La Trobe Australian Mortgage Fund Product Disclosure Statement Date: 11 December 2009
Contents 1. Key Features of the Fund 02 2. Eight (8) Benchmarks 04 3. Investment Snapshot 06 4. Fund Portfolio Metrics 08 5. The Four Investment Options Your Choice 10 6. Fees and Other Costs 15 7. Mortgage Selection Guidelines 20 8. Investment Risks 21 9. Frequently Asked Questions 25 10. Additional Fund Information 29 11. Dictionary 36 12. Corporate Directory 38 13. Completing the Application Form 39 Fund Application Form 41 Individuals Organisations In your interest Please take time to read through this Product Disclosure Statement ( PDS ) regarding our managed investments and discuss it with your financial adviser. In preparing this PDS, we have not taken into account your investment objectives, financial position or particular needs. Before making an investment decision, you may need to obtain and consider independent advice about whether this investment is suitable in light of your individual or personal circumstances. La Trobe and its Authorised Representatives do not provide financial product advice. Investment tip If you want peace of mind, you must determine which Investment Option is best for you. You must consider your attitude to risk and return so that you do not worry if the value of your investment changes. You must take responsibility for your own investment decisions and to this end you should consider obtaining independent advice before making any investment or financial decisions. Questions If you have any questions concerning the information contained in this PDS please contact La Trobe on 1800 818 818 or email us at investor@latrobefinancial.com.au Cover printed on Revive Recycled and text pages printed on Greenhouse Friendly ENVI Carbon Neutral Paper.
Our core purpose is to improve peoples lives by helping them invest to achieve financial security.
1. Key Features of the Fund Product Name The La Trobe Australian Mortgage Fund ARSN 088 178 321 Product Issuer La Trobe Capital & Mortgage Corporation Limited ( La Trobe ) ABN 27 007 332 363 Australian Financial Services Licence No. 222213 Investment Options Objectives The La Trobe Australian Mortgage Fund ( the Fund ) offers Investors the opportunity to invest in mortgages over real property located across Australia through the choice of four (4) different Investment Options: 1. Cash & Mortgages; 2. Pooled Mortgages; 3. Select Mortgages; 4. Special Situation Mortgages. The key objectives of the Fund are to provide Investors with: a choice of four (4) professionally managed mortgage related Investment Options, designed to allow each Investor to choose the most appropriate option for their circumstances; regular interest, either fixed or variable; and a mortgage-secured low cost investment structure. Investment Strategy To invest in a wide range of diversified mortgages across Australian commercial, residential, rural, construction and development and industrial property, and other income producing assets. Capital Protection Fund Features There is NO guarantee of the investment result, the return of capital, or the amounts payable to Investors, and there are risks associated with an investment in the Fund. These risks are explained in Section 8 of this PDS. Some of the notable features of the Fund include: One of Australia s largest Mortgage Funds, with $303 million of Funds under Management at 30 June 2009; Experienced management from an organisation that has been managing mortgages for over 55 years; No investment entry fees; La Trobe, through its appointed custodian, holds custody of all Title and security documents, ensuring safekeeping and proper registration of your investments and La Trobe or one of its related companies is always registered as the mortgagee (see FAQ 24 on page 28 for further details); and Conservative average loan to valuation ratio of 59.02% as at 30 June 2009. page 2 La Trobe Australian Mortgage Fund PDS 2009
Who is La Trobe Regular reporting Access to up-to-date information La Trobe Capital & Mortgage Corporation Limited ( La Trobe ) is the Responsible Entity of the Fund, and was incorporated on 14 November 1989 to operate La Trobe s private client investment and Funds Management arm. La Trobe holds Australian Financial Services Licence No. 222213 issued by the Australian Securities & Investments Commission ( ASIC ) and is licensed to operate registered managed investment schemes that hold deposits and mortgages for retail and wholesale clients. La Trobe Financial Services Pty Limited ( the Investment Manager ) was established in 1952 and since that time has acted as the Investment Manager for loans in excess of $10 billion Australia wide for both institutional and private investors, just like you. The Investment Manager currently employs over 120 staff specialising in mortgage lending, management and control of private and institutional mortgage investments across Australia. The Investment Manager has been contracted by La Trobe to act as the Investment Manager to the Fund. Loans made by the Fund are primarily short term, interest only, and commercially-related, and are assessed often on a low documentation basis. Other loans managed by the Investment Manager are primarily longer term, principal and interest, and residential, and the sources of funds for these loans are institutional investors. Details of the track record and experience of the senior management of La Trobe can be found at www.latrobefinancial.com.au Investors receive the following regular reports: A Receipt of Investment made; Detailed Transaction Statements; Financial Year Income Taxation Summary; and The Fund s Annual Report (if requested). We aim to provide Investors with up-to-date information about the Fund, so that Investors can monitor their investments in the Fund. In addition, information that is not materially adverse information is subject to change from time to time and may be updated. You can obtain up-to-date information about the Fund by: phoning La Trobe s toll free Investor Liaison number 1800 818 818; logging on to La Trobe s website at www.latrobefinancial.com.au; checking with one of La Trobe s Authorised Representatives or your financial advisor; reading the Fund s Monthly Mortgage Fund Update, available by phoning La Trobe. We can send you the Update in the post or by email. A paper copy of any updated information will be given to you without charge on request. La Trobe Financial How Investing Should Be page 3
