# FMF [First Mortgage Fund]



## mellifuous (30 August 2009)

Here's a new thread if there is anyone out there who has something to say about what's happened to their investment in the First Mortgage Fund.

Might be better to get away from the CIY thread.  Actually, the further away from CIY as possible.

Let's see.


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## mellifuous (31 August 2009)

Well, CPL is being wound up now.  Let's pretend that CPL should have informed us that the fund was in trouble (if the fund was in trouble) when it deconsolidated the fund.  Since it didn't tell us the fund was in trouble then it would be liable for certain breaches of law - namely s. 52 TPA breaches for telling us the fund was strong, when it was not - and, s. 601FC(1)(c) breaches for making its way out and leaving us there.

So, what's my point? Well, my point is this that the FMF is not standing in line as a creditor because no action was taken to establish our right to do so.

In my opinion, its the first loss of opportunity we are making as investors in the FMF.  The CBA is in there looking after its interests, but who is looking after ours?  ASIC should be, but it isn't.  Is Balmain? I guess not!

What will be the next loss?


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## mellifuous (31 August 2009)

This is what the CBA done to us.  While it wouldn't permit City to pay distributions/redemptions (not that I think City wanted to), in March 2009 (yes, this year) it would allow City to pay itself $17.8m (via CP1), and it would allow the fund to pay $18m to CP1 so CP1 could pay the CBA to protect the FMF from losses from CP1's insolvency.

$17.8m was secured by the 'Waves Motel' in northern NSW.  The debt was paid out by MP Pacific Investments Unit Trust/Pty. Ltd. (not sure) and the money stayed with CP1/Marina Cove Pty. Ltd. with miserable security at Martha Cove - no one will buy it, but the CBA and City sold it to us (via loans supported by 'first' mortgages there).

In its media release City stated that the $17.8m was used to 'reduce CP1s debt to City' - they didn't even have the balls to say that the money was paid to City.

So, we are now where the $18m was supposed to save us from. And, up the barrel following the $18m was another $15m, and another.  And what security did the fund end up with? more first and 'second' mortgages down at the cove.  If the first mortgages are no good, how much value are the second mortgages - not a murmur from investors.

City, and its cohort, the CBA, took $36m out of the fund to ultimately benefit (as I understand it) the CBA - both payments going to the CBA to write down City's and CP1's debts to the CBA (the risky debts) while leaving the FMF's debt unpaid.

To boot, there was a $20m deal on the Gold Coast taken over by an 'unnamed bank' (gee.. I wonder if it was the PGA (Piggy Bank of Australia)?). What was the fund's loss there? oh! probably not very much, maybe $5m or $6m - small bikkies.

And to cap it all off, the development land known as 'Pacific Beach' which owed the fund between $160m and $210m (not accounting for the fees CIty would have ripped from Foresight and the FMF - not sure if the amount includes interest either) was knocked off for $80m because the developer (one may as well say the FMF) didn't have $35m.

So, they took $36m in March 2009 to 'save' City and CP1 from the Piggy Bank of Australia, and left us to lose up towards $100m at Broadbeach.

What more should we expect from the PGA (before known to investors  as the CBA).

And not even a little 'groan' from the investor base.  And the manager, well, it seems happy that $45m goes back to the PGA - something a real estate agent accomplished for which the current manager shouldn't take any credit - a child could have done it.  It was  a giveaway.

The poor old investors have lost millions and millions, and their voices are still - not a murmur of discontent.


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## mellifuous (31 August 2009)

The good folk out there want a simplistic explanation of what went wrong.  

So, here's a simple explanation of how at least one related party transaction was put together (in my opinion).  The graphic is self explanatory and as simple as I can put the myriad of details.

The constructors the plan must have consumed an enormous amount of their time putting the plan together.

My questions are:-

(1)  just where did those guys at City ever get the time to run the FMF?
(2)  would the PGA (piggy bank of Australia)have  given the relatives loans on the sames conditions as the FMF did? and;
(3)  what steps did the PGA take to circumvent the FMF's rights as first mortgage holders to ensure payments to the PGA by relatives?


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## mellifuous (31 August 2009)

*It's now the fourth day and no reply.*

Copy of text sent to Trilogy via their website
on  Friday, 28 August 2009.

Dear Sir/Madam,
Please advise me of the following:-
1. Wrt to 'Pacific Beach', how much has been loaned by the FMF to Foresight? How much by Fortress? What other costs will be added to these debts (legals etc.)?
2. What is the impaired value held for this loan?
3. Why didn't the development proceed?
4. will Balmain/Trilogy be charging lenders from the FMF any 'direct' fees? If so, what are the fees, and the rate of each fee?
5. Restatement of Qs 1 & 2, but wrt Grande Pacific & Teak and/or other co-investors.
I look forward to your early reply.
Thank you.


The following is a copy of text also sent by Trilogy's website
on  Friday, 28 August 2009. 

1. When will Balmain inform members of the FMF that Mr. Ryan (a senior member of Trilogy management) has been found by a court to have breached a client's trust?
2. Why was KPMG retained when there is clearly a number of members who are not happy with KPMG's performance?
3. Why wasn't another facility provider obtained when there is clearly a number of members who are not happy with the FMF's relationship with the CBA?
4. Why was City Pacific staff encouraged to join Balmain/Trilogy when there is clearly a number of members who are not happy with the staff of City Pacific?
5. Why did Mr. Bacon think that Mr. Ellis was 'tenacious' when Ellis was using our money to fight? I think we'd all agree that everyone could be tenacious using other peoples money, and in circumstances such as City causing members to lose so much of their investments - doesn't Mr. Bacon have any sensitivites to the feelings of the members of the FMF?
6. How is it possible to conduct an objective evaluation of the legal issues when so many of the original 'mob' have been coupled up to the the new train (Balmain/Trilogy)
7. Why was it possible to tell the CBA (and BRW) the future of the FMF, but not tell members of the FMF first?
8. Why haven't members been given a clear and concise plan as to Balmain/Trilogy's vision of the future (or end) of the FMF?
9. What is EXACT position of the FMF with respect to its obligations to the CBA, Fortress, and Teak Capital? (This information must be straight forward and easy to explain to members, why haven't we been told?)


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## mellifuous (31 August 2009)

*'We haven't determined that yet'*​


Well, City were raking off $20m/year in 'direct' fees - those fees paid by lenders to City Pacific directly (not via the FMF).    How much they took over the past 18 months I don't know - but, they did.

Now, we have Balmain who promised ONE fee - 1.5%.  Does ONE fee include 'direct' fees, or will they be charged separately (that is, 1.5% to the FMF and 'direct fees from the lenders)?  This is but one of the questions I asked of Balmain on Friday and have not yet received an answer.

A unit holder phoned Balmain one time per week for three weeks (last one today) and asked about these fees, and the best answer to date from 'Adam', an employee of Balmain, is 'We haven't determined that yet'.
*
Unit holders should realise that since the lenders from the FMF are mostly in default, then any money that goes to Balmain in 'direct' fees, is money directly out of our pockets.*

*My advise to unit holders is to contact their manager, via their 1800 number or via the website and ask the question - 'is Balmain charging any other fees to lenders from the fund, than the 1.5% it's charging the FMF?'*

*Another tidbit from Adam was that there will be no update on Balmain's website until 'all the way up to October'.*


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## fleetz (31 August 2009)

I have copied the valid questions in the previuos posts and sent them to BT this evening. I have also express my concern about the lack of feedback from BT to the unitholders and reminded them who they are working for!

I am going to write to ASIC yet again tomorrow....although I think I am wasting my time.

Fleetz


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## mellifuous (31 August 2009)

fleetz said:


> I have copied the valid questions in the previuos posts and sent them to BT this evening. I have also express my concern about the lack of feedback from BT to the unitholders and reminded them who they are working for!
> 
> I am going to write to ASIC yet again tomorrow....although I think I am wasting my time.
> 
> Fleetz




There are a lot of people concerned, but I'm just not sure how many will engage with the new manager and seek disclosure of general information that will help investors know the reality of their situation.

Generally speaking, I think the questions are reasonable and should be answered without disclosing 'confidential information'.  It was within the guise of 'commercial-in-confidence' that allowed City to virtually do as it pleased.

For me, I'm pleased that you took the trouble to press Balmain for answers - I only wish more would do likewise.

The issue about (1) direct fees, (2) 'co-investors', (3) the manager's intentions are important to unit holders and should be fleshed out.


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## mellifuous (1 September 2009)

Look mama, a unit holder in the FMF...

Yes Forrest, so many of them seem to bury their heads in the sand, but this
one seems to be even more insecure - he's buried his head in the footpath!


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## mellifuous (1 September 2009)

If there is anyone out there who doubts that the FMF was in trouble in 2007, take a look at this graph showing unit holdings in the FMF, and (in the table below) included with defaults and facility (cash at bank not included and debt (bank interest & management fees) not included).

Now, would you have invested in the FMF in late December 2007 or up to March 2008 if you knew this information? The manager knew and deconsolidated - how convenient.   Did we lose our best ever chance of indemnity?

(as they like to say on this forum) ONYA ASIC - just love the way you let us down.







Now, this graph represents my view of the decision making process of the PGA.    If no questions are asked, then the money is just given.

If questions are asked, then the PGA must not have been concerned with the answers, so, the FMF slid down the DON'T CARE path to get the increases.

There is no doubt in my mind, that if the PGA cared, then it would not have increased the fund's facility by $1.

ONYA PGA.


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## grossrealisation (1 September 2009)

hi all
I would be very interested to talk to anyone that has invested in cp or cp1/fmf within in the last 2 years
the amount invested must be over 20k
I would like mellifuous to email me as there is no link on the website for contact details
you can send an email to grossrealisation@hotmail.com and I will reply from there.
I understand both groups and am in contact with the main players in all three entities that have got issues at the moment and have a couple of people that I am assisting at the moment.
my group has a financial gain in debt resolution and as such I am disclosing that up front. 
I am not a financial advisor but would be interested in the group or advisors that recommended all three entities
thanks in advance


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## mellifuous (1 September 2009)

*My Questions​*
Dear Sir/Madam,
Please advise me of the following:-
1. Wrt to 'Pacific Beach', how much has been loaned by the FMF to Foresight? How much by Fortress? What other costs will be added to these debts (legals etc.)?
2. What is the impaired value held for this loan?
3. Why didn't the development proceed?
4. will Balmain/Trilogy be charging lenders from the FMF any 'direct' fees? If so, what are the fees, and the rate of each fee?
5. Restatement of Qs 1 & 2, but wrt Grande Pacific & Teak and/or other co-investors.
I look forward to your early reply.
Thank you.

1. When will Balmain inform members of the FMF that Mr. Ryan (a senior member of Trilogy management) has been found by a court to have breached a client's trust?
2. Why was KPMG retained when there is clearly a number of members who are not happy with KPMG's performance?
3. Why wasn't another facility provider obtained when there is clearly a number of members who are not happy with the FMF's relationship with the CBA?
4. Why was City Pacific staff encouraged to join Balmain/Trilogy when there is clearly a number of members who are not happy with the staff of City Pacific?
5. Why did Mr. Bacon think that Mr. Ellis was 'tenacious' when Ellis was using our money to fight? I think we'd all agree that everyone could be tenacious using other peoples money, and incircumstances such as City causing members to lose so much of their investments - doesn't Mr. Bacon have any sensitivites to the feelings of the members of the FMF?
6. How is it possible to conduct an objective evaluation of the legal issues when so many of the original 'mob' have been coupled up to the the new train (Balmain/Trilogy)
7. Why was it possible to tell the CBA (and BRW) the future of the FMF, but not tell members of the FMF first?
8. Why haven't members been given a clear and concise plan as to Balmain/Trilogy's vision of the future (or end) of the FMF?
9. What is EXACT position of the FMF with respect to its obligations to the CBA, Fortress, and Teak Capital? (This information must be straight forward and easy to explain to members, why haven't we been told?)

*The 'Cop Out'​*
*Today, I received this email from Trilogy.*

"... In response to your email, the case relates to matters which occurred 10 years ago. The Court found no evidence of dishonesty or knowledge that could be attributed to Mr Ryan; however as a partner of a law firm he was liable for the actions of employees.

Given the short time frame in which the Fund is required to lodge its financial statements it is prudent to retain the existing firm at this stage for its familiarity and experience with the Fund.

There was no general encouragement of City Pacific staff to join BalmainTRILOGY. Several City Pacific staff have assisted with the file transition and loans information on a temporary contracted basis. They are not employees. We see no reason why this should compromise our legal review.

We are in the early stages of completing an asset review and results are expected to be available on or before the end of October. As you can appreciate, the scale and complexities involved mean that we are not yet in a position to provide specific direction on the future of the Fund.

Dialogue regarding the Fund’s loan facility with the CBA continues, however at this stage it is too early to provide results of these discussions. Investors will be kept informed as we progress this issue.

We invite you to make an appointment to discuss this if you require further information. ..."

*Comments:-*

1.  The case with respect to a breach of a client's trust is know as Jessup's Case.  It's sad to see the manager attempting to mislead me (breach of s.52 TPA) by referring to the ASIC case which did not involve a breach of trust, but rather involved misrepresentation and fraud.

Jessup's Case
http://archive.sclqld.org.au/qjudgment/2006/QSC06-003.pdf

ASIC Case
http://www.asic.gov.au/asic/asic.nsf/byheadline/06-172+Queensland+investors+recover+losses+in+failed+solicitors+mortgage+scheme?openDocument

2.  The manager is silent as to the fact of 'direct' fees - I wonder why?   Is Trilogy charging 'direct' fees? Why won't they say that they are not?  This matter should be resolved.

3.  In his masterpiece in BRW, the Msr. Baccon stated (paraphrased) that there was only 53 loans, now, when pressed, it's all changed to "..As you can appreciate, the scale and complexities involved  ...' in order to evade simple questions like:-  the amount of debt, the amount of interest, and the involvement of the so called 'co-investors'.

I want to know simply (and it's got nothing to do with the so called 'asset review') how much do we owe the so called 'co-investors', how much is owed on the 'Pacific Beach' deal and how much interest is owing - none of these issues relate to the 'asset review'.

4.   The fact that ex-employers of City are 'not employees of the Trilogy'.  I guess he means that they are contracted - and therefore doesn't see that they would compromise any investigation.

Well, I think they do - do anyone else think that?  Where is the objectivity?

5.    Needs KPMG to assist with the RG45? Why? it's not an auditors job to fill out forms, it's an auditors job to 'audit' (or so it should be).  Is Trilogy using KPMG to provide accounting services too? Come on guys, get real - any auditor could do the job - get rid of KPMG - let's get objective.

The letter does not answer my questions, and attempts to mislead me.

I am not pleased at all.  I don't want to make an appointment for a meeting, I want proper answers to all of my questions.

How about other readers?

I'm going to resubmit the questions.  Maybe second time lucky?


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## mellifuous (1 September 2009)

grossrealisation said:


> hi all
> I would be very interested to talk to anyone that has invested in cp or cp1/fmf within in the last 2 years
> the amount invested must be over 20k
> I would like mellifuous to email me as there is no link on the website for contact details
> ...




I suppose I don't blame these guys/gals wanting to get in on the act - like the old style lawyer who rushed to the car smash to hand out his/her card.

What I can't quite grasp is why they always want to take such a greedy slice of the action.  

Why pay up to 30% for a service you buy for just a few percent - and if you win, you'd even get your money back.

It's bad enough to lose money, but worse to lose it in a class action driven by a lawyer.

Be the driver, not the driven.


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## mellifuous (1 September 2009)

*Do Balmain take 'direct' fees from the FMF?*

Balmain won't say 'yes' or 'no' to taking 'direct' fees out of the FMF.  

Do members of the FMF (ex City Pacific FMF) think they should?

Well, Timmy, I thought about that, but, it seems to be an issue that may have a life of its own.

But, up to you, I'm too old to argue. If you want to delete, then you have the power.

Thanks.


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## Timmy (1 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

Shouldn't this be in the FMF thread?


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## mellifuous (1 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

I've made this posting on the FMF, but I'll try to keep this issue on this thread in order that is may be more easily dealt with.

There are a lot of questions that Trilogy should answer.  As I understood it, Trilogy promised to be transparent and keep unit holders informed.  Instead, it has gone out in an arrogant way to gloat its success in BRW.  The manager raised matters in BRW that should have been rightly raised directly with investors.

I think Msr. Baccon should be more forthright with members and disclose issues.  If its good enough to tell individual unit holders information, its good enough to tell us all.

This is the interchange of 2 x lots of questions and one answer together with some comments I have made. I re-submitted my questions to Trilogy this morning via their website.

I would appeal to investors in the FMF to press Trilogy for answers, proper answers.

My Questions


Dear Sir/Madam,
Please advise me of the following:-
1. Wrt to 'Pacific Beach', how much has been loaned by the FMF to Foresight? How much by Fortress? What other costs will be added to these debts (legals etc.)?
2. What is the impaired value held for this loan?
3. Why didn't the development proceed?
4. will Balmain/Trilogy be charging lenders from the FMF any 'direct' fees? If so, what are the fees, and the rate of each fee?
5. Restatement of Qs 1 & 2, but wrt Grande Pacific & Teak and/or other co-investors.
I look forward to your early reply.
Thank you.

1. When will Balmain inform members of the FMF that Mr. Ryan (a senior member of Trilogy management) has been found by a court to have breached a client's trust?
2. Why was KPMG retained when there is clearly a number of members who are not happy with KPMG's performance?
3. Why wasn't another facility provider obtained when there is clearly a number of members who are not happy with the FMF's relationship with the CBA?
4. Why was City Pacific staff encouraged to join Balmain/Trilogy when there is clearly a number of members who are not happy with the staff of City Pacific?
5. Why did Mr. Bacon think that Mr. Ellis was 'tenacious' when Ellis was using our money to fight? I think we'd all agree that everyone could be tenacious using other peoples money, and incircumstances such as City causing members to lose so much of their investments - doesn't Mr. Bacon have any sensitivites to the feelings of the members of the FMF?
6. How is it possible to conduct an objective evaluation of the legal issues when so many of the original 'mob' have been coupled up to the the new train (Balmain/Trilogy)
7. Why was it possible to tell the CBA (and BRW) the future of the FMF, but not tell members of the FMF first?
8. Why haven't members been given a clear and concise plan as to Balmain/Trilogy's vision of the future (or end) of the FMF?
9. What is EXACT position of the FMF with respect to its obligations to the CBA, Fortress, and Teak Capital? (This information must be straight forward and easy to explain to members, why haven't we been told?)

The 'Cop Out'


Today, I received this email from Trilogy.

"... In response to your email, the case relates to matters which occurred 10 years ago. The Court found no evidence of dishonesty or knowledge that could be attributed to Mr Ryan; however as a partner of a law firm he was liable for the actions of employees.

Given the short time frame in which the Fund is required to lodge its financial statements it is prudent to retain the existing firm at this stage for its familiarity and experience with the Fund.

There was no general encouragement of City Pacific staff to join BalmainTRILOGY. Several City Pacific staff have assisted with the file transition and loans information on a temporary contracted basis. They are not employees. We see no reason why this should compromise our legal review.

We are in the early stages of completing an asset review and results are expected to be available on or before the end of October. As you can appreciate, the scale and complexities involved mean that we are not yet in a position to provide specific direction on the future of the Fund.

Dialogue regarding the Fund’s loan facility with the CBA continues, however at this stage it is too early to provide results of these discussions. Investors will be kept informed as we progress this issue.

We invite you to make an appointment to discuss this if you require further information. ..."

Comments:-

1. The case with respect to a breach of a client's trust is known as Jessup's Case. It's sad to see the manager attempting to mislead me (breach of s.52 TPA) by referring to the ASIC case which did not involve a breach of trust, but rather involved misrepresentation and fraud.

Jessup's Case

http://archive.sclqld.org.au/qjudgment/2006/QSC06-003.pdf

ASIC Case

http://www.asic.gov.au/asic/asic.nsf/byheadline/06-172+Queensland+investors+recover+losses+in+failed+solicitors+mortgage+scheme?openDocument


2. The manager is silent as to the fact of 'direct' fees - I wonder why? Is Trilogy charging 'direct' fees? Why won't they say that they are not? This matter should be resolved.

3. In his masterpiece in BRW, the Msr. Baccon stated (paraphrased) that there was only 53 loans, now, when pressed, it's all changed to "..As you can appreciate, the scale and complexities involved ...' in order to evade simple questions like:- the amount of debt, the amount of interest, and the involvement of the so called 'co-investors'.

I want to know simply (and it's got nothing to do with the so called 'asset review') how much do we owe the so called 'co-investors', how much is owed on the 'Pacific Beach' deal and how much interest is owing - none of these issues relate to the 'asset review'.

4. The fact that ex-employers of City are 'not employees of the Trilogy'. I guess he means that they are contracted - and therefore doesn't see that they would compromise any investigation.

Well, I think they do - do anyone else think that? Where is the objectivity?

5. Needs KPMG to assist with the RG45? Why? it's not an auditors job to fill out forms, it's an auditors job to 'audit' (or so it should be). Is Trilogy using KPMG to provide accounting services too? Come on guys, get real - any auditor could do the job - get rid of KPMG - let's get objective.

The letter does not answer my questions, and attempts to mislead me.

I am not pleased at all. I don't want to make an appointment for a meeting, I want proper answers to all of my questions.

How about other readers?

I'm going to resubmit the questions. Maybe second time lucky?


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## mellifuous (1 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

http://business.brisbanetimes.com.au/business/city-pacific-sellup-set-to-start-20090828-f1yy.html

"... City Pacific, until this year, siphoned $30 million in annual fees from the fund. It also used to reap an additional $20 million a year in loan origination fees from developers borrowing from the fund. ..."

Note: the $20m are 'direct fees'.

'Trilogy First Mortgage Income Trust' (TFMIT), Page 15, Table 2 headed 'fees and costs that payable by the borrower', outlines these 'direct' fees charges in the TFMIT.
http://www.trilogyfunds.com.au/site/assets/files/pdf/FMIT-PDS-Final-19Feb.pdf

For example:-
Loan Application - between .5% and 3%
Loan Administration fee - between .5 and 3%

Unit holder ownership (in $1 units) in the FMF  is supposed to be valued at around $630m.  Debt is probably about $150m (CBA + 'co-investors).

So, the total funds under management (FUM) = $780m (exact figure known only to Trilogy at this time).

Therefore the management fee (as promised by Trilogy) = $780 * 1.5% = $11.7m

Suppose a loan admin fee (a 'direct' fee) of 1.5% (about midway between .5% and 3% as Trilogy would charge in their TFMIF) was charged that would be another $11.7m paid to manager directly from the lenders.

Since the majority of the lenders are incapable of paying their loans out and their loans have been capitalised, then this extra $11.7m is effectively coming out of the FMF's pockets.

In the above case, the manager would make $23.4m per annum, which equates to 3.7% of the $630m owned by unit holders per annum.

I don't believe that Trilogy stated one way or other with respect to these direct fees.  As the excerpt above points out, City took $20m per year in 'direct' fees, and it's perfectly legal for Trilogy to take them too.

However, I believe that many investors in the FMF don't understand that managers take fees inside and outside the FMF, and all of these fees end up coming out of the FMF's income.  

That is why Trilogy should clarify the situation with the fees.  It is a matter raised in a submission 182b to the senate inquiry.  One management fee of 1.5% does not necessarily mean one fee charged by the manager.

So, if you think that 'direct' fees are not important, I suggest you think again.


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## mellifuous (2 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

In my last posting, I wrongly referred to submission 182b to the senate inquiry.  

It is a matter raised in a submission 182a, (page 3 - heading 'the FMF has a new manager') to the senate inquiry. One management fee of 1.5% does not necessarily mean one fee charged by the manager.
http://www.aph.gov.au/senate/committee/corporations_ctte/fps/submissions/supsub182a.pdf

In its 'Notice of Meeting and Explanatory Memorandum', page 6, Balmain Trilogy stated (when citing the reasons for dissatisfaction with city), among other things:-

"... *the excessive level of fees being charged by CP to the Fund which exceeded $66.5m in the last two financial years ($36.5m in FYE 2007 and $30m in FYE 2008)*, particularly in the context of the poor performance of the Fund ...". However, not a whisper directed to the 'direct' fees.

Further, the document stated "... *the lack of meaningful information in relation to the Fund and its assets being provided to Members on a regular and timely basis* ...".  So, is Trilogy doing better than CPL? I don't think so.

