carried forward and should be available to offset capital gains derived in the same income year or subsequent years, subject in some cases to the Unitholder satisfying certain rules relating to the recoupment of carried forward losses.

CGT discount

A Unitholder (if either an individual, trust or a complying superannuation fund) may be entitled to a CGT discount in respect of a capital gain, if the Units are disposed of or a gain on tax deferred distributions is made at least 12 months after the date of acquisition. The CGT discount applies to reduce net capital gains made by individuals and trusts by 50% and net capital gains made by complying superannuation funds by 33 1/3%. The CGT discount is not available for companies.

12.10 Buyback

Where a Unitholder chooses to participate in the Buyback, this will result in a disposal of those Units by the Unitholder. As stated above, a Unitholder will derive a capital gain on the disposal of their Units to the extent that the consideration received on disposal exceeds the tax cost base of the Units. A Unitholder will incur a capital loss on the disposal of their Units to the extent that the consideration on disposal is less than the reduced tax cost base of the Units.

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12.11 Withdrawal Offer

If the Withdrawal Offer occurs, the tax consequences to Unitholders of this proposal will be set out in the information to be sent to Unitholders at the time that the proposal is considered.

12.12 Tax File Number and Australian Business Number

A Unitholder may quote their TFN or, where relevant, ABN to Arena. If a TFN or ABN is not quoted, tax may be deducted from any assessable amount paid to the Unitholder.

12.13 Goods and Services Tax

The issuing of New Units and the disposal of Units will generally be financial supplies and, consequently, no GST should be payable in respect of these transactions.

The ability of an Australian resident that is registered or required to be registered for GST to claim input tax credits on related transaction costs (if any) may be restricted. This is a complex area of the GST law and therefore, such Australian residents seek their own independent tax advice in this regard.

12.14 Stamp duty

No stamp duty should be payable by Investors upon the subscription for New Units. No stamp duty should be payable by Unitholders under the Buyback.

Arena REIT Product Disclosure Statement 71

13: Material agreements

13.1 Fund constitution

The Fund is governed by its Constitution. The Constitution binds Arena and the Unitholders. Below is a nonexhaustive summary of some of the important features of the Constitution. You can inspect a copy at our office at any time between 8:30 am and 5:00 pm on a business day in Melbourne or request a free copy by contacting Arena.

(a) Terms of units

The beneficial interest in the Fund is divided into Units, which carry all rights, and are subject to all restrictions and obligations attaching to those Units under the Constitution. Each Unit confers an equal undivided interest. A Unit does not confer any interest in a particular asset of the Fund but only an interest in the assets of the Fund as a whole, subject to the liabilities of the Fund.

(b) Issue of units and options

Arena can issue New Units at the price and on the terms determined in accordance with the Constitution.

Currently, the Constitution provides that the issue price of New Units must be calculated as:

((Net Asset Value – Accrued Income + Transaction Costs)/Units on issue) x (1/(1-Initial Service Fee))

Net Asset Value, Accrued Income, Transaction Costs and Initial Service Fee are defined under the Constitution. In summary, Net Asset Value means the value of the Fund’s Assets less the Fund’s liabilities, Accrued Income means the net income for the Fund for the period from the beginning of the current distribution period to the day on which the calculation is made and Transaction Costs means Arena’s estimate of the transaction costs to either acquire the Assets or to issue new Units. The Initial Service Fee is the fee charged by Arena (as determined by Arena) for the issue of new Units which is to be deducted from an investor’s Application Monies (which is not payable under this Offer).

It is proposed that the Constitution be updated, subject to Unitholder approval, to include certain provisions to reflect the transition of the Fund from an unlisted to a listed entity. Please refer to Section 13.1(n) below for details of the proposed amendments.

Arena has the power to issue options in respect of the Units.

(c) Transfers

Unitholders may transfer Units in a form approved by Arena. If the transfer would result in the Unitholder holding fewer Units than the then current minimum application amount, Arena may refuse in its discretion to transfer the relevant Units.

(d) Withdrawal

A Unitholder is not entitled to withdraw from the Fund other than in accordance with the provisions of the Constitution. The Constitution does not impose any obligations on Arena to make a withdrawal offer to Unitholders.

The Fund is currently not liquid (as defined in section 601KA of the Corporations Act). Accordingly, other than via an on market sale of their units (including participating in the Buyback) Unitholders may only withdraw from the Fund in accordance with a withdrawal offer made by Arena and Part 5C.6 of the Corporations Act. Investors should refer to Sections 4.14 and 4.15 for information regarding the Withdrawal Offer and Buyback.

The Constitution does not provide for withdrawals while the Fund is liquid (as that term is defined in section 601KA of the Corporations Act).

If the Fund has available cash to satisfy withdrawals, a Unit will be redeemed at a price calculated as follows:

(Net Asset Value – Accrued Income + Transaction Costs) / Units on issue

If withdrawal requests are funded by the proceeds from the sale of the Fund’s Assets, a Unit will be redeemed at a calculated as follows:

(Net Asset Value – Accrued Income - Transaction Costs) / Units on issue

The meaning of these defined terms is detailed above in Section 13.1(b).

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(e) Distributions

Distributions for a distribution period will be paid to Unitholders on the Unitholder register on the relevant record date for the distribution.

Arena may make a special distribution to Unitholders. The distribution may be in cash or by way of bonus Units.

If Arena offers Unitholders the right to reinvest in the Fund, a Unitholder may elect to reinvest any distribution received by acquiring additional Units. In certain circumstances, Arena may require that the Unitholder reinvests their distribution.

The Fund’s distribution policy is summarised in Section 5.12.

(f) Liability of Unitholders

Subject to the provisions of the Constitution and any separate agreement or acknowledgement by a Unitholder, the liability of a Unitholder is limited to the application price paid, or agreed to be paid, for a Unit and a Unitholder is not required to indemnify Arena if there is a deficiency in the net assets of the Fund or meet the claim of any creditor of Arena in respect of the Fund.