2. Eight (8) Benchmarks To improve the disclosure of information about mortgage funds in Australia, the Australian Securities & Investments Commission ( ASIC ) requires us to provide information about eight (8) benchmarks. Information about these benchmarks is outlined below. This information is updated as required on La Trobe s website at www.latrobefinancial.com.au. ASIC has also issued an independent guide for investors about unlisted mortgage funds called Investing in mortgage funds?, which can be obtained from ASIC s website www.fido.gov.au. La Trobe complies with the benchmarks and intends to comply with them in the future. Benchmark 1 Liquidity description This benchmark addresses the Fund s ability to satisfy withdrawal requests and other short-term operational commitments. The liquidity of a mortgage fund is key to its ability to meet its representations about the ability of investors to withdraw from the Fund and its other ongoing commitments. la trobe s response We comply with this benchmark. In relation to the Cash & Mortgages Option and the Pooled Mortgages Option of the Fund, we maintain cash flow estimates for the next three (3) months, and ensure that at all times these Options have cash or cash equivalents sufficient to meet the projected cash needs over the next three (3) months. In relation to the Select Mortgages Option and the Special Situation Mortgages Option, liquidity is dependent on the borrower repaying the loan on the due date, and investors are entitled to withdraw from the Fund once the loan has been repaid by the borrower. We have a policy of ensuring that sufficient assets are held in readily realisable investments in order to meet future withdrawal requests. We monitor historical rolling 12 months inflows and outflows and regularly revise our cash flow estimates based on this historical data. More information Please see Section 5 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au Benchmark 2 Fund borrowings description This benchmark addresses the Fund s policy on borrowing. Some mortgage funds borrow against the assets of the fund to fund distributions, redemption requests or scheme operations generally. la trobe s response We comply with this benchmark. As at the date of the PDS, the Fund does not have any borrowings. More information Please see our website at www.latrobefinancial.com.au for up-to-date information. Benchmark 3 Portfolio Diversification description This benchmark addresses the Fund s lending practices and portfolio risk. The criteria the responsible entity of a mortgage fund uses to decide what loans to make are variable and prone to risk especially where: loan-to-valuation ratios are often higher than for traditional lending; and the loans made may be highly concentrated to particular types of commercial activities, locations or borrowers. ASIC has prescribed the information that we are required to disclose about the Fund s investment portfolios. la trobe s response We comply with this benchmark, which applies only to the Cash & Mortgages Option and the Pooled Mortgages Option of the Fund. We have included the required details about the investment portfolios in Section 4 of the PDS. More information Please see Sections 4 & 7 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au Benchmark 4 Related Party Transactions description This benchmark addresses the risks associated with related party lending, investments and transactions. Some schemes lend, invest scheme funds and transact with associated companies or businesses. la trobe s response We comply with this benchmark. The Fund does not make any loans from the Fund to La Trobe or to any associated companies or businesses. The Fund does not invest scheme funds in La Trobe or any associated companies or businesses. The Fund, through La Trobe as the Responsible Entity, has retained an associated company, La Trobe Financial Services Pty Ltd as the Investment Manager and the Sub-custodian for the Fund on arm s length, commercial terms. La Trobe pays the Investment Manager and the Sub-custodian out of the fees that it receives from the Fund as its Responsible Entity. The Board of La Trobe page 4 La Trobe Australian Mortgage Fund PDS 2009
has a policy on related party transactions, including arrangements to manage conflicts of interest, and it monitors these at its quarterly Board meetings. La Trobe, as the Responsible Entity of the Fund, invests in the Fund from time to time on terms equal to other Investors. More information Please see page 3 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au Benchmark 5 Valuation policy description This benchmark addresses the Fund s policy in relation to obtaining valuations on the properties over which mortgages are registered. The valuations schemes rely on are carried out on a variety of bases, with differing assumptions and instructions. la trobe s response We comply with this benchmark. All properties that are used as security for loans made from the Fund are valued on an as is basis and for construction and development property, also on an as if complete basis. We have a clear policy on how often we obtain valuations and we have a panel of valuers, none of whom conducts more than 1/3 of the valuation work for the Fund. All valuers must be appropriately registered and they include in their valuation reports a warranty that their reports comply with all relevant industry standards and codes. More information Please see pages 20 & 22 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au Benchmark 6 Lending principles loan-to-valuation policies description This benchmark addresses the Fund s property-related lending practices. la trobe s response We comply with this benchmark. We maintain the following loan-to-valuation ratios for loans made by the Fund: where the loan relates to property development 70% on the basis of the latest as if complete valuation; in all other cases 80% on the basis of the latest market valuation. A loan made in the Special Situation Mortgages Option may exceed these ratios, but we will disclose this in the Supplementary Product Disclosure Statement relating to that loan. Where the loan relates to property development, we always ensure that the Fund only provides funds to the developer in stages, that is, on a cost to complete basis, based on external evidence of the progress of the development. More information Please see page 20 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au