Annualised returns for the Quarter ending were:30 June 2018Return is before tax and after fees and expenses. Past returns do not guarantee future performance. *PIE Fund effective return is calculated based on a taxpayer paying tax on non PIE income at 33%

*PIE Fund

5.86%PA

Group Investment Fund and PIE Fund

5.45%PA

I N V EST M E N TS | P RO P E RT Y F I N A N C E

First Mortgage Trust - Toll Free 0800 321 113 team@fmt.co.nz | www.fmt.co.nz

First Mortgage Managers Limited, the issuer, is not a registered bank under the Reserve Bank of New Zealand Act. Risk and returns between our investments and bank fixed term deposits are different. For a copy of our Product Disclosure Statement call 0800 321 113

or visit our website – www.fmt.co.nz

Hello and welcome to our new look

newsletter.

I am very pleased to report that our

investor return has increased. This has

been achieved through an increase in

good lending opportunities.

For the June quarter, 1st April to 30th

June 2018:

5.45% pa Group Investment Fund and

PIE Fund.

5.86% pa PIE Fund – effective rate for

33% tax payers.

When comparing our investment return

to the major Banks' 6 to 12 month fixed

term deposit rates, you are likely to find

we are achieving around a 2% higher

return for our investors. That equates to

around a 60% higher return.

While you cannot directly compare an

investment in a New Zealand Trading

Bank to one in First Mortgage Trust (due

to the different risk profiles of each

investment), considering all our

investments are either secured against

first registered mortgages or held in cash

deposits with New Zealand Trading

Banks, I think First Mortgage Trust

provides an investment option that is

hard to beat.

I am firmly of the belief that the Fund has

never been more resilient or in a better

position than where it is today,

particularly considering our track record

and 22 year history.

At the time of writing this report, I am

preparing for our annual investor

meetings. It is my 13th year at the helm

of First Mortgage Trust and presenting on

the Fund's position and performance.

We have had an incredible response to

our invitations to attend this year's

presentations, with record numbers

FROM THE CEO

conf i rmed for a l l venues. I am

anticipating attendance at our Tauranga

presentation will exceed 500.

I will report on this in my next newsletter.

As not everyone is in a position to attend,

I thought I would use this newsletter to

cover the key messages in my

presentation.

Two key messages – resilience and

performance:

l By resilience, I mean our core

conservative and cautious values.

l By performance, I mean our results -

what we have achieved based on

these values.

T h e r e s i l i e n c e o f t h e F u n d i s

demonstrated by the quality of the loans

we hold against your investment in the

Fund.

In the last financial year (1st April to 31st

March 2018), out of over 620 loans there

was only 1 loan where the Fund did not

receive all of the interest due. The loss of

interest, not investor capital, was

$56,000 against a total loan portfolio of

$525 million. This loss was covered by

the Reserve Fund.

Moreover this was the 4th consecutive

financial year end where we reported

zero non – performing loans. I think you

would agree this is a credible and

enviable result.

We continue to maintain

what is regarded in the

i n d u s t r y a s a

conservative lending

policy. This is commonly

referred to as lower loan

to value ratios. We take a

relatively conservative

approach in the way we

manage the business. It

is important to us that

borrowers have a good

deposit or equity in the

property we lend on.

Our investment policy is

to lend on properties

t h r o u g h o u t N e w

Zealand, but with a

focus on propert ies

within the Bay of Plenty,

Waikato and Auckland regions.

These regions have traditionally held or

increased property values and generally

support growth, have employment

opportunities and strong GDP. The

resilience or quality of our loan portfolio

is supported by a mix of residential,

commercial, rural and development

loans.

Now to performance: In the last

financial year (1st April 2017 to 31st

March 2018) we returned $30 million to

our investors.

I have included a graph to best

demonstrate our quarterly returns

compared to the average Bank 6 month

term deposits for the same period.

The return to investors in our Fund for

this period was 5.31% per annum, an

effective return of 5.71% per annum for

those investors in our PIE fund with a

personal income tax rate of 33%. The

average Bank 6 month deposit rate for

the same period was 3.28%.

The numbers speak for themselves.

I want to assure you; These results have

not been achieved through dealing in

higher risk loans – far from it. I reiterate

the fund had zero non-performing loans

at our financial year end. We intend to

maintain this position.