(g) Arena’s powers

Arena holds the assets of the Fund on trust for the Unitholders.

Subject to the Constitution, Arena has all the powers in respect of the Fund that it is possible under the law to confer on a trustee and as though it was the absolute owner of the assets of the Fund acting in its personal capacity.

In the exercise of its powers, Arena may, without limitation:

• § acquire and invest in any property (whether real or personal) and assets, dispose of or otherwise deal with assets, manage and administer the assets; and,

• § borrow or raise money, grant security and incur all other types of obligations and liabilities.

Subject to the Corporations Act, Arena may in its absolute discretion decide how and when to exercise its powers under the Constitution.

The Constitution may be amended by Arena by supplemental deed, subject to the requirements of the Corporations Act.

Arena may appoint delegates or agents (including custodians and underwriters) to perform any act or exercise any of its powers and may engage advisers to assist with its functions.

(h) Interested dealings

Subject to Arena’s duties, nothing in the Constitution restricts Arena, or its associates, from:

• (i) dealing with each other, the Fund or any Unitholder;

• (ii) being interested in any contract or transaction with the other of them, the Fund or any Unitholder or retaining for its own benefit any profits or benefits derived from any such contract or transaction; or

• (iii) acting in the same or similar capacity in relation to any scheme.

In each case, Arena and its associates may retain and are not liable to the Unitholders or any other person for profits or benefits from that activity.

Arena’s associates may hold Units in any capacity.

(i) Remuneration and reimbursement of expenses

Please refer to Section 11.

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13: Material agreements

(j) Responsible entity’s limitation of liability

Subject to the Corporations Act, Arena is not liable to any person (including any Unitholder) for any loss or damage to the assets of the Fund. In any case Arena’s liability is limited to the assets of the Fund from which Arena is entitled to be, and is in fact, indemnified.

Arena’s limitation of liability in respect of its liability will be reduced to the extent that loss or damage arises due to Arena’s actual fraud, gross negligence or wilful default.

(k) Responsible entity’s indemnities

Arena is entitled to be indemnified out of the assets of the Fund for any liability incurred by Arena in properly performing or exercising any of its powers or duties in relation to the Fund.

This indemnity continues after Arena retires or is removed as responsible entity of the Fund.

(l) Meetings

The convening and holding of Unitholder meetings will be in accordance with the Corporations Act.

(m) Winding up

The Constitution provides that Arena must wind up the Fund if the Fund comes to the end of its term as set out in the Constitution or where Arena determines the Fund should be wound up or where Arena is required by the Corporations Act or by law to wind up the Fund.

On winding up, each Unitholder is entitled to receive a share of the net proceeds of realisation of the assets of the Fund in proportion to their interest in the Fund.

(n) Listed provisions

Following Listing, Arena intends to update the Constitution. Arena intends to propose (among other things) that the following provisions and other consequential amendments be included in the Constitution, subject to the approval of Unitholders:

• (i) method of determining the issue price of Units while the Fund is listed by reference to the market price of Units, distribution entitlements and the maximum discount to the market price on an issue of further Units; and

• (ii) provisions setting out how Arena will deal with small holdings (i.e. unmarketable parcels of Units).

13.2 Debt Facility agreement

The Fund has entered into a Debt Facility with NAB and ANZ. The key terms are:

(a) Conditions precedent

There are a number of conditions precedent that must be satisfied or waived prior to the Debt Facility becoming effective. The most significant of these are:

• (i) a minimum equity raising of $50 million must occur, which will be satisfied by this Offer; and

• (ii) net proceeds of the Offer must be initially used to repay debt.

(b) Use of proceeds

The Debt Facility may be used by the Fund for eligible purposes which include:

• (i) the acquisition of properties in accordance with the Fund’s investment strategy;

• (ii) the development or refurbishment of existing properties;

• (iii) fitout or incentive costs in respect of any properties;

• (iv) the working capital requirements of the Fund; and

• (v) funding the proposed Buyback and Withdrawal Offer up to a maximum of $25 million.

The Debt Facility may be drawn on down at any time and may be drawn upon multiple times.

The Debt Facility requires the Fund to obtain consent from its lenders, for acquisitions that are greater than 20% of the value of the Properties of the Fund (based on the most recent independent valuations).

74 Arena REIT Product Disclosure Statement

(c) Amount of facility

The total commitment under the Debt Facility is $110.0 million.

(d) Term

The Debt Facility has a term ending on 30 June 2016.

(e) Financial covenants

The Fund must ensure that:

• § loan to value ratio (being the amount owing under the Debt Facility divided by the aggregate value of the Properties of the Fund), based on the most recent independent valuations, does not exceed 50%;

• § interest cover ratio (being operating profit (excluding non-cash items such as property or derivative valuations) received by the Fund divided by the interest cost for that period) is more than 2.0 times;

(f) Undertakings

The Debt Facility contains undertakings and negative pledges which are usual for a loan of this nature.

The Fund must comply with its interest rate risk management policy (approved by NAB and ANZ) or hedge its interest in respect of at least 65% of its drawn debt at all times for a period of not less than 12 months.

(g) Events of default

The Debt Facility contains various events of default, including non-payment, failure by the Fund to comply with its financial covenants, breach by the Fund of other undertakings where that breach is not remedied.

(h) Security

Security under the Debt Facility consists of first ranking mortgages over each of the Assets, plus a general security agreement over the assets of the Fund.

NAB is also a Joint Lead Manager in respect of the Offer and the Debt Facility will be repaid (in part) from the proceeds of the Offer as described in this PDS.

13.3 Summary of Standard Lease

Arena has adopted a Standard Lease for the childcare centres in the Fund. Over 95% of the Fund’s childcare centres have leases in a form consistent with that Standard Lease. The Standard Leases are essentially in the same form, apart for minor jurisdictional and tenant specific amendments.