Benchmark 7 Distribution practices description This benchmark addresses the transparency of the Fund s distribution practices. Some schemes fund distributions out of sources other than income. la trobe s response We comply with this benchmark. We only make distributions from income made from the Fund s investments, and this has been our practice since the commencement of the Fund. We do not expect to change our practice in this regard. The Pooled Mortgages Option also enjoys the benefit of an Interest Income Reserve that may be used to manage income risks. More information Please see pages 10, 11 and 22 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au Benchmark 8 Withdrawal arrangements description This benchmark addresses the transparency of a mortgage scheme s approach to withdrawals of investments. Some mortgage schemes promote short withdrawal periods to attract investors, although the maximum allowed in the scheme s constitution is much longer. la trobe s response We comply with this benchmark. We have set out in the Fund s Constitution and the PDS how Investors can access their money. The maximum time allowed for withdrawals from the Cash & Mortgages Option and the Pooled Mortgages Option is 12 months. However, we aim to process your withdrawal request from the Cash & Mortgages Option within 24 hours of receipt of your request, and from the Pooled Mortgages Option within 21 days of the end of the month in which your request is received. In relation to the Pooled Mortgages Option, your funds are automatically rolled over for a new term of 12 months unless you give us the required notice to withdraw. More information Please see pages 10, 11, 22, 23 and 25 of the PDS and for up-to-date information, please see our website at www.latrobefinancial.com.au La Trobe Financial How Investing Should Be page 5
3. Investment Snapshot As at 30 June 2009 The following table contains information about the Fund s Investment Options. The performance of your investment will depend on which Investment Option you choose. Feature Cash & Mortgages Option Pooled Mortgages Option Current Returns % p.a. 1 5.25% 6.95% Rolling 3 Year Returns % p.a. 2009 2008 2007 2009 2008 2007 6.25% 5.90% 5.40% 7.50% 7.49% 7.38% Benchmark Return Rate % (UBSA Bank-Bill) n/a 6.41% 6.51% 5.94% Minimum Investment 3 $1,000.00 $1,000.00 Investment Term 24 Hours 4 12 months Indicative Risk Level Low Low - Medium Interest Distributions Monthly direct to nominated Financial Institutions Account or re-invested Monthly direct to nominated Financial Institutions Account or re-invested Rates of Return Variable Rate Variable Rate Withdrawals 5 Permitted. Maximum time permitted: 12 months Permitted after 12 months. Early withdrawals considered. Maximum time permitted: 12 months Funds under Management $ 58.7 Million $ 56.1 Million Total Number of Mortgages 79 269 Total Mortgages $ $14,064,759 $54,922,412 Average Mortgage Investment $ $178,035 $204,173 Range of Loans $1,000: $9,000,000 $1,000: $9,000,000 Largest Mortgage Investment: % of the portfolio Top 10 largest Mortgage Investments in aggregate $1,242,872: 8.84% $896,698: 1.63% $7,182,147: 51.06% $7,463,533: 13.59% Weighted Average LVR % 69.60% 60.45% Total Loan Arrears (%) 7 1.99% 0.97% Number and value of loans in arrears Pre-paid and capitalised interest loans 18: $3,952,834 35: $9,110,304 10: $2,793,700 15: $4,741,555 Undrawn loan commitments 0: $0.00 11: $232,039 Loans exceeding 5% of the Fund Nil Nil 1. The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund and may achieve lower than expected returns. 2. Subject to availability. 3. There is no maximum investment, although La Trobe reserves the right to decline an investment in its absolute discretion if it considers it appropriate to protect the interests of all investors. 4. La Trobe will satisfy requests on the business day following receipt if reasonably practicable having regard to its liquidity position and the best interests of Investors. Withdrawals may be delayed see page 10 of the PDS. page 6 La Trobe Australian Mortgage Fund PDS 2009
Select Mortgages Option Special Situation Mortgages Option Total Fund from 7.14% 2 from 11.75% 2 2009 2008 2007 2009 2008 2007 9.66% 10.08% 9.94% 14.98% 16.50% 16.82% n/a n/a n/a n/a $1,000.00 $1,000.00 1-5 years 1-5 years Medium Direct to nominated Financial Institutions Account (frequency determined by investment selected) Fixed / Variable Rate Permitted after term maturity. Early withdrawals considered. Maximum time permitted: n/a Medium - High Direct to nominated Financial Institutions Account (frequency determined by investment selected) Fixed / Variable Rate Permitted after term maturity. Early withdrawals considered. Maximum time permitted: n/a $ 175.3 Million $ 12.8 Million $ 303.0 Million 750 36 907 6 $175,310,266 $12,790,100 $257,087,536 $233,747 $355,281 $1,000: $9,000,000 $1,000: $2,450,000 $1,000: $9,000,000 $8,204,014: 4.68% $2,453,986: 19.19% $8,468,659: 3.29% $43,365,791: 24.74% $10,096,959: 78.94% $48,626,610: 16.05% 57.26% 65.34% 59.02% 1.68% 3.41% 1.63% 65: $36,635,283 15: $4,148,741 96: $53,966,813 31: $42,862,521 6: $3,117,277 39: $53,515,053 26: $4,060,989 0: $0.00 37: $4,293,028 Nil Nil Nil 5. Withdrawal rights are subject to liquidity and may be delayed or suspended. See the important note on page 26 of the PDS in relation to La Trobe s ability to allow withdrawals while the Fund is Liquid (as defined by the law). 6. The Investment Options may invest in the same mortgage. 7. La Trobe takes a conservative approach and measures all the aggregate arrears for the Fund by dividing the total amount of overdue interest, the total amount of overdue loan instalments and any outstanding fees and charges by the total gross balance of outstanding loans. La Trobe Financial How Investing Should Be page 7
