10th June 2009

Dear Investor,

Mortgage Fund & Market Update

Much has come to pass in recent times in Australian and global investment markets, generally with disappointing outcomes for investors who had exposures to shares and many debt securities. Over that same time, the La Trobe Australian Mortgage Fund has maintained all of its investment objectives. Performance of the Fund has withstood the market fundamentals that have caused so much difficulty for other investment categories.

During the last year, the La Trobe Australian Mortgage Fund has achieved the following milestones:

  • No redemption 'freezes' on any investment options (operating 'business as usual');
  • Returns to investors have increasingly outperformed cash, term deposits and bank bill products - presently the mortgage investment return in our Pooled Mortgages Option is 6.95% p.a. variable (7.18% p.a. compounding)1;
  • Awarded two Money Magazine "Best of the Best" investment product awards;
  • Awarded by Australian Financial Review's Smart Investor magazine 'top ranked Mortgage Fund' and 'top ranked Cash Management Account (amount $10,000)'; and
  • Ratings re-issued by multiple ratings agencies2.

We believe our stable performance is testament to our efforts. We presently see ongoing improved opportunities for investment into quality mortgages generating regular investment income for the following five (5) reasons:

1 Mortgage investment outperform cash and term deposits

In recent years mortgage funds have operated in an environment of increasing cash deposit rates and heavy competition for loans from banks and securitisation programs. Both of these have reduced investor return premiums and opportunities. We are pleased to say that the mortgage market has now seen both of these go into sharp reverse.

As a result we believe the La Trobe Fund is entering a new phase of strong reward for investors. Borrower rates in the mortgage fund market are not reducing in line with official cash rates. While official cash rates have now reduced by 4.25% since September 2008, the La Trobe Fund's variable rate has only reduced by up to 2.20%. This results in increasing 'outperformance' by mortgage investments relative to cash and term deposits. These strong investment returns are regenerating increased demand and subscriptions from investors.

2 Stable investment market returns

Clearly we are in a turbulent time in global investment markets. Equity markets, listed property trusts and some other fixed interest categories have now all sustained heavy capital losses since late 2007. La Trobe is proud to demonstrate the positive returns on mortgage investments through this period (typically 7%-10% per annum1). Long term returns on mortgage funds in some cases now exceed returns on general equities.

La Trobe views property values as the key risk to manage. However, new investment proposals are incorporating reduced valuations into conservative loan-value-ratios. With good pricing these new proposals remain sound. Property values are being supported by monetary policy, net immigration and housing undersupply.

3 Understanding recent redemption restrictions

October 2008 saw many Australian mortgage funds announce restrictions on the redemption of capital by investors. This was exclusively in response to the Federal Government bank deposit guarantee. This is commonly viewed as an initiative which was misunderstood by the Government.

Subsequent to the 'media hype' this issue has settled considerably, with income generally ongoing and capital values stable. However these other mortgage funds have generally failed to re-establish adequate investor liquidity, condemning redemption terms previously marketed by these large operators.

The La Trobe Australian Mortgage Fund has not frozen redemptions from any investment option. Our Pooled Mortgages Option and Cash & Mortgages Option have both met investor requirements without issue. Select investors cannot be 'frozen' as Select is a legal investment structure and repayment occurs on discharge of the mortgage.

4 Strength of La Trobe

The downturn has also shown the vulnerability of some investment manager business models that have proliferated in recent years. Increasingly we have seen collapses of managers. We are now also seeing increasing pressures on many managers as a result of reduced funds under management and loan deal flow.

We are pleased to inform you that La Trobe is in a strong position to manage your investments through this present phase and beyond. La Trobe has been operating since 1952 and has built its business to survive cyclical contractions. La Trobe:

  • has total funds under management of approximately $1.7 billion, of which the Fund is a part. These larger operations bring substantial benefits for Fund investors;
  • has long term mortgage funding from large Australian banks, with facility terms ensuring our success through this period and funding out to 2016; and
  • has a strong balance sheet, capitalisation and solvency position.

La Trobe proudly continues its sole business focus of identifying, investing in and managing mortgages in a responsible, long term manner on behalf of investors.

5 Specific opportunities

We also take this opportunity to repeat that our Pooled Mortgages Option is presently paying 6.95% per annum1 variable to investors with monthly distributions. This Option has operated for six years, at all times in line with its stated aims for investor returns and asset quality. We present this Option to ALL investors, particularly those seeking constant mortgage rates of return* on their investments and no 'paper work' associated with Select mortgages.

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.