Below is a summary of the key terms of the Standard Lease.

(a) Term and option:

(i) Initial term

15 years

(ii) Option terms

• 2 further terms of 5 years each

(iii) Exercise of option

The tenant is required to give the landlord notice of its intention to exercise each option not less than 5 years prior to the expiration of the term.

(b) Rent

(i) Net/gross/increase in outgoings

A net rent is payable. Outgoings are not included in the rent amount, they are payable separately by the tenant.

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13: Material agreements

(ii) Frequency and type of rent reviews

On each anniversary of the commencement date that is not a market rent review date, rent is increased by the greater of:

• § the increase in the CPI (all groups for the relevant capital city) over the period between the quarter ending immediately prior to the review date and the quarter ending immediately prior to the last review date; and

• § 2.5% of the rent payable immediately before the rent review date.

On the tenth anniversary of the commencement date and on the commencement date of each further term a market rent review of rent is to take place.

(iii) Ratchet on CPI and market review

The rent following any review date must not be lower than the rent that was payable immediately before the review date. Under the leases to Goodstart, the rent cannot be more than 7.5% higher than the rent that was payable immediately before the review date. Under all other leases, there is no limit on the increase following a CPI or market review.

(c) Operating expenses

(i) Full operating expenses or increases above an agreed base year

Full operating expenses are payable by the tenant. The tenant must pay all amounts paid by the landlord (or for which the landlord may be or become liable for) in respect of the ownership, insurance, operation, repair, maintenance, renewal and management of the premises, including but not limited to:

• § rates and taxes (including land tax where recovery by the landlord from the tenant is permitted under the relevant retail legislation);

• § costs associated with the provision of services to the premises;

• § waste and rubbish removal costs;

• § the cost of repairing, maintaining and servicing all plant and equipment in the premises (including costs of a capital or structural nature);

• § the cost of repairing and maintaining the premises generally, including in connection with the operation, supply, repair, maintenance and renewal of the services supplied to the premises (including costs of a capital or structural nature);

• § management and agency fees; and

• § the cost of maintaining outdoor areas.

(ii) Tenant’s proportion of operating expenses

100%, unless any costs relate to both the premises and other land or buildings not within the premises, in which case the landlord may apportion an amount that it deems appropriate to the premises.

(d) Permitted use / Restrictions on use

The premises may only be used as a licensed childcare centre.

(e) Security

The tenant must provide a bank guarantee for an amount equivalent to 6 months’ rent plus GST. The bank guarantee must be unconditional, irrevocable, not expire until at least 6 months after the ultimate expiry date of the lease and otherwise be in a form approved by the landlord.

Goodstart currently provides bank guarantees with an aggregate value of approximately $8.8 million in satisfaction of its obligations to provide a separate bank guarantee under each of its leases. Arena is allowed to call on the pooled bank guarantee to rectify a breach of Goodstart’s obligations under any of its leases, subject to a cap of $750,000 in respect of any particular lease. The amount of the cap is to be increased annually by 2.5%.

76 Arena REIT Product Disclosure Statement

(f) Lease dealings

The tenant may not assign, transfer, mortgage or charge its interest in the premises to another person or grant any sublease or licence in relation to the premises without first obtaining the landlord’s consent, which must not be unreasonably withheld if the new tenant, assignee or sub-tenant meets certain requirements.

(g) Restrictions on change in control of tenant

A proposed change in the effective control of the tenant, is treated as an assignment of the lease and triggers the application of the assignment requirements.

(h) Repair and maintenance

(i) Tenant’s obligations

The tenant is required to maintain the premises in good and substantial repair. The tenant must also:

• § effect any necessary structural repairs to the premises;

• § repair or replace any landlord’s fixtures that may be broken or damaged;

• § redecorate the premises when reasonably required by the landlord (but not more than once in each 5 year period); and

• § carry out any structural alterations that are necessary as a result of the tenant’s occupation or use of the premises.

(ii) Restrictions on alterations by tenant

The tenant must not carry out any alterations to the premises or the building without obtaining the prior written consent of the landlord.

(i) Insurance

(i) Premises

The tenant must insure the premises against usual risks for its full replacement cost with an insurer approved by the Landlord.

(ii) Public liability

The tenant must insure against public risk in the amount of $20 million.

(iii) Other

• § The tenant must take out a worker’s compensation policy (which includes an employer’s liability coverage), as well as a policy covering loss of rent for 12 months.

• § The tenant must pay to the landlord any additional insurance costs on account of any extra risk caused by the tenant’s use of the premises.

(j) Indemnities

The tenant must indemnify and keep the landlord indemnified against all claims arising out of any cause relating to the premises and any person or property inside or outside the premises, including but not limited to:

• § the negligent use of services to the premises or the landlord’s fixtures;

• § the overflow or leakage of water from any source; and

• § for any matter for which the tenant is responsible under the lease.

(k) Default and termination

The landlord may terminate the lease if the tenant:

• § fails to pay the rent when it is due; or

• § fails to comply with any other provision of the lease and does not rectify the failure or pay the landlord compensation for the breach within 14 days after receiving a written request from the landlord to do so.

• The tenant must pay interest to the landlord at the default rate specified in the lease on any rent, costs or other money not paid to the landlord when due.

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13: Material agreements

(l) Damage and destruction

(i) Rent abatement

If the premises are damaged or destroyed and as a result are unfit for occupation by the tenant, then from the date that the tenant notifies the landlord of the damage the tenant will receive an appropriate abatement of the rent and any other money payable to the landlord under the lease, along with an abatement of its obligation to repair and maintain the premises.

The abatement continues until the premises is restored or made fit for the tenant’s use and occupation. However the tenant will not receive any abatement where the damage or destruction was caused or contributed to by the tenant or an insurer refused indemnity under the insurance policy.

