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Securities Note

PIONEER PUBLIC PROPERTIES III AS

Pioneer Public Properties III AS Senior Secured Bond Issue 2014/2019

Listing on Oslo Børs

ISIN: NO0010714124

23.10.2014

Sole Manager:

Securities Note ISIN NO0010714124

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Important information

The Securities Note has been prepared in connection with listing of the securities at Oslo Børs. The Financial Supervisory Authority of Norway has examined and approved the Securities Note pursuant to

Section 7-7 of the Securities Trading Act. The examination and approval by the Financial Supervisory Authority of Norway relate exclusively to the Company having included descriptions pursuant to a pre-defined list of content requirements. Consequently, the Financial Supervisory Authority of Norway has not examined or approved the correctness or completeness of the information disclosed in the Securities Note. Nor has the Financial Supervisory Authority of Norway performed any form of examination or approval of company law aspects described in, or encompassed by, the Securities Note.

Only the Borrower and the Arrangers are entitled to procure information about conditions described in the Securities Note. Information procured by any other person is of no relevance in relation to the Securities Note and cannot be relied on. Unless otherwise stated, the Securities Note is subject to Norwegian law. In the event of any dispute regarding the Securities Note, Norwegian law will apply.

In certain jurisdictions, the distribution of the Securities Note may be limited by law, for example in the

United States of America or in the United Kingdom. Verification and approval of the Securities Note by Finanstilsynet implies that the Note may be used in any EEA country. No other measures have been taken to obtain authorisation to distribute the Securities Note in any jurisdiction where such action is required. Persons that receive the Securities Note are ordered by the Borrower and the Arrangers to obtain information on and comply with such restrictions.

This Securities Note is not an offer to sell or a request to buy bonds. The content of the Securities Note does not constitute legal, financial or tax advice and bond owners should seek legal, financial and/or tax advice. The Securities Note together with the Registration Document and the Summary dated 23.10.2014

constitutes the Prospectus.


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Index Index ........................................................................................................................................ 3 1 Risk Factors ............................................................................................................................ 4 2 Persons Responsible ................................................................................................................ 5 3 Detailed information about the securities .................................................................................... 6 4 Additional Information ............................................................................................................ 14 5 Appendix: Bond Agreement .................................................................................................... 15


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1 Risk Factors Financing risks Interest rate risks - an increase in the company’s floating interest rates may have a material adverse

affect on the company’s business, financial condition, results of operation and liquidity. Market for the Bonds: The risk that the market for the bonds will be illiquid thereby limiting the possibility for investors to exit their investment. The Bonds will constitute new securities, for which currently there is no trading market. The liquidity of

any market for the Bonds will depend on the number of holders of those Bonds, investor interest at large and relative to the Company and its business segment in particular, and the interest of securities dealers in making a market in those securities and other factors.

Trading and liquidity risk - there is currently no trading record in respect of the bonds which are being issued and there can be no assurance that an active secondary market for the bonds will develop or, if it develops, that it will continue nor can there be any assurance that an investor will be able to re-

sell his bonds at or above the issue price or at all. Many factors of which the company has no control may affect the trading market for; and trading value of, the bonds. These factors include the level, direction and volatility of market interest rates; general economic conditions; the investment appetite of investors; the financial condition of the issuer and the market for similar securities. No prediction can be made about the effect which any future events will have on the market price of the bonds prevailing from time to time.

Payments under the Bonds: The risk that the Company will not be able to make scheduled payments on the Bonds. The Issuer's ability to make scheduled payments on or to redeem the Bonds will depend upon the Issuer's financial and operating performance, which will in turn be subject to prevailing economic and competitive conditions and to financial and business factors, many of which may be beyond the Issuer's control. The Issuer will also need to obtain financing to cover the balloon payment and there can be no assurances that such financing can be obtained.

The Bonds are subject to optional redemption: The risk that Investors will be forced to exit the Bonds. In accordance with the Term Sheet, the Bonds are subject to optional redemption by the Issuer. During any period when the Issuer may elect to redeem the Bonds, the market value of the Bonds generally will not rise substantially above the price at which they can be redeemed. Change of control event: Upon the occurrence of a Change of Control Event (as defined in the Bond

Agreement), each individual bondholder will have a right of pre-payment of the Bonds at a price of 101 % of par value plus all accrued and unpaid interest to the date of redemption. However, it is possible that the Issuer will not have sufficient funds at the time of the Change of Control Event to make the required redemption of Bonds.


