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Amazing Loans Franchises (Holdings) Limited ACN 125 208 291 Prospectus An offer of 15,000,000 ordinary shares at an issue price of 60 cents per share to raise $9,000,000 IMPORTANT INFORMATION This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without delay. An investment in the Company should be considered speculative. IMPORTANT NOTICE This Prospectus The Offer contained in this Prospectus is an invitation to apply for Shares in Amazing Loans Franchises (Holdings) Limited (the “Company”). The Offer does not take into account your investment objectives, financial situation or particular needs. It is important that you read this Prospectus in its entirety before deciding whether to invest in the Company. In particular, you should consider the risk factors that could affect the performance of the Company. You should carefully consider these factors in light of your personal circumstances (including financial and taxation issues) and seek professional guidance before deciding whether to invest. A number of key risk factors that you should consider are outlined in Section 6. This Prospectus is dated 19 July 2007. A copy of this Prospectus was lodged with ASIC on that date. No responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates is taken by ASIC. No Shares will be issued on the basis of this Prospectus later than 13 months after the Prospectus Date. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. This Prospectus does not constitute an offer or invitation in any jurisdiction where, or to any person to whom, such an offer or invitation would be unlawful. Disclaimer No person is authorised to give any information or to make any representation in connection with the Offer, which is not contained in this Prospectus. Any information or representation not contained in this Prospectus may not be relied on as having been authorised by the Company, the Directors, or any other person in connection with the Offer. Exposure Period The Corporations Act prohibits the Company from processing Applications received until after the Exposure Period has expired. The Exposure Period is the seven day period from the Prospectus Date and may be extended by ASIC by a further seven days. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. Financial Information All financial amounts contained in this Prospectus are expressed in Australian currency unless otherwise stated. Any discrepancies between totals and sums of components in tables contained in this Prospectus are due to rounding. Electronic Prospectus This Prospectus is available in electronic form at http://www.amazingloans.com.au/investorrelations/prospectus.pdf. The Offer constituted by this Prospectus in electronic form is available only to residents in Australia. Persons who access the electronic version of this Prospectus should ensure that they download and read the entire Prospectus. A hard copy of this Prospectus is available free of charge to any person in Australia by telephoning 03 8805 8000 during the period of the Offer. The Corporations Act prohibits any person from passing the Application Form on to another person unless it is attached to a hard copy of this Prospectus or the complete and unaltered electronic version of this Prospectus. Definitions and Abbreviations Defined terms and abbreviations used in this Prospectus are explained in the Glossary in Section 9. TABLE OF CONTENTS Key Summary.....................................................................................................................................................................1 Chairman’s Letter ..............................................................................................................................................................2 1. Details of the Issue ...........................................................................................................................................3 2. The Amazing Loans Business .........................................................................................................................5 2. The Amazing Loans Business .........................................................................................................................8 3. Consumer Credit Industry................................................................................................................................9 4. Directors and Management ............................................................................................................................13 5. Financial Information ......................................................................................................................................15 6. Investment Risks.............................................................................................................................................32 7. Material Documents ........................................................................................................................................34 8. Additional Information ....................................................................................................................................36 9. Glossary...........................................................................................................................................................39 10. Corporate Directory ........................................................................................................................................40 Application Form .............................................................................................................................................................41 Key Summary Key dates Prospectus Date 19 July 2007 1 Offer opens 27 July 2007 1 Offer closes 31 August 2007 Expected Allotment 5 September 2007 Expected despatch of shareholding certificates 15 September 2007 Key offer statistics Offer Price 60 cents per share 2 Number of Shares available under the Offer 15,000,000 3 Total Shares on issue 59,594,334 Notes: 1. Opening and closing times are inclusive only. The Company has the right to vary the dates and times of the Offer without notifying any recipient of this Prospectus or any Applicant for Shares. 2. Assumes the Offer is fully subscribed. 3. Assumes the Offer is fully subscribed and that no further shares for no additional consideration are issued (refer to Section 1.7), and is subject to rounding where a fraction of a share results on allotment. How to apply for shares Details on how to apply for Shares in the Offer are included in Section 1 of this Prospectus. If you have any questions about how to invest in the Company, please contact an accountant or other professional adviser. 648776_2.DOC 1 Chairman’s Letter 19 July 2007 Dear Investor It is with great pleasure that I present you with this Prospectus and invite you to apply for ordinary shares (“Shares”) in Amazing Loans Franchises (Holdings) Limited. The Company owns 100% of the shares in Amazing Loans Franchises Pty Ltd (“ALF”), which has the Amazing Loans master franchise in Australia apart from New South Wales, ACT, Melbourne metropolitan area, Geelong, Brisbane metropolitan area and the Gold Coast (“Franchise”) from Amazing Loans Limited (“AZD”). AZD has a vision to become a leading alternative finance company and to be recognised as a professional and ethical provider of innovative, quality products at competitive prices. Its initial aim is to become a leading provider of consumer finance in the high margin and fragmented Australian micro-lending market. The Company will participate in this mission. The strategy of AZD is to address the market needs of low to average income earners and people suffering from socio- economic disadvantage that tend to be ignored by mainstream institutional credit providers such as banks. Through AZD, the “Amazing Loans” brand is already strongly established at 6 branches in Western Sydney, 7 branches in Victoria and 8 branches in South East Queensland, promoting AZD’s line of credit products. AZD is positioned in a high margin, fragmented niche area of the finance market. The Directors believe that the Amazing Loans brand has many competitive advantages including being a price leader, increasing brand name recognition, quality service, loan processing speed which should assist the Company in the expression of its business. The strategy of ALF is to act as the loan originator and to open shopfront locations in the identical format to those already operating by AZD, in the designated franchise territory and to operate those stores on a customer service basis only. All loan processing, funding and collection will be carried out by AZD, for customers sourced by ALF through its shopfront outlets. ALF will earn income from and will be paid a fee of 30% of the administration and application fees, and interest earned by AZD. AZD will provide all loan funds for customers sourced by ALF and will attend to all approval and collection processes applicable to those loans. As such, the credit risk on all loans to the customer will be at AZD’s risk. ALF has secured shopfront locations or entered into leases in respect of premises situated at Maroochydore (1/95 Aerodrome Road), Albury (5/462 Dean Street), Morwell (17 Tarwin Street), Ballarat (72 Bridge Mall), Launceston (84 George Street and 3798 Invermay Road), Cairns (129 Sheridan Street), Gympie (66 Mary Street), Toowoomba (446 Ruthven Street), Cranbourne (59 South Gippsland Highway), and Salisbury (32 John Street). Trading has commenced at 3 shopfronts (namely Ballarat, Morwell and Maroochydore). ALF is currently negotiating lease agreements for further premises in Hobart, South Australia and Northern Queensland. The Company’s plan is to locate and open approximately 30 shopfront outlets in South Australia, Western Australia, Northern Territory, Tasmania, and provincial Victoria and Queensland by the end of 2008. The Company has also recently secured from AZD the global master franchise rights whereby the Company has the right to operate the Amazing loans franchise throughout the world except in those areas reserved to AZD under the Franchise (“Global Franchise”). The Company is investigating its options with these rights including operating or selling. This Prospectus seeks to raise $9 million by the issue of 15,000,000 Shares to investors at 60 cents each. Funds raised under this Prospectus will be applied by the Company in establishing shopfront stores in Australia, working capital, investigating international expansion of the Amazing Loans business model and in payment of the costs of the Offer. I strongly recommend that investors read the contents of this Prospectus. It contains important information regarding the financial position of ALF, the Franchise, the Global Franchise and that of AZD, as well as details of the terms and conditions of the Shares offered. I would also urge you to seek independent advice before making a decision to invest. My fellow Directors and I have confidence in the future of the Company, and commend to you this Prospectus and the investment it offers. Yours sincerely Harold Hansen Chairman 648776_2.DOC 2 1. Details of the Issue 1.1 Description of the Offer 1.5 Minimum Subscription Under this Prospectus Shares are being offered for issue The minimum subscription level for the Offer is by the Company on the basis of 15,000,000 Shares at 60 $2,000,000. No Shares will be allotted until the minimum cents per Share to raise $9 million. subscription level has been reached. If the minimum subscription has not been received within 3 months of the The minimum application is for $50,000 and thereafter in Prospectus Date, the Company will refund all multiples of $1,000. Where a fraction of a share results subscriptions received. on allotment, the number of Shares to issue will be rounded up the next whole number. For example an Application for $50,000 results in an application for 1.6 Application of proceeds of Offer 83,333.33 Shares which will be rounded up by the Proceeds of the Offer at minimum and maximum Company on allotment to 83,334 Shares. subscription amounts are intended to be applied as The total aggregate amount raised under the Offer will follows: represent approximately 15% of the Company’s issued Minimum Maximum Shares at completion of the Offer. Subscription Subscription All of the Shares offered under this Prospectus will rank Costs of Offer $192,310 $577,310 equally with all existing ordinary shares currently on issue Store Fit-outs $1,427,690 $5,632,690 in the Company. Working capital $200,000 $2,520,000 1.2 Purpose of Offer International $180,000 $270,000 The purpose of this Offer is to: expansion/ Investigation . provide the Company with funds to establish TOTAL $2,000,000 $9,000,000 shopfront locations under the “Amazing Loans” brand; Should the Offer raise less than the maximum subscription amount but more than the minimum . provide working capital in respect of the subscription amount, the Company will scale back from Franchise; its intended use of funds in the following order: . investigate international expansion under the . a scale back of the investigating of international Global Franchise; and expansion; . apply funds raised in payment of the costs of the . a scale back of capital to be available for store Offer. fit-outs; and 1.3 Structure of Offer . a scale back of working capital. The application of proceeds of the Offer is consistent with Offer Pricing the aims of the Company defined in this Prospectus, and the Directors believe that, at the minimum subscription, The Offer Price is 60 cents per Share. the Company will have enough working capital to carry out its objectives. Company’s discretion The Company reserves the right not to proceed with the 1.7 Further Shares for no Additional Consideration Offer at any time before the allocation of Shares to The Company will allot further Shares for no additional successful Applicants under the Offer. If the Offer does consideration if an Applicant submits an Application for not proceed, Application Monies will be refunded in full $100,000 or more and is issued Shares to the value of (without interest). $100,000 or more, in which case the Applicant will receive extra Shares equal to 20% of that number of 1.4 Capital Structure Shares that are the subject of its accepted Application The ownership structure of the Company immediately (rounded down to the nearest whole number). after completion of the Offer is shown in the table below. For example if an Application for $100,000 is accepted the Applicant will receive: Shareholders No. of % of . Shares applied for under the Offer 166,667 Shares Shares (rounded up to the next whole Tourquet Pty Ltd 9,600,001 16.11% number) Amazing Loans Limited 5,000,000 8.39% . additional Shares for no 33,333 Other shareholders 29,994,333 50.33% consideration being 20% of 166,667 (rounded down to the nearest whole New shareholders pursuant 15,000,000 25.17% number) to the Offer* Total Shares allotted 200,000 Total 59,594,334* 100% *Assumes that the Offer is fully subscribed and that no Shares for no additional consideration are issued – refer to section 1.7 648776_2.DOC 3 1. Details of the Issue 1.8 Dividend Policy . close the Offer early without prior notice; or The ability of the Company to pay dividends is subject to . vary any of the important dates set out in this the availability of profit and other relevant factors. Prospectus, including extending the Offer. The Directors can give no assurance regarding the payment of dividends for any financial year. Subject to 1.12 Underwriting and Handling Fees cash flow requirements and profitability the Directors The Offer is not underwritten. present intention is to declare dividends to the extent of 50% of the net profit after income tax (NPAT) which will The Company will pay a handling fee of 5% plus GST to be franked to the extent that available imputation credits financial intermediaries, in respect of successful permit. Applications made by their private clients, lodged by that intermediary and bearing their stamp. 