(ii) Landlord to reinstate if requested by the tenant

The landlord may decide whether to carry out reinstatement works.

(iii) Tenant’s right to terminate

The tenant may terminate the lease unless the landlord, within three months of receiving notice of the damage from the tenant, gives the tenant a notice that it will reinstate the premises and thereafter commences the works within a reasonable time.

(iv) Landlord’s right to terminate

The landlord may terminate by notice in writing to the tenant within three months after the tenant has notified the landlord of the damage.

(m) Tenant’s obligations on expiry

• § At the end of the lease, the tenant must make good any damage it causes in the removal.

• § The tenant must redecorate the premises within the last three months of the term and otherwise hand the premises back to the landlord in a state of good repair.

(n) Landlord’s obligations and rights - access to premises

• § The landlord may enter the premises at reasonable times, after giving prior reasonable notice to the tenant, for the purpose of determining whether the tenant is complying with its obligations under the lease.

• § The landlord also has a right to enter the premises to carry out repairs that it wishes to undertake or which any competent authority requires be undertaken, subject to the landlord using reasonable endeavours to minimise any inconvenience to the tenant.

(o) Operating and financial information

At various stages throughout each year of the term of the lease, the tenant must provide the landlord with statements of operating data and certified financial statements as to the financial and trading activity of the business conducted by the tenant.

(p) Childcare licence

The lease is subject to the tenant maintaining a licence to use the premises as a childcare centre and seeking the Landlord’s consent to any variation to the licence. If the tenant defaults under the lease, the landlord is appointed the tenant’s attorney to deal with the licence (for example, to obtain or renew the licence).

(q) Management agreements

The tenant may not appoint (or extend the appointment of) a manager to conduct or assist in conducting the business without obtaining the landlord’s consent, which must not be unreasonably withheld if the tenant provides the landlord with a copy of the management agreement and proves to the landlord that the manager is an appropriate person to manage the business.

(r) No restrictions on sale

The landlord may transfer its interest in the land at any time without the tenant’s consent.

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13.4 Underwriting Agreement

Arena has entered into the Underwriting Agreement with the Joint Lead Managers.

Under the Underwriting Agreement, Arena has exclusively appointed and the Joint Lead Managers have severally agreed to manage the Offer and to subscribe for, or procure that another party subscribes for any New Units which have not been settled under the Offer.

The Offer is conditional on the Underwriting Agreement remaining in place.

Fees and expenses

Arena will pay the Joint Lead Managers:

• § an underwriting fee of 3.50% of the Raising Amount (approximately $2.6 million excluding any applicable GST);

• § a management fee of 0.25% of the Raising Amount (approximately $0.2 million excluding any applicable GST); and

• § reasonable costs incidental to the Offer (including reasonable legal costs) incurred by the Joint Lead Managers.

The Joint Lead Managers will be responsible for the payment of all fees and commissions payable to any co-lead managers, co-managers or brokers appointed by them.

Representations and warranties

Customary representations and warranties are given by Arena and the Fund in relation to the power to enter into the Underwriting Agreement, solvency of Arena and the necessary corporate authority and approvals held by Arena. Arena also provides a number of further representations and warranties that the Offer, this PDS and Arena’s conduct of the Offer complies with the Corporations Act, Listing Rules and will not contain any misleading or deceptive statements or omissions. Representations and warranties are also given in relation to the assets, liabilities, financial position and business conduct of the Arena Group.

Termination events

Either Joint Lead Manager may terminate the Underwriting Agreement upon the occurrence of any of the following termination events (subject to, in the case of certain termination events, the satisfaction of a specified materiality threshold). These termination events include:

• § a statement in this PDS or certain other documents issued in connection with the Offer is or becomes misleading or deceptive or a matter required to be included is omitted from such a document;

• § the S&P/ASX 200 Index or the S&P/ASX A-REIT Index falls by more than 15% from the level as at the close of trading on the date of the Underwriting Agreement (Reference Level) and remains at that level for three consecutive Business Days, or until the Business Day immediately prior to the Settlement Date, whichever is the shorter;

• § approval is not given for the listing of the Fund or quotation of the Units;

• § certain ASIC orders are issued or applied for, or certain investigations commenced under the Corporations Act or by other government agencies in relation to this PDS or certain other documents issued in connection with the Offer;

• § Arena withdraws this PDS, certain other documents issued in connection with the Offer or the Offer;

• § Arena is prevented from allotting or issuing the New Units within the time required by amongst other things, the timetable in the Underwriting Agreement or the Listing Rules;

• § Arena is replaced as the responsible entity of the Fund;

• § a Director of Arena or an affiliate of Arena is charged with an indictable offence, or is disqualified from managing a corporation under the Corporations Act;

• § any government agency commences any public action against Arena, any Arena Group member, or any of Arena’s Directors in their capacity as directors of Arena or announces an intention to take such action;

• § there is a change in the senior management of Arena or the Arena Board;

• § a material adverse change occurs in relation to the assets, liabilities, financial position or performance, profits, losses or prospects of Arena or the Offer from the information publicly disclosed by Arena;

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13: Material agreements

• § a representation or warranty made by Arena in the Underwriting Agreement becomes not true, incorrect or is not performed;

• § Arena’s Australian financial services licence is cancelled or revoked or its terms and conditions are amended;

• § Arena becomes required to lodge a supplementary PDS under the Corporations Act, or a new circumstance arises that would have been required to be included in the PDS if it had arisen prior to the issue of the PDS;

• § certain opinions, forecasts or estimates contained in this PDS or certain other documents issued in connection with the Offer are or become unlikely to be achieved within a certain timeframe;

• § the Offer is not conducted in accordance with the timetable in the Underwriting Agreement without obtaining the Joint Lead Managers’ consent; and

• § there is a default by Arena in the performance of its obligations under the Underwriting Agreement.