4. Fund Portfolio Metrics As at 30 June 2009 Reference: Benchmark 3 La Trobe manages the asset allocation within the Fund to maximise returns to Investors while minimising the risks, and to maintain appropriate cash levels for each Investment Option. We aim to achieve the benchmark objectives over the long term, but this may vary on a day-to-day basis, depending on market conditions. Furthermore, to ensure consistent performance across Feature Cash & Mortgages Option Select Mortgages Option Asset Allocation Allocation Range Benchmark Actual Allocation Numbers Value $ 000 Benchmark Actual Allocation Cash 10-80% 20% 50.51% n/a $29,669,695 0.00% 0.00% Bank Bills/Term Deposits 0-50% 20% 25.54% n/a $15,000,000 0.00% 0.00% Fix/Var Mortgages 20-90% 60% 23.95% 111 $14,064,759 100% 100% Liquidity Ratio 10-35% n/a 76.05% n/a n/a n/a n/a By Security Residential 0-90% n/a 25.54% 20 $3,591,561 n/a 45.41% Vacant Land 0-30% n/a 20.80% 10 $2,926,171 n/a 14.97% Commercial 0-20% n/a 17.58% 18 $2,472,954 n/a 15.17% Industrial 0-15% n/a 30.79% 21 $4,330,836 n/a 8.45% Rural 0-20% n/a 5.28% 10 $743,238 n/a 16.00% Construction & Development 0-25% n/a 21.50% 9 $3,024,499 n/a 20.47% First Mortgages 93-100% n/a 99.31% 75 $13,968,343 n/a 100.00% Second Mortgages 0-7% n/a 0.69% 4 $96,416 n/a 0.00% By State ACT & NT 0-10% n/a 0.00% 0 n/a 0.17% NSW 0-45% n/a 30.77% 19 $4,328,163 n/a 18.60% QLD 0-40% n/a 27.90% 20 $3,923,995 n/a 29.64% SA 0-10% n/a 5.65% 2 $795,128 n/a 3.81% TAS 0-10% n/a 2.60% 5 $365,282 n/a 4.83% VIC 0-45% n/a 16.29% 20 $2,290,497 n/a 29.26% WA 0-20% n/a 16.79% 13 $2,361,694 n/a 13.70% Fixed Rate Mortgages 15-85% n/a 29.07% 32 $4,089,033 n/a 55.32% Variable Rate Mortgages 15-85% n/a 70.93% 47 $9,975,726 n/a 44.68% Maturity Profile % Investment % 0-6 months n/a n/a 41.00% 44 $8,159,024 $84,305,697 48.09% 7-12 months n/a n/a 12.35% 12 $2,457,188 $29,035,388 16.56% 13-24 months n/a n/a 14.26% 21 $2,837,894 $28,300,991 16.14% 25-36 months n/a n/a 0.00% 0 $2,996,507 1.71% 37+ months n/a n/a 3.07% 2 $610,653 $30,671,683 17.50% Total n/a n/a 70.68% 111 $19,898,532 $175,310,266 100.00% LVR Profile 1 Number Value < 50% n/a n/a 7.37% 12 $1,036,321 274 $45,740,082 50% 59.99% n/a n/a 10.36% 15 $1,457,392 114 $28,348,245 60% 69.99% n/a n/a 59.91% 31 $8,426,232 181 $69,628,108 70% 79.99% n/a n/a 22.02% 20 $3,097,543 78 $25,575,996 = 80% n/a n/a 0.34% 1 $47,270 3 $590,125 > 80% n/a n/a 0.00% 0 100 $5,427,711 Interest rate profile < 8.50% n/a n/a 1.72% 2 $241,513 318 $33,706,101 8.50% 8.99% n/a n/a 0.78% 3 $109,069 36 $6,867,667 9.00% 9.49% n/a n/a 15.42% 18 $2,169,025 129 $17,972,436 9.50% 9.99% n/a n/a 35.14% 25 $4,942,202 116 $30,770,915 10.00% 10.49% n/a n/a 28.82% 19 $4,053,583 80 $26,774,566 10.50% 10.99% n/a n/a 9.47% 4 $1,331,410 42 $13,554,867 11.00% 11.49% n/a n/a 4.90% 3 $689,159 20 $33,328,261 11.50% 11.99% n/a n/a 0.00% 0 7 $4,726,468 > or = 12.00% n/a n/a 3.76% 5 $528,798 2 $7,608,984 1. The LVR represents the valuation at the start of the loan compared to the approved loan amount, reflecting the LVR used in the Fund s lending criteria. page 8 La Trobe Australian Mortgage Fund PDS 2009
a range of market conditions, the Fund s mortgage portfolios are diversified at a number of levels, including sector, interest rate type, geographic location and loan size. Investors can obtain the most current Fund Portfolio Metrics at www.latrobefinancial.com.au Special Situation Mortgages Option Pooled Mortgages Option Total Fund Benchmark Actual Allocation Allocation Range Benchmark Actual Allocation Numbers Value Values in aggregate 0.00% 0.00% 0-10% 5% 2.13% $1,195,256 n/a $30,864,951 0.00% 0.00% 0.00% 0% 0.00% n/a $15,000,000 100% 100% 90-100% 95% 97.87% 269 $54,922,412 907 $257,087,536 n/a n/a 5-10% 5% 2.13% n/a 15.14% n/a 76.50% 30-60% 45% 42.39% 85 $23,283,782 485 45.22% n/a 11.80% 5-15% 10% 6.17% 17 $3,386,508 43 13.25% n/a 0.71% 15-40% 25% 21.04% 72 $11,556,309 149 15.84% n/a 1.84% 5-20% 10% 17.46% 58 $9,590,630 125 11.27% n/a 9.14% 5-15% 10% 12.94% 37 $7,105,183 105 14.42% n/a 29.22% 0-25% 15% 11.63% 15 $6,390,005 26 19.07% n/a 58.50% 100% 100% 100.00% 269 $54,922,412 877 97.86% n/a 41.50% 0% 0% 0.00% 0 30 2.14% n/a 0.00% 0-10% 5% 1.19% 5 $655,149 7 0.37% n/a 16.12% 0-45% 25% 19.98% 59 $10,972,783 174 19.44% n/a 23.42% 0-40% 25% 27.11% 57 $14,891,959 119 28.69% n/a 0.00% 0-10% 5% 5.41% 14 $2,971,524 45 4.06% n/a 0.09% 0-10% 5% 7.26% 28 $3,987,930 73 4.99% n/a 27.51% 0-45% 25% 24.67% 74 $13,550,234 394 27.48% n/a 32.87% 0-20% 10% 14.37% 32 $7,892,834 95 14.97% n/a 44.32% 15-85% 50% 34.01% 97 $18,679,304 279 48.78% n/a 55.68% 15-85% 50% 65.99% 172 $36,243,108 628 51.22% Investment % % % $9,236,523 72.22% n/a n/a 32.46% 92 $17,827,927 276 46.49% $2,416,110 18.89% n/a n/a 16.52% 42 $9,071,120 96 16.72% $1,137,466 8.89% n/a n/a 30.10% 81 $16,531,438 182 18.98% $0 0.00% n/a n/a 2.59% 16 $1,423,542 34 1.72% $0 0.00% n/a n/a 18.33% 38 $10,068,385 318 16.08% $12,790,100 100.00% n/a n/a 100.00% 269 $54,922,412 906 100% Number Value Number Value 2 $227,425 n/a n/a 19.12% 83 $10,501,527 325 $57,505,355 7 $5,015,533 n/a n/a 16.54% 46 $9,083,582 136 $43,904,753 7 $2,493,142 n/a n/a 36.47% 88 $20,028,747 218 $100,576,229 17 $3,490,485 n/a n/a 27.87% 52 $15,308,556 121 $47,472,580 1 $429,780 n/a n/a 0.00% 0 5 $1,067,175 2 $1,133,734 n/a n/a 0.00% 0 102 $6,561,444 2 $1,008,664 n/a n/a 13.47% 28 $7,399,575 344 $42,355,853 1 $1,477,395 n/a n/a 10.50% 27 $5,768,820 56 $14,222,952 0 n/a n/a 23.76% 71 $13,047,635 147 $33,189,096 1 $1,636,711 n/a n/a 29.26% 78 $16,068,133 154 $53,417,962 1 $260,600 n/a n/a 12.12% 41 $6,653,856 96 $37,742,605 0 n/a n/a 4.46% 13 $2,449,039 47 $17,335,316 2 $2,949,985 n/a n/a 4.44% 7 $2,438,166 23 $39,405,571 0 n/a n/a 1.02% 3 $562,024 8 $5,288,492 29 $5,456,744 n/a n/a 0.97% 1 $535,163 32 $14,129,689 Note: All figures shown as a percentage are based on dollar values La Trobe Financial How Investing Should Be page 9
5. The Four Investment Options Your Choice Reference: Benchmarks 1, 7 & 8 Investment Option 1 Cash & Mortgages The Cash & Mortgages Option offers you a variable rate of return and flexible access to your funds with consistent returns resulting from investment in a range of Australian dollar assets. Returns from the Cash & Mortgages Option are variable, are calculated on daily balances held by you and are paid monthly directly into your nominated financial institution account. You will receive a Quarterly Investor Statement detailing all transactions and interest earned in that period. The rates of return are not guaranteed and are determined by future revenue of the Fund and may achieve lower than expected returns. Cash & Mortgages Option Tip: You can use the Cash & Mortgages Option either as an ideal place to invest any available cash or as a holding account for your money while you decide in which of the Fund s other Investment Options you would like to invest. investment objective and strategy The Cash & Mortgages Option aims to provide Investors with a reasonably stable and predictable income based on a monthly variable rate of return, investing in mortgages, cash