NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO ANY U.S. PERSON OR ANY PERSON ACTING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON

This communication and any attachments to it are being made and may only be distributed:

• outside the United States, solely to certain Regulation S institutional investors in Australia, and other jurisdictions, who are entitled to participate in the Offer pursuant to the laws of the relevant jurisdiction without registration, lodgement or other formality and who are not, and are not acting for the account or benefit of, “U.S. Persons” as defined in Regulation S under the US Securities Act of 1933, as amended (the “U.S. Securities Act”) (“U.S. Persons”)

Non-compliance with the foregoing may constitute a violation of law. The information contained in this communication is subject to change without notice.

By accepting this communication, each recipient agrees to be bound by the foregoing limitations and the Acknowledgements and the Terms of the Important Notice and Disclaimer at the end of this communication.

Any capitalised term used but not defined in this document has the meaning given to it in the Master ECM Terms and/or the Informational Materials. 

Offeror and Securities

Offeror:

Offer:

Securities:

Australian Unity Bonds Series E – Tranche 1 (“Securities” or “Bonds”)

Price:

A$100 per Security

Offer structure:

The Offer comprises:

• Reinvestment Offer;
• Priority Offer;
• Broker Firm Offer; and
• Institutional Offer.

Minimum Application:

20 Bonds for applicants under the Offer ($2,000).

Proceeds of the Offer:

The proceeds of the Offer will be used to refinance Australian Unity Series C Bonds that are repurchased through the Reinvestment Offer and for general corporate purposes.

Term:

Approximately 5 years

Maturity Date:

15 December 2028 (unless Redeemed early in accordance with the Terms)

Not guaranteed or insured:

The payment obligations of the Offeror under the Bonds are not guaranteed by any Subsidiary of the Offeror, any government, government agency or compensation scheme of Australia or any other jurisdiction, or any other party.

Not deposit liabilities, protected accounts or policy liabilities:

The Bonds are not deposit liabilities or protected accounts of Australian Unity Bank under the Banking Act and are not policy liabilities with any member of the Australian Unity Group under the Life Insurance Act.

Interest Rate:

Floating Interest Rate.

The Interest Rate is the sum of the Market Rate plus the Margin.

Market Rate:

BBSW Rate for a three month period.

Margin:

The Margin is expected to be in the range of 2.50 percent to 2.70 percent per annum.

The Margin will be determined by the Offeror following the completion of the Bookbuild. The Margin will be announced by the Offeror on or around the Opening Date. The Margin may be outside the range specified above.

Interest Payment Dates:

The first Interest Payment Date will be 14 January 2024. Interest will be paid quarterly in arrears on the following dates in each year as well as on the applicable Maturity Date for the Bonds of the Series, or any earlier Redemption Date:

– 14 January

– 14 April

– 14 July

– 14 October.

If any of these scheduled dates is not a Business Day, then the Interest Payment Date will be the next Business Day. Holders are not entitled to any additional payment in respect of that delay.

Early Redemption at Australian Unity’s option:

The Offeror will have the right (but not an obligation) to Redeem the Bonds prior to the applicable Maturity Date:

– following the occurrence of a Tax Event;

– following the occurrence of a Change of Control Event; or

– when a Clean Up Condition subsists.

Early Redemption rights for Holders:

Holders of Bonds have the right to vote to require Redemption prior to the applicable Maturity Date following the occurrence of a Change of Control Event. Redemption in these circumstances requires a Holder Resolution to be passed in favour of Redemption.

Holders have no right to require Redemption before the applicable Maturity Date in any other circumstances.

Negative pledge:

While any Bonds remain outstanding, Australian Unity will not secure any “Relevant Indebtedness” without according the same security (or an equal ranking security) to the Bonds. Some security interests are excluded from the negative pledge – including any security interests in respect of syndicated or term loan arrangements within the limit described in Section 2.1.4 of the Base Prospectus.

“Relevant Indebtedness” broadly means debt securities issued by Australian Unity (including Bonds of another Series) which are, or are capable of being, quoted on a stock exchange and indebtedness owing under syndicated or term loan arrangements.

Covenant Gearing Ratio limit:

While any Bonds remain outstanding, the Offeror will ensure that, on each 30 June and 31 December occurring after the Issue Date, the Covenant Gearing Ratio is not greater than 50 percent.