The Underwriting Agreement also contains a number of other customary termination events, including the insolvency of Arena or the Arena Group, fraudulent conduct or activities of Arena, affiliates of Arena, or any of their Directors or officers or certain changes in or contraventions of applicable laws or specified disruptions in financial markets and hostilities.

If one of the Joint Lead Managers terminates the Underwriting Agreement upon the occurrence of a termination event, the remaining Joint Lead Manager may elect to take up the terminating Joint Lead Manager’s rights and obligations by giving written notice to Arena. Unless such notice is given within a certain time, the Underwriting Agreement will be deemed to have been terminated at the expiry of the notice period.

Indemnity

Subject to certain exclusions relating to, among other things, fraud, wilful misconduct or gross negligence by the Joint Lead Managers and certain affiliated parties, Arena indemnifies the Joint Lead Managers and certain affiliated parties against all losses suffered or incurred directly or indirectly arising out of or in connection with the Offer or the Underwriting Agreement.

13.5 Escrow Agreement

The Trust Company (Australia) Limited as trustee of the Citrus Subsidiary Trust (CST), a vehicle ultimately owned by MSREF VII Global via interposed entities, holds 20.41% of the Units on issue in the Fund (CST Holding) prior to the Offer. CST is the largest Unitholder in the Fund.

CST and Citrus II Investments Pty Limited, in its capacity as trustee of Citrus I Holding Trust (controller of CST) (CIHT) have entered into a Voluntary Escrow Deed with Arena in connection with the CST Holding. Under the Voluntary Escrow Deed, CST and CIHT have agreed that CST will not deal, or be instructed to deal, with the CST Holding including, disposing of the CST Holding, creating any security interest in the CST Holding or to do or omit to do any act which would effectively transfer ownership or control of the CST Holding to a person other than CST, for a period of six months from the date of Listing (Escrow Period), without the prior written consent of Arena.

The restrictions will not apply if there is a takeover bid (which becomes unconditional) or a scheme of arrangement in respect of the Fund.

The CST Holding will become fully transferable following the end of the Escrow Period.

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14: Additional information

14.1 Summary of Custodian function

Sandhurst Trustees Limited (Sandhurst) is the custodian of the Fund. Sandhurst is a long established and respected trustee company that was incorporated in Victoria in 1888 and is a wholly owned subsidiary of Bendigo and Adelaide Bank Ltd.

The role of Sandhurst is to have custody of the Assets of the Fund.[25] The Custodian can only deal with the Assets as instructed by Arena in accordance with the provisions of the Corporations Act and the custodian agreement between Arena and Sandhurst. The Custodian is not a trustee appointed to protect your interests. Arena may, subject to any applicable laws, act as custodian of some or all of the Assets of the Fund.

The Custodian is not the issuer of this PDS and has not prepared this PDS. The Custodian makes no representation in and takes no responsibility for the accuracy or truth of any statement in or any omission from any part of this PDS. Neither the Custodian, nor Bendigo and Adelaide Bank Ltd and its respective directors or associates, guarantee the performance or success of the Fund, the repayment of capital, or any particular rate of return of either capital or income.

14.2 Related party holdings

The Arena Hybrid Property Fund, an unlisted fund managed by Arena Investment Management Limited, holds 722,909 Units. The stated objective of the Arena Hybrid Fund is to liquidate its investments (including its holding of Units) and wind up. The Units held by Arena Hybrid Fund are not subject to voluntary escrow arrangements described in Section 13.5.

MSREF VII Global’s indirect holding in the Fund is described in Section 5.8.

Directors of Arena (and their associates) are entitled to apply for New Units under the Stakeholder Offer and may hold Units in the Fund following the Offer.

Arena maintains and complies with a written policy on related party transactions, including the assessment and approval processes for such transactions and arrangements to manage any conflicts of interest.

14.3 Consents

The persons listed in the following table have given and have not, before the lodgement of this PDS with ASIC, withdrawn their written consent to:

• (a) be named in the PDS in the form and context in which they are named;

• (b) the inclusion of their respective reports or statements noted next to their names and the references to those reports or statements in the form and context in which they are included in the PDS; and

• (c) the inclusion or other statements in this PDS which are based on or referable to statements made in those reports or statements, or which are based or referable to other statements made by those persons in the form and context in which they are included:

Name of person	Named as	Reports or statements
PricewaterhouseCoopers Securities Limited	Investigating accountant	Investigating Accountant’s Report
Morgan Stanley Australia Securities Limited	Joint Lead Manager
National Australia Bank Limited	Joint Lead Manager
ANZ Securities Limited	Co-Manager
Morgan Stanley Wealth Management	Co-Manager
Australia Pty Ltd
PricewaterhouseCoopers	Taxation advisor
PricewaterhouseCoopers	Auditor
Boardroom	Registry

1. Arena currently holds 4 Properties directly on behalf of the Fund.

81

Arena REIT Product Disclosure Statement

14: Additional information

Name of person	Named as	Reports or statements
Hall & Wilcox	Legal advisor
Sandhurst Trustees Limited	Custodian
Citrus II Investments Pty Limited		Statements in Section 13.5

CBRE Valuations Pty Ltd (CBRE) has consented to the inclusion of statements in this PDS based on statements provided by CBRE in its independent valuation reports in respect of the Fund’s Properties as at 30 June 2011, 30 June 2012 and 31 December 2012 including information in the portfolio valuation table in Section 5.2 and the historical and Pro Forma Balance Sheet in Section 8.5 of this PDS.

14.4 Directors’ interests

No Director of Arena has during the last two years:

• § held any interest in the Offer, the promotion of the Offer or the Listing of the Fund;

• § held any interest in any property acquired or proposed to be acquired by the Fund, in connection with the Offer, the promotion of the Offer or the Listing of the Fund;

• § received any benefit from any person as inducement to become, or to qualify as a Director of Arena; or, for services provided in connection with the Offer, the promotion of the Offer or the Listing of the Fund (other than remuneration payable for acting as a Director of Arena).