The fundamental difference, and what

underpins our higher return, is how and

what the Manager of the Fund charges

investors compared to banks.

Kind regards

Tony Kinzett – CEO

First Mortgage Managers charges a

management fee to manage the Fund.

All returns in excess of the fee are

generally paid to our investors. Banks

are margin takers. That is, they take the

difference between what they offer

investors and charge borrowers. This is

significant to our performance and why

F i r s t Mor tgage Trus t 's re turn i s

substantially higher.

Looking to the future. We look ahead

with confidence. Our view is the

property market in New Zealand is

stable and values have generally been

maintained.

Confidence in property and good

lending opportunities remain steady.

This should result in the continuation of

consistent returns to our investors.

At our investor meeting, attendees will

be offered the opportunity to ask

questions. I extend this opportunity to

those of you that have been unable to

attend. Please feel free to call me or one

of our management team to discuss any

questions you have.

Thank you for your continued support of

the Fund.

First Mortgage Trust - Toll Free 0800 321 113 team@fmt.co.nz | www.fmt.co.nz

YOUTH SPONSOR

Sam ShergoldFirst Mortgage Managers Limited (the Manager of First Mortgage Trust) has sponsored the

following person. This is not a cost to FMT investors – it is funded by the Manager.

*NB Where donations are made by the Manager, these do not come out of investor funds.

Donations are paid for by the Manager although in the name of First Mortgage Trust.

The event was set for excitement as a

solid 3-6ft surf fluctuated throughout

the 3 days of competition.

I came away from one of my best

nationals after finishing with gold in the

Board Relay, Ski Relay, Taplin Relay and

Rescue Tube Rescue and a bronze in the

Double Ski. Although many other finals

were made in both individual and team

events, I couldn't manage to grasp more

medals . As a sur f c lub, Mount

Maunganui came away with the

winning title for the sixth consecutive

year, creating history.

Since March I have enjoyed some down

time surfing and relaxing with friends

before setting goals for the next targets. I

have taken the opportunity to improve

my cooking skills while also trying to

add more healthier options that fuels my

body better and is ultimately less

processed food. Although you win

some, you also lose some and learn, just

like sport.

This year the ISA World SUP and prone

paddleboarding Championships are

held in Brazil during November. If I were

to be selected for this team it would be

my fifth year in the NZ team, having

medalled every other year.

Thank you

Sam Shergold

The 2018 summer season of racing finished in the

middle of March when the Surf Life Saving

National championships were held at Midway

Beach, Gisborne.

Tauranga Intermediate Boys Cricket (TIBC)

Numerous lead up games are

required to be played and won, to

advance towards the ultimate goal of

going to Christchurch in November.

Tauranga Intermediate School has a

long and impressive record in cricket

as being very competitive. In

February and March this year the

school cricket team earned the right

to compete in a local tournament of

20/20 cricket comprising of five Bay

of Plenty teams, with the winning

team to progress to the next stage

towards playing in Christchurch.

The other Intermediate schools

represen ted were Otumoeta i

(Tauranga), Bethlehem (Tauranga),

Whakatane, and John Paul College

(Rotorua).

After TBIC had beaten the four other

teams, a final was then played against

Otumoetai with TIBC once again

being victorious and earning the right

to become the Bay of Plenty 2018

Intermediate Schools representative

team.

The next s tage was a fur ther

tournament of 20/20 cricket against

five intermediate school teams

representing (1) Kamo – Northland,

(2) Pukekohe – Counties Manukau,

(3) Berkley – Hamilton, (4) St Peters –

Waikato Valley and (5) Gisborne –

Poverty Bay.

It was very pleasing for everyone

involved with TIBC that they once

again won all five games and are now

the Intermediate schools Northern

Dis t r ic t s represen ta t ive team

t rave l l ing to Chr i s tchurch in

November.

The players, coaching team, families

and supporters are extremely

appreciative that First Mortgage

Managers have kindly agreed to

sponsor the team uniform and playing

gear.

Amongst Intermediate schools there is

an intense determination to represent

their province in a New Zealand wide

tournament held each year in

Lincoln, Christchurch, based at the

NZ Cricket Academy.

