product disclosure statement kremnizer mortgage fund · 2017. 10. 3. · for any particular...

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Product Disclosure Statement Kremnizer Mortgage Fund ARSN 101 518 067 Dated 2 October 2017 Issued by Baccus Investments Limited ABN 87 095 832 072 AFS Licence No: 220647

Kremnizer Mortgage Fund

Product Disclosure Statement i

Table of Contents

CORPORATE DIRECTORY .................................................................................................................... iii

Further Information ...................................................................................................................... v

SECTION 1: ............................................................................................................................................. 1

KEY FEATURES OF THE KREMNIZER MORTGAGE FUND ................................................................ 1

SECTION 2: ............................................................................................................................................. 3

ASIC BENCHMARKS AND DISCLOSURE PRINCIPLES ...................................................................... 3

SECTION 3: ............................................................................................................................................. 8

INTRODUCTION TO THE FUND ............................................................................................................ 8

What is a Mortgage Investment? ................................................................................................ 8

SECTION 4: ............................................................................................................................................. 9

INVESTING IN THE FUND...................................................................................................................... 9

Making an Investment in the Fund .............................................................................................. 9

Cooling Off .................................................................................................................................. 9

Investment of Application Moneys .............................................................................................. 9

Additional Investments .............................................................................................................. 10

SECTION 5: ........................................................................................................................................... 11

Investment benefits and risks ................................................................................................................ 11

Investing Risks .......................................................................................................................... 11

SECTION 6: ........................................................................................................................................... 15

FUND OVERVIEW ................................................................................................................................ 15

Constitution of the Fund ............................................................................................................ 15

Operation of the Fund ............................................................................................................... 15

Fund Property ........................................................................................................................... 15

Syndicate Property .................................................................................................................... 16

Accounts and Audit ................................................................................................................... 16

Termination of the Fund ............................................................................................................ 16

SECTION 7: ........................................................................................................................................... 17

MORTGAGE INVESTMENTS ............................................................................................................... 17

What Mortgage Investments are made available ..................................................................... 17

Borrowers and Lending ............................................................................................................. 18

Management of the Mortgage Investment ................................................................................ 20

Default Management................................................................................................................. 20

Realisation and Enforcement of Mortgage Investments ........................................................... 21

Termination of Syndicate .......................................................................................................... 21

Ethical and other Considerations .............................................................................................. 22

SECTION 8: ........................................................................................................................................... 23

YOUR INVESTMENT IN THE FUND .................................................................................................... 23

Investment Objectives............................................................................................................... 23

Payment of Income ................................................................................................................... 23

Repayment of Investment ......................................................................................................... 24

Rights of Members .................................................................................................................... 24

Withdrawal Rights ..................................................................................................................... 24

Transfer Rights ......................................................................................................................... 24

Liability of Members .................................................................................................................. 24

Limitation on Members.............................................................................................................. 24

Reporting to Members .............................................................................................................. 24


Product Disclosure Statement ii

Continuous disclosure and updated information ...................................................................... 25

Updated benchmark disclosures .............................................................................................. 25

Meetings of Members ............................................................................................................... 25

Complaints and Dispute Resolution .......................................................................................... 25

Privacy and personal information ............................................................................................. 26

Anti-Money Laundering and Counter Terrorism Financing....................................................... 26

Foreign Tax Compliance Disclosure ......................................................................................... 27

Taxation .................................................................................................................................... 28

Goods and Services Tax .......................................................................................................... 28

SECTION 9: ........................................................................................................................................... 29

THE FUND DOCUMENTS .................................................................................................................... 29

The Constitution ........................................................................................................................ 29

Amendment or Replacement of Constitution ............................................................................ 29

The Compliance Plan................................................................................................................ 29

Administration Services Agreement .......................................................................................... 29

SECTION 10: ......................................................................................................................................... 31

PARTIES INVOLVED IN THE FUND .................................................................................................... 31

The Manager ............................................................................................................................. 31

Disclosure ................................................................................................................................. 31

Directors of the Manager .......................................................................................................... 31

Powers of the Manager ............................................................................................................. 32

Liability of the Manager ............................................................................................................. 32

Indemnity of Manager ............................................................................................................... 32

Compliance Committee............................................................................................................. 32

Compliance Plan Auditor .......................................................................................................... 33

The Administrator ...................................................................................................................... 33

SECTION 11: ......................................................................................................................................... 35

FEES AND OTHER COSTS .................................................................................................................. 35

Consumer Advisory Warning .................................................................................................... 35

Fees and other costs ................................................................................................................ 35

Additional Explanation of Fees and Other Costs ...................................................................... 38

SECTION 12: ......................................................................................................................................... 42

GLOSSARY OF TERMS ....................................................................................................................... 42

SECTION 13: ......................................................................................................................................... 44

HOW TO INVEST .................................................................................................................................. 44

Application Form ....................................................................................................................... 49


Product Disclosure Statement iii

CORPORATE DIRECTORY Manager BACCUS INVESTMENTS LIMITED

ABN 87 095 832 072 AFSL 220647 PO Box 191 DOUBLE BAY NSW 1360 Telephone: (02) 9327 7911 Facsimile: (02) 9327 6830 Email: [email protected]

Registered Office Level 1 369-371 New South Head Road DOUBLE BAY NSW 2028

Directors Robert Kremnizer Anthony Etzine David Bleier

Auditor of Manager, Fund and Compliance Plan

Pitcher Partners Level 22, MLC Centre 19 Martin Place SYDNEY NSW 2000 Telephone: (02) 9221-2099 Facsimile: (02) 9223-1762

Important Information Issuer The issuer of interests in the Kremnizer Mortgage Fund ARSN 101 518 067 (Fund) is Baccus Investments Limited ABN 87 095 832 072 (Manager). The Manager holds Australian Financial Services Licence No: 220647. Contact details for the Manager are set out above. Product Disclosure Statement This product disclosure statement (PDS) was prepared by the Manager on and is dated 2 October 2017. This PDS has not been lodged with the Australian Securities and Investments Commission (ASIC) and is not required by Corporations Act 2001 to be lodged with ASIC. None of the Manager, its directors or associates, guarantees the repayment of moneys invested or any particular rate of return. Offer only in Australia This PDS can only be used by investors receiving it (electronically or otherwise) in Australia. This PDS does not constitute and should not be construed as an offer, invitation or recommendation by the Manager to apply for interests in the Fund or in a Syndicate in any state, country, or jurisdiction where such offer, invitation or recommendation may not be lawfully made. Electronic copies of this PDS If an electronic copy of this PDS is printed all pages including the application form must be printed. If this PDS is made available to another person, they must be provided with the entire electronic file or printout including the application form. If you are unsure whether the electronic document you have received is complete, please contact the Manager. An electronic copy of the PDS may be downloaded from the Manager’s website or alternatively a printed copy of this PDS (and any supplementary documents) can be obtained free of charge on request from the Manager or by contacting your financial adviser.


Product Disclosure Statement iv

Updating Information The information in this PDS is up to date at the time of preparation. However, some information can change from time to time. The Manager may make available updated infromation in relation to this PDS. This may include matters that ASIC requires it to tell you about on a regular basis, such as disclosing against the benchmarks that apply to the Fund, which are referred to in section 2: ASIC Benchmarks and Disclosure Principles and any information that must be disclosed by the Manager to meet its continuous disclosure obligations. Investors may access this information at www.baccus.com.au. Alternatively you may request a paper copy of the information, free of charge, by calling the Manager on 02 9327 7911 or by contacting your financial adviser. The information that the Manager will make available by way of these updates will not be information that is materially adverse to investors. If new information were materially adverse, it may need to be contained in a supplementary or replacement or new product disclosure statement. WARNING: In preparing this PDS and any supplementary product disclosure statement (Syndicate SPDS) (which relates to the relevant Mortgage Investment) the Manager has not taken into account your investment objectives, financial position or particular needs. Before making an investment decision on the basis of this PDS or any Syndicate SPDS, you need to consider or obtain advice about whether the investment is suitable in the light of your personal circumstances. Important investment considerations and risks are set out in section 5: Investment Benefits and Risks of this PDS. Investment in the Fund is subject to investment and other risks. These could result in delays in repayment of, or loss of, income or capital invested.


Product Disclosure Statement v

Product Disclosure Statement

The product disclosure document issued by the Manager is in relation to an investment in the Fund and to investment in mortgage investments generally.

The details of each particular Syndicate SPDS mortgage investment in which a member of the Fund may invest (Mortgage Investment) will be contained in a supplementary product disclosure statement (Syndicate SPDS) that relates to the particular Mortgage Investment.

Information contained in this PDS This PDS contains the information that must be provided to potential investors in the Kremnizer Mortgage Fund (Fund) by the provisions of the Corporations Act 2001 and ASIC policy. For instance it tells you:

at Section/page

� how the Manager discloses against the ASIC benchmarks and disclosure principles

Section 2

� who is the issuer offering an interest in the Fund Page iii Sections 6, 10

� how you may contact the issuer Page iii

� what sort of investment is being offered and how to apply for an interest in the Mortgage Investment

Sections 2, 7

� how much do you pay for your investment Sections 4, 11

� what returns you will get and when you may expect them Section 8

� what fees and charges are payable Section 11

� what are the significant benefits to you Sections 5, 8, 9

� what are the significant risks to you Section 5

� how you may complain if you have a problem with the investment Section 8

� whether you may withdraw your investment and if so when Section 8

This PDS also contains other information that may be relevant to your investment. Certain words used in this PDS are given a particular meaning. A glossary of those terms is in section 12: Glossary of Terms. Further Information If after reading this PDS you require further information about the Fund you should contact your independent adviser or the Manager. The contact details of the Manager are set out in the Corporate Directory on page -iii- of this PDS. You may also ask the Manager to send you a copy of any document or policy of the Manager that is referred to in this PDS. A charge may be payable.

Investment decisions are important. They often have long term consequences. You are urged to read this PDS, and the Syndicate SPDS relating to a particular Mortgage Investment, carefully consider it, ask questions, and seek independent advice.


Product Disclosure Statement page 1

SECTION 1: KEY FEATURES OF THE KREMNIZER MORTGAGE FUND

Application for Membership of the Fund

In accordance with the application form that accompanies this PDS.

Minimum application $1,000.00

Minimum additional investment

In multiples of $1.00

Maximum investment

Unlimited.

Entry fees Nil.

Exit fees Nil. However, if you exit before the maturity date of the Mortgage Syndicate of which you are a member, by way of a transfer to another person, a fee may be charged and the Manager reserves the right to pass on any costs or charges associated with your early exit. See section 11: Fees and Other Costs for details.

Application for Membership of a Syndicate

In accordance with the application form that accompanies the relevant Syndicate SPDS.

Mortgage Investments

Investors will be offered the opportunity to invest in a range of mortgages offered by the Manager under various Syndicate SPDSs. Each Mortgage Investment will be secured against property which may comprise a single residential, commercial and industrial property or vacant land for residential, commercial or industrial purposes, or more than one property of the same type or a combination of different types of property. The relevant security property or properties for any particular Mortgage Investment is detailed in the relevant Syndicate SPDS. A summary of the Mortgage Investments made through the Fund as at 30 June 2017 appears in section 7: Mortgage Investments.

Loan to valuation ratio

It is the policy of the Manager that the maximum loan to valuation ratio (LVR) is 80.0%. See section 7: Mortgage Investments for details. The LVR of a particular mortgage is set out in the relevant Syndicate SPDS.

Term This will usually be 12 or 24 months, but may be up to a maximum of 3 years. The term of a particular mortgage is as specified in the relevant Syndicate SPDS.

Income distribution Distributions of income to Members of a Syndicate are calculated monthly as at the same calendar day of each month as the day on which the Mortgage Investment is entered into. See section 8: Your Investment in the Fund and the relevant Syndicate SPDS for further details.

How is distribution paid

Your distribution is paid directly into your nominated bank account.

Interest rate Interest rate applicable to a particular Mortgage Investment is detailed in the relevant Syndicate SPDS.



Management Costs A fee is payable to the Manager for its management as responsible entity of the Fund and as manager of each Mortgage Investment expressed as a percentage per annum of the value of the aggregate of the Fund property held on trust and of the Mortgage Investments, calculated and payable monthly in arrears is payable to the Manager. As at the date of this PDS, it will charge a maximum of 3.225% (inclusive of GST, less RITCs).

Other fees may be payable to the Manager in certain circumstances. See section 11: Fees and Other Costs for details.

The Manager is also entitled to a fee equal to any fee or charges charged to a borrower in connection with a Mortgage Investment.

The fees payable in relation to a particular Mortgage Investment are specified in the relevant Syndicate SPDS.

Generally, the day to day expenses in operating the Fund (to the extent that they are not paid by borrowers) are paid by the Manager from its own resources, not by Members.

Brokerage and Adviser fees

All mortgage brokerage fees trail fees or commission are payable by the borrowers, not by Members. Adviser fees are payable by the relevant Member as agreed with their adviser. See section 11: Fees and Other Costs and the relevant Syndicate SPDS for further details.

Investment risks Investors should be aware that there are risks in investing in mortgages. Refer to section 2: ASIC Benchmarks and Disclosure Principles and section 5: Investment Benefits and Risks.

Not Capital protected

An investment in the Fund and in a particular Mortgage Investment is not an investment in a bank deposit. It is not capital guaranteed in any way. There is no guarantee of the investment result, the return of capital, or the amounts payable to investors.

Reporting Members will receive a confirmation of investment and an annual taxation statement for taxation purposes. A copy of the Fund’s annual report, which will be available on the website at www.baccus.com.au, will be sent on request, by email or by post.

Complaints The Manager has a procedure to deal with complaints from Members.

Taxation advice The application of tax law depends on your individual circumstances. This PDS is provided as a general statement of disclosure and does not take into consideration your personal circumstances. You should therefore consult your financial adviser or tax accountant, as to the likely taxation implications of an investment.

Investment advice The Manager does not provide any financial product advice, whether in the nature of personal advice or general advice, as to the suitability of an investment in the Fund. It therefore does not advise potential investors. Investors should seek their own independent investment advice before making an investment in the Fund or in a Mortgage Investment.

How to contact us to obtain further information

Please refer to the Corporate Directory on page –iii- of this PDS.



SECTION 2:

ASIC BENCHMARKS AND DISCLOSURE PRINCIPLES

Disclosure against the ASIC RG 45 benchmarks and disclosure principles is as at 30 June 2017, unless otherwise stated, and may change during the currency of this PDS. These disclosures will be updated at least 6 monthly and if there is a significant adverse change. Updated disclosures will be provided with each Syndicate SPDS, each PDS that is obtained from us and during the currency of this PDS will become available on our website at www.baccus.com.au.

Benchmarks

.

The table below sets out briefly: • the benchmark; • how and to what extent the Manager complies with the benchmark and if not, why not; and • where additional information is to be found in this PDS.

ASIC benchmark Meeting the benchmark Section Benchmark 1: Liquidity This benchmark does not apply to the Fund. Benchmark 2: Scheme borrowing The responsible entity does not have current borrowings and does not intend to borrow on behalf of the Fund.

The Manager meets this benchmark The Manager does not have current borrowings and does not intend to borrow on behalf of the Fund.

Benchmark 3: Loan Portfolio and Diversification This benchmark does not apply to the Fund. Benchmark 4: Related party transactions The Manager does not lend to related parties of the Manager or to the Fund’s investment manager.

The Manager meets this benchmark Loans may not be made by the Fund to parties associated with the Manager. The Manager has not appointed an investment manager but if it were do so, the Manager would not make a loan to that person.

Section 10

Benchmark 5: Valuation policy In relation to valuations for the scheme’s mortgage assets and their security property, the board of the responsible entity requires: a. a valuer to be a member of an

appropriate professional body in the jurisdiction in which the relevant property is located;

b. a valuer to be independent; c. procedures to be followed for

dealing with any conflict of interest;

d. the rotation and diversity of valuers;

e. in relation to security property for a loan, an independent valuation to be obtained: i. before the issue of a loan and

The Manager does not meet this benchmark The Manager meets all aspects of this aspect other than a. On occasions it may instruct a valuer who is not a member of a professional body in the relevant jurisdiction, provided among other requirements the valuer has not less than 10 years’ experience valuing properties for mortgage purposes in the jurisdiction in which the relevant property is located. Further details of the Manager’s Valuation Policy are provided below at Disclosure principle 5: Valuation Policy.

Section 7



ASIC benchmark Meeting the benchmark Section 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 decrease in the value of security property may have caused a material breach of loan covenant.

Benchmark 6: Lending principles – loan to valuation ratios As the Fund directly holds mortgage assets: a. where the loan relates to property

development – funds are provided to the borrower in stages based on independent evidence of the progress of the development;

b. where the loan relates to property development – the Fund does not lend more than 70% of the latest ‘as if complete’ valuation of property over which security is provided; and

c. in all other cases – the Fund does not lend more than 80% of the latest market valuation of property over which security is provided.

The Manager meets this benchmark The lending policies of the Manger include that:

• for all loans secured by a first mortgage, the loan to valuation ratio (LVR) must not exceed 80.00% of the valuation of the security property as at the date of the valuation report; and

• for all loans secured by a second mortgage,

the amount of the loan, when aggregated with other prior or equal ranking mortgages, must not exceed 80.0% of the valuation of the security property as at the date of the valuation report.

For further details see Disclosure principle 6: Lending principles – Loan to valuation ratios below.

Section 7

Benchmark 7: Distribution practices The responsible entity will not pay current distributions from scheme borrowings.

The Manager meets this benchmark The Manager will not pay current distributions from scheme borrowings.

Section 8

Benchmark 8: Withdrawal arrangements This benchmark does not apply to the Fund.

Disclosure Principles The table below sets out: • the disclosure principle; • the relevant disclosures of the Manager; and • where additional information is to be found in this PDS. ASIC disclosure principle Manager’s disclosure Section Disclosure principle 1: Liquidity This disclosure principle does not apply to the Fund.



ASIC disclosure principle Manager’s disclosure Section Disclosure principle 2: Scheme borrowing If the Fund has borrowings, it must disclose various details: a. as to the borrowings. b. why the responsible entity has

borrowed the money, including whether the borrowed funds will be used to fund distributions or withdrawal requests;

c. any material loan covenant breaches;

d. the fact that amounts owing to lenders and other creditors of the scheme rank before an investor’s interests in the scheme; and

e. the risks associated with the scheme’s borrowing and credit facility maturity profile.