1.9 Application for Shares 1.13 Allotment of Shares All applications for Shares must be made by completing the Application Form issued and attached to this Allotment of the Shares under this Prospectus will take Prospectus. An application for Shares may be accepted place as soon as practicable after the Closing Date. in full, for any lesser number, or rejected by the Application Monies will be held in a subscription account Company. If any application is rejected, in whole or in until allotment. part, the relevant Application Monies will be repaid This account will be established and kept by the without interest. Company in trust for each Applicant. Any interest earned The precise number of Shares allotted will not be on the Application Monies will be for the benefit of the determined until after the Offer closes. Company and will be retained by the Company irrespective of whether allotment takes place. 1.10 How to apply for Shares The Company may at its discretion reject any Application An Application for Shares can only be made by or accept an Application in respect of a number of Shares completing and lodging an Application Form contained in less than the number applied for. this Prospectus. The Application Form contains detailed Where an Application is rejected, the Application Monies instructions on how it is to be completed. An Application will be returned in full with no interest. Where the number Form must be accompanied by a cheque in Australian of Shares allotted is less than the number applied for, the dollars, crossed “not negotiable” and made payable to surplus monies will be returned by cheque within 30 days “Amazing Loans Franchises (Holdings) Limited – Share of the Closing Date. Where no allotment is made, the Application Account”. Applications received by the amount tendered on Application will be returned in full by Company which do not meet these requirements may be cheque within 30 days of the Closing Date. Interest will refused at the discretion of the Directors. not be paid on monies refunded. Completed Application Forms and accompanying The Shares will be allotted and share certificates cheques may be lodged at the following address: dispatched to holders as soon as possible after Amazing Loans Franchises (Holdings) Limited determination by the Company of entitlements. c/-Level 1 255 Blackburn Road Mount Waverley VIC 3149 1.14 Taxation The Australian taxation consequences of any investment OR in Shares will depend upon the investor’s particular circumstances. Potential investors should make their Amazing Loans Franchises (Holdings) Limited own enquiries concerning the taxation consequences of c/-PO Box 4619 an investment in the Company. If you are in doubt as to Mulgrave VIC 3170 the course you should follow, you should consult your stockbroker, lawyer, accountant or other professional Completed Application Forms must be received before adviser. 5pm (Melbourne time) on the Closing Date. 1.15 Enquiries Completed Application Forms and cheque(s) should be sent to the required address as soon as possible after the If you require assistance to complete the Application Offer opens. Form or require additional copies of this Prospectus you should contact the Company on 03 8805 8000 or via the 1.11 Opening and Closing Dates of the Offer Prospectus website at http://www.amazingloans.com.au/investorrelations/prospe The Opening Date of the Offer will be 27 July 2007 at ctus.pdf. 9.00am (Melbourne time) and the Closing Date will be 31 August 2007 at 5.00pm (Melbourne time). If you require advice as to whether to invest in the Company, you should seek professional advice from your The Directors of the Company reserve the right to: stockbroker, accountant or financial adviser. 648776_2.DOC 4 2. The Amazing Loans Business 2.1 Overview of AZD’s activities . AZD will receive 70% of the application fees, The Amazing Loans business was commenced by AZD in interest, and loan administration fees that are June 2005. AZD was founded with a vision to become a earned on approved loans introduced by ALF, leading alternative finance company and to be recognised while ALF will receive the remaining 30% of these as a professional and ethical provider of innovative, fees and interest. quality products at competitive prices. Its initial aim is to (See section 7.1 for further information about this become a leading provider of consumer finance in the agreement) high margin and fragmented Australian micro-lending market. It now has a strategy to expand the number of Global Franchise financial services and financial products it offers as On 8 June 2007 the Company entered into a Global evidenced by its takeover bid for Investment Evolution Master Franchise Sales Agreement with AZD. The Limited to achieve this goal. territory covered by the Global Franchise is worldwide but excludes the various geographical locations reserved to The strategy of AZD as a micro lender is to address the each of AZD and ALF under the Franchise Agreement. market needs of low to average income earners and people suffering from socio-economic disadvantage that Under the Global Master Franchise Sales Agreement the tend to be ignored by mainstream institutional credit Company: providers such as banks. . can sell the products of AZD and all of its Since commencement, AZD has grown significantly. associated entities (including Investment Evolution Limited and FirstRock Financial Limited); Currently AZD’s main product offering is personal unsecured finance of amounts ranging from $2,000 to . will approve/decline loans as it considers $10,000. The term of a loan is 3 years with 156 weekly appropriate; and repayments of principal and interest. . will provide all loan funds for the loans generated through any of its sales outlets (and will therefore These products (as well as other products that may be be responsible for any bad debts that arise). developed by AZD, or available to it, from time to time) will be offered through the shopfront stores to be opened (See section 7.3 for further information about this by the Company. agreement) 2.2 Industry Overview Structure of Franchises The consumer credit industry in which AZD currently A diagrammatic representation of the structure of the operates has undergone considerable growth in recent franchises is set out below: years as consumers have sought access to credit via personal loans, credit cards, in-store loyalty cards and payday loans. AZD expects that growth to be fuelled by Amazing Loans Franchises Global Master confidence in the general economy, a willingness of (Holdings) Franchise Sales Australians to borrow funds and greater acceptance of Limited Agreement non-traditional sources of finance. See Section 3 for further information regarding the consumer credit industry 100% in Australia. 2.3 Grant of Franchises Franchise Agreement Amazing Loans Amazing Loans Franchise Agreement Franchises Limited On 29 December 2006, AZD granted the Amazing Loans Pty Ltd franchise rights to ALF for $4.4 million under a Franchise Agreement. Under the Franchise Agreement, ALF acquired the right to use the Amazing Loans franchise 2.4 Business objectives Australia wide excluding New South Wales, ACT, Melbourne metropolitan, Geelong, Brisbane metropolitan The Amazing Loans business model is to provide short- and Gold Coast regions. Under this transaction, AZD term finance to parties on short notice upon the swift also received 5 million ordinary shares in ALF. evaluation of a person’s ability to repay, as well as other financial services and products, through “Amazing Loans” The key terms of the Franchise Agreement are: branded shopfronts. . ALF will act primarily as the loan originator and will 2.5 Regulation be responsible for all fit-out, advertising and operating costs of its Amazing Loans outlets; The Business operates in an industry which is highly . AZD will maintain full control over the loan compliance focused. All loans currently undertaken by approval and collection process, provide loan AZD are regulated by the Consumer Credit Code. funds to the customer and be responsible for any bad debts that arise; and 2.6 Competition The Australian finance industry tends to be dominated by conventional finance institutions such as banks and 648776_2.DOC 5 2. The Amazing Loans Business non-bank financial institutions. There are established 2.8 Lending Criteria competitors in the market segment in which the Business operates. The Business seeks to differentiate its As indicated in section 2.3, in respect of the Franchise products and services from its competitors through its Agreement, ALF will act primarily as a loan originator, infrastructure, processes and procedures. while AZD will control loan approval and loan funds to customers introduced through the Company’s shopfront The barriers to entry for competitors are considered by locations. AZD and the Company to be high due to the large level of The main focus of the lending criteria of AZD is to provide capital required, significant business infrastructure loans for a period of 3 years with the ability to provide required, establishing processes and procedures, and the rollover facilities where prudent. AZD has a lending ability to manage the risk of a lending business. manual which is used in assessing loan applications. The AZD Lending Manual includes details of all AZD believes that it has an advantage over some investigations to be undertaken by AZD in relation to traditional sources of finance as its business model is credit risk of potential borrowers and details of AZD’s based on a friendly and responsive approach, a fast loan lending approval criteria. appraisal process with an interest rate commensurate to the risk and short lead time in providing loan funds. Approval of Loans 2.7 Product Offering The process of approval of all loan applications has been delegated to the lending manager of AZD who approves The current main product offering of the Business those loan applications which comply with the criteria consists of unsecured loans between $2,000 and listed below. $10,000. Key features of the product are: Loan Applications . Affordable repayments; Loan approvals of AZD require the following: . Fast loan approvals in less than 20 minutes (after . 100 point ID check, 4 weeks’ pay-slips, bank receipt of all relevant information) to most people statements for proof of income, Veda Advantage aged over 18; credit check, reference check and employer/benefit check; . Fixed interest rate for the term of the loan; . loans will not normally be approved if in excess of . Fixed up-front loan application fee (non- 20% of annual income and/or the client has a refundable); previous loan default record; . Once a loan is approved, a separate loan advance . completion of its standard loan documentation; and establishment fee is charged; and . Loan terms will vary depending on the size of the . where available, signing of a direct debit authority loan; to debit repayments against the customer’s bank account. . Approval generally requires a 100 point ID check, 4 weeks’ pay-slips, bank statements for proof of income, credit check, reference check and Loan Terms employer/benefit check; Currently, loan terms are for a period of 3 years. . Loans will not normally be approved if they exceed 10% of annual income of the customer, or the 2.9 Loan Portfolio of AZD customer has a previous loan default record; and As at 30 April 2007 AZD’s loan portfolio comprised loans . In most cases, repayment through a direct debit totalling $11,460,250 comprising a total of 5036 loans. authority with the customer’s bank. AZD’s bad debt expenses (which comprises write-offs and provision for bad debts) increased from $220,000 in Core Product Offering of the Business 2005 to $490,000 in 2006. In terms of the percentage to operating revenue, AZD’s bad debt expense has fallen Loan application fee $30 non-refundable from 13.5% to 10.3% due to improved loan collections Annual Percentage Rate Up to 47.9% pa in all States and loan management systems. (inclusive of all interest, fees and charges under 2.10 Default Procedure the loan) AZD presently imposes a default fee of $30 per default if Loan Advance and Variable depending on size payments are made late or direct debits are dishonoured. Administration Fee and term of loan If a borrower is late in effecting a payment or otherwise Size of loans $2,000 - $10,000 defaults on their loan, AZD has indicated that it will take Repayment Schedule 3 years (principal & interest) action to recover the amount owed. Where appropriate, AZD issues a default notice to the borrower, and if this is not satisfied, AZD will instigate legal proceedings for recovery of outstanding amounts. 648776_2.DOC 6 2. The Amazing Loans Business 2.11 Funding Facility AZD has in place a $25 million funding line with Ron Medich Properties Pty Ltd which is secured over the assets of AZD. The facility provides funding for loans undertaken by AZD and is drawn down as required. As at 30 April 2007 a total of $6.5 million had been drawn down under the facility. AZD is currently in negotiation to secure a $25 million line of credit. If secured, the line of credit will be in addition to the $25 million funding line with Ron Medich Properties Pty Ltd and result in AZD having funding lines totalling $50 million. 