and bank bills, retaining higher cash than other Options. asset allocation The Cash & Mortgages Option invests in a range of asset types cash, term deposits, bank bills and mortgages. We manage the asset allocation to maximise returns to Investors in the Cash & Mortgages Option, while minimising the risk exposure of its portfolio and maintaining appropriate cash levels for the Option. We aim to achieve the benchmark allocation objectives over the long term, but this may vary on a day-to-day basis, depending on market conditions. interest distributions The interest on your funds invested in the Cash & Mortgages Option is calculated on the daily balances held by you, is set at the end of each month and is paid within fourteen (14) days after the end of each month by direct credit to the financial institution account nominated in your Application Form. If you direct us, we will reinvest your interest in the Cash & Mortgages Option. You may check with La Trobe on 1800 818 818 or check our website for the current Cash & Mortgages Option rate. cash & mortgages option access to your money For Cash & Mortgages Option Investors, you have access to your funds by giving notice to La Trobe. La Trobe has 12 months from receipt of your notice to comply with your request. In practice La Trobe will satisfy requests by crediting your nominated financial institution account with the requested proceeds direct on the business day following receipt of the withdrawal notice, if reasonably practicable having regard to the Fund s cash position and the best interests of Investors. La Trobe may treat a withdrawal request that would leave a net investment of less than $1,000 in an account as a request for a complete withdrawal. cash & mortgages option cash management La Trobe aims to maintain an appropriate cash level within the Cash & Mortgages Option. This policy balances the need to meet reasonably foreseeable redemption requests, with the required investment of funds in a percentage of fixed term mortgages in order to generate the income return levels sought by Investors on their total invested funds. Maintenance of the appropriate cash level is subject to inevitable short term fluctuations relating to investment and redemption activities. If at any time during a calendar month, La Trobe has received redemption requests or acceptances of withdrawal offers for amounts which exceed the available cash such that an insufficient amount of cash is or would be available to satisfy all requests received, then from that time onwards the requests will be satisfied proportionately in accordance with the following formula: The amount of money available X The amount an Investor has requested to withdraw Total of all amounts Investors request to withdraw Wherever less than full redemptions are able to be forwarded, Investors will be notified of this. La Trobe has historically not paid less than full redemptions. Investors receiving proportionate redemptions according to the above formula will have the outstanding redemption balances redeemed in the month(s) thereafter, subject to cash constraints and again subject to the above formula if relevant. Redemption requests from any one (1) month will be met completely prior to satisfaction of requests received in subsequent months, gaining priority as a class according to the time of La Trobe receiving the redemption request. cash & mortgages option capital provisioning La Trobe s management of the Cash & Mortgages Option includes operating a provisioning policy relating to potential and actual losses of investor capital in specific, individually identified mortgage investments. The primary aim of this policy is to effect an appropriately equitable distribution of any such capital losses amongst all relevant investors in the Cash & Mortgages Option. As a result, redemptions of Investor funds will be adjusted, if applicable, to reflect an appropriate allocation of any provision balances (in proportion to the total capital in the Cash & Mortgages Option) existing at the time of the redemption. La Trobe has historically not had to provide for any investment losses in the Cash & Mortgages Option (although there is no guarantee that losses will not occur in the future). page 10 La Trobe Australian Mortgage Fund PDS 2009
Investment Option 2 Pooled Mortgages The Pooled Mortgages Option offers you a variable rate of return from a pool of mortgages chosen and managed by La Trobe. Investors monies are pooled and invested collectively, meaning that no individual Investor has a specific entitlement to any individual mortgage. This is the way most mortgage trusts operate. Loans which form part of the Pooled Mortgages Option are generally to 66% of the value of the security property as certified by a valuer independent of La Trobe, but may on occasions go to 75%. Loans are secured by a first ranking mortgage. The interest of an Investor in the Pooled Mortgages Option is as a tenant in common, in the same proportion as the amount the Investor has invested bears to the total amount invested by all Investors in the Pooled Mortgages Option. If you choose the Pooled Mortgages Option, you do not need to make an assessment of the individual mortgages. La Trobe assesses all loans which are secured by the mortgages, which must meet our lending criteria (see Section 7 titled Mortgage Selection Guidelines of this PDS). The rates of return are not guaranteed and are determined by future revenue of the Fund and may achieve lower than expected returns. Pooled Option Tip: Choosing the Pooled Mortgages Option means you enjoy a substantially broader diversification of investment in mortgages and income risks when compared to either the Select Mortgages Option or Special Situation Mortgages Option. investment objective and strategy The Pooled Mortgages Option aims to provide Investors with a reasonably stable and predictable income based on a monthly variable rate of return, investing in a wide range of mortgages in a range of industry sectors, with geographic diversification across Australia. asset allocation The Pooled Mortgages Option is invested 100% in mortgages, with the exception of a cash reserve held to meet cash requirements. The Pooled Mortgages Option aims to hold mortgages in a range of security types, with geographic diversification across Australia. We aim to achieve the benchmark allocation objectives over the long term, but this may vary on a day-to-day