Further, on page 8, under the heading "5. How will members benefit', Balmain Trilogy promises:-

"... 5.2. *Information regarding the Fund will be made available to Members and the Fund will be administered and managed on a transparent basis.* Full compliance with Trilogy’s statutory disclosure obligations will be enhanced by regular Member newsletters and the establishment of the Investor Committee. The Investor Committee represents a significant step forward in allowing Members t*o be fully informed as to the status of the Fund.* The conclusions of all of the Investor Committee meetings will be made available to all Members. The results of the asset review will be published (with due regard to privacy issues of the borrowers) to ensure visibility. ..."

http://www.balmaintrilogy.com.au/pdf/BTI_NOM_ExpMemo.pdf

Well, 5.2 is struggling to come into being - Trilogy won't answer questions.

Same body (FMF), different head (Trilogy)?


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## mellifuous (2 September 2009)

"... But the only flow was the river of gold to the banks. ..." (Queensland MP Bernie Ripoll, chairman of the joint parliamentary inquiry into financial products and services referring to Storm)

http://www.news.com.au/couriermail/story/0,23739,26013817-3102,00.html

Guess where a lot of our 'river of gold' went?  Just see the dark blue area increasing dramatically since September 2007.  This area does not include (to the best of my knowledge) the costs of borrowing via the so-called 'co-lenders'.

(note also, that the green area representing the manager's fees DOES NOT INCLUDE 'DIRECT' FEES)

= all information in this graph is taken from FMF financial reports =

As bad as this graph looks, it was actually very much worse.


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## mellifuous (2 September 2009)

To those who don't think there is outrage about Bank's lending practices (in some circumstances)

Thanks to the storm thread for the info.

"... Watching on the sidelines are the financiers of the other group.  It doesn’t take much to figure out that they won’t be able to recover their dodgy debts after the Federal Court case against the first group is over.  *So the finance companies are grabbing as much cash from innocent business operators as they can before the ACCC shuts the gate.*

And Bank of Queensland’s equipment finance subsidiary is one of the players.  *Yes, that’e the same Bank of Queensland that denies all responsibility for the outrageous lending practices of failed Storm Financial.* ..."

http://cspcentral.com.au/2009/09/bank-of-queensland-finances-telco-scam/

*'Grabbing as much cash' before the 'gate is shut'?
*
You’d weep (with laughter, sometimes) if you hear the line the ultimate financiers are pushing.

"... “We aren’t guilty.  We totally trusted the middleman.  So how can we be guilty ?  It’s the customer’s fault for being ripped off.”

The argument is that because they were careless about everything their broker representatives did, and because their broker representatives appointed dishonest companies to do the face-to-face selling, they (the financiers) are the innocent parties.  PLEASE !!! ..."


----------



## mellifuous (2 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

"... * Mr Bacon said his firm would also not draw other fees from the fund.* *"Our proposal is for one fee only," *said Mr Bacon, who was a senior executive at Challenger International when it was run by Bill Ireland.

According to Trilogy Funds Management's financial accounts for the year to June 30, 2008, the business drew $1.05 million in fees of which only $155,690 were in management fees. It collected a further $287,451 in "administration and performance fees" and $386,764 in "establishment fees". ..."

Now, this article is interesting because it mixed it all up together and Trilogy did not make any effort to clarify things.  There will only be ONE FEE, the 1.5%.  Yet, in the very next sentence Scott Rochfort states the 'direct' fees taken from lenders of Trilogy's fund.

Mr. Rochfort doesn't seek to clarify the situation either.  My guess is that many investors still believe that 'one fee from the fund' means that the 1.5%  is all Trilogy is collecting in fees.

I just wonder why Trilogy doesn't say 'yes, we do direct fees', or 'no, we don't collect direct fees'.

If they say 'no', then they don't collect the millions $$$$ from such fees.

If they say 'yes' then my bet is that a heap of investors are going to be really peeved. 

So, I guess for Trilogy, silence is the middle road - they'll do what do until they'll have to disclose.   Still, this isn't what I expected from Trilogy.

So, it all seems to turn on the key phrase 'from the fund'.   This is a bit like Bill Clinton's statement "... "I did not have sexual relations with that woman, Ms Lewinsky." It was a sentence to be replayed and analysed many times in the months to come. ..." http://news.bbc.co.uk/2/hi/special_report/1998/12/98/review_of_98/themes/208715.stm

What does 'from the fund' mean? Does it mean physically 'out of the fund', or does that the fund eventually pays (or losses money), i.e. 'our/from the fund'.  

Ordinarily I think it means that the fund pays (or losses the opportunity to get that money in the case of a frozen fund), in which case 'direct fees' are 'out/from the fund'.

The other view is that it means that physically the money does not come out of FMF accounts, in which case 'direct' fees are not included in the word 'fees from the fund'.

I guess in the end investors will know what they thought and act accordingly when they find out whether Trilogy does or does not collect 'direct' fees in the FMF.

*Nevertheless, investors are entitled to know.*


*And by the by, *there was no general encouragement, but there was this (contained in the above article) :-

"... In an olive branch to City Pacific management, Mr Bacon said: "We would expect that some selected people from the City Pacific staff would come on board." ..."

So, again, I ask the question "how can an objective assessment of the FMF be made with 'selected people' from City staff' on board?" 

'Selected people from City', KPMG, and the CBA - what really has changed?


----------



## mellifuous (3 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

Another day, another dollar.

No reply.

I confess that I'm surprised. I would have thought that a professional 
manager could just simply answer the question as to the 'direct' fees
as 'yes' or 'no', and if 'yes', then which fees, and at what rate.

Also, very disappointed that Mr. Ryan's breach of trust was fobbed off as the ASIC case.

Trilogy are so lucky that there isn't a cohesive force of unit holders to confront them.

I wonder if they feel that they're 'darned if they do, and darned if they don't'?


----------



## mellifuous (3 September 2009)

Oh.. how I yearn for a simplistic life again.


----------



## mellifuous (4 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

Time to put it another way....






which way will the scales fall?

Towards unit holders /// or /// to Balmain?

*If it's unlikely that unit holders are going to get distributions, then if Balmain is taking 'direct' fees, then how much more unlikely is that unit holders will get distributions.*

[Despite repeated requests, Balmain have neither stated they are, or are not, taking 'direct' fees.]

Terry ('Froghill') points out on another forum:-

"... At the meeting of unit holders in May members agreed to to amend Clause 21.1 Section (b) of the FMF Constitution so that:

"All monies, or income generated by the business of the City Pacific First Mortgage Fund such as loan establishment fees, investment fees, exit fees, or all such income, will be treated as income to the scheme. The manager or responsible Entity, other than operational expenses as described in Clause 21.3 will only receive fees or any other remuneration as set forth in Clause 21, section (a) and sub sections (i) and (ii)".

The intention of this amendment was to restrict the "total" fees that the RE can extract to (proposed 1.5%, accepted 2.5%) 2.5% of the gross asset value of the scheme or 3% of the gross income of the scheme. ..."

*So, it is perplexing why the manager simply doesn't say 'no, we don't take direct fees' - and that would be the end of that matter.*


----------



## mellifuous (5 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

Well, a whole week has gone by, and still no real answer to my questions to Trilogy.

I'm confused as to why unit holders don't seem to be a tad upset by the fact that Trilogy didn't answer.

How about those folk who complained about Sullivan - all the moans of 'oh! if I'd known about that Sullivan was an ex-bankrupt, I wouldn't have invested in the FMF'.  

Now, we have Phil Ryan who was found to have breached a client's trust in Jessup's case - and just look at the defences he put up (as any good defendant should), he even said he owed no duty of trust whatsoever. http://archive.sclqld.org.au/qjudgment/2006/QSC06-003.pdf

Now, this guy is a senior manager in Trilogy, so, where are the moans now?  

Then we have the case of the 'direct' fees - those fees - yes, essentially all the advance fees and the like are past (well, I assume that are), but how about 'administration' fees? anywhere from .5% to 3% in Trilogy's First Mortgage Income Fund.  

In fact these fees are so good that Trilogy isn't (or wasn't) charging a management fee in that fund because, as Aegis states, charging a management fee might detract from investment in the fund - that report is available at Trilogy's site. http://www.trilogyfunds.com.au/site/assets/files/pdf/Aegis%20Research%20Report%20Aug%2008.pdf

Listed as a 'Weakness', on page 4 of the report, 'the investor has no opportunity to share in the significant fees charged to borrowers by the manager including loan application, administration, and extension fees, and performance fees'.

So, Trilogy makes  good use of these fees, to extent Aegis calls them 'significant'. 

Under 'Threats' (on page 4), Aegis states 'removal of the manager's waver of it's MER would reduce investor returns'.  That is, if Trilogy charged a management fee, then the amount of money payable to investors would reduce the level of distributions.

So, in the end, ALL fees and charges impact investor's opportunity to received a distribution (if at all). 

Their fund seems well organised, but Trilogy can't apply those principals to loans in the FMF, because our loans are 'set in stone' (so to speak).

I've been reminded that the amendments in the FMF's constitution prohibits particular fees, but I'm not sure to what extent, and by which entity.

To put this matter to bed, Trilogy should answer the questions.


----------



## mellifuous (6 September 2009)

Foresight's claim against CPL and the FMF.

You'll have to flip/invert the .pdf file to read the document.

Note the top of page 10 - a unique way to 'roll' over loan book - 2 x 1 year loans, instead of 1 x 2 year loan.

http://www.moneymagik.com/foresight.pdf


----------



## mellifuous (8 September 2009)

Post by 'Seamisty' on the 'Octaviar' thread today.

"... It seems it was well under way prior to the release of the last PIF update and used as a carrot to dangle as the only positive to take the spotlight off the dismal non performance of management indicated by the sliding unit value. 

I was informed in Mar 2009 that the PIF had been stabilised and left with a strong asset base which could be built on. I think the foundations are crumbling or our operating costs are too high!! 

*Why else would the proceeds of the last two PIF assets be totally absorbed into running costs of the PIF( not to mention incidental earnings of the PIf)*? I had been reassured by WC staff ( on 19th Mar 2009) that operating costs of the PIF hotline costs were absorbed by WC operating costs and other PIF expenses were being absorbed by WC infrastructure. Was this information correct? 

If it wasn't and the PIF is being billed for staff manning a phone providing information of a generic content and contributing to costs we are expected to pay for, can the PIF justify the expense of having access to a facility used solely for the purpose of placating irrate investors?

 I think we have had a huge wake up call. *On the 20th Jan 2009 I was told the financier of the short term loan at 25% would be disclosed in the annual financial report. 

This information certainly was not correct,* sorry JH, not good enough and if this service is what we can expect to have to pay for,* I for one am not prepared to sacrifice any more of our diminishing assets* so you can be seen to be running a successful business and justifying a hotline profiding incorrect or misleading information. Regards Seamisty ..."

'Seamisty' raises two issues which FMF investors should be concerned with in our own fund:-

1.  The lack of information from the manager  , and;
2.  The risk that asset sales will simply prop up the running costs of the FMF.

Investors in the FMF should wake up to the fact that timely information is critical for investors to make proper decisions about their investments' (or what is left of it) future.


----------



## mellifuous (8 September 2009)

*Re: Do Balmain take 'direct' fees from the FMF?*

Well, today is the 8 September 2009 and I first sent my requests for information to Balmain in late August and re-sent the same requests on 1 September.

I still have no reply.  Why can't Trilogy simply answer the questions?

Are Trilogy taking 'direct' fees? 
How about Mr. Ryan?
How about the value of the transactions to co-lenders?

Investors are entitled to know.   No need to hide information.
Where is the transparency promised?


----------



## mellifuous (8 September 2009)

"... THE Commonwealth Director of Public Prosecutions is considering laying criminal charges against Opes Prime directors over their roles in securing a new line of finance from ANZ Bank just days before the share-lending firm collapsed in March last year. ...

According to Mr Mullaly, ASIC has recommended the DPP charge Mr Smith ''and at least two other directors'' with ''recklessly or dishonestly'' failing in their duties as directors.

Mr Mullaly said the allegations regarding Mr Smith include failing to exercise his duties as a director by allegedly affirming in a directors' resolution on March 20, 2008, that Opes Prime and OPGL were solvent ''even though he knew that the resolutions were false, because he knew at the time that those companies were then insolvent or near insolvent''. ...

ANZ lodged the charge documentation with ASIC on March 27, and hours later it put Opes into receivership. ..."

Now, when I think back to the actions of the Board of CPL in September 2007 when the fund facility was extended by $90m in circumstances where the FMF fund was unable to repay the $150m facility it already had.

Just how solvent was the FMF in September 2007, and how long would have it lasted without the $90m.  Look at the mid-term 2007 - 2008 financial report and one will see that it was very, very sick.

I guess any kind of business, rotten or otherwise, is able to run for a few months with $90m.

The real question remains 'How long could the FMF remained solvent after 1 September 2007 without the $90m facility increase?'

Keep in mind that a lot of investors invested and re-invested between 1 September 2007 and 3 March 2008 (when City froze the FMF).


----------



## mellifuous (9 September 2009)

Well, here we go again, one of Trilogy's 'chosen few' speaks to the papers to 'calm' concerns about the 'dearth' of information coming from Trilogy.  Even an inside tip about Martha Cove.

Well, if it's good enough from Trilogy/Balmain to tell Mr. Shev (and perhaps others), then it's good enough to put it on their site.

How about Mr. Ryan's history?

How about are Trilogy taking 'direct' fees.

If you're a unit holder in the FMF, then ask Trilogy about the facts.

Ask why Mr. Shev knows and you don't.

Ask them if they confide in others.

We're all in this together ---- tell one, tell all.

After all Mr. Shev was the star unit holder reference in the BRW press release, and now he says 'he's prepared to play the waiting game'.

Yes, sure he is.  He's a 'Balmain/Trilogy' man, he was one of those who pushed the new manager in.   Trust him? I don't.

Press Trilogy to answer the questions.

Now, he tells us (and Trilogy doesn't) that the books were a 'total mess' but there are 'some assets that could prove valuable'.

Wonderful news to hear secondhand, yet again.

If it's not 'chinese whispers', it's press releases from 'insiders'.

What sort of mess have we got ourselves into?




http://www.goldcoast.com.au/article/2009/09/09/135211_gold-coast-business.html

"... 'VOCAL First Mortgage Fund investor Vadim Shev is willing to play the waiting game with Balmain Trilogy.

"It's not something we didn't expect," said Mr Shev (pictured) of the dearth of information coming from the fund manager.

He said most investors with whom had been in contact were still comfortable with the Balmain Trilogy timetable.

"There is not, at this stage, any worry or concern," he said.

Mr Shev said while early indications were that the fund's loan book was 'a total mess', there were some assets that could prove valuable to investors over the long term.

One is the $650 million Martha Cove project on the Mornington Peninsula. Mr Shev said Balmain Trilogy was convinced 'there will be money made out of it'. ..."


----------



## doctorj (9 September 2009)

Are you the only one impacted by this thing?


----------



## mellifuous (9 September 2009)

Well, congratulations.. you're hit the nail on the head.

There's 14,000 (approx) investors, but yes, you would think that only a few of us (on the CIY thread too) were affected.

If you look at the Octaviar thread, there's a lot of activity, but for FMF, virtually nothing.

But, I'm pleased if you think I'm the only one affected.  Perhaps I'm mad, perhaps 13,999 have a problem.. 

The odds are certainly against me.

The FMF was worth over $1b. 

Then in Dec 2008 it was worth $630m (debt accounted for).

Now there are 'Chinese whispers' that its not worth very much.

If one looks at the 'Octaviar' thread you'll note that only a relatively small number of investors post, and yet there are about 10,000 investors in that fund.

Sometimes it's very hard to get people to contribute, and if they don't then one hopes that they might read something that might enlighten them.

I just do what I feel I have to.  I submitted three submissions to the financial enquiry, 182, 182a, 182b and there was only one other, no. 355.

I hope that answers your question.. and thanks for asking the obvious.


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## k.smith (9 September 2009)

Congratulations, Mellifuous., looks like some people have been reading your thread.
from the Goldcoast news today...
Investors' $1.5m Balmain Trilogy question

"Several chat forums have expressed concern at the lack of communication by Balmain Trilogy to unitholders."


looks like there are other investors who aren't happy ...

"..FIRST Mortgage Fund investors have started to question the value of their new manager, Balmain Trilogy.

The Sydney-based manager, a joint venture between Balmain NB Corporation and Trilogy Capital, is nearing its second month in charge of the $630 million fund that already has delivered it about $1.5 million in fees.

But it appears to have gone to ground since seizing control of the fund from City Pacific in July.

One unitholder, who declined to be named, said there was a rising tide of discontent among investors who had described Balmain Trilogy's charge at the fund as yet another cash grab for their frozen investments.

"The only correspondence we have received from Balmain Trilogy is a letter verifying our unitholding and information on the formation of a committee of members," she said.

"There's been nothing else."
http://www.goldcoast.com.au/article/2009/09/09/135201_gold-coast-business.html


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## mellifuous (10 September 2009)

Thanks Mr. Smith - btw, Trilogy still haven't answered the questions.  Seems strange that they can't simply say 'no' to collecting 'direct' fees.

Here is an article posted on the storm thread that shows that the money keeps flowing (from all of us):-

"... The Courier-Mail reports at least $1 million was secretly collected from Storm victims in the six months to June by the corporate recovery firm KordaMentha, which the bank appointed as receiver and manager over the company in January.

The revelation that victims continued to be charged so-called "trailing commissions" is an embarrassment following the bank's acknowledgement earlier this year of "shortcomings" and "mistakes" in the way it dealt with Storm clients.

...

One Brisbane couple were shocked to discover this week that they had been charged about $8000 by KordaMentha, as it seeks to recover $27 million Storm owes to the bank.

The couple, who asked not to be identified, said they never authorised the payments after Storm failed and were never told they were being taken from their remaining investment.

"KordaMentha's justification is that Storm victims had to formally write to KordaMentha telling them they were not authorised to take these fees," the woman said. "Does our system really allow victims of companies like Storm to be subsequently gulled again by receivers on the ... basis that 'we did it because you didn't tell us not to'?"

KordaMentha has defended its actions and vowed to keep the money.

KordaMentha earned nearly $900,000 for its work on behalf of the bank.

Director Trish Talty said the receivers "are not prepared to refund the fees which have been validly charged in the absence of nomination of an alternate adviser. Additionally, there could be significant and onerous consequences to the receivers and a potential breach of the receivers' indemnity provisions if any monies were to be discretionally refunded, given the large number of investors involved and potential to set a precedent."

One of the receivers, Bill Buckby, said yesterday that keeping the trailing commissions was "in accordance with industry standard practice".

KordaMentha ceased collecting the money in June when it sold the Storm client book to Financial Index Australia, which has been trying to attract up to 10,000 former Storm investors as new customers. ..."

Didn't CPL appoint KordaMentha?


*Stunning*

http://www.news.com.au/business/story/0,27753,26052571-462,00.html


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## mellifuous (10 September 2009)

I'm really concerned about the legal review :- 

In its proposal, Trilogy stated (among other things) -  "...  Immediately upon appointment BalmainTRILOGY will instruct a leading Australian law firm to complete a review of the past conduct of the Fund with particular emphasis on assessing whether Investor's may have any valid cause of action relating to the conduct of the previous responsible entity. BalmainTRILOGY intends to pursue any legally valid claim to help recover any lost value to the Fund.

Costs in relation to the legal review will be borne by the Fund and may be recoverable in certain circumstances. ..."

What is the name of this 'leading Australian law firm'? 

Just how objective is such a review going to be if :-

a. ex-key personal from City are engaged (albeit as contractors),
b. KPMG is still involved as the fund's auditors, and;
c. the CBA is still providing the facility for the fund.

Is the real review directed solely to the actions of the Board of CPL?

Because if it is, Trilogy should tell us so.

How about a review of the CBA's and KPMG's activities with respect to the Fund?

Trilogy should immediately disclose to unit holders (1) the company doing the work, and (2) the ambit of the review.

Ah, same body, different head.


----------



## mellifuous (12 September 2009)

White ants eat away at your savings.

http://www.moneymagik.com/white_ant.php


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## mellifuous (12 September 2009)

Will the four  months from 25 June 2009 - 25 October 2009 be expensive for 
investors in the FMF?

Just how will the new manager calculate its management fees from the FMF?

Further, I hope they answer the questions I sent them. 

http://moneymagik.com/comment_1.php


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## Julia (12 September 2009)

mellifuous said:


> KordaMentha has defended its actions and vowed to keep the money.
> 
> KordaMentha earned nearly $900,000 for its work on behalf of the bank.
> 
> ...



Who do you think should pay Korda Mentha?
As stated above, it's standard practice for receivers to take their fees out of investors' funds.
Nothing to them if they decide to spin their task out, commission outside firms to do additional investigation etc.  They know they will get paid.


----------



## mellifuous (13 September 2009)

Julia said:


> Who do you think should pay Korda Mentha?
> As stated above, it's standard practice for receivers to take their fees out of investors' funds. Nothing to them if they decide to spin their task out, commission outside firms to do additional investigation etc.  They know they will get paid.




Yes, their fees come from the 'project'. In the case of the FMF, it's from the company to which they 'attach' themselves, which is a company owing money to the FMF.  So, yes, in the end, a liquidators fee comes from investors, because any fee deducts from the amount payable to investors.

Who regulates them their time management? I guess they do.  Yes, there'll be laws for this, and laws for that - but, in the end, everything is 'up for grabs'.

How much do they charge? The answer is answered by another question, 'How long is a piece of string?'

I've always taken the view that liquidators are simply 'further (necessary) imposts on the backs of sick companies'.

I was saying to a friend, that if a group of a liquidator's staff turn on the office lights, pull down the office blinds, and switch on the music, and then come out 10 hours later, what would one think?

He said 'well, I'd think they've had a really great time, and their client is going to get a really big bill'.

Doubtlessly, there's only one winner and that's not investors (imo).

Sadly, it's the client who pays (one way or the other) from the 'project' and I think that's fine - the problem is 'how does the client regulate the costs of the liquidator?'

Just in passing, I was watching ACA or Today Tonight, and I noticed a story on lawyers running 'speculative' cases.  It was stunning to see what those guys/gals charged $60 for a 'thank you' letter. 

One client was charged $600k in one year in reference to a 'standard' personal injury case.  If one had a solicitor being paid then the bill would probably be less than $5k.  

How people think that running 'speculative' cases is economical is beyond my thinking.

Same goes for the class action lawsuits run by lawyers.    Around 30% of the take - a claim of $1b = $300m for a job that could be pulled up for less than $2m.

When there's no control, there seems to be no limit - be it for an auditor, solicitor, liquidator, or even a car.  That's why in cars we have brakes and accelerators.


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## mellifuous (13 September 2009)

This is how the 'infection' spreads, and it's how I got it.


"...  Mr Jones said he introduced several close friends who now face the same problems, which troubles him greatly.

''I just thought it was a wonderful thing to be in and why not share it with my friends,'' he said. ..."


http://www.smh.com.au/business/some-fall-a-long-way-after-collapse-20090911-fkrl.html {last two paragraphs}


----------



## mellifuous (13 September 2009)

Msr. Sullivan, Equititour, & Carlson Hotesl Asia Pacific Pty. Ltd.

This looks like the action which was set aside because of the Limitations Of Actions Act (LAA) has been resurrected by Slater & Gordon.

Google --- courts.qld.gov.au CARLSON HOTELS ASIA PACIFIC PTY LIMITED sullivan equititour
(note - press 'show more results under the two results that come up)

Is it about this land?

http://www.chriscouper.com.au/properties.php?id=302980&vtour

Is it the Radisson Resort?

http://www.radisson.com/goldcoastau

Just one example (unformatted):-

1545/08 SIXTH GYPSY PTY LTD -V- EQUITITOUR PTY LTD & others  	 District
Originated in 	Currently in 	File type 	File nature 	Date filed 	Next listing
Brisbane 	Brisbane 	Claim 	Damages 	13/06/2008 	(none) - (none)
Parties
Last/Company name 	First name 	ACN 	Party role 	Representative
CARLSON HOTELS ASIA PACIFIC PTY LIMITED 		000708332 	Defendant 	
DODD 	JAMES 		Defendant 	
EQUITITOUR PTY LTD 		069116409 	Defendant 	
SIXTH GYPSY PTY LTD 		006646555 	Plaintiff 	SLATER & GORDON LAWYERS
SULLIVAN 	PHILIP KEITH 		Defendant 	
Events
Date 	Event group 	Event type 	Chambers type 	Resource 	Result
07/07/2009 	Registry 	Application for Renewal of Claim 		Registrar Applications 	Granted
Documents
Doc. no. 	Date filed 	Document type 	Document description 	Filed on behalf of 	Pages
1 	13/06/2008 	Claim 		Plaintiff 	
2 	07/07/2009 	Affidavit 	OF GRAEME HANCOCK 	Plaintiff


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## k.smith (14 September 2009)

Experiencing both fiascos of MFS PIF and CPFMF I am coming to the conclusion that  we as unitholders  must collectively  demand changes that give us disclosure and transparency about the true state of our investments in these funds.Although both funds have a new RE, nothing seems to have changed.Questions remain unanswered.  The daily ritual of scrutinising the media, and forever awaiting the promises of "fund updates" is pathetic, why can't we make our voices heard?
Seem to me that the "industry" has the imput into the rules and guidelines as the "industry" itself  consults with ASIC, but where is the imput of the retail investor?
    http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/REP_139.pdf/$file/REP_139.pdf
REPORT 139
Report on submissions for
CP 100 Unlisted property
schemes””improving
disclosure for retail investors
September 2008
"As part of our consultation, we wrote to 98 responsible entities of unlisted
property schemes seeking their feedback on CP 100. This report highlights the
key issues that arose out of the submissions received to CP 100, both from the
responsible entities and generally, and our response to those issues...."