14.5 Interests of experts and advisers

Other than as set out in this PDS, no promoter of the Fund, AFSL holder or underwriter involved in the Offer and Listing or any other person named in this PDS as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this PDS, has or has held, during the last two years prior to the date of the Offer an interest in:

• § the promotion of the Offer or the Listing of the Fund;

• § property acquired or proposed to be acquired by the Fund in connection with the Offer, the promotion of the Offer or the Listing of the Fund; or

• § the Offer.

Hall & Wilcox is entitled to be paid $270,000 (plus GST and disbursements) in fees and charges for legal services provided to Arena and the Fund up to the date of this PDS in connection with the Offer and Listing. Further amounts may be paid in accordance with its time-based charges.

PricewaterhouseCoopers Securities Ltd is entitled to be paid $95,000 (plus GST and disbursements) in fees and charges for preparation of the Investigating Accountant’s Report up to the date of this PDS in connection with the Offer and Listing. Further amounts may be paid in accordance with its time-based charges.

PricewaterhouseCoopers is entitled to be paid $70,000 (plus GST and disbursements) in fees and charges for tax advice provided to Arena up to the date of this PDS in connection with the Offer and Listing. Further amounts may be paid in accordance with its time-based charges.

Morgan Stanley Australia Securities Limited and NAB will receive fees for acting as Joint Lead Managers for the Offer, as described in Section 11.5.

Each of Morgan Stanley Wealth Management Australia Pty Limited and ANZ Securities Limited will act as comanagers and will receive from the Joint Lead Managers 1.00% of the amount allocated to each of them under the Broker Firm Offer.

82 Arena REIT Product Disclosure Statement

14.6 Accessing information about the Fund

Arena will provide regular communication to Unitholders, including publication of:

• § audited annual financial reports;

• § reviewed half year financial reports;

• § quarterly distribution statements;

• § annual taxation statements; and

• § any continuous disclosure notices given by the Fund.

There will also be a website that will provide up to date information on the Fund, including current Unit prices, access to half year and annual reports and distribution statements.

Arena, as a disclosing entity, will be subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC in relation to the Fund may be obtained from, or inspected at, an ASIC office.

You also have the right to obtain a copy of each annual report, half yearly report and any continuous disclosure notice from Arena free of charge.

14.7 Ethical considerations

While Arena intends to conduct itself in an ethical and sound manner, our investment criteria do not give additional weight to labour standards or environmental, social or ethical considerations when making or realising an investment of the Fund.

14.8 AML and CTF

Notwithstanding any other provision of this PDS, each Investor agrees to provide to Arena any information or documents which Arena reasonably requests be provided in order for Arena to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) or AML/CTF Rules. Information requested may include, identification checks and procedures, including, in relation to an individual Investor, name, address and date of birth and for an Investor that is a company, details of directors and beneficial shareholders of the company.

If Arena forms the view that, in its reasonable opinion, it is required to disclose information in order to comply with the AML/CTF Act or AML/CTF Rules, each Investor agrees that, to the extent permitted by law, such disclosure will not be a breach of any obligation or duty Arena owes to Investors and Arena will incur no liability to the Investor in respect of the disclosure.

14.9 Complaints handling

If you have a complaint, then please contact us directly. Arena has a complaints handling and dispute resolution procedure which it follows to acknowledge, investigate, respond to and resolve complaints by Unitholders.

Arena will endeavour to acknowledge both written and verbal complaints immediately, and in any event as soon as practicable following receipt. Arena will investigate the complaint with a view to resolving it and advise you as soon as possible. Arena will finally resolve your complaint within 45 days after it receives the complaint.

If you are not satisfied with our response, you can refer your complaint to the Financial Ombudsman Service, an external complaints handling body that provides an independent assessment of your complaint.

The Financial Ombudsman Service’s contact details are:

GPO Box 3, Melbourne, VIC, 3001 Telephone: 1300 78 08 08 Email: info@fos.org.au Website: www.fos.org.au

Arena REIT Product Disclosure Statement 83

14: Additional information

14.10 Expenses of Listing

The total expenses of the Offer and the Listing are estimated at approximately $3.7 million (including any nonrecoverable GST). The expenses include equity capital raising costs, advisory, legal, accounting, Listing and other administrative fees, as well as printing, advertising and other expenses. All expenses in connection with the PDS and Listing are being borne by the Fund.

Please refer to Section 11.5 for details of the expenses related to the Offer and the Listing.

14.11 Directors’ consent to issue

Each Director of Arena as at the date of this PDS has consented to the lodgement of this PDS with ASIC.

14.12 Privacy

The Application Form requires you to provide information that may be personal information for the purposes of the Privacy Act. Arena as the responsible entity of the Fund (and the Registry on its behalf) collects, holds and uses that personal information to assess your Application, service your needs as an investor, provide facilities and services that you request and to administer the Fund. The Corporations Act requires certain particulars of security holders to be collected and maintained in a public register.

Access to information may also be provided to Arena’s agents and service providers on the basis that they deal with such information as required by law. If you do not provide the information requested of you in the Application Form, the Registry may not be able to process your Application for Units appropriately.

Under the Privacy Act, you may request access to your personal information held by (or on behalf of) Arena. You can request access to your personal information by telephoning or writing to Arena. You can access Arena’s privacy policy at www.arenainvest.com.au.