Restrictions on Subsidiary Indebtedness:

While any Bonds remain outstanding, Australian Unity will ensure that no Subsidiary of Australian Unity incurs Financial Indebtedness (other than in certain circumstances set out below).

“Financial Indebtedness” is defined broadly in Clause 12.4 of the Base Terms.

The restriction does not apply to the following:

• Limited Recourse Debt;
• Financial Indebtedness owed by one member of the Australian Unity Group to another member of the Australian Unity Group;
• any Financial Indebtedness of an entity which becomes a member of the Australian Unity Group after the Issue Date which was incurred or agreed to be incurred before the entity became a member of the Australian Unity Group;
• any other present or future Financial Indebtedness not referred to above provided the aggregate principal amount is not more than 10 percent of Total Equity;
• Subsidiaries which are, broadly, trusts funded by the public or external investors and in respect of which an Australian Unity Group entity does not have a “controlling interest”. A person has a “controlling interest” in a trust or other entity if the person owns beneficially more than 50% of issued units in the trust or other entity (regardless of whether those units or interests have voting rights);
• any ADI that is a member of the Australian Unity Group (which, as at the date of the Base Prospectus, means Australian Unity Bank);

-       any present or future Retirement Village Investment Notes issued by Australian Unity Finance Limited ("AUFL”) provided the recourse of the holders of those notes is limited to the assets of AUFL and Australian Unity Retirement Living Investments Limited;

-       any subordinated capital notes from time to time issued by Australian Unity Health Limited, provided the outstanding aggregate principal amount of such notes does not exceed $60 million;

-       $5.1 million in loans between Australian Unity Support Foundation Limited (previously known as Grand United Centenary Centre Limited) and Australian Unity Retirement Living Management Pty Ltd (“AURLM”) made on or about 31 August 2012;

-       any present or future Financial Indebtedness incurred by Herston Company Pty Limited (or any of its Subsidiaries) in connection with the Herston Projects, provided the outstanding aggregate principal amount of such indebtedness does not exceed $60 million; and

-       any present or future Financial Indebtedness owing by Australian Unity Home Care Service Pty Ltd (“AUHCS”) or AURLM in respect of government funding provided to AUHCS or AURLM (as the case may be) in connection with the provision of homecare or disability care services by AUHCS or AURLM (as the case may be).

“Limited Recourse Debt” is Financial Indebtedness of certain Subsidiaries of Australian Unity which is incurred in relation to the purchase, construction, development or operation of an asset where the financier’s recourse is limited to those assets (or the income or cashflow from those assets) or shares or units issued by that entity or those entities, and the financier otherwise has no guarantee from any member of the Australian Unity Group (as defined in Clause 12.4 of the Base Terms) which is not involved in the purchase, construction, development or operation of such asset, or any security over any other assets of the Australian Unity Group, and includes a refinancing of any such Financial

Indebtedness.

These exceptions are cumulative upon the general exceptions in Clause 4.3 of the Base Terms and do not limit any other exceptions.

Ranking on winding-up:

A Holder’s claim will rank equally with holders of other Series of Bonds, and equally with claims of all other unsubordinated and unsecured creditors (other than any obligations preferred by mandatory provisions of applicable law, including employee entitlements and secured creditors).

A Holder’s claim will rank ahead of the claims of all holders of subordinated instruments and Mutual Capital Instruments, and members of the Offeror.

Holders’ claims are subject to structural subordination which is explained in the Base Prospectus.

Events of Default:

Events of Default are set out in the Base Terms and described in the Base Prospectus and include non-payment of principal or interest, failure by the Offeror to comply with certain other obligations, the insolvency of the Offeror and the cessation or suspension by the Offeror of the conduct of its business.

Listing:

The Offeror has applied for the quotation of the Bonds on ASX.

It is expected that the Bonds will be quoted under the code “AYUHE”.

Credit Rating and Product Complexity Indicator:

Bonds have been assigned a BBB+ long-term Credit Rating and a ‘Green’ Product Complexity Indicator by Australia Ratings.

Selling restrictions:

Selling restrictions apply to the sale of Bonds in foreign jurisdictions. Certain selling restrictions are summarised in the Base Prospectus.

Arranger:

Acacia Partners Pty Ltd (“Acacia Partners”).