......and

"...Responses to consultation

6 We received 23 written responses to CP 100 from a wide variety of sources
including responsible entities of unlisted property schemes, relevant industry
bodies, compliance plan auditors, law firms and ratings providers. We also met
with a number of interested parties during the consultation period, including
responsible entities and industry bodies..."

no mention of responses from the retail investors themselves...


----------



## mellifuous (14 September 2009)

Well, Balmain have finally disclosed part of their plan:-

"... The review of the Fund's assets will be complete by the middle of October 2009. We also believe that arrangements in respect of the Fund's indebtedness to its financiers should be finalised at about the same time. In the interim we will be establishing mechanisms for amending the Constitution to allow redemptions at the prevailing unit value. *As most unitholders would understand the Fund currently has a fixed unit redemption price of $1.00. This is significantly greater than the current unit value and effectively prohibits any redemptions from occurring as this would have the effect of treating the remaining unitholders unfairly.* ..."

http://www.balmaintrilogy.com.au/

As, I understand it, this statement is misleading in that it states that a unit price of $1.00 'effectively prohibits any redemptions from occurring as this would have the effect of treating the remaining unit holders unfairly.'  I do not believe that to be the case.  I believe there is nothing restrictive about the $1.00 because of offer of $1.00 (if it is $1.00) must be made to everyone.

Currently, the fund is subject to the Corporations Act and an offer can be made at any time.  There is no need to amend the constitution.

By reducing the unit price to the 'prevailing unit value' it more or less takes the fund out of the realm of the Corporations Act and will allow for new investment.

Then, what does happen is that those members who take their redemptions at less than $1.00 are the ones who will lose out with the opportunity for any increase in value of the fund's assets.

Clearly, the next step is to attempt to introduce further investment into the fund at that price which will have the second negative effect of reducing the benefit to existing members in the fund.

I'll make a complaint to ASIC today over these issues and post the letter on my website www.moneymagik.com

I may be right, and I may be wrong, but I'm going to make the complaint anyway.

The only fair way is to leave the unit price at $1.00 and pay a prorata distribution to ALL, say 5% - that's fair - that's Aussie.

Example:-

investor A has $100,000 (100,000 units) so, he/she will receive $5,000 (5,000 units)
which would allow 95,000 units to benefit from any future gain in assets.

If a unit was to reduce to .45c then to take $5,000 would cost A 11,111 units
which would leave only 88,889 units (6,111 less units)

Now, this might not seem important in isolation - and it's not if the fund was going to be wound up.  On the other hand if new investment is introduced into the fund, then it will matter because of the two disadvantages outlined above.

Balmain stated that they would leave it up to unit holders whether the fund would go on or be wound up, however,  Balmain have again proceeded with a path of action with complete indifference to the wishes of unit holders who should have been consulted first.

There should have been a lot of debate about this issue, and now Balmain has proceeded with unilateral action rather than the promised bilateral action.


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## mellifuous (14 September 2009)

This issue of the unit price raising its ugly head so soon was foreshadowed in my first supplementary submission to the Senate Inquiry - 182a, page 7, 'How is a Unit Valued'. 

http://www.aph.gov.au/senate/committee/corporations_ctte/fps/submissions/supsub182a.pdf

The manager is suggesting that if it made an offer of $1.00 that there would be members who wouldn't take the offer - well, I'd be surprised if that was the case - everyone would be busting to take that offer.

Of course, the payment would pro rata -- at 1, 2, 5, 10 percent - so, it's a free-for-all.

The manager should retract the statement on the front page of its site with respect to unit price.

It could be mandatory payment of (x) units @ $1.00 each.

Remember, the fund is subject to the Corporations Act - the constitution has no effect at this time.

I'm personally very upset with the content relating the 'unit value' on the manager's front page.

If units were deemed at $1.00 then clearly that couldn't continue on for the whole of the number of units in the fund, however, it is fair for EVERYONE.

The manager should first determine if the fund is going to be wound up or continued before suggesting change to the constitution in relation to unit price.


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## mellifuous (14 September 2009)

For those few looker-ins, I have submitted an ecomplaint to ASIC.

It says it'll take up to 28 days to action the complaint with more time attributed to having to seek information.

It wasn't a nasty complaint, but rather one that might hopefully be treated seriously.


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## mellifuous (14 September 2009)

Msr. Shev strikes again. This time in the Herald Sun today:-

"... The City Pacific scenario was very complex, it was a record keeping nightmare ..."  

Now, how does he know this?   I don't know of any other person to be told this information.  Why is always in  the media?

Where is Balmain applying this strange concept of treating all investors equally? - at least some seem to be doing better with getting information - is it okay for the manager to tell some and not others?  Does the Corporations Act apply here too?







On 25 June 2009, he was reported as "... Vadim Shev is from an action group representing 3,000 investors. ..."

http://www.abc.net.au/news/stories/2009/06/25/2608765.htm

Ah! the winds of strange.

Just a few of many pro-Trilogy tidbits:-

In support of Trilogy:-

"...  Vadim Shev, a member of a unitholders action group opposed to City Pacific's continued fund oversight, praised Trilogy's proposals as "certainly on the right track". ..."

http://www.news.com.au/couriermail/story/0,,25174046-3122,00.html

In relation to Investaguard (the opposition):

"... Other unitholders were more sceptical. "We're very wary of Mr Hynes. We don't think he's doing this in the best interest of unitholders," Vadim Shev said. ..."

http://www.news.com.au/couriermail/story/0,,25380740-3122,00.html


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## k.smith (14 September 2009)

http://www.theaustralian.news.com.au/business/story/0,28124,26067872-30538,00.html
"....Similar examples of the responsible entity favouring its own interest, as opposed to the interests of investors, can be found in the schemes promoted by Allco, Centro and MFS. 

The so-called safeguards built into the Managed Investments Act have failed on their first test. In particular, the independent decision-making requirements in the single responsible entity system have been shown to be inadequate. The independent directors of a responsible entity are pitted against the resources and interests of the company that appoints them, pays them and can remove them. If a properly formed compliance committee (with external members) is in place, a majority of independent directors is not even needed. However, a compliance committee does not provide any real-time monitoring or check on the single responsible entity's actions and is similarly lacking in independence....."

at last a downright sensible statement...

".....Efficient markets depend on the proper conduct of the agents in that market. Just as with ASIC's submission in relation to financial advisers, the critical issue in reviewing the Managed Investments Act is to ensure the responsible entity of a scheme acts in the interests of investors in that scheme. As recognised by the Menzies government, that is best achieved by ensuring the responsible entity of a scheme is independent of the scheme manager. ...."


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## mellifuous (14 September 2009)

There has been a grumbling of 'where is the money anyway?', 'How could they pay the redemption at any price?'

I think it's time for Balmain to come forth with the plans, the debt, and explain it all to unit holders.

No more we'll jump over this, and duck under that ... we deserve to know the reality.

Balmain should not have any mechanisms in place to amend the constitution in any way whatsoever until its explained itself to unit holders.

Balmain has made a public statement about unit holders having a  choice, and by law it is obligated to do as it states.

The constitution may only be changed unilaterally by the manager in circumstances whereby members are not adversely affected - I believe that members are adversely affected if a constitutional change is made in circumstances where the fund is not to be wound up.

However, if it is to be wound up, it would be wound up pursuant to the Corporations Act, in which case it still would be unnecessary to amend the constitution.

I have no complaints if it is Balmain's plan to wind up the fund (contrary to their public statements), and if they intend to do so, they should declare so at the earliest moment.


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## k.smith (15 September 2009)

from Balmain Trilogy's website 11th September..

http://www.balmaintrilogy.com.au/
"The review of the Fund's assets will be complete by the middle of October 2009. We also believe that arrangements in respect of the Fund's indebtedness to its financiers should be finalised at about the same time. In the interim we will be establishing mechanisms for amending the Constitution to allow redemptions at the prevailing unit value. As most unitholders would understand the Fund currently has a fixed unit redemption price of $1.00. This is significantly greater than the current unit value and effectively prohibits any redemptions from occurring as this would have the effect of treating the remaining unitholders unfairly........................................."
.......................................................................................................................................


As the fund is an illiquid fund, the Corporations Act sets out how an illiquid fund must operate. As cash comes back into the fund from the sale of assets,redemptions will be offered on a pro-rata basis. For many unitholders, this is preferable to receiving distributions, because a return of capital is not taxed, whereas distributions, (even though the units are worth a lot less  !)are classed as taxable income...so a lot of us will pay 30c/$ tax.So to me it makes sense to receive payments back as redemptions, not distributions.
It is also imo the fairest way, as each payment is proportional to ones investment, and all the risks and rewards are proportional to ones investment.

If BT is successful in its bid to amend the Constitution to enable redemptions at the "prevailing unit price", it will disadvantage the desperate amongst us who will redeem as the offers are made to them, while the richer amongst us, who are in a better position to hold out,  are then advantaged as the NTA values start to increase.I cannot see that this is in the interests of all unitholders as we all have to be treated equally.

Furthermore,  will openning the fund to new investors increase our chances of recovering our "prevailing unit value"?  Imo, we would  just be duplicating our present predicament ...more of the same risky business, and why? I'd rather move on to the safe haven of the banks now, thanks!


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## mellifuous (16 September 2009)

What is happening?

1.  Trilogy is not answering my questions.

2.  A unit holder has phoned them to for the third week in a row and they refuse to say 'yes' or 'no' as to whether they are taking 'direct' fees + the 1.5% management fee.

3.  The person who answered the phone is the same person who answered the phone on each occasion and the same person who responded to my first email to them, and yet, he denied that he had been asked about 'direct' fees, although it is clearly raised by myself as well as by the caller.

What is going on?

How did you go Fleetz? (if you're still around) - Did they answer your questions?

In the BRW article, Balmain made a public statement (a representation) on which unit holders are entitled to rely - and that is that we would be given a choice whether we want to wind up the fund or not.  The way that such issues are resolved in a managed fund are by way of a meeting.

As I understand it, the manager has a responsibility to ensure that members are properly informed.

Unit holders should press Balmain to keep that promise.

Further, Balmain should open the issues of 'unit price' and the fund's future up for discussion at meetings (just like City did with the issue of their proposed listing) prior to hold a meeting/s.

Unit holders should be proactive and make their feelings known.


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## mellifuous (16 September 2009)

A posting I made on the Octaviar thread:-

"... I don't know if I should feel good or bad about being in the 'same boat' with you guys - seems neither the manager of the FMF or the PIF seem inclined to show transparency and answer reasonable questions.

We've only had Balmain Trilogy for a few months and for nearly the past month they simply refuse to disclose whether or not they are taking 'direct' fees out of the fund.

I get the feeling that the system is dead against investors. We don't seem to have any rights whatsoever, not even to have managers answer reasonable questions, and ASIC seems like a 'pidgeon-hole' to an abyss.

Maybe investors in all of these stuffed-up funds should get together somewhere/somehow and start to get political? ..."


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## mellifuous (16 September 2009)

What is Balmain's motive to amend the meaning of 'unit price' in the constitution? 

The Simple Truth - 'It doesn't matter what price a unit is valued at if there is no money to pay redemptions, and if there is money to pay redemptions then it doesn't matter what the price of a unit is either'.

In the Income Fund, City paid 20% of the fund - we didn't ask - they paid.

We don't have to ask Balmain either - when there is money, they can pay too - and the unit price is irrelevant. 

There might be another simple truth, and that truth might be that money to pay redemptions might just be hard to come by.

The 'Five Step Weight Loss Program' (as advertised on dumdum TV)

Step 1 - phone up and buy the program
Step 2 - receive the product in the mail
Step 3 - open the product and see it's a waste of your time
Step 4 - send the product back
Step 5 - get ripped off for the p & p.

How many steps is the Balmain Program, and which step is getting money back?


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## k.smith (16 September 2009)

imo there must be a trickle of some monies coming back into the fund, things have moved a little over the last few months, http://www.raywhite.net/?tag=hope-island-property-bargains
Perhaps the proceeds go to real estate agents fees, liquidators fees, maintenance fees...etc..
Perhaps we should be pressing for a spreadsheet telling us what is sold, for how much, when and where etc...
And what deductions are applied...etc


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## mellifuous (16 September 2009)

Ah costs.. costs.. costs..

"... The spectre of bloodsucking receivers draining precious cash was often invoked during the testy meetings of investors voting on moratorium plans for the finance company undead. Was the fear justified?

A comparison of several receiverships and moratoriums over the last three years suggests not.

The six biggest finance company receiverships are Provincial, Bridgecorp, Dominion, Nathans, Capital + Merchant and Lombard.

Each has provided detailed figures every six months showing how much has been recovered, what the costs are and how much has been paid out to investors.

The costs in some cases look substantial. In their first six months, Provincial Finance's receivers from PricewaterhouseCoopers billed for $1.4 million in fees, on top of the $8.5m they paid in staff wages and operating costs.

Over the three years it took to recover $273m of Provincial's loans, PWC took $3,267,000 in fees. ..."

http://www.stuff.co.nz/business/2858754/The-corporate-undead/


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## mellifuous (17 September 2009)

Copied from Balmain's site today (under 'Unit holder comments' - refresh screen to see various comments):-

"... Liars & thieves should never prosper. Information from these cowards has totally dried up. ..."

I wonder who they're talking about?  Someone actually said this morning that it was grumpy unit holder referring to Balmain - I hope Balmain will clarify this as soon as possible.



http://www.balmaintrilogy.com.au/


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## mellifuous (17 September 2009)

I get the impression that the new manager is somewhat split between the Brisbane camp (Trilogy/Steering group) and the Sydney camp (Balmain/sydney folk).    

Confusion is beginning to reign supreme, we have:-
Mr. Shev's media releases,
the rumours,
Balmain Trilogy website,
BRW release, and;
the unanswered questions.

Personally I'm not seeing an alignment of the information.  I feel that I'm  getting mixed messages from different sources, I'm confused and  I'm feeling unsettled again.   I'm not happy with the situation, and I'm not the only one.  

Is the third option resurfacing again? 

We run from City to Balmain. Will the dissatisfaction rise to a level whereby we'll want to run again?

Somewhere along the way, investors in the FMF have to get together to solve the problems facing us.  If we don't act in unison and with common purpose then we'll run from pillar to post merely to see our respective investments diminish as we make each run.


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## mellifuous (18 September 2009)

'The Fund will be strong again' (re: BRW Article, per Mr. Griffin of Balmain).

Well, I've been thinking how it's going to be strong because (1) losses incurred from the sale of property are unable to be recovered, and (2) property that might be held to recover part of all of the losses on respective loans cannot exceed the money owed on those loans.

Some investors think that new investment into the fund will solve the problem but it won't.  New investors will want security and payment of distributions. This means that new loans will require low LVRs probably around 60% and interest rates on offer will have to be high to attract investment.

When adding up the attractive offered interest rates and management (and other) fees there is little to add on top to eke out a share of profit from new investors' funds to existing investors.  

There will a upper limit to just what interest rate an arm's-length borrower would be prepared to pay, and this upper limit will inhibit the capacity of the FMF to produce excess profit.   In the case of CPL, it was very different because the fees were used as a simple mechanism of transferring money directly from the borrowers to CPL itself, so the amount of interest paid was not really important.

Clearly, existing investors' funds are not producing adequate income to participate with new investors on an equal basis.

The FMF is not an owner of property and so cannot take full advantage of any future property increases in the value of property held as security for loans given by the fund.   

There is no doubt that good judgment has to be exercised in determining which security property should be sold and at what time, but in the end, it's all now just a matter of 'time'.

The manager informs us that its making moves to unilaterally amend the fund's constitution - perhaps the manager should instead put the matter of winding up the FMF to a meeting of the FMF as promised (BRW article, per. Mr. Griffin).


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## mellifuous (19 September 2009)

http://www.news.com.au/couriermail/story/0,23739,26093047-3122,00.html

Now, what a surprise --- 'CITY PACIFIC HAD NOT IMPAIRED ANY OF ITS RELATED PARTY LOANS'

Mr. Griffin calls this an 'optimistic view', what would you call it?

Now, that has to be the basis of a complaint to ASIC, along with the CP1/Martha Cove transactions of March 2009, the transactions relating to Grande Pacific in March 2008, the de-consolidation on 1 December 2007, the extending of the facility in September 2007, and all the statements made post September 2007 that the fund was strong.

Remember, when City took the $18m from the fund in March 2009 to 'protect the FMF against CP1's possible insolvency by action from the CBA'?  And then there was another $15m due, and probably more, and yet, now we find out there has been no impairment on the loan.   Unbelievable: So risky they took millions from the FMF and yet not so risky to impair.  Maybe we've just lost the $18m and the loan is secure - lol.

How would not impairing related transaction have affected investors? If the loans should have been impaired then for one thing, the FUM would certainly have remained higher than if the loans were impaired, and City would have reaped more management fee than they should have; and for another thing, investors may have thought their respective investments were worth more than they really were. oppps.. that's not good news. It would be interesting to know if the 'Pacific Beach' project had been impaired. How about Grande Pacific?

Seems Mr. Griffin makes no mention of any potential litigation for anything other than issues related to loans and this should raise concern amongst investors. There are many other issues that need to be investigated.

Griffin 'declined to specify how large a further drop' would be but it would not approach $338m, so, does $100m NOT approach it? or $150m NOT approach it? Certainly $1 DOESN'T approach it - so, why open his mouth if he's not prepared to say - shades of ELLIS - different head/same body (see 'You Must Remember This', last paragraph).

"... He said City Pacific had not impaired any of its related party loans. "I think that was a very optimistic view shared by the directors and auditors," Mr Griffin said.

He declined to specify how large a further drop in fund value would be but he suggested it would not approach the magnitude of the $339 million writedown overseen by City Pacific in April. ..."

Now, legal action is flagged, but no detail of the reasons and no details of the alleged wrongdoers - just 'concern' that some loans don't 'pass muster'.

"... THE new managers of a $630 million mortgage fund with assets concentrated on the Gold Coast have flagged legal action over questionable loans made in the last two years.

Balmain Trilogy joint chief executive Andrew Griffin said this week that "there are certain transactions that don't pass muster" in the long-troubled fund, including advantageous terms for some borrowers.

"We're very concerned about some of the lending practices that have come to light and we're certainly concerned about transactions over the last 12 to 18 months. These will be subject to legal proceedings," Mr Griffin said. ..."

And here is our new manager with the the old auditor, KPMG: with the old bank, the CBA: and, with some of the old City staffers. Is anyone concerned that it just might be somewhat difficult for the manager to make a truly objective legal review of the fund's prior operation?

It seems that Mr. Griffin is prepared to go out to the media and make broad statements without detail, yet has still failed to answer the simplest question as to whether or not Balmain Trilogy is taking 'direct' fees from the FMF.

Nearly one month as passed and Balmain will not speak to the issue of 'direct' fees, and two months have passed and Balmain has given no detail to investors.

Seems to me that the latest 'offering' is merely an effort to 'quieten the baying hounds'. They've had months and yet shown no detail - to me it's 'pie in the sky' - come on Balmain, show the detail, file the claims, and get some objectivity into the FMF - fire KPMG, get another facility provider, and break free from the past.

This manager seems to be incapable of communicating directly with investors in a clear and concise manner, but rather prefers to eke out forebodings and tid bits via the media, insiders, or its website.

You must remember this

"... Mr Ellis said unitholders still had 97 cents of every dollar invested in the fund intact, after already recording an impairment of $53 million last financial year. But he said this figure did not include the hundreds of millions of bad debts the FMF could still be forced to write down. ..."

http://www.smh.com.au/business/founder-bows-out-from-troubled-city-pacific-20081112-5nyj.html


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## k.smith (19 September 2009)

Thats all very well - knowing that the related party loans were not impaired by City Pacific.
 But what about the "co-investors" -(as City Pacific called them )
We have already seen Fortress' impact on the funds bottom line in the sale of the land at Broadbeach.
 According to media reports, and as I understand it , Fortress is engaged with other related party transactions, and Teak Capital is engaged at Grande Pacific.The terms and conditions between the fund and the "co-investors" would have been known to Balmain Trilogy months ago and there is no reason why Balmain Trilogy couldn't have realised details of  the amounts and the borrowers to unitholders at that time, imo...


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## mellifuous (20 September 2009)

Well, now we've found out that City didn't impair any of its related party loans. Now we've found out the third step in an unknown number of steps program - First it was the $53m impairment step, then the $339m impairment step, now the $200m impairment step? What's the next step? Is it 'the FMF will be strong again'? Well, it just might be, but OUR investments won't.

City did well not to include impairments for the related party loans in the 2008 - 2009 mid terms, and it did well not to include the $339m impairments in the 2007 - 2008 accounts, and it did fantastic to not include both impairment in the 2007 - 2008 accounts. Just think of how unit holders would have reacted to City's assurances of just how good a manager it is, especially in the face of such losses. It would have all been over for City a year ago (when it should have been).

Yes, for all of us who believed their spiel, we really were suckers. Yes, for those who thought that City deserved a 2.5% management fee, then they were sucked in again too. For years they took fee after fee directly from borrowers, and with all the millions and millions they took, they still failed. The only winners were the management of City, every one who believed them and trusted them lost all or most of their investment.

Surely managers must thank their lucky stars for the existence of valuations, capitalised loans, and the good ol' accruals accounting system.

Of course, there stands ASIC which puts all these losses down to prudential choice. I wonder if ASIC might be stirred to some sort of interest now that the manager has foreshadowed legal action in relation to loans. Probably not, City filled out all the forms properly, no need for ASIC to be bothered.

It's a great system we have in Australia - just like the US system as described by Harry Markopolos (the man who tried unsuccessfully for 7 years to expose Madoff's fraud) - "... That's typically how the SEC does it. They come in after the crime has been committed, they toe-tag the victims, count the bodies, and try to find out who the crooks were after the fact, which does none of us any good. ..."

http://www.moneymagik.com/others.php

We've been complaining for over a year and ASIC did nothing - and yet, what are the loans the manager has concern about? They are the loans of the last 12 to 18 months - the very ones complained to ASIC about.

Yes, here too, if we're lucky, ASIC will come in and toe-tag the victims, count the bodies, and try to find out who the wrongdoers were after the fact - which as Mr. Markopolos says 'won't do us any good' - it's more likely that we'll have to chase the wrongdoers ourselves.


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## mellifuous (23 September 2009)

A Conversation with ASIC

Well, if you've ever thought of putting a complaint into ASIC, my advice is not to bother. It's just a waste of bloody time.

What directors say, and what directors do, are of no concern to ASIC. Directors can say anything they like and investors can lose if what is said is misleading - that's all okay by ASIC.  To ASIC it all comes down to an investor's choice.

They love their paperwork, but they just don't care about investors' losses.

What is the point of having ASIC at all? If they don't assist to mitigate investors' losses, then what is their function?

I cannot say how deeply disappointed I am with ASIC - I am ashamed that I paid taxes for so long to support such an incompetent organisation.

Relying on ASIC is no more than living in hope while dying in the mire of despair.

No wonder some companies don't answer questions (when they should), why some mislead, and why some don't give a hoot - it's a learnt behavior brought about by the clear realisation that ASIC will not act, and if it does, it will be more than generous to them: a fact investors are learning at the expense of their investments.

Fidicuary standards are of no interest to ASIC.

The first two complains I sent were not actioned, rather they were sent to the wastepaper basket, the topic recorded, and my name went on a 'merged mailing list' with the names of other complainants who had other issues.

We were all sent out the same letter which signified the end of the matter for all of us.  

Job well, done - complaints disposed of, complainants informed, and everything neatly filed away.


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## mellifuous (24 September 2009)

In the news today - searching google for ** Balmain Trilogy latest **

http://www.comparestoreprices.co.uk/answer.asp?q=how+much+balmain+hair+extensions%3F
*
how much balmain hair extensions?*

*do Boots sell Trilogy shampoo?*

That's the news for today - better luck tomorrow!


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## mellifuous (26 September 2009)

ROLE OF ASIC - as disclosed by Ritesh Patel/Misconduct & Breach Reporting/Stakeholder Services in a letter dated 13 June 2009.