Northland 2% Auckland 59%

Bay of Plenty 15.5%Waikato, Coromandel& King Country 8.5%

Taranaki 0.5%

Hawkes Bay 1%

Wellington 4.5%

Marlborough 0.5%

Otago 0.3%

Canterbury 6%

Southland 0.5%

Manawatu & Wanganui 1.5%

Tasman 0.1%

Nelson 0.1%

Residential56%

Bank Deposits18%

Rural 11%

Commercial15%

INVESTMENTS BY TYPELOANS BY REGION

As the Manager of the Fund we have aimed to continue our conservative position. The Fund has been managed to maintain a spread and mix of quality property as securities for our loans. The map and

graph providing detail of Loans by Region and Investments by Type as at 6 June 2018 demonstrate the diversity of First Mortgage Trust.

First Mortgage Trust - Toll Free 0800 321 113 team@fmt.co.nz | www.fmt.co.nz

New Staff

Kevin Menezes

- BDM Administration Assistant

Kevin joined the FMT team in March

as an administrative assistant, based

in Auckland. He is originally from

India and migrated to New Zealand

in 1999. Kevin has worked in

various roles across Rural Banking,

Business and Commercial Banking

and Insurance. In his free time Kevin

is an amateur gardener and loves

cooking and reading.

Bonus Draw winnersJune 2018

Congratulations and well done to

our previous winners who all

chose between Petrol and

Supermarket Giftcards as their

prize.

The bonus draw is six random

selections made from our current

investors, paid for by First

Mortgage Managers Limited (not

First Mortgage Trust), which

means it has no effect on the

return to investors.

1 trust - Matamata

1 individual - Dargaville

4 individuals - Tauranga

Two new walking groups have been

added to Sport Bay of Plenty’s City on

its Feet programme, creating more

opportunities within the community for

people to get active more often.

City on its Feet, supported by Tauranga

City Council, features more than 25 free

walking groups across the city and

Get Walking!New walking groups for

fitness, fun and friendshipssurrounds, including Papamoa East,

Omanawa (lower Kaimais), Pyes Pa,

Bethlehem and more. These are

organised and supported by a group of

volunteer Group Captains, who help

keep participants motivated.

Two new groups have been added in Te

Puke and Mount Maunganui. No matter

your age or ability, walking groups are of

huge benefit, and with our lives

becoming increasingly sedentary,

there’s no easier (or cheaper) way to

keep moving on a regular basis.

Recreation Advisor Michelle Barns says

“It’s not just about the physical aspect –

participants really enjoy the social

environment of the groups; being able to

meet up each week and chat as they

walk. Many people have made new,

For more information about City

on its Feet, as well as a full

timetable of walking groups, visit

www.sportbop.co.nz/get-

active/city-on-its-feet/

If you, or someone you know,

would like to become a Group

Captain for the Te Puke or Mount

Maunganui walking groups,

please contact Michelle on

michellb@sportbop.co.nz

or 027 441 2164.

In recent years the Government has

made a number o f changes to

regulations in the financial services

space.

The changes have been made to

improve business practices and the

moni tor ing and enforcement of

legislation. As a licenced financial

service provider, we monitor our

business activities to ensure alignment

with legislation and also best practice.

We are now required to request

information regarding our Account

Holders and their controlling persons'

tax residency. This includes requesting

that Account Holders (investors), their

controlling persons and in some

instances beneficiaries complete a self-

certification form.

What is the AEOI?

AEOI is the exchange of financial

account information between Tax

Authorities in relevant countries. The

law requires this information to be

collected by Financial Institutions

around the world for reporting to Tax

Authorities.

AEOI is made up of two information

sharing frameworks:

l The Foreign Account Tax Compliance

Act (FATCA) which is a US framework

to identify US citizens and tax

residents with accounts in foreign

(non-US) jurisdictions; and

l The Common Reporting Standard

(CRS) under which details of foreign

tax resident accounts are shared

between participating Governments

(56 at present).

Under the AEOI , a l l F inanc ia l

Institutions (including First Mortgage

Managers Limited – “FMM”) must

identify accounts held by customers

who are foreign tax residents as well as

foreign tax residents (individuals or

entities) connected with an account.

Financial Institutions must report these

to the relevant Tax Authority who will

then automatically exchange the

account information with the relevant

foreign Tax Authority(ies).

Governments (in countries committed to

the AEOI) have enacted domestic laws

to require Financial Institutions to

collect and report this information and

have entered into internat ional

agreements to exchange the information

with other Governments.