14.13 Application Form

Returning the Application Form will be taken to constitute a representation by the Applicant that they:

• § are an Australian resident;

• § have received a printed or electronic copy of the PDS (and any supplementary or replacement document) accompanying the Application Form and have read them all in full;

• § agree that their Application is completed and lodged in accordance with this PDS and subject to the declarations and statements on the Application Form;

• § declare that all details and statements in the Application Form are complete and accurate;

• § acknowledge that once the Application Form is returned it may not be withdrawn;

• § agree to be issued the number of Units referable to the value they apply for (or a lower number as determined in accordance with this PDS);

• § if natural persons, are at least 18 years old and do not suffer from any legal disability preventing them from applying for Units; and

• § authorise Arena and the Joint Lead Manager and their officers and agents, to do anything on their behalf necessary for Units to be issued to them, including to act on instructions received by the Registry using their contact details in the Application Form.

14.14 Cooling off period

Cooling off rights do not apply to an investment in Units pursuant to this Offer. This means that, in most circumstances, Applicants cannot withdraw their Application once it has been accepted.

84 Arena REIT Product Disclosure Statement

15: Glossary

Term	Defnition
ABC Learning	ZYX Learning Centres Limited (in liquidation) (receivers and managers appointed) ACN
	079 736 664 (formerly known as A.B.C. Learning Centres Limited).
ABN	Australian Business Number.
Accrued Income	Has the same meaning given in the Constitution as summarised in Section 13.1.
ACN	Australian Company Number.
AEST	Australian Eastern Standard Time.
AFSL	Australian Financial Services Licence.
Allotment Date	Expected to be 13 June 2013.
AML/CTF Act	Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth).
ANZ	Australia and New Zealand Banking Group Limited ACN 005 357 522.
Application	An application for New Units under the Offer described in this PDS.
Application Form	Each of the application forms accompanying this PDS upon which an Application may be
	made.
Application Monies	Monies received by Arena from Investors in respect of subscribing for New Units in the
	Fund.
Arena	Arena Investment Management Limited ACN 077 235 879 AFSL 233190, the responsible
	entity of the Fund.
Arena Board	The board of directors of Arena.
Arena Staff	Employees and contracted staff of Citrus or Arena.
ARSN	Australian Registered Scheme Number.
Assets	The assets of the Fund, including the Properties of the Fund.
ASIC	Australian Securities and Investments Commission.
ASX	ASX Limited ACN 008 624 691, the Australian Securities Exchange, or the market
	operated by it, as the context requires.
ASX Guidelines	ASX Corporate Governance Principles and Recommendations (amended 2010).
ATO	Australian Taxation Offce.
Audit Committee	The committee established by Arena to oversee the integrity of the Fund’s fnancial
	reporting, internal fnancial controls, fnancial procedures and policies and the
	independence of external auditors as described in Section 10.3.
Broker	A broker appointed by the Joint Lead Manager to act as a participating broker to the
	Offer.
Broker Firm Offer	The offer under this PDS open to all Retail Investors who have received a frm allocation
	from their Broker.
Business Days	A day other than a public holiday in Sydney, a Saturday or Sunday.

Arena REIT Product Disclosure Statement 85

15: Glossary

Term	Defnition
Buyback	An on market buyback of up to 13.2 million Units (equivalent to 10% of the Fund’s issued Units prior to the Offer) at a price up to $1.00 per Unit and not more than the lesser of: (i) the Withdrawal Price; or (ii) the 5-day volume weighted average price of Units traded on ASX. Details of the Buyback are set out in Section 4.14.
Carrying Value	The value of the Properties recorded in the accounts of the Fund.
CIHT	Citrus I Holding Trust, controller of CST.
Citrus	Citrus Investment Services Pty Limited ACN 154 326 084, the parent company of Arena.
Closing Date	The closing date of the Broker Firm Offer and the Stakeholder Offer, expected to be 7 June 2013.
Constitution	The trust deed of the Fund dated 27 August 2003.
Corporations Act	Corporations Act 2001 (Cth)
CPI	Consumer Price Index as published by the Australian Bureau of Statistics.
CST Holding	The 26,952,874 Units held by The Trust Company (Australia) Limited in its capacity as trustee of Citrus Subsidiary Trust.
Custodian	Sandhurst Trustees Ltd ACN 004 030 737.
Debt Facility	The Fund’s $110 million debt facility with NAB and ANZ.
Directors	The directors of Arena.
EBIT	Earnings before interest and taxation.
EPU	Net operating proft available for distribution per Unit
Escrow Agreement	The agreement between Citrus II Investments Pty Limited in its capacity as trustee of CIHT (controller of CST), The Trust Company (Australia) Limited in its capacity as trustee of Citrus Subsidiary Trust and Arena, pursuant to which the parties have agreed to escrow the CST Units.
Escrow Period	Has the meaning given in Section 13.5.
Financial Information	The fnancial information described in Section 8.1.
Forecasts	The fnancial forecasts contained in Section 8.
Forecast Period	The forecast period described in Section 8.1.
Fund	Arena REIT ARSN 106 891 641.
FY13	The fnancial period ending 30 June 2013.
FY14	The fnancial period ending 30 June 2014.
Gearing Ratio	Drawn debt Total Assets
Goodstart	Goodstart Early Learning Ltd ACN 139 967 794.
GST	Goods and Services Tax.
GST Law	GST law as defned in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