"... It is important to understand the role of ASIC and to understand that ASIC is not a prudential regulator, nor do we approve products prior to their release. ASIC's powers primarily relate to ensuring that the scheme's disclosure complies with the law. As such, ASIC has limited scope to intervene in the operation of companies simply because the products or investments they propose may contain a certain amount of risk or are not performing as expected. Irsk and its relationship to the expected returns are matters for investors to assess (with or without financial advisers) and ASIC cannot direct how people invest their money. ..."

Investors should realise that this is how ASIC actually sees the world - there are no bad guys, there are just a bunch of whinging investors who are silent when their investments are going well, and then who grumble when things do go so well. ASIC sees an investment's failure as one of the two consequences of 'risk': bad prudential choice.

I think ASIC believes that investors are trying to 'use' ASIC to get money back from failed investments, rather than taking care to look carefully at the behavior of managers of managed funds.

Even in respect to the creation of the RG45 reporting scheme, ASIC (as I understand it) canvassed about 90 managers, but did not seek input from investors. ASIC created the RG45 scheme based on about 23 replies from the 90 managers canvassed.

Keep in mind, ASIC just sees investors as naive, uneducated, individuals incapable of making a good choice.

Sadly, it is ASIC which is naive in that it really doesn't grasp the fact that there are bad people out there who are willing to do bad things to fill up their coffers with investors' funds.

It's really interesting to see Bernie Madoff going on TV and saying how it would not be possible to fool the regulators - how cheeky he could be - right in front of them, on national TV.  Seems the more a company states any sort of association with the regulator then the more that company seems to be unlikely to be pursued by that regulator (whether or not that company has done anything wrong).

Oh! and by the way, the letter from ASIC stated (among other things) "... Specifically, however, you are concerned that CIty Pacific has advised you that you are unable to access the funds you have invested. ..."

Well, specifically, however, that was not my concern and the letter did not address my complaint at all.

Investors lack the power to inquire - investors lack cohesion - Investors lack real control.

Investors lack the power to investigate unless they are prepared to individually (or in small groups) take unilateral action against a manager.

Since ASIC puts a lossy fund down to the vicissitudes of business, and in particular puts investor losses down to their respective prudential choices, ASIC is loathe to investigate any issue providing the manager of that fund has complied with the formal requirements of licencing.

ASIC wants to hold the power, but at the same time wants to hold investors liable for wayward managers. If a manager doesn't want to answer an investor's question, then it can't be compelled to. In most cases, investors have no idea as to the true state of a fund until such time as the manager feels that it will disclose, or at such time as mandatory financial disclosure is required.

Even if investors have an inkling that something is wrong, there is nothing investors can do - they simply have to wait until their investments are lost (or mostly lost) before they are able to act - and even then, the options are limited.

It is clear that the next big issue is the inability of investors to get together to form a united force. In the case of the FMF, control has been exerted by a totally unelected group of investors, namely the so-called steering group, and Phil Pot. This has limited choice to one party, and one party only.

Since investors lack cohesion and the power to investigate, it follows that they lack control. One might say, well, investors are able to have a meeting - yes, that's true, and that would be fine if investors could communicate with each other and could organise themselves into an effective united group - that would also be fine if investors had the power to investigate the accounts of a fund and the activities of its manager as and when is required.

One might say, well, investors in the FMF united to oust City, but I would say that it was City's actions that ousted City - it took about eighteen months from the date City protected itself from the FMF's losses by deconsolidating the FMF (1 December 2007) until such time as investors in the FMF realised that City had to go. We weren't protected, City was: City knew the reality and could act, we didn't know and we had to trust - we trusted to our financial detriment.

Without the ability to unite and the power to investigate, there is no opportunity for investors to control their future. Investors can do no more than hide in their respective worlds until the manager discloses the bad news to them. It certainly is a manager's delight.

ASIC keeps the power to inquire and control to itself. ASIC does not introduce laws to permit each unit holder to know the contact details of each other members, and it allows managers to charge thousands of dollars for the list of members, with strong prohibitions on the use of such a list. Such activity does no more than isolate investors and acts as a deterrent to investor cohesion.

The system is with the manager and ASIC, but against investors - but, do we have to accept it?

Graphics, links, and video at www.moneymagik.com


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## Avarice67 (26 September 2009)

All I can say is...

http://www.youtube.com/watch?v=Zf0ZyoUn7Vk

My sympathies...


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## mellifuous (26 September 2009)

Hey Avarice, nice to see you here.  We'll have to suffer until the end .. oh! woe is us. Thanks for your concern.  Got any insights into the future of the fund with Balmain?


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## Avarice67 (26 September 2009)

Hi Melli,

I really dont have much to say about BT. From what I can tell they are just more of the same. I wish I could say it's all going to work out and FMF investors will get something back, but I cant. I cant help but think that the the CP triplets - CPL, CP1 and FMF were symbiotic... ie kill one and all three die. It shouldnt have been like that - and it didnt have to be like that. Trusting investors got sold up the river twice now... I wonder who's going to be the next false prophet.

Take my advice Melli...

Fargeddaboudit.


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## mellifuous (27 September 2009)

Avarice, you have a point - and you're entitled to your view.  As I understand it, you are not an investor in the FMF.  I understand you are/were an investor in CPL and it's true that CP1, CPL, and the FMF are interrelated.

I  agree that CPL and CP1's failure relate to the fact that investors in the FMF voted to drop CPL as manager, however  I believe the FMF's failure related directly to the manager's managership of the fund. I believe we waited two years too long before doing what should have been done back in late 2007 if we'd known the true state of the fund at that time.

I recall your '_Animal Farm_' excerpt on _HotCopper_, and agree with you (at this time) that Trilogy is no more than a new head (manager)  on the same body (structure of the FMF - CBA, KPMG, and some City employees being contracted).  Further, I am disappointed with Trilogy for their lack of communication and transparency at this time.

There is no doubt that investors in CPL and the FMF would have been streets ahead if CPL had stuck to fund management and did not engage in related party transactions and excessive leverage.

For me, like many investors in storm and other failed enterprises,  it is not just a matter of restitution (which you say 'forget about it'  in a gangsta-like way), but also a matter of justice, which at this time, has not seen to be done.

I notice in the storm thread that many say "chase the banks because they have deep pockets, don't worry about the founders of storm, they have been decimated by the company's collapse". 

Others say "chase the founders, they have liability too. Even if they don't have money - we want justice".

At the present time there seems to be a strong argument going on between storm investors over the issue of who to pursue.

I believe that those who want the founders pursued are entitled to justice - they want a sense of fairness to prevail. I agree with their point of view, and I too want justice - I want a sense of fairness to prevail.

Sure, there may or may not be a good reason to take action against the founders, and it probably might come down to insurance, but many people  desire natural fairness and equality, not just monetary restitution.

It's also true that the founders (like many directors in failed enterprises)  may or may not be guilty of breaches of law - however, I believe that the matters should be investigated and a determination given.

I, like many investors in failed enterprises, feel shocked that many directors' actions that are perceived to be illegal by investors have been completely disregarded by the regulator.

Many investors would sleep better, and accept outcomes easier, if actions of directors were placed under the microscope by the authorities and determinations publicly made.

Until such time, I think it natural that one fights in whatever way one is able to fight to bring about restitution and a sense of natural fairness,  justice: For me, it's a forum or my website.  

In many cultures the desire to seek justice overrides the desire to seek monetary compensation: wrongdoers may find that they have a chance to meet their maker a lot sooner than expected.

I reckon that wrongdoers should be very comfortable that no such prospect will befall them in our society, and consequently should not worry about the prospect of losing only their 'exposed' wealth and becoming bankrupts. 

A desire for justice is a very strong human desire and should be heeded, not ignored.


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## fleetz (27 September 2009)

mellifuous said:


> Avarice, you have a point - and you're entitled to your view.  As I understand it, you are not an investor in the FMF.  I understand you are/were an investor in CPL and it's true that CP1, CPL, and the FMF are interrelated.
> 
> I  agree that CPL and CP1's failure relate to the fact that investors in the FMF voted to drop CPL as manager, however  I believe the FMF's failure related directly to the manager's managership of the fund. I believe we waited two years too long before doing what should have been done back in late 2007 if we'd known the true state of the fund at that time.
> 
> ...




I agree with your comments 100%.....if there is wrong doing which we believe there is throughout the last few years directors need to be held to account. These directors have a habit of going again if the rod is not brought out....sad to say they can even go again some times even if they do!

Bring out the rod! 

You post on ASIC is on the money...toothless tigers. Be interested is seeing just how much information and requests for intervention they have from the unitholders. I wrote 3 times and got two piss weak replies....I knew I was wasting my time after the third time.

Cheers,

Fleetz


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## lightlystrung (28 September 2009)

Hello Melli,

Have read all of your informative posts here at ASF and had a thorough look at your moneymagik web page.    Great information there!   

You have collected all the statistics required to formulate a top document/petition to take to ASIC.   Maybe a web page, promoting a petition, to be signed by 100's of unitholders, then sent to ASIC, demanding that they investigate unitholders treatment at the hands of City Pacific.   

A huge volume of signatures might have some impact and also drum up some good publicity to back up our action.

lightlystrung


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## k.smith (28 September 2009)

Well, at least our New Zealand counterpart  has got it's head out of the sand and acknowledged the failures.....
http://www.parliament.nz/NR/rdonlyr...9-064848076239/100892/DBSCH_SCR_4272_6521.pdf

"....The business model for contributory mortgage companies
morphed into the finance company model, with many of the same players involved in
either the borrowing or lending role.

BUSINESS MODEL ISSUES..

Corporate Governance: The quality of corporate governance is a key factor to be
considered in our attempt to understand the reasons for the failure of the finance company
industry. In a number of cases, these companies were dominated by a chief executive who
was the principal architect of the company’s modus operandi. The boards tended to lack
the breadth of experience and skills required to oversee the scale, complexity and
characteristics of financing operations. Too often directors were not adequately informed,
misled or failed to take sufficient interest in the affairs of the company. There is also a
pattern of the company’s CEO or directors having been involved in previous financial
industry failures...."

Mellifuous....perhaps the people at ASIC should get together with their counterparts in New Zealand and compare notes....
At least in New Zealand there is an acknowledgment of the need for changes in the industry, and they have moved a lot quicker than us to identify the failures that caused so many investors so much loss.


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## mellifuous (28 September 2009)

k.smith said:


> Mellifuous....perhaps the people at ASIC should get together with their counterparts in New Zealand and compare notes....
> At least in New Zealand there is an acknowledgment of the need for changes in the industry, and they have moved a lot quicker than us to identify the failures that caused so many investors so much loss.




Mr. Smith, I agree - ASIC are still twiddling with their 'dial' between the cost & extent of capital in the market viz-a-viz the risk to investors.  ASIC doesn't mind a graveyard full of investors providing the capital is flowing. 



lightlystrung said:


> Maybe a web page, promoting a petition, to be signed by 100's of unitholders, then sent to ASIC, demanding that they investigate unitholders treatment at the hands of City Pacific.
> 
> A huge volume of signatures might have some impact and also drum up some good publicity to back up our action.




Good morning 'lightlystring' it's nice to meet a third FMF investor on the thread -  it was all getting very lonely out here.   You are right about a petition signed by hundreds of members, but participation is so low that it would be impossible to achieve.

Way back I tried to get a suite of amendments up and found it impossible.   

I'm not sure of the lack of participation - perhaps investors in the FMF are largely too old (no computer or inhibited by walking frames) or just content to lose money.

At first I was optimistic that people would just work hard to protect their money - but I was wrong.   I've come to the conclusion that some investors would fight harder for one dollar in change not given at a supermarket checkout than they would for hundreds of thousands lost in this mess.

It must have taken investors a great deal of time and effort to save the money they invested, but they just don't seem to see the value of working hard to get their money back: Mostly they just want other people to do it.

The truth is that if we don't work together in a united and organised group that we achieve very little: nothing is going to come easily.

However, if you're willing to create a page of text to support a call for signatures, I'd be happy to publish it online to see what happens.

To date I've made four complaints to ASIC. I consider all the complaints relate to serious matters.   My first two were simply ignored and I received a phone call over the next two which I believe to be an attempt to just push them aside also.

I invested a lot of money in City's funds and I believe I've been cheated.  And the cheating started back in September 2007.  I just can't believe ASIC stands back and does nothing.

I don't mind commercial loss if everything was 'above board' and properly managed, but I believe a reasonable person would see that everything was not above board and the funds were not properly managed.

Yes, I'm sure Trilogy will press some issues about the loans, but I'm concerned that there are many other issues that won't see the light of day with them as manager.  After all, they've brought KPMG and CBA back, as well as some City employees.  

To my mind, the objectivity is gone except with respect to the board of City Pacific - the very board Trilogy praised for being 'tenacious'.  No mention of the fact that the 'tenacity' came about because they were using investors' money.

In my submissions to the senate inquiry (182, 182a, 182b) I raised concerns about KPMG and the CBA.  I don't believe that the CBA should have extended the fund's facility to $240m when the fund was incapable of paying the $150m it owed before the increase.

The managers 'idiotic fundamentals' are just unbelievable.  

City was able to deconsolidate to protect itself but was allowed to keep stating that the fund was strong in order to induce investors to continue to invest and reinvest in its  ponzi-like schemes.

I'm aware that my arguments are circular, but that's because we (who believe we know the 'truth')  have to keep stating things until such time as investors wake up to the fact that they've been dudded.

In the end, the facts will always speak for themselves.

*res ipsa loquitur*
http://en.mimi.hu/law/res_ipsa_loquitur.html


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## mellifuous (28 September 2009)

Wow - see the value of an examination of directors --->

I'd guess it's not the evidence the CBA and Challenger wants to hear.

http://www.theaustralian.news.com.au/business/story/0,28124,26135155-643,00.html

"... FORMER Storm Financial managing director Emmanuel Cassimatis has told a Brisbane court that t*he company was developing a way to identify clients going into margin call when the market nosedived late last year.*

Storm went into receivership earlier this year *with one of the main complaints of its 14,000 clients that they failed to receive margin calls telling them their Storm Financial portfolios were in trouble.*

Mr Cassimatis has previously maintained it was the responsibility of the banks, which had made the individual loans, rather than Storm Financial, to notify clients that their portfolios were facing margin calls.

Asked by Craig Wilkins, counsel for the liquidators Ivor Worrell, *why the company had not developed a facility, Mr Cassimatis said: “It was part of the evolution but I don't think we finally got there.”*  ..."

and, guess what? Two of the banks were using the software:- 

http://www.news.com.au/couriermail/story/0,,26135128-3102,00.html

"... The hearing was also told that the *same software system was used by two of the lenders which lent money to Storm clients, Commonwealth Bank subsidiary Colonial Geared Investments and financial services firm Challenger.* ..."

Isn't it stunning that such a revelation had not been made before this time.  Methinks this is absolutely great news for investors who lent from CGI and Challenger (subject to further evidence).


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## mellifuous (30 September 2009)

http://www.investsmart.com.au/news/news.asp?DocID=SMH090930R46H34L5CRC&Action=Display

"... Bacon says he came across unitholders with widely varying understanding of the City Pacific fund and its operations. City Pacific raised a lot of money by going direct to the public rather than through financial planners," he says. "A lot of those direct investors were naive.  ...."

Ah.. never a kind word for investors - we didn't have our trust misplaced, we were 'naive'.

"... He says one of the difficulties investors had in deciding whether to change managers was the standard and timeliness of reporting by previous management. He says investor reporting is an area ASIC should tighten up. ..."

Yes, perhaps he should heed his own concerns - especially given that he's taking months and months to give investors in the FMF loan information.

There certainly are some strange happenings down there on Rodger's patch.


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## k.smith (30 September 2009)

http://www.goldcoast.com.au/article/2009/09/30/142401_gold-coast-business.html

".....CP1's receiver Ian Carson, of PPB, is co-ordinating a sell-off of the company's assets to repay about $112 million owed to the Commonwealth Bank.

The key properties in CP1's portfolio include the Martha Cove waterfront development in Victoria and the Paradise Resort at Surfers Paradise....."



can't help but wonder if we will even get a look in after the bank retrieves their $112 million...is there enough land to go around????????????

wasn't the $18million the RE of CPFMF forwarded to CP1 at our expense in March, 2008 supposed to keep them from collapse?


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## mellifuous (30 September 2009)

k.smith said:


> http://www.goldcoast.com.au/article/2009/09/30/142401_gold-coast-business.html can't help but wonder if we will even get a look in after the bank retrieves their $112 million...is there enough land to go around????????????
> 
> wasn't the $18million the RE of CPFMF forwarded to CP1 at our expense in March, 2008 supposed to keep them from collapse?




That was really great of the CBA to allow City to loan Marina Cove Pty. Ltd./CP1 (whichever) the $18m to protect the fund against loss by CP1 as a consequence of the CBA pulling the plug on CP1 (the first March 2009 transaction) - well, no need to wonder whether we'll get the $18m back, it's probably lost anyway.

Makes sense - to lose money to protect against loss that will happen anyway - that used to be called 'throwing good money after bad' - City called it 'prudent management' --- oh! how times have changed!

And the second mortgages the fund got to secure it? what a waste of space .. good on ya CBA, KPMG, and ASIC.

Of course, in March 2009 (the second March 2009 transaction), there was the $17.8m from the 'Waves Motel' in NSW that City (with the CBA's blessing) allowed CP1 to keep and pass on to City (which probably went back to the CBA too).

Yes, where is the value? - over $100m to the CBA (which is the only one to get a mention from the liquidators) and sadly, well over $110m from the FMF - no mention from the liquidators.

One day Trilogy might tell us just what a balls up it is for the FMF down there are the cove where the pirates have been more than action - seems the CBA took all the gold - maybe we'll get the seashells.

The two transactions in March had the anesthetic build in - we've been shafted and didn't feel a thing.


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## mellifuous (30 September 2009)

k.smith said:


> http://www.goldcoast.com.au/article/2009/09/30/142401_gold-coast-business.html can't help but wonder if we will even get a look in after the bank retrieves their $112 million...is there enough land to go around????????????
> 
> wasn't the $18million the RE of CPFMF forwarded to CP1 at our expense in March, 2008 supposed to keep them from collapse?




That was really great of the CBA to allow City to loan Marina Cove Pty. Ltd./CP1 (whichever) the $18m to protect the fund against loss by CP1 as a consequence of the CBA pulling the plug on CP1 (the first March 2009 transaction) - well, no need to wonder whether we'll get the $18m back, it's probably lost anyway.

Makes sense - to lose money to protect against loss that will happen anyway - that used to be called 'throwing good money after bad' - City called it 'prudent management' --- oh! how times have changed!

And the second mortgages the fund got to secure it? what a waste of space .. good on ya CBA, KPMG, and ASIC.

Of course, in March 2009 (the second March 2009 transaction), there was the $17.8m from the 'Waves Motel' in NSW that City (with the CBA's blessing) allowed CP1 to keep and pass on to City (which probably went back to the CBA too).

Yes, where is the value? - over $100m to the CBA (which is the only one to get a mention from the liquidators) and sadly, well over $110m from the FMF - no mention from the liquidators.

One day Trilogy might tell us just what a balls up it is for the FMF down there at the cove where the pirates have been burying all the treasure - seems the CBA took all the gold - maybe we'll get the seashells.

The two transactions in March had the anesthetic build in - we were shafted and didn't feel a thing.


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## mellifuous (1 October 2009)

If you want a good reason to get togther to make right the wrongs, then this excerpt from the storm thread on AFS is a good one:-

"... To be perfectly honest? I am sick of fighting the banks. I am ready to give up now, and to say okay, I worked my whole life, my wife worked her whole life, we have denied ourselves many things that we wanted to make sure that we would not have to survive on a government pension, but hey that's okay, leave us with nothing, but please give me back my sanity, please tell me that I am not responsible for taking my family to this very terrible situation that we find ourselves in. ..."

We shouldn't be surprised if we find out that we have more in common with 'stormers' than we originally thought. 

One of the biggest complaints is that investors in storm were lent more than they could possibly repay. That is, if things went bad, then many of them would lose everything, including their homes.

Remember back in September 2007 when the CBA lent the fund $90m at a time when the fund was incapable of repaying the $150m the fund already owed, and in circumstances whereby the market was heading south; adverse publicity hit the media; smart investors were leaving the fund; and defaulters were most certainly on the horizon.

I think the CBA has a lot to answer for.

However, just like the storm investor quoted above, now is a time when all of us question the reasons we invested, but truly the reality was that  'we paid the fare and were really taken for a ride'.

Sadly for investors in the FMF, now is also such a time when we are 'blessed' with a manager who calls many of us 'naive' but yet praises the management of City for its tenacity.   A man who speaks of objectivity  and yet engages ex-employees of City, the CBA, and KPMG.  A man who speaks of credibility and yet his company has in its senior management a man who (with others) has been found  by the Supreme Court of Queensland to have beached his client's trust.

Yet, this man calls many of us 'naive'?  

Am I only one who thinks he comes across as uncaring, thoughtless, and a holder of double standards? 

Seems to me that he's the one who is naive.


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## mellifuous (1 October 2009)

Is the past an indicator of the future?

Mirvac Aqua - a JV between Mirvac and Balmain 

http://www.mirvacaqua.com.au/downloads/20090629_Letter%20to%20Fund%20Investors%20Final.pdf

29 June 2009 

"... Redemptions
We are pleased to announce the opening of the redemption offer for July enabling investors to redeem up to 4% of units held.

The effect of this redemption would be to reduce an investor’s investment by the same proportion and, from this, a corresponding reduction in future income payments.

It is important to note that in the event that any monies accounted for in the loss provisions announced to date be recovered, the proportion of your investment redeemed from your Fund would not have the benefit of the recovered sum. Similarly, any future potential losses would also not affect the portion of your investment which you have redeemed.

The value of the redemption will be calculated using the unit price prevailing on 5 August 2009 and will comprise a return of capital and income for the period 1 August 2009 to 5 August 2009.

Please note that the offer to redeem is set as a fixed percentage of units owned by the investor and we are unable to either increase or decrease the percentage.

You are not required to accept the offer of this pro-rata redemption. If you choose not to participate, no action is required. ..." 

Now, in these funds the drop was a maximum of 7% - still, it took each investor over 7% more of their units to take each $1.00 - and an investor who took money lost participation in future profits. It's really moot to talk about future losses since all the impairments have already incurred and the market is moving upwards (excepting the surprise contained in the penultimate paragraph of the document).

They did this because (among other things) the fund is looking to continue on with new investment, and if it does, then all investors who remain in the fund will lose out on any future gains, to the extent as affected by future investment. It could be a few percent of the 7% write down (if the money was able to be recovered).

Remember, this is an offer pursuant to the Corporations Act - the fund (like the FMF) remains illiquid. 

In the FMF, it's a BIG jump down, probably over 50%. Yes, investors in Mirvac Aqua (like us) look forward with bated breath to see the plan. 

The losses occurred due to 'mezzanine lending' (second mortgages):-

"... In September 2008 we wrote to investors advising them of the status of the above Funds and that there were potentially impaired loans in the Mezzanine Debt Pool (MDP), that would impact the unit value of this Pool and, from this, the unit value of the Enhanced Income Fund (EIF) and the High Income Fund (HIF) which both invest in the MDP. ..." 

Top up loans are risky business, even at the best of times - except for CPL because it controlled the first mortgage lender - an exception to the rule.

Finally, the penultimate paragraph carried the nut cruncher:-

"... Finally, let me say that we are distressed about the need to advise of further loan portfolio provisions and cognisant of the impact this may have on our investors. Allow me to assure you that we are doing everything we can to ameliorate this and provide the best outcomes we can in what are most difficult market conditions for lenders with existing loan portfolios. ..." 

Mr. Tunley is certainly a wordsmith - but what he is saying here is that the fund will continue to take on debt to continue on lending money to borrowers from the fund. Let's hope for investors' sake that the borrowers aren't in as much distress as the board say they are over the fact that the fund will be incurring  further indebtedness.


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## lightlystrung (1 October 2009)

Hi Melli,

Did you also read the Mirvac Acqa Annual Report for the 2009 Tax Year?

lightlystrung


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## lightlystrung (1 October 2009)

Hi Melli,

Forgot to attach the link - too much vino!!!    

http://www.connect4.com.au/fcas/casdeliver.cgi?img=00980597

lightlystrung


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## mellifuous (1 October 2009)

Yes, interesting.