What does this mean for First

Mortgage Trust's Existing

Individual and Entity Customers?

If you have an existing account, and/or

meet certain thresholds then we are

required to confirm your country(ies) tax

residence.

To enable FMM to meet this obligation

we will be requesting a self-certification

form be completed for the account

holder. Where controlling person(s) are

identified, then they too must complete

an individual self-certification form.

Where a distribution has been made to a

beneficiary(ies) of a trust, they are

considered to be a controlling person

and are also required to complete a self-

certification form.

Further information including the self-

certification forms can be obtained from

our office or downloaded from our

website www.fmt.co.nz. Navigate the

web page as follows: Documents,

Online Documents, Other Investment

Forms and Products, FMT Tax Residency

form – Individual or FMM Tax Residency

Form – Entity.

Upon receipt and following assessment

of the completed forms, we may request

additional information. This is to

establish whether you have accounts

that need to be reported under the

FATCA or CRS laws.

Where can I find further

information?

A Customer Tax Residency Information

sheet is available from our office or on

our website, as described above. This

provides further information regarding

the legislation and information being

requested. It also provides details of the

Inland Revenue sites which have further

resources avai lable to ass is t in

understanding these obligations.

Again – thank you for your continued

support of First Mortgage Trust.

long-lasting friendships, as well as

improved their physical and mental

wellbeing.

“There are so many beautiful places to

walk around the city, and while we have

many areas covered we’re always

looking to add more groups. If anyone

wants to set up a group in a new location

or at a new time, they’re welcome and

we’d love to hear from them.”

The City on its Feet walking groups are

always welcoming new participants of

any age or ability, and have groups

across the Western Bay of Plenty.

Customer Tax Residency Self-Certification– Automatic Exchange of Information (AEOI)

PLEASE DIARISE THESE DATES

Investor withdrawals - September 2018 -

We advise our last day for

investor withdrawals at the end

of the quarter is

Monday 24 September.

Completed and signed Notices

of withdrawal will need to be

received on or before

Friday 21 September.

Our normal Monday and

Thursday pattern will resume

from Monday 1st October for

investor withdrawals for the

quarter, with completed and

signed Notices of withdrawal

required by close

of business the previous day.

First Mortgage Trust - Toll Free 0800 321 113 team@fmt.co.nz | www.fmt.co.nz

RECIPE

GARDENING

1 cup cooked black lentils

1 large onion, chopped

1 hard-boiled egg

Salt and black pepper

Dash of oil

Method:

l Fry the onions, until soft.

l Blend all the ingredients together,

until smooth.

l Season to taste. If the texture is too

stiff, add a little more oil.

Will keep in the fridge for four days.

Delicious vegetarian pate

Many fragrant flowers like daphne and

viburnum are in bloom this month and

roses, lily of the valley, forget-me-nots,

calendula, polyanthus, snapdragons

and pansies are just some of the

gorgeous flowers that are available for

planting.

Although it can be dreary and cold

outside, colourful potted plants work

wonders to brighten up the garden.

At this time of year you can grow leafy

green crops such as spinach, silverbeet

or kale in pots, however these will

need to be in a warm, sheltered place.

Beetroot, broad beans, carrot and

lettuce can be sown straight into the

garden, but only in warmer areas, and

Brassicas such as broccoli, cauliflower

and cabbage can be sown in trays or

punnets for planting out when plants

are a good size (usually after 4-6

weeks). Plant onion seedlings now so

that the bulbs will be forming as the

weather warms. Well-drained soil and

plenty of organic matter are a must.

Winter is also a good time to plant fruit

trees. If you're planting a windy area,

stake them for the first season. Plant

lemons in a sunny position sheltered

from frosts.

Slugs and snails will still be active and

munching through tender shoots so

they will need to be controlled. Keep

on top of weeds so that these don't

give you any issues in spring. This is

also a good time of year to get all your

tools sharpened and fixed, ready for

spring time.

In the Garden

TRAVEL

Some will holiday resting with their feet

up, others prefer feet on the ground

walking farther and higher than ever

before. Some of those feet will reach Mt

Everest Base camp as mine did a few

years ago… the time and effort well

worthwhile.

Le t 's backt rack to where these

adventures began! It's likely we

associate Everest with one of our great

New Zealanders, Sir Edmund Hillary.