The Manager confirms that it has no borrowings and no borrowings are intended by it or for the Fund.

Disclosure principle 3: Loan Portfolio and Diversification This disclosure principle does not apply to the Fund. Disclosure principle 4: Related party transactions Disclose details of any related party transactions including: a. the value of the financial benefit; b. the nature of the relationship; c. whether the arrangement is on

arm’s length terms and is reasonable remuneration;

d. whether member approval for the transaction has been sought and, if so, when;

e. the risks associated with the related party arrangements; and

f. 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.

The Fund has not made any loan to any related party of the Fund. This includes the Directors and shareholders of the Manager, or any associated entity of any of them. As part of its management of conflicts of interest policy, no borrowing is permitted by a related party of the Fund. The Manager has engaged the Administrator to provide certain administration services to the Fund. This includes services relating to the management of the Mortgage Investments. The Administrator is a related party of the Manager and the appointment under the Administration Services Agreement is a related party transaction. Details of this agreement, which is on arm’s length terms, are given in the PDS.

Section 10

Disclosure principle 5: Valuation policy The responsible entity must disclose: a. where investors may access the

scheme’s valuation policy; b. the processes that the directors

employ to form a view on the value of the security property;

c. the frequency of valuations of security property; and

d. any material inconsistencies between any current valuation over the security property and the scheme’s valuation policy.

The Valuation Policy is available on the website at www.baccus.com.au. A copy will be provided on request at no charge. The processes that the directors use for a view on the value of the security property are described in the Valuation Policy and in this PDS. The Manager relies on independent valuations to form a view on the value of the security property. The frequency with which a security property must be valued, and the times at which it may also be revalued are as stated in the Valuation Policy and in this PDS. Importantly, the security property must be valued:

Section 7



ASIC disclosure principle Manager’s disclosure Section � prior to loan approval; � prior to the renewal or rollover of a loan for a

period of more than 6 months; � before commencing the marketing of the sale of a

security property where the loan is in default; and � within 2 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.

There are no material inconsistencies between any current valuations and the Valuation Policy.

Disclosure principle 6: Lending principles – loan to valuation ratios As the Fund directly holds mortgage assets the responsible entity must disclose: a. The maximum and weighted

average loan-to-valuation ratios for the scheme as at the date of reporting; and

b. Where funds are lent for property development: i. the criteria against which the

funds are drawn down; ii. the percentage (by value) of

the completion of any property that is under development as at the date of reporting; and

iii. the loan-to-cost ratio of each property development loan as at the date of reporting.

It is the policy of the Manager that the amount of the loan for a first Mortgage Investment will not exceed 80.00%% of the valuation of the security property. In the case of a second mortgage, the amount of the loan must not, when aggregated with the amount secured under a prior or equal ranking mortgage, exceed 80.0% of the valuation. Information as to the average LVR for Mortgage Investments made through the Fund, as at 30 June 2017 is provided in the PDS. The Fund does not lend funds for property development.

Section 7

Disclosure principle 7: Distribution practices As the responsible entity makes distributions from the Fund it must disclose: a. the source of the current and

forecast distributions (e.g. from income earned in the relevant distribution period, operating cash flow, financing facility, capital, application money);

b. 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;

c. if the distribution is sourced other than from income, whether this is sustainable over the next 12 months; and

d. when the responsible entity will pay distributions and the frequency of payment of distributions.

All distributions of monthly returns to the members of a Mortgage Syndicate are made solely from the income received from borrowers from the Fund in respect of that Mortgage Investment. The Manager does not anticipate that this will change in the future. The Manager has no present intention to borrow or otherwise obtain funds from which it will make income distributions to Investors.

Section 8

Disclosure principle 8: Withdrawal Arrangements The responsible entity must disclose Members of the Fund have no ability to withdraw from Section 8



ASIC disclosure principle Manager’s disclosure Section certain matters in connection with the right to withdraw from the Fund. These matters include*: a. the scheme’s withdrawal policy

and any rights that the responsible entity has to change the policy;

b. the ability of investors to withdraw from the scheme

c. Any significant risk factors or limitations that may affect the ability of investors to withdraw from the scheme;

d. how investors can exercise their withdrawal rights, including any conditions on exercising these rights;

e. 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;

f. any rights the responsible entity has to refuse or suspend withdrawal requests.

* For a full list of the matters to be disclosed, contact the Manager.

the Fund. As stated in the PDS:

• when Application Moneys are invested into a Mortgage Investment, members may not withdraw from that investment

• if the term of a loan is to be extended, or rolled

over, this must be agreed to by the Syndicate Members.

The PDS also describes how and when members of the Fund receive back investment moneys.



SECTION 3:

INTRODUCTION TO THE FUND

The purpose of this Product Disclosure Statement (PDS) is to provide you with an opportunity to invest in a Mortgage Investment through the Kremnizer Mortgage Fund (Fund). You will from time to time be offered the opportunity to invest in a specific Mortgage Investment as set out in the Syndicate SPDS that applies to that Mortgage Investment. The Fund is managed by Baccus Investments Limited (Manager). The Fund seeks to provide investors with a selection of Mortgage Investments in order to provide regular income from the interest payments received.

The Fund operates as a contributory mortgage scheme where the Member or investor selects to invest in one or more of the Mortgage Investments offered to the Member by the Manager.

What is a Mortgage Investment?

A Mortgage Investment through the Fund is any loan or debt, secured by a legal mortgage over real property. The type of loan may include advances in relation to residential, commercial and industrial properties. The mortgage is registered with the relevant State Authority and provides the investor with a power of sale over the property and with priority over subsequent registered and unregistered mortgages and any other non-secured creditors of the borrower. The Manager must operate within the approved and prudent guidelines in terms of investment selection (credit assessment), the valuation of security and the management of the investment. These guidelines, and the method in which the

Manager operates, are detailed in one or more of the following documents:

� this PDS; � the relevant Syndicate SPDS, which will

contain matters such as the details of the borrower, the credit assessment, the amount of the loan, the repayments terms, the duration of the loan, the security and the LVR;

� the Constitution, which is further described in

‘The Constitution’ in section 9: The Fund Documents; and

� the Compliance Plan, which is further

described in ‘The Compliance Plan’ in section 9: The Fund Documents.

The purpose of these guidelines is to ensure the Fund provides Members/investors with Mortgage Investments that conform to the Manager’s approved lending criteria which aim to ensure the investment has acceptable levels of credit risk and appropriate security. The extent to which the creditworthiness of the borrower is assessed and if it is, the basis of the assessment, are set out in section 7: Mortgage Investments of this PDS. To ensure investors are provided with a level of comfort that the Manager conducts its business in a proper and efficient manner the Manager is legally required to comply with its Australian financial services licence, and the Fund’s Constitution and Compliance Plan as well as with all applicable financial services laws, and the policies of ASIC.



SECTION 4: INVESTING IN THE FUND

Making an Investment in the Fund How do you apply If after reading this PDS and obtaining your independent advice you wish to invest in the Fund you should: � complete the application form that

accompanies this PDS in accordance with the instructions in section 13: How to Invest of this PDS; and

� send the application form together with any additional documentation required as set out in the form or in this PDS to the Manager with your Application Moneys.

If you are already a member of the Fund the information in Additional Applications in section 13 is relevant. How much do you pay The minimum initial investment is $1,000 and additional investments may be made in multiples of $1.00. There is no maximum amount set by the Manager. There are no entry fees payable by the investor. How do you pay You should pay your Application Moneys by electronic funds transfer (EFT) or by cheque. If you wish to pay in some other way you should contact the Manager first to ensure that your proposed method of payment is acceptable to it. Any interest in the Fund issued against Application Moneys paid other than in cleared funds, is void if the funds are not subsequently cleared within 1 month after the receipt of the application. How do you become a Member The Manager has the right to accept or reject your application in whole or in part. If the Manager accepts your application, in whole or in part:

� you will become a Member of the Fund; and

� the Manager will send you written confirmation of your application within 21 business days after your initial and each additional investment. You may also request investment statements at any time.

If your Application Moneys are received by the Manager but there is a delay in their acceptance for any reason, the Manager must nevertheless deposit the Application Moneys in a trust account, in accordance with the Corporations Act 2001, on trust for you. This account is called the Application Moneys Account. If any interest is earned in respect of the amounts so deposited then the interest is sent to you, less any fees and charges that the bank charges in accordance with its standard terms and conditions (which can vary over time) relating to these moneys.

Application for membership of a Syndicate, that is, in a particular Mortgage Investment, is made in accordance with the application form that accompanies the relevant Syndicate SPDS. The Manager has no obligation to issue to you any certificate in respect of any interest of an investor, whether as a Member of the Fund or of a particular Syndicate, but will issue written transaction confirmations. If the Manager rejects all or part of your application it will return the relevant part of your Application Moneys as soon as is practicable. Cooling Off Under the Corporations Act 2001 retail investors, as defined by the legislation, have the right to a “cooling off” period of 14 days during which they may request the repayment of their Application Moneys, unless those provisions do not apply. Investors in the Fund should note that the “cooling off” rights DO NOT apply if the managed investment scheme is not a liquid scheme, as defined in the Corporations Act 2001, at the relevant time. The Fund is not a liquid scheme and accordingly investors do not have any “cooling off” rights. Investment of Application Moneys The Application Moneys paid by a Member of the Fund and accepted by the Manager must be applied to the Mortgage Investment selected by the Member under the relevant Syndicate SPDS,



within 90 days after the receipt of the Application Moneys by the Manager. A Member’s Application Moneys becomes an asset of the Fund for the period between its acceptance and its application to the chosen Mortgage Investment. During the period between its acceptance and its application, a Member’s Application Moneys are held on trust for the Members by the Manager in the Fund Account. The Manager may invest the Application Moneys in investments authorised by the Constitution before the money is applied to the chosen Mortgage Investment. The Member is entitled to any interest that may be earned on the Application Moneys held for the Member in the Fund Account operated by the Manager after deduction of any fees payable to the Manager. For further details of the management costs and fees payable to the Manager see section 11: Fees and Other Costs of this PDS.

Additional Investments If you are a current member of the Fund and want to make an additional investment you must complete an additional investment form that you may obtain from the Manager. If you are a current Member of the Fund and a Member of a Syndicate, you may wish to invest in a new Mortgage Investment. To do this you will need to sign the relevant Syndicate SPDS. To ensure you have up to date information about the Fund when making an additional investment, the Manager will ensure you receive or have access to the current PDS and each supplementary PDS. You should keep your copy of the current PDS and any supplementary PDS, as well as any reports that the Manager provides to you, so that you may refer to these when deciding to make a further investment through the Fund.



SECTION 5:

INVESTMENT BENEFITS AND RISKS

Investing Benefits The Fund seeks to provide to its investors a regular and fixed income for a fixed period, with the capital risk minimised by the repayment of the moneys advanced to the borrower being secured by way of a registered mortgage. Further, the structure of the Fund also gives to an investor the opportunity to make its own choice as to whether its Application Moneys are applied to a particular loan secured over a particular property. The performance or characteristics of other Mortgage Investments made through the Fund, which may not suit the investor’s particular objectives or tolerance for risk, do not impact on the investors in any other Mortgage Investments. Members of the Fund have the benefit of the experienced team of the Manager who have been managing mortgages over a considerable period of time. Investing Risks

Investors should be aware that investment in the Fund may be subject to a number of risks. These are of 4 basic types: � those that relate to the lending on mortgages

generally;

� those that may apply to a particular Mortgage Investment;

� those that are specific to the Fund; and � those that are specific to an investor. • General Mortgage Lending Risks The Fund intends to arrange for the Members to lend to persons involved in a wide variety of industries and activities. While some borrowers are those who have had credit difficulties with other financial institutions, as at the date of this PDS, they are mostly borrowers who are looking for short-term finance to fund their business or investment activities. They are typically companies or individuals who operate their own business or who wish to borrow for investment purposes. It is the current policy of the Manager not to approve a loan secured over residential real estate where the borrower is a natural person. In general, the Manager will approve a loan secured by residential property where the borrower is a company and a natural person is on title. Commercial and industrial property will be accepted as security for any new loan whether the borrower is a natural person or a company. The ability of borrowers to meet mortgage interest payments and to repay the amount borrowed may be influenced by factors over which the Manager

Important Notes: In preparing this PDS and any Syndicate SPDS, the Manager has not taken into account your investment objectives, financial position or particular needs. Before making an investment decision on the basis of this PDS or any Syndicate SPDS, you need to consider or obtain advice about whether this investment is suitable in light of your personal circumstances. As indicated above, an investment in the Fund is subject to investment and other risks. They could result in delays in the repayment of, or loss of, income or capital invested. Investors should also note:

• an investment in a Mortgage Investment is an equity investment, not an investment in a bank deposit: There is a higher risk of losing some or all of their investment than is the case with a bank deposit

• the Manager is not a bank and investors do not have the benefit of any government guarantee of the amounts invested.

None of the Manager, its directors or associates, or any of the parties providing services to the Fund, guarantees the investment.



has no control, such as a lack of creditworthiness of a borrower or the state of the Australian economy generally. Adverse economic conditions, such as economic recession or depression, could adversely affect property values. Other factors such as the movement in interest rates, changes in taxation policies, the imposition of new statutory requirements, or changes in judicial interpretation and application of the law, may impact on the return that investors may receive from their investment in a Syndicate, or the enforceability of a Mortgage Investment, when compared with other possible investments. • Specific Mortgage Investment Risks The specific risks associated with an investment in a Syndicate include the possibility of:

- default by the borrower

A Member of a Syndicate (or its nominee) holds, with other Members of that Syndicate, a registered mortgage over the mortgaged property and, generally, there is minimal capital risk to the Member of a Syndicate.

If the borrower has defaulted and the mortgaged property is sold, there may be a delay in the repayment of the capital, even if no loss is sustained.

There is also a risk that the borrower does not repay the loan (or the interest) and the sale of the property secured by the mortgage does not realise sufficient funds to repay the mortgage and the borrower is unable to, or fails, to make sufficient further payment.

Further, given that the underlying security is property that is relatively illiquid, or changes in economic conditions or the creditworthiness of the borrower pose refinancing difficulties, there is a risk that substantial delays could occur between the loan going into default and the sale of the property. This delay could be increased should the borrower elect to contest the sale through the courts. Notwithstanding that interest, at the higher rate would continue to accrue during the above process, interest may not be paid to the Manager and in these circumstances would not be available for distribution to Syndicate Members. Defaults are managed in accordance with the procedures described in section 7: Mortgage Investments. The level of defaults as at the date of this PDS is also stated in that section. There may also be delays in receiving interest payments if the borrower does not pay within the time provided by the mortgage.

As indicated above, the failure of the borrower to pay interest on a timely basis, or at all, may arise from a number of reasons. These may include a refusal to pay. The Manager’s policy as to the assessment of the creditworthiness of a borrower is set out in Section 7: Mortgage Investments. Investors should note that as at the date of this PDS it is the practice of the Manager to obtain credit checks of borrowers and guarantors. If the borrower does not pay within the time provided by the mortgage, the borrower is required to pay interest at a higher rate. If the Manager receives payment at the higher rate of interest, the Manager will pay the higher rate of interest to the Members of the relevant Syndicate. - overstated valuation Further, if a borrower defaults on the payment of interest required under the Mortgage Investment, and the Syndicate Members direct the Manager to enforce the Mortgage Investment, the Members of a Syndicate could incur a capital loss if the property value is wrong or has significantly decreased since the date of the valuation of the property taken for the purposes of the Mortgage Investment. There is also a risk that even if a valuation is negligent or otherwise defective, liability may be denied by the valuer’s insurer. This risk is minimised by the policy referred to in the Constitution that money lent to a borrower on a mortgage must not exceed 80.0% of the value of the mortgaged property at the valuation date as required under the Constitution for the purpose of making the Mortgage Investment. - second mortgages Investors should also be aware that in general terms an investment in a second mortgage may carry risks higher than an investment in a first mortgage. This is because the first lender’s rights of repayment take priority over those of the second lenders. Second mortgages usually carry higher interest rates than first mortgages. It is important to keep in mind one of the main rules of investing: the higher the potential reward, the higher the risk of losing money. The Manager seeks to reduce any higher risk for a second Mortgage Investment by requiring that the aggregate of the amounts lent on both the first and the second mortgages does not exceed 80.0% of the valuation of the security property. - inadequate insurance

There may be a shortfall where no insurance cover is held over the improvements to the security or where insurance cover is held but



proves to be insufficient to recover the full amount invested in the Syndicate. Investors must also be aware that if the loan is in default and the Manager enters into possession of the security property for the Syndicate, insurance may not be obtainable at a commercially acceptable rate. If this occurs, the Manager will seek the directions of the Syndicate Members. This may include that the Syndicate Members effect insurance in their own names. - mortgage insurance Loans made to borrowers through the Fund are not mortgage insured. Investors should note that this means that no mortgage insurance policy proceeds are available to meet any shortfall in the payment of interest or the repayment of the loan principal. - documentation risk There is a risk of deficiency in the accuracy of documentation, including the mortgage documentation entered into for the Syndicate, which could, in certain circumstances, adversely affect the recoverability of monies invested by the Syndicate and reduce the value of your investment. There is also the risk of unauthorised dealing with documents of title. Subject to land titles office requirements in different Australian states and territories, the title deeds and security documents are held by the Manager in safe custody, until the loan is fully repaid. - litigation risk This is the risk that any lender faces when it takes legal action to enforce the mortgage by the sale of the security property. Borrowers may defend the enforcement proceedings successfully in whole or in part, in light of judicial interpretation of the borrowing and enforcement arrangements, which may vary over time. In addition, Courts are vested with wide discretionary powers, and these may be exercised in favour of the borrower. - National Consumer Credit Protection Act (NCCP Act) – Regulated loans The Manager is not, and has no present intention to be in the future, licensed to make loans that are regulated under the NCCP Act. Nevertheless, a court may for some reason hold that a loan is so regulated. In such a case, the actions that the Manager must take in enforcing such a loan are more demanding, and may take longer to implement, than in respect of unregulated loans. In general terms, there are limits on the amount of default interest that may be charged and the

actions that the Manager may have to take in enforcing a mortgage regulated by the NCCP Act are more demanding and may take longer to implement. In addition, the terms of the loan may be changed if the borrower is having or will have trouble making payments by reason of financial hardship caused by illness, unemployment or other reasonable cause. - External dispute resolution risk

The Manager is a member of an ASIC approved external dispute resolution scheme (EDR scheme), in accordance with its obligations in respect of the Members. Such an EDR scheme may, in addition to considering complaints by Members, also consider any complaint that is lodged by a borrower from the Fund, even if the borrower does not have a NCCP Act regulated loan. There is now the additional risk that either during the course of a loan, or more typically when the Manager seeks to enforce the loan, the borrower lodges a complaint with the EDR scheme that has the effect of “freezing” any enforcement action that is being taken or delaying any enforcement action that may be taken, while the EDR scheme considers the complaint. Investors should note the information as to the possible termination of a Syndicate in Section 7: Mortgage Investments. If the Manager has identified any risks that are specific to a particular Mortgage Investment these will be stated in the Syndicate SPDS that applies to that Mortgage Investment. • Fund risks These are the risks that an investor faces, from having invested in a Mortgage Investment through the Fund, which are in addition to those that it may face if it made the loan to the borrower directly. They include: - operational risk Operational risk includes the possibility of fraud, systems failure, regulatory requirements, documentation risk, legal issues and other unforeseen circumstances. - conflicts of interest No loans may be advanced to parties related to the Manager or its associates. However, persons related to the Manager or its associates may be Members of the Fund.



