trilogy monthly income trust pds 22 july 2015 web

8/18/2019 Trilogy Monthly Income Trust PDS 22 July 2015 WEB

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Trilogy Monthly Income TrustPRODUCT DISCLOSURE STATEMENT / 22 JULY 2015

Triligy Monthly Income Trust ARSN 121 846 722Responsible Entity: Trilogy Funds Management LimitedACN 080 383 679 AFSL 261425


2/562 TRILOGY MONTHLY INCOME TRUST | PDS

Trilogy Monthly Income Trust

The fund oered under this Product Disclosure Statement (PDS) is the Trilogy Monthly Income Trust ARSN 121 846 722

(Trust) formerly known as the Trilogy First Mortgage Income Trust.

This PDS is dated 22 July 2015 and is issued by Trilogy Funds Management Limited ACN 080 383 679, in its capacity as

Responsible Entity (Trilogy Funds or the Responsible Entity). Trilogy Funds takes responsibility for this PDS. This PDScontains some general investment advice. It does not take into account your individual objectives, nancial situation or

needs. You should take these and your personal circumstances into account when considering whether the information

contained in this PDS is appropriate for you. You should also seek your own nancial advice from a licensed adviser

before investing.

In this PDS, ‘we’, ‘us’ and ‘our’ refer to Trilogy Funds and ‘you’ and ‘your’ refer to individual Investors, both as potential

Investors reviewing this PDS and as existing Investors with a holding in the Trust, as the context requires.

No interest in the Trust oered under this PDS is guaranteed or otherwise supported by Trilogy Funds or any of its

Directors or any other party associated with the preparation of this PDS. You should consider this when assessing the

suitability of the investment and particular aspects of risk.

This document can only be used by Investors receiving it (electronically or otherwise) in Australia and New Zealand.

This PDS is available in electronic format, and can be accessed via our website www.trilogyfunds.com.au. If you receive

it electronically, please ensure that you have received the entire PDS and applicable Application Forms. If you are unsure

whether the electronic document you have received is complete, please contact us on 1800 230 099. A printed copy is

available free of charge.

All dollar amounts referred to in this PDS are in Australian dollars. In Section 8.6 we have included a glossary of terms that

are used in the PDS.

Obtaining further information before making a decision

Visit our website www.trilogyfunds.com.au regularly for further information about the Trust, including disclosure against

ASIC benchmarks and disclosure principles, continuous disclosure and Trust updates.

Important: Historical returns are not a reliable guide to future returns. Any returns noted in this PDS represent pastperformance only and may not reect the current and future returns of the Trust. You should not base your decision to

invest in the Trust on past returns.

This PDS supersedes all previous PDSs issued for the Trust. No investments will be accepted on the basis of this

document once it is replaced by a later PDS. Investors who invested in the Trust under a previous PDS should read this

PDS in full to ensure that this Trust continues to meet their investment objectives.


3/563TRILOGY MONTHLY INCOME TRUST | PDS

Dear Investor,

Trilogy Funds is pleased to invite you to consider an investment in the Trilogy Monthly Income Trust.

The Trust oers Investors access to the attractive returns available through investments in rst mortgages

over Australian property through a pooled mortgage trust. The Loans are secured by registered rst mortgages

over a portfolio of property, which can include residential, commercial, retail, development sites and

industrial properties. Examples of project types are unit developments, townhouses and land subdivisions for

residential development.

We are very pleased to say that since its inception in February 2007, the Trust has paid its Investors a distribution

every month and paid all withdrawals. The Trust’s unit price has also been maintained at $1.00 throughout its history.

We are very proud of our track record managing the Trust and its performance over the past 8 years. We consider

that the returns we have delivered over that time have made us competitive against our peers and demonstrateour experience guiding this Trust through a constantly changing economic environment (please note that past

performance is not a reliable indicator of future performance). The Trust has experienced signicant growth over the

last year with an increase of over 60% in funds under management.

In considering the Trust for potential inclusion in your portfolio, we recommend that you read this Product Disclosure

Statement in full. This, in combination with advice from your licensed adviser, should help you to understand and

assess the risks involved as well as the potential benets of an investment in this Trust.

We have a team available during business hours to answer any questions you may have. You can reach them by free

call to 1800 230 099 between 8:30am and 5:00pm (AEST). Alternatively you can email [email protected].

There are also additional resources available at www.trilogyfunds.com.au/tmit to help you to consider an investment.

These resources include an explanatory video on how the Trust works, case studies from existing investors and the

most recent variable rate paid.

We look forward to discussing this opportunity with you.

Yours sincerely,

Rodger Bacon

Executive Deputy Chairman



Table of Contents

Section 1 – Investment overview ........................................................................ 7

Section 2 – Key features of the trust ............................................................... 10

2.1 Key features table ............. .............. .............. .............. .............. .............. .............11

2.2 ASIC benchmarks and disclosure report .............. .............. .............. ...... 12

Section 3 – The Trust...........................................................................................18

3.1 Minimum investment............. .............. .............. .............. .............. .............. ...... 19

3.2 Minimum investment period ............. .............. .............. .............. .............. .... 19

3.3 How an investment is made .............. .............. .............. .............. .............. .... 19

3.4 Issuing units................. .............. .............. .............. .............. .............. .............. ...... 19

3.5 Distributions ............. .............. .............. .............. ............... .............. .............. ........ 19

3.6 Withdrawals ............. .............. .............. .............. ............... .............. .............. .......20

3.7 Transferring units ............. .............. .............. .............. .............. .............. ............. 21

3.8 Adding to your investment .............. .............. .............. .............. .............. ...... 21

3.9 Liquidity and liquidity targets ............ ............... .............. .............. .............. . 21

3.10 Reporting............................................................................................................... 22

3.11 Wholesale Investors and investing through investment platforms....22

Section 4 – About the Trust’s Loans ................................................................23

4.1 Registered rst mortgages .............. .............. .............. .............. .............. ..... 23

4.2 Additional security that may be taken ............. .............. .............. .......... 23

4.3 Loan-to-Valuation Ratios (LVR) ............. .............. .............. .............. .......... 23

4.4 Valuations ............. ............... .............. .............. .............. .............. .............. ............ 24

4.5 Borrower’s capacity to service the Loan and Loan assessment .....244.6 Adequate property insurance ............ .............. ............... .............. .............. 25

4.7 Loan monitoring and defaults or arrears .............. .............. .............. ..... 25

4.8 Loan diversication ............... .............. .............. .............. .............. .............. ..... 25

4.9 Loans yet to be advanced ............. .............. ............... .............. .............. ....... 26

4.10 Maximum Loan amount ............. .............. .............. .............. .............. ............ 27

4.11 Maximum Loan term ............. .............. .............. .............. .............. .............. ..... 27

4.12 Interest rates .............. ............... .............. .............. .............. .............. .............. ..... 27

4.13 Capitalisation of interest .............. .............. .............. .............. .............. .......... 27

4.14 Credit contract loans .............. .............. .............. .............. .............. .............. ... 27

4.15 Dealing with Mortgage Investments ............. ............... .............. .............. 274.16 Other assets of the Trust ............. .............. .............. .............. .............. .......... 27

Section 5 - Fees and costs ................................................................................28

5.1 Consumer advisory warning ............. .............. .............. .............. .............. ...29

5.2 Fees and costs ............. .............. .............. .............. .............. .............. .............. ...29

5.3 Additional explanation of fees and costs ............. .............. .............. ..... 32



Section 6 - Risk ...................................................................................................34

6.1 Introduction ............. .............. .............. .............. .............. .............. .............. .........34

6.2 Risks to consider before investing in the Trust ............... .............. ......34

6.3 Property market risk ............. .............. ............... .............. .............. .............. ....34

6.4 Construction risks .............. .............. .............. .............. .............. .............. ......... 35

6.5 Borrower default risk ............ .............. ............... .............. .............. .............. .... 35

6.6 Liquidity risk.............. .............. .............. .............. .............. .............. .............. ....... 35