However, the Mirvac Aqua Income Funds Performance Update June 2009 is a good read too.   It doesn't give a lot of info, but what it does give is interesting.

http://www.mirvacaqua.com.au/downloads/20090917_MA_June_Quarterly_Update.pdf

On page 8, all loans are in monetary default, however, only 2 are in technical default.   The managers are lucky the investors are all tied up.  The frozen fund, a manager's delight.

opps.. I've become a skeptic about valuations. And just look at this:-
*Loans with capitalising interest^^ Value $33,860,729 as a % of loans 41.96%*

Mortgages Under Management (MUM) $80,691,884
Provision for loss -$23,368,193
Mortgages Under Management (net of provision) $57,323,691
Average Loan to Value Ratio, net of provision* 77.35%
Average Loan to Value Ratio** 98.46%

*And this was OVER ONE YEAR AGO --->*

Once they get money they just don't want to let it go - "... 
Mirvac AQUA also froze its Income Fund despite it not being exposed to mezzanine loans, the company said. The decision has been made so investors would not rush to withdraw their money. ..." How dare they want their money back ... well, they can't have it.

http://www.investordaily.com/4762.htm

"... *Investors may face losses on Mirvac AQUA funds*
Impaired mezzanine loans
Vishal Teckchandani
By Vishal Teckchandani
Fri 01 Aug 2008

Mirvac AQUA freezes three of its mortgage funds, two of which have exposure to impaired mezzanine loans.

Investors in Mirvac AQUA's funds may be at risk of taking losses, as the investment manager stopped redemptions last week because the value of its investments has eroded.

Mirvac AQUA froze its High Income Fund and Enhanced Income Fund as their mezzanine loan exposures have become impaired.

The High Income fund has $37.3 million of its $180 million in funds under management (FUM) tied to these types of loans. The $6.3 million Enhanced Income fund has 10.5 per cent in FUM invested in mezzanine loans.

Mirvac AQUA also froze its Income Fund despite it not being exposed to mezzanine loans, the company said. The decision has been made so investors would not rush to withdraw their money.

Mirvac AQUA did not make it clear whether it intended to liquidate the funds, however it notified ratings agency Standard and Poor's that payouts from the High Income and Enhanced Income funds would tumble as much as 6 per cent and 7 per cent respectively.

Just in its last company quarterly review Mirvac AQUA stated that the funds were "well-placed" to perform and maintained high levels of liquidity.

"We are conscious at times like these that investors and their financial planners seek clear and transparent communications on the activities of the manager and the funds and we remain committed to our corporate position of investment confidence through clarity," the review said.

The firm intends to meet unitholders within two months to discuss the situation, a Mirvac spokesperson told InvestorDaily. ..."


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## mellifuous (1 October 2009)

The Waiting Game

Well, I'm peeved that Trilogy is taking so long .. but Balmain has a history of the waiting game in its partnerships -- well, at least in the FMF (to date) and in Mirvac Aqua.

In its 'Letter to Investors' dated 29 June 2009, Mirvac Aqua stated (in part) on page 3:-

"... Going forward
In recent months we have been working on strategies to restructure and re-open the Mirvac AQUA Income Funds and, in so doing, improve returns and provide a more certain and rapid redemption program. We are in the process of finalising this strategy and will write to you shortly with details of this strategy. ..." 
http://www.mirvacaqua.com.au/downloads/20090629_Letter%20to%20Fund%20Investors%20Final.pdf

In Mirvac Aqua's 'June Quarterly Update' released on or after 19 September 2009, the manager stated (in part) on page 3:-
"... FUTURE STRATEGY
The Manager, Mirvac AQUA, is completing a review of the Mirvac AQUA Income Funds from a structural viewpoint and will be writing to Unitholders shortly regarding its proposed strategy for the Funds. ..." 

On the 29 June 2009, the manager of Mirvac Aqua 'was finalising the strategy' and would write to investors 'shortly'. On 19 September 2009, the manager was "... completing a review of the Mirvac AQUA Income Funds from a structural viewpoint and will be writing to Unitholders shortly regarding its proposed strategy for the Funds. ..."
http://www.mirvacaqua.com.au/downloads/20090917_MA_June_Quarterly_Update.pdf

So, as at the 29 June 2009 they had been working on a strategy in 'recent months' - let's say from 1 May 2009 (not to go back more than 2 months) and yet, as at 19 September 2009 they were still working on it: that's nearly five months without a strategy. Will there be a strategy? What will it be? Listing? If they can't come up with one in five months, can they come up with one at all?

The strategy has morphed into a 'review' in order to disclose a 'strategy' - what's next for them? A strategy about another review to disclose a strategy about a review? hummmm!

It's now October 2009 and the Mirvac Aqua fund was frozen on 31 July 2008 - it's heading up to a year and a half for them, and there has been no resolution. 'Going Forward'/'Future Strategy', is it no more than 'Pie in the Sky'? Managers make fees, time passes, investors wait .. and wait .. and wait ---- managers make fees, time passes, investors wait .. and wait .. and wait. 

It's the Waiting Game.

I think Trilogy should disclose their strategy - they've had months now - let's not hear that they need to have a review to determine a strategy - oh no! no more reviews.


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## mellifuous (5 October 2009)

No fire sale in CityPac retiree tower

Nick Nichols, business editor - October 4th, 2009
http://www.goldcoast.com.au/article/2009/10/04/144301_gold-coast-business.html

The article makes no mention of 'co-lenders' ('co-investors'). 

The latest loan figures (taken from the fund's accounts and tabulated in the references below) show that the two syndicates at Grande Pacific owed the fund over $80m as at December 2008. 

Comment and loan information at:
http://www.moneymagik.com
http://www.moneymagik.com/grande.php

Rumour has it that the 'owners' in Grande Pacific have interesting conditions attached to their contracts - does anyone know what the conditions are?

Is there yet another set of competing interests down at Grande Pacific?


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## mellifuous (5 October 2009)

oh! I'm slow .. they're 'occupants', not owners.

So, what's the deal? How much is costing the fund for the occupants to stay there?

So, just where does the fund stand with respect to these 'occupants'?



We lost out to second mortgages, banks, co-lenders .. now do we lose out to occupants?



oh no! not another strategy "... Receiver Mr Park said he would be putting together a strategy to sell the remaining apartments in Grande Pacific Broadwater. ..."

"... Mr Park assured all existing occupants that they had security of tenure ..."

So, if they have security of tenure, why the need to assure them there would be no fire sale? 

I would have thought it more prudent of them to assure investors in the FMF that there would be no fire sale.

...


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## k.smith (5 October 2009)

seems there are things happening in a number of developements..

http://www.businessspectator.com.au...r-Marina-Cove-lots-WHSDK?opendocument&src=rss

I wonder when we who are "kept in the dark" are going to hear something..

waiting, waiting,

people who dont read the newspapers and are not computer savvy would have no idea what is going on with their investments...


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## mellifuous (5 October 2009)

Just a thought - hypothetically, if the 'occupants' of Grande Pacific are unsecured creditors and the FMF holds the first mortgage (subject to other entities), then why doesn't the fund take possession of the 'occupants' premises and put them up for sale?

If so, then why do investors in the FMF have to wait for years to get their money back while unsecured creditors are not pressed to vacate?

Would the manager be working in our best interests?

Why is it  that investors in the FMF seem to have to stand behind everyone else in the world?

Why is the money always coming from our pockets and from no one elses?

The receiver is taking money from our pockets and nothing from the 'occupants' - is that fair if they are no more than unsecured creditors?

Why should investors in the FMF 'fall on their own swords' when there is a contest of rights/priorities?

This is all hypothetical, but ask Balmain if the 'occupants' are owners or merely unsecured creditors!


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## mellifuous (6 October 2009)

Ok, Trilogy said they'd finish their strategies and reviews by mid-October, and while I think that's the managed funds' equivalent of a "Bridge too Far'", that is, a "Month Too Long": something we all await with bated breath.

As part of his BRW spiel, Mr. Griffin said that the manager would do what investors wanted - if investors wanted to wind up the fund, then the manager would - however, if investors wanted to see the brave new world of the STRONG FMF, then they could stay on board.

Clearly a meeting of investors is required to determine the wishes of majority before long term decisions should be made.   

It's implicit in the promise to give investors choice by way of a meeting, that the manager be restrained from making long term plans with assets held by the fund by way of security from borrowers.

It's implicit also that the manager be restrained from releasing tidbits to the media and private investors ahead of releasing information to investors.

Well, now we find out that there's a rumour about the loan  to 'Pacific Beach" at Broadbeach being  $170m (or so) when Sullivan told us it was $205m.  

Now, we have a media report (goldcoast.com.au) that the loan to Grande Pacific is $50m when the December 2008 accounts should $82.6 + interest payable as at December 2008 + interest to date, which should account to $90m.

Are we to believe the rumour about Broadbeach? 

Are we to believe the media report of $50m owing at Grande Pacific?

How about the co-lenders at Grande Pacific? Are there any? and if so, how much?

If the debt is $90m, wouldn't we expect the manager to correct the public record?

Now we have the manager assuring 'occupants' of Grande Pacific of their 'tenure' without any reference to the fund's voted-on future.  Further, the manager has now stated they are reopening Martha Cove in 2010 - again, without a vote as to the direction the fund will take.

Sure, the manager is interested in its commission and thinks long term  - but, we're interested in our money - we didn't invest for the duration.  

Sure, even in a wind-up there will be some assets that will take long to sell than others.   Common sense dictated that a fire sale is of no value to investors in the FMF.

However, there is a great disparity between the 'dream' to have the fund strong again (long term) on the one hand, and a desire to wind up the fund in a sensible way (short to media term) on the other.

It seems to me that the manager has already taken the long-term view without putting the matter to members, and this is not consistent with Mr. Griffin's promise in BRW.

It's not good that a manager takes months to give information to members, but members have to wait.  ASIC thinks it's reasonable and has unbelievably given them months to do what should have taken much, much less.

However, this hasn't stopped the manager from spruiking off in the media as its heart desires with respect to issues that I would have thought should have been properly directly communicated to members of the fund, BEFORE transmission to the media.

I phoned a friend the other day and asked him if he knew about the fact that City had not impaired the related party loans - he said he didn't know about that.  I'm sure he's not the only one.   If one doesn't get all the news reports, then one doesn't know what the manager is 'outing' to the press at any given time.

The manager has email and mail contact information for many members, as well as a web site, yet it chooses to give information to SOME media outlets before giving it directly to members.

You can see I'm not happy with the manager with regard to these issues.

I think the manager should have :-

(a) Waited until its release of information to members in mid-October before giving ANY information to ANYONE (individuals and media).

(b) Ensured members  were properly informed about EVERY loan.

(c)  Ensured members were properly informed about the TOTAL debt/liability to EVERY creditor of the fund.

(d)  Called a meeting in order to allow members to decide the future for the fund (i) wind up, (2) a brave new world.

(e)   Informed members FIRST before dropped tidbits to the media and others.

(f)   Not given assurances to ANY entity (person or otherwise) before determining the future direction of the fund.  There is no good reason that members of the FMF should be placed BEHIND individuals holding a lesser security is there is NO GOOD reason to do so.

If you're happy, clap your hands....  :band:

If you're not happy, then do something about it!


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## k.smith (6 October 2009)

http://www.goldcoast.com.au/article/2009/10/05/143895_gold-coast-business.html

".....Balmain Trilogy joint chief executive Andrew Griffin described the completed Broadwater tower as 'a business as well as real estate'.

He said receivers were called to ensure the business was 'managed properly' and to maintain the continuity of rights for existing occupants.

"It is a considerably valuable business asset (that) has been devoid of management," he said....."

Isn't it the duty of the RE to look after OUR interests before any other interests?
We know the "occupants" are in a precarious situation...SO ARE WE..! !

We invested in first mortgages on real estate...we are not interested in running a "business"...
What about our "continuity of rights"?
Pacifing the existing "occupiers" doesn't help us sleep at night.


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## mellifuous (8 October 2009)

Familiar story - just try to fit all the names with different ones and see if you can create a story of your own .... :cowboy:


"... MFS bosses, auditor pursued over $420m loss
MICHAEL EVANS October 8, 2009

LAWYERS for investors in the collapsed Gold Coast property company MFS Limited, now called Octaviar, are pressing ahead with a $1 billion class action against former executives including chief executive Michael King and auditor KPMG.

In an amended statement of claim before the matter returns to the Federal Court in Sydney tomorrow, Carneys Lawyers prepared a 560-page document detailing a series of claims against officials of MFS Investment Management, the manager of MFS's main fund that held $1 billion in deposits from more than 10,000 investors.

It includes details of related party transactions and claims that officers failed to exercise care and diligence. Auditor KPMG is accused of failing to carry out compliance audits and to notify suspected breaches of the Corporations Act. There are allegations that Mr King and two fellow company officials were directors of both MFS's management company and another company, McLaughlin Financial Services Limited - the responsible entity of the MFS Diversified Trust - at the time of a series of loans.

''Unauthorised payments by MFS Investment Management'' were made from the fund in related party transactions, it is claimed.

It is also alleged that MFS Investment Management officers made unauthorised investments against the stated investment criteria and the managers' ''wrongful transactions'' led to investors suffering losses of more than $420 million.

The claim says KPMG partner Andrea Waters failed to refer transactions to ASIC despite ''awareness of suspected breaches'' ..."

http://www.smh.com.au/business/mfs-bosses-auditor-pursued-over-420m-loss-20091007-gn5j.html


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## k.smith (12 October 2009)

http://www.crikey.com.au/2009/08/18/westpoint-paper-trail-snares-kpmg/

"....Unfortunately, the Westpoint collapse is one of a series of calamities to hit KPMG’s audit division in recent years. Through bad luck or incompetence, KPMG was involved in auditing MFS (and also the MFS Premium Income Fund), Allco, City Pacific and Bill Express. In the cases of MFS and Allco, former KPMG partners and auditors readily switched from auditing to being employed by their former client. At City Pacific’s subsidiary, CP1, KPMG’s auditors infamously failed to detect several basic arithmetic errors in the company’s financial reports. In all instances, the financial reports of those companies prior to their collapse appeared to bear very little resemblance to reality...."

http://www.smh.com.au/business/how-do-you-solve-a-puzzle-like-octaviar-20091011-gscz.html

"...Anderson declined to say how many people were paid through Business Puzzle Solutions, for which he is the only director and shareholder.

CBD: How many people are paid by Business Puzzle Solutions?

Anderson: Anything do with this and the payments of the administrators, you should … speak to the administrators.

''Speak to them,'' the former KPMG partner confided to CBD. In MFS's final annual report Anderson, who joined the firm in 2002, is referred to as ''responsible for treasury and financial structuring roles throughout MFS, oversees the financial reporting and taxation functions and assists in investment banking projects''....."

http://www.ilovebig4.org.ua/2009/06/big4s-billion-dollar-errors-lawyers.html

"....Similarly, complex fraud is difficult to detect, especially in very large businesses, because of the sampling methods used by auditors. However, in some cases auditors appear content to authorise financial statements which are incorrect, due to incompetence, personal interest or a combination of the two. As with ratings agencies, the independence of auditors has been called into question, given that they are being paid by the very people they are supposed to be monitoring.

Auditors are officially appointed by a board's audit committee to review management accounts, but in many cases that company's board is on very friendly terms with its executive team. As such, questioning the auditors' conclusions may be akin to questioning the performance of management...."


.....does anyone have any idea how much CPFMF paid KPMG for audit and non-audit fees..??


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## mellifuous (12 October 2009)

k.smith said:


> [ur .....does anyone have any idea how much CPFMF paid KPMG for audit and non-audit fees..??




More Importantly, is Trilogy paying KPMG for non-audit services and audit service?

Ho Hum ... just another question that would go unanswered.

:jump::jump::jump::jump::jump::jump:
One just has to look at the apathy displayed by just about every FMF unit holder to see how easy it is for any manager to lead the whole fund around like a lazy old cow with a halter.


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## k.smith (12 October 2009)

http://www.ilovebig4.org.ua/2009/06/big4s-billion-dollar-errors-lawyers.html

"....By receiving significant audit, and non-audit, fees yet rarely seeming to blow the whistle on problems, auditors' independence and value are cast into serious doubt.

The clamour is growing for solutions - such as having the external audit function run by a government authority, similar to the auditor-general, or having ASIC, rather than a company's board, select and appoint the auditors from an approved panel....."



....well, I guess this is just another area where we unitholders really had no idea of the undercurrents at play.


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## mellifuous (12 October 2009)

Well, this is what $1m/month (more or less) gets us:-

*  2009 Tax statements to be sent to all unit holders.
      (Oct 09)  ---- yes, we earnt nothing - I'm surprised that actually could print a zero statement in the months and months they've had to do it.

    * Publication of Summary Report of the Asset and Legal review.
      (Early Nov 09) --- a broken promise.

    * Finalisation of the CBA facility extension.
      (Mid Nov 09) --- wasn't it supposed to be written down?  Why not go to another provider? Where is the objectivity?

    * Release of 2009 financial accounts.
      (Late Nov 09) --- any slower and they'll be going backwards.

    * Publish RG45 disclosures.
      (Late Nov 09) -- yes, well, who cares about statutory obligations.

    * Investor Committee members to be chosen by MGI White Hancock.
      (Late Nov 09) ---  well, we'll see this when we see it - don't be surprised by the outcome.

    * Web based portal to access unit holder information to be made available.
      (Nov/Dec 09) === why so long? gee, these guys are sloooooow.

    * Hardship policy to be implemented and published.
      (Dec 09) ---  good, now those in need can get their $100k each.

http://www.balmaintrilogy.com.au/Default.aspx

Now, don't be suprised --- this was to be expected --- reviews, strategys.. remember the MIRVAC Aqua fund of which Balmain is a partner? well, reviews/strategys -- month after month after month.

Seems when they haven't got any answers, then they just delay. 

The promise of mid-October now runs to November --- a month by a month.

Of course, where is the mention of the meeting we're supposed to have to determine the fund's future?  

For my part, these managers all look the same to me.

and don't forget, we can trust these figures because they'll be audited by KPMG - wow.. that must give unit holders a great deal of comfort.


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## mellifuous (13 October 2009)

I set up a simple yahoo forum at http://asia.groups.yahoo.com/group/pac_fmf/ for anyone interested in having a say 'for' or 'against' the manager.

At some time members have to realise that their futures are really in their own hands and sitting back and waiting for a manager to deliver the goods has not worked in the past.

Please consider participating.  Thanks.


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## mellifuous (14 October 2009)

Interesting to see the news on CNN this morning - two Bear Sterns traders in handcuffs heading into court charged with various frauds - part of the evidence is that an email from one trader to the other stated that the sub-prime mortgage securities they were trading in was 'toast' while at the same time they were out promoting investment in that market.

Interesting to look at all the statements made by City Pacific from August 2007 until 3 March 2008 that the fund was strong, and then have a look at the state of the fund at the time the statements were made.

If the two situations could be regarded as 'pictures', then what do you think is in the first picture that's not in the second picture?



Lest we forget (those statements).


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## mellifuous (17 October 2009)

Now, don't go and think that ASIC doesn't go and do battle, because it does:-

"... On January 30, ASIC won court orders freezing the $2 million after arguing there did not seem to be a "proper basis" for the payment. Worrell, appointed liquidator of Storm on March 26, subsequently retrieved the funds and the money made its way back to Storm's major secured creditor CBA. ..."

well, it's gotta be worth going to bat for the good ol' CBA - that's what taxpayers' money is for - it's not for protecting members of the FMF, and it's not for investigating matters within the FMF - gee, we've only done over half a billion dollars - no need to waste money chasing hundreds of millions when ASIC can get back for $2m for the CBA.

https://www.aussiestockforums.com/forums/attachment.php?attachmentid=34001&d=1255733812  (thanks to research on the Storm thread)

Oh! and by the way, a member of the FMF approached Trilogy to enquire as to (1) the cost of the disk/s containing unit holders contact information, (2) the format of the data on the disk, and (3) the detail contained about each unit holder.

Trilogy had one question 'What do you want to do with the disk?'

The answer 'To contact other unit holders'.

Trilogy's employee did not provide an answer, and like other requests for information from Trilogy, stated he 'would be back with the information', and that was after he went to speak with his manager.

Yes, I knew about the approach, because I, like others, want to put together a united front to protect our interests.

After the fund was frozen on 3 March 2008, we sat back and waited, and just look what happened - are members really prepared to do the same again, well, I'm not!  Are you?


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## k.smith (17 October 2009)

Fellow investors, 
there is a huge interest by unitholders for information, we can gauge that by the amount of hits onto the sites that are on ASF and on Yahoo....everyone is anxious for news. 
The amount of people that actually post on the forums is only a  very small percentage, but to make that more effective we need YOUR input..
So may I ask you to JOIN the forums, say something, even a one line sentence , so that we that DO post know that you are out there..
If we sit back in silence, we WILL LOSE..http://asia.groups.yahoo.com/group/pac_fmf/


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## mellifuous (17 October 2009)

"... Jenny Hutson, whose merchant bank Wellington Capital manages the Premium Income Fund, was yesterday frustrated that the $200 million held by Octaviar when the company hit the wall last year had now been whittled down to $125 million. ..." (excerpt from posting #2468 by 'Seamisty' on the *Octaviar MFS Premium Income Fund PIF* thread on this ASF.)

It really is worth reading the MFS and Storm threads.

Hey, they've got a bargain ... 'Pacific Beach' at Broadbeach cost the FMF over $205m and we're getting back $40m from the sale (according to media reports).http://www.moneymagik.com + $30m (more or less) already paid in March 2008 and accounted for in that financial year.

Organisationally, Storm have done a great job - they got together, got organised, and went out fighting.  I've posted before how investors in Storm done no less that swamp the Senate Inquiry with submissions. 

Even hand written submissions were made by inidividuals who seems to be unable to even write a straight line - yet, they made the effort to contrible, some must have made a magnficant effort.

Storm  were just so well represented that, on more than one occasion,  the inquiry has been called the 'Storm Inquiry' -  the few submissions from managed funds flounder in the 'noise' of lack of representation and lack prominance due to the plethora of Storm submissions.

I think it's reasonable to think that anyone reading the Inquiry site would think that investors in managed funds must be comfortable with the position they're in - sure, they've lost money, but they don't seem to put the blame anywhere and they don't seem to want to make an effort to get the senate to do anything for them.  Heck, they don't seem to even be interested to write a letter expressing their views to the inquiry.

Well, we all know that investors are concerned and do allege blame with respect to their losses, and we all know that virtually nothing was done  because we're not well organised, and we all know that we do not have a united voice for FMF members, and while there is organsisation within Westpoint and MFS, they were not represented at the inquiry to any real extent either.

One has to ask, in the absence of representation, why don't members act for themselves?  Why are so many members 'lookers' but not 'doers'?

There must be at least 100,000 Australians with billions of dollars of losses from investments in managed funds, yet ASIC's representations at the inquiry would suggest we complain of nothing more than the  fact the funds are frozen and we want some or all of our money returned.

In fact, ASIC has made submissions as to only two issues (1) money for the needy, and (2) just when investors might get money (a) early and take losses, or (b) stay in the long term to recover loss.  That's it!  If I'm wrong, then please correct me - I have not read all submissions. 

Nothing from ASIC about management of the funds, related party loans, bank involvement, auditors, or the PTQ.  Yes, the forums are full of views as to the behavior of management and associated entities - yet nothing relating to these matters from ASIC.

Readers will note in my last posting on this forum that ASIC would go to court to recover $2m effectively on behalf of the CBA, but does nothing for members of the FMF.

Look at the heat the CBA, BoQ, and other financial institutions as well as the directors of storm and financial advisors related to investors in storm are feeling from the inquiry - and then look to see if management, auditors, bankers, and custodians are feeling nothing more than the cool flow of an air of contentment.

Storm's actions have made it pellucidly clear that if we do nothing, we will get nothing - 'the good lord helps those who help themselves.'   No flood will be contained without building a wall against it, no wrong will be set right unless we act to make right the wrong.

Sooner of later, members of the FMF must realise that to do nothing is to get nothing.

You can pray all day and all night, you can think that what goes around, comes around - but neither will help --- if you do nothing, you will get nothing.

I note that Trilogy have meetings with various entities, including the CBA and ASIC - we're not there and can't share the business cards, tea/coffee, cakes/donuts, and chit chat.  We're out of the loop.   All these folk are on first name terms - we just know their names in this reign of M. Bacon I.

If the past is a predictor of the future, every reader should see for him/herself the myriad of dangers which present themselves when we disregard the absolute need to become a consolidated group.


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## mellifuous (19 October 2009)

Hi lookers on,

As a result of conversations between myself and 'seamisty' from the MFS thread, a new thread has been created - MANAGED FUND CO-OPERATION GROUP.

This thread has been created in the hope that members of various managed funds might  discuss (and hopefully solve) common issues of concern.

You may access the thread through its name or by searching using either of the key words FMF or MFS.

Please continue browsing.  

Thank you.


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## mellifuous (21 October 2009)

If you support the manager changing the constitutional interpretation of the value of a unit from $1.00 to 'fair value', then you'll be caught, 'hook, line & sinker'.