The Manager also engages the services of the Administrator, which wholly owns all the shares in the Manager, and thus is related to the Manager. Any potential or perceived conflict of interest is addressed in accordance with the Manager’s management of conflict of interest policy. Investors are referred to the information in ‘Management of Conflicts of Interest and Related Party Transactions’ in Section 10: Parties involved in the Fund. - Fund borrowing and gearing risk

These are the general risks that an investor in any scheme may face if the scheme were to borrow from a third party and secure the repayment against the assets of the scheme. The risk would include that loan facilities may not be renewed at maturity or would require the liquidation of assets to repay the loans. While the Manager has the power to borrow under the Fund Constitution, it has not done so as at the date of this PDS and has no current intention to do so.

Specific investor risks Not every investor is the same. Some features of the Fund and of a Mortgage Investment may raise risks to some investors while not to other investors. These features include: - no right of withdrawal A Syndicate Member’s funds advanced to a borrower are not generally available during the term of a specific loan, although the interest in a Syndicate may be transferred to another potential investor with the consent of the Manager. Investors should take this into account before deciding to become a Member of a Syndicate of the Fund. - diversification An investment in one Syndicate is entirely separate from an investment in another Syndicate. Accordingly, a default by a borrower under its loan will only impact on the Members of this Syndicate. Investors may diversify their risk by investing in a range of Mortgage Investments.



SECTION 6: FUND OVERVIEW

Constitution of the Fund

The Kremnizer Mortgage Fund has been established by a deed (Constitution) made by the Manager, Baccus Investments Limited, and is a registered managed investment scheme. The Fund is operated by the Manager, as the responsible entity of the Fund. Operation of the Fund

The operation of the Fund is governed by the requirements of the Corporations Act 2001, the Constitution and the Compliance Plan. The Fund operates as an umbrella mortgage fund under which an investor will become:

� a Member of the Fund; and

� a Member of a Syndicate.

Thus, a person seeking to make an investment in a Mortgage Investment through the Fund will participate in the Fund in two stages: Stage I – Membership of the Fund

When the Manager accepts the application, receives the Application Moneys in clear funds and has all of the identification information that it needs, the applicant has an interest in and becomes a Member of the Fund. This process is described in section 4: Investing in the Fund of this PDS.

The rights that attach to this interest are set out in the Constitution and are summarised in section 8: Your investment in the Fund – Rights of Members of this PDS. Stage II – Membership of the Syndicate The Member will be offered the opportunity to invest in a Mortgage Investment through a separate Syndicate SPDS. Each Syndicate SPDS is issued as a supplementary document to this PDS and will set out details of the particular Mortgage Investment, such as:

� the amount that is to be advanced;

� the property offered as the mortgage security; and

� the term of the mortgage and the rate of interest payable.

It will also set out the aggregate amount to be contributed by Members wishing to be part of the Syndicate.

Upon acceptance by the Member of the terms of the Syndicate SPDS, the Member’s Application Moneys will be advanced to the borrower under the Mortgage Investment selected by the Member. The decision to invest in a particular Mortgage Investment is made by the investor, not the Manager. There may be: � only a single Member of a Syndicate in the

case where a single Member contributes the entire amount of the Mortgage Investment; or

� a number of Members who contribute to the

same Mortgage Investment. A Member of the Fund becomes a Member of a Syndicate (Syndicate Member) by lodging with the Manager the application form that accompanies the Syndicate SPDS relevant to the Mortgage Investment that is described in the Syndicate SPDS.

Fund Property

The assets of the Fund, as distinct from the assets of Members, comprise: � the Application Moneys of Members of the

Fund, pending investment in the relevant Mortgage Investment; and

� income derived from the investment of the

Application Moneys, as permitted under the Constitution, not applied to a Mortgage Investment.

All Fund assets are held on trust for the Members by the Manager in accordance with the Corporations Act 2001 and the Constitution.



The Manager is responsible for identifying the interest of each Member in the Fund assets. Fund assets, being cash, are held in two accounts for the Fund, comprising the Fund Account and the Mortgage Interest Account. These accounts are maintained by the Manager with Westpac Banking Corporation or such other bank as the Manager may direct. The accounts earn interest at the then prevailing interest rates offered by the bank. This interest rate will vary from time to time in accordance with changes in the official interest rates.

Syndicate Property

Property of a Syndicate, being the Mortgage Investment, is owned by the Members of the relevant Syndicate and is not held by the Manager on trust for Members of the Fund. Each Syndicate Member is entitled to be registered on the title to the mortgage property, or to have it registered in the name of its nominee as provided in the relevant Syndicate SPDS. Where the number of Syndicate Members is 3 or more, the security documents may be registered in the name of the nominee. Where specified in the Syndicate SPDS, each Syndicate Member authorises the Manager to register the Mortgage Investment on the title of the property in the name of its nominee as mortgagee. The Syndicate Members hold the legal and beneficial interest in the Syndicate’s Mortgage Investment as tenants in common. The Mortgage Investment is an asset of Syndicate Members not an asset of the Fund. Subject to relevant land titles office requirements in different Australian states and territories the documents of title will be held in safe custody by the Manager in accordance with the terms of the Constitution. Accounts and Audit The Manager must establish and maintain proper books of accounts which accurately record all receipts and outgoings in relation to the Fund and the assets. The accounts must be accessible to the Fund auditor appointed by the Manager. The Fund auditor must audit the accounts at the time

and as required by the Corporations Act 2001 and the costs of the Fund auditor may be paid out of the assets. Termination of the Fund

The Fund must be wound up and terminated on the first to occur of the following dates: � if the Members by extraordinary resolution so

determined the date the extraordinary resolution is passed;

� if the Manager considers it to be in the

interests of the Members, the date the Manager so determines;

� the vesting date; or � if wound up pursuant to an order of a court,

the date of that order or such other date as the court determines.

The vesting date is the date 80 years after the commencement of the Fund. The Manager must as soon as practicable after the termination date: � convert the assets into money; � realise any Mortgage Investment; � pay the liabilities of the Fund and provide for

any contingent liabilities or liabilities not yet accrued;

� pay the balance of the assets to the Members

in accordance with the provisions of the Constitution;

� pay the proceeds of the realisation of any

Mortgage Investment to the Syndicate Members of the relevant Syndicate in accordance with the provisions of the Constitution.

In winding up the Fund, the Manager may postpone the sale of any of the assets for such time as it thinks fit, and is not responsible for any loss attributable to any postponement.



SECTION 7: MORTGAGE INVESTMENTS

What Mortgage Investments are made available The Manager envisages that Members will be offered the opportunity to invest in a range of Mortgage Investments secured against property which may comprise:

� residential properties (urban or rural);

� commercial properties;

� industrial properties; or

� vacant land for residential, commercial or industrial purposes.

As at the date of this PDS it is the policy of the Manager that it will not offer to investors a Mortgage Investment that is secured against a development or construction property. While the details of a Mortgage Investment will be in the relevant Syndicate SPDS a mortgage will generally have the following characteristics: Security: registered mortgage over real

property or in the case of company title by a mortgage over shares

Location: New South Wales, Queensland Victoria or Western Australia

Purpose: business or investment purposes

Due date for interest payments:

the

same calendar day of each month as the day of the month on which the loan is made

Interest rate:

fixed for the period of the loan

Standard term:

12 or 24 months

LVR: not exceeding 80%

If appropriate to the nature of the property, the Manager requires and has monitoring systems in place to ensure that: � the property is adequately insured before the

loan is made; and

� the insurance is renewed before each cancellation date.

On occasions the interest payable in respect of a loan may be prepaid by the borrower as part of the capital advanced. The Manager will not make available to Members of the Fund any loan where:

� the borrower is not at arm’s length; or

� the borrower is not independently advised.

It is also the policy of the Manager not to make “specialty” loans, that is, a loan that is secured over assets such as hotels, caravan parks, nursing homes, and the like. What Mortgage Investments are held The information below provides an overview of the 91 Mortgage Investments held through the Fund that were current as at 30 June 2017. - First and second mortgages The following table shows the first and second ranking mortgages by number and value: Mortgage Ranking

No % of total number

Value $ % of total value

First 87 95.60% $116,483,720 98.71% Second 4 4.40% $1,525,000 1.29% Total 91 100.00% $118,008,720 100.00%

� First Mortgages

- Types of security for first mortgages Loan Type No % of

total number


Residential 75 86.20% $97,946,720 84.08% Commercial 4 4.60% $4,760,000 4.09% Industrial 8 9.20% $13,777,000 11.83% Total 87 100.00% $116,483,720 100.00%



- Location of first mortgage security properties

Location

No

% of total number

Value $

% of total value

Greater Sydney Area 42 48.28% $ 71,785,000 61.63% Newcastle Hunter Area Central Coast 13 14.94% $ 23,184,000 19.90%

NSW -other 7 8.04% $ 2,526,000 2.17% VIC 7 8.05% $ 12,798,000 10.99% Queensland 18 20.69% $ 6,190,720 5.31% Total 87 100.00% $116,483,720 100.00%

- LVR ranges of first mortgage loans

Range of LVR

No % of total

number


Less than 50%

13 14.94% $24,076,000 20.67%

50% - 59% 20 22.99% $29,845,000 25.62% 60% - 69% 38 43.68% $43,992,360 37.71% More than 70%

16 18.39% $18,640,360 16.00%

Total 87 100.00% $ 116,483,720 100.00%

- Other features of first mortgages The average Mortgage Investment held on first mortgage security at 30 June 2017 was $1,338,893 and the average LVR was approximately 59.69% (calculated on the basis of the total of the LVRs divided by the total number of loans). The amount of the total of the loans as a percentage of the total security value was approximately 55.69%. The largest separate loan represented about 7.30% of the total loans secured by first mortgages and the highest aggregate loan to any borrower was $8,500,000.

� Second Mortgages Types of security for second mortgages Loan Type No % of

total number


Residential 4 100.00% $1,525,000 100.00% Commercial - - - - Industrial - - - - Vacant Land - - - -

Total 4 100.00% $1,525,000 100.00%

- Location of second mortgage security properties

Location

No

%

of total number

Value $

% of total

value

Greater Sydney area 2 50.00% $920,000 60.33% Newcastle Hunter area/ Central Coast 1 25.00% $170,000

11.15%

NSW - other - - - - Victoria 1 25.00% $435,000 28.52% Queensland - other - -

Total 4 100.00% $1,525,000 100.00%

- LVR ranges of second mortgage loans

Range of LVR

No % of total

number


Less than 50% -- - - - 50% - 59 % 1 25.00% $620,000 40.65% 60% - 69% 2 50.00% $735,000 48.20% More than 70% 1 25.00% $170,000 11.15%

Total 4 100.00% $1,525,000 100.00%

Other features of second mortgages The average Mortgage Investment held on second mortgage security at 30 June 2017 was $318,250 and the average LVR was approximately 63.86% (calculated on the basis of the total of the LVRs divided by the total number of loans). The amount of the total of the loans with a second mortgage as a percentage of the total security value relating to those loans was approximately 56.03%. Borrowers and Lending

Persons seeking to borrow money will, from time to time, approach the Manager and submit an application to the Manager for funding. These applications will be submitted to the Lending Committee of the Manager for consideration and possible approval.

The Lending Committee has the primary responsibility to ensure that: � appropriate credit or other checks are

undertaken in relation to the borrower; � the Manager has the benefit of a valuation of

the security;



� the type, quality and value of the security provided complies with the Constitution; and

� legal title to the Mortgage Investment is

vested in the Syndicate Members (or their nominee).

Credit worthiness of borrowers The creditworthiness of the borrower is considered by the Lending Committee in accordance with the lending criteria in the Compliance Plan and the Manager’s operations manual. Each Syndicate SPDS will disclose whether, and if so, the basis on which the Lending Committee has assessed the creditworthiness of the relevant borrower. In respect of any borrowing application, the Manager’s Lending Committee will consider whether a credit reference check by a credit reference organisation or bureau is to be undertaken in relation to the borrower and any guarantor. As at the date of this PDS it is the practice of the Manager to obtain credit checks of borrowers and guarantors. The Lending Committee may also (but has no obligation to) consider the capacity of the borrower to service the loan in accordance with the proposed mortgage conditions in terms of timing and amount. The Lending Committee may require that the loan application be accompanied by such documentary and other evidence as to the statement of financial position of a corporate borrower or guarantor, or as to the assets, liabilities and income of an individual borrower or guarantor, as prescribed by the board of the Manager from time to time. The Lending Committee usually requires the Manager to obtain a statement from the borrower’s accountant as to the borrower’s ability to service the loan. The ability of the borrower to service the loan is assessed on an individual basis and takes into account the strength of each borrower’s overall financial position as disclosed in the loan application form. Where the borrower pre pays interest on the loan, the Lending Committee does not require a statement from the borrower’s accountant as to the borrower’s ability to service the interest payment component of its obligations. Valuations All borrowing applications that are approved are subject to a valuation of the security property by a property valuer who is approved and appointed as a Panel Valuer of the Manager. The valuer must

be independent of the Manager and subject to the exception stated in Benchmark 5: Valuation Policy in Section 2: ASIC Benchmarks and Disclosure Principles and as stated in the relevant Syndicate SPDS, must be a member of an appropriate professional body in the State or Territory in which the property is situated. For further details see the Manager’s Valuation Policy which is available on the website at www.baccus.com.au. A copy will be provided on request. Valuers must have current professional indemnity insurance that extends to providing a valuation for the purpose of the loan made through the Fund, unless the Lending Committee waives this requirement and discloses that waiver in the relevant Syndicate SPDS, so that each Member of the Syndicate also agrees to waive this requirement, in writing, before the loan is made, by signing the application form that is attached to that Syndicate SPDS. The valuation must not be more than 3 months old at the time when the loan is made. Valuations must also be obtained prior to the renewal or rollover of a loan for a period of more than 6 months, before commencing the marketing of the sale of a security property where the loan is in default; and within 2 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. All valuations must be on an ‘as is’ basis using the following methodologies: For residential loans, vacant land and rural properties, the value is defined as the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion. For commercial, industrial and retail properties, the fundamental method of valuation is the capitalisation of net rentals supported by comparable sales. Loan to Valuation Ratios It is the policy of the Manager that the amount of the loan for a first Mortgage Investment will not exceed 80.0% of the valuation of the security property. In the case of a second mortgage, the amount of the loan must not, when aggregated with the amount secured under a prior or equal ranking mortgage, exceed 80.0% of the valuation.



The Syndicate SPDS will disclose the LVR applicable to the relevant Mortgage Investment. Insurance

Before settling a loan, the Manager must also ensure that the property is adequately insured. Its policy is that the insurance must be for an amount not less than the amount that the valuer recommends as the replacement value of the improvements for insurance purposes. For each loan, this amount will be set out in the relevant Syndicate SPDS. Mortgage Investments made to Related Parties As at 30 June 2017 and the date of this PDS there are no loans made to the Manager or any of its related parties. Such loans are not permitted under the Manager’s conflicts of interest policy.

Management of the Mortgage Investment

The loans will be managed by the Manager and Members of a Syndicate are paid interest in the proportion in which those Syndicate Members have contributed to the relevant Syndicate. Any loss of interest or capital is shared by the Members of that relevant Syndicate – not by other Members of the Fund. The Manager must manage the Syndicate in accordance with the requirements of the Constitution, this PDS, the relevant Syndicate SPDS and the Corporations Act 2001. On becoming a Member of a Syndicate, each Syndicate Member appoints and authorises the Manager to manage the Member’s Syndicate interest in the Mortgage Investment as the agent for that Member. That appointment cannot be revoked by the Syndicate Member but ceases on the termination of the Syndicate. The Syndicate Members, for the convenience of management and administration, give to each of the Manager, and any director of the Manager, attorney or substitute nominated by the Manager (each severally an “attorney”) an irrevocable power of attorney to execute on behalf of the Syndicate Member from time to time documents relating to the registration, discharge and enforcement of the Mortgage Investment and any other dealing the attorney reasonably considers necessary, including the granting of any consent. Each Syndicate Member indemnifies and must keep the attorney indemnified against any liability, loss, cost, expense or damage arising from the lawful exercise of any right by the attorney under the power of attorney granted by that Syndicate

Member. Each Syndicate Member must execute and deliver such further instruments and do such further acts and things as may be reasonably required by the Manager to carry out its duties and functions under the Constitution, this PDS and the relevant Syndicate SPDS. As part of its management functions the Manager: � collects and receives all money arising from

the Mortgage Investment; and � collects and receives the proceeds resulting

from the enforcement of any Mortgage Investment.

The Manager has engaged the Administrator to provide certain administration services to the Fund. This includes services relating to the management of the Mortgage Investments. The Administrator has the necessary systems in place to provide real time reporting to the Manager, the Members of the Fund and Syndicate Members, regarding the status of any Mortgage Investment, including mortgage interest and repayment receipts, property insurance cover and arrears.