2.12 Capital Structure At the date of this Prospectus, the Company has on issue 44,594,334 ordinary shares. 2.13 Direction of the Company Australia Through ALF, the Company plans to locate and open approximately 30 branches in provincial Victoria, South Australia, Western Australia and provincial Queensland by the end of 2008. ALF currently has secured shopfront locations under lease for the premises in the table set out below. Existing Leases City/Town Premises Start Date Term Rent Option to Renew Victoria Albury 5/462 Dean Street 20/04/2007 3 years $11,748 per annum 5 years Morwell 17 Tarwin Street 02/04/2007 3 years The lease is rent free for the first 2 months, and 5 years thereafter the rent payable is between $12,500 plus GST per annum and $16,224 plus GST per annum over the following 3 year period. Ballarat 72 Bridge Mall 16/02/2007 3 years $31,350 per annum 5 years Cranbourne 59 South Gippsland Highway 1/7/07 3 years $29,400 plus GST per annum 5 years Tasmania Launceston 84 George Street 09/03/2007 3 years $25,000 per year including outgoings plus GST. 5 years Launceston 3798 Invermay Road 01/05/2007 3 years $10,572 per annum. There is a rent free period 5 years from the commencement of the lease to 1/9/07. Queensland Gympie 44 Mary Street 6/07 3 years $18,860 plus GST per annum (inclusive of all 5 years outgoings). Toowoomba 446 Ruthven Street 1/7/07 3 years $50,000 per annum. There is a rent free period 5 years from the commencement of the lease to 31/8/07. Cairns 2/129 Sheridan Street 15/6/07 3 years $18,000 plus GST per annum. 3 years Maroochydore 1/95 Aerodrome Road 3/2007 3 years $28,440 per annum (including GST and outgoings) 5 years South Australia Salisbury 32 John Street 25/6/07 3 years $11,400 plus GST per annum. There is a rent free 5 years period from the commencement of the lease to 25/7/07. The shopfronts located at Ballarat, Morwell and Maroochydore are currently trading. 648776_2.DOC 7 2. The Amazing Loans Business Lease negotiations are underway for further premises in: Tasmania . Hobart (2 premises) Northern Queensland . Townsville . Bundaberg . Mackay . Rockhampton . Maryborough South Australia . Port Adelaide International Expansion The Company is currently investigating its commercial options in relation to the Global Franchise. 648776_2.DOC 8 3. Consumer Credit Industry 3.1 What is Consumer Credit? The Business does not currently offer this type of service. Credit is money that is borrowed and then paid back over time with additional charges known as interest and Micro/Small loans providers establishment fees. Generally consumer credit is available by way of a credit or finance agreement, using a Micro/small loans providers usually provide loans up to credit card (from a credit card company or an affiliated $10,000 with ranging levels of security and credit store card) or taking out a loan. checking processes. There are many types of credit including personal loans, AZD is a micro/small unsecured loan provider. home loans, credit cards, overdrafts, ‘interest-free’ loans, store credit cards, lines of credit and payday loans. 3.3 Growth of the Alternative Finance Market The emergence and expansion of the alternative financial 3.2 Overview of Alternative Finance Market market in Australia parallels similar developments in other The Australian financial services industry can be sub- Western industrialised nations. divided into the following sectors: In the USA, Canada and the United Kingdom the previous 2 decades have witnessed rapid expansion of . banks; the alternative finance market. . non-bank financial institutions, including money One of the major factors contributing to the growth of the market corporations, finance companies and alternative finance market is that mainstream banks have permanent building societies; increasingly discouraged low-income consumers from . life insurance and superannuation funds; and borrowing, both through raising basic transaction costs and by removing financial products tailored to their . other managed funds and financial institutions, needs. Major financial institutions have abandoned short- including cash management trusts, common term small loans. Banks have redirected credit away funds, general insurance companies, friendly from socially disadvantaged groups towards wealthier societies, public unit trusts and co-operative consumers perceived to present less risk and yield higher housing societies. profit margins. The providers of credit in the Australian credit industry As a result of the large number of consumers being can be divided into ‘mainstream credit providers’ and excluded from financial services and products offered by ‘fringe or alternative finance providers’. The former are mainstream banks the alternative finance market has made up of banks, building societies, credit unions and expanded to meet the growing demand of consumers for national finance companies. The latter refers to all those access to credit and financial products. credit providers on the fringe of the credit industry such as payday lenders, pawnbrokers and micro or small loans 3.4 Australian Usage of Credit lenders. It has been reported by the Office of Fair Trading (Qld) The Business operates in the alternative finance market. that: The different types of participants in the alternative . 55% of all Australians over the age of 18 have a finance market include: major branded credit or charge card; Payday Lenders . more than 8 million Australians hold at least one or more major branded credit or charge card; Payday lenders offer short-term cash loans between an employee’s paydays. Payday lenders must operate . 71% of all credit or charge card holders have a within the same laws governing other lenders. Payday personal income of under $45,000 per annum; loans are particularly appealing to people ineligible for a loan from mainstream credit providers. . In 2004, Australians made over 94 million credit purchases totalling $12.2 billion per month; Payday lenders attract customers with the promise of quick, easy and convenient cash, but usually at very high . Reserve Bank figures estimate the average limit interest rates. per credit card is $7,235 and the average debt per credit card is $2,606; and Payday loans are marketed as quick and easy to obtain, available 'on the spot', 'cash when you need it' or 'cash . 12,800 payday loans are made in Australia every within the hour'. month and it is predicted that this amount will increase in line with trends in North America at a Some payday lenders, unlike banks, building societies or rate of 12%-14% per annum in Australia. credit unions, do not usually put customers through comprehensive credit checks. Often loans can be Australians have moved from saving to spending. obtained by providing proof of residence and an income. Consumers can access credit nearly everywhere - in department stores, furniture shops, car dealers and real The Business does not offer payday lending services. estate agents, as well as from banks, credit unions and even over the internet. Pawnbrokers Pawnbrokers provide loans using goods as security for the loan. Should the loan not be repaid, then the goods are sold into retail stores to recover the principal and interest of the loan. 648776_2.DOC 9 3. Consumer Credit Industry Table 2 illustrates credit applications in New South According to credit reporting organisation, Veda Wales, Queensland and Victoria in the three months of Advantage, personal loan applications increased by October to December 2006 compared to the same 10.9% in the December 2006 quarter compared to the period in 2005. same period in 2005. Veda Advantage reported that Table 2 personal loans are fast becoming a preferred source or credit for Australians, with an all-time high of 2.7 million Credit applications in NSW, VIC and QLD in the three applications in 2006, up 200,000 on 2005. months of October to December 2006 compared to the same period in 2005 According to recently published data by Veda Advantage, as illustrated in Table 1, unsecured credit demand for personal loans increased nationally by 7.06% in the State Personal % Credit % December quarter of 2006 as compared with the Loans change Cards change December 2005 quarter. The percentage increases in New South Wales, Queensland and Victoria are also illustrated in Table 1. NSW 231,059 11.8% 322,860 0.9% Table 1 VIC 146,902 12.1% 219,294 1.4% Details of credit applications nationally and in NSW, VIC and QLD in the December 2006 quarter compared to the December 2005 quarter QLD 176,715 10.9% 187,991 1.0% Source: Veda Advantage State Personal % Credit % Loans change Cards change NSW 886,206 +8.1% 1,341,970 +7.9% VIC 567,856 +8.9% 907,338 +3.9% QLD 677,393 +7.4% 757,741 +3.5% National 2,794,132 +7.7% 3,732,499 +5.3% Total Source: Veda Advantage Table 3 illustrates national unsecured discretionary credit applications by month from October 2002 to June 2006. Table 3 Source: Veda Advantage 648776_2.DOC 10 3. Consumer Credit Industry Table 4 illustrates the percentage change in credit demand for credit cards and personal loans in Australia between the April 2005 quarter and the April 2006 quarter. Table 4 Source: Veda Advantage The data displayed in Tables 1 to 4 is in respect of applications made to Veda Advantage’s credit bureau by lenders and not every application may be approved by lenders. Data, as illustrated in Tables 1 to 4, indicates a continued willingness of Australian consumers to use credit for consumer purchases and other lifestyle needs. 3.5 Regulation and Money Plus, all of which have shop fronts that provide small short term personal loans. Potential The Consumer Credit Code operates throughout competitors to the Global Franchise are not yet known. Australia and governs all consumer credit transactions. Competition in the alternative finance market is Under the Consumer Credit Code, a credit provider is influenced by a number of factors, including: defined as any business that provides finance to purchase goods, services and land, or to lease goods. Price – The level of interest rate charged and loan These credit providers include banks, building societies, establishment fees. credit unions, finance companies, payday lenders and businesses. AZD aims to be one of the price leaders in its core micro- lending market segment. Its internal research and The Consumer Credit Code applies to credit providers if customer feedback suggests that it currently provides the they charge for the credit and their customers are cheapest customer lending rates compared to the individuals or residential strata corporations who use it majority of its major competitors. mostly for personal, household or domestic purposes. Brand name and reputation – The ability of the Under the Consumer Credit Code credit providers must prospective customer to be attracted to the products and advise the borrower of their rights and obligations under services of the business. the credit arrangement. Credit providers are required to provide a written contract that includes information on Amazing Loans shopfronts are bright, colourful, interest rates, fees, commissions and a payment professional and welcoming. The brand name, marketing schedule. and image have been designed to be memorable. AZD has a program of staff training designed that person A number of the state governments are currently working in the shopfronts meet the highest standards of conducting a review of the finance sector in which AZD conduct and ethics to maintain reputational risk. operates. AZD has indicated to the Company that it has made formal submissions and is in discussions with the Service/Speed – Staff knowledge regarding loan respective departments of the relevant state features and functionality as well as customer service governments. levels and speed are important factors in attracting business. There is a need to ensure staff acquire the relevant knowledge to address customer queries to 3.6 Competition attract repeat customers and customer loyalty. There are several established competitors in the market AZD provides an average loan approval turnaround time segment in which the Company will operate. The major of less than 20 minutes (after receipt of all relevant competitors of the Franchise are City Finance, Cash documents). Stop, Cash Converters, GE Money, Money Centre, AMX 648776_2.DOC 11 3. Consumer Credit Industry Location –The location of a store affects the consumer traffic attracted to the store. The Company selected prime sites for all of its shopfront locations, generally on the main street of each particular suburb in order to maximise exposure and walk-in customer traffic. 3.7 Barriers The barriers to entry for competitors in the alternative finance market are considered to be high due to the significant government regulation, large amount of capital required, significant business infrastructure requirements, establishing effective processes and procedures, establishing adequate distribution channels and the ability to manage the risk of a micro lending business. The Company believes that the Amazing Loans business model has an advantage over competitors based on: . streamlined application process; . low operating costs; . superior branding; . ethical standards required by all staff at all times; . effective loan distribution channels; . a targeted marketing strategy . a strong management team. 648776_2.DOC 12 4. Directors and Management 4.1 Directors Harold Hansen – Chairman Lisa Stribley – Director Lisa is a Certified Practicing Accountant. She has 14 years experience in the accounting profession, Harold is an accountant, CPA, and has been a partner in specialising in business development consulting, taxation an accounting firm for 34 years and is the CEO of advice and compliance for the small to medium enterprise Hansens Accountants Pty Ltd. market. He has had extensive experience in tax planning, She has been a Partner of Hansens Accountants Pty Ltd management accounting, joint venture property for over 9 years and has been instrumental in growing the syndicates and more recently, has helped many clients in business throughout this period. their wealth creation strategies. Lisa has extensive experience in property syndicates, He has also worked with clients in measuring and prospectus development for unlisted public companies managing their affairs to co-ordinate strategies that have and agribusiness investments. allowed them to diversify their business strategies to encompass financial planning products, property development, share warrants and developments in venture capital operations. As a member of the Australian Society of CPA’s, Harold has chaired a number of Public Accountants discussion groups and spoken at many accounting conferences and presented on subjects that have helped many other accounting firms become proactive in helping clients view their futures. Trevor Schoenmaekers – Director Trevor is a Certified Practicing Accountant and Company Director. He has 18 years experience in the accounting profession, specialising in business development and taxation advice. He has been a Partner of Hansens Accountants Pty Ltd for over 9 years and has been instrumental in growing the business throughout this period. Hansen’s is in BRW’s top 100 accounting firms and is one of the fastest growing and successful accounting firms in Australia. Trevor’s experience and expertise in growing businesses and maintaining close and proactive relationships with all of his clients has allowed him to assist his clients to plan for, and implement, strategies for growth and expansion. 