basis, depending on market conditions. interest distributions Returns from the Pooled Mortgages Option are variable and are calculated daily. Interest distributions for the Pooled Mortgages Option are paid monthly within fourteen (14) days after the end of each month by direct credit to the financial institution account nominated in your Application Form. The first Pooled interest distribution is made within fourteen (14) days after the end of the month in which you invest. The interest rate on the Pooled Mortgages Option is set at the end of each month and will be paid from interest generated by the Pooled Mortgage assets of the Fund. You may check with La Trobe on 1800 818 818 or check our website for the current Pooled Mortgages Option rate. If you direct us, we will reinvest any interest payable to you in either the Cash & Mortgages Option or the Pooled Mortgages Option. pooled mortgages option access to your money The minimum initial period for investment in the Pooled Mortgages Option is twelve (12) months ( the minimum initial period ). We will not be obliged to repay any part of those investments to you as an Investor until after the minimum initial period has expired on each investment made. At the expiration of the minimum initial period, the terms of your nominated investment option will create one of the following cycles: Ordinary 100% cycle: your complete investment is automatically rolled over into a further minimum period of twelve (12) months, unless you give at least five (5) business days prior written notice to withdraw your investment at the end of the current period. We will not write to you separately regarding each expiry of investment. If you want to withdraw funds at the expiry of the minimum initial period, you should complete and forward a written redemption request to La Trobe at any time at least five (5) business days prior to the expiry date (including in relation to multiple future maturity dates if relevant). Your investment expiry period will be notified to you on receipt of each investment. To assist Investors, you may also request an Investment Maturity Certificate at any time detailing each investment made by you and the related initial minimum investment period; a fee of $15.00 will apply on each issuing occasion. If you don t notify La Trobe of your intention to withdraw from the Fund as required above i.e. at any time at least five (5) business days prior to maturity, in writing, on that part of your total investments in the Fund, then that part of your investment will continue in the Fund for a further minimum investment period of twelve (12) months. Regular Access Investment Cycle: at your request, a proportionate component of your total investment frees up each month, quarter or six monthly period, as nominated by you and is available to be withdrawn by you by providing written notice. La Trobe Financial How Investing Should Be page 11
The Regular Access Investment option is ideal for potential medium and long term Investors (a minimum complete cycle of 24 months) who want to retain the option to access part of their capital on a regular basis after the minimum initial period. As an example, where you have selected the monthly option, after the initial 12 month minimum period, one twelfth of your investment becomes available to you every month. Should you not exercise this right by giving at least five (5) business days written notice, the respective proportionate investment amount will be reinvested for a further period of twelve (12) months. One written instruction from you can direct a progressive release program of all or part of your investment funds over twelve (12) months. Upon receipt by La Trobe of your written redemption request prior to the expiry date, La Trobe will, subject to the availability of cash in the Fund, repay the redemption amount within twenty-one (21) days of the end of the month in which the redemption request is received and interest will be paid up until payment. The redemption amount will, if relevant, include any adjustment determined in accordance with the Pooled Mortgages Option capital provisioning policy as explained below. Whilst withdrawal during the minimum period is generally not permitted, La Trobe may also consider a written withdrawal request at its discretion. This will always require us to consider the interests and needs of our other Investors. If a withdrawal within the minimum period is authorised, an authorised withdrawal in such an instance will be subject to an Early Withdrawal Fee (see page 16 of the PDS). La Trobe may treat a withdrawal request that would leave a net investment of less than $1,000 in an account as a request for a complete withdrawal. pooled mortgages option cash management Choosing the Pooled Mortgages Option means you enjoy substantially improved access to your funds when compared to either the Select Mortgage Option or Special Situation Mortgages Option. La Trobe aims to maintain an appropriate cash level within the Pooled Mortgages Option. This policy balances the needs to meet reasonably foreseeable redemption requests, with the required investment of funds in fixed term mortgages in order to generate the income return levels sought by Investors on their total invested funds. Maintenance of the appropriate cash level is subject to inevitable short term fluctuations relating to investment and redemption activities. If at any time during a calendar month, La Trobe has received redemption requests or acceptances of withdrawal offers for amounts which exceed the available cash such that an insufficient amount of cash is or would be available to satisfy all requests received, then from that time onwards the requests will be satisfied proportionately in accordance with the following formula: The amount of money available X The amount an Investor has requested to withdraw Total of all amounts Investors request to withdraw Whenever less than full redemptions are able to be forwarded, Investors will be notified of this. La Trobe has historically not paid less than full redemptions. Investors receiving proportionate redemptions according to the above formula will have the outstanding redemption balances redeemed in the month(s) thereafter, subject to cash constraints and again subject to the above formula if relevant. Redemption requests from any one (1) month will be met completely prior to satisfaction of requests received in subsequent months, gaining