Default Management Borrowers may be late in paying interest or in meeting their repayment obligations, or may be unable to do so. The Manager has a well-developed policy of pursuing defaults and arrears and for instituting appropriate recovery action. These include:

� monitoring all due dates for payments and billing any overdue payments;

� following up overdue payments where appropriate, usually within 6 business days after the due date for payment of interest or repayment of capital;

� issuing notices if payments remain in arrears for 30 days (or such other period as the Manager considers is appropriate in the circumstances). In most cases our in- house solicitors prepare and issue the appropriate notices;

� instituting legal proceedings for possession of the security property if the borrower fails to comply with the issued notices;

� selling the security property once a possession order has been obtained.

For the purpose of the information below, a loan is considered to be in “default” if either the payment of interest is more than 30 days in arrears or the



loan has not been repaid within 30 days after the due repayment date. In either case, the Manager will notify the relevant Syndicate Members. It will also notify them within 30 days after the commencement of any enforcement action and of the outcome of those proceedings.

As at 1 September 2017, there were 3 loans on 1st

mortgage security where interest payments were more than 30 days in arrears. This represents approximately 3.75% by number or 6.42% by value of the then current loans.

The following information should be noted:

� default recovery action has been taken in all 3 loans; and

� over the 15 years to 30 June 2017, the Fund has originated 1st mortgages totalling $1,006,890,579. The amount of principal losses on 1

st mortgages incurred by

Syndicates has been 0.57% ((calculated by dividing the dollar value of the losses by the total dollar value of the loans originated) or 3.21% (calculated by dividing the number of loans with principal losses by the total number of the loans originated).

The Manager is not in a current position to state the outcome of these recovery proceedings in respect of any of these loans.

As at 1 September 2017, there were no loans on 2

nd mortgage security where interest payments

were more than 30 days in arrears.

Over the 15 years to 30 June 2017, the Fund has originated 2nd mortgages totalling $53,665,450. The amount of principal losses on 2

nd mortgages

incurred by Syndicates during this period was 5.71% (calculated by dividing the dollar value of the losses by the total dollar value of the loans originated) or 12.12% (calculated by dividing the number of loans with principal losses by the total number of the loans originated).

Important Note: The past performance as to the rate of recovery of outstanding loan principal is not an indication of any future performance in this regard and must not be treated as such by investors. All applicants must be aware that any loss that may occur by reason of a default under the Mortgage Investment is borne by the Members of that Syndicate only and not by other Members.

Realisation and Enforcement of Mortgage Investments

Where an enforcement right in respect of a Mortgage Investment becomes exercisable by

Syndicate Members, whether by the default of the borrower or the occurrence of an event that constitutes a default, the Syndicate Members are entitled to exercise that right subject to the general power of management of the Mortgage Investment conferred on the Manager by each Syndicate Member to the Manager. The Manager may call a meeting of all Syndicate Members before it exercises a right or power of enforcement and those Syndicate Members may direct the Manager by special resolution to exercise its powers in a particular manner. If the Syndicate Members do direct the Manager to exercise a power in a particular way, the Manager may require that it be indemnified against any losses, costs, expenses, claims or liabilities which the Manager may incur following that direction, as a condition of its doing so. Since each Syndicate is separate from any other Syndicate, a default under one Mortgage Investment is borne by the relevant Syndicate Members and is not shared by the members of any other Syndicate.

As part of its services to the Manager, the Administrator will undertake, as agent for the Manager and in accordance with the terms of the Administration Services Agreement, many of the default management and realisation and enforcement of Mortgage Investment obligations. Termination of Syndicate The Syndicate is terminated and each Syndicate Member ceases to be a Syndicate Member where the proceeds of realisation of the Mortgage Investment are distributed to the Members of that Syndicate. However, the Constitution of the Fund also provides a process for the termination of a Syndicate in respect of which the Mortgage Investment is in default. Under this process either the Manager, if it considers that it is in the interests of the Syndicate Members that the Syndicate terminate, or the holders of 50% of the interests in the Syndicate wish this to occur, may seek the termination of the Syndicate. Termination is subject to a number of conditions, including that the proposal is approved unanimously by the Syndicate Members. As a result of termination the Manager will cease to manage the Mortgage Investment, the Syndicate Members themselves will manage the process of enforcement and realisation and the Syndicate will no longer be part of the Fund. This power to take the Syndicate outside the Fund is designed primarily to assist in a situation where the enforcement of a Mortgage Investment which is



not a NCCP Act regulated loan is nevertheless impeded by a referral by the borrower to an EDR Scheme, as further described in Section 5: Investment Benefits and Risks.

Ethical and other Considerations

The Manager does not take into account labour standards, environmental, social or ethical considerations when selecting, retaining or realising assets of the Fund or a Mortgage Investment



SECTION 8: YOUR INVESTMENT IN THE FUND

Investment Objectives The Manager seeks to provide a regular income stream for a fixed term with minimal capital risk to investors. To achieve this objective it lends to borrowers with the loan secured by a registered mortgage over the relevant property or in the case of company title by a mortgage over shares. The mortgage requires interest to be paid by the borrower on a monthly basis, unless the relevant Syndicate SPDS provides for a different period. Payment of Income Interest, calculated at the rate disclosed in the relevant Syndicate SPDS, is payable monthly in arrears to the Manager by the borrower. The due date for payment is the same calendar day in each month as that on which the loan was made. Mortgage interest when paid by the borrower is credited to the Mortgage Interest Account held by the Manager for its Members. Each Syndicate Member has an immediate beneficial interest vested absolutely in the net income to the extent of the Member’s present entitlement to that share of the net income. In accordance with the Constitution, the Manager must distribute the income to which the Member is presently entitled within 30 days after the date of receipt. However, the Manager anticipates that distributions will occur within 7 days after the interest payments are received from the borrower. The tables below provide information as to the range of distribution rates to which Members of Syndicate Mortgage Investments have received on mortgages current at 30 June 2017: - Distribution rates ranges - first mortgage loans

Interest rate *

No % of total

number


Less than 8.00%

42

48.27%

$44,313,000

38.04%

8.00% - 8.99 %

23

26.44%

$14,985,720

12.87%

9.00% - 9.99 %

4

4.60%

$6,420,000

5.51%

More than 10.00%

18

20.69%

$50,765,000

43.58%

Total 87 100.00% $116,483,720 100.00%

* This is the rate net of management fees and taxes.

- Distribution rates ranges - second mortgage loans

Interest rate *

No % of total

number

Value $ % of total Value

Less than 8.00% - - - - 8.00% - 8.99 % - - - - 9.00% - 9.99% 1 25.00% $170,000 11.15% More than 10.00% 3 75.00% $1,355,00 88.85%

Total 4 100.00% $1,525,000 100.00%

* This is the rate net of management fees and taxes. Important Notes: � The above figures exclude additional higher

interest that may apply from time to time by reason of default of the borrower and are based on the lower rate in the mortgage contract and the relevant Syndicate SPDS.

� Distribution rates offered to investors vary over time, although they usually reflect movements in the official interest rate. In exceptional circumstances, the distribution rates would have fallen outside the above ranges. Past performance is not indicative of future performance.

Syndicate Members are entitled to receive all “default” interest payments received by the Manager from a borrower who must pay an additional amount if an interest payment is not paid when due. This additional amount will normally range between 2.5% and 5.0% of the amount lent. However, it will be as provided in the relevant Syndicate SPDS. In certain situations, Members of the Fund may be entitled to other income:

� if interest is earned on the Application Moneys Account, and the application for an interest in the Fund is not accepted, the relevant Member is entitled to that interest, after the deduction of fees. For further details see section 4: Investing in the Fund.

� if interest is earned on the Fund Account (during the period between the acceptance of the Application Moneys and its application



to a Mortgage Investment) the Members are entitled to that interest pro rata (after deducting any fees) according to their interest in the Fund Account. Distributions of that income, if any, must be made to the Members entitled to it within 45 days after the date of its receipt by the Manager.

Repayment of Investment

The Fund’s Constitution provides that a Mortgage Investment must be repayable no later than 3 years after the investment date unless repayable on demand or payable at a later date as specified in the relevant Syndicate SPDS. As indicated above, the term of each loan will be stated in the Syndicate SPDS, and will usually be for 12 or 24 months. Rights of Members

An interest in the Fund entitles a Member to: � attend and vote at meetings of Members. A

Member has 1 vote for each $100 paid by way of Application Moneys;

� receive the Member’s proportionate share of

the net income (if any) of the Fund Account after deduction of fees to which the Manager is entitled;

� receive the Member of a Syndicate’s

proportionate share of the net income of the Mortgage Interest Account;

� subject to the Syndicate SPDS, participate

with other Members of a Syndicate in the division of proceeds of the realisation or repayment of any Mortgage Investment as a tenant in common with each other Member of the Syndicate; and

� participate in the division of any surplus of

assets or profits of the Fund if the Fund is terminated.

Withdrawal Rights

No Member of a Syndicate has a right to withdraw from the Fund or a Syndicate. Subject to obtaining relief from ASIC, the Manager may, however, repay a Member of a Syndicate all or part of the Application Moneys where an exceptional circumstance, such as hardship, is established to the satisfaction of the Manager and the Application Moneys have not yet been applied to a Syndicate.

Transfer Rights A Member of a Syndicate may transfer its interest to another person only with the approval of the Manager. A transfer of any interest is not effective until the Manager registers it in the register of Fund interests. The Manager may refuse to register a transfer without giving any reason for refusal. The Manager may charge a fee and its administrative costs and expenses, as set out in section 11: Fees and Other Costs of this PDS. Liability of Members

The liability of a Member of the Fund under the Constitution is limited to the amount paid as its Application Moneys. The Member must, however, meet any tax liability arising from a Member’s action or inaction, or its liability for payments due and payable to the Manager. The Member of the Fund need not indemnify the Manager if there is a deficiency in the assets of the Fund and is not liable for the claim of any creditor of the Manager in relation to the Fund. However, you should be aware that no complete assurance can be given with regard to the above as the ultimate liability of an investor as a Member of a scheme has not been determined by the courts. Where the Manager acts at the direction of the Members of a Syndicate, those Members may be required to indemnify the Manager in the circumstances referred to in ‘Realisation and Enforcement of Mortgage Investments’ in Section 7: Mortgage Investments. Limitation on Members

As a Member you may not: � interfere with the rights or powers of the

Manager in its dealings with the assets and the Fund;

� exercise any rights, powers or privileges in

respect of any part of the assets; � lodge a caveat in respect of any property

comprised in the assets; or � require the transfer of any property comprised

in the assets of the Fund. Reporting to Members

� The Manager will provide to Members a

receipt for the Application Moneys and such



written transaction confirmations as are required by the Corporations Act 2001.

� When your Application Moneys are applied to

a specific Mortgage Investment, you will receive a Member Syndicate Statement of the mortgage which will confirm the terms on which the loan has been advanced to a borrower and of the registration of the mortgage.

� Syndicate Members will be notified monthly as

to mortgage interest received and distributed. � If a borrower is in default the Manager will

advise the relevant Syndicate Members and of the action it has taken, as their agent, in enforcing the terms of the mortgage and if necessary the realisation of the security.

� In accordance with the Constitution and the

Corporations Act 2001, Members will have access to or receive periodic financial statements as to the Fund and in relation to the Syndicate.

A Member may check the status of its investment at any time during business hours by contacting the Manager. The contact details are set out in the Corporate Directory on page -iii- of this PDS. Continuous disclosure and updated information The Fund is a disclosing entity under the Corporations Act 2001. As such it is subject to regular reporting and disclosure obligations under the Corporations Act 2001.

Copies of documents lodged with ASIC in relation to the Fund may be obtained from, or inspected at, any ASIC office. The Manager will, on request, provide to Members, free of charge, a copy of the annual financial report most recently lodged with ASIC for the Fund and any half yearly financial reports for the Fund.

Information relating to the Fund that changes and is materially adverse information will be disclosed in accordance with the Manager’s continuous disclosure obligations. If the information relates to the Fund as a whole it will be disclosed on the Manager’s website at www.baccus.com.au or in supplementary product disclosure statement or the Manager will issue a replacement or new product disclosure statement. If the information relates to a particular Syndicate then the Manager will write to the Syndicate Members.

You are encouraged to check the Manager’s website regularly to obtain updated information and to check that this PDS is current.

The contact details are in the Corporate Directory on page -iii- of this PDS.

Updated benchmark disclosures

As stated in section 2: ASIC Benchmarks and Disclosure Principles the Manager anticipates that it will update the information the extent to which the benchmarks are met at any time, and if not, why not, on a regular basis, and at least every 6 months. This information will be made available to both the Members of the Fund and applicants under this PDS. It will be available on the website of the Manager at www.baccus.com.au. Meetings of Members

The Manager may at any time convene a meeting of Members. It will also convene a meeting of Members if requisitioned by the lesser of at least 100 or 5% of the Members. Each Member is entitled to attend and vote at a meeting unless prohibited from doing so under the Corporations Act 2001. All Members are entitled to receive notices of all meetings. Complaints and Dispute Resolution

The Manager seeks to deliver to investors an optimal level of client service and is committed to handling any complaint quickly, fairly and in strictest confidence. It welcomes suggestions for service improvements. If a Member does have a complaint regarding any aspect of the Manager’s services the Member should contact the Manager. The Members are encouraged to put the complaint in writing. Any complaint, whether oral or in writing, is handled in accordance with the internal policy and procedures that the Manager has adopted. A copy of the policy and procedures may be obtained from the Manager. If the complaint is not resolved to the Member’s satisfaction in accordance with the policy and procedures, the Member has a right to refer the matter to an external complaints resolution scheme. The Manager is a member of Credit and Investments Ombudsman Limited (CIO). CIO may be contacted by writing to PO Box A252, South Sydney, NSW 1235, or by telephoning on 1800 138 422. More information about CIO is obtainable on its website at www.cio.org.au. The Member may also contact ASIC by telephone on 1300 780 885.



Privacy and personal information By applying to invest in the Fund or a Syndicate, the applicant consents to information about them being used by the Manager for the purposes for which it was provided, the provision of investment services by the Manager. The collection of personal information may also be required under anti-money laundering and counter-terrorism financing legislation. The Manager is committed to protecting the privacy of applicants and Members. The Manager in its capacity as the responsible entity of the Fund, is bound by the Privacy Act 1988 (Privacy Act) as amended from time to time and the principles and procedures to be adopted under the legislation. The Privacy Act regulates, among other things, the collection, storage and security, quality, management, correction, use and disclosure of personal information. The application form accompanying this PDS requires you to provide personal information. The Manager, and any service providers to the Manager or the Fund, may collect, hold and use your personal information in order to assess your application, service your needs as a client or investor, provide facilities and services to you, the Manager or the Fund and for other purposes permitted under the Privacy Act.

Taxation (Australian and international), company, anti-money laundering and other laws also require some of the information to be collected in connection with your application. If you do not provide the information requested or provide us with incomplete or inaccurate information, your application may not be able to be processed efficiently, or at all.

• Disclosing your personal information

Under various laws and regulatory requirements the Manager may have to pass on your information (or parts of it) to government agencies who may lawfully request it, such as the Australian Taxation Office (ATO) and the Australian Transaction and Reports Analysis Centre. Information may also be disclosed to external parties on your behalf, such as your financial adviser, unless you have instructed the Manager in writing to do otherwise. The Manager may also disclose your personal information to its service providers (lawyers and others) to enable the printing, distribution and administration of documents relevant to the Mortgage Investment and for other administration of your investment purposes.

Your personal information may also be used by the Manager to administer, monitor and evaluate products and services, gather, aggregate and report statistical information, assist you with any queries and take measures to detect and prevent fraud and other illegal activity. It may also be allowed or obliged to disclose information by law and to report on risk management matters. It is not anticipated that it will ever need to disclose your personal information to overseas recipients.

• Accessing and correcting your personal information

Members are entitled to access, correct and update all personal information which the Manager holds about them. This information held may be obtained by contacting the Manager. You should contact the Manager if you have concerns about the completeness or accuracy of the information we have about you or would like to access or amend your personal information held by the Manager (or its service providers). Please advise the Manager of any changes to such information you have provided. If you have any complaint about the way in which the Manager complies with the Privacy Act or if you have any questions relating to the Manager’s privacy policy or anything else found in this PDS or the Syndicate SPDS, please contact the Manager by e-mail, fax or phone during normal business hours. The contact details are set out in the Corporate Directory on page -iii- of this PDS. Important Note: You should also check the website at www.baccus.com.au for the current version of the Privacy Policy of the Manager. Changes will be made to the policy from time to time to reflect changes in the law, including the Privacy Act. Anti-Money Laundering and Counter Terrorism Financing

The Manager is required to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and associated regulations (AML/CTF law). The Manager will require you to provide personal information and documentation in relation to your identity and that of any controlling person, beneficial owner or beneficiary, when you invest in the Fund. The Manager may need to obtain additional information and documentation from you to process your application or subsequent transactions or at other times during your investment. The obtaining of information will be pursuant to the AML/CTF



Program that has been adopted. The Manager may need to identify: � Transferees of your interest in the Fund or in a

Syndicate. The Manager will not register a transfer until all relevant information has been received and your or your transferee’s identity or that of its beneficial owners has been satisfactorily verified;

� Your estate. If you die while you are the owner of an interest in the Fund or a Syndicate, the Manager may need to identify your legal personal representative prior to transferring ownership or making any payments; and

� Anyone acting on your behalf, including under your power of attorney.

In some circumstances, the Manager may need to re-verify this information and may request additional information. By applying to become a Member of the Fund and invest in a Mortgage Investment, you also acknowledge that the Manager may decide to delay or refuse any request or transaction, if it is concerned that the request or transaction may breach any obligation of, or cause the Manager to commit or participate in an offence under, any AML/CTF law, and the Manager or any of its related bodies corporate, affiliates, associates or officers will incur no liability to you if it does so. Investors should also note the following requirements:

• Politically exposed persons (PEPs)

To comply with AML/CTF law the Manager requires you to disclose whether you are or have an association with a politically exposed person (PEP). A ‘PEP’ is an individual who holds a prominent public position or function in a Government body or an international organisation in Australia or overseas, such as a Head of State, or Head of a Country or Government, or a Government Minister, or equivalent senior politician. A PEP can also be an immediate family member of a person referred to above, including spouse, de facto partner, child and a child’s spouse or a parent. A close associate of a PEP, i.e. any individual who is known to have joint beneficial ownership of a legal arrangement or entity, is also considered to be a PEP. Where you identify as, or have an association with a PEP, the Manager may request additional information from you.