6.7 Arrears of the Trust’s mortgage portfolio ............. .............. .............. ....36

6.8 Specic Mortgage Investment risks ............. .............. .............. .............. ..36

6.9 Specic Trust risks ............ ............... .............. .............. .............. .............. ......... 36

6.10 General investment risks ............... .............. .............. .............. .............. ......... 37

6.11 Responsible Entity risk ............. .............. .............. .............. .............. .............. 376.12 Conclusion .............. .............. ............... .............. .............. .............. .............. ......... 37

Section 7 – About Trilogy Funds Management Limited ...............................38

7.1 Trilogy Funds Management Limited .............. .............. .............. .............. 38

7.2 Management experience .............. .............. .............. .............. .............. ......... 38

7.3 Directors of Trilogy Funds ............. .............. .............. .............. .............. .......39

7.4 Senior executives ............. .............. .............. .............. ............... .............. .......... 40

Section 8 - Additional information ...................................................................41

8.1 General information........................................................................................... 41

8.2 Summaries of material documents ............ .............. ............... .............. ....44

8.3 Additional applications ............. .............. .............. .............. .............. ..............468.4 The Custodian and the Custodian’s disclaimer .............. .............. .......46

8.5 New Zealand Investors ............. .............. .............. .............. .............. ..............46

8.6 Glossary ............. .............. ............... .............. .............. .............. .............. .............. ..48

Section 9 - Guide to completing the application forms and ID requirements 49

9.1 Guide to the Application Forms.................. ............... .............. .............. ....49

9.2 Completing the Application Form ............. ............... .............. .............. ....49

9.3 Identication required from Investors ..................................................... 51

Corporate directory ...........................................................................................54



S E C T I O N 1 I n v e s t m e n t o v e r v i e w



Section 1 – Investment overviewThis investment overview provides general information

about an investment in the Trust. The overview does

not take into account any of your personal objectives,

nancial situation or needs and does not seek to provide

a personal recommendation to you. You should read

this Product Disclosure Statement in full, particularly the

Risks in Section 6, before making a decision to invest in

this Trust.

Who we are

Trilogy Funds was established in 1998. Following

a merger in 2004 with a wider group of senior

management professionals, Trilogy Funds harnessed

a wealth of expertise in property. Trilogy Funds has a

strong background in structuring and managing property

investments. Our core investment oerings are mortgage

and property trusts. Property is the key commonality,

which capitalises on the strengths of the team andtheir experience. More information about our senior

management team is provided in Section 7 and in the

Corporate Prole located on the Trilogy Funds’ website.

The Trust

The Trust oers Investors an opportunity to invest

in a managed investment scheme holding a pool of

registered, rst mortgage Loans to Borrowers for the

purchase, development, construction or re-nancing of

Australian property. The Trust is a registered managed

investment scheme that was rst oered to Investors by

Trilogy Funds in 2007. It has paid Investors a distribution

every month since inception*.

Investors share in a proportional amount of the risk and

the income from the Trust’s Loans. Investors receive a

variable monthly distribution* based on the net returns

from the Loans and cash held.

*(Please note that past performance is not an indicator of

future performance).

The Trust is open to both retail and wholesale Investors.

Wholesale Investors should consider Section 3.11.

The Trust’s LoansIn Australia, there are borrowers in the market seeking

loans for the development, construction or renancing

of property.

This Trust is currently nancing properties and projects

that primarily have the following characteristics:

• units, townhouses and land subdivisions for

residential development;

• loans up to $5,000,000; and

• loan terms from 6 months up to 24 months.

Some of the reasons why borrowers choose the Trust

as their nancier include:

Trilogy Funds’ hands-on management style.

All borrowers deal directly with a dedicated lending

manager for the full duration on the loan. This ensuresthey have a dedicated contact from the time of their

initial loan enquiry through to the time of the actual loan

submission, which is prepared by the Head of Lending

and submitted to the Lending Committee. For a loan

to be approved, unanimous approval from the Lending

Committee is required. If a development or construction

loan is approved Trilogy Funds appoints a qualied

Quantity Surveyor (QS) for the project. The role of the

QS is to certify the construction draw-downs as well as

reporting to the Lending Committee in relation to the

progress of the project.

Trilogy Funds specialises in managing shorter

term loans.

Traditional lending institutions like banks are often

reluctant to take on short term loans due to the high

level of administration involved. For example, if a

borrower’s current loan facility for the construction of a

unit development has expired, the borrower may wish to

renance and require a loan for only six months whilst

they nalise the sell down of any unsold units.

Satisfaction with their lending experience with Trilogy

Funds is evidenced by the fact that a number of our

borrowers are repeat customers of the Trust. You can

hear what one of our borrowers has to say about their

experience by viewing the video testimonial on ourwebsite at www.trilogyfunds.com.au/services/

private-lending

The Trust is currently in its ninth year of operation and

has to date successfully funded over $70,000,000 of

property transactions. During this period, the Trust

has never suered a loss of capital and has always

maintained a unit price of $1.00*.

*(Please note that past performance is not an indicator of

future performance).



Upon investment, funds are placedinto an Australian bank (in theTrust’s Short Term InvestmentAccount) and investors are issuedwith Cash units.

Cash units become designatedas Allocated units when allocatedto the loan pool. For example,this occurs upon the approval ofa new loan.

INTEREST RATE

Cash units earn distributions atthe prevailing interest rate givento the Trust by its bank for cashdeposits.

Distributions are:

• calculated DAILY and

• paid MONTHLY in arrears.

INTEREST RATE

Allocated units earn distributionsfrom the pool of mortgageinvestments and Allocated cashassets of the Trust (less fees and

expenses and excluding the incomeearned on the Short Term InvestmentAccount). Allocated units earn amonthly, variable interest rate.

Distributions are:

• calculated DAILY and

• paid MONTHLY in arrears.

Investor Cash units Allocated units

Short TermInvestment

Account

Investorchooses

CONVERSION TIMEFRAME

Average number ofdays investors spentholding Cash unitsbefore designated asAllocated units forthe calendar year to31 May 2015.

Check our monthlyperformance updatesfor the most recentaverage.

Investor chooses to:

1. Have their monthlydistributions paid to

their bank account; or

2. Reinvest their monthly

distributions toacquire Cash units.

9

The investment process

As the diagram above shows, the Trust receives

Investment Monies from Investors and places it into the

Short Term Investment Account (STIA) and issues Cash

units which are purchased for $1.00 per unit. Investors

hold Cash units and earn income from the interest

earned on their Investment Monies in the STIA until their

Investment Monies are allocated into the mortgage pool.

When a new Loan is written and/or funds are drawn

down, Cash units are designated as Allocated units,

which earn income from the interest charged on the

Mortgage Investments. (See Section 3.5 for more details

on how interest is derived on Allocated units).

Every month interest is collected by the Trust from

Borrowers, fees are deducted for the Trust’s ongoing

management and the remainder is paid to Investors

holding Allocated units in the form of income

distributions. Allocated unit holders can choose to

receive their monthly distribution into their personal bank

account or reinvest in the Trust and purchase more Cashunits and increase their unit holding.

Trust Investors can add to their investment at any time,

with the minimum top up accepted being $1,000.

The withdrawal process

The Trust has a withdrawal process tailored to

safeguard its liquidity levels and to protect the interests

of its Investors.

Investors can request the withdrawal of units after they

have held those units in the Trust for two months. A four

month notice period is required to withdraw units, and assuch, the minimum investment period is six months from

when they were issued. This approach assists Trilogy

Fund to manage the Trust eectively in the interest of all

Trust Investors.

Withdrawals may be processed earlier than the end of

the four month waiting period at the discretion of Trilogy

Funds if the liquidity position of the Trust allows this to

occur. Please see Section 3.6 for a full description of the

withdrawal process.

Withdrawal proceeds are normally paid within 10

business days after the expiry of the notice period.

Investors must note, however, that no assurance is giventhat processing will always be within that timeframe.