priority as a class according to the time of La Trobe receiving the redemption request. pooled mortgages option capital provisioning La Trobe s management of the Pooled Mortgages Option includes operating a provisioning policy relating to potential and actual losses of Investor capital in specific, individually identified Pooled Mortgage investments. The primary aim of this policy is to effect an appropriately equitable distribution of any such capital losses amongst all relevant Investors in the Pooled Mortgages Option. As a result, redemptions of Investor funds will be adjusted, if applicable, to reflect an appropriate allocation of any provision balances (in proportion to the total capital in the Pooled Mortgages Option) existing at the time of redemption. La Trobe has historically not had to provide for any investment losses in the Pooled Mortgages Option (although there is no guarantee that losses will not occur in the future). Investment Option 3 Select Mortgages The Select Mortgages Option offers you fixed or variable rates of return and the opportunity to individually select the mortgages in which you want to invest. You decide which mortgages suit you, based on information about the loan, its term and interest rate, the security property and the borrower. Mortgages in this option are secured on a first mortgage basis. You receive the benefits and the rights that attach to the mortgage that you select. From an individual Investor s perspective, the Investor is exposed to the specific selected mortgage, and does not enjoy the benefit of the diversification of the Pooled Mortgages Option portfolio. If you choose the Select Mortgages Option, this PDS is the first part of a two part disclosure process, and you will be subsequently provided with a separate document called a Supplementary Product Disclosure Statement or SPDS. The SPDS supplements the information contained in this PDS, and will provide you with information about the specific mortgage you select, such as the property, the borrower, the interest rate and the term of the investment. You should consider both the information in this PDS and in the SPDS before deciding to invest in a Select mortgage. page 12 La Trobe Australian Mortgage Fund PDS 2009
Following your registration with the Fund and after you have chosen the Select Mortgages Option on your Application Form, you will then separately receive an SPDS for your consideration to invest in individual Select Mortgages either individually or together with other Investors. You will need to complete the Application Form which forms part of the SPDS before your investment in the selected mortgage can occur. The rates of return are not guaranteed and are determined by future revenue of the Fund and may achieve lower than expected returns. Select Option Tip: The Select Mortgages Option provides less diversification of investment income and access to your funds for each individual investment than the Pooled Mortgages Option. However, you have the benefit of selecting the mortgage yourself and the potential for achieving higher returns. investment objective and strategy The Select Mortgages Option aims to provide Investors with a reasonably stable and predictable income based generally on fixed rates of return over a set period or duration on a monthly basis, investing primarily in mortgages of short duration in a wide range of diverse first mortgages. asset allocation The Select Mortgages Option is invested 100% in mortgages chosen by Investors, and the underlying asset for each Select Mortgage is an individual residential, commercial, retail, rural, construction and development, or industrial real estate loan secured by a registered first mortgage as disclosed in the SPDS. Once the selected mortgage matures and is fully repaid by the borrower, your money will be placed into the Cash & Mortgages Option, until you select another mortgage to invest in, or until you decide to withdraw your funds. If, however, the borrower seeks to renew the selected mortgage at the then current interest rate for a further term the loan will be re-submitted to you by way of another SPDS for your consideration and approval to extend the term. Provision of the SPDS to Investors will generally occur prior to maturity but it is dependent on completion of a new valuation. There will be no obligation on you to approve the extended term and if you do not so approve, your money will be placed in the Cash & Mortgages Option, subject to discharge or other refinance of the mortgage by the borrower. commencement of earnings Following completion and lodgement of the Application Form, your investment will be deposited into the Cash & Mortgages Option and will start earning interest immediately. Then, once you have selected your mortgage, investment earnings will commence once the loan has been advanced to the borrower ( settled ). In the case of a Substituted Investor, where you are replacing an existing Investor in an existing loan, investment earnings commence on substitution. Your investment moneys are held in the Cash & Mortgages Option at all times you are not invested in a selected mortgage, that is, prior to, and following repayment of, any selected mortgage investment. interest distributions For Select Investors, distributions are generally monthly, but this may be varied by disclosure in the SPDS. Investment earnings are dependent on the borrower making the payments required under the loan. Once the borrower has made the payment required under the loan, the payment has to be cleared and this may take up to five (5) business days. Funds are then credited to Investors accounts. If you direct us, we will reinvest any interest payable to you in the Cash & Mortgages Option. investment term For Select Mortgage Investors, the usual term is between 12-24 months with the longest investment period generally 60 months. The investment term is agreed to by you following disclosure of the investment term in the SPDS. select mortgages option access to your money Withdrawals are not available to Select Mortgage Investors during the agreed term of each selected mortgage investment and La Trobe and the Investment Manager are under no obligation to process a withdrawal request from an Investor in a Select mortgage during the agreed term of that Select mortgage investment. La Trobe may, at its discretion, consider such a request from Select Investors who need, through unforeseen and exceptional