• Beneficial owners

To comply with AML/CTF law the Manager also requires you to disclose beneficial owners. ‘Beneficial owner’ means an individual who ultimately owns or controls, directly or indirectly, the applicant investor. ‘Control’ includes control as a result of, or by means of, a trust, agreements, arrangements, understandings and practices, whether or not having legal or equitable force and whether or not based on legal or equitable rights, and includes exercising and control through the capacity to determine decisions about financial and operating policies. ‘Owns’ means ownership, either directly or indirectly, of 25% or more of the applicant.

• Source of funds

As part of the obligation to ‘know your customer’ and to assess money laundering and terrorism financing risk under its AML/CTF program, the AML/CTF law requires the Manager to ask about the applicant’s (and of their beneficial owners’) income and assets available for investment and the sources of funds, including their origin. Foreign Tax Compliance Disclosure Each investor agrees to provide, and it is a condition of becoming a Member of the Fund, certain information that the Manager requires in order for it to comply with any applicable law, including any foreign law. Foreign Account Tax Compliance Act (FATCA) is tax legislation that enables the Internal Revenue Service of the United States of America (USA) to identify and collect tax from USA residents that invest in assets through non-US entities. The OECD Common Reporting Standards for Automatic Exchange of Financial Account information (CRS) is a similar global regime aimed at collecting and reporting on investor’s tax status. If you are a foreign resident for tax purposes, then you should note that the Trust will comply with its FATCA and CRS obligations by collecting, retaining and reporting about certain investors to the ATO. In order for the Fund to comply with its FACTA and CRS obligations, the Manager may require potential investors to provide certain information about themselves including their country of tax residence, and may include providing their US Taxpayer Identification Number (TIN) or CRS status as appropriate. Further information is provided in the application form. If you require further information or details as to the completion



of the form or relating to the implementation of FATCA and CRS, please refer to the Australian Taxation Office’s guidance material link: https://www.ato.gov.au/General/International-tax-agreements/In-detail/International-arrangements/Automatic-exchange-of-information---guidance-material/ .

Taxation

Investing in an investment product such as the Fund is likely to have taxation consequences. The Manager cannot give tax advice on obtaining, retaining or disposing of investments in the Fund or in any Mortgage Investment. Australian tax laws are complex and subject to change. The tax comments below are only in respect of Australian tax and are based on the current law in Australia as at the date of this PDS. Further, the tax comments in this section are only relevant for Australian resident investors in respect of their investment in the Fund. In particular, the comments may not be relevant to investors that are subject to special tax rules such as banks, insurance companies, financial intermediaries, managed investment trusts, tax exempt organisations and dealers in securities. The Manager advises you to seek professional tax advice on your proposed investment in the Fund before making a decision to invest. By making an investment in the Fund, you will legally and beneficially own an interest in the underlying Mortgage Investment, together with other Syndicate Members. In this way, for Australian tax purposes, Mortgage Investments will be treated as a loan that is made directly by you and the other Syndicate Members. Further, the income received by you will be in the form of interest received directly from the Mortgage Investment. The rules in relation to the taxation of beneficiaries in a trust should not be applicable. The loan will qualify as a financial arrangement for the purposes of the Taxation of Financial Arrangement (TOFA) provisions in the Australian income tax law. Accordingly, if you are subject to the TOFA regime, or have elected for this regime to apply to you, then you should be subject to tax on the interest on the loan on a compounding accruals basis over the term of the Mortgage Investment. Under the compounding accruals method, the gain or loss may be spread over the term of the Mortgage Investment pursuant to the effective interest method allowable in AASB 139. If you are not subject to the TOFA regime, and have also not elected for this regime to be

applicable to you, then you should be subject to tax on the interest on the loan when received by you. In this respect, the accruals taxation provisions in the income tax law should not be applicable to you on the basis that the only return on the Mortgage Investment will be in the form of periodic interest payments and there is no inherent discount or premium on the investment. On termination of the Mortgage Investment, you should receive any accrued interest and a repayment of the outstanding loan principal. Any gain that is made by you on termination should be assessable to you at the time of termination. Any loss that is made by you on termination may be allowable to you as a deduction at the time of termination. However, there are certain circumstances when a loss is not allowable as a deduction but rather gives rise to a capital loss for the Syndicate Member. The Manager recommends that you seek your own professional tax advice to determine whether such a circumstance may be applicable to you.

Goods and Services Tax Fees and expenses incurred by the Fund, such as management costs, will generally attract Goods and Services Tax (GST) at the rate of 10%. Given the nature of the Fund’s activities, the Fund will generally not be entitled to claim input tax credits for the full amount of the GST incurred. However, Reduced Input Tax Credits (RITCs) should be available for the GST paid on the expenses incurred by the Fund. Where RITCs are available, the prescribed rate is currently 55% or 75% depending on the nature of the fee or cost incurred. No GST obligations arise for investors on the application, withdrawal or transfer of interests in the Fund. Distributions made by the Fund will also not be subject to GST. Stamp duty may also apply on the transfer of the Mortgage Investments in certain circumstances.



SECTION 9:

THE FUND DOCUMENTS

The Constitution

The Fund is established under a constitution made by the Manager by a deed poll dated 8 August 2002 (Constitution). It is the Constitution that primarily governs the powers and duties of the Manager, the rights and obligations of the Members and the structure of the Fund.

The Constitution binds the Manager and each Member of the Fund.

In addition to those matters set out elsewhere in this PDS (such as the rights of Members, the liability of Members, withdrawal rights, applications for interests, the investment and return of Application Moneys, the making, management, realisation and enforcement of Mortgage Investments) the Constitution also contains provisions as to:

• the powers of the Manager

• the liability of the Manager and its rights to indemnity

• the termination of the Fund

• the retirement of the Manager

• the amendment of the Constitution

• the meetings of Members.

Any Member or adviser wishing to gain full knowledge of the contents of the Constitution should inspect it. It is available for inspection at the registered office of the Manager during normal business hours. The Manager will provide a copy of the Constitution to any person upon written request.

Amendment or Replacement of Constitution

The Manager’s right to amend, replace or repeal the Constitution are specified in the Corporations Act 2001. Generally, the Constitution may be amended by special resolution of Members or by the Manager alone if the Manager reasonably believes that the change will not adversely affect the rights of Members. The Manager must lodge with ASIC a copy of any modification or

amendment of the Constitution or the new Constitution. Where the Corporations Act 2001 or any relief granted by ASIC requires certain provisions to be included in the Constitution, then those provisions are taken to be in the Constitution. The Compliance Plan

The Manager has adopted a compliance plan for the Fund (Compliance Plan) as required by the Corporations Act 2001. The Compliance Plan sets out the key criteria that the Manager will follow to ensure that it is complying with the Corporations Act 2001 and the Constitution. Each year, the Compliance Plan is to be audited, as required by the Corporations Act, and the auditor’s report is lodged with ASIC. A copy may be obtained from ASIC upon payment of the prescribed fee. Administration Services Agreement Certain services relating to the administration of the Fund are provided to the Manager by the Administrator under an agreement between them. These services must be provided diligently and in a proper, business-like and skilful manner and in accordance with the performance criteria set out in the Administration Services Agreement. These include the times and manner in which various activities must be carried out and the reports that are to be provided. Under the agreement, the Manager is to pay to the Administrator a fee for the services provided. This fee is stated to be 1.0% per annum of the aggregate value of the Fund Property and Mortgage Investments and is calculated and payable on a monthly basis. The Administrator may waive this fee in whole or in part. The fee is payable by the Manager from its own fees, and is not payable by the Fund or by any Member of the Fund or Syndicate Members. The Administrator has an obligation to perform its services diligently and in a proper, professional and skilful manner. Regard must also be had to the obligations of the Manager under the Corporations Act 2001 and other legal and regulatory requirements. The Administrator must



provide reasonable access to its records relating to the provision of these services to the Manager and to any auditor of the Manager, the Fund, or the Compliance Plan. The Administrator must also certify to the Manager every year that it is complying with the terms of agreement.

Investors should note the additional information in ‘Management of Conflict of Interests and Related Party Transactions’ in Section 10: Parties involved in the Fund.



SECTION 10: PARTIES INVOLVED IN THE FUND

The Manager The Kremnizer Mortgage Fund is a registered managed investment scheme for the purposes of Chapter 5C of the Corporations Act 2001. Baccus Investments Limited, the Manager, is the responsible entity of the Fund. The Manager is the holder of an Australian financial services licence No. 220647 issued by ASIC on 9 August 2002. This authorises the Manager to act as the responsible entity. Disclosure

Baccus Investments Limited in its own capacity, and not in its capacity as Manager, may from time to time, make investments in mortgages other than through the Fund. Where it decides to make those investments on its own behalf it does not offer that investment to Members of the Fund.

Directors of the Manager

Anthony Etzine – B.Bus Sci Since qualifying as an accountant in 1981 in South Africa, Anthony has specialised in providing a wide range of management advice to professional organisations. After spending three years at Deloittes Haskins & Sells, he was recruited to work for Altshuler Melvoin & Glasser, a large accounting firm in Chicago Illinois, which specialises in advising medium sized enterprises.

Since his arrival in Sydney in 1990, his experience has involved designing and implementing management systems including back office and computer systems as well as instituting programs to improve staff performance.

In August 2004, Anthony joined the Manager as Executive Director and as a member of the Lending Committee. In July 2007, he was appointed the Responsible Manager and in March 2008, he was appointed the Compliance Manager. He has held all those positions since those dates. His primary responsibilities cover all compliance and regulatory issues of the Manager as well as the day to day management of the mortgages.

Since 1995, he has been one of the lead educators in the highly successful risk management education program which was

instituted by LawCover, the Professional Indemnity Fund for solicitors in NSW. Robert Kremnizer B.A. L.L.B Robert was admitted as a solicitor in March 1967 and within two years had established his own practice, RL Kremnizer & Co. In 1993 he decided to focus solely on mortgage transactions. Robert has been a director of the Manager as well as a member of our Lending Committee since August 2004. He has always had a major role in the Manager’s credit assessment and approval process as well as supervising the lender requirements. In August 2008, Robert became in-house counsel for the Manager when the Board decided to have an in-house legal team. Since then he has headed up Manager’s legal team that handles all legal requirements from settlement to the discharge of the loan, including enforcement if necessary. Today he has extensive and well-developed industry contacts, a depth of experience in all levels of residential and commercial property lending and an appreciation of the various factors that may impact that industry over time and through a variety of economic cycles. In addition to his business interests, Robert is actively involved in a number of community and charitable organisations. He is the author of a number of books as well as a portrait artist of note. David Bleier David Bleier has been working in the finance and mortgage industry since 1990. In 1992 he moved to Allied Mortgage Corporation where his role included working as a Credit Analyst and Business Relationship Manager as well as preparing submissions to the board for credit approval. During his time at this corporation, he developed broad skills in financial and equity structuring

In mid-1993, David Bleier founded Bleier Mortgage Corporation in Double Bay and focused solely on mortgage transactions. Since that time, David has specialised as a mortgage broker in sourcing potential borrowers and placing them with private mortgage funds and various other lenders.



Since May 2010, David has been a director of the Manager and a member of the Lending Committee.

He has a wealth of experience in the mortgage industry, in particular, in assessing the creditworthiness of borrowers. He also has an extensive network of contacts that enables him to source new loan opportunities. Powers of the Manager

Subject to any express limitation in the Constitution the Manager has all the powers in respect of the Fund and the assets, including using the assets and credit of the Fund and doing anything else on behalf of the Fund which it could exercise or do if it were the absolute and beneficial owner of the Fund and the assets. While the Manager has not exercised this power, and has no current intention to do so, the Manager in its capacity as trustee of the Fund has power to borrow (whether or not on security) and to incur all types of obligations and liabilities. The Manager may also authorise any person to act as its agent or delegate. Every discretion and power vested in the Manager is absolute and uncontrolled. In addition to any right of the Manager under the general law to refuse disclosure of any document or matter, the Manager is not required to disclose to any person or Member documents relating to its deliberations or the exercise of any power or discretion, or the non-exercise of such power or discretion, other than where this is required by law or the Constitution. A related body corporate of the Manager and any person being a director or shareholder of the Manager or a related body corporate may be directly or indirectly interested in the exercise of powers and discretions under the Constitution without affecting the validity of the exercise of such powers or discretions. Liability of the Manager

If the Manager acts in good faith and without negligence, it is not liable in contract, tort, or otherwise to Members or any loss suffered in any way relating to the Fund or a Syndicate, including any Mortgage Investment. The Manager is otherwise liable only to the extent of the value of assets vested in it or received by it under the Constitution. The liability of the Manager to any person, other than a Member, including any contracts entered into as Manager of the Fund or in relation to the assets, is limited to the

Manager’s ability to be indemnified from the assets.

The Manager is not liable for any loss or damage to the assets or the Fund or to any person caused by: � the exercise of any discretion or power

conferred by the Constitution or by law on the Manager or any failure to exercise the discretion or power;

� any breach of duty or trust, unless it is proved

that the Manager acted, or failed to act, in bad faith; or

� any disclosure by the Manager of any

document, matter or thing relating to the Fund or any Member.

The Manager is not liable for anything done, suffered or omitted by it in good faith and in reliance upon the opinion or advice of counsel or solicitors, whether or not instructed by the Manager, in relation to the interpretation of the Constitution or any other document (whether statutory or otherwise) or generally in connect with the Fund.

Indemnity of Manager

The Manager acting in good faith is entitled to be indemnified out of the assets or, where appropriate, the proceeds of the realisation of a Mortgage Investment in respect of all liabilities, costs and expenses incurred by the Manager in relation to the operation of the Fund or the enforcement of the Mortgage Investment. The right of the Manager to be indemnified is limited to the assets and does not extend to enable the Manager to recover from any Member of a Syndicate or other person beneficially entitled to any interest or Mortgage Investment any loss or liability incurred by the Manager. Compliance Committee

The Manager has appointed a compliance committee in accordance with the requirements of the Corporations Act 2001 to oversee compliance by the Manager with the requirements of the Corporations Act 2001, the Constitution and the Fund’s Compliance Plan. The role of the Compliance Committee is to: � monitor the Manager’s compliance with the

Compliance Plan and report to the Manager;



� report to ASIC where the Compliance Committee forms the view that the Manager is not taking steps to remedy matters reported to it by the committee; and

� regularly review the adequacy of the

Compliance Plan and where necessary recommended changes to the plan.

As at the date of this PDS, the members of the Compliance Committee are:

Anthony Etzine – B.Bus Sci

Please see the information in the paragraph in this Section headed ‘Directors of the Manager’. James Sofiak – CPA, JP Mr Sofiak has been a Financial Investigator/ Forensic Accountant for over 30 years. He holds specialist fraud qualifications from Charles Sturt University and the University of Canberra. He was a Senior Investigator and Special Investigator with the Corporate Affairs Commission, which was the predecessor regulator to ASIC. He was a Financial Investigator on two Royal Commissions and appointed a Special Investigator by the Attorney General to a Special Investigation called by the Attorney General. With 16 years’ experience on various compliance committees, Mr Sofiak brings to the Compliance Committee his proven investigative and detection skills, together with his administration and systems compliance experience. Timothy J F O’Brien – Dip Law (SAB) Mr O’Brien has practised as a lawyer since 1975. He is admitted as a solicitor of the Supreme Court of New South Wales and the Supreme Court of the Australian Capital Territory. Since 1977 he has been a partner of WP McElhone & Co, lawyers. He has extensive experience as a property and commercial lawyer and has acted for lenders, borrowers and sureties in relation to a large range of residential, commercial and development mortgage, finance and security transactions. He is actively involved in the day to day management of significant trust and estate funds, is a director of several companies and serves as an external member of various compliance committees for several mortgage funds. Each member of the Compliance Committee is entitled to be paid by the Manager (and not by the Fund) for his or her services by way of periodic fee, salary, commission or otherwise as determined and approved by the board of the

Manager. Compliance Committee members may also be reimbursed out of assets for any costs, charges, expenses and outgoings reasonably and properly incurred by them under the Compliance Plan. Compliance Plan Auditor

The Manager has appointed a Compliance Plan auditor to audit the plan. The details of the auditor as at the date of this PDS are set out in the Corporate Directory on page -iii- of this PDS. The Compliance Plan Auditor must have access to all records of the Fund and must audit the Compliance Plan to ensure that it complies with the requirements of the Corporations Act 2001. The Administrator The Manager has engaged the Administrator, Drake Administrative Services Pty Limited, to provide to it certain administration services and documentation services in relation to its management of the Fund and of each Mortgage Investment, under the Administration Services Agreement, described in section 9: The Fund Documents. The Administrator is a related party of the Manager. Management of Conflicts of Interest and Related Party Transactions As indicated above the Administrator is associated with the Manager. In addition, the Constitution does not prohibit loans being made to parties associated with the Manager it is the current policy that no such loan will be made. The Manager and its related parties may, from its or their own resources, invest in a Mortgage Investment. Any such investment in a Mortgage Syndicate must be made, and maintained, on identical terms to the investment made by the other Members of the relevant Syndicate. In accordance with its obligations under its AFS Licence and the Compliance Plan for the Fund, the Manager identifies and manages any perceived or potential conflict of interest that may arise in the manner identified in the management of conflicts of interest and related party transactions policies. Those policies and the related procedures require, among other things:

- the identification of any actual or potential conflicts and the reporting of these to the



Manager’s compliance officer and the board;

- the establishment and maintenance of a

register of conflicts and related parties; - the consideration of the register by the

Compliance Committee on a quarterly basis;

- the approval by the board to the entering

into of any related party transaction, even if it is on arms’ length terms; and

- the requirement that the Administrator effect and maintain professional indemnity insurance.

Compliance with these policies is monitored primarily by the Manager’s compliance officer. In addition, the Compliance Committee members may obtain such independent advice on related party transactions as they and the board determine is reasonably necessary.