Importantly the Trust’s Constitution provides a maximum

of 15 months within which Trilogy Funds must meet

withdrawal requests. The reason for this and what it may

mean to Investors is described in Sections 3.6 and 3.9.



Steps to investThere are three steps to make an investment in the Trust.

Step 1 – Read this document, andconsider the oer

You should read this PDS in full before deciding

whether to invest in the Trust. Pay particular attention

to the risks set out in Section 6 and other information

concerning units, the Trust and its assets. The risks need

to be considered in light of your particular investment

objectives, nancial situation and needs. You should

seek your own nancial advice from a licensed adviser

before investing.

Step 2 – Complete the relevantApplication Form

To make an investment, complete and return the relevant

Application Form that accompanies this PDS. Please take

care to ensure that you complete the Application Form

in the manner outlined in Section 9. The completed form

must be returned in full together with any additional

documentation required as set out in the relevant

Application Form or this PDS.

The minimum application amount is $10,000, and

in multiples of $1,000 thereafter. We will accept the

payment methods listed below.

Cheque

Cheques must be in Australian currency drawn on

an Australian bank. They must be marked “NonNegotiable” and made payable to:

The Trust Company Limited ACF – TMIT

Direct deposit

You can transfer your investment funds to the

following account:

BSB 124-028

Account number 22287528

Account name Trilogy MIT

Reference Your surname, or, if you are an

existing Trilogy Funds’ Investor,

your Investor ID number

BPAY

You can BPAY your investment funds:

Biller Code 364471

Reference number If a reference number has not

already been provided to you,

you can obtain one by calling

Investor Relations on 1800 230

099 or emailing investorrelations

@ trilogyfunds.com.au

Step 3 – Send your Application Form

You have two options for sending your application:

Option 1

Free post your application to:

Trilogy Funds Management Limited

Reply Paid 1648

Brisbane QLD 4001

Option 2

Scan and email your application to

[email protected]

The application conrmation process

Once your application is received, our Investor

Relations team will communicate with you according

to your communication preference as your applicationprogresses through our processes. They may also be

in contact with you if further information is required.

The three step application conrmation process is

outlined below.

Questions?

For further information on the Trust, please contact

your nancial adviser or contact our team.

Phone Free call within Australia 1800 230 099 or+61 7 3039 2828

Free call within New Zealand +800 5510 1230

Email [email protected]

Website www.trilogyfunds.com.au/tmit

Discuss your potential investment

Our Business Development Managers are available

on 1800 230 099 to discuss the Fund with you and

answer your questions about a potential investment. We

are available between 8:30 am and 5:00 pm Monday

to Friday Australian Eastern Standard Time (AEST).

Alternatively you can email [email protected].



S E C T I O N 2 K e y f e a t u r e s o f t h e T r u s t



Section 2 – Key features of the Trust2.1 Key features

The information in the table below provides a snapshot of the Trust. Please read the whole PDS and seek any advice

you need before deciding to invest.

Product name Trilogy Monthly Income Trust

Australian Registered Scheme Number

(ARSN)

121 846 722

APIR Product Information Code TGY0003AU

Inception February 2007

Manager and Responsible Entity Trilogy Funds Management Limited

The role of Trilogy Funds in acting as the Responsible Entity of the Trust

is to ensure that Trust assets are managed and dealt with in accordance

with the Trust’s Constitution, the Corporations Act and this PDS.

Trilogy Funds has established a Lending Committee which considers

all Loan applications in accordance with Trilogy Funds’ lending policy

guidelines. These guidelines have been developed by Trilogy Funds’

personnel who have extensive experience in making and managing

mortgage investments.

In addition, a Compliance Committee has been established to monitor

Trilogy Funds’ compliance with the Constitution, the Compliance

Plan and the Corporations Act. A majority of the members of the

Compliance Committee must be, and are, external to Trilogy Funds.

Custodian The Trust Company (Australia) Limited, an independent specialist

custodian, provides custody of the Trust’s assets.

Investment strategy The investment strategy of the Trust is to source Loans for development,

construction or re-nancing of Australian property, secured by registered

rst mortgages over residential, commercial, retail, development sites and

industrial properties geographically spread over Queensland, New South

Wales, Victoria and the Australian Capital Territory.

Minimum investment $10,000

Minimum additional investment $1,000

Distributions Distributions are paid monthly in arrears at a variable rate. Investors can

choose whether their distribution income is paid into their nominated

bank account or reinvested into the Trust. Refer to Section 3.5 for full

details in relation to distributions.

Withdrawals The Trilogy Monthly Income Trust has a withdrawal process tailored to

safeguard its liquidity levels and to protect the interest of its Investors.

Investors must hold their investment for a minimum two months before they

are able to request a withdrawal. A four month notice period is then required

for withdrawals.

Withdrawals may be processed earlier than the end of the four month notice

period at the discretion of Trilogy Funds if the liquidity position of the Trust

allows this to occur. This is solely at the discretion of Trilogy Funds.

It should be noted that the Constitution provides a maximum of 15 months

within which Trilogy Funds must meet withdrawal requests. Please refer to

Section 3.6 for full details in relation to withdrawals and liquidity.



Fees • No entry or exit fees.

• No contribution fees.

• Responsible Entity Management fee of 0.7175% p.a.* for

Allocated units.

• Other management costs of 0.2640% p.a.* for Allocated units.

• No fees are payable for Cash units.

See Section 5.2. Published returns for Investors are net of all fees

charged to the Trust.

* inclusive of GST, less any applicable RITCs

Reporting Investors receive the following correspondence regarding their

Trust investment:

• receipt of funds notication;

• monthly distribution statements;

• monthly performance updates;

• annual tax statement;

• annual periodic (transaction) statement; and

• annual nancial report (if requested).

Access to current information You can obtain up to date information in relation to the Trust’sperformance and any continuous and other disclosure material at

www.trilogyfunds.com.au/tmit.

This includes RG 45 benchmarks and disclosure principles updates,

and performance updates which report returns payable and the length

of time between the issue of a Cash unit and its designation as an

Allocated unit.

Historical performance Refer to www.trilogyfunds.com.au/tmit.

Please note past performance is not a reliable indicator of

future performance.

2.2 ASIC benchmarks anddisclosure report

Disclosure against the ASIC RG 45 benchmarks and

disclosure principles is as at the date of this PDS, unless

otherwise stated, and may change during the currency of

this PDS. All nancial and statistical data is as at

31 May 2015. These disclosures will be updated at leastsemi-annually and if there is a signicant adverse change.

Updated disclosures will be available on our website

www.trilogyfunds.com.au and a paper copy of the current

ASIC RG 45 Benchmark and Disclosure Report will also

be provided to Investors free of charge on request.

Benchmarks

The section below sets out briey:

• the benchmark;

• how and to what extent Trilogy Funds complies

with the benchmark and if not, why not; and

• where additional information is to be found inthis PDS.

Benchmark 1: Liquidity – Trilogy Funds meets

the benchmark

To meet this benchmark, the responsible entity must

have cash ow estimates for the scheme that:

Demonstrate the scheme’s capacity to meet its expenses,

liabilities and other cash ow needs for the next 12 months.See Section 3.9 for details.

Are updated at least every three months and reect any

material changes.

See Section 3.9 for details.

Are approved by the directors of the responsible entity

at least every three months.

See Section 3.9 for details.

Benchmark 2: Scheme Borrowing – Trilogy Funds meets

the benchmark

To meet this benchmark, the responsible entity must not have current borrowings and must not intend to

borrow on behalf of the scheme.

There are no borrowings or intention to borrow

on behalf of the scheme.



Benchmark 3: Loan Portfolio and Diversication -

Trilogy Funds does not meet the benchmark


meet the following:

The scheme holds a portfolio of assets diversied

by size, borrower, class of borrower activity and

geographic region. Yes, see Section 4.8 for details.

The scheme has no single asset in the scheme portfolio

that exceeds 5% of the total scheme assets.