Joint Lead Managers:

Acacia Partners, ANZ Securities Limited, Commonwealth Bank of Australia, E&P Corporate Advisory Pty Limited, National Australia Bank Limited, Morgans Financial Limited and Westpac Institutional Bank (a division of Westpac Banking Corporation).

Key risks

Key risks associated with the Bonds

·            A detailed outline of risks relating to the Bonds is contained in Section 4 of the Base Prospectus and Section 3 of the Offer Specific Prospectus. All potential investors should read both the Base Prospectus and the Offer Specific Prospectus in full before deciding whether to invest in the Bonds. A summary of some of the key risks associated with the Bonds is set out as follows.

·            Market price of the Bonds – The market price of the Bonds may fluctuate due to various factors including general movements in interest rates, credit margins, the Australian and international investment markets, international economic conditions, changes in inflation rates and inflationary expectations, the market price of any other Australian Unity debt, factors that affect Australian Unity’s financial position and performance or credit worthiness, global geo-political events and hostilities, investor perceptions and other factors beyond the control of Australian Unity and its Directors.

·            Liquidity of the Bonds – Australian Unity has applied for the Bonds to be quoted on the ASX. However, the Bonds may have no established trading market when issued, and one may never develop. If a market does develop, it may be less liquid than the market for other securities.

·            The Bonds may be suspended or delisted – There is a risk that trading in the Bonds could be suspended or could cease to be quoted on the ASX in certain circumstances, including if Australian Unity fails to comply with applicable listing rules.

·            Changes in Interest Rate payable – For any Series of Bonds issued with a floating interest rate, Interest Rate will fluctuate (both increase and decrease) over time with movement in the Market Rate.

·            Australian Unity may default on payment of Face Value or Interest – Depending upon its performance and financial position, Australian Unity’s cash flows and capital resources may not be sufficient to pay some or all of the Face Value or Interest due on Bonds as and when payable under their terms.

·            The Bonds have limited Events of Default and rights to require redemption – The only circumstances in which the Trustee may (under the direction of Holders) accelerate payment of the Bonds are where Australian Unity fails to make a payment on the Bonds (which is not remedied within 10 Business Days after the due date), fails to comply with other obligations under the Terms or the Trust Deed (which is not remedied for 30 Business Days after the Trustee has given notice of the failure), becomes insolvent, or ceases or suspends the conduct of all of its business. Other than the change of control put option described in Section 2.1.3 of the Base Prospectus, Holders will have no right to require Australian Unity to Redeem the Bonds, including where the Bonds are no longer admitted to quotation on a stock exchange (although Australian Unity does have an obligation to use its reasonable endeavours to maintain the quotation of the Bonds on a stock exchange).

Key business risks associated with Australian Unity and the Australian Unity Group

·            A detailed outline of risks relating to the Australian Unity Group’s business is contained in Section 4 of the Base Prospectus and Section 3 of the Offer Specific Prospectus. All potential investors should read both the Base Prospectus and the Offer Specific Prospectus in full before deciding whether to invest in the Bonds. A summary of some of the key risks associated with the Australian Unity Group’s business is set out as follows.

·            Availability of a skilled and experienced workforce – Australian Unity is reliant on its valued employees and the skills and experience they possess to effectively service its members and customers. If Australian Unity can’t access appropriately skilled people or effectively retain its current employees, Australian Unity may experience workforce constraints that adversely impact the provision of service, growth plans and financial performance. Australian Unity is currently experiencing this risk as of the date of the Base Prospectus in its care workforce due largely to competition for talent and changes to sector workforce dynamics and government funding models.

·            Changing customer expectations – Australian Unity operates in markets where customer expectations are changing rapidly and preferences are shifting to digital engagement channels. The operation of Australian Unity’s technology is an important part of how it delivers services to customers. If Australian Unity is not successful in adapting its products, services and technology to meet changing customer preferences, it may lose customers which may adversely impact its financial performance.

·            Cyber security threats – Australian Unity’s businesses are reliant on technology to deliver its products and services. To provide these products and services, Australian Unity handles large amounts of customer, member and employee data. Cyber security threats are on the rise with growing frequency, sophistication and severity. If the systems Australian Unity have to detect and prevent cyber-attacks fail, it could experience unauthorised access, modification or loss of confidential information or business disruption due to system unavailability.