If you don't care about your money, care for mine - don't be suckered by the words 'fair value', because their use won't be fair for  you.

'fair value' splits the fund into the needy and the greedy (hopeful).  The only winner will be the manager.   We came into this fund together, and we should leave it together, with an amalgam of equality and fairness as the foundation of our actions.







Just a trip down memory lane:-

http://www.moneymagik.com/we_believe.php

http://www.moneymagik.com/change.php


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## lightlystrung (22 October 2009)

When did BT announce that they are going to change the constitutional interpretation of the value of a unit from $1.00 to 'fair value'?


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## mellifuous (22 October 2009)

lightlystrung said:


> When did BT announce that they are going to change the constitutional interpretation of the value of a unit from $1.00 to 'fair value'?




"... The review of the Fund's assets will be complete by the middle of October 2009. We also believe that arrangements in respect of the Fund's indebtedness to its financiers should be finalised at about the same time. In the interim we will be establishing mechanisms for amending the Constitution to allow redemptions at the prevailing unit value. *As most unitholders would understand the Fund currently has a fixed unit redemption price of $1.00. This is significantly greater than the current unit value and effectively prohibits any redemptions from occurring as this would have the effect of treating the remaining unitholders unfairly.* ..."

http://http://www.balmaintrilogy.com.au/news_111009.aspx


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## mellifuous (22 October 2009)

mellifuous said:


> "... The review of the Fund's assets will be complete by the middle of October 2009. We also believe that arrangements in respect of the Fund's indebtedness to its financiers should be finalised at about the same time. In the interim we will be establishing mechanisms for amending the Constitution to allow redemptions at the prevailing unit value. *As most unitholders would understand the Fund currently has a fixed unit redemption price of $1.00. This is significantly greater than the current unit value and effectively prohibits any redemptions from occurring as this would have the effect of treating the remaining unitholders unfairly.* ..."
> 
> http://http://www.balmaintrilogy.com.au/news_111009.aspx




I refer to 'fair value' as 'the value of a unit calculated from time to time as a portion of the total unit holder equity in the fund', that is equity is 600m held by 1b units, then 'fair value' is $.60c.

Members of managed funds seem to fall into one of three camps at this time:-

1.   The liquid fund - in its normal state distributions are paid and members are free (within limits of liquidity) to redeem and invest.  In the FMF the unit price ($1.00) was set by the constitution and provided a stable base for investment and redemption: that is, a member could not gain an increase or decrease in the value of the unit in normal circumstances so unit price was neither a deterrent to redeem, nor a deterrent to invest.

2.  The illiquid (frozen) fund which is managed pursuant to the corporations act (illiquid provisions)  - the constitution does not apply to redemptions.  A manager may make an offer from time to time which members may accept of reject.   The needy will take offers if they are dire straits, and the rest will remain in the fund in the hope the unit  'fair value' will improve (I refer to this as being hooked).

3.   The listed fund where members rely on the market to set the value - Take the MFS Octaviar fund - which is now listed.  The unit value was $1.00, but now that its listed the value is determined by market forces - it can be seen empirically that about 2% of members have taken very low offers (about 9c) for their once $1.00 units - but, the bulk (about 98%) have remained in the fund (they are hooked).  Those remaining have not received income of any kind for two years, and it seems their fund is dwindling in value rather than increasing.  They complain that promises made by the manager have not been fulfilled.

I realise that 'fair value' no longer represents $1.00 and that is has not done so for some time.

My complaint about Trilogy unilaterally amending the constitution falls on the ground that I do not wich to invst in a fund with a variable unti price, that is ,a 'fair value' unit price as determined from time to time (and it can only be from time to time as all accounting is done - gee, looking at how long it's taken Trilogy to do the books this time, it would seem that it might be months between calculations of 'fair value').

The MFS experience shows that, when faced with lower offers than members perceive their units to be worth, members will not sell.  In fact, 98% of members have not sold while those in dire straits were prepared to accept $.9c for their once $1.00 units.  Promises from the manager seem to have been a strong inducement for members not to sell.

This will happen in the FMF too - when faced with a choice, then only those in dire staits will take any offer, because the remainder will stay in (be hooked), especially if the manager purports that the fund will be strong in the future.

So, how would the manager make the FMF liquid? Well, the first step would be to amend the constitution to 'fair value' so that the units could be traded on a fair basis, but of course the fund would have to be paying interest (distribution) in order to induce investment at any price - and that is unlikely.

The FMF's consitution provides that at the discretion of the manager (in consultation with the auditors) the manager may pay 'distirbutions' to captial - given the impairments, it would seem that the manager would duty bound to direct any 'income' to capital, and not to members in the form of distributions.

If we assume that it is possible for the fund could operate as liquid (which is unlikely given the fact that members want their money back), then how would unit 'fair value' be calculated? Clearly the time between valuations would not be short since the fund holds a range of assets and the assets would be sold at variyng times and for varying prices, and expenses would calculated and paid at different times, and valuations have to be made - and of course, audits have to be made.

Where would this leave members in the fund? Well, I believe in a similar position to being in a illquid fund, or being a member of a listed fund - in a very uncertain position - always being hooked into retaining money in the fund in the hope things will improve.  One should also remember that valuing is not a science, it's really estimating - a guess - may be up to 20% out.

It might be that things might not improve and it might be that they will - where is the evidence one way or another?  Look what the accruals accounting system and valuations did for us with City - just consider how much of our grief come from valuations.  If it worked one way, then isn't it possible to work the other way?

MFS members won't sell and they've got nothing for two years, the FMF hasn't paid anything for about 15 months and won't see anything this side of smas 2009, so why would members want to live on promises for more time?

We always have to keep in mind that the manager's interests are not ours - the manager want's the cash cow to go on and on - so did City (and City said so).  The manager has already pubicly expressed views about long term business ventures and given promises about tenure to occupants of Grande Pacific, yet has promised that it would be members who decide whether the fund should go on or wound up: the manager is at best, inconsistent.

The reality is that the $1.00 unit will stop the manager from even thinking about making the fund liquid because, with a unit value of $1.00, the fund IS illiquid because 'fair value' is less than $1.00.

In this way the onus is on the manager to (1) call a meeting of members to determine the future of the fund, (2) disclose a clear strategy for the future, and (3) provide members with a comprehensive report on all facits relevant in making a proper decision about the fund's future.

Now, after members have decided and if the evidence support the fund moving along, then an informed decision can be made and amendments made by consent.

On the other hand, the fund should be wound up in a sensible way.

The manager has already expressed the view that it would wind up the fund if that is what members desired (BRW spiel, per Mr. Griffin).

Amending the constitutional basis for calculating the unti price is not a mechanism that relates to redemptions, it relates more to an attempt to make the fund 'liquid' - to lock us up as if listed.

If members allow the manager to do what it has done (or is doing) wrtamending the unit price calculation , then we will end up no better off than if we had listed the fund.

In this world of equality (as envisaged by the manager) the needy will always be disadvantaged, and the remainder will always be hooked.

IMO.


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## mellifuous (22 October 2009)

THE 'BLACKBOARD LISTING'  -- that's how a poster  refers to City's purported amendment of the calculation of unit price in the fund's consitution.  I agree with it, same outcome, but no listing on the NSX (or elsewhere).

Again, posting number 3995 from the storm thread states (in part):-

*"... When or if you come face to face with Cassamatis, you can ask him a couple of questions from me. I already asked him these questions on his website, but in his typically weak and cowardly way he didn't respond.

If you were managing your clients portfolios, why did you let them evaporate into thin air? Why did you let them sit through more than 12 months of one of the worst bear markets in history, without taking any defensive action that would have saved their portfolios from being decimated?

Well of course we all know the answer - selling clients out would have dried up his cash flow, firstly by eliminating Storm's ongoing management fees, secondly by effectively preventing new clients from coming on board with Storm. I mean, if word had got out that Storm were evacuating their clients from the stockmarket, then nobody in their right mind would have walked into Storm and asked to be put into the market. ..."*

Clearly this poster sees the relationship between a manager's income, the value of a fund, and the length  that a least one manager will go to maintain the value of a fund to secure a steady income.

Please look at the possible consequences of a manager's act and try to put aside the reasoning put forward by the manager, look to the effect of the act..

Remember how Mr. Ellis said the 'recent' impairments (over $300m) were only paper lossses, while Sullivan, when explaining why two months of distributions were put to capital, stated (in part) that impairments were actual losses - in the first case they wanted out vote, in the second case the wanted out money.

Remember also how City attempted to list the fund under the guise of an avenue for the needy to gain access to their funds, even thought goldcoast.com.au had published an article stating (among other things) that investors would be decimated by the listing (Aegis had been engaged by City to do a report - City knew what would happen to our investments). We also had the clear evidence that MFS's listing was a disaster.

None of this deterred City, because I believe the true aim of the listing was for their benefit, not ours.

Now this manager states that its amending the unit price as disclosed in the constitution based on 'fairness' - look at the consequences of their action and determine for yourselves if the reason they give really makes sense: work out for yourselves whether you believe the act to be fair.

*If you're not happy with your investment tied up in a illiquid fund, and you're not happy with more of the same in a 'liquid' fund, and you don't want a listing, then contact the manager and ask them to provide comprehensive information on the state of the fund.  Ask them to disclose a strategy about the future of the fund, and ask them to set down a meeting so members can decide the fund's future before the manager goes out an makes long term plans.*

It's our fund, don't let your investment get wound up in a 'Blackboard Listing'.

Of course, if you're happy to sit back and trust the manager, then none of this matters.


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## mellifuous (23 October 2009)

http://www.moneymagik.com/unit_value.php

A frozen fund is a 'manager's delight' - the illiquidity provisions of the Corporatons Act put icing on a manager's 'cake'.

The 'offer' (pursuant to the Corp Act) is the hook that keeps most investors hangin' in.

A damaged fund with a variable unit price is no better than an illiquid fund.

*Press the manager to (1) put forward a strategy, (2) give unit holders a comprehensive report on the state of the fund, and (3) call a meeting to determine the future of the fund.*


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## mellifuous (25 October 2009)

I'll make this prediction about the future with a variable unit price, and the prediction is this:-
'that most investors in the FMF will not take out their investments for years because they will not be prepared to face the losses they will be presented with, and the only beneficiary will be the manager, investors will be caught, HOOK, LINE, AND SINKER. - they may as well have listed the FMF.'

If you're an investor in the FMF, then you'll have the pleasure of thinking about my prediction when you find that you cannot accept the first offer that comes from the manager.

You'll feel a sense of despair when you find that you can't redeem your units at the 'fair value' because the loss will simply be too much.

You'll be locked in for the long haul -- just remember my words.


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## mellifuous (25 October 2009)

Nah, I wasn't trying to play Nostradamus - the facts that follow on from a variable unit price in a non-liquid fund suffering such losses as the FMF are really quite obvious.

I don't recall Michael West making the comments he did back there in August 2007, but I wish I'd seen them and taken notice of him - if I did, then I would have saved most of my money.

I can remember most investors in the FMF attacked his comments, but even if City had sued him, and even if he's said nothing, the outcome would still have been the same - ASIC should have listened to him and all of us might have had a lot more of our respective investments in the FMF than we now have.

So, here again, I'm just warning investors of an outcome as I see it - I could be wrong, but on the other hand, I might be right.

I'd rather be heading into a meeting fully informed, than receiving an offer so low that I just can't accept it.

I'm stunned as to why investors aren't up in arms about the tardy nature of the manager's responses and the watering down of reports to summaries of reports.

Well, as I saw on 4 corners about the real estate bubble in L.A.,  a comment about lemmings following lemmings, all going in the same direction - sadly, it's not always the right direction.

Yes, I delude myself to think that there would be investors who would think they've been duped when they receive those offers too low to accept, but it's a nice dream to hold on to - in reality, they'll probably all be consumed by thoughts of just how 'strong the fund will be in the future' to give any thought to the fact that they won't be getting any money.

Still, a good dream.


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## mellifuous (26 October 2009)

Well, M. Baconne is doing it again.. off to the media without regard to unit holders.

http://www.investordaily.com.au/cps/rde/xchg/id/style/7699.htm?rdeCOQ=SID-0A3D9632-5781AE32

"... An asset review by responsible entity BalmainTRILOGY has found that there is no significant cash income being earned by Pacific First Mortgage Fund (PFMF), formerly known as the City Pacific First Mortgage Fund.

According to BalmainTRILOGY joint chief executive Andrew Griffin, the asset review has found that a substantial majority of the loans in the portfolio were in default. ..."

Well, there you go - "no significant cash income", so much for the accruals accounting system which deemed it great that no real cash was received, but in the non-liquid environment, cash is king - but I guess it means the facility providers and the manager will get their take, but as usual unit holders will get nothing - it's really about risk and reward.







"... As part of the ongoing work to restore investor value, managers have organised for tax statements relating to members' investments in the fund to be sent to all unit holders. ..."

Yes, nil income statements that took months - a great achievement.

But, there's more:-

http://www.watoday.com.au/business/new-broom-blames-old-one-20091025-herc.html

"... Two weeks ago, the group raised $80 million through the sale of a Gold Coast beachfront property. ..."

You'd be forgiven if you really thought that Trilogy did something 'raise the $80m", but they really didn't.  As I understand it, the contract was entered into while City was still the manager - and in any event, the deal lost upward of $135m - no fire sale? Well, if Balmain wants to take credit for the sale, then they should take credit for the fire sale.

"... "As a consequence it is going to take time and a great deal of effort to get PFMF reworked in the interests of unitholders," Griffin said.

"We know that this is a difficult situation for unitholders who are keen to know the future of their fund and are wanting answers as soon as possible. ..."

Yes, of course - and of course you took the $1.00 value of a unit to 'fair value' just in prevent anyone who stayed in the fund with a $1.00 wouldn't  be disadvantaged.

And, yes, one day the 'fund will be strong', but for 2 years it hasn't been able to pay anything to investors, but 'one day' it will be strong, just wait for a few years of no income, and then,, eh.. what? What will happen? How will the fund get income when we're so heavily impaired?

Did I misunderstand something? We can get income from losses? Now, that's an interesting concept - is it misleading to say something like that?  Does he mean 'return of capital'? There is a really BIG difference between the two - one indicates profit before expenses, the other means limiting loss.

When will M. Baconne get the reality that unit holders should be told before the media?

Around the 12th of never?


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## mellifuous (26 October 2009)

http://www.goldcoast.com.au/article/2009/10/26/151631_gold-coast-business.html

"... In a brief statement, the funds manager said the asset review of Gold Coast financier City Pacific's former flagship fund was nearly completed and a legal review would follow soon with news of how Balmain Trilogy proposed to recover delinquent loans from developers.

"As a result of the review, it is clear that a substantial majority of the loans in the portfolio are in default and *there is no significant cash income being earned*," said Balmain Trilogy joint chief executive Andrew Griffin. ..."

'income', an interesting word to use when referring to meager returns of impaired capital.  eg. $600m of impairments, $600m unimpaired, $200m debt, $12 'income', more impairments likely - (figures not correct, example only).  How could the $12m be declared as 'income'? 

What Trilogy means is return of capital ('income') will be used to pay off facility provides and the manager - there is no money for investors -- but, interestingly, 'the fund will be strong again'.

"... It is likely there will be further writedowns after the review. ..."

Interesting use of the word 'likely' - I would have guessed they'd either know now or they'd never know - why can't they just say the words  'there will be further write downs'?

"... As a consequence, it is going to take time and a great deal of effort to get Pacific First Mortgage Fund reworked in the interests of unit holders.  ..."

And how about money? So far over $4m + costs of reviews.   

What does 'reworked' mean?  Down the unit price to 'fair value' to enact a 'blackboard listing'?  Give 'occupants' in Grande Pacific tenure assurance?  Declare running Grande Pacific as a business (that's the project City got it's money back from in March 2008 - the business at that time was described as 'ailing').

Well, we never know, but we may hear of Trilogy organising helicopter trips to 'its' Mornington Peninsula playground at Martha's Cove.

"We know that this is a difficult time for unit holders who are keen to know the future of their fund and wanting answers as soon as possible.

Well, why shouldn't they? Why does it seem that so many believe that Trilogy is able to pay them distributions when Trilogy won't get back half of the lost capital? If Trilogy can't get back the capital, what there is no income - IMO there will NEVER be income from the fund because the capital losses will be NEVER be made up.

IMO income will only come when the FMF's unit price is fixed and losses are accepted - no acceptance of losses will mean no income, and shouldn't all monies received be repaid to capital?  Why pay tax on distributions while suffering losses that haven't been crystalised?

"We are confident that the thick veil that previously shrouded the affairs of the fund will be removed once and for all in the very near future."

Yes, and if that 'thick veil' is lifted, what will unit holders get to see?

I wonder why Trilogy doesn't put all these tidbits on the front page of their site - low level of 'income', the 'fund will be strong again'.

A great way to hear about things, through the media gatekeepers.


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## mellifuous (26 October 2009)

http://www.watoday.com.au/business/new-broom-blames-old-one-20091025-herc.html

"... Two weeks ago, the group raised $80 million through the sale of a Gold Coast beachfront property. ..."

Okay, you're read the press release from Trilogy, now read the history, you'd be forgiven if you thought they'd done something good, but have they? -- was it them or someone else, like Fortress? and was it a good thing, or a bad thing? :-

The property in question is called 'Pacific Beach' at Broadbeach.

http://www.moneymagik.com/broadbeach.php

http://www.moneymagik.com/broadbeach_again.php

09 May 2009 " ... FORTRESS Credit appears to have stepped up the pressure on City Pacific to sell a huge development site at the southern end of Surfers Paradise after the collapse of a $205 million deal struck this time last year. ..." http://www.goldcoast.com.au/article/2009/05/09/77215_gold-coast-business.html

Now, the sale brought about $80m, but Fortress is supposed to be owed at least $35m+, so the FMF would get less than $45m, which would be shipped straight to the CBA (as most free cash is).

Q. Did Trilogy 'raise' $80m from the sale - that is, did Trilogy make the sale when they otherwise did not have to?  With a potential loss of about $135m, wouldn't that be considered a fire sale - and wasn't there a promise of no fire sales?

Further, it seems the news is totally one sided, suggesting a great win for the fund, when in fact, the truth is that it was one hell of a loss for the fund.  Sort of wrapping up bad news like a present.

Seems also that City seemed to be able to make deals with the CBA a lot quicker than Trilogy seems able to do - 3 months and about $40m (from Broadbeach) hasn't seen settlement between the two.

And they say they 'won' an extension in filing the fund's returns - gee, that's great - maybe they'll get a little trophy or something - what do we get?


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## mellifuous (27 October 2009)

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/property_trust_speech_180504.pdf/$file/property_trust_speech_180504.pdf

"... Representations about future financial performance
ASIC considers all representations made about future financial performance in the context of whether there are reasonable grounds for those representations.

Material assumptions on which future representations are made must be adequately disclosed. So must:
 the expected time period for the expected returns to be realised;
 the risks that they will not be realised, or not realised within the expected
time frame; and
 the method by which the prospective information was calculated.

Investors must also be warned about the limited reliability of prospective financial information. ..."

Then how about Mr. Griffin's statement in his BRW spiel that the 'fund would be strong again'?

1. what is the expected time period?
2. the risks?
3. the method of calculation?
4. the warning about the limited reliability of the statement?

Come on Mr. Griffin, give us the details, not just a statement devoid of evidence to support it.


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## k.smith (27 October 2009)

mellifuous said:


> http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/property_trust_speech_180504.pdf/$file/property_trust_speech_180504.pdf
> 
> "... Representations about future financial performance
> ASIC considers all representations made about future financial performance in the context of whether there are reasonable grounds for those representations.
> ...




And come on ASIC, is BT's statement fair to unitholders...?


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## k.smith (27 October 2009)

From BT Webpage, under FAQ..

http://www.balmaintrilogy.com.au/qa.aspx

"....Our proposed fee is approximately half that currently charged by CPL but yes we are doing this to make money. Where Balmain and Trilogy make money is from cleaning up the industry and leading the charge in re-opening the mortgage fund sector to investment.  We both want to be managers of multi-billion dollar mortgage trusts that operate within a visible and fully accountable environment. 

We are strong believers that, absent the government guarantee of bank deposits which forced even well managed mortgage trusts to freeze, the current environment is a perfect time for mortgage trusts to raise money....."

"....Investors' alternatives are limited but we need to clean up the image of mortgage funds that is so heavily influenced by the failures of certain managers before we can promote mortgage trusts again..........."


These statements seem imo, to suggest that BT is trying to portray an imagine to unitholders that they are the "new dawn" of the mortgage fund industry.As we are paying them to look after our best interests will they give us  all the "investors' alternatives" even if they are not in the managements best interests? Will unitholders be advised, for instance,  that by accepting a variable unit price they risk facing losses which may lock them into the fund for a very long time?  
in post 103 Mellifuous wrote(quote)"....The MFS experience shows that, when faced with lower offers than members perceive their units to be worth, members will not sell. In fact, 98% of members have not sold while those in dire straits were prepared to accept $.9c for their once $1.00 units. Promises from the manager seem to have been a strong inducement for members not to sell.
This will happen in the FMF too - when faced with a choice, then only those in dire staits will take any offer, because the remainder will stay in (be hooked), especially if the manager purports that the fund will be strong in the future...."


or will unitholders feel so comfortable that BT are "leading the charge" in reopening the mortgage fund  sector to investment" that they will not press BT to disclose ALL our" limited "alternatives...???

Will ASIC take any interest?

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/property_trust_speech_180504.pdf/$file/property_trust_speech_180504.pdf

".......Failure to explain, as a significant feature of the product, the possible dilution
of investors' interests by future transactions...."


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## mellifuous (27 October 2009)

k.smith said:


> Where Balmain and Trilogy make money is from cleaning up the industry and leading the charge in re-opening the mortgage fund sector to investment.  We both want to be managers of multi-billion dollar mortgage trusts that operate within a visible and fully accountable environment.




Now, take into account the statement by Mr. Griffin in the BRW Spiel, "... Griffin is confident the fund will have a future. I think there will be some sort of distribution and redemption (of funds) and I think with proper management there is every chance the fund will even reopen ..."






Now, that's an interesting statement from Mr. Griffin - maybe it just slipped his mind that the fund has been impaired to the extend of about 40% with more to come (Griffin's inference, especially since City didn't impair its related party loans - of course, it also depends on how much of the $135m odd loss has already been accounted for).

So, lets assume the fund's units have a 'fair value' of $.40c each - so, how is is possible to get a distribution? Wouldn't it be called a return of capital?  I mean, shouldn't we all realise now that there is no such thing as 'distributions' any more? We're scratching to get some of our investment (capital) back.

So, how is Griffin going to do it? pay back capital and call it a distribution? Any offer has to be capital, not distribution - members may as well forget the word 'distribution', it does not exist in the FMF anymore.

Open the fund? How?  How does the manager propose to start up 'distributions' when we can't get back our capital?  Why doesn't the manager admit (as we've now realised) that the FMF will never pay distributions again.

What about the idea of new investment? New investment into the fund would necessarily share in any increase of our current assets, which in turn would reduce the level of recovery of the money owing by borrowers from the FMF.

So, what's the future - massive capital losses (some recoverable), and not a snow flakes in hell's chances of distributions - do you still want to leave your money in once an asset has been disposed of by the manager and there's spare cash?

The fire sale of Pacific Beach for $80m left the fund with an  loss of at least $135, and after fortress takes its $35m+, then the fund will be left with about $40m which will go directly to the CBA's coffers.

And where is the transparency?   There isn't much at all - City was compelled to make announcements to the ASX, but Trilogy is not - Apart from the tidbits sent out on media releases, Trilogy has given unit holders virtually no information - very disappointing given their self-serving statement on their site and in the media.

So, Mr. Griffin, how do you propose to pay distributions when there is no way that we'll recover our capital losses?   

If you can't support your statements, then you should retract them.

And the weekend statements about 'income', perhaps that should be changed to a 'meager level of capital return'.

Yes, unit holders like to think they'll get 'distributions' when 'income' increases, but the days of 'income' in the FMF are done with - it's all about trying to get capital back now, and nothing more.


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## mellifuous (27 October 2009)

(from Ocv thread)

http://www.thepeninsulaqatar.com/Display_news.asp?section=Business_News&subsection=market+news&month=October2009&file=Business_News200910250351.xml

"... And all eyes are on the first case due to come before courts in America, where KPMG is being sued for $1bn (£690m) in damages by the trustee of a collapsed US sub-prime lender, New Century Financial. KPMG is accused of conducting "reckless and grossly negligent audits" that failed to show the lender's financial problems. The auditing firm has denied any wrongdoing. .."