648776_2.DOC 13 4. Directors and Management 4.2 Organisational Chart The organisational structure of the Company and ALF as at the Prospectus Date is detailed below. Organisation Structure Board of Directors Harold Hansen - Chairman Trevor Schoenmaekers - Director Lisa Stribley - Director Damien Mathieson Bryce Hoare Chief Operating Officer Consultant Imelda Damayanti National Marketing Manager and Call Centre Manager Dianna Zivanovic Call Centre staff Rene Fulko Tracy Bray Administration Manager Operations Manager Assistant Operations Branch Staff 648776_2.DOC 14 5. Financial Information 5.1 Independent Accountant’s Report 18 July 2007 The Directors Amazing Loans Franchises (Holdings) Limited Level 1, 255 Blackburn Road Mount Waverly VIC 3149 Dear Sirs, INDEPENDENT ACCOUNTANT’S REPORT Introduction This report has been prepared by Moore Stephens Sydney Pty Limited for inclusion in a prospectus to be dated on or about 18 July 2007 relating to the issue by Amazing Loans Franchises (Holdings) Limited (“ALF Holdings”) ACN: 125 208 291 (the “Company”) of up to 15,000,000 fully paid shares at an offer price of $0.60 per share. The minimum application is for $50,000 and thereafter in multiples of $1,000. The Offer has not been underwritten. Expressions defined in the Prospectus have the same meaning in this report. This report considers the pro-forma balance sheet at completion of the proposed capital raising immediately after the initial application date and the historical financial information. Background The Company was incorporated as a holding company on 31 May 2007. The Company holds 100% of the share capital of Amazing Loans Franchises Pty Limited (“ALF”). ALF was incorporated on 4 December 2006. ALF acts as a franchisor of Amazing Loans Limited (“AZD”) products. On 29 December 2006, AZD granted the Amazing Loans franchise rights to ALF for $4.4 million under a Master Franchise Agreement to use Amazing Loans franchise Australia wide, excluding New South Wales, ACT, Melbourne metropolitan, Geelong, Brisbane metropolitan and Gold Coast regions. ALF plans to locate and open approximately 30 branches in South Australia, Western Australia, Northern Territory and provincial Victoria and Queensland by the end of 2008. ALF currently has lease agreements in place for 4 premises in Victoria, 2 in Tasmania, 4 in Queensland and 1 in South Australia. Trading has commenced at 3 shopfronts (namely Ballarat, Morwell and Maroochydore). Refer to section 2.3 and 2.13 of the Prospectus for further information. Financial Information The Directors of the Company have determined that the pro forma financial information presented in Appendices 1 to 5 of this report are the most relevant to potential investors and accordingly comprise of balances and results of the Group since incorporation of ALF, assuming ALF Holdings existed at that time.. The pro forma financial information set out in Appendices 1 to 5 of this report includes: a. Appendix 1 – The pro forma consolidated income statement for Amazing Loans Franchises (Holdings) Limited and its controlled entities (“ALF Holdings Group”), for the financial period ended 30 April 2007; b. Appendix 2 – The pro forma consolidated balance sheet of ALF Holdings Group as at 30 April 2007 pre capital raising and the pro forma consolidated balance sheet of ALF Holdings Group as at 30 April 2007 post capital raising based on minimum and maximum subscription amounts; 648776_2.DOC 15 5. Financial Information c. Appendix 3 – The pro forma consolidated cash flow statement of ALF Holdings Group, for the financial period ended 30 April 2007 pre capital raising and pro forma cash flow statement as at 30 April 2007 post capital raising based on minimum and maximum subscription amounts; d. Appendix 4 – The pro forma consolidated statement of changes in equity of ALF Holdings Group as at 30 April 2007 pre capital raising and pro forma statement of changes in equity as at 30 April 2007 post capital raising based on minimum and maximum subscription amounts; and e. Appendix 5 – The details of the methodology applied in preparing the pro forma financial information and material accounting policies adopted and disclosed by the Company. Pro forma historical financial information The pro forma historical financial information contained in Appendices 1 to 5 of this Report have been prepared by the Directors in accordance with the recognition and measurement principals prescribed in Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001, modified for certain presentation matters for the purpose of inclusion in the Prospectus. The material accounting policies adopted by the entity are summarised in Appendix 5 of this Report. The pro forma historical financial information has been derived by consolidating the dormant parent company ALF holdings, assuming it had been incorporated before 30 April 2007, with the audited financial statements of ALF, for the 10 months ended 30 April 2007 as prepared by the Directors of ALF. Historical pro forma adjustments No adjustments have been made to the historical financial information of ALF included in the pro forma consolidated financial information for the financial period ended 30 April 2007 "pre capital raising" of ALF Holdings as disclosed in Appendices 1 to 5. Responsibilities The Directors are responsible for the preparation and content of the pro forma financial information including determination of the pro forma adjustments. It is our responsibility to review the pro forma financial information and report on it. We disclaim any responsibility for any reliance on this report or the financial information to which it relates for any purpose other than that for which it was prepared. This Report should be read in conjunction with the full Prospectus. Scope The Directors have requested Moore Stephens Sydney Pty Limited prepare a report covering the following information: a. The pro forma consolidated income statements, balance sheets, cash flow statement, statement of changes in equity and related notes of ALF Holdings Group for the financial period ended 30 April 2007 pre capital raising; and b. The pro forma consolidated balance sheet, pro forma cash flow statement, statement of changes in equity and related notes of ALF Holdings Group as at 30 April 2007 post capital raising, which assumes completion of the offer with a minimum and maximum subscription. Review of pro forma financial information Moore Stephens Sydney Pty Limited has conducted an independent review of the pro forma financial information included in the Appendices to this report in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the pro forma historical financial information is not presented fairly in accordance with the methodology applied in preparing the pro forma financial information and material accounting policies adopted and summarised in the Notes set out in Appendix 5. Our review has been conducted in accordance with Australian Auditing Standards AUS902 "Review of Financial Reports". We have made such enquires and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances, which were limited primarily to: 648776_2.DOC 16 5. Financial Information a. Review of relevant working papers detailing the adjustments and the assumptions on which they were made, accounting records and other documentation, as appropriate; b. A review of adjustments made to the pro forma consolidated balances sheets, cash flow statements, statement of changes in equity and related notes; c. Consideration of the consistency in application of the recognition and measurement principles prescribed in Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001; and d. An enquiry of ALF and ALF Holdings Directors, management and others. The procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. The Directors of the Company are responsible for the pro forma historical financial information included in the Appendices to this report. Review statement on pro forma financial information Based on our review, which is not an audit, nothing has come to our attention which would cause us to believe that: a. the pro forma financial information of ALF Holdings as set out in Appendices 1 to 5 of this report is not drawn up so as to present fairly, the pro forma consolidated financial performance and pro forma consolidated financial position of ALF Holdings Group; b. the pro forma financial information is not prepared in accordance with the methodology and accounting policies summarised in Appendix 5; c. the assumptions, notes, accounting policies and estimated expenses of the offer made by Directors, do not provide a reasonable basis for the preparation of the pro forma financial information. Legal Proceedings To the best of Moore Stephens Sydney Pty Limited's knowledge and belief, there are no material legal proceedings outstanding or currently being undertaken not otherwise disclosed in this report which would cause the information included in the report to be misleading. Dilution of shareholders interests As set out at Section 1.7 of the Prospectus, the Company will allot further Shares for no additional consideration if an Applicant submits an Application for and is issued Shares to the value of $100,000 or more, in which case the Applicant will receive extra Shares equal to 20% of that number of Shares that are the subject of its accepted Application. The total number of extra shares that could be issued assuming the minimum subscription and maximum subscriptions is 666,660 and 2,999,970 shares respectively. The dilutionary impact is illustrated below Minimum subscription $2m Maximum subscription $9m Shareholders No. of % of % of Shares No. of % of % of Shares Shares Shares (undiluted) Shares Shares (undiluted) (undiluted) (undiluted) Tourquet Pty Ltd 9,600,001 20.0% 19.8% 9,600,001 16.1% 15.3% Amazing Loans Limited 5,000,000 10.4% 10.3% 5,000,000 8.4% 8.0% Other shareholders 29,994,333 62.6% 61.7% 29,994,333 50.3% 47.9% New shareholders pursuant to the Offer 3,333,333 7.0% 8.2%* 15,000,000 25.2% 28.8%* Undiluted Total 47,927,667 59,594,334 648776_2.DOC 17 5. Financial Information Minimum subscription $2m Maximum subscription $9m Shareholders No. of % of % of Shares No. of % of % of Shares Shares Shares (undiluted) Shares Shares (undiluted) (undiluted) (undiluted) Shares for no additional consideration alloted to New Shareholders 666,660 2,999,970 Fully diluted Total 48,594,327 62,594,304 * includes Shares for no additional consideration Subsequent Events Please refer to Note 8 of Appendix 5 of this report. Amazing Loans Franchises (Holdings) Limited was incorporated on 31 May 2007. 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 other material transactions or events outside of the ordinary business of the Company 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. Sources of Information We have made enquiries of the Directors of the Company and other parties as considered necessary during the course of our analysis. We have also referred to the Prospectus and material documents which will relate to the operations of the Company. We have no reason to believe the information supplied is not reliable. Declarations Moore Stephens Sydney Pty Limited has prepared this report for inclusion in the Prospectus. We have not acted in any other capacity to the Prospectus, and have not been involved in the preparation of any part thereof. Moore Stephens Sydney Pty Limited does not have any interest in the outcome of this issue of shares in ALF Holdings other than a fee in connection with the preparation of this report for which normal professional fees in the order of $18,000 will be received. No pecuniary or other benefit, direct or indirect, has been received by Moore Stephens Sydney Pty Limited for or in connection with the making of this report. This Report has been prepared on behalf of Moore Stephens Sydney Pty Limited by Scott Melville Whiddett, who is a Director of Moore Stephens Sydney Pty Limited and a partner of Moore Stephens Sydney, Chartered Accountants. Mr Whiddett is an associate of the Institute of Chartered Accountants and a Registered Company Auditor. Mr Whiddett has over 16 years of experience including audit of public companies, detection of fraud, valuations, economic loss calculations, due diligence and the preparation of Independent Expert’s Reports. Other than as disclosed above, Mr Whiddett, the other Directors and the staff involved with the preparation of this report have, at the date of this report, no interest or financial relationship with ALF or ALF Holdings. Yours faithfully, MOORE STEPHENS SYDNEY PTY LIMITED S.M. WHIDDETT Director 648776_2.DOC 18 5. Financial Information 648776_2.DOC 19 5. Financial Information APPENDIX 1 ALF HOLDINGS GROUP Pro forma Consolidated Income Statements The Pro forma Consolidated Income Statement is to be read in conjunction with the accompanying notes set out in Appendix 5 Incorporation to 30 April 2007 $ Revenue 31,969 Other Income 1,097,823 Accountancy expenses (50,350) Advertising expenses (19,560) Auditors' remuneration (12,400) Consultancy fees (963,638) Depreciation and amortisation expenses (340) Directors fees (50,000) Employee benefit expenses (4,380) Legal fees (13,932) Other expenses (19,988) Operating loss before tax (4,796) Income tax expense 1,439 Operating loss after tax (3,357) 648776_2.DOC 20 5. Financial Information APPENDIX 2 ALF HOLDINGS GROUP Pro forma Consolidated Balance Sheets The Pro forma Consolidated Balance Sheets are to be read in conjunction with the accompanying notes set out in Appendix 5. Post capital raising Minimum Maximum Pre capital subscription subscription As at 30 April 2007 raising $2m $9m Note $ $ $ CURRENT ASSETS Cash and cash equivalents 6,881,548 6,189,238 12,804,238 Trade and other receivables 3 734,339 734,339 734,339 Total Current Assets 7,615,887 6,923,577 13,538,577 NON-CURRENT ASSETS