A mortgage is simply a debt instrument secured by a registered charge on real estate. It secures a promise by the borrower (mortgagor) to the lender (mortgagee) to pay a certain amount of money on stipulated terms and conditions. A mortgage is registered in the Land Titles Office and cannot be removed other than with the consent of the lender or by a court order.

Rate of return
Investments in private mortgages can consistently earn between 7.00% and 15% depending on the degree of risk. If you re-invest the interest received at the same rate, you could increase your initial investment every seven (7) years.
This rate of return can compare favourably with other forms of investments. Compare these returns with the 1 and 5 year average return as follows:

Asset Class	1 Yr Return	5 Yr Return
Official cash rate (RBA)	5.50%	4.75%
Average 1 year Bond (Govt)	1.6%	3.4%
Average 5 year Bond (Govt)	3.9%	4.6%
UBSA Bank Bill Index	5.74%	5.24%
Dow Jones Industrial Average	14.2%	4.1%
Average Direct Mortgage Return - La Trobe Financial Fund	9.99%	9.70%
Pooled Mortgage Rate - La Trobe Financial Fund	7.25%	N/A

Security
Unlike investments in stocks or bonds, mortgage investments are secured by tangible assets that you can 'touch and feel'. Typical mortgages are based on a percentage of the appraised value of the real estate security or the Loan to Value Ratio (LVR). By combining a lower LVR with short loan terms (the length of time of the loan is outstanding) the likelihood of the value of the real estate security dropping below the value of the mortgage is in a normal market considered minimal.

As an example, if you were to invest $100,000 in a mortgage today, with real estate security worth $133,000, in two years time, when the mortgage matures and is repaid the value of the real estate could drop 20% and your initial investment capital should on balance still be protected. Compare that security to a $100,000 investment in a share whose value drops 20% to $80,000 after your purchase it!

Low Volatility
Mortgage investments have a stated interest rate for the length of the loan that typically is constant. You know what you will earn on your investment when you make it.

Diversification
Investment in a range of 'Direct Mortgages' can reduce the volatility associated with individual market segments, and accordingly protect your assets.

You choose the real estate mortgage that is right for you
A unique feature of the La Trobe Financial Fund is our 'Direct Investments' which means before you invest, you and your financial adviser can review the details of the borrower and the proposed loan, including investment term, interest rate, and payment terms together with a description of the project or property used as security for the loan. Based on this information, and any additional details required, you make the decision to invest or not.

The types of first and second mortgage investments available can include the following:

• Residential single and multi purchase and development
• Unit or apartment conversions
• Land acquisition, land servicing and new construction building loans
• Commercial, retail, industrial and other projects.

Periodic Income
Once the borrower receives the mortgage funds, they are required to make regular periodic payments of interest. This provides you as the Investor with regular periodic cash flow.

Professional Management
La Trobe Financial manages all the details of the mortgage loan. We co-ordinate all the legal documentation, monthly mortgage administration and mortgage renewal negotiations. We collect your interest due and pass it on to you, the investor. Fees for this service are paid by the borrower via a management fee which is paid with the borrower's interest.

As the name suggests, a mortgage fund takes Investors' money and uses it to make loans secured by mortgages or buy existing ones. You as an investor then receive the net interest payments on those mortgages, after the Investment Manager deducts fees and expenses in running and operating the Fund. These loans can be secured by mortgages over retail, commercial, construction and development, industrial or residential properties.

La Trobe Financial will find, qualify, and negotiate a loan on your behalf directly with a borrower through the Direct Mortgages Option of the Fund. We take care of all the work for you.

LVR stands for "Loan to Valuation Ratio". It is the loan amount compared to the valuation amount of the property offered as security for the loan. The higher the LVR the less equity the borrower has in the property used as security for the loan. It is generally safe to say that the higher the LVR, the greater the risk, all other things being equal.

We employ trained professionals who have met the required educational requirements in order to be registered by ASIC. This registration ensures we provide a level of care, a knowledge of mortgage products and a standard of service to meet individual needs. Our wealth of lending experience allows us to quickly review and qualify property for lending.