circumstances, to withdraw part or the whole of their investment prior to the Select mortgage maturity date. The withdrawal would then be considered only if a Substituted Investor is available to take your place. An authorised withdrawal in such an instance will be subject to an Early Withdrawal Fee (see page 17 of this PDS). Investment Option 4 Special Situation Mortgages The Special Situation Mortgages Option is similar to the Select Mortgages Option in the way that it operates. You, as the Investor, still select the mortgages in which you want to invest. However, there is one major difference the mortgages offered to Investors through the Special Situation Mortgages Option will contain special characteristics that are less common and which will make the mortgages riskier than the mortgages made available through the Select or Pooled Mortgages Options. The special characteristics may include the priority of the mortgage, that is, it may be a second mortgage, bridging finance, the Loan-to-Value ratio ( LVR ) may be higher than any other Investment Option in the Fund and may be over 100%, the term of the loan may be shorter than any of the other mortgages, the fees payable may be higher, and La Trobe Financial How Investing Should Be page 13
the nature of the information sought from the borrower may be less than for other mortgages. The underlying loan in these circumstances is therefore a Special Situation Mortgage. These special characteristics will be fully disclosed to you in the SPDS for the Special Situation Mortgages Option. Note: Because this Option is generally likely to be riskier than the other Investment Options, we strongly suggest that you obtain independent financial and investment advice before investing in this Option. Please note that neither La Trobe nor its Authorised Representatives provide financial product or investment advice. Special Situation Option Tip: While the mortgages available through the Special Situation Mortgages Option are likely to be riskier, we expect that they will generate higher returns than the Select mortgages available through the Fund. The rates of return are not guaranteed and are determined by future revenue of the Fund and may achieve lower than expected returns. From an individual Investor s perspective, the Investor is exposed to the selected mortgage, and does not enjoy the benefit of the diversification of the Pooled Mortgages Option portfolio. investment objective and strategy The Special Situation Mortgages Option aims to provide Investors with a higher rate of return than other Options but with a commensurate increase in risk, based on primarily fixed rates of return, investing in a wide range of diverse second mortgages, specialised securities and higher LVR loans. asset allocation The Special Situation Mortgages Option is invested 100% in mortgages chosen by Investors, and the underlying asset for each Special Situation Mortgage is an individual residential, commercial, retail, rural, construction and development, or industrial real estate loan secured by a registered first or second mortgage as disclosed in the SPDS. Once the selected mortgage matures and is fully repaid by the borrower, your money will be placed into the Cash & Mortgages Option, until you select another mortgage to invest in, or until you decide to withdraw your funds. If however, the borrower seeks to renew the selected mortgage at the then current interest rate for a further term the loan will be re-submitted to you by way of another SPDS for your consideration and approval to extend the term. Provision of the SPDS to Investors will generally occur prior to maturity but it is dependent on completion of a new valuation. There will be no obligation on you to approve the extended term and if you do not so approve, your money will be placed in the Cash & Mortgages Option, subject to discharge or other refinance of the mortgage by the borrower. commencement of earnings Following completion and lodgement of your Application Form, your investment will be deposited into the Cash & Mortgages Option and will start earning interest immediately. Then, once you have selected your Special Situation mortgage, investment earnings will commence once the loan has settled. In the case of a Substituted Investor, where you are replacing an existing Investor in an existing loan, investment earnings commence on substitution. Investment earnings are dependent on the borrower making the payments required under the loan. Your investment moneys are held in the Cash & Mortgages Option at all times you are not invested in a selected mortgage, that is, prior to, and following repayment of, any selected mortgage investment. interest distributions For Special Situation Mortgage Investors, distributions are generally monthly, but this may be varied by disclosure in the SPDS. Investment earnings are dependent on the borrower making the payments required under the loan. Once the borrower has made the payment required under the loan, the payment has to be cleared and this may take up to five (5) business days. Funds are then credited to investors accounts. If you direct us, we will reinvest any interest payable to you in the Cash & Mortgages Option. investment term For Special Situation Mortgage Investors, the usual term is between 12-24 months with the longest investment period generally 60 months. The term of the loan may be shorter than 12 months. The investment term is agreed to by you following disclosure of the investment term in the SPDS. special situation mortgage option access to your money Withdrawals are not available to Special Situation Mortgage Investors during the agreed term of each selected mortgage investment and La Trobe and the Investment Manager are under no obligation to process a withdrawal request from an Investor in a Special Situation Mortgage during the agreed term of that Special Situation Mortgage investment. La Trobe may, at its discretion, consider such a request from Special Situation Mortgage Investors who need, through unforeseen and exceptional circumstances, to withdraw part or the whole of their investment prior to the Special Situation Mortgage maturity date. The withdrawal would then be considered only if a Substituted Investor is available to take your place. An authorised withdrawal in such an instance will be subject to an Early Withdrawal Fee (see page 17 of this PDS). page 14 La Trobe Australian Mortgage Fund PDS 2009