No, there are seven Loans that represent amounts greater

than 5% of the scheme assets. Cash holdings also exceed

the 5% benchmark gure. Trilogy Funds notes that there

are a limited number of Loans in the portfolio which

makes diversication more dicult. See Section 4.8 for

details. Also see Section 6.3b for the risks associated with

limited diversication.

The scheme has no single borrower who exceeds 5% of

the scheme assets; andNo, there are seven Borrowers who exceed 5% of the

scheme assets. Trilogy Funds notes that there are still

a limited number of Loans in the portfolio which makes

diversication more dicult. See Section 4.8 for details.

Also see Section 6.3b for the risks associated with limited

diversication.

All loans made by the scheme are secured by rst

mortgages over real property (including registered

leasehold title).

Yes, all Loans are secured by rst mortgages over real

property. See Section 4.1.

Trilogy Funds does not meet the benchmark in respect ofeither of the 5% limits referred to above.

Benchmark 4: Related Party Transactions - Trilogy

Funds meets the benchmark


not lend to related parties of the responsible entity or

to the scheme’s investment manager.

Yes, the responsible entity does not lend to related

parties of the responsible entity. There is no

investment manager.

Benchmark 5: Valuation Policy - Trilogy Funds does notmeet the benchmark

To meet this benchmark, the board of the responsible

entity requires its valuation policy to meet the

following:

• A valuer to be a member of an appropriate

professional body in the jurisdiction in which the

relevant property is located.

• A valuer to be independent.

• Procedures to be followed for dealing with any

conict of interest.

• The rotation and diversity of valuers.

• In relation to security property for a loan, anindependent valuation to be obtained:

i. Before the issue of a loan and on renewal:

A. For development property, on both an ‘as is’

and ‘as if complete’ basis; and

B. For all other property, on an ‘as is’ basis: and

ii. Within two months after the directors form a

view that there is a likelihood that a decreasein the value of security property may have

caused a material breach of a loan covenant.

Trilogy Funds’ valuation policy meets each aspect of this

benchmark other than i above, specically Trilogy Funds

does not invariably obtain a new valuation on a renewal

of a loan.

In determining whether there needs to be a revaluation

when a loan is being extended, or there is an increase in

the amount of the borrowing or a change in the interest

rate, the Trilogy Funds’ Lending Committee will take into

account a number of factors including the Borrower’s

Loan history, the amount of the Loan outstanding, theduration of the extension and other information such

as recent sales and settlements, from local agents and

valuers.

See Section 4.4 for details of Trilogy Funds’

valuation policy.

Benchmark 6: Lending Principles —Loan-to-Valuation

Ratios - Trilogy Funds meets the benchmark

To meet the benchmark, if the scheme directly holds

mortgage assets, it must meet the following:

Where the loan relates to property development

funds are provided to the borrower in stages basedon independent evidence of the progress of the

development.

Yes, see Section 4.3 for details.

Where the loan relates to property development – the

scheme does not lend more than 70% on the basis of the

latest ‘as if complete’ valuation of property over which

security is provided.


In all other cases – the scheme does not lend more

than 80% on the basis of the latest market valuation of

property over which security is provided.


Benchmark 7: Distribution Practices – Trilogy Funds

meets the benchmark

To meet the benchmark, the responsible entity must not

pay current distributions from scheme borrowings.

There is no current or intended borrowing.



Benchmark 8: Withdrawal Arrangements – Trilogy

Funds does not meet the benchmark

For liquid schemes to meet the benchmark:

The maximum period allowed for in the constitution for

the payment of withdrawal requests is 90 days or less.

No. The maximum period allowed for is 15 months. See

Section 3.6 for the reason behind the 15 months waitingperiod in the Constitution.

The responsible entity will pay withdrawal requests within

the period allowed for in the constitution.

Yes, Trilogy Funds will pay all withdrawal requests within

the period provided in the Constitution.

The responsible entity only permits members to withdraw

at any time on request if at least 80% (by value) of the

scheme’s property is:

i. Money in an account or on deposit with a bankand is available for withdrawal immediately, or

otherwise on expiry of a xed term not exceeding

90 days, during the normal business hours

of the bank; or

ii. Assets that the responsible entity can reasonably

expect to realise for market value within 10

business days.

Trilogy Funds permits members to withdraw at times

other than those stated in the benchmark. Even though

all cash of the Trust is held on deposit with a bank and

is available for immediate withdrawal, the Mortgage

Investments of the Trust are not assets that Trilogy Funds

can reasonably expect to realise for their market valuewithin 10 business days.

At any one time more than 20% of the Trust’s assets will

be in Mortgage Investments that are not expected to fall

due for repayment within that time period. Nevertheless,

Trilogy Funds only permits members to withdraw when

the Trust is ‘liquid’ within the meaning of the Corporations

Act. See Section 3.6 for further details.

Disclosure principles

The section below sets out briey:

• the disclosure principle;• the relevant disclosures of Trilogy Funds; and

• where additional information is to be found in

this PDS.

Disclosure principle 1: Liquidity

Disclose the current and future prospects of liquidity of

the scheme.

See Section 3.9.

Disclose any signicant risk factors that may aect the

liquidity of the scheme.

See Section 3.9.

Disclose the policy of the scheme on balancing the

maturity of its assets with the maturity of its liabilities.

See Section 3.9.

Disclosure principle 2: Scheme Borrowing

If the scheme has borrowings, it must disclose various

details.

There are no Trust borrowings.

Disclosure principle 3: Loan portfolio

and diversication

For pooled mortgage schemes, disclose by number

and value:

Loans by class of activity and by geographical region.

See Section 4.8.

The proportion of loans that are in default or arrears for

more than 30 days, by number and value.

See Section 4.7. There are no loans that are in default or

in arrears as at the date of this PDS.

The nature of the security for loans made by the scheme.

See Sections 4.1 and 4.2.

Loans that have been approved but have funds that haveyet to be advanced and other details.

See Section 4.9.

The maturity prole of all loans.

See Section 4.11.

Loan-to-valuation ratios for loans.

See Section 4.3.

Interest rates on loans.

See Section 4.12.

Loans where interest has been capitalised.

See Section 4.13.

For pooled mortgage schemes, disclose:

The proportion of the total loan money that has been lent

to the largest borrower and the 10 largest borrowers.

See Section 4.10.

The percentage of loans (by value) that are secured by

second-ranking mortgages.

There are no loans secured by second-ranking

mortgages. See Section 4.1.

The use of derivatives (if any).

There is no derivative use in the Trust.

A clear description of the non-mortgage assets of the

scheme, including the value of such assets.

See Section 4.16.

The scheme’s diversication policy and how the assets

correlate with that policy. See Section 4.8.


The maximum loan amount for any one borrower.

See Section 4.10.

The method of assessing borrowers’ capacity

to service loans.

See Section 4.5.

The responsible entity’s policy on revaluing security

properties when a loan is rolled over or renewal.

Trilogy Funds has procedures in relation to loan renewals.

The Lending Committee will make a determination if a new

valuation is required prior to a renewal. See Section 4.4.



The responsible entity’s approach to taking security on

lending by the scheme (e.g. the types of security it takes

and in what circumstances, and whether the security

must be income producing).

See Sections 4.1 and 4.2. The security does not need to

be income producing.


If the scheme invests in, or may invest in, other unlistedmortgages schemes (whether registered or unregistered)

and the policy on investing in those schemes, including

the extent to which there is a requirement for those

schemes to meet the benchmarks and apply the

disclosure principles.

See Section 4.15.

Disclosure principle 4: Related Party Transactions

Disclose details of any related party transactions

including:

The value of the nancial benet.

See Section 8.1g for the related party arrangement that

has been entered into.

The nature of the relationship.

See Section 8.1g.

Whether the arrangement is on arm’s length terms and is

reasonable remuneration.

See Section 8.1g.

Whether member approval for the transaction has been

sought and, if so, when.

The arrangement was entered into before the

establishment of the Trust and no unit holder approvalwas sought.

The risks associated with the related party arrangements.

See Section 6.11.

The policies and procedures that the responsible entity

has in place for entering into related party transactions,

including how compliance with these policies and

procedures is monitored.