Our role is to find and structure deals that are suitable for mortgage financing. Once the deal is pre-approved by us, we package the deal for presentation to the investing public. For this service we are paid a fee by the person borrowing the funds, not by the investor.

La Trobe Financial is committed to product excellence, investment security and service. We have over 50 years of experience financing quality real estate properties. We draw from these years of experience in the financial industry to serve your mortgage investment needs. All investment projects are vetted through an underwriting process prior to being presented to you, the investor. Preservation of your capital is first and foremost in every mortgage opportunity we review. Our commitment to excellence includes the following criteria:

• Quality real estate security
• Additional collateral required when appropriate
• Above average return
• Short term (12-24 months) to minimise risk
• Pre-planned exit strategies
• Full team of legal and project advisers
• All mortgage investments are arm's length from La Trobe Financial
• Independent valuation on all security
• Credit checks on all borrowers

Nothing. All upfront costs are paid by the borrower at the application stage of the mortgage and there are NO investment ENTRY FEES. You as the investor do not pay any establishment fees in relation to the mortgage. All establishment and loan management fees are paid by the borrower. La Trobe Financial does not charge a Trustee fee. The “Fees & Charges” section of the Product Disclosure Statement describes the fees that may be payable by you as investor.

Persons who are not Australian Residents are allowed to invest in registered managed investment schemes and will, in most cases, only pay 10% of the interest earned as a withholding tax.

The minimum investments amount is $1,000.00; the maximum amount is unlimited for the Pooled Mortgages Option and Cash & Mortgages Option. Direct Mortgage Investments are limited to the amount of funds available for investment in each mortgage. La Trobe Financial however, reserves the right to reject an investment amount if it is not in the best interest of all investors.

La Trobe Financial as the Responsible Entity of the Fund is listed on the Title as the Mortgagee. The benefit of this is that substitutions of mortgage investments can be processed immediately without the delay of having a transfer of mortgage completed.

No. An SPDS is provided to you detailing the specific details of the Direct Mortgage you are considering. Once you have signed and returned the SPDS to La Trobe Financial you have made a commitment to invest in the Direct Mortgage, subject to the availability of the mortgage selected.

We endeavour to send SPDSs to you the same day you have requested them. SPDSs can be faxed, emailed and posted to you. It is important to note that your investment can only be placed in the Direct Mortgage Investment when La Trobe Financial has received your signed SPDS and holds clear funds for investment.

You receive the following regular reports:

• Receipt of Investments
• Detailed, itemised Monthly Statements
• Financial Year Income Taxation Summary

Additionally, you may obtain up to date information about the Fund at any time by:

• Ringing La Trobe Financial toll free on 1800 818 818
• Logging into the La Trobe Financial website at www.latrobefinancial.com.au
• Checking with one of La Trobe Financial's Authorised Representatives
• Reading the Fund's quarterly Mortgage Fund Update.

La Trobe Financial currently pay Authorised Reps 0.50% p.a. for introducing investors to the Pooled or Direct Mortgages option of The Fund. The amount of commission is disclosed on each SPDS.

The Fund does not guarantee investors capital. The following order of priority applies to payment of money received following a mortgagee sale in accordance with La Trobe Financial’s obligations at law:

1. First, towards payment of other liabilities having priority at law to the Mortgage Investment, for example, Council Rates, GST obligations & liquidator’s fees;
2. Secondly, in payment of La Trobe Financial’s or the Investment Manager’s fees, charges and other costs or expenses incurred in the proper performance of duties (including legal costs on a full indemnity basis);
3. Thirdly, in payment of the Investor’s capital investment; and
4. Fourthly, in payment of any interest at the lower rate, and thereafter at the higher rate (if applicable), as it falls due to which the investors are entitled but not yet paid.

