18th March 2009

Dear Investor,

The La Trobe Australian Mortgage Fund -
the four Investment Options

It's been some time since we had a look at the four separate Investment Options that comprise our Mortgage Fund, so we thought that we would provide some information about each option.

In this Investment News, we will give you an overview of the Options, and in next week's edition we will look in more detail at the Select Mortgages Option and the Special Situation Mortgages Option.

Our Mortgage Fund offers four individual Investment Options, each of which has a different risk - return profile.

The Options are:

  • Cash & Mortgages
  • Pooled Mortgages
  • Select Mortgages
  • Special Situation Mortgages

The first 2 Options - Cash & Mortgages and Pooled Mortgages - are what are commonly referred to as "pooled" investment options - that is, investors' money is "pooled" together, and invested collectively in a number of mortgages chosen and managed by La Trobe. Investors in these two Options benefit from the diversification that comes with an investment in a range of mortgages with different investment characteristics such as geographical location, sector type, loan maturity time lines and interest rate profiles.

The Cash & Mortgages Option spreads its investments across both cash and mortgages (as its name suggests) and the current balance between the two asset classes is about 50/50. Of the Option's mortgage component, it currently has investments in 125 individual mortgages.

The Pooled Mortgages Option is almost 100% invested in mortgages and it currently has investments in 263 mortgages.

Each of these Investment Options can have an investment in the same mortgage, depending upon the portfolio requirements of each.

The other 2 Options - Select Mortgages and Special Situation Mortgages - are what are commonly referred to as "contributory" investment options, where investors select the mortgage in which they want to invest, on the basis of information provided by La Trobe about the mortgage. One investor may be the sole investor in a selected mortgage, or there may be a number of investors in the mortgage. Investors are likely to enjoy greater returns on their investment in either of these 2 Options, but with a higher exposure to risk as the investment trade-off. These investments will be for a set term after which the investor will revert to the Cash & Mortgages Option until another suitable investment is confirmed. This contrasts with the Pooled Mortgages Option where the investment and related returns continue until the investor redeems. Hence, for example, an investment in the Pooled Mortgages Option may over time yield a higher return than a series of Select investments over the same period (as well as at a lower risk level), because of the time spent invested in the Cash & Mortgages Option between each investment in Select mortgages.

There are different investment terms for each Option:

  • Cash & Mortgages - 24 hours3
  • Pooled Mortgages - 12 months3
  • Select Mortgages - the term of the underlying loan, usually 12-24 months
  • Special Situation Mortgages - the term of the underlying loan, usually 12-24 months

The mortgages that form part of each Investment Option all undergo the same rigorous selection and underwriting procedures at La Trobe, and are all managed by La Trobe for the term of the loan.

The investment rates payable to investors for each Investment Option reflect the risks associated with the Option, and there is a gradual increase in both return and risk as the exposure to mortgages increases, and as the diversification enjoyed by investors in the 2 pooled options is replaced by the investment focus on an individual mortgage in the 2 contributory options.

The current investment rates payable for each Option are:

  • Cash & Mortgages - 5.50% p.a. variable1
  • Pooled Mortgages - 6.95% p.a. variable1
  • Select Mortgages - Approx 8.00% to 10.00% p.a.1
  • Special Situation Mortgages - Approx 12% p.a. plus1

We will go into more detail about the Select Mortgages Option and the Special Situation Mortgages Option, and how they differ from the Cash & Mortgages Option and the Pooled Mortgages Option in next week's edition of Investment News.

Best regards,
Chris Andrews


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Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.

La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

* La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
(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. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
(2) Withdrawal rights are subject to liquidity and may be delayed or suspended.
(3) As at 30/11/10 the La Trobe Australian Mortgage Fund had received a Morningstar RatingTM of 5 stars. The Morningstar Rating is an assessment of a fund's past performance - based on both return and risk - which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. © 2010 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the above data or content to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant product disclosure statement, before making any decision. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.pdf
(4) 3.75 star rating out of a possible 5 star rating indicates that Adviser Edge believes that La Trobe has performed in line with its peers and exceeded its peers on some fronts.
(5) The Standard and Poors rating of 4 out of 5 stars indicates that S + P has high conviction that La Trobe Financial will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers.
(6) The award was given to the La Trobe Australian Mortgage Fund, Pooled Mortgages Option.
Research Ratings are subject to change. To view the latest research information please visit www.adviseredge.com.au or www.standardandpoors.com.au. Ratings issued by Adviser Edge Investment Research AFS Licence No. 236783 and Standard & Poors Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. The ratings are only one factor to be taken into account in deciding to invest. Research Houses receive a fee from La Trobe for rating the product. The Adviser Edge rating is generally a measure of the rated entity's capacity to meet its repayment obligations in all market circumstances.
IMPORTANT: This message, together with the La Trobe Financial website (www.latrobefinancial.com.au) and all its contents have been prepared for general information only and should not be taken as legal or financial advice, and as such the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the La Trobe website.