Financial assets 4 5,399,741 5,399,741 5,399,741 Plant & equipment 5 71,339 71,339 71,339 Intangible assets 6 4,000,400 9,000,400 9,000,400 Total Non-Current Assets 9,471,480 14,471,480 14,471,480 Total Assets 17,087,367 21,395,057 28,010,057 Current Liabilities Trade creditors & accruals 568,512 3,068,512 3,068,512 Group tax payable 747 747 747 Superannuation payable 395 395 395 Total Current Liabilities 569,654 3,069,654 3,069,654 Non Current Liabilities Application Monies 14,121,065 - - Total Non-Current Liabilities 14,121,065 - - Total Liabilities 14,690,719 3,069,654 3,069,654 Net Assets 2,396,648 18,325,403 24,940,403 Equity Contributed equity 7 2,400,005 18,325,760 24,943,760 Retained profits (3,357) (3,357) (3,357) Total Equity 2,396,648 18,325,403 24,940,403 648776_2.DOC 21 5. Financial Information APPENDIX 3 ALF HOLDINGS GROUP Pro Forma Consolidated Cash Flow Statements The Pro forma Consolidated Cash Flow Statements are to be read in conjunction with the accompanying notes set out in Appendix 5. Incorporation to 30 April 2007 Post capital raising Consolidated Minimum Maximum Pre capital subscription subscription raising $2m $9m $ $ $ Cash Flows from Operating activities Cash receipts in the course of operations - - - Cash payments in the course of operations (1,297,477) (1,297,477) (1,297,477) Interest received 31,969 31,969 31,969 Finance costs paid (16) (16) (16) Net cash used in Operating activities (1,265,525) (1,265,525) (1,265,525) Cash Flows from Investing activities Payments of plant and equipment (71,679) (71,679) (71,679) Payments for investments (4,301,918) (4,301,918) (4,301,918) Payments for intangibles (4,000,400) (6,500,400) (6,500,400) Net cash used in Investing activities (8,373,997) (10,873,997) (10,873,997) Cash Flows from Financing activities Proceeds from Share Issue 2,400,005 4,207,695 10,822,695 Proceeds from capital raising 14,121,065 14,121,065 14,121,065 Net cash provided by financing activities 16,521,070 18,328,760 24,943,760 Net increase in cash held 6,881,548 6,189,238 12,804,238 Cash at beginning of financial year - - - Cash at end of year 6,881,548 6,189,238 12,804,238 648776_2.DOC 22 5. Financial Information APPENDIX 4 ALF HOLDINGS GROUP Pro forma Consolidated Statements of Changes in Equity The Pro forma Consolidated Statements of Changes in Equity are to be read in conjunction with the accompanying notes set out in Appendix 5. Incorporation to 30 April 2007 Post capital raising Pre Minimum Maximum capital subscription subscription raising $2m $9m $ $ $ Total equity at the beginning of the period - - - Profit attributable to equity shareholders (3,357) (3,357) (3,357) Shares on issue at 4 December 2006 - 114,600,000 fully paid ordinary shares 2,400,005 2,400,005 2,400,005 Application for 41,292,397 Shares - 14,121,065 14,121,065 Shares to be issued - minimum subscription 3,333,334 shares - 2,000,000 - Shares to be issued - maximum subscription 15,000,000 shares - - 9,000,000 Estimated costs of the offer (192,310) (577,310) Total equity as at 30 April 2007 2,396,648 18,325,403 24,940,403 648776_2.DOC 23 5. Financial Information APPENDIX 5 ALF HOLDINGS GROUP Note 1: Basis of Preparation The pro forma consolidated income statement, balance sheets, cash flow statements and statements of change in equity have been prepared on the basis of the following methodology: (a) Pro forma Consolidation Whilst ALF Holdings was Incorporated on 31 May 2007, a pro forma consolidation has been performed as at 30 April 2007 on the basis that the Company controlled ALF since its Incorporation on 4 December 2006. The Company itself has not traded. (b) 30 April 2007 pre-capital raising The pro forma consolidated income statement and balance sheets have been derived as follows: • The actual audited financial statements of Amazing Loans Franchises Pty Limited for the period 4 December 2006 to 30 April 2007 as prepared by the directors, and are audited by Houston & Co, Chartered Accountants. The audit opinion was unqualified. • There have been no material adjustments required to be made to the historical actual balances and results of Amazing Loans Franchises Pty Limited for the period ended 30 April 2007 “pre capital raising”. (c) 30 April 2007 post-capital raising (minimum and maximum) The 30 April 2007 post-capital raising pro forma balance sheets have been derived from the audited financial statements of Amazing Loans Franchises Pty Limited as prepared by the Directors of Amazing Loans Limited and audited by Houston & Co., Chartered Accountants. Additionally, the effect of the following adjustments has been included: • On 8 June 2007, the company entered into a Global Master Franchise Sales Agreement with Amazing Loans Limited in exchange for $5 million consideration. (Refer to Section 7.3 of the Prospectus). $2.5 million was paid on 8 June 2007 and has been adjusted against cash with the remaining $2.5 million balance owing being adjusted against Creditors in the pro forma post capital raising balance sheet. • The incorporation of Amazing Loans Franchises (Holdings) Limited on 31 May 2007. • Allotment of shares in ALF Holdings with respect to application monies of $14,121,065 received by ALF. • Proceeds from the minimum subscription of $2,000,000. • Proceeds from the maximum subscription of $9,000,000. • The payment of anticipated capital raising expenses of approximately $192,310 for the minimum subscription and $577,310 for the maximum subscription. • Assumes that no Shares for no additional consideration are issued – refer to section 1.7 of the Prospectus. • No adjustment has been made for the additional costs associated with being a public company. 648776_2.DOC 24 5. Financial Information APPENDIX 5 (CONTINUED) ALF HOLDINGS GROUP NOTE 2: Statement of Significant Accounting Policies The pro forma financial report covers the consolidated groups of Amazing Loans Franchises (Holdings) Limited and it’s controlled entity Amazing Loans Franchises Pty Limited. Amazing Loans Franchises (Holdings) Limited is a company limited by shares, incorporated and domiciled in Australia. The pro forma historical financial information contained in Appendices 1 to 5 of this Report have been prepared by the Directors in accordance with the recognition and measurement principals prescribed in Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001, modified for certain presentation matters for the purpose of inclusion in the Prospectus. The material accounting policies adopted by the entity are summarised below. Principles of Consolidation A controlled entity is any entity Amazing Loans Franchises (Holdings) Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. All controlled entities have a June financial year-end. All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity. Where controlled entities have entered or left the consolidated group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased. Plant and Equipment Plant and equipment are carried at cost and are depreciated over their useful lives to the Company. Financial Instruments Recognition Financial instruments are initially recognised at cost on the trade date, which includes transaction costs, when the contractual rights or obligations exist. After initial recognition, financial instruments are measured as set out below: Financial assets at fair value through profit and loss A financial asset is classified in this category if it is acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139. Unless designated as a hedge, derivatives are also categorised as held for trading. Realised and unrealised gains and losses arising from changes in the fair value is recognised in the income statement immediately. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. 648776_2.DOC 25 5. Financial Information APPENDIX 5 (CONTINUED) ALF HOLDINGS GROUP NOTE 2: Statement of Significant Accounting Policies Held to maturity investments Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities. It is the company's intention to hold these investments to maturity. Available-for-sale financial assets Available-for-sale financial assets include any financial assets not included in the above categories. Available- for-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity. Financial liabilities Non-derivative financial liabilities are brought to account at amortised cost, comprising original debt less principal payments and amortisation. Derivative instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in the income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in the income statement depends on the nature of the hedge relationship. Fair value The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the company establishes fair value by using valuation techniques. These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis and option pricing models. Impairment The company assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. Impairment losses are recognised in the income statement. Financial Assets Financial assets are initially recognised on the cost basis, including acquisition charges associated with the financial asset. The carrying amounts of financial assets are reviewed annually by the director. The recoverable amounts are assessed from the quoted current market value for shares in listed companies or the underlying net assets for other non-listed corporations. The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts recognised, unless otherwise stated. Intangibles Goodwill Goodwill is initially recorded at the amount by which the purchase price for a business exceeds the fair value attributed to its net assets at date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. 648776_2.DOC 26 5. Financial Information APPENDIX 5 (CONTINUED) ALF HOLDINGS GROUP NOTE 2: Statement of Significant Accounting Policies Revenue Interest revenue is recognised on a proportional basis taking into account the interest rates relevant to the financial assets. Revenue from the providing of a service is recognised when the customer receives the service. Critical accounting estimates and judgments In preparing this financial report, the directors were required to make estimates and assumptions. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. 30 April 2007 Minimum Maximum Pre capital subscription subscription raising $2m $9m $ $ $ Note 3: Receivables Current Receivables 200,000 200,000 200,000 Prepayments 12,934 12,934 12,934 GST on supplies 519,966 519,966 519,966 Other receivables 1,439 1,439 1,439 734,339 734,339 734,339 Note 4: Financial Assets Non-Current Shares in Amazing Loans Ltd – available for sale 5,399,741 5,399,741 5,399,741 Note 5: Plant and equipment Office Equipment at cost 71,679 71,679 71,679 Accumulated depreciation (340) (340) (340) Total Plant and Equipment 71,339 71,339 71,339 Note 6: Intangible Assets Formation Expenses at Cost 400 400 400 Franchise Fee 4,000,000 4,000,000 4,000,000 Global Franchise Fee - 5,000,000 5,000,000 4,000,400 9,000,400 9,000,400 Note 7: Contributed equity Issued and paid-up capital Issued capital 2,400,005 18,328,760 24,943,760 Retained earnings (3,357) (3,357) (3,357) 2,396,648 18,325,403 24,940,403 648776_2.DOC 27 5. Financial Information APPENDIX 5 (CONTINUED) ALF HOLDINGS GROUP Note 8: Events subsequent to Balance Date Amazing Loans Franchises (Holdings) Limited was incorporated on 31 May 2007. The intention of this company is to act as holding of Amazing Loans Franchises Pty Ltd, through the acquisition of all shares on issue of the Company through the issue of shares in the Amazing Loans Franchises (Holdings) Limited and further capital raising. Note 9: Contingent liabilities The Directors are not aware of any other contingent liabilities existing at the end of the financial period. Note 10: Related party transactions a. Directors The names of Directors of the Company who have held office for the period from 4 December 2006 to 30 April 2007 are: Harold Hansen Trevor Schoenmaekers Bryce Hoare b. Director's and director-related entities' holding of ordinary shares on issue The interests of the Directors and Director-related entities in shares of the Company are set out below. Name 30.04.2007 No. Tourquet Pty Ltd 9,600,001 Amazing Loans Limited 5,000,000 Total 14,600,001 c. Director' and Director-related entities' transactions with the Company Transactions between Directors and Director-related entities are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Details of transactions are as follows: Consulting fees During the period the Company paid consulting fees to the following director-related entities for assisting in the management of the Company: $ Management services provided by Hansens Accountants an entity associated with directors - Harold Hansen, Trevor Schoenmaekers and Lisa Stribley 352,385 Management services provided by Jackstar Pty Limited, an entity associated with director – Bryce Hoare 222,000 648776_2.DOC 28 5. Financial Information APPENDIX 5 (CONTINUED) ALF HOLDINGS GROUP Note 11: Capital and Leasing Commitments (a) Finance Leasing and Hire Purchase Commitments Neither Amazing Loans Franchises (Holdings) Limited or Amazing Loans Franchises Pty Ltd has no exposure to finance leasing. (b) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements Payable – minimum lease payments – not later than 12 months - – between 12 months and 5 years (Ballarat and Morwell) 47,850 – greater than 5 years - 47,850 The property leases are a non-cancellable lease with a three-year term, with rent payable monthly in advance. Contingent rental provisions require that the minimum leases payments shall be increased by CPI. An option exists to renew the leases at the end of the three-year term for an additional five years. (c) Capital Expenditure Commitments Capital expenditure commitments contracted for: Plant and equipment purchases Capital expenditure projects - Ballarat (Actual) 79,486 - Morwell (Estimated) 50,000 129,486 Payable – not later than 12 months 129,486 – between 12 months and 5 years (Ballarat, Morwell and - Ma) Maroochydore) – greater than 5 years - 129,486 Note 12: Financial Instruments Financial Risk Management The entity’s financial instruments consists primarily of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bills and leases. The main purpose of non-derivative financial instrument is to raise finance for group operations. The entity does not have any derivative instruments at 30 April 2007. 