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2 Persons Responsible 2.1 Persons responsible for the information Persons responsible for the information given in the Securities Note are: Pioneer Public Properties III AS, c/o Pioneer Capital Partners, Rådhusgata 23, 0158 Oslo, Norway

2.2 Responsibility statement by persons responsible This Prospectus has been prepared on behalf of Pioneer Public Properties III AS in connection with the Bond Issue and an investment therein. The Company confirms that, having taken all reasonable care to

ensure that such is the case, the information contained in the Prospectus is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.

Oslo, 23 October 2014

Pioneer Public Properties III AS


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3 Detailed information about the securities ISIN code: NO0010714124 The Reference Name/The Bonds/The Bond Issue:

Pioneer Public Properties III AS Senior Secured Bond Issue 2014/2019

Borrower/Issuer: Pioneer Public Properties III AS

Security Type: FRN Currency: NOK

Borrowing Amount/First Tranche: 385,000,000 Borrowing Limit: 500,000,000

Denomination – Each Bond: 1,000.00

Securities Form: The Bonds are electronic registered in book-entry form with the

Securities Depository.

Settlement/Issue Date: 27 June 2014 Interest Bearing From and Including:

Settlement/Issue Date

Interest Bearing To: Maturity Date Maturity Date: 27 June 2019 Coupon Rate: 3 months NIBOR + 4.50% p.a.

Day Count Fraction - Coupon: “act/360”,

Business Day Convention: “modified following” Interest Payment Date: 27 March, June, September and December each year

For more information please see clause 9. in the Bond Agreement.

Interest Fixing Date: Two business days prior to the Interest Payment Date. #Days first term: 94 Issue Price: 100% of par value

Yield: 6.94% yield to maturity as of issue date. Calculation based on a coupon consisting of margin (4.5%) plus the 5 year interest rate swat at 27/6/2014 (2.17%). Assuming no tap issue during the

tenor of the bonds. Business Day: “Oslo”

Put/Call options: The Issuer may redeem the Bonds (all or nothing) as follows:

(i) with settlement date from and including the Settlement

Date to, but not including, the Interest Payment Day falling 2 years after Settlement Date at a price equivalent to the sum of:


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a. the present value of 104.00 % of par value as if

such payment originally should have taken place on the Interest Payment Day falling 2 years after Settlement Date;

b. the present value of the remaining coupon payments (less any accrued but unpaid interest) through to and including the Interest Payment Day falling 2 years after Settlement Date; and

c. accrued but unpaid interest on the redeemed amount,

(ii) both a) and b) above calculated by using a discount rate of

50 basis points over the comparable Norwegian Treasury Rate (i.e. comparable to the remaining duration of the Bonds until the date falling 2 years after the Settlement Date) on the 10th Business Day prior to the repayment

date.

(iii) with settlement date from and including the Interest Payment Day falling on or about 2 (two) years after the Settlement Date up to, but not including, the Interest

Payment Day falling on or about 3 (three) years after the Settlement Date at a price equal to 104.00 % of par value;

(iv) with settlement date from and including the Interest Payment Day falling on or about 3 (three) years after the Settlement Date up to, but not including, the Interest

Payment Day falling on or about 4 (four) years after the Settlement Date at a price equal to 102.00 % of par value;

(v) with settlement date from and including the Interest Payment Day falling on or about 4 (four) years after the

Settlement Date, but not including, the Interest Payment

Day falling on or about 4.5 (four and a half) years after the Settlement Date at a price equal to 101.00 % of par value; or

(vi) with settlement date from and including the Interest

Payment Day falling on or about 4.5 (four and a half) years after the Settlement Date up to, but not including, the Final Maturity Date, at a price equal to 100% of par value;

in all instances with the addition of accrued interest on the redeemed amount. Exercise of the Call Option shall be notified by the Issuer in writing to the Bond Trustee and the Bondholders at least thirty (30) Business Days prior to the settlement date of the Call Option. On

the settlement date of the Call Option, the Issuer shall pay to each

of the Bondholders holding Bonds to be redeemed, in respect of each such Bond, the principal amount of such Bond (including any premium as stated above) and any unpaid interest accrued up to the settlement date. Bonds redeemed by the Issuer in accordance with the Call Option stated above shall be discharged against the outstanding bonds.

