Convertible Step Up Preference Units

TOPIC: Convertible Step Up Preference Units

Maximum Length: 3,000 words plus any supporting exhibits

Product Disclosure Statement for the Offer of Convertible Step - up Preference Units (CPUs) in the US Masters Residential Property Fund. It is available on the LMS under the resources tab or it can be found by searching ASX announcements for code URF which will give other information about the Fund.

You have been engaged by a potential investor who is interested in understanding how to determine whether the CPUs are fairly priced and also in understanding the implications of some details of the them.

Your client (who will not be impressed by a report which simply reproduces material from the product disclosure statement or other company announcements, and which does not provide appropriate referencing to materials which have been relied upon ) would like a report which:

1. Briefly outlines the key features of the CPUs and the activities and structure of the fund (URF) issuing them
2. Explains (drawing on your understanding of how to decompose a security such as the CPUs into its replicating parts) how you would go about determining whether it is fairly priced. You are not required to estimate a fair price (although your client would be impressed if you did provide some indication of whether the expected return is appropriate for the risk).
3. Explains how the distribution policy of the fund might affect the possibility of benefiting from any upside gains on conversion of CPUs.
4. Explains which types of risks are likely to be significant in determining the ultimate returns to an investor in CPUs.
5. Explains the extent to which the interests of the holders of CPUs will be aligned with those of unit holders in the fund and the possibility that act ions by the responsible entity might favour unit holders at the expense of investors in CPUss.
6. Provides some discussion of why the company might have chosen to issue such securities with these characteristics. (What are the possible sources of net benefit from this type of fund raising?)