See Section 8.1g.

Disclosure principle 5: Valuation Policy

Disclose:

Where investors may access the scheme’s

valuation policy.

The valuation policy is available on the Trilogy Funds’

website www.trilogyfunds.com.au/tmit.

The processes that the directors employ to form a view

on the value of the security property.

Trilogy Funds’ directors rely on independent valuations to

form a view on the value of the security property.

The frequency of valuations of security property.

See Section 4.4.

Any material inconsistencies between any current

valuation over the security property and the scheme’s

valuation policy.

No material inconsistencies.

Disclosure principle 6: Lending Principles – Loan-to-

Valuation Ratios

Disclose:

The maximum and weighted average loan-to valuation

ratios for the scheme as at the date of reporting.

See Section 4.3.

Where funds are lent for property development, the

criteria against which the funds are drawn down.

See Section 4.3.

Where funds are lent for property development, the

percentage (by value) of the completion of any property

that is under development as at the date of reporting.

See Section 4.3.

The loan-to-cost ratio of each property development loan

as at the date of reporting.

See Section 4.3.

How and when funds are provided to developers.

See Section 4.3.

Disclose:

If property development loans exceed 20% of the

scheme’s assets, the responsible entity should identify

the scheme as one that invests a signicant component

of funds in property development loans.

See Section 4.3.

If the loan-to-cost ratio of any property development

loan exceeds 75%.

See Section 4.3.

Disclosure principle 7: Distribution Practices

Disclose:

The source of the current and forecast distributions (e.g.

from income earned in the relevant distribution period,

operating cash ow, nancing facility, capital,

application money).

The source for distributions diers between Cash units

and Allocated units. See Section 3.5.

If the distribution is not solely sourced from income

received in the relevant distribution period, the reasons

for making those distributions and the risks associated

with such distributions.

Interest charged to a Borrower is typically capitalised

in a development or construction Loan (see Section

4.13). In this case, distributions will be paid from the cash

component of the Trust. There is a risk that cash held by

the Trust will be insucient to enable distributions to be

paid in any one or more months. See Sections 6.4 and 6.6.



If the distribution is sourced other than from income,

whether this is sustainable over the next 12 months.

See Section 3.5.

When the responsible entity will pay distributions and the

frequency of payment of distributions.

See Section 3.5.

Disclose:

If the scheme promotes a particular return on investments,

disclose details of the circumstances in which a lower

return may be payable, together with details of how thatlower return will be determined

and other information.

Not applicable. Trilogy Funds does not promote a

particular return and does not forecast distributions.

Disclosure principle 8: Withdrawal Arrangements

Disclose:

The scheme’s withdrawal policy and any rights that

the responsible entity has to change the policy.

See Section 3.6.

The ability of investors to withdraw from the scheme whenit is liquid.

Withdrawals are allowed from the Trust when it is a

liquid scheme.

The ability of investors to withdraw from the scheme when

it is non-liquid.

The Trust is a liquid scheme. If it were to become an illiquid

scheme all withdrawals would be on the basis provided in

the Corporations Act. The Trust would become an illiquid

scheme in the circumstances described in Section 3.6.

Any signicant risk factors or limitations that may aect

the ability of Investors to withdraw from the scheme.

The ability for an Investor to redeem their units from the

Trust is dependent upon its liquidity. The Trust’s liquidity

is inuenced by additional investments into the Trust and

draw-downs required on approved Loans.

How investors can exercise their withdrawal rights,

including any conditions on exercising these rights.

See Section 3.6.

The approach to rollovers and renewals, including

whether the ‘default’ is that investments in the scheme are

automatically rolled over or renewed.

Not applicable.

If the withdrawals from the scheme are to be funded

from an external liquidity facility, the material terms of this

facility, including any rights the provider has to suspend or

cancel the facility.Not applicable as there is no external funding facility.

The maximum withdrawal period that applies to the

payment of withdrawal requests when the scheme is liquid.

There is a maximum of 15 months to meet withdrawals if

the Trust is a liquid scheme.



Any rights the responsible entity has to refuse or

suspend withdrawal request.

See Section 3.6.

The policy of the scheme on balancing the maturity of its

assets with the maturity of its liabilities and the ability of its

members to withdraw.

The policy of the Trust on balancing the maturity of its

assets with the maturity of its liability and the ability of its

members to withdraw is described in Disclosure principle 1:

Liquidity. See Section 3.9.

Disclose:

If the responsible entity makes representations to investors

that they can withdraw from the scheme, disclose:

The grounds for the statement.

See Section 3.6.

The supporting assumptions for the statement.

See Section 3.6.

The basis for the statement.

See Section 3.6.

Any specic risk factors that mean that withdrawal

requests might not be satised within the expected period.

See Sections 6.6 and 6.8a.

Disclose:

If the scheme promotes a xed redemption unit price for

investments (e.g. $1 per unit), the responsible entity must

clearly disclose details of the circumstances in which a

lower amount may be payable, details of how that amount

will be determined and the impact of a default under the

scheme’s mortgage assets on investors.

The Constitution provides a mechanism for compulsory

redemption of Cash units and Allocated units. If as at the

end of a quarter Trilogy Funds ascertains that the unit

price is less than the xed withdrawal price of $1.00 per

unit, Trilogy Funds will redeem sucient Cash units andAllocated units to bring the unit value of each of the

Cash units and Allocated units back to equal the

withdrawal price.

This is achieved by redeeming an amount of capital from

the Trust equal to the number of whole dollars of the

amount by which the unit value is less than the withdrawal

price of the units.



S E C T I O N 3 T h e T r u s t



Section 3 – The TrustAn overview of the Trust

The Trust has assets consisting of mortgages and cash.

Initially, Investors’ Investment Monies in the Trust are

placed in the Short Term Investment Account (STIA)(either a cash account or a term deposit) held with an

Australian authorised deposit-taking institution (ADI),

and those Investors are issued Cash units. These units

are entitled to income distributions based on the interest

earned in the STIA. When the Investment Monies are

allocated into the mortgage pool, the Cash units become

designated as Allocated units, and the Investors’ funds

are removed from the STIA. Once the Investor’s Cash

units become Allocated units they are entitled to income

distributions based on the assets, excluding the STIA,

of the Trust (less fees and expenses and losses). For

the calendar year ended 31 May 2015, the average time

between the issue of Cash units and their designation

as Allocated units was nine days. Investors should note,however, that past performance is not indicative of future

performance and the period may at any time be longer

or shorter.

The Trust may keep funds such as cash deposits or term

deposits held with an Australian ADI to provide liquidity

to meet the cash requirements of the Trust.

If a Borrower defaults then the property used as security

can be sold and the proceeds used to repay the Loan

made by the Trust together with interest and other costs.

Trilogy Funds will determine which Loans are suitable for

investment. Trilogy Funds’ policy of Loan diversicationis adopted to help protect the Trust from signicant

losses by ensuring risks are not concentrated with one

particular borrower or group of borrowers or in one

particular geographical area or one type of property. It

would be dicult for most individual Investors to match

that kind of diversication when investing on their own.

3.1 Minimum investment

The minimum investment for an initial application is

$10,000, and thereafter in multiples of $1,000. We may

accept a lesser amount at our discretion, which can be

discussed with one of our team by calling 1800 230 099.

Trilogy Funds reserves the right to reject any application

or to allocate a lesser number of units than applied for.

3.2 Minimum investment period

The Trust has a minimum investment period of two

months. After that time a four month notice of

withdrawal may be given. Therefore, the total minimum

investment period is 6 months. Please refer to Section 3.6

for further details.

3.3 How an investment is made

To become an Investor of the Trust, an applicant must

initially complete either:

• an Application Form accompanying this PDS and

included in the application pack; or

• an Application Form accompanying the electronic

copy of this PDS available on Trilogy Funds’ website

www.trilogyfunds.com.au. The Application Forms are

labelled clearly on the website.