648776_2.DOC 29 5. Financial Information APPENDIX 5 (CONTINUED) ALF HOLDINGS GROUP Note 12: Financial Instruments (continued) Treasury Risk Management A finance committee consisting of senior executives of the group meet on a regular basis to analyse currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. Financial Risks The main risks that Amazing Loans Franchises (Holdings) Limited and Amazing Loans Franchises Pty Ltd are exposed to through its financial instruments is liquidity risk. Interest rate risk Interest rate risk is managed with a mixture of fixed and floating rate debt. Neither Amazing Loans Franchises (Holdings) Limited or Amazing Loans Franchises Pty Ltd has any debt as such they are not exposed to interest rate risk. Foreign currency risk The entity is not exposed to fluctuations in foreign currencies. Liquidity risk The entity manages liquidity risk by monitoring forecast cash flows and ensuring that Adequate unutilized borrowing facilities are maintained. Credit risk The maximum exposure to credit risk , excluding the value of any collateral or other security, at balance date to recognised financial asset, is the carrying amount, net of any provisions for impairment of those assets , as disclosed in the balance sheet and notes to the financial Statements. The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity Price Risk The entity is not exposed to any material commodity price risk 648776_2.DOC 30 5. Financial Information 5.2 No Directors’ Forecasts The Company has not included any forecasts or prospective financial information for future financial years in this Prospectus. The Directors consider that there does not exist, at this time, reasonable grounds for including forecasts for future earnings for the Company as both the Company and ALF were formed recently. While trading has commenced recently at 3 shopfronts (namely Ballarat, Morwell and Maroochydore), it is too early to determine future earnings with any certainty at this time. The benefits and risks of investing in Shares in the Company are, in the opinion of the Board, adequately disclosed in this Prospectus. 648776_2.DOC 31 6. Investment Risks An investment in the Company involves various risks Termination of Franchise which can be broadly divided into general risks and specific risks. Applicants should consider if an The Company’s ability to carry on the Business is investment in the Company suits their financial objectives dependent on the continuation of the Franchise and should obtain independent financial advice before a Agreement and the Global Master Franchise Sales decision is made to proceed. Agreement. If the Franchise Agreement is terminated, the ability to Before any decision is made to subscribe for Shares in carry on the Business in Australia will effectively cease as the Company, the following risks, as well as other matters ALF has agreed to a non-competition provision which described in this Prospectus, should be considered. prevents it from competing with AZD for 12 months after termination. Accordingly, the Company’s ability to 6.1 General Risks continue as a going concern in the short to medium term is dependent on the continuation of the Franchise Economic, Social and Political Conditions Agreement. A summary of the key terms of the Franchise Agreement is set out at section 7.1. Changing economic, social and political conditions in Likewise if the Global Master Franchise Sales Agreement Australia and overseas may affect the demand for the is terminated the Company will be required to cease type of finance offered under the Franchise and the carrying on business under the “Amazing Loans” brand. Global Franchise. Periods of declining economic activity or uncertainty may see a downturn in demand for loan Pricing pressure facilities. AZD’s pricing structure may not be able to compete Factors, such as, but not limited to, political movements, successfully against current or future competitors where stock market trends, changing customer preferences, aggressive pricing policies are employed to capture interest rates, exchange rates, inflation levels, commodity market share. That competition could result in price prices, industrial disruption, environmental impacts, reductions, reduced gross margins and loss of market international competition, taxation changes and legislative share, any of which could materially adversely affect the or regulatory changes, may all have an adverse impact operating results of the Franchise, as the Company on the operating costs and profit margins of the Franchise (through ALF) will receive 30% of application fees, and the Global Franchise. These factors are beyond the interest and loan administration fees on loans originated control of the Company and it cannot, with any degree of by ALF. certainty, predict how they will impact on it or the Business. Reliance on key personnel War and terrorist attacks The unforeseen loss or incapacity of the Directors, or other key management personnel including those at AZD War or terrorist attacks anywhere in the world could result may have a negative effect on the Franchise, and the in a decline in economic conditions worldwide or in a ability of AZD to raise funds (to service loan applications particular region. There could also be a resultant material serviced through the Company’s shopfronts) and to adverse effect on the business, financial condition and manage loans. performance of the Franchise and the Global Franchise . ALF does not have keyman insurance in place. 6.2 Specific Risks Ability to attract personnel Inadequate financial capability The success of the Franchise and Global Franchise depends, in part, on the ability to identify, attract, motivate The Company may not be able to attract additional capital and retain additional suitably qualified management and (if required) to service the working capital requirements of sales personnel. Competition for qualified staff is strong. the Business. The inability to access and retain the services of a sufficient number of qualified staff could be disruptive to Limited operating history the development efforts or business development of the Franchise and the Global Franchise and could materially Both the Company and ALF have a limited operating adversely affect operating results of the Company. history having been formed on 31 May 2007 and 6 December 2006, respectively, upon which an Profitability evaluation of future prospects can be based. While the Company has secured under lease shopfront locations as Future operating results of the both Franchise and global set out at section 2.13, as at the Prospectus Date the Franchise will depend to a large extent on the Company’s Company (through ALF) has only recently commenced ability to successfully manage expansion and growth, business operations at three of those premises (Ballarat, which necessarily requires expansion of all aspects of the Morwell and Maroochydore). Similarly the Company was business operations, such as revenue forecasting, granted the Global Franchise on 8 June 2007 and addressing new markets, controlling expenses, international expansion of the Business is being implementing infrastructure and systems and managing assessed. its assets. Inability to control the costs and organisational impacts of business growth or an unpredicted decline in An investor in the Company must consider the risks and the growth rate of revenues without a corresponding and difficulties frequently encountered by businesses with timely reduction in expense growth or a failure to manage limited operating histories. There can be no assurance other issues arising from growth could materially that the Franchise and the Global Franchise will be adversely affect the operating results of the Company. profitable in the future. 648776_2.DOC 32 6. Investment Risks Under the Franchise, ALF earns income from the Legislation and other regulatory standards following sources (which is paid to ALF by AZD): The Franchise may be affected by changes in the . 30% of the administration fees generated under Consumer Credit Code and other specific State each loan that is written from its introduction; consumer legislation, the Corporations Act, taxation laws or Australian Accounting Standards. Any variation in . 30% of the loan application fee; and legislation and government policy may also affect the Franchise and the environment in which the Company . 30% of the interest charged over the term of the and ALF operate. loan. The Global Franchise may be affected by similar risks, Changes in demand for finance offered by AZD, and depending on jurisdiction in which the Company wishes events such as loan defaults and bad debts will therefore to operate. affect the profitability of ALF and ultimately the Company. On-going capital requirements for the Company Finance If the Company requires access to further funding at any In Australia, AZD will provide all loan funds for loans stage in the future, it may be adversely affected in a generated through ALF sales outlets. If AZD refuses to material way if, for any reason, access to that capital is provide a loan to the borrower, ALF is not permitted to not available. There can be no assurance that additional refer or assist the borrower in obtaining a loan from funds will be available. If additional funds are raised by another source. ALF is therefore dependent on AZD, as issuing equity securities, this may result in dilution of franchisor, continually being able to supply funds some or all of the then existing shareholders of the necessary to fulfil loan approvals. In particular, if the Company. funding facility with Ron Medich Properties Pty Ltd was to cease and not be replaced, or if the new line of credit Technology Risk currently under negotiation (see section 2.11) did not AZD has invested in the development of loan eventuate, the ability of AZD to supply funds to ALF management systems, disaster backup and recovery would be affected. systems and other information technology systems designed to maximise the efficiency of operations. If the The Company’s ability to expand internationally will systems are not adequately maintained, secured or depend in large on its ability to secure funding facilities to updated, there may be a negative impact on the fund loans sourced from shopfronts in overseas performance of the Franchise. jurisdictions. There can be no guarantee that the Company will be able to secure such facilities at all or on Taxation Risks favourable terms. The tax consequences and risks of the Offer depend Management of bad debts upon the specific circumstances of each applicant, who should obtain their own professional taxation advice Under the Franchise, bad debts are managed by AZD as regarding the applicable law in respect of the Offer. franchisor, which has experienced, and expects that it will continue to experience, loan defaults by customers. Term of Investment and Illiquidity of Investment Defaults may occur for a wide range of reasons, including changes in a customer’s circumstances, death and changes in the general state of the Australian economy. Applicants will be investing in an unlisted public company, with no ready market for the sale of shares in the The risk of bad debt may be minimised by assessment of Company. As such, any investment in shares in the loans in accordance with standard procedures. AZD Company should be considered illiquid. applies strict default recovery procedures overseen by the collections manager, which for loans more than 90 Applicants should regard any investment in the Company days overdue may lead to instigation of legal enforcement as a medium to long term investment. proceedings against the customer. The existence of bad debts will ultimately affect the profitability of ALF and therefore the Company. 648776_2.DOC 33 7. Material Documents 7.1 Franchise Agreement 7.2 Principal and Agency Agreement AZD and ALF entered into a Franchise Agreement on On 2 May 2007 AZD entered into a Principal and Agency 29 December 2006. The period of the franchise is Agreement with ALF whereby ALF agreed to negotiate indefinite. The territory covered by the franchise is and sign contracts with customers (as agent for AZD) Australia, but excludes New South Wales, the after AZD has made all necessary inquiries and granted Australian Capital Territory, the Melbourne metropolitan credit approval. On signing, AZD is bound by such credit area, Geelong, the Brisbane metropolitan area and the contracts. AZD is to pay the loan amount to ALF, which Gold Coast. is in turn lent to the borrower. ALF will collect all payment from the borrower due under the credit contracts. Under the agreement ALF has agreed to open approximately 30 sales outlets in Western Australia, The agreement may be terminated at any time by giving 3 South Australia, Tasmania, Northern Territory, country months notice. The agreement also contains the Victoria and Queensland. In exchange for being granted termination ‘for cause’ provisions, such as termination for the franchise rights under the agreement, ALF agreed to breach and insolvency related events. pay $2.4m by way of a territory reservation deposit and a further $2m as balance of the consideration for the 7.3 Global Master Franchise Sales Agreement Franchise. AZD and the Company entered into a Global Master Under the Franchise Agreement ALF can only promote Franchise Sales Agreement on 8 June 2007. The period and sell AZD products, and is not permitted to sell any of the Global Franchise is indefinite, but may be other products of any kind without AZD’s approval. terminated in certain circumstances. The territory Under the Franchise Agreement ALF is entitled to be paid covered by the Global Franchise is worldwide but by AZD within 5 banking days of the end of the month in excludes Australia in those areas which remain the which the loan was written: exclusive property of AZD under the Franchise Agreement, and those areas which have already been . 30% of the administration fees generated under purchased by ALF under the Franchise Agreement. each loan that is written from its introduction; In exchange for being granted the Global Franchise rights . 30% of the application fee; and under this agreement, the Company agreed to pay $2.5m on 8 June 2007, and a further $2.5m as balance of the . 