86 Arena REIT Product Disclosure Statement

Term	Defnition
IBISWorld	IBISWorld Pty Ltd ABN 76 006 819 987
Initial Service Fee	Has the same meaning given in the Constitution, as summarised in Section 13.1.
Institutional Offer	A person to whom offers and issues of Units may lawfully be made without the need
	for disclosure under Part 7.9 of the Corporations Act or without any other lodgement,
	registration or approval with or by a government agency (other than one with which the
	Fund, in its absolute discretion, is willing to comply).
Investigating	The Investigating Accountant’s Report prepared by PricewaterhouseCoopers Securities
Accountant’s Report	Ltd.
Investor	A person who acquires New Units.
Joint Lead Managers	The joint lead managers and underwriters of the Offer, being Morgan Stanley and NAB.
Listing	The listing of the Fund on ASX.
Listing Rules	The offcial listing rules of the ASX from time to time as modifed by any express written
	confrmation, waiver, or exemption given by ASX.
MSREF VII Global	The investment platform sponsored and managed by Morgan Stanley Real Estate
	Investing which purchased Arena via a series of interposed investment vehicles.
NAB	National Australia Bank Limited ACN 004 044 937.
Net Asset Value	Has the same meaning given in the Constitution, as summarised in Section 13.1.
New Units	Units issued as a result of Applications under the Offer.
NTA	Net tangible assets value.
Offer	The offer of New Units under this PDS to raise $75 million via the Broker Firm Offer, the
	Institutional Offer and the Stakeholder Offer.
Offer Period	Expected to be 20 May 2013 to 7 June 2013.
Offer Price	$1.01 per Unit.
PDS	This Product Disclosure Statement dated 13 May 2013.
Privacy Act	Privacy Act 1988 (Cth).
Pro Forma Balance	Has the meaning given in Section 8.1.
Sheet
Pro Forma Historical	The pro forma historical income statements contained in Sections 8.3 and 8.4.
Income Statements
Properties	The direct properties held by the Fund, as described in Section 5 of this PDS.
Registry	Boardroom Pty Limited ABN 14 003 209 836.
Retail Investor	Has the same meaning given to the term ‘Retail Client’ under Section 761G of the
	Corporations Act.
Stakeholder Offer	The offer under this PDS to all existing Arena REIT Unitholders, investors in other funds
	managed by Arena, Directors of Arena (and their associates) and Arena Staff who have a
	registered address in Australia.
Standard Lease	The standard lease for over 95% of the childcare centres, the terms of which are
	summarised in Section 13.3.

Arena REIT Product Disclosure Statement 87

15: Glossary

Term	Defnition
TFN	Tax fle number.
Transaction Costs	Has the same meaning given in the Constitution, as summarised in Section 13.1.
Underwriting	The Joint Lead Managers’ obligation to underwrite the Offer pursuant to the
	Underwriting Agreement.
Underwriting	The agreement between the Joint Lead Managers and Arena in its capacity as
Agreement	responsible entity of the Fund, pursuant to which Arena has agreed to undertake and the
	Joint Lead Managers have agreed to underwrite the Offer summarised in Section 13.4.
Underwriting Fees	A fee of 3.75% of the amount raised under the Offer, approximately $2.8 million payable
	by the Fund to the Joint Lead Managers for agreeing to Underwrite the Offer, described
	in Section 11.5.
Unit	An ordinary unit in the Fund.
Unitholder	A holder of Units.
Unit Price	The price at which Units are issued to Investors, calculated in accordance with the
	Constitution.
WALE	Weighted average lease expiry, weighted by income.
Withdrawal Offer	An off market withdrawal offer at the prevailing Withdrawal Price under which Unitholders
	can apply to withdraw their Units from the Fund which may be undertaken by Arena (in its
	sole discretion) following Listing as described in Section 4.15 of this PDS.
Withdrawal Price	The price at which the Units may be redeemed under the Withdrawal Offer (if
	undertaken) as determined under the Constitution at the relevant time, being (in
	summary), the Net Asset Value - Accrued Income + Transaction Costs divided by the
	number of Units on issue.

88 Arena REIT Product Disclosure Statement

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Arena REIT Product Disclosure Statement 89

Corporate Directory

Responsible entity

Arena Investment Management Limited ABN 23 077 235 879 AFSL 233190

Registered Office Level 20 600 Bourke Street Melbourne Vic 3000

Arena Investor Services Telephone: 1800 008 494 Email: info@arenainvest.com.au

Board of Directors of Arena David Ross (Non-executive Chairman) Dennis Wildenburg (Non-executive Director) Simon Parsons (Non-executive Director) James Goodwin (Joint Managing Director) Bryce Mitchelson (Joint Managing Director)

Registry

Boardroom Pty Limited ABN 14 003 209 836 Level 7 297 Kent Street Sydney NSW 2000

Joint Lead Managers

Morgan Stanley Australia Securities Limited ABN 55 078 652 276 AFSL 233741 Level 39, Chifley Tower 2 Chifley Square Sydney NSW 2000

National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 Level 4 800 Bourke Street Docklands Vic 3008

Co-Managers

ANZ Securities Limited ABN 16 004 997 111 AFSL 237531 Level 9 833 Collins Street Docklands Vic 3008

Morgan Stanley Wealth Management Australia Pty Ltd ABN 19 009 145 555 AFSL 240813 Level 39, Chifley Tower Chifley Square Sydney NSW 2000

Auditor

Investigating Accountant

PricewaterhouseCoopers Securities Limited ABN 54 003 311 617 AFSL 244572 Freshwater Place 2 Southbank Boulevard Southbank Vic 3006

PricewaterhouseCoopers Freshwater Place 2 Southbank Boulevard Southbank Vic 3006

Taxation advisor PricewaterhouseCoopers Freshwater Place 2 Southbank Boulevard Southbank Vic 3006

Legal advisor Hall & Wilcox Level 30 600 Bourke Street Melbourne Vic 3000

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Environmentally Responsible Paper This PDS is printed on Pacesetter Satin, an environmentally friendly paper. Pacesetter Satin is FSC Mix Certified, which ensures that all virgin pulp is derived from well-managed forests and controlled sources. It is manufactured by an ISO 14001 certified mill and is Elemental Chlorine Free.

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90 Arena REIT Product Disclosure Statement

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Arena Investment Management Limited ABN 23 077 235 879 AFSL No. 233190

info@arenainvest.com.au www.arenainvest.com.au

Level 20, 600 Bourke Street Locked bag 32002, Collins Street East T +61 3 9093 9000 Freecall Melbourne VIC 3000 Melbourne VIC 8003 F +61 3 9093 9093 1800 008 494