The completed Application Form is to be returned to

Trilogy Funds together with the selected method of

payment. Please refer to Section 9 for further details.

3.4 Issuing units

Issuing Cash units

When an Investor’s Investment Monies are initially

accepted, interests in the Trust will be issued in the form

of Cash units and each unit will cost $1.00.

Designating Cash units as Allocated units

Investment Monies of an Investor held in the STIA will be

used to invest in the pool of Mortgage Investments. TheCash units, represented by the amount of the Investment

Monies so used, will then be designated as Allocated units.

Where the amount of the available Mortgage Investments

is less than the total amount in the STIA, the Investment

Monies will be applied to the Mortgage Investments (and

the Cash units designated as Allocated units) in the order

in which the Investors’ Investment Monies have been

received and accepted by Trilogy Funds.

The earning rate on the Allocated units will then be

determined by the portfolio of mortgages held in

the Trust. Please refer to Section 3.5 for information

regarding the distribution of net interest earned toInvestors who hold Allocated units.

3.5 Distributions

All Loans in the current portfolio expire at varying times.

With Trilogy Funds’ liquidity policy and active review by

the Treasury Committee and the Board, the Directors, as

at the date of this PDS, have a reasonable basis to state

that distribution practices are sustainable over the next 12

months. This view may change in the future if there is an

increased risk that there could be an inux of withdrawals

that could not be met by the liquidity levels of the Trust

or there is a signicant delay in the repayment of Loans

or interest.

Income distribution on Cash units

The proceeds of Cash units (Investment Monies) will be

held in the STIA established with an Australian ADI for

the Trust. The STIA is kept by the Custodian, as an agent

of Trilogy Funds. The Investment Monies held in the STIA

earn interest for the Trust and Cash units are entitled to

income distributions based on interest earned in the STIA

from the date on which cleared funds are deposited until

the Cash units are designated as Allocated units or are

redeemed. Distributions on Cash units do not include

interest earned from Loans.



The distributions on Cash units are calculated daily but

paid monthly or following withdrawal or designation of

the Cash units as Allocated units. Investors can choose

to have this paid into their nominated nancial institution

account or it can be reinvested into the STIA as additional

Cash units. By allocating interest daily, the price of Cash

units is maintained at $1.00 per unit.

The current interest rate payable on the Trust’sSTIA is disclosed on Trilogy Funds’ website

www.trilogyfunds.com.au or a copy can be posted to you

without charge by contacting Trilogy Funds. Interest rates

will uctuate from time to time.

Please see Section 6.2b regarding the risk of a delay in

converting Cash units to Allocated units and Section 6.9d

regarding the risk of negative income, which will result in no

distributions being paid in the relevant distribution period.

Income distribution on Allocated units

The amount of the distribution for Allocated units

is calculated on the income earned in the relevant

distribution period (i.e. monthly) on the assets, excludingthe STIA, of the Trust (less fees, expenses and losses). The

cash for current distributions may be sourced from cash

held by the Trust which:

• where interest is capitalised, is advanced to the

Borrower to enable the Borrower to make the interest

payments due under and in accordance with the

relevant Loan agreement;

• where interest is not capitalised, is from interest paid

by Borrowers;

• constitutes repayments of Loans by Borrowers; or

• constitutes interest received from the deposits of

Allocated cash.

As the interest on all mortgage Loans is typically

capitalised, the current distribution is sourced from

sources other than the receipt of interest payments from

Borrowers, as noted above. It is Trilogy Funds’ practice to

pay monthly distributions based on the income earned in

the relevant period but potentially not as yet paid by

the Borrower.

Where Investment Monies are allocated to Mortgage

Investments and the units are designated as Allocated

units, income distributions are calculated daily anddistributed monthly in arrears, in accordance with your

directions on the Application Form. Please also refer to

Section 6.9d regarding the risk of negative income.

Distribution payment options

Investors with Cash units and Allocated units can

choose to have their distributions paid directly into their

nominated nancial institution account or into the STIA

as additional Cash units in the Trust.

Investors holding Cash and Allocated units who elect to

reinvest will have their distributions paid into the STIA

and be issued with additional Cash units.

No minimum investment amount applies to any

distribution re-investment.

The preference for payment into the nominated nancial

institution account or reinvestment into Cash units can be

changed at any time by completing a change of details

form, which is available on our website or by requesting

a copy.

3.6 Withdrawals

While an Investor holds Cash units or Allocated units,

the Investor may make a withdrawal from the STIA by

applying for withdrawal of all or some of the units held.While there is no minimum amount for a withdrawal,

the Investor must maintain a minimum investment of

$1,000 in the Trust, whether in the form of Cash units or

Allocated units, to remain invested.

The withdrawal price for Cash units is $1.00 each.

Investors will also receive, at the same time, their

proportion of the income earned from the STIA referable

to the redeemed Cash units.

The withdrawal price for Allocated units is $1.00 each.

Income entitlement will also be paid. Please also refer

to Section 6.9d for more information about the risk of

negative income and its eect on a withdrawal.

Any withdrawal is subject to compliance with the notice

period and the Trust’s liquidity, each as referred to below.

Notice period

After holding the unit for two months, a four month

notice period is currently required for withdrawals.

Trilogy Funds, at its discretion, may waive or reduce

this period. Any waiver or reduction is contingent on

sucient liquidity in the Trust at the time of the request.

Trilogy Funds may increase the four month notice

period by giving you not less than 30 days’ prior notice,

provided that it continues to be able to meet withdrawal

requests within 15 months, which as explained below isthe maximum period specied in the Constitution for

satisfying withdrawal requests. Withdrawals will normally

be paid within 10 business days after the expiry of the

notice period. Investors must note, however, that no

assurance is given that processing will always be within

that timeframe.

How to make a withdrawal

Investors who wish to withdraw all or part of their

investment in the Trust should complete and sign a

Withdrawal Form and fax, post or deliver it to the Trilogy

Funds oce in Brisbane, as advised in the corporate

directory at the back of this PDS.

Withdrawal and Trust liquidity

The liquidity of the Trust aects withdrawals in two ways.

The rst is that for the Trust to meet withdrawal requests

from Investors, the Trust must be a ‘liquid’ scheme. To

be a ‘liquid’ scheme, not less than 80% of the assets of

the Trust must be able to be realised within the period

specied in the Constitution for satisfying withdrawal

requests. The maximum period specied in the

Constitution for satisfying withdrawal requests is stated

to be 15 months. The reason for not meeting the 90 day

period noted in Benchmark 8 of RG 45 (see Section 2.2)

is due to the fact the Loans of the Trust usually have a

maturity prole between 12 and 18 months. The maximum

withdrawal period must provide a realistic timeframe for

realising these underlying assets. The adoption of the 15

month period means that the Trust can be treated as a

liquid scheme.



In addition, Investors should note that if the Trust is

not ‘liquid’ at any time, an Investor may only make a

withdrawal in accordance with the provisions of the

Corporations Act and any relief granted by ASIC from

time to time. These provisions prevent Trilogy Funds

from redeeming units (i.e. by allowing withdrawals

by Investors) other than in accordance with certain

procedures including that a pro rata oer must be made

to all Investors in the Trust. As at the date of the issue ofthis PDS, it is anticipated that the Trust will continue to be

a ‘liquid’ scheme.

The second aspect is that even as a liquid scheme,

withdrawals may aect the Trust’s liquidity and

therefore the Constitution permits Trilogy Funds, in

certain circumstances, to withhold, suspend or delay

the payment of withdrawals. Specically, there must be

provision for a circumstance where there are a signicant

number of withdrawal requests that potentially exceed

the cash holding at that time of receipt. In this scenario,

the maximum withdrawal period of 15 months would

allow time for Loans to be repaid and payment of

withdrawals made.

The Fund is not an ‘at call’ cash account and should not

be treated as such.