You should be aware that GST may be payable on the sale of a property by La Trobe Financial in certain circumstances and this will reduce the funds available for distribution to investors, in accordance with priority (i) above.
Where funds are recovered from the borrower or any third party subsequent to the distribution of proceeds following the sale of the security property, those funds will be distributed to investors according to the priority of their original mortgage investment.

Normal legal requirements will apply as with Direct Mortgage Investments and a new SPDS is required.

Please take time to read through the Product Disclosure Statement (PDS) regarding our managed investments and discuss it with your financial adviser. In preparing the 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 Financial and its Authorised Representatives do not provide financial product advice.

We cannot recommend or suggest any one specific mortgage investment over another as we are not licenced to give "financial product advice". We can however give you factual information about the products of the Fund and the Fund itself and we leave the choice up to you and your investing client.

For instance you have four (4) investment choices for your money in the Fund :

• Opiton 1: Cash & Mortgages account with 24 hour access^* to your money;
• Option 2: Pooled Mortgages "set and forget" type mortgages where La Trobe Financial chooses the mortgage and interest is paid monthly;
• Option 3: Direct Mortgages where you choose the mortgage;
• Option 4: High Yield and higher risk/yield mortgages chosen by you (eg: second mortgages).

Second Mortgages attract a higher interest rate due to higher risk. A second mortgage is second in priority to the first mortgage. This means that the second mortgage does not receive any funds until the first mortgagee has received all their entitlements i.e. principal and all interest. For our Mortgage Fund it depends, among other things, on the security property and the creditworthiness of the borrowers; there is still investment risk (refer to section 8 of the PDS) involved and a second mortgage would be considered riskier than a first mortgage.

With the Pooled Option you share the investment risk with all other investors in the Pooled Option. You don't receive Late Payment Fees with the Pooled Option as interest is paid to you each month by the Pooled Option.

With the Direct Option the performance of each investment you make is directly related to the performance of the mortgage you have selected. Interest cannot be paid to you unless the borrower has made their interest payment. If the borrower makes a payment late you may be entitled to receive half of any Late Payment Fee collected. If a direct mortgage repays early, you may also be entitled to recieve half of one months interest if an Early repayment fee is collected.

Yes. A minimum investment of $1000 applies to the Cash & Mortgages and Pooled Mortgages options. Generally both the Direct and High Yield Mortgages options require $1000 minimum investment, although this may be varied in the SPDS made available to investors.

La Trobe Financial's strict lending guidelines as applied to "Direct Mortgages" will also apply to loans funded by the "Pooled Mortgages Option". Whilst the Fund can accommodate loans to a maximum LVR of 75%, only prime residential securities will be considered to this level. Generally the maximum LVR of 66% will apply, with lower LVRs for Commercial (up to 70%) Rural (up to 55%) and specialised securities. Second Mortgages will be considered by the Fund and generally be limited to an LVR of 75%. Second Mortgages attract higher rates of return and will improve the overall rate of return to investors. The objective is to have a diversified spread of assets by geography and type whilst maximising income.

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 to the total amount invested by all investors in the Pool.

No. Investments in the Pooled Mortgages Option are made through the Product Disclosure Statement only. Once an investor has completed the Fund Application Form and ticked the Pooled Mortgages option, there is no further paperwork required.

You can invest in any of the mortgages listed on the Mortgage Shopping List once La Trobe Financial has received your signed Application Form attached to the PDS and holds your cleared funds in the Fund's Cash & Mortgages option. As all mortgages on the Mortgage Shopping List have already settled (unless stated otherwise on the list) the decision is yours when you decide to invest in the mortgages providing there are sufficient funds available.

La Trobe Financial settles each Mortgage Shopping List mortgage first (unless otherwise advised) to settle the loan quickly as a borrower service without the need of having all the investors in place to settle the loan. Investment in a Direct Mortgage is accepted on a "first come, first served" basis, so if the Direct Mortgage is fully funded, we may not be able to accept all or part of your investment.

Our Mortgage Shopping List is updated on our Website every Wednesday - usually by midday. You can have a copy of the Mortgage Shopping List emailed, faxed or posted to you as regularly as you like.