SECTION 11: FEES AND OTHER COSTS

Consumer Advisory Warning

DID YOU KNOW?

Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns.

For example, total annual fees and costs of 2% of your investment balance rather than 1% could reduce your final return by up to 20% over a 30 year period

(for example, reduce it from $100 000 to $80 000).

You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs.

You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial adviser.

TO FIND OUT MORE

If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website

(www.moneysmart.gov.au) has a managed funds fee calculator to help you check out different fee options.

When comparing an investment in the Fund through this PDS or Syndicate SDPS with other products in the

market place, recognise that other products may charge a contribution fee and you may be able to negotiate a lower contribution fee with that fund or your financial adviser. The warning aims to alert investors of the importance of value for money and the compounding value of fees and costs and their impact over time on end benefits. For an additional description of the fees and other costs charged by the Fund, please read the section below. The example given in the warning is not intended to represent an investment in the Fund offered through this PDS or any specific Mortgage Investment offered through any Syndicate SPDS. This is particularly so, given that distributions to you can never be more than the interest rate applicable to your selected Mortgage Investment. Fees and other costs This section shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the assets of the Fund as a whole. Taxes are set out in another part of this document. You should read all the information about fees and costs because it is important to understand their impact on your investment.



TYPE OF FEE OR COST AMOUNT HOW AND WHEN PAID

Fees when your money moves in or out of the Fund

Establishment fee

The fee to open your investment.

Nil Not applicable

Contribution fee

The fee on each amount contributed to your investment.

Nil Not applicable

Withdrawal fee

The fee on each amount you take out of your investment. [Note 1]

Nil Not applicable

Exit fee

The fee to close your investment.

Nil Not applicable

Management Costs

The fees and costs for managing your investment.

The management costs comprise:

• management fees

[Note 2]

Between 0.97% and 3.225% (inclusive of GST less applicable RITCs) per annum of the aggregate of the value of the Mortgage Investments [Note 3]

Between 0.098% and 0.489% (inclusive of GST less applicable RITCs) per annum of the aggregate of the value of the Fund excluding the Mortgage Investments [Note 4]

Paid from the interest payments that are made by borrowers and from interest earned on the Fund Account and the Mortgage Interest Account.

Calculated as at the last day of each month and payable in arrears, within 5 business days after each month end date.

• other expenses and

reimbursements

Nil [Note 5] Not applicable

• indirect costs Other management costs – fees, costs and expenses paid by the borrowers to the Manager. These vary from loan to loan and are set out in the relevant Syndicate SPDS. [Note 6]

Paid by the borrower at the times provided in the loan documentation

Service Fees [Note 7]

Switching fee

The fee for changing investment options

Nil Not applicable



Notes: [1] There are no withdrawal fees associated with a withdrawal from the Fund or a Syndicate although if

withdrawal is prior to the maturity date of the Mortgage Investment the Manager reserves the right to pass on any costs or charges associated with an early withdrawal. A withdrawal is by way of a transfer. A fee on the transfer of an interest in a mortgage investment may be payable in accordance with the Constitution. Under the Constitution, the Manager may charge the transferor a fee not exceeding 0.5% of the value of the interest transferred, on or before the registration of the transfer. (See ‘Fees Payable to Manager for Transfer’ under the heading ‘Additional Explanation of Fees and Other Costs’).

[2] This fee includes an amount payable to the Administrator. (See ‘Fees payable to the Administrator’

under the heading ‘Additional Explanation of Fees and Other Costs’). [3] As at the date of this PDS the Manager charges a management fee of between 0.97% (inclusive of

GST less RITCs) and 3.225% (inclusive of GST less RITCs) per annum of the value of the Mortgage Investments during the currency of this PDS. On this basis, for an investment of $110 million in Mortgage Investments, the maximum per annum management fee to which the Manager would be entitled during the currency of this PDS is $3,547,555. If the minimum were charged, it would be $1,067,000. It is only paid when received from borrowers, and if not received, then it cannot be paid to the Manager. The actual amount received in the 206/2017 financial year was at the rate of 0.97%. Under the Constitution the Manager is entitled to charge a maximum of 3.0% (plus GST less applicable RITCs). (See ‘Variation and waiver of Fees’ under the heading ‘Additional Explanation of Fees and Other Costs’).

[4] As at the date of this PDS the Manager charges a management fee of between 0.098% (inclusive of

GST less RITCs) and 0.489% (inclusive of GST less RITCs) per annum of the value of the Fund excluding the Mortgage Investments during the currency of this PDS. On this basis, for a holding of $8 million in the Fund (excluding Mortgage Investments) the maximum per annum management fee to which the Manager would be entitled during the currency of this PDS is $39,120. If the minimum were charged, it would be $7,840. (The actual amount received in the 206/2017 financial year was insignificant and is included in the 0.97% management fee referred to in Note 3.) Under the Constitution the Manager is entitled to charge a maximum of 3.0% (plus GST less applicable RITCs). (See ‘Variation and waiver of Fees’ under the heading ‘Additional Explanation of Fees and Other Costs’).

[5] The Manager meets all of the day to day operating expenses of the Fund from its own resources.

Abnormal expenses, such as litigation expenses, are reimbursable from the Fund. (For further information see ‘Additional Explanation of Fees and Other Costs’).

[6] Indirect costs cover the amounts that the Manager receives by way of fees and charges from borrowers that it retains for its own benefit. (For further information see ‘Fees payable by Borrower’ below.)

[7] For the position of commissions or other fees payable to advisers, mortgage brokers or others see

‘Brokerage and Commissions’ under the heading ‘Additional Explanation of Fees and Other Costs’. If a Member’s financial adviser charges a fee in connection with an investment in the Fund or in a Mortgage Investment, the adviser must tell the Member about this fee, including the amount, as well as how and when it is payable by the Member in accordance with the financial adviser’s fee disclosure obligations under the Corporations Act 2001.

Fees Payable by Borrower

In addition to the management fee disclosed in the table of Fees and Costs above, the Manager is entitled to a fee equal to any fee or charges charged to a borrower in connection with a Mortgage Investment. The amount that is charged in relation to a particular Mortgage Investment is set out in the relevant Syndicate SPDS.



TYPE OF FEE OR COST AMOUNT HOW AND WHEN PAID [Note 1]

Initial Fees

� loan settlement fee

� loan offer fee, which covers loan application, processing, document preparation and administration

Between $100 and $250 [Note 2]

From $2,000 [Note 3]

On settlement of the loan.

On settlement of the loan.

Fees payable during loan [Note 4]

� loan management fee

� payment dishonour fee

Between 0.0% and 3.0% per annum of the amount of the loan

Between $35 and $100 per occurrence [Note 2]

Monthly in arrears on the date of the month on which settlement occurred [Note 5]

At the time of the dishonour

� attendance fee payable for when attendance is required for any reason

Between $75 and $100 [Note 2] At the time of the occurrence

� administration fee Between $15 and $25 per month [Note 2]

On the first day of each month in which a loan repayment is due

� insurance renewal fee payable if the borrower fails to renew its insurance and the Manager does so on its behalf

Between $250 and $500 On the date the insurance renewal is effected

Fees payable at maturity

� variation settlement fee Between $1,750 and $1,950 [Note 2]

On the settlement of the variation of the loan

� discharge settlement fee and documentation and attendance fee

Between $1,750 and $1,950 [Note 2]

On discharge of the loan

Notes: [1] These fees are paid to the Manager within 5 business days after they are received by the Fund. [2] As at the date of this PDS the lower amount is currently charged. [3] The amount charged to the borrower will depend on the complexity of the loan. [4] Additional enforcement fees will be charged to the borrower in the event of a default and the enforcement of the

loan by the Manager. These fees are provided for in the Mortgage documentation. [5] As the loan management fee is deducted from the interest received from the borrower, it is only paid as and

when the interest is received. A delay in receipt of the interest may result in a delay in receipt of the loan management fee. The Manager may pay all or part of this fee to parties associated with the Manager.

In addition, there will be occasions when the Manager will pay expenses or disbursements on behalf of the relevant Syndicate Members. This could be court filing fees, repair to properties after it has taken possession, insurance, council or water rates, etc. Under the terms of the mortgage, the Manager is allowed to charge the borrower interest at the higher rate on a daily rate basis for these outlays as well as recovering the amounts spent. Additional Explanation of Fees and Other Costs Management Costs The Manager must disclose the management costs of the Fund, that is, any amount for administering the Fund, the other expenses and reimbursements in relation to the managed

investment scheme and indirect costs. Management costs do not include transactional and operational costs or costs that that an investor would incur if he or she invested directly in the asset, in this case made the loan.



Indirect Costs Indirect costs are any amount that the Manager knows, reasonably ought to know; or, where this is not the case, may reasonably estimate will directly or indirectly reduce the return on the product that is paid from, or the amount or value of, the income of or property attributable to the investment, or an ‘interposed vehicle’ in or through which the property attributable to the investment is invested These cover amounts that the Manager receives by way of fees and charges from borrowers that it retains for its own benefit. The Manager must tell you about these and will do so, in respect of any particular Mortgage Investment in the relevant Syndicate SPDS. For the purpose of disclosing the indirect costs component of the management costs in the ‘Example of annual fees and costs’ below the Manager has calculated the fees and charges it received during the last financial year and has shown these as a percentage of the Fund’s net asset value during that year. The indirect costs for that year were 2.97% of average aggregate net value of the Fund property and the Mortgage Investments. Investors should note that the indirect costs for the Fund as a whole may be significantly different from those in respect of any one or more Mortgage Investments. You are therefore advised to consider the disclosure of fees and costs, including the management costs charged or chargeable in respect of a Mortgage Investment in the relevant Syndicate SPDS before investing. Fees Payable to Manager for Transfer If a Member wishes to transfer between Mortgage Investments, transfer fees may be payable by the transferor. The Manager will advise the transferor of the fee, if any, and give an estimate of the costs and expenses before it processes the transfer. The Manager’s costs and expenses will be calculated on the basis of its then current hourly charge. As at the date of this PDS rates range from $300 to $500 per hour (inclusive of GST). The Manager may also charge a fee to a Member who wishes to transfer its interest in the Fund or in a Syndicate. The fee may be up to 0.5% inclusive of GST less applicable RITCs of the value of the interest transferred. The Manager may also receive any administrative costs and expenses from the transferor in processing the transfer. For example, a Member wants to transfer

$100,000 of Mortgage Investment to another Member of the Fund. In this instance, the Manager may decide to charge a fee for its costs and expenses as well as an additional transfer fee. The total costs for transfer may be as follows: Manager’s costs and expenses $1,050 (based on 3.5 hours) Transfer fee $500 (calculated at 0.5% of $100,000) Administrative costs and expenses $100 Total transfer costs $1,650 Please note that the example is for illustrative purposes only, and actual costs associated with such a transfer may be substantially different from the costs disclosed in the example. Brokerage and Commissions Where a borrower is introduced to the Fund by a mortgage broker, that broker may be entitled to receive a brokerage fee. This is paid by the borrower. The broker may also receive a trailing commission during the term of the loan. Mortgage broker fees and commissions vary from broker to broker, but are usually calculated as a percentage per annum of the amount of the loan. The amount of any brokerage payable in respect of a particular Mortgage Investment will be stated in the relevant Syndicate SPDS. The Manager pays the fee from the advance to the borrower and trailing commission out of the interest it receives from the borrowers. They are therefore met by the borrowers and not by the Members of the Fund or the Syndicate Members. Similarly, commissions may be payable to an investor’s adviser. Payment of any such commissions is subject to any legal limitation. Adviser commissions also vary, but may be up to 5.0% per annum of the amount of the Application Moneys. For example, if the investment in Fund property or a Mortgage Investment is $100,000, the maximum commission payable to advisers is $5,000. Where instructed by the Member, the Manager deducts adviser commissions from the relevant Member’s share of the net income received from the borrowers. A Member may also have to pay additional fees to the adviser. Details of those fees should be set out in the Statement of Advice given to the Member by the adviser. Important Note: The fees and charges payable by a borrower in respect of any Mortgage Investment and the fees and expenses of the Manager will be set out in the relevant Syndicate SPDS.



Fees payable to the Administrator

The Administrator is entitled to a service fee in relation to the services it provides under the Administration Services Agreement, described in section 9: The Fund Documents. This fee is payable by the Manager from its aggregate management fee referred to in the table of fees and costs above. It is not payable by the Members of the Fund or the Syndicate Members. While the agreement provides for a maximum fee of 1.0% per annum of the aggregate value of the Mortgage Investments and the value of the Fund property, this fee may be waived in whole or in part by the Administrator. During the currency of this PDS the Administrator will charge between

0.5% and 1.0%.

GST Unless otherwise stated, all fees and charges are shown inclusive of GST net of any available RITCs. The Management Costs are based on the GST rate (currently 10%) and available RITC however this estimate may vary from time to time depending on a variety of factors including the types of fees and costs paid and any changes to the GST rate and the RITC available. See ‘Goods and Services Tax’ in section 8: Your investment in the Fund. Where the Manager, in its capacity as manager of the Fund, becomes liable to pay GST in respect of its services in relation to the Fund, it may, in the future, recover that amount from the Fund, after deducting any available RITCs. This recovery is by way of distribution of that amount, as income, to the Manager as the holder of the Manager’s Interest, and not by way of remuneration. Expenses Generally the expenses incurred by the Manager in relation to the performance of its duties in respect of the Fund are payable by the Manager in respect of the Fund or Syndicate from its own funds to the extent that they are not met by the borrower. These expenses include matters such as: � amendments to the Constitution; � amendment and audit of the Compliance Plan; � the preparation, review and distribution and

promotion of any PDS or Syndicate SPDS in respect of the interest in each Mortgage

Investment or any other promotion of the Fund;

� the convening and holding meetings of

Members and (subject to exceptions) the implementation of any resolutions;

� communications with Members; � the engagement of agents, valuers,

contractors and advisers (including legal advisers) whether or not the agents, contractors or advisers or associates of the Manager, including overheads and expenses payable to related to the body corporate of the Manager for staff, equipment and leased premises;

� preparation, audit and lodgement of taxation

returns and accounts of the Fund including the Fund auditor’s fees;

� termination of the Fund and the retirement or

removal of the Manager and the appointment of a replacement;

� the Compliance Committee established by the

Manager in connection with the Fund, including any fees paid to or insurance premiums in respect of Compliance Committee members;

� compliance with any law, and any request or

requirement of ASIC; � preparing and dealing with applications and

requests for transfer and transmission of interest (subject to exceptions);

� preparing, printing and posting accounts,

cheques and all other documents or making payments to Members; and

� establishing and maintaining the register, the

accounting and investment recording systems of the Fund; and

� development and operation of computer

facilities, salaries and costs relating to the matters set out in the sub-paragraphs above.

A full list of these expenses is in the Constitution of the Fund. Subject to the Corporations Act 2001, all other expenses incurred by the Manager, for example, taxes or government charges:



� in relation to the Manager’s proper performance of its duties in respect of the Fund, are payable from the Fund; and

� in relation to the Manager’s proper

performance of its duties in respect of a Syndicate, are payable from the relevant Mortgage Investment.

Investors must note that:

� if the Syndicate Members direct the Manager to take or not take any particular action in relation to the relevant Mortgage Investment, the Manager is entitled to payment of any fees, costs and expenses it may incur in complying with the direction;

� any fees, costs and expenses incurred by the Manager in enforcing the rights of the Syndicate Members in relation to the relevant Mortgage Investment on a default by the borrower are payable by the borrower in accordance with the mortgage documentation and the Manager may deduct these from the proceeds of sale;

� the Manager’s fees will be based on its then hourly charge. As at the date of this PDS these rates range from $300 to $500 per hour (inclusive of GST less RITCs), depending on the complexity of the matter.

Transaction and operational costs Transactional and operational costs, which are to be disclosed to investors in the Fund, cover matters such as stamp duty, equity broker’s fees, clearing fees and some custodial fees. The Manager notes that as at the date of this PDS it does not anticipate that there will be any such costs. However, if any are incurred in relation to a Mortgage Investment, they will be disclosed in the relevant Syndicate SPDS. Variation and Waiver of Fees Fees may be varied within the maximum range allowable in the Constitution, by notice in writing to Fund members at least 30 days’ before any increase. The Manager reserves its right to waive, rebate or refund any entitlement it may have to fees under the Constitution, this PDS or any Syndicate SPDS.

Example of annual fees and costs This table gives an example of how fees and costs on this product can affect your investment over a 1 year period. You should use this table to compare this product with other managed investment products. Example Balance of $50,000

with contributions of $5,000 during year

Contribution fee Nil Nil PLUS Management Costs

2.97% [Note 1]

For every $50,000 you have in the Fund, you will be charged $1,485 each year [Note 2]

EQUALS Cost of Fund

If you had an investment of $50,000 at the beginning of the year and you put in an additional $5,000 during the year, you would be charged fees of:

$1,485 [Notes 2 and 3]

Notes:

[1] The Management Costs of 2.97% is the aggregate of:

• the annual management fee of 0.97% (inclusive of

GST, less RITCs); and

• 2.00% (inclusive of GST, less RITCs) being

indirect costs received by the Manager in the

period of 1 July 2016 to 30 June 2017 from the

borrowers expressed as a percentage of the

average aggregate value of the Fund property and

the Mortgage investments.

[2] While the example refers to the amount that you will be ‘charged’ during a year, as explained above, it is the borrowers who are charged and are required to pay the ‘indirect costs’.

{3} It does not take account of any management costs

referable to the additional $5,000 you put in during the year. It assumes that the additional amount was put in on the last day of the year.

The example does not apply to any particular Mortgage Investment. As each Mortgage Investment is different, the relevant Syndicate SPDS will contain a breakdown of the Management Costs for the loan.



SECTION 12: GLOSSARY OF TERMS

Administrator Drake Administrative Services Pty Limited ABN 66 109 976 267.

Administration Services Agreement

The agreement, dated 31 March 2003, between the Manager and the Administrator, under which the Administrator is to provide certain administration and other services to the Manager.

Application Moneys The amount specified in an application to become a Member of the Fund (minimum $1,000).

Application Moneys Account

Before the approval of an application, the amount specified in the application becomes part of this account, held on trust by the Manager.