Of course let's not forget MFS PIF's claim against KPMG for a billion aussie dollars.

http://www.theaustralian.news.com.au/business/story/0,28124,25348988-643,00.html

"... A SYDNEY law firm yesterday filed an action seeking $1 billion from auditor KPMG and the old MFS Investment Management, on behalf of about 10,000 unitholders. ..."

KPMG even got a special mention with Madoff:-

"... "The complaint alleges Bernard Madoff's fraud was not accomplished in isolation," the law firm's statement said. "The sheer size and scope of the fraud make it impossible for Madoff to have acted alone. The complaint alleges JP Morgan and the Bank of New York as well as powerhouse accounting firm KPMG LLP and their international counterparts, KPMG UK and KPMG International were primary players necessary to accomplish the fraud." ..."

http://www.sbs.com.au/news/article/1115216/Madoff-investors-sue-KPMG

And with all this uncertainly, and all the losses we suffered in the FMF to date, our grandiose M. Bacon engaged KPMG to again audit the fund at the very time an 'objective' assessment was being made of the fund.

I wonder if KPMG has been supplying accounting services as well as auditing services - now, that wouldn't seem to be constructive for us if they were.

Of course, so did the CBA (that friendly banker who gave the fund another $90m when it couldn't even pay off the first $150m, and then forced out in the cold when things went bad), and some of the folk from City (you know, the guys who dealt with those messy loans) - so, it would just seem silly to leave out  KPMG if you really wanted to keep the whole gang together.

Objectivity? Blah!

PS. I wonder what is name of the leading law firm doing the legal review?  

PPS.  How's Trilogy's senior executive Mr. Ryan going? (remember him, he's the guy who was found by the Supreme Court of Qld. to have breached his client's trust).

Thinking about it, isn't it strange that those folk who say they would have never invested in the FMF if they'd known that Sullivan was a discharged bankrupt seem to be content with Mr. Ryan as a senior executive with the manager of their fund.   Surely they can't be serious about what they said about Sullivan, or perhaps they just have double standards.

Very interesting.


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## mellifuous (28 October 2009)

SURPLUS CASH IN THE FUND

A fundamental question that we have to grapple with is 'what to do with surplus cash arising out of the sale of assets?'.

It seems to me that  no one is going to get anything until the facility providers are repaid, or at least assured that they will be repaid, and there is sufficient spare cash in the fund to pay the manager's fees and other fund expenses on a properly accounted-for budget.

IMO some assets will recover more quickly than others, while others would require more time. One might take the view that if we left all the assets there, then they might all recover to some extent - we could also take the view that we would be capable of investing our money in more secure ventures than leaving money in the fund.

But, what do we want to do with the surplus cash?

I want the manager to pay that money to investors - not as an offer, but as a payment - and if the manager has a good deal to offer, then that should be made by way of a PDS, not by way of hopeful statements.

If the PDS and its accompanying disclosures are not possible, then why retain money in the fund?

A PROPOSED SHAREHOLDERS' LETTER

The first draft of the contents of a letter the Senate Inquiry, Finance Minister, and media is available on the 'Managed Fund Co-operation Group' thread here at ASF.

There is a copy of the draft available at :  http://www.moneymagik.com/investors_letter.php

Please feel free to comment on the 'Managed Fund Co-operation Group' thread with respect to the proposed letter.

Thanks.


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## mellifuous (30 October 2009)

I know unit holders think I go on about City's deconsolidation of the FMF.  I'm sure that most will remember Daniel Loeb's comment:-

"... "It smells like the company is doing everything possible to makethings look like they are OK," trader Daniel Loeb said. "But off balance sheet vehicles and a cash loss/accounting profit do not make for investor comfort.

"The reality is that their mortgage funds are likely to be hidingbad debts and this is the real reason for the deconsolidation. Why would you go to this hassle if there wasn't a loss pending? All they donow is charge hefty management fees from the fund – and for what?" ..."

Daniel Loeb sees it right on 29 February 2008

http://www.news.com.au/couriermail/story/0,23739,23298694-3122,00.html

"... "City Pacific's culture and style of businesses are totally different to MFS," he said.  Mr Sullivan said talk about a cash flow crisis and potential collapse are "total and absolute rubbish". ..."

Now, one has to take Mr. Loeb's comment in context, and that at some time before City deconsolidated the funds, before 1 December 2007 - because what Mr. Loeb is saying is that at early as some time before 1 December 2007 knew that the FMF was hiding bad debts.

To bring that into context, consider this statement released in a media report today (re: Timbercorp):-

"... The class action coincides with a directions hearing in the Victorian Supreme Court today in related proceedings by Timbercorp Finance against some ''defaulting borrowers''.

The three directors, Gary Lidell, Robert Hance and Sol Rabinowicz, have been targeted in the class action, brought by Timbercorp investors who borrowed or used their own money to buy into the company's investment schemes between February 2007 and April 2009. 

The investors, who now face ongoing repayments on their investments, allege the true state of the company's finances was not fully disclosed in those years, and if it had been, they would not have borrowed or put more money into the projects. ..."

http://www.smh.com.au/business/explosive-claims-against-timbercorp-20091029-hno1.html

We all know that fund was in big trouble at such time as the CBA extended the facility and sent us to our doom - so, does anyone think that we were in any different position to those investors at Timbercorp?

The investors in Timbercorp say "... they would not have borrowed or put more money into the projects ..." if the company's finances were fully disclosed.

Would you have invested in the CPFMF (or CPIF) if you knew what City knew - that is, about undisclosed debts in the FMF that were causing City to run?  City run  to protect itself,  while leaving us the  lurch.

I believe the investors in Timbercorp are doing what we should also  be doing.

Good luck to them for having to gonads to do it.


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## mellifuous (31 October 2009)

http://www.goldcoast.com.au/article/2009/10/31/153831_gold-coast-business.html

"... THE corporate watchdog has finally moved on failed financial services giant MFS, launching a $147.5 million action against former directors, including chief executive Michael King.

The claim, which makes sensational allegations of falsified documents, is dwarfed by the $2.3 billion owed to creditors, but it is the first tangible move by the Australian Securities and Investments Commission against the Gold Coast company since its implosion almost two years ago.

It also comes a week after ASIC launched action against directors of Centro Properties Group over alleged failings in the company's accounts.

ASIC yesterday filed the claim in the Supreme Court of Queensland to recover money from a number of former MFS directors, as well as a senior manager, after an 18-month investigation. ..."

This is great news - I'd guess we might be more hopeful that something might come along for us...

Let's dream of an appropriate headline for the directors of the past manager of the CP FMF & CP IF, and let's see it can come true before Christmas?

Let's have the Christmas all of us (including the directors) deserve.


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## mellifuous (1 November 2009)

If you're interested in participating in the construction of a letter, then please check out the Managed Fund Co-operation Group thread on ASF.

The document (under construction) is at http://www.moneymagik.com/managed_fund_co-operation_group.pdf

Thanks.


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## mellifuous (2 November 2009)

http://www.asic.gov.au/asic/asic.nsf/byheadline/09-214AD+ASIC+commences+civil+proceedings+against+former+officers+of+MFS+Group?openDocument

*"... 

In taking this action,

ASIC is addressing 

the core obligations 

of a responsible entity 

and its directors 

and officers

to operate the fund 

with care 

and diligence, 

and in the best interest of the fund’s members. ..."*


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## fleetz (7 November 2009)

mellifuous said:


> http://www.asic.gov.au/asic/asic.nsf/byheadline/09-214AD+ASIC+commences+civil+proceedings+against+former+officers+of+MFS+Group?openDocument
> 
> *"...
> 
> ...




Surely ASIC are looking into City Pacfic's previous conduct now. They would have to have a mountain of complaints. Seems that when the snarring company disappears that ASIC grows balls and takes action! 

I know you have been a very active provider of quality information and lots of questions that our belove corporate watchdog should be looking into.

Not sure what one has to do to get there attention....i wrote 3 emails to them and got patronising lip service in return.

What are the chances of them stepping up to the plate albeit belatedly??

Or is a class action the only way like others are doing? Surely there would be plenty for the lawyers to get their hooks into!!

If there were a class action I would happily throws a couple of thousand in... 

Fleetz


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## mellifuous (23 November 2009)

Life was never meant to be easy.


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## mellifuous (23 November 2009)

fleetz said:


> Surely ASIC are looking into City Pacfic's previous conduct now. They would have to have a mountain of complaints. Seems that when the snarring company disappears that ASIC grows balls and takes action!
> 
> I know you have been a very active provider of quality information and lots of questions that our belove corporate watchdog should be looking into.
> 
> ...




I'd be stunned if a unit holder-directed 'class action' goes ahead - I'd be there too if there's good advice about liability together with a good chance of recovery.

I think ASIC just reacted very slowly and now there's so much to do that they can't keep track of it all.

Sadly, this loss to Jodie Rich will set them back a long way - I met Jodie once in my office and I'm stunned to see just where we each ended up.

Let's hope ASIC comes out fighting after its 'two black eyes and broken nose'.


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## mellifuous (24 November 2009)

FROM THE LIPS OF THE REGULATOR 
http://www.theage.com.au/business/fees-find-foe-but-no-giant-steps-20091124-j9e8.html

"... As the Australian Securities and Investments Commission noted in its submission: "Remuneration based on the amount of funds under advice can also create conflicts of interest.* Advisers who are remunerated by reference to funds under advice have an interest in selling investment products to their clients and encouraging their clients to borrow to invest*."

This sounds a little like a certain brainchild of Emmanuel Cassimatis up Townsville way called Storm Financial. ..." (emphasis added) 

And, sadly for investors in the FMF, it sounds EXACTLY what City Pacific Limited did - they couldn't help themselves borrowing to increase the 'funds under advice (management)' ("FUM").

What is interesting is that it's ASIC that is  stating the obvious.

Apart from self-interest and poor management, debt was the biggest killer of the highly impaired funds.


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## caroljace (25 November 2009)

Mellifuous, thanks for taking the trouble to compose and send the letter featured on moneymajik.   There are many of us out here who know what they want to say but do not have the expertise.    I particularly feel annoyed with regard to tax paid on "dividends" (which of course were our principal in the latter stages) and I had the double whammy were I paid the tax but did not even get that portion of my principal as it was "reinvested"!

I have struggled through the accounts as presented on BTs website and whilst I have some meagre book keeping knowledge the processes used are beyond my comprehension.     One thing that comes immediately to mind is the constant use of the words "invested in first and second mortgages" since when was the PDS changed to include "second mortgages".  The PDS I read before I invested did not include these words.

Also, CP paid themselves $24+ million.    This was based on what!   Certainly the funds under management were nowhere near that in December and most probably were nowhere near that on 1st July, 2008.   It is more than obvious that management kept the assets artifically high so that they could continue to milk as much as they could.    Isn't it interesting that the auditors (the same ones as before) are now predicting gloom and doom for the remaining assets of the fund but they were very gung ho when CP were at the helm!
I can't see where they every pressed CP to obtain more up to date valuations.
I can understand the need for a PDS when people are chosing to invest but what is the point of a PDS if the managers do not adhere to it in the normal course of business.    We have been deceived and lied to over and over again.     

It will be interesting to see what the real asset values are when BT release this information.


----------



## mellifuous (25 November 2009)

AN ANNUAL (OR BI-ANNUAL) GENERAL MEETING
FOR MANAGING FUNDS (LISTED/UNLISTED)

A very astute unit holder has come up with a very good idea - an annual general meeting for managed funds.

Companies have them - managed funds don't.

Write to the Hon Chris Bowen MP and request that the Corporations Act be amended to incorporate annual (or bi-annual) general meetings for managed funds.

A great idea. 

http://www.chrisbowen.net/contact-chris-bowen/home.do


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## mellifuous (25 November 2009)

caroljace said:


> Mellifuous, thanks for taking the trouble to compose and send the letter featured on moneymajik.   There are many of us out here who know what they want to say but do not have the expertise.    I particularly feel annoyed with regard to tax paid on "dividends" (which of course were our principal in the latter stages) and I had the double whammy were I paid the tax but did not even get that portion of my principal as it was "reinvested"!
> 
> I have struggled through the accounts as presented on BTs website and whilst I have some meagre book keeping knowledge the processes used are beyond my comprehension.     One thing that comes immediately to mind is the constant use of the words "invested in first and second mortgages" since when was the PDS changed to include "second mortgages".  The PDS I read before I invested did not include these words.
> 
> ...




Hi Carol,

I think that we as investors find it difficult to face economic truths (re: Paul Clitheroe in the below referenced citation)- I remember when Michael West published articles expressing negative sentiments about the FMF - I remember saying at the time just how stupid it was of M.W. to put our investments at risk.

However, thinking back, if everyone would have listened to M.W. in August 2007 then most of our investment would have been secure.
http://www.theaustralian.news.com.au/story/0,25197,22318180-16942,00.html

Here is an interesting audio clip about Paul Clitheroe (on ABC Nightline) wherein he states (among other things) that 'investors find it difficult to face economic truths'.
http://www.abc.net.au/nightlife/podcast.htm

I cannot understand why B/T doesn't fully impair the second mortgages at Martha Cove.

I cannot understand why KPMG say no more than a 'material uncertainly' exists about those loans.

Why doesn't KPMG come out and say the loans should be impaired - is KPMG working in our best interests by not being forthright about the realities of the fund?

Yes, the tax thing is a big ripoff - the government is happy to grab the tax from us, yet does not to stop these guys over-valuing funds in order to keep the FUM high - City Pacific is a great example.

ASIC should go back to December 2007 and revalue the fund and make the necessary accounting adjustments to bring justice to investors in the FMF.

It really is a sham - from City to Canberra - one right royal stuff-up.


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## mellifuous (25 November 2009)

mellifuous said:


> AN ANNUAL (OR BI-ANNUAL) GENERAL MEETING
> FOR MANAGING FUNDS (LISTED/UNLISTED)
> 
> A very astute unit holder has come up with a very good idea - an annual general meeting for managed funds.
> ...




**** CORRECTION ****

The heading should have been:-

AN ANNUAL (OR BI-ANNUAL) GENERAL MEETING
FOR *MANAGED *FUNDS (LISTED/UNLISTED)


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## mellifuous (26 November 2009)

*HOT NEWS THAT WE'LL READ AND WEEP*

*2009 FMF Compliance Report*

http://www.balmaintrilogy.com.au/pdf/Compliance%20Plan%20Audit%20Report-PFMF%20%28Year%20End%20June%202009%29.pdf

(from B/T's site)

*KPMG finds City Pacific in serious breach*


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## mellifuous (26 November 2009)

There's  proof of self-interest - a breach of the law - and where the hell was ASIC .. 

City's self-interested actions were complained of month after month and nothing was done.


----------



## mellifuous (27 November 2009)




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## k.smith (27 November 2009)

City Pacific told us this....

http://news.iguana2.com/bspectator/ASX/CIY/198716
"......City Pacific and the FMF are separate entities and the assets of the
FMF are held separate from the assets of City Pacific by the Public
Trustee of Queensland as custodian of the FMF......"

"...........FMF investor funds are not able to be used by City Pacific to operate
its business (the operations of the FMF are separate to the operations
of City Pacific)......."


----------



## mellifuous (27 November 2009)

k.smith said:


> City Pacific told us this....
> 
> http://news.iguana2.com/bspectator/ASX/CIY/198716
> "......City Pacific and the FMF are separate entities and the assets of the
> ...




City Pacific Fund Update - January / March 2008, page 3
http://news.iguana2.com/bspectator/ASX/CIY/198716

Yes, the spiel goes on (in part):-

"... The FMF had a bank facility of $240 million. Repayment of which has already commenced and is aligned with current cash flows of the fund. ..."

However, in a document sent to unit holders on 13 October 2008, City disclosed (among other things) this graph:-






Why wasn't City picked up on the statement that the repayments had '... already commenced and is aligned with current cash flows of the fund ..."?

The Fund Update was released on the 8 April 2009 (see the 'document properties' by right clicking on the .pdf document when you download it).

*On the graph you will see the evidence as to why the above referenced statement is clearly misleading and incorrect* - there was no cash flow - on the 8 April 2009 there were nearly $400m in defaulters (which we didn't find out about until 13 October 2008.)
http://www.moneymagik.com/letter_13_oct_08.pdf

*Further, one wonders why KPMG accepted $50m of impairments as at 30 June 2008, when the amount of defaulters up until 30 June 2008 was around $500m.*

Oh! how blind trust has made us broke.

How did the board of City Pacific allow such a statement to be made?

Why did the CBA allow it?

Why didn't KPMG pick it up?

How about ASIC?

How about the PTQ?

We deserve an explanation & those at fault should pay.


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## seamisty (27 November 2009)

k.smith said:


> City Pacific told us this....
> 
> http://news.iguana2.com/bspectator/ASX/CIY/198716
> "......City Pacific and the FMF are separate entities and the assets of the
> ...



All too familiar k.smith, stuff senate enquiries, there is enough evidence of misconduct of monumental proportions to warrant a full forensic investigation in relation to the WELLINGTON CAPITAL PIF and the FMF on their own!! And while the :fan our respective RE's are busy :hide: and :couch and our unit values are :flush:!!!! We can only hope the day of reckoning will see those responsible suitablly punished! :behead::whip:bbat::rocketwho:badass::samurai::  Seamisty


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## mellifuous (27 November 2009)

City Pacific made the statement in the preceding post when it was implementing its 'idiotic fundamentals' (that is, making advances to defaulters in a downwards heading market, and not pushing for payment from borrowers)  - see item (4) on page 1 of this document sent to unit holders on 19 August 2008:-
http://moneymagik.com/q_and_q_19_08_2008.pdf

City also continued to pay distributions.

The likelihood of repayment of the bank on schedule would have been non-existent.

City just kept the whole thing up and doing with the help of the CBA without any regard for unit holders' interests.

In the past I opposed writing to the CBA, but on reflection, it was the right thing to do.  The CBA should not have increased the facility in September 2007 and should not have continued to support City's folly.

Now we're in the position we're in, the CBA should give our fund special consideration and help us though this difficult time


----------



## mellifuous (27 November 2009)

seamisty said:


> Seamisty




I have a feeling that the managers, who deserve it, will get the :behead: 

And we get some satisfaction for :chimney:

Time will tell.


----------



## mellifuous (27 November 2009)

mellifuous said:


> City Pacific Fund Update - January / March 2008, page 3
> http://news.iguana2.com/bspectator/ASX/CIY/198716
> 
> Yes, the spiel goes on (in part):-
> ...





Another of my famous errors -* the fund update was released in 2008, not 2009.  * - I have now amended the quote to reflect the proper year.

My apologizes.


----------



## mellifuous (27 November 2009)

http://www.zibb.com/article/5695251/Marina+Cove+mired+in+debt

"... * Marina Cove owes $A129 million to the Pacific First Mortgage Fund and $A71.8 million to Commonwealth Bank of Australia.  ..."*

*It used to be $100m to City, $100m to the FMF, and $100m to the CBA *--- oh! how times have changed.

As I understand it, B/T hasn't impaired second mortgage loans down at Martha Cove.

No wonder KPMG expresses that a 'material uncertainly' exists in regard to the fund's loans, especially second mortgage loans.

From the $36m the fund lent Marina Cove Pty. Ltd. (100% owned by CP1, a relative of City), the fund took on board second mortgage loans.

I stated at the time, that if the first mortgage loans had no chance of recovering, then what is the use of second mortgage loans.

I somehow think KPMG is being as generous to B/T as it was City when it was the manager.

Where is the independent auditor?

Where is ASIC?


----------



## mellifuous (30 November 2009)

For once, a little support from the media:-

http://www.smh.com.au/business/senate-probe-bodes-badly-for-asic-20091129-jyy1.html

"... The role of ASIC also needs to be examined. In many of the big collapses, ASIC was warned well in advance of concerning issues but appears to have done nothing, and in smaller cases, *when a company was put into administration, it also turned a blind eye. *..."

"... Meanwhile, *the carcass is being ripped apart,* and if ASIC eventually decides to investigate, the case will be cold and the damage already done. ..."

The descriptor 'undertaker' sits well with ASIC - as 

The US have their problems too - the SEC is not unlike ASIC:-

http://curiouscapitalist.blogs.time.com/2008/12/18/harry-markopolos-really-did-have-the-goods-on-bernie-madoff/

Even accusations of 'turning a blind eye':-

"... After the revelation of a massive fraud scheme, *a former government investigator has accused government law enforcement officials of repeatedly turning a blind eye to Wall Street crime* and, in doing so, allowing the foundational trust of the global financial system to crumble. ..."

The following in an (edited) email I sent to Ruth Williams at businessday on  10 August 2009  in relation to her article on 8 August 2009 http://www.theage.com.au/business/asic-calls-for-a-debate-on-its-role-20090807-ed17.html

As expected, I didn't get a reply.

http://www.watchdog.asic.gov.au/fido/fido.nsf/byheadline/Complaining+about+companies+or+people+FIDO+version?openDocument

ASIC's website states (in part) "... If you cannot resolve the problem with them, or if your complaint is about misconduct or illegal activity by a company or person, then ASIC may be one of a number of government and non-government organizations able to help you. ..."

I think that ASIC confuses investors' expectations that "ASIC will investigate matters of concern and will act on complaints", or as it holds out that it will.  However, when many complaints were made to ASIC about City Pacific, ASIC replied back, that investors' losses related to  "investors' prudential choices" rather than taking our complaints seriously.  

Clearly, Mr. D'Aloisio thinks that  "... At the end of the day, we (ASIC) are responsible for oversight and as the supervisor of the markets - we (ASIC) are not a guarantor of last resort. ...". This excerpt from your article  clearly shows the dichotomy of views of ASIC's role with respect to regulation viz-a-viz the regulator and investors:  Investors don't see ASIC as the 'guarantor' of last resort, I think it's more that ASIC thinks that investors see ASIC in that role.

This following excerpt discloses ASIC's lack of understanding of the market - "... we think the efficiency of the market will deliver such benefits that offsets the need for regulation ...".  Could it be that ASIC doesn't believe that there are bad guys out there who are willing to fill their bags of gold at investors' expense?

Mr. D'Aloisio stated (in part) "... Because of what we've seen and the losses to investors, should we be turning the dial to more protection, and taking the risk that that might make the markets less efficient, and could marginally add to cost [of] capital? ...".  I just wonder which planet he must have been on when he made this statement?    Clearly ASIC had the 'dial' set where it expected  investors losses in favour of an 'efficient market', so it should have been of no surprise to them to see the failures of recent months.  Investors should be aghast that such a statement was made at all - I'd guess that it's not what they would have expected to hear.

"... What else could we have done? What should we have done? What did we miss?'' ...".  Well,  I think that ASIC could have properly acted on investor's complaints and given proper and timely feedback with respect to those complaints.  ASIC should have been proactive and acted at the soonest possible opportunity to protect investors as it promised as Fido at www.watchdog.asic.gov.au.   ASIC should have looked at the substance of a company's behavior (what is was really doing)  rather than its 'form' (that is, that the right forms are filled out etc.)

It is interesting to note the following two transcripts from an interview on 60 minutes (USA) by Mr. Harry Markopolous.  Mr. Markopolous tried on 7 occasions between 2000 and 2008 to have the U.S. S.E.C. investigate Bernie Madoff.

(1)  http://www.youtube.com/watch?v=E_AT...ymagik.com/others.php&feature=player_embedded 

Q.  So, if they're not trained at securities work, then what are they trained at? --- A. How to look at pieces of paper that the securities laws require. They can check every piece of paper perfectly and find misdemeanors and they'll miss all the financial felonies that are occurring because they never look there. Even when pointed to fraud, they're incapable of finding fraud.

(2) http://www.youtube.com/watch?v=-g3V...ymagik.com/others.php&feature=player_embedded 

Q. So he turned himself in before anyone in authority began a serious investigation?  A. *That's typically how the SEC does it. They come in after the crime has been committed, they toe-tag the victims, count the bodies, and try to find out who the crooks were after the fact, which does none of us any good. *

I consider that Australian investors' experiences have not deviated from U.S. investors' experiences .  We have each been badly let down by the very ones in which we placed so much of our trust.  No one expected that the regulators would be no more than '*corporate undertakers*'.

In my view, it has been (a) ASIC's defective view that investors lose money based solely on their respective prudential choices rather than attempting  to believe that there are really bad guys out there, together with (b) ASIC's  obsession for 'form' over 'substance' that has caused serious damage to both investors' wealth and investors' confidence in the Australian financial markets.


----------



## mellifuous (30 November 2009)

*THIS IS VERY SERIOUS BUSINESS*

and my guess is that the star witness for the fund's defence will be Philip Sullivan himself.

"... The relationship flourished with new facilities obtained and the terms of existing loan agreements altered in the normal course of business. But Mr Gore alleges City Pacific approached him about June 2007 with the news that City Pacific 'was, or was about to be, in default' of loans with the Commonwealth Bank and that it 'required access to liquid funds in order to remain solvent'.