·            Providing quality clinical and care services – Australian Unity provides high-trust services such as health and aged care services in the community.  Poor quality clinical services may arise from inadequate policies and procedures, lack of training and supervision or other situational factors. A severe event or series of events could result in mistreatment, injury or death to Australian Unity’s customers, sanctions from regulators, reduced government funding, reputational damage and remediation costs.

·            Workplace hazards and risks – Australian Unity has a large workforce that could be exposed to workplace injuries or illness. Given the variability of its business activities, locations, conditions and types of care delivered, there is a broad range of risks and hazards that may impact Australian Unity’s employees, including manual tasks, ergonomics, slips, trips, falls, driving, mental health and occupational violence. Workplace injuries can impact Australian Unity’s ability to service customers, its ability to retain employees, and increase its costs.

·            Economic conditions – Australian Unity may be exposed to local and global conditions which could impact its financial performance. For example, as at the date of this presentation, inflationary pressures are leading to rising medical, construction, operational and staffing costs.

Investor information

Required investor actions:

·         Read the Information Materials (as defined below), other information released by the Offeror on the ASX and all other information released by the Offeror pertaining to the Offer.

·         Bid into the Book, as set out below by 12:00pm Friday, 3 November 2023 (Melbourne time).

·         Confirm acceptance of allocation by completing, signing and returning the personalised “Confirmation of Allocation” sent by the Joint Lead Managers following the close of the Offer. 

·         Confirm allocation and registration details by returning the personalised CARD Form sent by the Joint Lead Managers following the close of the Offer.

Settlement agent:

Morgans Financial Limited (ABN 49 010 669 726)

Information Materials:

As specified in paragraphs (a) – (g) in the definition of “Information Materials” in section 2.1 of the Master ECM Terms dated 30 June 2023, including without limitation:

1. an investor presentation dated 30 October 2023;
2. the Base Terms and Offer Specific Terms dated 30 October 2023 (together, the “Terms”);
3. the Base Prospectus and Offer Specific Prospectus lodged with the Australian Securities and Investments Commission on 30 October 2023, (together, the “Offer Documents”);
4. the ASX announcement lodged with ASX on 30 October; and
5. the Target Market Determination issued by the Offeror in respect of the Securities dated 30 October 2023 (“Offer TMD”) – available at https://www.australianunity.com.au/bonds

Bookbuild information 

1.   Invitation

• All bids into this Bookbuild are by invitation only and are subject to this communication and the Master ECM Terms dated 30 June 2023, as incorporated by reference below
• If you fail to respond to the invitation within the required time (see below), you will be deemed to not have accepted the invitation to participate in the Bookbuild and no bids will be accepted from you

2.   Timing

• All bids from investors must be received by 12:00pm Friday, 3 November 2023 (Melbourne Time)
• The Bookbuild times are indicative only and the Bookbuild may be closed or extended without notice or consultation with you

3.   Bidding prices

• Bids will ONLY be accepted at the Price

4.   Bids

1. While the Bookbuild is open:

i.           All bids must be submitted by replying to this email and confirming the Series, margin, number and value of Securities for which you are bidding using the template(s) below.

Reinvestment bid

Please note: The total number of Securities specified in Your reinvestment bid above cannot exceed the number of AYUHC You hold as at the Reinvestment Offer record date. If You would like to bid for additional Bonds, please complete the “New Money bid” table below.

New money bid

ii.          All bids will represent legally binding and irrevocable offers to subscribe for a number of Securities up to the maximum amount for which a bid is made at the Price and will be capable of acceptance in full or in part by the Offeror, subject to (iii).

iii.        All existing bids may only be adjusted up for volume.

2. On closing of the Bookbuild:

i.           All existing bids in the Book will represent legally binding and irrevocable final offers to subscribe for a number of Securities up to the maximum amount for which a bid is made at the Price and will be capable of immediate acceptance in full or in part

ii.          Acceptance of your bid and allocation (if any) will be notified to you and will form your contract

3. Any bid may be deemed to be invalid by the Offeror acting in consultation with the Joint Lead Managers.
4. While bids are confidential, general updates may be provided to all bidders in the course of the Book and any information disclosed to you in relation to the status of the Book is confidential and may constitute inside information. Therefore, as a recipient of that information, you must not trade, procure others to trade or communicate that information to any person who is likely to trade in Division 3 financial products relating to the Offeror, if to do so would breach insider trading laws.