In the event Trilogy Funds determines that there has

been negative income in the Trust in any period and

that Trilogy Funds is required to eect a compulsory

redemption of both Cash units and Allocated units in

order to maintain the unit price at $1.00 (see Section

6.9d), the payment of any withdrawals that may fall

due for payment between the date Trilogy Funds

ascertains that there has been negative income and the

date the compulsory redemption of units is eected

will be suspended until the compulsory redemption is

completed. Any Cash units or Allocated units in respect

of which there is a pending withdrawal request will

be included in the compulsory redemption. Once the

compulsory redemption is completed, any suspended

withdrawals will be paid on the basis of the reduced

number of Cash units or Allocated units the subject of

the redemption.

3.7 Transferring units

Units, whether they are Cash units or Allocated units, may

be transferred in accordance with the provisions of the

Constitution. A transfer of units must be in writing, signedby both the seller and the buyer and transfer duty paid (if

applicable) before it is given to Trilogy Funds.

When units are transferred, Trilogy Funds may charge

a fee of 2% (plus GST) payable to Trilogy Funds based

on the value of the units transferred. This fee has

been waived by Trilogy Funds for the life of this PDS.

Thereafter the waiver may cease. See Section 5.3a.

3.8 Adding to your investment

Current Investors wishing to add to their investment can

do so by completing an Additional investment application

form, which accompanies the current PDS and theelectronic version of the PDS. You may also request

a copy from us. The minimum additional investment

amount is $1,000.

To ensure that you have up to date information about the

Trust when making an additional investment, Trilogy Funds

suggests that you contact us and we will provide you with

a copy of any new or supplemental product disclosure

statement that has been issued. Investors should keep a

copy of the current PDS and any supplemental product

disclosure statement, as well as any reports or updated

information that Trilogy Funds provides to you, so that

you may refer to these when deciding whether to make afurther investment in the Trust.

3.9 Liquidity and liquidity targets

Trilogy Funds has a ‘Liquidity Policy’ which requires

the updating and tabling of a report to the Treasury

Committee for the Trust on a regular basis and is

presented to both the Executive Committee and the

Board monthly as to cash ow estimates that meet the

benchmark requirements. The Board formally approves the

cash ow estimates at least every three months.

The report uses the following assumptions to monitor

liquidity (these assumptions may change from time totime as reviewed) and balance the maturity of assets and

the maturity of liabilities:

• forecast Investor withdrawals are based on the

larger of:

- known pending withdrawals from withdrawal

requests received; or

- an estimated amount of $100,000 per month.

• forecast inow of funds have been based on estimates

made by Trilogy Funds’ Sales Department; and

• forecast drawdowns have been based on the latest

Lending Department individual Loan forecasts

noting all scheduled inows and outows (assets and

liabilities) for individual mortgages.

The assumptions used to monitor liquidity are stress

tested on a regular basis via sensitivity analysis that is

provided to the Treasury Committee.

Some signicant risks that may aect the liquidity of the

Trust could be:

• a large number of withdrawals of an amount more

than the available liquidity of the Trust; and

• borrower defaults.



The Treasury Committee monitors the maturity of assets

(mortgage Loans and cash) and also the maturity of

liabilities (Investor withdrawals and Borrower drawdowns).

Mortgage Loans may be for a period of up to

24 months duration (and longer, if extended), while

Investor withdrawals require a four month notice period

(and may be longer – see Section 3.6). While the Treasury

Committee currently has a target that at least 5% of the

Trust assets are to be held in cash type investments, thereis a risk that liquidity may be insucient to meet Investor

withdrawals and/or draw down requests to Borrowers (see

Sections 6.6 and 6.8a).

As part of its liquidity policy, cash is held in the STIA.

As at the date of this PDS Trilogy Funds has no reason

to believe that it will not have sucient cash or cash

equivalents to meet its projected cash needs over the

next 12 months or that it will not continue to do so

going forward.

3.10 Reporting

Investors in the Trust will be provided with the following

upon their initial investment:

• acknowledgement letter on receipt of

application monies;

• acknowledgement letter conrming Cash unit

holding; and

• acknowledgement letter and Statement of Initial

Investment immediately following the designation of

Cash units as Allocated units.

Investors also receive:

• monthly performance updates;

• monthly distribution statements;

• an annual statement of taxable income, providing a

summary of distributions earned for inclusion in the

Investor’s income tax return;

• annual periodic statement, which details all

transactions on each Investor’s account, together with

balances on the number of units held in the Trust; and

• annual nancial report of the Trust in accordance with

regulatory requirements, if requested.

3.11 Wholesale Investors and investingthrough investment platforms

Trilogy Funds will have the discretion to waive or reduce

fees for wholesale Investors or investment platforms.

Any waiver or reduction is available only to persons

who are “wholesale” investors within the meaning of

the Corporations Act on an individual basis, and only in

accordance with the Corporations Act requirements and

the ASIC class order relief relating to dierential fees.

Wholesale InvestorsWho is a wholesale investor?

Product value test

Where the initial amount paid by the investor at the time

of investment in the Trust is at least $500,000. The person

will remain a wholesale investor even if their investment

subsequently falls below $500,000.

For investments less than $500,000, the following

tests apply:

Individual wealth test

The person has provided a certicate by a qualied

accountant stating that the person has net assets of at

least $2.5 million or gross income for each of the last two

years of at least $250,000. A company or trust will also

be a wholesale investor if controlled by a person who is

certied as meeting the wealth test. The certicate can be

no more than six months old.

Professional Investor test

The nancial product is provided to a ‘professional

investor’ which includes:

• an Australian nancial services licensee;

• a body regulated by APRA outside of superannuation;

• a body registered under the Financial Corporations

Act 1974;

• trustees of superannuation funds, approved deposit

funds, pooled superannuation trusts and public sector

superannuation schemes under the Superannuation

Industry (Supervision) Act 1993 with net assets of at

least $10 million; and

• a person who controls at least $10 million.

Investment platforms

You may invest in the Trust through an investment

platform, also referred to as wraps and investor directedportfolio services (IDPS). Trilogy Funds authorises the

use of this PDS as disclosure to investors who wish

to access the Trust through investment platforms

(Indirect Investors).

Indirect Investors who gain exposure to this Trust through

a master trust, wrap account or IDPS do not:

• become unit holders in the Trust, nor do they acquire

the rights of a unit holder in the Trust. The operator

of the master trust, wrap account or IDPS has those

rights and can exercise, or decline to exercise, them on

behalf of the Indirect Investors; and

• receive interest distributions or reports directly from

Trilogy Funds, nor do they directly participate in

Investor meetings or the winding up of the Trust.

Withdrawal timeframes for Indirect Investors are

dependent on their master trust, wrap account or

IDPS operator.

Indirect Investors in master trusts, wrap accounts or IDPS

should consult their operator to obtain information on

how their operator deals with applications, withdrawals,

transfers, interest distributions and timing, fees and

expenses and monitoring of their investments. Such

Indirect Investors should also read the disclosure

document issued by the operator of the relevant mastertrust, wrap account or IDPS.



S E C T I O N 4 Ab o u t t h e T r u s t ’ s Lo a n s

Section 4 - About the Trust’s LoansAs at 31 May 2015, Trust assets were as follows:

Drawn Loans $13,450,718

Cash in the STIA (and receivables) $8,023,994

Total Funds Under Management $21,474,712

Current and future Mortgage Investments are Loans

made directly to Borrowers from the Trust secured byregistered rst mortgages over residential, commercial,

retail, development sites and industrial properties at

either xed or variable interest rates.

The Mortgage Investments held by the Trust are held

benecially for the holders of Allocated units according

to their proportionate share. The legal title to each

Mortgage Investment is held by the Custodian.

4.1 Registered rst mortgages

The primary security for each Mortgage Investment held by

the Trust will be a registered rst mortgage situated within

specied states and territories in Australia. ‘Registered’

means that the mortgage is registered with the Queensland

Department of Natural Resources and Mines or the

equivalent government department in other states.

There are no Mortgage Investments secured by a

second-ranking mortgage.

4.2 Additional security that may be taken

Additional types of security may be taken including

general security agreements and personal guarantees to

support the rst mortgage security.

