FAD-binding monooxygenase; part of the gene cluster that mediates the biosynthesis of terretonin, a fungal meroterpenoid that acts as a mycotoxin (PubMed:22549923, PubMed:23116177, PubMed:25671343). The first step of the pathway is the synthesis of 3,5-dimethylorsellinic acid (DMOA) by the polyketide synthase trt4 (PubMed:22549923, PubMed:23116177). DMOA is then prenylated into farnesyl-DMOA by the polyprenyl transferase trt2 (PubMed:22549923, PubMed:22782788, PubMed:23116177). Methylation by the methyltransferase trt5 then leads to farnesyl-DMOA methyl ester which is further subject to epoxidation by the FAD-dependent monooxygenase trt8 to yield epoxyfarnesyl-DMOA methyl ester (PubMed:22549923, PubMed:22782788, PubMed:23116177). Cyclization of epoxyfarnesyl-DMOA methyl ester by the terpene cyclase trt1 leads to a tetracycle intermediate which is in turn converted to preterretonin (PubMed:22549923, PubMed:22782788, PubMed:23116177). Dehydrogenase trt9 comes next to transform preterretonin to preterrenoid (PubMed:22549923, PubMed:23116177). The FAD-dependent monooxygenase trt3 is then required for the C-hydroxylation at C16 of preterrenoid to yield terrenoid (PubMed:22549923, PubMed:23116177). The cytochrome P450 trt6 catalyzes three successive oxidations to transform terrenoid into an unstable intermediate, which then undergoes the D-ring expansion and unusual rearrangement of the methoxy group to afford the core skeleton of terretonin (PubMed:25671343, PubMed:28759016). Trt14 catalyzes the D-ring expansion of terretonin involving intramolecular methoxy rearrangement as well as the hydrolysis of the expanded D-ring and the methyl ester moiety (PubMed:25671343, PubMed:28759016). Finally, the nonheme iron-dependent dioxygenase trt7 accomplishes the last two oxidation reactions steps to complete the biosynthesis of terretonin (PubMed:25671343). Terretonin C is produced via spontaneous decarboxylation of the terretonin precursor (PubMed:23116177). Another shunt product of the terretonin biosynthesis is dihydrofarnesyl-DMOA, derived from epoxyfarnesyl-DMOA through hydrolysis of the epoxide (PubMed:22549923, PubMed:22782788, PubMed:23116177). Binds 1 FAD per subunit. Secondary metabolite biosynthesis; terpenoid biosynthesis. Impairs the synthesis of terretonin but accumulates preterrenoid (PubMed:23116177). Belongs to the FAD-binding monooxygenase family.