The risks of the investment are outlined in the Product Disclosure Statament in section 8 but may be summarised as:

Value of Underlying Real Estate
Mortgages are generally considered low risk investments in a stable or rising real estate market because they are backed by real property. In a declining market, the value of the underlying real estate must drop to below the value of the mortgage registered against the property before the investment is at risk. Based on the expected changes in the market, the LVR at the time of the initial loan is set conservatively to reduce the risk of loss.

Funds Held in Trust
Moneys invested by you are held "in trust" by La Trobe Financial to be used only for the agreed purpose. When payments are received from the Borrower, these amounts are also held "in trust" until distributed back to you, the investor. These trust funds, and the transactions related to them are regulated under the Corporations Act, are audited annually, and reviewed by ASIC which is responsible for licensing Managed Investments. So these amounts are yours, and cannot be used for any purpose not authorised by you. The integrity and soundness of the Investment Manager is critical.

The Product Disclosure Statement at section 8 entitled "Investment Risks" outlines all the risks and you should read this before investing.

Mortgage funds can provide Investors with superior investment returns than cash management trusts, and are less volatile than share or equity based investments. Apart from higher returns, mortgage funds can give you an extra level of diversification. Given that mortgage funds are not closely correlated with returns from other asset classes, adding a mortgage fund to your portfolio can smooth the volatility of your total investment returns.

Investing in mortgage funds is not entirely without risk, as the value of the underlying mortgage investments can fluctuate, depending on the quality of the mortgages. As such, the lending parameters of each mortgage fund should be individually assessed to ascertain what levels of risk you are comfortable with. Please read section 8 'Investment Risks' in the Product Disclosure Statement and you may also choose to discuss these issues with your financial adviser.

The assets of the Fund are private unrated securities. However, the Fund has been rated by S&P and Advisor Edge.

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A number of factors influence the interest rate of a mortgage. These include the type and location of the property and the borrower's credit history. Usually a residential property has a lower interest rate than a commercial or rural property. However this doesn't mean residential properties are less risky. All loans are dependent on the borrower making their payments and repaying the loan.

Prepaid interest is when La Trobe Financial as a condition of the specific loan approved requires the borrower to make payments in advance and those payments are held trust within the Fund. Prepaid interest must be either paid from the borrower's own resources or included in the loan amount and deducted at first loan advance to the borrower.

Prepaid interest means that La Trobe Financial is holding the borrower's future interest payments in trust within the Fund. Prepaid interest provides certainty that interest for the loan term will be paid to you on time. However, it does not provide any greater certainty that the principal will be repaid on time.

Prepaid interest provides certainty that interest payments will be paid to you on time during the prepaid period. However, it does not guarantee you against loss. Like all loans, loans with prepaid interest still need to be repaid in full or renegotiated for a further period at the end of the loan term. If the borrowers are unable to meet their loan maturity obligations, La Trobe Financial will start its loan recovery actions and procedures.

For the Cash & Mortgages Option and the Pooled Mortgages Option interest is paid monthly in arrears and will be paid as directed by you either direct to your nominated financial institutions account or retained in the Cash & Mortgages option.

Interest for Direct Mortgage Investments will be paid according to the Direct Mortgage Investment chosen by you and paid as directed. Usually interest is paid monthly, quarterly or half yearly.

Yes, you can have your interest reinvested in the Pooled Mortgages Option. However, it is important to note that each investment deposit to the Pooled Option means a new investment period of 12 months for each deposit.

Whilst we expect that some loans will fall into arrears, the Fund will continue to distribute interest to investors on a monthly basis. It is our intention to pay a consistent interest rate to investors on a monthly basis despite peaks and troughs in cash receipts from borrowers' loan repayments.

The Pooled Mortgages option is a fixed term investment of 12 months. Generally early redemption from the Pooled Mortgages option is not permitted^*.