ASIC Australian Securities and Investments Commission.

ATO Australian Taxation Office

Borrower Person(s) who apply for, and are granted, a loan by the Manager.

Compliance Committee Appointed by the Manager to ensure the Manager complies with the requirements of the Corporations Act 2001, the Constitution and the Fund’s Compliance Plan.

Compliance Plan The document adopted by the Manager that sets out the key criteria and procedures that the Manager is to follow to ensure that it complies with the requirements of the Corporations Act 2001 and the Constitution.

Constitution The deed poll entered into by the Manager establishing the Fund as amended by deed polls dated 2 April 2003, 19 December 2006 and 29 March 2012.

CRS The OECD Common Reporting Standards for Automatic Exchange of Financial Account information which has been implemented in Australia commencing from 1 July 2017 and imposes certain due diligence and reporting obligations on financial institutions and other financial intermediaries, including the Fund, in respect of foreign investors from participating jurisdictions.

FATCA The Foreign Account Tax Compliance Act which is a United States tax law imposing certain due diligence and reporting obligations on foreign (non-US) financial institutions and other financial intermediaries, including the Fund, to prevent tax evasion by US citizens and US tax residents through the use of non-US domiciled investments or accounts.

Fund Kremnizer Mortgage Fund ARSN 101 518 067.

Fund Account After approval of an application, the amount specified in the application becomes part of this account, held on trust by the Manager.

GST Goods and services tax within the meaning of the New Tax System (Goods and Services Tax) Act 1999.

LVR Loan to valuation ratio, percentage of the total value of the security property the Manager is willing to lend to the borrower (a maximum of 80%).



Manager’s Interest The interest in the Fund of the Manager, entitling it to the receipt by way

of income an amount equal to the reduced input tax credits refunded as a result of the GST payable by the Manager for its services provided to the Fund.

Manager Baccus Investments Limited ABN 87 095 832 072.

Member(s) Successful applicants who have an interest in the Fund by way of

investment.

Mortgage Interest Account

The account maintained by the Manager into which all payments of interest and repayments of principal are held by the Manager on trust for the Members of the relevant Syndicate pending distribution.

Mortgage Investment Any loan or debt secured by a legal mortgage over real property, by a Syndicate.

State Authority Land and Property Information New South Wales, Department of Natural Resources and Mines Queensland or Department of Sustainability & Environment Victoria.

Syndicate Made up of Members of the Fund who elect to invest in a particular Mortgage Investment through the relevant Syndicate SPDS.

Syndicate SPDS Outlines details of a Mortgage Investment and is to be used by Member(s) of the Fund to invest into a Syndicate.



SECTION 13: HOW TO INVEST

General Applications Applications for membership of the Fund may only be made on the application form accompanying this PDS. You become a member of the Fund only:

- on receipt of:

• a fully completed application form;

• verification of the applicant’s identity and any beneficial owner’s identity;

• payment in full in cleared funds;

- and acceptance of your application.

If you are a current Member of the Fund and want to make an additional investment, you should use the additional application form that is available from the Manager. To invest in a specific Mortgage Investment you must use the form that accompanies the relevant Syndicate SPDS.

How to complete the application form

Please read the following information carefully. General Please complete the application form using a black ballpoint pen and CAPITAL

LETTERS Section A: Investor Details

Please ensure: • You identify what type of entity you are. Different entities need to complete

one or more parts of section A. • You complete the FULL name of all applicants. Your name must match

your driver’s licence, passport or other document you are using as proof of identity.

• Company applicants include a contact name and ACN, ABN or ARBN as applicable.

• Individual applicants are 18 years of age or over. • For company investors the Manager requires the full address of the

registered office, plus the principal place of business. If you have more than 2 individual applicants or beneficiaries, you will need to obtain a second copy of the PDS and complete a second original application form for the additional applicants, or download and print another copy of the application form from the website. Photocopies of the application form will not be accepted. See also Examples of Correct Names and Account Designations following. AML/CTF identification documents At the end of each part of section A there is a list of the identification documents

Please read the PDS in full and this section carefully BEFORE signing

and lodging the application



that need to be provided. For further information please see the end of this section 13 and under the heading ‘Anti-money laundering and counter-terrorism financing’ in section 8: Your investment in the Fund. This contains material as to politically exposed persons and beneficial owners.

Section B: Account holder’s tax residency and classification - FATCA and CRS (including Controlling Persons)

Please ensure that this section is completed for each applicant and EACH Controlling Person. For further information please see the material under the heading ‘Foreign Tax Compliance Disclosure’ in section 8: Your investment in the Fund.

Tax File Number (TFN) or TIN: • Enter your TFN, exemption category or ABN if applicable. You are not

obliged to provide your TFN. However, if you do not do so the Manager is required to deduct Australian tax from distributions of income made to you at the highest marginal rate, plus Medicare Levy (if you are an Australian resident). If you are investing in the course of furtherance of an enterprise, you may quote your ABN instead of your TFN.

• Tax File Numbers for minors will not be accepted.

Section C: Account Contact Details

• (OPTIONAL) Enter account designation eg. <SMS Super Fund>. • You may only elect one postal address for all notices and correspondence. • Please ensure that you complete this section, if different from the

information provided in Section A, as this will allow the Manager to contact you if there are any issues with your application or it needs to contact you during the term of your membership of the Fund or of a Syndicate.

Section D: Investment Details

• Enter the amount that you wish to invest. The minimum initial subscription

is $1,000.00 and additional subscriptions may be in multiples of $1.00.

• Only Australian currency will be accepted.

• Application for membership of the Fund will only be accepted on receipt of the Application Moneys and receipt of the completed application form, issued together with the PDS dated 2 October 2017.

Payment of Application Moneys by ETF or Cheque • The Manager does NOT accept cash or third party cheques in any

circumstances. • Details for electronic payment are in the application form. Please ensure

that you provide your name in the ETF reference field. • If your payment is by cheque, please make your cheque payable to

“Kremnizer Mortgage Fund” and cross your cheque “not negotiable”. Your cheque should be mailed with your completed application form to the address as set out below in “Lodging the application”.

Source of funds and investment purpose • The information as to source of investment funds and purpose of your

investment must be completed. For further information see the material under the heading ‘Anti-money laundering and counter-terrorism financing’ in section 8: Your investment in the Fund.

Section E: Bank Account Details

• The bank account you elect on the application form will be used by the Manager to pay out income distributions and repayments of the investment.

• The account must be in the name of the investor. • The account must be an Australian resident bank, building society or credit

union. • You may change these details at any time by contacting the Manager.

Section F: Operating Authority

• When giving instructions to us about your investment please indicate who has authority to operate your account.

Section G: Request for Annual

• It is costly to print and post annual reports to Members. You are taken to have agreed to access these form the website if you do not indicate on the



reports application form that you wish to receive a copy from the Manager by mail or by email.

• Please think of the environment before requesting a printed copy. • You may change your election at any time.

Section H: Privacy

• The Manager may wish to contact you from time to time about future investment opportunities. You can elect to receive this information by ticking the box.

Section I: Declaration and Signatures

• Declaration: by completing the application form to invest, you are declaring that you have read and understood the PDS along with a number of other declarations, acknowledgements and consents. Please ensure you read these.

• Signatures: you should ensure that you have read the attached PDS before signing the application. This form must be signed. Applications which are not signed or not signed correctly may be rejected. o Joint Applications – all applicants must sign.

o Signature under Power of Attorney – a certified copy of the Power of

Attorney must accompany this application form. Where this application

form is signed under a Power of Attorney, the Attorney declares that

the Attorney has no notice of revocation.

o Company – this application form must be signed by 2 directors or a director and company secretary, or a sole director in the case of companies with a sole director who is also sole company secretary. Titles of all signatories should indicated and inapplicable titles deleted.

Section J: Financial Adviser details and Customer identification declaration

If you are investing in the Fund through your financial adviser this section is to be completed by your adviser. Both you and adviser must sign this part.

Lodging the application

Please mail the completed application form and your identification documents to:

The Manager Baccus Investments Limited PO Box 191 Double Bay NSW 1360

Please remember to attach your cheque to the application form if your funds have not been electronically transferred.

Examples of Correct Names and Account Designations

Only legal entities are allowed to be a member of the Fund and to hold an interest in a Syndicate. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname are required for each natural person. The name of a beneficiary or any other non-registrable name may be included as an account designation if completed as set out in the examples of correct forms given below.

Type of Investor Correct Form of

Registration

Incorrect Form of

Registration

Individual Use given names in full

Mr John H Citizen

J H Citizen

Company Use full company name, not abbreviations

Citizen Holdings Pty Ltd

Citizen Hldgs P/L

Joint Holdings Use full and complete names

Mr John H Citizen &

John & Wendy



Type of Investor Correct Form of

Registration

Incorrect Form of

Registration

Mrs Wendy S Citizen Citizen Trusts Use the trustees name

Mr John H Citizen <John Citizen A/C> Citizen Holdings Pty Ltd <John Citizen A/C>

John Citizen Family Trust

Minor (person under 18 yrs) Name of responsible adult with applicable designation

Mr John H Citizen <Henry Citizen>

Master Henry Citizen

Partnerships Use the partners’ personal names

Mr John H Citizen & Mr Henry J Citizen <John Citizen & Son A/C>

Business Names Use personal names

Mr John H Citizen <Citizen Imports>

Citizen Imports

Superannuation Funds Use the name of the trustee

Citizen Pty Ltd <Citizen Super Fund A/C>

Citizen Pty Ltd Superannuation Fund

Anti-money laundering and counter terrorism financing requirements Forms of Identification required from Investors The application form states the form of identification documents that the Manager will collect from you. The Manager will usually collect these documents before processing the application, but may request additional information at a later date. If you do not provide the documents and information we may not be able to process your application. Alternative forms of documents may be acceptable under certain circumstances permitted by law. Non-English documents must be accompanied by a translation prepared by an accredited translator.

It is not compulsory for applicants to provide the information requested by the Manager. However, if not all the requested information is provided the Manager may not be able to process an applicant’s application, administer their investment or comply with any of their instructions. If you are in any doubt as to what information must be provided with the application form, please contact the Manager. Its contact details are set out in the Corporate Directory on page –iii- of this PDS. Certification of documents The certification of your documents must be completed in Australia by a person in one of the positions below and who is not related to you (i.e. a parent, spouse, de facto partner or child). When having copies of documents certified, you should show both the original document and copy to the eligible certifier.



The following persons are able to certify your document:

• Judge • Pharmacist

• Lawyer • Finance company officer*

• Notary Public • Full time bank employee*

• Magistrate • Accountant with CPA or NIA membership*

• Justice of the Peace • Full-time post office employee*

• Police Officer • Authorised representative of a holder of an AFSL *

*Required to have at least two years of continuous service or membership

For a more detailed list of eligible certifiers, please refer to the Certification Guide on our website at www.baccus.com.au or contact the Manager. The following is a guide as to the form of the certification: Document Type Sample wording Certification requirements Single page I, [full name], certify that this is a true and

correct copy of the original. Certified within the last 12 months • Signed and dated • Includes name, occupation and any licence number of the certifier

Multiple page document (with certification on every page)

I, [full name], certify that this is a true and correct copy of the original.

Multiple page document (with certification on front page only)

I, [full name], certify that this page and the following ‘x pages’ are a true and correct copy of the original.

Please ensure you send a certified copy only and not the original.

Correspondence All correspondence should be addressed to: The Manager Baccus Investments Limited P O Box 191 DOUBLE BAY NSW 1360



Application Form Kremnizer Mortgage Fund ARSN 101 518 067

SECTION A - INVESTOR DETAILS

What type of entity is applying? Please tick one box ONLY.

� Individual, joint investors or sole trader – complete A1

� Partnership – complete A1 (partners who are individuals) and A2 (partners which are companies)

� Company – complete A1 (directors and beneficial owners) and A2

� Trust / Super Fund with Individuals as Trustee – complete A1 (Trustees and beneficiaries) and A3

� Trust / Super Fund with Corporate Trustee – complete A1 (Directors), A2 (Company) and A3

� Other: ____________________________________________________

If none of the above categories is applicable to you, or you have other questions relating to this application form, please contact the Manager on 02 9327 7911 during business hours. A1 INDIVIDUAL INVESTOR DETAILS (including individuals acting as trustees, corporate directors, individuals who are partners and sole traders)

• Details

INVESTOR 1 (Your name MUST match your ID exactly.)

Given Names (in full): Mr /Mrs /Miss /Ms First Name Second Name

Surname

Date of Birth (for identification)

/ /

This application form accompanies the Product Disclosure Statement dated 2 October 2017 (PDS) issued by Baccus Investments Limited ABN 87 095 832 072; AFSL 220647 (Manager) in its capacity as responsible entity of the Kremnizer Mortgage Fund ARSN 101 518 067 (Fund). It is important that you read the PDS in full and the declarations and acknowledgements contained in section I of this application form before applying for membership of the Fund. If you are an existing investor and wish to make an additional investment, please contact the Manager who will provide an additional investment form to you. Unless otherwise defined, capitalised terms used in this application form have the same meaning given to them in the PDS.



Occupation

Residential Address (Not a PO Box)

Suburb or Town State Postcode

Phone Number _ Mobile

Email Address (we encourage you to provide your email address so that you can receive copies of communications by email)

INVESTOR 2 (Your name MUST match your ID exactly.)

Given Names (in full): Mr /Mrs /Miss /Ms First Name Second Name

Surname

Date of Birth (for identification)

/ /

Occupation



Phone Number _ Mobile


If there are more than 2 individuals please provide details and attach to this application form.

• Politically Exposed Person (PEP)

Is any investor a PEP? Please refer to page 27 of the PDS if you are unsure who is a ‘PEP’. Please tick the applicable box.



Yes, please provide description of PEP position

No

• Additional information for sole traders (only applicable if applying as a sole trader)

Full business name (if any)

Australian Business Number (if obtained)

Address of principal place of business (not a PO Box). If same as residential address given above, mark ‘as above’


• Identification documents required

To comply with Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation, the Manager must collect certain information from prospective individual investors (and beneficial owners) supported by ORIGINAL CERTIFIED COPIES of relevant identification documents for all investors (and beneficial owners). Please refer to pages 47 - 48 of the PDS for details of how to arrange certified copies. Please provide all documents in the proper format otherwise we may not be able to process your application for investment. For each individual, enclose an ORIGINAL CERTIFIED COPY of one of the following documents: Type of ID to submit ID requirements Drivers licence � An originally certified copy of an Australian drivers licence (front

and back), displaying your photograph and current residential address

Passport �

An originally certified copy of your current passport that shows your photograph, date of birth, and signature

If you do not have either of the above options, please contact the Manager on 02 9327 7911 during business hours for assistance.



A2 COMPANY INVESTOR AND CORPORATE TRUSTEE DETAILS

• Company Details

Full name of Company

Contact name

Telephone No (work) Telephone No (home)

Email Address

Country of registration, incorporation, formation

Country of residence for tax purposes (if not Australia)

Tax File No or Exemption ABN/ACN (if registered in Australia) ARBN (if registered with ASIC)

AFS Licence number (if applicable)

If an Australian company, registration status with ASIC

� private/proprietary company � public company

� other (please specify)

If the applicant is a Foreign Company, please contact the Manager.

• Directors

If the company is registered as a proprietary company by ASIC, please list the name of each director of the company. Director 1 - Full name

Director 2 - Full name



If there are more than 2 directors please provide their full names on a separate page and attach to this application form. Politically Exposed Person (PEP) Is any director a PEP? Please refer to page 27 of the PDS if you are unsure who is a ‘PEP’. Please tick the applicable box.


No

• Beneficial owners

If the company is an Australian private company (companies whose name ends in Pty Ltd or Proprietary Ltd) please provide details in section B4 below for each shareholder having 25 per cent or more of the company’s issued share capital OR for any other person who otherwise controls the company. Please refer to page 27 of the PDS if you are unsure what ‘beneficial owner’ or ‘controls’ mean.

• Identification documents required

To comply with Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation, the Manager must collect certain information from prospective individual investors (and beneficial owners) supported by ORIGINAL CERTIFIED COPIES of relevant identification documents for all investors (and beneficial owners). Please refer to pages 47 - 48 of the PDS for details of how to arrange certified copies. Please provide all documents in the proper format otherwise we may not be able to process your application for investment. Type of ID to submit ID requirements Company registration certificate and extract

�

�

A certificate of registration or incorporation issued by the relevant foreign registration body (showing name of company, registration body, registration number and type of company – private or public), and

If registered in Australia as a foreign company, a copy of the company search on the ASIC database, displaying the company’s name, registration number, registered office and any beneficial owners.

AND

Provide an ORIGINAL CERTIFIED COPY of a photographic identification document for each officeholder (director or secretary) who has signed the application form identified in this section. Type of ID to submit ID requirements Drivers licence � An originally certified copy of an Australian drivers licence (front


Passport �


If you do not have one of the above options, please contact the Manager on 02 9327 7911 during business hours for assistance.



A3 TRUSTS or SUPERANNUATION FUNDS DETAILS

A3.1 Trust, Fund details

Full name of Trust or Superannuation Fund

Country of establishment

Country of residence for tax purposes

Tax File No or Exemption* ABN (if any)

• Type of trust

(Please tick ONE box from the list below to indicate the type of trust and provide the required information)

Type A: � Regulated trust (eg. self-managed superannuation fund)

Name of regulator (e.g. ASIC, APRA, ATO) Registration/ licencing details

Type B: � Other type of trust/unregulated trust

Trust description (eg. family trust, unit trust, discretionary trust, charitable trust)

If the applicant is some other type of trust, please contact the Manager.

A3.2 Additional Information for Type B Trusts

• Settlor of the Trust

If the material assets contribution to the trust by the settlor at the time the trust was established was greater than $10,000 and the settlor of the trust is alive, please provide the full name of the settlor of the Trust.

• Beneficiary details

Do the terms of the Trust identify the beneficiaries by reference to a membership of a class?



� Yes - Describe the class of beneficiaries below (e.g. unit holders, family members of named person,

charitable purposes)

� No - Provide the full names of each beneficiary of the Trust and of beneficial owners who ultimately own 25 per cent or more of or control the Trust in section B4. Please refer to page 27 of the PDS if you are unsure what ‘beneficial owner’ or ‘controls’ mean.