4.3 Loan-to-valuation ratios (LVR)

All Loans approved in the Trust must be at a maximum

LVR of 70% of the latest ‘as if complete’ valuation

when the Loan relates to a property development or

construction (development Loan). Otherwise, Loans are

oered at a maximum LVR of 70% of the ‘as is’ valuation

received that was not more than four months old at the

time of Loan approval. As at 31 May 2015 the weighted

average LVR of all the Loans in the Trust was 55.19%.

As at 31 May 2015, the highest LVR for an individual loan

was 66.61%.

Where a Loan is in default, the LVR on that Loan may

exceed 70%. It should be noted that if an advance

of further funds is required in order to complete adevelopment where a Loan is in default, the LVR may

exceed 70% of the ‘as if complete’ valuation.

As at 31 May 2015 the LVRs of the existing approved

Loans, in percentage terms, were as follows:

The LVR is calculated on the higher of the approved loan

amount and the drawn loan balance for each Borrower,

divided by the property value.

Development Loans are those where a Borrower

utilises the Loan monies to construct buildings

(e.g. units, houses, commercial or retail property) or to

undertake land development. On the sale of a unit, house,

commercial, industrial or retail building, or part of the

land, all or part of the proceeds are utilised to reduce

the Borrower’s debt. Development Loans involve close

supervision by Trilogy Funds. To this end, Trilogy Funds

appoints an external QS, engineer, project manager or

valuer to advise:

• the amount of all draw-downs by a Borrower and all

payments which are to be made to contractors in

stages based on the progress of development; and

• the costs to complete the project.

RANGE VALUE OF

LOANS

NUMBER OF

LOANS

Less than 60% $13,285,000 13

61% - 70% $6,692,079 6

Total $19,977,079 19



The Trust invests a signicant component of funds in

property development Loans. There are seven property

development Loans which account for 30.79% of the

Trust Assets (including cash assets), at various stages of

development with percentages of completion ranging

from 0% to 83.84%.

The loan to cost ratio of the development Loans range

from 59.33% to 74.95%. Investors should note that noneof the development Loans has a loan to cost ratio that

exceeds 75%.

4.4 Valuations

Trilogy Funds requires valuations to be prepared by an

independent, qualied and registered valuer prior to

advancing loan funds against a property being oered as

security. In all cases, Trilogy Funds requires the valuation to

meet the following criteria (amongst other things):

• all external valuations must be performed by a

valuer who is on the panel of Trilogy Funds’

approved valuers;

• the valuer must be a member of an appropriate

professional body in the state or territory where the

mortgaged property is situated;

• Trilogy Funds prefers to instruct the valuer, however

if not, the valuation must be addressed or assigned to

Trilogy Funds for mortgage purposes under Trilogy

Funds’ standard instructions;

• the panel valuer must be independent of the borrower

and Trilogy Funds;

• no one valuer conducts more than one third ofthe total valuation work undertaken for the Trust

calculated by number of the security properties;

• the report must comment as to whether the

mortgaged property represents satisfactory security

for mortgage purposes as appropriate;

• valuers must include a statement in their valuation

reports as to whether the valuation complies with all

relevant industry standards and codes;

• the valuer must be instructed to prepare the valuation

report in a format which clearly sets out the primary

methodology used and, if so requested, a secondary

check valuation methodology, in accordance with

the instructions;

• valuations for construction projects and completed

buildings should state a replacement value in the

valuation for the purpose of Trilogy Funds determining

the amount of insurance required; and

• where a loan is for development or construction

purposes, the valuer must assess the property on both

an ‘as is’ and ‘as if complete’ basis. All other property

loans are valued on an ‘as is’ basis.

In terms of when valuations must be obtained:

• all valuations must not be more than four months old

as at the date of approval of the loan; and

• valuations must also be obtained:

- at least every four years;

- within two months after the directors

form a view that there is a likelihood that

a decrease in the value of security

property may have caused a material

breach of loan covenant; and

- for any other reason determined

by the Lending Committee.

At the discretion of the Lending Committee valuations

may also be obtained when the following occurs:

• a material change in the terms of the loan, including as

to the amount, duration, or interest rate on renewal;

• delay in any construction or development proposal;

• information that leads Trilogy Funds to believe that

there may be a variation in the security value;

• a material change in the nature of the

building/property;

• a material change in the tenancy prole of a building;

• a request to vary directorship or ownership of

the borrower or a guarantor company (or its

associates); and

• the valuation undertaken for funding is in excess

of four months old as at the time of approval of the

new loan.

4.5 Borrower’s capacity to service theLoan and Loan assessment

A disciplined process is used by Trilogy Funds to evaluate

each loan proposal that is submitted by Borrowers and

for monitoring any Loan that is subsequently approved

by Trilogy Funds. This process reects the requirements

contained within Trilogy Funds’ Lending Policy. The

process includes:

• a standard loan application form is completed and

signed by the Borrower;

• the Borrower or a director of the Borrower entity is

interviewed by a representative of Trilogy Funds;

• the Borrower’s and/or the project’s ability to repay theloan is evaluated;

• a credit check is carried out in all cases; and

• Trilogy Funds inspects all property security.

In the case where interest is capitalised in respect of a

development or construction loan, Trilogy Funds will

assess the feasibility of the project. In doing so, Trilogy

Funds relies upon an independent valuer’s assessment of

the property on an ‘as if complete’ basis and an ‘as is’ basis

and has a QS examine the costs to complete the project

and drawdowns required. As part of its loan assessment

process, Trilogy Funds will consider an appropriate amount

to be reserved for capitalised interest before determining

the loan advance and ultimate LVR.

All funds drawn down for a property development are

based on certication by an independent panel QS. After



the QS’s report is received, funds are advanced to the

builder/contractor. The QS’s report includes a ‘cost to

complete’ the project.

4.6 Adequate property insurance

Prior to a loan being made, written conrmation must be

given to Trilogy Funds conrming that adequate insurance

over the property to be mortgaged is in place and that theinterest of the Custodian will be noted as mortgagee on

the relevant policies. Insurance coverage is monitored on a

regular basis.

4.7 Loan monitoring and defaultsor arrears

The performance of all Loans is actively and regularly

monitored by Trilogy Funds with respect to timely

payment of interest, adherence to ongoing reporting

requirements and specic Loan covenants. The Lending

Committee is responsible for monitoring any Loans in

default/arrears. Arrears relate to non-payment of principalor interest after the due date for payment. Default relates

to non-adherence to the conditions of the loan agreement,

such as the need to have adequate insurance in place.

That committee meets on a regular basis (usually weekly).

The Head of Lending reports on all Loans (not just those in

default) at these meetings.

In the event that a Borrower is in default of a

Loan condition or is in arrears by failing to make an

interest payment on the due date, the following

actions will be taken:

• where a Loan is in arrears more than seven days, the

Borrower will be contacted to arrange collection of

the arrears;

• any Loan in arrears more than 30 days (unless

otherwise determined by the Lending Committee

or the Board) may be placed in the hands of Trilogy

Funds’ solicitors to commence recovery procedures;

• enforcement proceedings may commence in

accordance with the following process:

- the mortgagee may become a `mortgagee

in possession’ or appoint a suitably

qualied administrator;

- a new valuation of the secured property may

be sought; and

- the underlying security may be placed on

the market for sale or, depending on the

nature of the security and where it is deemed

to be in the best interests of the Mortgage

Investors, appointing parties to complete the

development or construction of the property,

prior to such sale process commencing;

• the Lending Committee will monitor the progress of

the enforcement proceedings and any other action

taken by Trilogy Funds in connection with the defaultor arrears.

At the date of the PDS, there are no Loans in default

or arrears.

4.8 Loan diversication

The Trust holds a portfolio of Loans diversied by size,

Borrower, class of Borrower activity and geographic

region. The position as at 31 May 2015 was as follows:

Loans by class of activity

CLASSOF ACTIVITY

VALUE OFLOANS

% OFPORTFOLIO

trilogy monthly income trust pds 22 july 2015 web

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