Direct Mortgage Investments are treated as fixed term investments. La Trobe Financial is under no obligation to process a withdrawal request during the agreed term of the investment. La Trobe Financial may at its discretion consider requests for withdrawal, only if a substitute investor can be located. If a replacement investor is found an early withdrawal fee of 1.5% of the withdrawal amount (minimum $500) will apply.

Investors in the Cash & Mortgages option generally have access to their money on 24 hours' written notice and we can credit your nominated financial institution's account with the requested proceeds^*. In the Pooled Mortgages option, investments are subject to a minimum investment period of 12 months. After this time, you can structure ongoing access^* to your cash after the minimum initial investment period through the Regular Access Investment option. Your complete investment is rolled over into a further 12 month period unless 5 days prior written notice is received. With the Direct Mortgages and High Yield Mortgages Options, La Trobe Financial is under no obligation to process a withdrawal request during the agreed term of that investment. La Trobe Financial may at its discretion consider requests for withdrawal, only if a new investor in the same mortgage option could be found. Such withdrawal is subject to an Early Withdrawal Fee.

La Trobe Financial generally takes legal action to recover the debt, but in many instances legal action is not necessary, but just a simple reminder letter/telephone call from our Mortgage Help team. Once a legal action judgement has been entered against the borrower, La Trobe Financial obtains physical possession of the property and markets the property for sale. Once the property is sold, settlement usually takes place between 30 and 90 days. Our Mortgage Help Desk will provide regular written updates to you on the recovery process, and your monthly Investors Statement confirms the amount of interest (including default interest if applicable) owing to you for late payment

Investors receive the following regular reports:

• A Receipt of Investment made. Mortgage Investment Notice
• Detailed Monthly Statements
• Financial Year Income Taxation Summary

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 is subject to change from time to time and may be updated. You can obtain up-to-date information about the Fund at any time by;

• making enquiries to La Trobe Financial's toll free Investor Liaison number 1800 818 818
• logging on to La Trobe Financial's website at www.latrobefinancial.com.au
• checking with one of La Trobe Financial's Authorised Representatives
• reading the Fund's Monthly Mortgage Fund Update, available by phoning
  La Trobe Financial or by email.

We will pay referrers, financial advisers and our Authorised Representatives an ongoing commission of 0.5% p.a. of the money invested in the Pooled Mortgages Option on a monthly basis for introducing investors to the fund. This commission amounts to $50 p.a. for every $10,000 that you have invested in the Fund. We do not pay any commission in relation to the Cash & Mortgages Option. We may pay our Authorised Representatives both an initial commission and an ongoing commission in relation to the Direct Mortgages and High Yield Mortgages Options and these payments will be disclosed in the SPDS that relates to each Direct or High Yield mortgage. As neither La Trobe Financial nor its Authorised Representatives are authorised to provide financial product advice, we will not charge a fee for this. You may however, obtain financial product advice from your financial adviser, who may charge you for this. Your financial adviser will disclose the fees that you have to pay for this advice. All commissions paid by La Trobe Financial are paid out of the fees that La Trobe receives from the Fund and are not additional amounts that you have to pay.

If you have a financial advisor, you can instruct us to pay certain fees to your financial advisor for financial advice provided to you. These fees will be deducted from your account in the Fund. The fees payable to your financial advisor can be in the form of an initial advisor fee, an ongoing advisor service fee or a combination of the two. By completing section 8 of the Fund Application Form at the end of the PDS, you can instruct us to deduct these fees from your account and pay them to your financial advisor. Your financial advisor should provide you with either a Financial Services Guide or Statement of Advice which will detail their remuneration and other benefits. If you wish to change or cancel the ongoing advisor fee, you can do so by writing to us.

These fees will be in addition to the commissions described above that we pay to your financial advisor. The additional advisor fees are deducted from your account; the commissions that we pay to your advisor are paid out of the fees that we receive from the Fund.

We will acknowledge receipt of your investment within 5 business days of receipt. Your money will be invested once your funds have been cleared, and you will start earning interest immediately.