A3.3 Trustee details

If a trustee is an individual, please ALSO complete section A1 above (for each individual trustee) and provide the required identification documents.

If a trustee is a company, please ALSO complete section A2 above (for each corporate trustee) and provide the required identification documents.

• Identification documents

To comply with Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation, the Manager must collect certain information from prospective investors (their beneficial owners and beneficiaries) supported by ORIGINAL CERTIFIED COPIES of relevant identification documents for all investors (their beneficial owners and beneficiaries). Please refer to pages 47 - 48 of the PDS for details of how to arrange certified copies. Please provide all documents in the proper format otherwise we may not be able to process your application for investment.

For Trusts identified under A3.1 as Type A Type of ID to submit ID requirements Details of status as regulated trust and of regulator

� For a self-managed superannuation fund provide search of relevant regulator’s website eg. ‘Super Fund Lookup showing registration/licensing details; AND

�

Full trust deed For a registered managed investment scheme, provide a copy of an offer document, eg, a product disclosure statement

For Trusts identified under A3.1 as Type B

Provide an ORIGINAL CERTIFIED COPY of one of the following documents Type of ID to submit ID requirements Trust Deed and trust details � Full trust deed, OR

�

�

Extract of the trust deed containing the cover page, full names of trustees, clauses dealing with the appointment and removal of Trustees, recitals, schedule to trust with names of members, appointors, etc and signature page; OR Original letter from a solicitor or qualified accountant that confirms the name of the Trust, the full name of the settlor of the Trust, full names of trustees, clauses dealing with the appointment and removal of Trustees, recitals, schedule to trust with names of members, appointors, etc;



AND For Trusts identified under A3.1 as either Type A OR Type B

Provide an ORIGINAL CERTIFIED COPY of a photographic identification document for each Controlling Person (including each Beneficial Owner and Beneficiary) who is identified in section B4 below. Type of ID to submit ID requirements Drivers licence � An originally certified copy of an Australian drivers licence (front


Passport �


AND Provide relevant identification documents for the trustee/s as specified in:

� section A1 (individual trustee/s) OR

� section A2 (corporate trustee/s) as applicable. If you do not have one of the above documents, please contact the Manager on 02 9327 7911 during business hours for assistance.



SECTION B – ACCOUNT HOLDER’S TAX RESIDENCY AND CLASSIFICATION - FATCA AND CRS (INCLUDING CONTROLLING PERSONS)

The account holder is the person listed or identified as the applicant investor under section A (Account Holder). The Account Holder’s Country of Tax residence, Taxpayer identification number (TIN) (see Note 1 below), Global Intermediary Identification Number (GIIN), FATCA Status, CRS Status and Controlling Persons (includes beneficial ownership details) should be provided in this section. If you are acting as an intermediary, agent, custodian, nominee, signatory, investment adviser or legal guardian on behalf of one or more of the Account Holders, this section must be completed by or on behalf of that other person who is referred to as the Account Holder. If you are unable to complete this section please seek appropriate advice relating to the tax information required. For further guidance relating to the implementation of FATCA and CRS, please refer to page 28 of the PDS. If you are applying as a: • Individual or joint investor or as trustee/s for a trust or sole trader please complete section B1.

• Company, trust or other type of entity please also complete section B1, B2, B3 and B4.

Note 1 - TIN is the number assigned by each country, for the purpose of administering tax laws (equivalent to a Tax File Number (TFN) in Australia).

B1 TAX RESIDENCE – INDIVIDUALS/SOLE TRADER Please provide details for all jurisdictions in which the Account Holder is resident for tax purposes and the related Taxpayer identification number (TIN). If the Account Holder is a United States (US) citizen or lawful resident alien of the U.S, even if residing outside the US, the US TIN must be provided. If you are a tax resident of Australia please provide your TFN or else applicable TIN. INVESTOR 1

� Tick if you are a US citizen or lawful resident alien of the U.S Country of Tax residence 1

Taxpayer Identification Number 1 # TIN Unavailable

Country of Tax residence 2


TIN Unavailable explanation(s) – If any ‘TIN Unavailable” box is checked please provide an explanation

� If the Account Holder has additional countries of tax residence, please attach a statement to this form containing the Country and TIN for each additional country



� I certify the tax residence countries provided represent all countries in which I am considered a

tax resident. .

INVESTOR 2

� Tick if you are a US citizen or lawful resident alien of the U.S Country of Tax residence 1





� If the Account Holder has additional countries of tax residence, please attach a statement to this form containing the Country and TIN for each additional country

� I certify the tax residence countries provided represent all countries in which I am considered a

tax resident.

B2 TAX RESIDENCE OF THE ACCOUNT HOLDER – COMPANIES, TRUSTS AND OTHER TYPES OF ENTITIES Please provide details for all jurisdictions in which the Account Holder is resident for tax purposes and the related Taxpayer identification number (TIN). If the Account Holder is a United States (US) citizen or resident alien of the U.S, even if residing outside the US, the US TIN must be provided. If you are a tax resident of Australia please provide your TFN or else applicable TIN.

� Tick if the Account Holder is a tax resident of the US. Country of Tax residence 1







� If the Account Holder has additional countries of tax residence, please attach a statement to this form containing the Country and TIN for each additional country.

� I/We certify the tax residence countries provided represent all countries in which the Account

Holder is considered a tax resident.

B3 FATCA AND CRS STATUS - COMPANIES, TRUSTS AND OTHER TYPES OF ENTITIES

NON US PERSON CERTIFICATION Select a classification that matches your FATCA Status. Please tick ONE box from the list below:

� Exempt Beneficial Owner (includes self-managed superannuation fund)

� Passive NFFE (Companies, Associations etc), – complete section B4 – Controlling Persons

� Trust (including testamentary trust) – complete section B4 – Controlling Persons

� Participating FFI( Managed Investment Scheme with ASIC licence) – provide the GIIN below

� Local/Partner Jurisdiction FFI - provide the GIIN in section below

� Deemed Compliant FFI Select the deemed-compliant category

� Trustee-Documented Trust - provide the GIIN and Trustee name in section B2

� Sponsored Investment Vehicle - provide the GIIN and Sponsor’s in section B2

� Registered-Deemed Compliant FFI - provide the GIIN in section B2

� Other Deemed Compliant Category

� Nonparticipating FFI

� Direct Reporting NFFE – provide the GIIN in section B2

� Sponsored Direct Reporting NFFE – provide the GIIN and Sponsor’s name in section B2

� Active NFFE

� Other – describe the FATCA Status

Provide the Account Holder’s GIIN

- -

B4 CONTROLLING PERSONS (INCLUDES BENEFICIAL OWNERS AND BENEFICIARY DETAILS UNDER SECTIONS A2 AND A3) This section is considered to be an integral part of the self-certification to which it is associated. If there is a change in Controlling Persons/Beneficial Ownership/Beneficiaries, please submit an updated form within 30 days.



CONTROLLING PERSON 1 / BENEFICIAL OWNER 1

Given Names (in full): First Name Second Name

Surname



Country of residence

Date of birth

City/Town of birth Country of Birth








Please tick the boxes to select the role types that are relevant to you (ie Controlling Person 1 / Beneficial Owner 1)

� Controlling Person ^/ � Beneficiary Type ^



Legal Person ^

�

By Ownership

�

By other means

�

Senior Management Official

Legal Arrangement – Trust ^

�

Settlor

�

Trustee �

Protector �

Beneficiary �

Other

Legal Arrangement – Other ^

�

Settlor – Equivalent

�

Trustee Equivalent

�

Protector Equivalent

�

Beneficiary Equivalent

�

Other -Equivalent

Politically Exposed Person (PEP) Is the Controlling Person 1 / Beneficial Owner 1 a PEP? Please refer to page 27 of the PDS if you are unsure who is a ‘PEP’. Please tick the applicable box


No



Surname




Date of birth












� Controlling Person ^/ � Beneficiary Type ^ Legal Person ^

�

By Ownership

�

By other means

�



�

Settlor

�

Trustee

�

Protector

�

Beneficiary

�

Other


�


�

Trustee Equivalent

�


�


�

Other -Equivalent

Politically Exposed Person (PEP) Is Controlling Person 2 / Beneficial Owner 2 a PEP? Please refer to page 27 of the PDS if you are unsure who is a ‘PEP’. Please tick the applicable box


No



Surname






Date of birth










� Controlling Person ^/ � Beneficiary Type ^ Legal Person ^

�

By Ownership

�

By other means

�



�

Settlor

�

Trustee �

Protector �

Beneficiary �

Other


�


�

Trustee Equivalent

�


�


�

Other -Equivalent

Politically Exposed Person (PEP)



Is Controlling Person 3 / Beneficial Owner 3 a PEP? Please refer to page 27 of the PDS if you are unsure who is a ‘PEP’. Please tick the applicable box


No

If there are more than 3 Controlling Persons or Beneficial Owners or more than 3 Countries of Tax residence for any person, please provide the details on separate page and attach to this application form.



SECTION C – ACCOUNT CONTACT DETAILS

Joint investors with different residential addresses must elect one email and one postal address in this section.

Account Designation (optional)

Main Contact

Postal Address


Phone number Mobile


SECTION D - INVESTMENT DETAILS

I/We apply to invest $ ��,��,�� in the Kremnizer Mortgage Fund

The minimum initial investment is $1,000.00 Please tick the box beside your chosen payment method and complete the required details.

� Cheque

Amount: $ ��,��,��

Please make your cheque payable to “Kremnizer Mortgage Fund” and cross your cheque “not negotiable”.

� Electronic funds transfer or direct deposit

Please transfer your payment electronically to the: Bank: Account Name: BSB: Account; Reference

Westpac Banking Corporation Kremnizer Mortgage Fund (No 1) 032 053 196 031 …………………………………………………………. “Investor surname/company or trust name” (as applicable)

Amount: $ ��,��,��



Date of transfer: / /

Source of Investment Funds Please identify the source of the funds you are providing: (Mark box which best describes) Gainful Employment Inheritance/ gift Business Activities Superannuation

savings Financial Investments

Other- Please specify What is the purpose of this investment? (Mark box which best describes) Savings Growth Income Retirement Business account Other- Please specify

SECTION E - BANK ACCOUNT DETAILS

All investors must complete this section with an Australian banking institution to receive their distributions by direct deposit.

Bank/Financial Institution/Credit Union

Branch Name

BSB No Account No

Account Name

Note: the name of the account must be the same as the investor’s name. SECTION F - OPERATING AUTHORITY When giving instructions to us about your investment please indicate who has authority to operate your account:

INDIVIDUAL/JOINT ACCOUNTS (if no box is ticked we will assume all to sign)

� any one to sign � any two to sign � all to sign

COMPANY, TRUST, SUPER FUND ACCOUNTS (if no box is ticked all future written instructions must be signed by 2 directors/trustees, director and secretary, or a sole director)

� any one to sign � any 2 to sign � all to sign � OTHER _______________________________



SECTION G - REQUEST FOR ANNUAL ACCOUNTS (optional) The accounts for the Fund will be available on the website at www.baccus.com.au, unless you indicate below that you wish to receive them, free of charge, from the Manager as indicated.

� email notification (you must provide your email address in Section C)

� by post You may change your election at any time as to whether you want us to send you the accounts, and if so the way in which you receive them, by contacting the Manager. SECTION H – PRIVACY The Manager may wish to contact you about future investment opportunities that may be of interest. Please tick the box if you consent to your personal information being used and disclosed for marketing purposes as broadly described in the Privacy statement in the PDS.

� I/we wish to receive information from the Manager regarding future investment opportunities. You may change your election at any time by contacting the Manager.

SECTION I - DECLARATIONS AND SIGNATURES

YOU SHOULD READ THE PRODUCT DISCLOSURE STATEMENT IN FULL BEFORE SIGNING THIS APPLICATION FORM When you complete this application form you make the following declarations:

• I/we have read and understood the PDS to which this application form applies, including any

supplemental information;

• I/we have received and accepted the offer to invest in Australia;

• The information provided in my/our application form or any other information provided in support of

the application is true, correct and complete in all respects;

• I/we agree to be bound by the provisions of the Constitution governing the Fund and the terms and

conditions of the PDS, each as amended from time to time;

• I/we acknowledge that none of the Manager, its related entities, directors or officers has guaranteed

or made any representation as to the performance or success of the Fund, or the repayment of

capital from the Fund. Investments in the Fund are subject to investment risk, including delays in

repayment and loss of income or principal invested. Investments in the Fund are not deposits with or

other liabilities of the Manager or any of its related bodies corporate or associates;

• I/we acknowledge the Manager reserves the right to reject any application or scale back an

application in its absolute discretion;

• If applicable, after assessing any of my/our circumstances, I/we have obtained my/our own

independent financial advice prior to investing in the Fund;

• If this application form is signed under Power of Attorney, each Attorney declares he/she has not

received notice of revocation of that power (a certified copy of the Power of Attorney should be

submitted with this application form);

• I am/we are over 18 years of age and I/we are eligible to hold an investment in the Fund;

• I/we have all requisite power and authority to execute and perform the obligations under the PDS and

this application form;

• I/we agree that the method of the payment to me/us of any return on my/our investment in a Syndicate Mortgage Investment will be in accordance with my/our instructions given in the application form accompanying the PDS and the relevant Syndicate SPDS and that unless I/we otherwise direct, no separate written confirmation of the transactions comprised of those payments need be made;



• I/we have read the information on privacy and personal information contained in the PDS and consent to my/our personal information being used and disclosed as set out in the PDS;

• I/we acknowledge that the Manager may deliver and make reports, statements and other

communications available in electronic form, such as e-mail or by posting on a website;

• I/we indemnify the Manager and each of its related bodies corporate, directors and other officers,

shareholders, servants, employees, agents and permitted delegates (together, the Indemnified

Parties) and to hold each of them harmless from and against any loss, damage, liability, cost or

expense, including reasonable legal fees (collectively, a Loss) due to or arising out of a breach of

representation, warranty, covenant or agreement by me/us contained in any document provided by

me/us to the Manager, its agents or other parties in connection with my/our investment in the Fund.

The indemnification obligations provided herein survive the execution and delivery of this application

form, any investigation at any time made by the Manager and the issue and/or sale of the investment;

• To the extent permitted by law, I/we release each of the Indemnified Parties from all claims, actions,

suits or demands whatsoever and howsoever arising that I/we may have against any Indemnified

Party in connection with the PDS or my/our investment;

• Other than as disclosed in this application form, no person or entity controlling, owning or otherwise

holding an interest in me/us is a United States citizen or resident of the United States for taxation

purposes;

• I/we will promptly notify the Manager of any change to the information I/we have previously provided

to the Manager, including any changes which result in a person or entity controlling, owning or

otherwise holding an interest in me/us;

• I/we consent to the Manager disclosing any information it has in compliance with its obligations under the U.S. Foreign Account Tax Compliance Act (FATCA) and the OECD Common Reporting

Standards for Automatic Exchange of Financial Account Information (CRS) and any related

Australian law and guidance implementing the same. This may include disclosing information to the

Australian Taxation Office, which may in turn report that information to the relevant tax authorities as

required;

• I/we acknowledge that the collection of my/our personal information may be required by the Financial

Transaction Reports Act 1988, the Corporations Act 2001, the Income Tax Assessment Act 1936, the

Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the FATCA and CRS

(which for these purposes includes any related Australian law and guidance) and the Anti-Money

Laundering and Counter-Terrorism Financing Act 2006. Otherwise, the collection of information is

not required by law, but I/we acknowledge that if I/we do not provide personal information, the

Manager may not allow me/us to invest in the Fund;

• I am/we are not aware and have no reason to suspect that the monies used to fund my/our

investment in the Fund have been or will be derived from or related to any money laundering,

terrorism financing or similar or other activities illegal under applicable laws or regulations or otherwise prohibited under any international convention or agreement (AML/CTF Law);

• I/we will provide the Manager with all additional information and assistance that the Manager may

request in order for the Manager to comply with any AML/CTF Law, FATCA and CRS; and

• I/we acknowledge that the Manager may decide to delay or refuse any request or transaction,

including by suspending the issue or redemption of investment in the Fund, if the Manager is

concerned that the request or transaction may breach any obligation of, or cause the Manager to

commit or participate in an offence, including under any AML/CTF Law, FATCA and CRS.

Signature of Applicant 1 _____________________________________________________________

Name of Applicant 1 _____________________________________________________________

Date _______________________

Tick capacity - mandatory for companies � Sole Director � Director � Secretary

Signature of Applicant 2 _____________________________________________________________



Name of Applicant 2 _____________________________________________________________

Date _______________________

Tick capacity - mandatory for companies � Sole Director � Director � Secretary

SECTION J – FINANCIAL ADVISER DETAILS AND CUSTOMER IDENTIFICATION DECLARATION

Customer Identification Declaration – Adviser to Complete )I confirm that I have completed an appropriate Customer Identification Procedure (CID) on this investor and/or the beneficial owners which meets the requirements of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). Please select the relevant option below:

� I have attached the original verification documents that were used to perform the CID for this investor and/or the beneficial owners; OR

� I have attached a copy of the verification documents and will retain the originals accordance with the

AML/CTF Act and agree to provide Baccus Investments Limited (Manager) or its agents with access to the original documents upon request; and

� I also agree that if I become unable to retain the originals of the verification documents used for this

application in accordance with the requirements of the AML/CTF Act I will forward them to the Manager. I agree to provide the Manager or its agents with any other information that they may require to support this application.

Financial Adviser Name (if a new adviser, please attach a copy of your employment/ representative authority)

Business name

Adviser number (if applicable)

AFS Licence number ABN

Name of regulator (if licenced by an Australian Commonwealth, State or Territory statutory regulator)

Dealer group name (if different from the above)

Street address (not a PO Box)




Country

Postal address


Country

Telephone number (work) Mobile number

Facsimile number (work)

Email Address

Adviser/Dealer Stamp

Signature of Financial Adviser

Date: / /

Investor to complete Please tick the box below if you wish your financial adviser to have access to information and/or to receive copies of transaction confirmations from time to time. If no election is made, access to information and/or copies of transaction confirmations will not be provided to your financial adviser.

� Please provide access to information and send copies of transaction confirmations to my/our financial adviser.

You may change your election at any time by contacting the Manager.