Change of Control: Change of Control Event means:

(i) if Kristian Adolfsen, Roger Adolfsen, Benn Eidissen and/or


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Even Carlsen or any of their respective heirs, successors or

assigns, cease to jointly control directly or indirectly 50% or more of the outstanding shares and/or voting capital of the Issuer; or

(ii) any other Person or group of Persons acting in concert becomes the owner directly or indirectly of 50% or more of the outstanding shares and/or voting capital of the Issuer.

Upon a Change of Control Event occurring, each bondholder shall

have a right of pre-payment (Put Option) of the Bonds at a price of 101% of par value (plus accrued interest), such option to be exercised within 60 days following the notice of a Change of Control Event.

Amortization: The Bonds shall amortize as follow:

(i) An amount equalling 7.00% of the issued Bond amount

(including Tap Issues that have been issued) with settlement on the Interest Payment Day falling 2 years after Settlement Day at 100% of par value (plus accrued

interest on redeemed amount);

(ii) An amount equalling 7.00% of the issued Bond amount (including Tap Issues that have been issued) with settlement on the Interest Payment Day falling 3 years after Settlement Day at 100% of par value (plus accrued

interest on redeemed amount);

(iii) An amount equalling 7.00% of the issued Bond amount (including Tap Issues that have been issued) with settlement on the Interest Payment Day falling 4 years

after Settlement Day at 100% of par value (plus accrued interest on redeemed amount); and

(iv) The remaining outstanding amount at Final Maturity Date at 100% of par value (plus accrued interest on redeemed

amount). Redemption: All claims under the Bonds and this Bond Agreement

for payment, including interest and principal, shall be subject to the time-bar provisions of the Norwegian Limitation Act of May 18, 1979 No. 18.

(The “forelesesfrist” is 3 years for interest and 10 years for the principal).

Status of the Bonds: The Bonds shall be senior debt of the Issuer and secured by

certain assets of the Group as set out herein, and otherwise rank

at least pari passu with the claims of its other creditors, except for obligations which are mandatorily preferred by law.

Finance Documents: Means:

(i) the Bond Agreement;

(ii) the Security Documents;

(iii) the Trustee’s fee letter; and

(iv) any other document the Issuer and the Trustee agree in

writing to be a Finance Document.


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Encumbrance: Means any encumbrance, mortgage, pledge, lien, charge (whether fixed or floating), assignment by way of security, finance lease, sale and repurchase or sale and leaseback arrangement, sale of

receivables on a recourse basis or security interest or any other agreement or arrangement having the effect of conferring security.

Security: All amounts outstanding under the Finance Documents to the

Trustee and the bondholders, including but not limited to interest and expenses, shall be secured by:

Pre-Settlement Security:

(i) a pledge over the Issuer’s claim against the bank for the amount from time to time standing to the credit of the

Issuer on the Escrow Account (as defined below) (the “Escrow Account Pledge”);

Pre-Disbursement Security:

(ii) a second priority mortgage over the Espira Properties,

including all relevant equipment being legally part of such Properties under Norwegian law (the “Second Priority Mortgage”);

(iii) a pledge granted by the Issuer over all of its

shares/ownership interests (100% of issued shares) in Property HoldCo (the “Share Pledge”);

(iv) a pledge of the Issuer`s from time to time receivables

under Intercompany Loans (if any) (the “Intercompany Loans Pledge”);

(v) a pledge of claims under the NCG Master Lease;

(vi) a pledge of claims under the Lessee Parent Guarantee;

The Security in (i) – (vi) together with any Additional Security to be referred to herein as the “Security Documents”. Ranking: The Security and the Additional Security (as defined below) shall

rank on a first priority basis and in favour of the Trustee (on behalf of the Bondholders), except for the Security in (ii) above which shall rank on second priority basis after the respective Husbanken Loans and SR-Bank Loan only. The Pre-Settlement Security shall be established no later than at

the Settlement Date. The Pre-Disbursement Security shall be established prior to the first release from the Escrow Account as described below under Conditions Precedent Pre-Disbursement.

Undertakings: Covenants

13.1 General

13.2 Information Covenants 13.3 General Covenants 13.4 Special Covenants Please see clause 13 in the Bond Agreement for more information

about Covenants.