Just mentioning his name stirs adventure

within many Kiwi bones. Most of us

have considered 'doing something like

this one day' and nowadays it seems,

many of us can.

Nepal offers New Zealanders a genuine

welcome. Kathmandu will wrap you in

everything an adventurous holiday

should. Safe, yet challenging, it's a

strangely comfortable place to spend a

few days pre or post any Himalayan

adventure. Kathmandu is generally the

starting point for a myriad of trekking

Enquiries to: Shane Kennedy (Owner Operator)

House of Travel TaurangaCnr Willow and Spring Streets

Tauranga Email: shanek@hot.co.nz

Nepal and the Himalaya mountainsBy Shane Kennedy

and climbing adventures and also the

place you'll return to for a warm bed, a

cold beer, and reflection on where your

feet have just taken you.

My adventure was a 30 day trek with

base camp Mt Everest the prize. Other

options include a comfortable four or

five days in the Annapurna range

offering quick access to the base of

enormous mountain ranges without the

altitude challenges that Everest presents.

Trek independently or join a myriad of

guided companies – the choices can be

focused on cost, time, and your level of

fitness. If your next holiday becomes a

feet forward approach rather than feet

up, know that you can mix and match

the two by enjoying a few beachy days

on the way home…easily achieved and

very popular.

Somehow after challenging yourself to

walk in the footsteps of heroes we can

come home better people, humbled by

what Nepal offers and appreciative of

Many Kiwi's have an intrepid

spirit, a little bit of adventure

in their bones.

what home offers us too. With our world

increasingly accessible, the only barriers

to achieving your Hillary moment is the

courage to actually give it a go. Holidays

are not competitions but expect to feel

rewarded for your efforts. You'll have

expe r i ence s t o r e f l e c t on and

achievements to be proud of for a

lifetime.

To consider visiting Nepal grab some

brochures, ask yourself 'what could my

Hillary moment be?' and then have the

courage and fortitude to give it a go.

A growing issue in

New ZealandNew Zealand has an ageing population

and an increasing number of people

with dementia.

In 2011, there were an estimated 48,000

New Zealanders with dementia, an

increase of nearly 20 percent since

2008. By 2026, this number is estimated

to balloon to over 78,000.

Dementia care needs to be improved

nationwide in a way that maximises the

independence and wellbeing of people

with dementia and their families, while

ensuring safety and affordability of

services.

A new model of careThe Care Village opened at the end of

2017. It is operated by a not-for-profit

charitable trust.

Based on the renowned Dutch village

called “De Hogeweyk” (pronounced De

Hogeway), the CARE Village is a world-

leading dementia and aged-care

community on the shores of Lake

Rotorua. It is the only one of its type

outside of Holland.

The CARE Village was founded on the

belief that there had to be a better way of

delivering aged care - one which not

only preserved the lifestyles of those

needing care, but also challenged

traditional institutional practices in the

wider industry

The vision is to create a lifestyle that

provides people with dementia with a

relatively normal existence. We believe

tha t fami l ia r i ty, comfor t and a

stimulating environment have the

greatest impact on overall health,

happiness and wellbeing.

The Care Village replicates a small-scale

New Zealand town and is designed to

allow people to live in households. This

environment creates a foundation of

independence, home and community,

with professional support and carers

nearby.

Each of the 13 single-level six and seven

bedroom households look and function

like a typical home. They reflect

extensive research that people with

dementia are much happier when they

live in an environment they recognise as

home. The houses have also been

designed and decorated differently, to

reflect the lifestyles people are most

familiar with.

Highly skilled staff, along with the latest

in technology, provide residents with the

freedom to move about the Village in a

safe and constant environment. Where

possible, residents are also able to come

and go from the Village as they please.

Residents are not locked away in a

secure ward.

When all stages are completed, the

village will also include a café,

hairdresser and clubrooms, all of which

will be open to the wider community as

well. In the meantime, residents can

enjoy the small market, the gardens and

lakeside promenade.

Any inquiries about

The CARE Village can be directed

to Therese Jeffs on 07 347 9612 or

therese@thecarevillage.co.nz

The CARE Village in Ngongotaha – A World-Leading Dementia and Aged Care FacilityArticle prepared by Simon Collett (Chairperson)