Investing with Zagga

Market risk is the risk that negative market movements will affect the price of assets within a particular market. By their very nature, markets experience periods of volatility involving price fluctuations of varying magnitudes. In general, shares and listed property investments experience more volatility than fixed interest investments and mortgages, which in turn experience more volatility than cash investments. For mortgage investments this means the interest receivable from your investment may not move in line with general interest rate markets and the amount you receive as income may vary over time.

The Fund’s investments may be subject to economic variables (including economic growth and inflation) and changes to government policy. These factors are generally beyond the control of the Trustee.

Market conditions such as low or declining demand for real estate may result in the security property being sold for a price that is lower than anticipated and this may ultimately result in a lower return to Investors.

There is a risk that the Borrower may default under the terms of the Loan, including if the Loan is not repaid by the end of its term. This may be for a wide range of reasons, including a change in the:

• individual financial or other circumstances of the Borrower; and
• economic climate generally that adversely affects all Borrowers.

The Trustee manages this risk by applying its approved lending policies, collection and management systems (see section 5.7) and the Fund’s compliance programme. All Loans are subject to periodic review.

If a default occurs, the ZILT, either directly or via an appointed specialist third-party, will take all necessary action to remedy the default, including:

• pursuing recovery of arrears of income and capital;
• arranging the issue and service of all default notices and other notices of demand;
• taking possession of the security property;
• exercising the power of sale pursuant to the mortgage; and
• otherwise dealing with the security property and collateral security, such as enforcing guarantees, to protect the Investors’ interests.

The Trustee does not guarantee your investment in the Fund or the payment of any interest or principal in relation to a Loan. Your investment in the Fund is dependent upon the Borrower repaying the principal and interest on the Loan on their due date(s).

An investment in the Fund is illiquid and there are limited rights to withdraw your funds from the Fund after you have submitted, and we have received, your Application Form and have issued you Units.

Investing in an unlisted and unregistered managed investment scheme (such as the Fund) is not like investing directly on your own. The Fund must take into consideration all applications made by all Investors, which can result in different income or capital gains outcomes when compared to investing directly on your own. Therefore, income from the Fund may be different to that received from investing directly on your own. You should obtain professional advice before deciding to invest in the Fund.

In the early stages the Fund will have limited diversity of loans. Diversification will increase as more loans are invested in.

There is a risk that the individual Loans may not be repaid in a timely fashion which may cause a delay or potential loss of capital. The Trustee seeks to manage this risk through the initial Loan approval process as well as managing maturing Loans in a timely fashion.

The Fund’s operations may be negatively impacted by changes to government policies, regulations and taxation laws. Although the Trustee is unable to predict future policy changes, the Trustee seeks to manage this through its risk management and compliance programmes to monitor and manage regulatory change.

Further, Australian tax laws are constantly in a state of flux with the introduction of various taxation amendments which may affect you.

Tax liability is your responsibility; we are not responsible for the taxation consequences of an investment in the Fund. You should consult your own taxation adviser to ascertain the tax implications of your investment.