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NIBOR: means the interest rate fixed for a defined period on Oslo Børs’

webpage at approximately 12.15 Oslo time or, on days on which

Oslo Børs has shorter opening hours (New Year’s Eve and the Wednesday before Maundy Thursday), the data published at approximately 10.15 a.m. shall be used. In the event that such page is not available, has been removed or changed such that the quoted interest rate no longer represents, in the opinion of the Bond Trustee, a correct expression of the relevant interest rate, an alternative page or other electronic source which in the opinion of

the Bond Trustee and the Issuer gives the same interest rate shall be used. If this is not possible, the Bond Trustee shall calculate the relevant interest rate based on comparable quotes from major banks in Oslo. If any such rate is below zero, NIBOR will be deemed to be zero. Historical development of the 3 months NIBOR can be found on

www.oslobors.no.

Listing: An application will be made for the Bonds to be listed Oslo Stock

Exchange. An application for listing will be sent as soon as possible after the Prospectus has been approved by Finanstilsynet.

Purpose: The net proceeds from the Bond Issue (net of legal costs, fees of

the Manager and the Trustee and any other agreed costs and expenses) shall exclusively be employed to partly finance the acquisition of the shares in Property HoldCo.

The employment of the net proceeds from the Bonds shall be evidenced to the satisfaction of the Trustee. The market value of the assets owned by Property HoldCo are NOK 1,330 million in addition to an initial cash balance of NOK 147.8

million which is later reduced according to the note in the figure below.

The total acquisition price of Care Real Estate AS is NOK 1472 million, however this includes cash of NOK 147.8 million (as such net of cash, the kindergartens are acquired for NOK 1324.2 million).

Transaction costs consist of fees and expenses in connection with the financing (fees to the bond arranger, legal fees, roadshow expenses etc) and the acquisition of the kindergartens (legal and other due dilligance fees etc). The sources stem from this Bond Issue, Husbank loans, a short term loan (which will be repaid with the cash on balance from Care

Real Estate AS), approx. NOK 30 million loan from SR, and subordinated capital.

Please find below a set-up of the sources and uses for the acquisition of Care Real Estate including financing transactions:

http://www.oslobors.no/


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Uses NOKm

Acquisition of Care Real Estate 1,472.0

- Of which kindergartens 1,324.2

- Of which cash on balance 147.8

Transaction costs 26.8

Total uses 1,498.8

Sources NOKm

Bond loan 385.0

Husbank loans + NOK 30m SR loan 606.3

Short term loan 110.0

Cash balance in Care Real Estate 26.8Subordinated loan 105.9

Equity 264.8

Total sources 1,498.8

Note: NOK 147.8m (Care Real Estate cash) – NOK 110m (short term loan) –NOK 26.8m (trans. cost) = NOK 11.0m initial cash position before operational cash flow

Approvals: The Bonds have been issued in accordance with the Issuer’s Board

approval dated 30 june 2014. The Prospectus will be sent to Finanstilsynet and Oslo Børs for

control in relation to a listing application of the Bonds. Bond Agreement: The Bond Agreement has been entered into by the Borrower

and the Bond Trustee. The Bond Agreement regulates the Bondholder’s rights and obligations with respect to the bonds. The Bond Trustee enters into the Bond Agreement on

behalf of the Bondholders and is granted authority to act on

behalf of the Bondholders to the extent provided for in the Bond Agreement. When bonds are subscribed / purchased, the Bondholder has accepted the Bond Agreement and is bound by the terms of the Bond Agreement.

The Bond Agreement is available through the Arrangers or from the Borrower. The Bondholders have the right to vote in a Bondholders’ meeting. Please see chapter 16 of the Bond Agreement for further information. The Bond Agreement is attached to the prospectus.

Availability of the Documentation: www.oslobors.no Bond Trustee: Nordic Trustee ASA (formerly known as Norsk Tillitsmann

ASA), P.O. Box 1470 Vika, 0116 Oslo, Norway.