30% of the interest charged over the term of the consideration at a date to be agreed between the parties. loan. The Global Franchise must be operated using the name AZD will provide all loan funds for loans generated “Amazing Loans”. The Company can sell the products of through any sales outlet of ALF. AZD is responsible for AZD and all of its associated entities including Investment the approval of rejection of loans. If AZD refuses to Evolution Limited and FirstRock Financial Limited. The provide a loan to the borrower, ALF is not permitted to Company is not permitted to sell any other products refer or assist the borrower in obtaining a loan from without AZD approval. another source. The Company: All advertising, marketing and promotional activities are to be carried out by ALF at its cost in accordance with the . must operate all sales outlets in accordance with AZD operating manual. ALF is not permitted to conduct the AZD operating manual, and is responsible for any form of advertising, marketing or promotional activity costs associated with its sales outlets; outside its territory without the written agreement of AZD. . is responsible for all costs associated with any ALF is required to provide ongoing training to its staff to a advertising, marketing or promoting activity; level and in conformity with the AZD operating manual. . will approve/decline loans; If ALF wishes to sell or transfer the Franchise or any shares in the franchise company, AZD is given a right of . will provide all loan funds for the loans generated first refusal to acquire the business or shares. AZD’s through any of its sales outlets. consent is required before the business or shares may be All employees are employees of the Company, and must sold. be trained to a level and in conformity with the AZD The Franchise Agreement is of indeterminate duration, operating manual. but may be terminated in certain circumstances. The Company may terminate the agreement by giving 6 ALF may terminate the agreement by giving 6 months months notice, in which case the Company is deemed to notice, in which case ALF is deemed to have waived all have waived all rights to sell the Global Franchise, and rights to sell the Franchise, and AZD may consequently AZD may consequently purchase or sell the Global purchase or sell the Franchise to another party or deal Franchise to another party or deal with it as it sees fit. with it as it sees fit. The proceeds of any such sale will The proceeds of any such sale will be given to the be given to ALF, less costs incurred by AZD. Company, less costs incurred by AZD. AZD may terminate the agreement in the event of a The Company is permitted to raise capital to fund the cost breach by ALF or where an insolvency event occurs in of purchasing the Global Franchise, fit outs, working relation to ALF. On termination for any reason ALF is capital, investments and any other purpose it decides. restrained from competing with AZD for 12 months. 648776_2.DOC 34 7. Material Documents 7.4 Consultancy Services Agreements (ALF) necessary, conciliation is exhausted. The agreement with Hansens Accountants is non-exclusive. Hansens Accountants Pty Ltd – Harold Hansen Jackstar Holdings Pty Ltd ALF has entered into a Consultancy Services Agreement with Hansens Accountants Pty Ltd. Under the ALF has entered into a Consultancy Services Agreement agreement, Hansens Accountants is to provide financial with Jackstar Holdings Pty Ltd. Under the agreement, management advice to ALF, and assist in the selection of Jackstar Holdings is to provide project management skills sites for ALF stores. The services of Hansens for the selection of sites and fitout of new ALF stores, and Accountants must be carried out by Harold Hansen who the management of the day to day business operations of will act as State Manager of ALF in Victoria, South ALF. The services of Jackstar Holdings must be carried Australia and Tasmania. The agreement is for a term out by Bryce Hoare who will act as State Manager – Chief ending on 31 December 2007. The agreement also Operating Officer of ALF in Victoria, South Australia and contains an option for a further term of 3 years. Tasmania. The agreement is for a term ending on 31 December 2007. The agreement also contains an option Hansens Accountants is paid $120,000 per annum plus for a further term of 3 years. GST. A review of this fee is to be conducted in June of each year. The termination provisions of the agreement Jackstar Holdings is paid $120,000 per annum plus GST. include standard insolvency type events, as well as a A review of this fee is to be conducted in June of each provision for termination for non-performance under the year. The termination provisions of the agreement agreement after a process of consultation and, if include standard insolvency type events, as well as a necessary, conciliation is exhausted. The agreement provision for termination for non-performance under the with Hansens Accountants is non-exclusive. agreement after a process of consultation and, if necessary, conciliation is exhausted. The agreement Hansens Accountants Pty Ltd - Trevor with Jackstar Holdings is non-exclusive. Schoenmaekers Imelda Damayanti ALF has entered into a Consultancy Services Agreement with Hansens Accountants Pty Ltd. Under the ALF has entered into a Consultancy Services Agreement agreement, Hansens Accountants is to provide financial with Imelda Damayanti. Under the agreement, Imelda management advice to ALF, and assist in the selection of Damayanti is to supervise the national marketing of ALF sites for ALF stores. The services of Hansens and the call centre management function of ALF. The Accountants must be carried out by Trevor agreement is for a term ending on 31 December 2007. Schoenmaekers who will act as State Manager of ALF in The agreement also contains an option for a further term Victoria, South Australia and Tasmania. The agreement of 3 years. is for a term ending on 31 December 2007. The agreement also contains an option for a further term of 3 Imelda Damayanti is paid $130,000 per annum plus GST. years. A review of this fee is to be conducted in June of each year. The termination provisions of the agreement Hansens Accountants is paid $60,000 per annum plus include standard insolvency type events, as well as a GST. A review of this fee is to be conducted in June of provision for termination for non-performance under the each year. The termination provisions of the agreement agreement after a process of consultation and, if include standard insolvency type events, as well as a necessary, conciliation is exhausted. The agreement provision for termination for non-performance under the with Imelda Damayanti is non-exclusive. agreement after a process of consultation and, if necessary, conciliation is exhausted. The agreement 7.5 Share Sale Agreement with Hansens Accountants is non-exclusive. Under a Share Sale Agreement dated 31 May 2007, the Hansens Accountants Pty Ltd – Lisa Stribley Company acquired all the shares in ALF from AZD and Tourquet Pty Ltd in return for issuing to the sellers shares ALF has entered into a Consultancy Services Agreement in the Company as follows: with Hansens Accountants Pty Ltd. Under the agreement, Hansens Accountants is to provide financial . to Tourquet Pty Ltd - 9,600,000 ordinary shares at management advice to ALF, and assist in the selection of an issue price of 25 cents per share; sites for ALF stores. The services of Hansens Accountants must be carried out by Lisa Stribley who will . to AZD - 5,000,000 ordinary shares at a total price of $5.00. act as State Manager of ALF in Victoria, South Australia and Tasmania. The agreement is for a term ending on 31 The agreement contains various warranties in relation to December 2007. The agreement also contains an option the shares acquired by the Company including such for a further term of 3 years. shares being duly issued and allotted and fully paid up, being free from encumbrance, and that ALF has not given Hansens Accountants is paid $30,000 per annum plus any options over unissued shares. GST. A review of this fee is to be conducted in June of each year. The termination provisions of the agreement include standard insolvency type events, as well as a provision for termination for non-performance under the agreement after a process of consultation and, if 648776_2.DOC 35 8. Additional Information 8.1 Incorporation Transfer A Shareholder may transfer all or any of its Shares by: The Company was incorporated on 31 May 2007. . in any common form or form approved or adopted 8.2 Tax Status and financial year by the Directors. The directors of the Company may decline to register any The Company will be treated as a public company for transfer Australian taxation purposes. If the directors of the Company decline to register a paper The Company has a financial year end of 30 June. based transfer or seek to apply a holding lock, the Company must give the lodging party a written notice of 8.3 Share Capital the refusal and the precise reasons within five business days after the date on which the transfer was lodged with the Company. As at the Prospectus Date, there is only one class of shares on issue in the Company, being fully paid ordinary shares, and the number of fully paid ordinary shares on Variation of rights issue is 44,594,334 shares. Any share can be issued with preferred, deferred or other 8.4 Constitution and Rights Attaching to Shares special rights, obligations or restrictions, as the board may determine. The rights and restrictions attaching to Set out below is a summary of the major provisions of the any class of shares of the Company can only be altered Constitution and rights attaching to ownership of shares with the consent in writing of shareholders with at least in the Company. 75% of the votes in the class, or by special resolution passed at a separate meeting of the holders of the shares Share Capital of that class. The directors may issue shares on any terms and Subject to the requirements of the Corporations Act, the conditions and of various classes and may issue shares Company need not issue share certificates. with preferential, deferred or special rights (including rights to dividends or bonus shares for a certain class of Forfeiture of shares shareholder) as they so determine. Meeting procedures The Company is empowered to forfeit shares in relation to which calls have been made or are deemed to have been made and which remain unpaid in accordance with Each shareholder and director of the Company is entitled the Constitution and the Corporations Act. to receive notice of and attend any general meeting of the Company. The Company is obliged to convene and hold Listing provisions an annual general meeting. The Constitution contains provisions which take account Rights of ordinary shareholders of any listing on ASX including compliance with the ASX Listing Rules, takeover provisions and sales of Subject to restrictions on voting from time to time unmarketable parcels of shares. Directors do not propose affecting any class of shares in the Company, and any to list the Company on any stock exchange at this time, restrictions imposed by the Corporations Act, the ordinary nor in the foreseeable future. shares in the Company carry the right to cast one vote on a show of hands and, on a poll, one vote for each fully 8.5 Interests of Directors paid ordinary share held, and for each partly paid ordinary share held, a value as the proportionate value as Except as disclosed in this Prospectus, no director of the the proportion to which the shares has been paid up. Company holds or has held in the last 2 years before the Voting may be in person or by proxy, attorney or lodgement of this Prospectus with ASIC any interest: representative. . in the formation or promotion of the Company: or Dividends . in any property acquired or proposed to be acquired by the Company in connection with its The board may from time to time determine to pay a formation or promotion or the Offer in respect of dividend, or interim dividend which is payable on all which this Prospectus relates. shares in proportion to the amount of capital paid up on Except as disclosed in this Prospectus, no director of the the shares. No dividends are payable except out of the Company has been paid or has agreed to be paid or has profits of the Company. The directors may also resolve received or has agreed to receive any benefits: to pay a dividend by the distribution of specific assets including bonus shares. The board does not require . to induce them to become or to qualify as a shareholder approval to pay a dividend or make an in director of the Company: or specie distribution of assets of the Company. . for services rendered by them in connection with the formation or promotion of the Company or in 648776_2.DOC 36 8. Additional Information relation to the Shares in respect of which this Name No. of Shares Issue Price Prospectus relates. Interests associated Remuneration of Directors of the Company with Directors Tourquet Pty Ltd 9,600,001* 25 cents per The Constitution of the Company provides that the share directors may be paid, as remuneration for their services, a sum determined by the shareholders of the Company in Other Shareholders a general meeting. Amazing Loans Limited 5,000,000* $5.00 Interests in the Company Other non-associated 7,260,000 25 cents per shareholders share No remuneration is payable as such by the Company to the Directors. However, the following arrangements are 22,526,000 50 cents per in place: share . Hansens Accountants Pty Ltd, a company 208,333 60 cents per share associated with Harold Hansen, Trevor Schoenmaekers and Lisa Stribley is paid * Issued pursuant to the Share Sale Agreement referred to at consultancy fees of $120,000 (plus GST) per clause 7.4. annum for the provision of services by Harold Except for Shares issued to Amazing Loans Limited, the Hansen; issue of Shares has represented seed capital funding . Hansens Accountants Pty Ltd, a company received by ALF (by way of equity and loans) which has associated with Harold Hansen, Trevor been transferred to and capitalised in the Company. Schoenmaekers and Lisa Stribley, is paid consultancy fees of $60,000 (plus GST) per 8.7 Interests of Experts and Advisers annum for the provision of services by Trevor Schoenmaekers; No expert, or firm in which an expert is a partner, has any interest in the promotion of ALF or the Company and no . Hansens Accountants Pty Ltd, a company amounts have been paid or agreed to be paid (whether in associated with Harold Hansen, Trevor cash or otherwise) to an expert, or to such firm, for Schoenmaekers and Lisa Stribley, is paid services rendered in connection with the promotion of consultancy fees of $30,000 (plus GST) per ALF or the Company other than set out below. annum for the provision of services by Lisa Stribley. Moore Stephens Sydney Pty Limited has prepared the Independent Accountant’s Report included in this Tourquet Pty Ltd, a company associated with Harold Prospectus, for which the Company has agreed to pay Hansen, Trevor Schoenmaekers and Lisa Stribley holds $18,000 plus GST. 9,600,001 shares in the Company. Interests associated with those individuals hold the following number of shares ClarkeKann has acted as lawyers to the Offer for which it in Tourquet Pty Ltd: will be paid a fee of approximately $45,000 plus GST and . Harold Hansen - 1,500,000 fully paid ordinary an additional amount for disbursements. shares. 