The Bond Trustee shall monitor the compliance by the Issuer of its obligations under the Bond agreement and

applicable laws and regulations which are relevant to the terms of the Bond agreement, including supervision of timely and correct payment of principal or interest, inform the Bondholders, the Paying Agent and the Exchange of relevant information which is obtained and received in its capacity as Bond Trustee (however, this shall not restrict the Bond Trustee from discussing matters of confidentiality

with the Issuer), arrange Bondholders’ meetings, and make

http://www.oslobors.no/


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the decisions and implement the measures resolved

pursuant to the Bond agreement. The Bond Trustee is not obligated to assess the Issuer’s financial situation beyond what is directly set forth in the Bond agreement.

(For more details, see also Bond agreement clause 17)

Arrangers: Pareto Securities AS, Dronning Mauds gate 3, NO-0115

Oslo, Norway

Paying Agent: SR Bank, Bjergsted Terrasse 1, Postboks 250, 4066

Stavanger Taxation The Issuer shall pay any stamp duty and other public fees

accruing in connection with issuance of the Bonds or the

Security Documents, but not in respect of trading of the Bonds in the secondary market (except to the extent required by applicable laws), and the Issuer shall deduct

before payment to the bondholders at source any applicable withholding tax payable pursuant to law.

Calculation Agent: The Bond Trustee.

Securities Depository: The Securities depository in which the bonds are registered,

in accordance with the Norwegian Act of 2002 no. 64 regarding Securities depository. On Disbursement Date the Securities Depository is the Norwegian Central Securities Depository (“VPS”), P.O. Box

4, 0051 OSLO. Restrictions on the free transferability: Bondholders located in the United States will not be

permitted to transfer the Bonds except (a) subject to an

effective registration statement under the Securities Act, (b)

to a person that the Bondholder reasonably believes is a QIB

within the meaning of Rule 144A that is purchasing for its

own account, or the account of another QIB, to whom notice

is given that the resale, pledge or other transfer may be

made in reliance on Rule 144A, (c) outside the United States

in accordance with Regulation S under the Securities Act in

a transaction on the Oslo Børs, and (d) pursuant to an

exemption from registration under the Securities Act

provided by Rule 144 thereunder (if available). The Bonds

may not, subject to applicable Canadian laws, be traded in

Canada for a period of four months and a day from the date

the Bonds were originally issued.

Market-Making: No market-maker agreement has been made for this Issue.

Reuters: Financial information electronically transmitted by the news agency Reuters Norge AS.

Legislation under which the

Securities have been created: Norwegian law Fees and Expenses: The Borrower shall pay any stamp duty and other public

fees in connection with the Bonds. Any public fees or taxes on sales of Bonds in the secondary market shall be paid by the Bondholders, unless otherwise decided by law or

regulation. The Borrower is responsible for withholding any withholding tax imposed by Norwegian law.


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Prospectus: The Registration Document dated 23.10.2014 and this Securities Note dated 23.10.2014, together with the Summary.


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4 Additional Information The involved persons in the Issuer have no interest, nor conflicting interests that are material to the Bond Issue. Advisors:

The Issuer has mandated Pareto Securities as Arranger for the issuance of the Bonds. The Arranger has acted as advisors to the Issuer in relation to the pricing of the Bonds. Listing of the Bonds: The Prospectus will be published in Norway.

Prospectus fee for the inspection of the Registration Document by Finanstilsynet: NOK 50,000 Prospectus fee for the inspection of the Securities Note and Summary by Finanstilsynet: NOK 13,000 Advertisement in the newspaper Finansavisen: (estimated) NOK 11, 887 ex VAT.

An application for listing on Oslo Børs will be sent as soon as possible after the Disbursement Date. Listing will take place as soon as possible subsequent to the approval of the Prospectus.

Annual Listing fee for the Bonds will be: NOK 21 753 (NOK 56,50 per MNOK issued). Each bond is negotiable. Statement from the Sole Manager:

Pareto Securities has assisted the Borrower in preparing the Prospectus. Pareto Securities has not verified the information contained herein. Accordingly, no representation, warranty or undertaking, express or implied, is made, and the Sole Manager expressively disclaims any legal or financial liability as to the accuracy or completeness of the information contained in this Prospectus or any other information supplied in connection with bonds issued by the Borrower or their distribution. The

statements made in this paragraph are without prejudice to the responsibility of the Borrower. Each

person receiving this Prospectus acknowledges that such person has not relied on the Sole Manager nor on any person affiliated with it in connection with its investigation of the accuracy of such information or its investment decision.


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5 Appendix: Bond Agreement