8.8 Consents . Trevor Schoenmaekers – 300,000 fully paid ordinary shares. The following parties have given and have not, before the date this Prospectus was lodged with ASIC, withdrawn . Lisa Stribley - 300,000 fully paid ordinary shares. their written consent to be named in this Prospectus, in Interests in AZD the following terms: . Interests associated with Harold Hansen hold . Moore Stephens Sydney Pty Limited has given its 2,320,622 ordinary shares in AZD. consent to be named in this Prospectus as Independent Accountant and to the inclusion of . Interests associated with Trevor Schoenmaekers the Independent Accountant’s Report in Section hold 153,575 ordinary shares in AZD. 5.1 in the form and context in which they are included; . Interests associated with Lisa Stribley hold 140,875 ordinary shares in AZD and 4,950 . Houston & Co, Chartered Accountants has given redeemable preference shares in AZD. its consent to be named in this Prospectus as Auditor of the Company; and 8.6 Issue Price of Shares prior to Prospectus Date . ClarkeKann has given its consent to be named in The following details the price at which Shares were this Prospectus as lawyers to the Offer in the form issued in the Company prior to the Prospectus Date: and context in which it is named. 648776_2.DOC 37 8. Additional Information 8.9 Responsibility Statements 8.11 Litigation The Directors are not aware of any litigation of a material Each of the companies and firms named in Section 8.8: nature pending or threatened that may significantly affect . has not authorised or caused the issue of this the Company or ALF. Prospectus; 8.12 Expenses of the Offer . has not made any statement in this Prospectus, or any statement on which any statement in this The estimated costs of the Offer including advisory, legal, Prospectus is based, except where expressly accounting, tax and administrative fees, which are stated in Section 8.8; payable by the Company, as well as printing, advertising, brokerage fees and other expenses are currently . to the maximum extent permitted by law, estimated to be $192,310 at minimum subscription and expressly disclaims and takes no responsibility for $577,310 at maximum subscription. any part of this Prospectus other than a reference to its name or in respect of statements referred to in Section 8.8; and 8.13 Taxation and Tax File Number . was not involved in the preparation of the You are not required to provide your tax file number Prospectus or any part of it except where (“TFN”), but if you do not, or no TFN exemption details expressly attributed to it. are supplied, the Company may be required to withhold tax from dividend payments at the highest marginal tax 8.10 Privacy rate plus the Medicare levy (currently 48.5%). Exemptions from quoting TFNs include recipients of The information requested in the Application Form is certain pensions (eg age, sole parent and veterans’ being collected by the Company. The Company collects affairs pensions). and holds the personal information for the purpose of establishing and administering your investment with us. 8.14 Governing law Such administration includes monitoring, auditing, The Offer and the contracts formed under the Offer for evaluating, modelling data, dealing with complaints, the issue of Shares are governed by the laws applicable answering queries and providing services in relation to in New South Wales. your investment. The Company will ensure that its procedures comply with the Privacy Act 1988 (Cth) and the National Privacy Principles established by that 8.15 Documents for Inspection legislation. Copies of the Constitution, and the documents referred to in Section 7 may be inspected at the registered office of The information you provide to us will be held by us on a the Company during normal business hours during the strictly confidential basis and will only be used by us for period of the Offer and for 3 months after the date of this the purposes of the Company’s business and affairs. We Prospectus. may share your personal information with other third parties such as government authorities when required by law, legal and accounting firms and outsourced service providers appointed by the Company. 648776_2.DOC 38 9. Glossary “A-IFRS” means Australian Equivalents to International “Closing Date” means 31 August 2007, or such other Financial Reporting Standards. date determined by the Directors. “ALF” means Amazing Loans Franchises Pty Ltd “Director(s)” means unless otherwise stated, a member ABN 61 122 981 588, a wholly owned subsidiary of the of the Board, either individually or combined where the Company. context requires. “Applicant” means a person who submits an Application “Exposure Period” means the waiting period specified Form. in Section 727(3) of the Corporations Act, being a minimum period of 7 days after the date of lodgement of “Application” means an application made to subscribe this Prospectus with ASIC, during which an Application for a specified number of Shares offered by this must not be accepted. ASIC may extend the period to no Prospectus. more than 14 days after the date of lodgement. “Application Forms” means the application form for the “Franchise” means the Amazing Loans franchise being Offer, contained in this Prospectus. operated by ALF pursuant to the Franchise Agreement. “Application Monies” means the monies payable in “Franchise Agreement” means the Agreement between connection with an Application, being the Offer Price ALF and AZD dated 29 December 2006. multiplied by the number of Shares applied for. “Global Franchise” means the Amazing Loans franchise “ASIC” means the Australian Securities and Investments being operated by the Company pursuant to the Global Commission. Master Franchise Sales Agreement. “ASX” means Australian Stock Exchange Limited. “Global Master Franchise Sales Agreement” means the Agreement between the Company and AZD dated 8 “Auditors” means Moore Stephens Sydney, Chartered June 2007. Accountants. “Independent Accountant” means Moore Stephens “AZD” means Amazing Loans Limited Sydney Pty Limited. ABN 68 112 725 756, a company listed on ASX which has granted the Franchise to ALF. “Listing Rules” means the Listing Rules of ASX. “Board” or “Board of Directors” means unless “Offer” means the offer of Shares under this Prospectus otherwise stated, the board of directors of the Company. comprising the Offer. “Business” means the business of producing short term “Offer Price” means $0.60 per Share. finance to parties on short notice, and other financial services and products, through “Amazing Loans” branded “Opening Date” means 27 July 2007, or such other date shopfronts. determined by the Directors. “Business Day” means a day other than a Saturday, “Prospectus” means this document (including the Sunday or public holiday in New South Wales. electronic form of this Prospectus), and any supplementary or replacement prospectus in relation to “Company” means Amazing Loans Franchises this document. (Holdings) Limited ACN 125 208 291. “Prospectus Date” means the date of this Prospectus “Consumer Credit Code” means the uniform consumer being 19 July 2007. credit code contained in the Appendix of the Consumer Credit (Queensland) Act 1994 given force by related “Share” means a fully paid ordinary share in the capital legislation in each state and territory of Australia. of the Company. “Corporations Act” means the Corporations Act 2001 “$” or “A$” means Australian dollars. (Cth). 648776_2.DOC 39 10. Corporate Directory Registered Office Level 1 255 Blackburn Road Mount Waverley VIC 3149 PO Box 4619 Mulgrave VIC 3170 Ph 03 8805 8000 Fax 03 8808 8088 Directors Harold Hansen (Chairman) Trevor Schoenmaekers (Director) Lisa Jayne Stribley (Director) Auditor Houston & Co Suite 3 113 Willoughby Road CROWS NEST NSW 2065 Independent Accountant Moore Stephens Sydney Pty Limited Level 7 20 Hunter Street SYDNEY NSW 2000 Lawyers to the Offer ClarkeKann Level 7 300 Queen Street BRISBANE QLD 4000 Each of the Directors of Amazing Loans Franchises (Holdings) Limited has consented to the lodgment of this Prospectus under Section 720 of the Corporations Act. This Prospectus is signed for the purposes of Section 351 of the Corporations Act. _____________________ Harold Hansen - Director PIN CHEQUE(S) HERE Application Form Amazing Loans Franchises (Holdings) LimitedACN 125 208 291 Broker Reference – Stamp Only Fill out this Application Form if you want to apply for shares in Amazing Loans Franchises Broker Code Advisor Code (Holdings) Limited • Please read the Prospectus dated 19 July 2007. • Follow the instructions to complete this Application Form (see reverse). • Print clearly in capital letters using black or blue pen. OFFER CLOSES 31 AUGUST 2007 (unless closed earlier or extended) A Total Amount Payable* B Number of Shares applied for* $ @ $0.60 per Share = *Minimum Application is $50,000 (which results in 83,333.33 Shares which, in accordance with the Prospectus, will be rounded up by the Company on allotment to the next whole number (ie 83,334 Shares), and thereafter in multiples $1,000. C Write the name(s) you wish to register the shares in (see reverse for instructions) Name of Applicant 1 Name of Applicant 2 or < Account Name > Name of Applicant 3 or < Account Name > D Write your postal address here Number / Street Suburb/Town State Postcode E CHESS participant – Holder Identification Number (HIN) X F Enter your Tax File Number(s), ABN, or exemption category Applicant #1 Applicant #2 Applicant #3 Exemption Category G Cheque payment details Please enter details of the cheque(s) that accompany this Application Form: Name of drawer of cheque Cheque No. BSB No. Account No. Cheque Amount A$ TOTAL $ H Contact telephone number (daytime/work/mobile) I Email address By submitting this Application Form, I/We declare that this Application Form is completed and lodged according to the Prospectus and the instructions on the reverse of the Application Form and declare that all details and statements made by me/us are complete and accurate. I/We agree to be bound by the constitution of Amazing Loans Franchises (Holdings) Limited. I/We was/were given access to the electronic Prospectus together with the Application Form. I/We represent, warrant and undertake to the Company that our subscription for the above Shares will not cause the Company or me/us to violate the laws of Australia or any other jurisdiction which may be applicable to this subscription for Shares in the Company. GUIDE TO THE APPLICATION FORM YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION FORM. Please complete all relevant sections of the appropriate Application Form using BLOCK LETTERS. These instructions are cross-referenced to each section of the Application Form. Instructions A. If applying for Shares insert the $amount of Shares for which you wish to subscribe at Item A (not less than $50,000 and then in multiples of $1,000). Divide the $amount at A. by 0.60 AUD to calculate the total number of Shares applied for and enter the number of Shares at B. If a fraction of a Share results, insert the fraction – the Company will round the fraction up to the next whole number on allotment. C. Write your full name. Initials are not acceptable for first names. D. Enter your postal address for all correspondence. All communications to you from Amazing Loans Franchises (Holdings) Limited will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered. E. If you are sponsored in CHESS by a stockbroker or other CHESS participant, you may enter your CHESS HIN if you would like the allocation to be directed to your HIN. NB: your registration details provided must match your CHESS account exactly. F. Enter your Australian tax file number ("TFN") or ABN or exemption category, if you are an Australian resident. Where applicable, please enter the TFN /ABN of each joint Applicant. Collection of TFN's is authorised by taxation laws. Quotation of your TFN is not compulsory and will not affect your Application Form. G. Complete cheque details as requested. Make your cheque payable to “Amazing Loans Franchises (Holdings) Limited - Share Application Account” in Australian currency, cross it and mark it "Not Negotiable". Cheques must be made in Australian currency, and cheques must be drawn on an Australian Bank. H. Enter your contact details so we may contact you regarding your Application Form or Application Monies. I. Enter your email address so we may contact you regarding your Application Form or Application Monies or other correspondence. CORRECT FORMS OF REGISTRABLE TITLE Note that ONLY legal entities can hold the Shares. The Application must be in the name of a natural person(s), companies or other legal entities acceptable to Amazing Loans Franchises (Holdings) Limited. At least one full given name and surname is required for each natural person. Examples of the correct form of registrable title are set out below. Type of Investor Correct Form of Registrable Title Incorrect Form of Registrable Title Trusts Mr John David Smith John Smith Family Trust <J D Smith Family A/C> Deceased Estates Mr Michael Peter Smith John Smith (deceased) <Est Lte John Smith A/C> Partnerships Mr John David Smith & Mr Ian Lee Smith John Smith & Son Clubs/Unincorporated Bodies Mr John David Smith Smith Investment Club <Smith Investment A/C> Superannuation Funds Mr John Smith & Mrs Mary Smith John & Mary Smith Superannuation <Smith Family Super Fund A/C> Fund Lodgement Mail your completed Application Form with cheque(s) attached to the following address: Delivery address: Mailing address: Amazing Loans Franchises (Holdings) Limited Amazing Loans Franchises (Holdings) Limited Level 1, 255 Blackburn Road PO Box 4619 Mount Waverley VIC 3149 Mulgrave VIC 3170 It is not necessary to sign or otherwise execute the Application Form. If you have any questions as to how to complete the Application Form, please contact Amazing Loans Franchises (Holdings) Limited on: Tel: (03) 8805 8000. Privacy Statement: Amazing Loans Franchises (Holdings) Limited advises that Chapter 2C of the Corporations Act 2001 (Cth) requires information about you as a shareholder (including your name, address and details of the shares you hold) to be included in the public register of the entity in which you hold shares. Information is collected to administer your share holding and if some or all of the information is not collected then it might not be possible to administer your share holding. You can obtain access to your personal information by contacting us at the address or telephone number shown on the Application Form.
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