Mr Gore alleges he then took steps to refinance existing loans and sell assets to assist City Pacific at the behest of then City Pacific chief executive Phil Sullivan and current director Steve McCormick. He alleges this was done despite a letter being received from City Pacific in February last year stating that Atkinson Gore Group and AGG Treetops were not in default on any loans.

He further alleges City Pacific said it would refrain from appointing receivers to four of Mr Gore's companies 'in the event of any default' of loans that had been forwarded by City Pacific. Mr Gore alleges he was 'induced' by City Pacific to refinance loans -- some were cheaper than rates offered by City Pacific; others were as high as 48 per cent -- and sell assets at a 'less favourable' price. Receivers were appointed to the Gore companies on February 12.

Mr Gore claims that, according to the terms of the deed, the appointment of receivers is void. He is suing the receivers for 'damages in trespass'. The action against City Pacific alleges 'misleading and deceptive' conduct. Mr Gore is claiming $300 million in damages, citing his inability to 'finalise negotiation with Mayfair Ltd (Lord Ashcroft's company) with respect to refinancing each of the facilities with City Pacific'.

He is also claiming loss of opportunity. The parties also entered into a deed of settlement, which is alleged was to insure Mr Gore's companies against any recovery action by City Pacific until March 31 this year. ..."

(goldcoast.com.au)
http://www.goldcoast.com.au/article/2009/03
/23/62171_gold-coast-business.html

more
http://www.goldcoast.com.au/article/2009/11/19/159961_gold-coast-business.html

more
http://www.goldcoast.com.au/article/2009/09/11/135995_gold-coast-business.html

more
http://www.news.com.au/couriermail/story/0,23739,25310050-3122,00.html


----------



## mellifuous (1 December 2009)

ASSET REVIEW?

Ah! the typical way that B/T communicates with unit holders - via the press release - the management of the manager seems to struggle with the idea that it should communicate with us in the first person. I'd guess unit holders have come to expect no better than this from B/T. Maybe B/T should go back to university (if they have degrees) and redo 'Communication Skills'.

So, they've had this asset review for some time - where is it? Seems good enough to give a spiel to the media, but not good enough to give a report to unit holders.

I do not like this manager, B/T.

Here is the media release (remember, this is how B/T are disclosing information to unit holders, no 'This is your Captain speaking.. ", just a media release) {I have inserted comments within the media release}

"... Asset review reveals need for Pacific First Mortgage Fund write-down

Following a review of the assets of the Pacific First Mortgage Fund (Fund) in conjunction with auditors (KPMG), the gross assets have been written down by $448.9 million for the 12 months to June 30, 2009. Gross assets in the Fund now stand at $521.1 million. This write down represents an additional impairment of $108.9 million from the written down value as at 31 December 2008 which was $630.0 million.

Comment:- yet this doesn't seem to have included second mortgages down at Martha Cove - mortgages that the auditors (KPMG) express a mere 'material uncertainly' about - is B/T acting in our best interests? Are the auditors acting in our best interests - should have KPMG criticized KPMG for not impairing those loans? I think it should have.

We should not have been saddled with KPMG again - the fund should have had a new auditor, and the legal review should have included KPMGs past interactions with the fund. It's puzzling that the 'Compliance Report' criticizes City back in 2007 - 2008, however no complaints seem to have be registered for that period, at least that we've seen.

KPMG should be gone, and they should be 'legally reviewed'.

Rodger Bacon and Andrew Griffin, joint chief executives of the Fund's investment manager BalmainTRILOGY, agreed that the additional write-down was "inevitable but extremely disappointing" for unitholders. Based on these revised accounts, the net tangible assets (NTA) stand at $0.48 a unit.

Comment:- huh? I would have thought it was obvious and a tad overrated. I'm still getting over how B/T managed to come up with $0.48 - when do we get the new surprise that will be more of 'inevitable but extremely disappointing'?

The NTA takes into account the $91 million owed to the Commonwealth Bank of Australia as at 30 June 2009. Since then and following some asset sales the Fund has been able to repay further $8.7 million on 31 August 2009 to reduce the outstanding loan to $82.3 million.

Comment:- Well, we'd better hope that the NTA takes into account the $60m owing to Fortress. If it doesn't, then the fund is worth at least $60m less.

Andrew Griffin said: "The negotiations with the Commonwealth Bank are nearing conclusion and an announcement in respect of an extended facility should be made soon."

Comment:- yes, kowtowing back to the same tired old entity that was happy to loan the fund $90m at a time when the fund was incapable of repaying the $150m it already owed - the relationship between City Pacific Limited and the CBA has been a disastrous one for members of the FMF. This manager should have sought a new source of finance, and it should have included the CBA's interactions with the fund in its 'legal review'.

The Australian Securities and Investments Commission (ASIC) had previously extended the deadline to lodge the Fund's annual accounts to November 15. On lodging the annual accounts, Rodger Bacon said: "The write-down highlights the woeful performance of City Pacific which was RE of the Fund for that entire period. More disappointingly the biggest part of this write-down is attributable to loans to related parties of City Pacific.".

Well, I've been looking at Mirvac's Funds (that's Balmain's partner is Mirvac Aqua), and they haven't performed very well at all either - Mirvac had to do a takeover deal to get the fund's price up from $0.50 to $0.60 - these shares were trading at a $1.50 - so, not startling either).

The Mirvac Aqua funds (in which Balmain is a partner) still remain frozen without any communication from their manager since 1 October 2009, and investors have been waiting for months for the manager to disclose a 'strategy' to resolve the difficulties - a strategy promised for months and months but which has not been forthcoming.

By the way, how is Trilogy's own stellar fund performing? - the fund is conservatively run and there are no losses - Their Mortgage Income Trust seems to have converted mortgage loans to cash at the end of the year - its balance has dropped. I wonder if the cash went back to investors or was re-invested. While the fund is well run, Trilogy hasn't shown that they're able to grow the trust, in fact, quite the opposite.
http://www.trilogyfunds.com.au/site/assets/files/TFMIT%20Annual%20Report%202009%20V6%20_%20Website.pdf

Trilogy is not charging unit holders in their Mortgage Income Trust much of a management fee, but it is charging a heap of fees to borrowers from their trust - oh! by the way, I'll ask the question again "is B/T charging 'direct fees' to borrowers in the PFMF?'

No good signs from Balmain or Trilogy either.

Andrew Griffin said: "The strong property and debt markets that preceded the Global Financial Crisis did much to hide the damage that was already being inflicted on the Fund by City Pacific. The honeymoon ended abruptly when the markets turned and it is only now that we can see the extent of the harm that City Pacific caused. We do, however, believe that with the removal of the previous conflicts and with the benefit of significantly greater management resources that the worst for unitholders is over. The rebuilding of the Fund can begin in earnest."

Comment:- Is the worst over? How about the Martha Cove loans? and why KPMG's comment re:material uncertainly?

'the honeymoon ended abruptly'? what do they mean?

'The rebuilding of the fund can begin in earnest?' - huh? So, where is the unit holder's vote promised by Mr. Griffin?

He added: "Although we are mindful that some investors might support an acceleration of sales, notwithstanding the significant discounts that would result, it is critical that some of the Fund's resources are allocated to improving existing assets. This will ensure that these assets achieve an improved return for the PFMF and consequently the value of the Fund is at least maintained and potentially enhanced."

Comment:- how about this? Unbelievable from the man who gave the great speech in the BRW (20 August 2009) about giving members of the fund the opportunity to decide what the future of the fund will be. Yes, there are those who want the fund wound down, and that would be brought to a meeting of members to make a choice. Ah! the drip from the cash cow is in the manager's arm - things change - things are different.

As part of its commitment to ensure that unitholders are closely informed as to the management of Fund, BalmainTRILOGY are in the process of bedding down the Investor Committee. More than 300 unitholders have expressed interest in being on the 10 person Committee (including an independent chairman), with the auditors expected to announce the successful candidates by early December so the first meeting can be held before Christmas.

Comment:- So, this committee will be 'announced by KPMG', the very entity that presided over the period of the decimation of our savings. What the hell goes on in B/T's minds. They need an Investor committee to closely inform us? They have their website - not much there. there is the media, yes, drip feeds there - what could possibly change with an investor committee selected by KPMG?

The Investor Committee in the PIF (MFS) fund has been a disaster, don't expect anything more from a manager who doesn't tell us much anyway.

BalmainTRILOGY was also in the process of formulating a hardship policy in accordance with ASIC guidelines. Bacon said: "We appreciate there are some genuine hardship cases among unitholders. The difficulty has been reaching agreement regarding access to funds and finding a legal solution to the constitution problems that require a redemption price of $1.00 per unit to deliver the funds to unitholders.

Comment:- They could pay you at $1.00 - they're just stalling - they don't have the money anyway - after they take their cut, all the expenses are paid, the CBA and Fortress take their cuts, there is nothing left - live in hope, wallow in mire.

If they pay everyone at the same rate $1.00 - then it's fair.

In fact, if they pay at a V.U.P. and the price changes (up or down), which it will, then that's unfair.


"We are hopeful of having a solution in the near future for those unitholders with genuine hardship situations." ..."


----------



## Mary Lynch (1 December 2009)

Mellifuous,  can you tell me the email address of ASIC, so that I can write to them?


----------



## mellifuous (1 December 2009)

Mary Lynch said:


> Mellifuous,  can you tell me the email address of ASIC, so that I can write to them?




Their contact page:-
http://www.fido.asic.gov.au/fido/fido.nsf/byheadline/Contact+us?opendocument

Ecomplaint:-
https://www.edge.asic.gov.au/008/complaintV005?get/complainant/t=8b89635f67bfd715c9214959ea68f7e97baeb14d

Good morning Mary,

Do you want to share what you need to contact ASIC about?

Allan.


----------



## mellifuous (1 December 2009)




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## fleetz (1 December 2009)

Received a "Thank you for your correspondence" from ASIC in today's post.

Pretty much one sentence.

"The issue you have raised will receive dareful consideration and ASIC will contact you again in due course"

There is a contact name and number which I will follow up on.

I suggest the more that make an eCompliant to more pressure is place in ASIC to look deeper aand take action.

A couple of posts down mellifuoushas provided the link to make a eComplaint to ASIC. It is easy and painless just need to spend a small amount of time. If enough people do it then the populus will be heard.

I would also recommend contacting Minister Chris Bowen Minister for Human Services, Minister for Financial Services, Superannuation and Corporate Law http://www.chrisbowen.net/contact-chris-bowen/home.do 

I have written to the Minister to put maximum pressure on ASIC to take some action. For those interested mellifuoushas has posted this content of the letter with my permission the homepage on his website http://moneymagik.com/

CP and it's directors need to be held to account.....make the effort.

Regards,

Fleetz


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## mellifuous (1 December 2009)

fleetz said:


> "The issue you have raised will receive dareful consideration and ASIC will contact you again in due course"




Fleetz, are you sure you got the letter from ASIC?

It just doesn't strike me that ASIC would be 'full of daring or of defiance, or adventurous'!

We should be happy they didn't send the letter in ASCII code. 

..

http://www.websters-online-dictionary.org/Da/Dareful.html

"... DAREFUL

Adjective

1. Full of daring or of defiance; adventurous.

Source: Webster's Revised Unabridged Dictionary (1913)


Date "DAREFUL" was first used in popular English literature: sometime before 1606. (references)

Etymology: Dareful \Dare"ful\, adjective. Full of daring or of defiance; adventurous.. (Websters 1913) ..."


----------



## fleetz (1 December 2009)

mellifuous said:


> Fleetz, are you sure you got the letter from ASIC?
> 
> It just doesn't strike me that ASIC would be 'full of daring or of defiance, or adventurous'!
> 
> ...




Opppppps............careful.

Was only one button and to the right a bit away. Very familiar with ASCII strings and it's implimentation!

Yes I have and A4 bit of paper from ASIC....they have truly gone to a lot of effort!

Regards,

Fleetz


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## mellifuous (1 December 2009)

fleetz said:


> Opppppps............careful.
> 
> Was only one button and to the right a bit away. Very familiar with ASCII strings and it's implimentation!
> 
> ...




lol - I couldn't believe such a word would come from ASIC's 'lips'.

I received a copy of the annual report today - together with a letter written in the first person - well, that's nice.

All the same cr&p, but in the first person.


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## mellifuous (1 December 2009)

NOW YOU'LL LEARN WHAT REFUSING AN OFFER IS ALL ABOUT

This is a posting made by a member on the Pot forum, in response to a letter to B/T.

I think that the following is simply untrue - very sad.

Just posted on the Pot forum:-

"... xxxxx,

In order to make capital payments to investors we have no other option but to provide payments at the reduced market price.

You do not have to participate in the redemption process and each unit holder will be given this option when we have established some liquidity.

Regards,

BalmainTRILOGY ..."

Well, what can I say - they speak like the fund is open for business and that we can just go up and exchange our units for money - that is simply not the case. It is not the case that one can put in a redemption request and have it satisfied, the Corporation Law is clear, the offer must be made to all members.

The fund is non-liquid - it is not a liquid fund.

The ONLY single way of equality and fairness is to pay each of us a pro-rata payment based on $1.00.

I hardly think anyone would refuse a $1.00 offer, but if they were stupid enough to do so, then B/T could also write a disclaimer to warn them they would lose if they don't take the offer.

If a V.U.P. offer made and one accepts the offer, then if the V.U.P. increases at a later date, then one would lose - in fact, B/T would write a disclaimer to that effect in the offer - it's the usual way - is that fair? no, it is not.

If a V.U.P. offer is made and one rejects the offer, then if the V.U.P. goes down, then one will lose - is that fair? no, it is not.

B/T does not want to see the fund wound down, and so is not giving us our money back as it rightly should.


----------



## mellifuous (1 December 2009)




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## k.smith (2 December 2009)

This is what BT said in their Explanatory Memorandum in May, 2009

http://www.balmaintrilogy.com.au/pdf/BTI_NOM_ExpMemo.pdf
'..........Asset Review) BalmainTrilogy will commence an independently reviewed detailed assessment of the quality and value of all of the assets of the Fund, being the underlying mortgages, and report to Members when complete;........"

This is what BT promised us ...

http://www.balmaintrilogy.com.au/proposal.aspx

Asset Assessment

Immediately upon appointment BalmainTRILOGY will commence a detailed assessment of the quality and value of all of the assets of the Fund, being the underlying mortgages.  When complete this Asset Assessment will be reviewed by an independent expert. The reviewed Asset Assessment will form the basis of a COMPREHENSIVE DISCLOSURE TO INVESTORS. Investors will be advised of the results of the Asset Review not later than 6 months from the date of appointment.

From their mailout which I  received dated the 26th November, 2009

"...the asset review has also been completed and a SUMMARY of our findings will be finalised this month and mailed to unitholders..."

WHAT HAPPENED TO "COMPREHENSIVE DISCLOSURE"?

So as it stands now we are still no wiser as to more possible impairments regarding, in particular, the second mortgages at Martha Cove. What happened at Broadbeach? was this a "firesale"? To make an informed assessment of our situation we must have the COMPREHENSIVE DISCLOSURE, not just the SUMMARY..


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## mellifuous (2 December 2009)

This posting refers to the fund's 2009 financial report.
http://www.balmaintrilogy.com.au/pdf/PFMF%20Annual%20Report%202009.pdf

LIVING HIGH ON THE HOG?

From the fund's 2009 accounts (page 21):-

Note 6:-

Professional fees $1,645,468
Seminars & Conferences $2,204

It's nice that someone's been able to flirt away at the fund's expense...

seminars & conferences $2,204?

and, all those 'Professional fees' - no explanation at all!!

FORTRESS CREDIT

On Page 12 of the 2009 Accounts:-

Mortgage Loans $507.660m (see note 10)

Note 10 (Page 24):-

'Co-Lending Arrangements'

The Fund had an agreement with an institutional investor which was previously referred to by the former responsible entity as a co-lending agreement. The agreement provided that the institutional investor lent approximately $100m to borrowers on existing first mortgages held by the fund and a new first mortgage. The institutional investor became a joint first mortgage lender with the fund however a priority agreement has the effect of pushing the fund into a second-ranking mortgage position. Consequently the institutional investor has first priority and its security ranks ahead of the fund.

As at 30 June 2009, the institutional investor had co-lent $60.7m with the fund on three separate loans.

However, on Page 12, the accounts disclose that 'Interest Bearing Loans' = $91.035m

From Note 12 on Page 24 of the accounts, that $91.035 is attributable to the CBA.

So, where does Fortress come in? Is there $60.7m going begging here?

Remember, it was Fortress which forced the sale of 'Pacific Beach' for a loss to the fund between $95m - $135m (all unconfirmed by the present manager) - The property returned $80m of which over $30m went to Fortress - this is a sale that post-dates the accounts - about $40m will be returned to fund, which of course will go to the good old CBA.

Now, where is the next $30m, or is it more? Is there another dent coming from Fortress? Don't forget if there is a default, and there is likely to be, there will be default interest and charges made by Fortress which will also impact on the fund, after all, the fund has indemnified Fortress.

By the way, why wasn't a significant event like the sale of 'Pacific Beach' mentioned in 'Subsequent Events' on page 17 of the report? There is no doubt that the losses incurred in that sale are more than noteworthy to unit holders - In fact, I think unit holders are entitled to know.

Why don't you ask B/T why not? Ask them what is the impact of loans from Fortress (the so-called 'co-investor')?

ALL JOINTLY SIGNED BY Mr. Philip Ryan - the man who breached his client's trust - aren't we so, so lucky?

SECOND MORTGAGE LOANS AT MARTHA COVE

"... Material uncertainty regarding the carrying value of assets secured by property located at Martha Cove, Victoria.

Without qualification of the above opinion, we draw attention to note 15(b)to the financial report. The recoverability of the fund's mortgage loans and interest receivable which is secured by registered first and second mortgages over property located at Martha Cove, Victoria is dependant upon the realization of security property occurring at values in line with those used by the new responsible entity in assessing the recoverable amount of mortgage loans and interest receivable at 30 June 2009.

As set out in Note 15(b) a number of other properties located at Martha Cove are security properties for loans of other parties funded by various financiers, and many of the other parties are in external administration or receivership. There is significant uncertainty as to the course of action that may be taken in relation to the realization of the security property at Martha Cove and the impact that these courses of action could have on the value of the property securing the first and second mortgage loans and interest receivable of the fund.

*In the event that other security property is realized on a forced sale basis, the value of the fund's mortgage loans and interest receivable could be significantly reduced resulting in further impairment losses that may be material to the fund* ..."

Note 15(b) is located on Page 36.

second mortgage loans: http://en.wikipedia.org/wiki/Second_mortgage

'Pacific Beach' at Broadbeach: http://moneymagik.com/broadbeach.php

The auditor fails to mention that it is not only a 'forced sale' that will cause the fund to lose its second mortgages. Our losses will probably occur by way of prudent (self-interested, and correctly so) choices by the first mortgage holders

It is clear that the auditor is warning us that B/T has not written down the fund adequately - think about it, we have second mortgage loans down at Martha Cove and entities like City Pacific and CBA (and maybe others like Fortress) have/had first mortgages on which the fund's second mortgages rely.

The value of property at Martha Cove is in the doldrums at this time - so, what can we expect? Well, the first mortgage holder is not going to wait forever - yes, it has duties to the borrower to ensure it gets the best price it case under certain conditions, but that doesn't include waiting for the value of the property to reach a maximum price in an unlimited time span.

The first mortgage holders are going to wait for the optimum time before choosing  to sell the properties, and those choices will NOT include waiting for the price to go so high as to allow the fund to recover its second mortgages.

I think B/T should have further impaired these loans in order that such a statement from the auditor would be entirely unnecessary. In fact, it's a crying shame that the auditor had to make such a statement - It certainly makes me nervous because I think that second mortgages at Martha Cove will be 100% unrecoverable.

If you think as I do, then let B/T know that you have grave concerns about Martha Cove


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## mellifuous (3 December 2009)

*A GAME OF SEMANTICS?*

Posting on Pot's forum:-

"... xxxxx,

In order to make capital payments to investors we have no other option but to provide payments at the reduced market price.

You do not have to participate in the redemption process and each unitholder will be given this option when we have established some liquidity.

Regards,

BalmainTRILOGY ..."

Yesterday, a posting on FMF Coffee Club re: an email querying the posting on the Pot forum:-
http://finance.groups.yahoo.com/group/FMF_coffee_club/message/78

"... Dear Mr Griffin and Mr Bacon,

I have seen the quote below from BalmainTRILOGY, on the FMF Coffee Club:

"In order to make capital payments to investors we have no other option but to provide payments at the reduced market price. You do not have to participate in the redemption process and each unitholder will be given this option when we have established some liquidity. Regards, BalmainTRILOGY ..."

The first sentence is just not correct. BT does have the option to provide payments at $1.00 per unit as per the Constitution of the Fund. Also, there is no such thing as a market price for Units in the Fund; there is an estimated net assets per unit based on uncertain impairment values as admitted in the recent annual report on the Fund and stated by the Auditors.

Would you please explain/justify this position that you take that "we have no other option" if it is indeed a statement from BalmainTRILOGY.

yours sincerely,  xxxxxxxxx ..."

This morning, another posting on the FMF Coffee Club:-
http://finance.groups.yahoo.com/group/FMF_coffee_club/message/81

"... I asked BT about the posting attributed to BT "on Pot's forum". Mr Bacon replied:

"I confirm that neither Andrew Griffin nor myself have made this comment."

xxxxxxx"

Is it a game of semantics?

They say they didn't make the statement, but they didn't answer the question as to whether the statement was made on their behalf, that is, on behalf of B/T.

Are they taking us seriously?

*MY GUESS AT THE PRICE OF A UNIT*
*$0.374c*

1. $36m lent to Martha Cove in March 2009 - in my opinion, 100% at risk.

2. $60.7m due to Fortress (at 'Pacific Beach', and probably Martha Cove and/or Grande Pacific)
- I'd guess this is 100% at risk too.  Keep in mind what Fortress did at 'Pacific Beach', massive losses to the fund there.

3. Total Number of unit holders 880.283m (page 14 of the fund's 2009 report)

4. Total Assets attributable to unit holders $426.243m (page 12 of the fund's 2009 report)

So, ($426.243m - $36m - $60.7m)/880.283 = $0.374c 

Any comments?


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## mellifuous (4 December 2009)

This option will please those who want the fund wound down - it will please those who need money and don't want to make a loss - and it will please those who have patient capital but would prefer to see their money come back without loss.

Compare this to a V.U.P. unit where the fund would be sustained and  which not please those who want the fund wound down - it will not please those who need money and don't want to make a loss - and it will not please those who have patient capital but would prefer to see their money come back without loss.

IT IS IMPORTANT TO UNDERSTAND THAT the fund is worth less than half its original value, so as money is taken, the NTA will drop until such time as there is nothing left to pay - UNIT HOLDERS CANNOT GET ANY MORE THAN THE NTA, BUT THEY WILL NOT SUFFER LOSS UNTIL AFTER ALL THE ASSETS HAVE HAD A CHANCE TO MAXIMIZE THEIR VALUES.

So, the manager has a chance to show its skill, and we can have as much of our money back as the manager is able to give us by maximising the value of assets - what could be a better outcome than that?

It really should please everybody - maybe it won't please those who want to wait for 50 years in hope that the NTA reach $1.00, but the sad reality is that it cannot, because as any payment is made, the remaining NTA will drop every time (whether is made at $1.00 or at a V.U.P.) because with the same number of units and a lower value of NTA, then unit price will go down.

NOTES

The payments are made from surplus moneys (not from fire sales)

Unit holders actually get the money to use as they please to improve their lives.

The money is taken at a unit price of $1.00 which is the optimum value, a value which the fund will never achieve - there is NO LOSS on the money taken - and there will be no tax.

If a member wants to attain liquidity, then the option is to sell his/her units privately, but the price will not even reach the NTA backing per unit.

The NTA will reduce in the fund over time - that is, the fund will be necessarily wound down - an issue that I think will not please the manager.

Note: the graph could also be constructed at 10% of original investments, $880m, but I guess a payment of 5% wuld be more appropriate. However, a payment of 1%, 2%, or whatever, is able to be made.

Don't fix your minds on any particular figure - make sure you press the manager to get your money back - you can get 5.6% with BankWest on as little as $1.00 overnight without any risk at all.

There is no need to go back into a managed fund where your money could be frozen, income frozen, and savings diminished or decimated.

Please think about it!

Also, a correction a posting made yesterday:-

MY GUESS AT THE PRICE OF A UNIT
$0.4147c (*** AMENDED, 4 December 2009)

1. $36m lent to Martha Cove in March 2009 - in my opinion, 100% at risk.

2. $60.7m due to Fortress (probably from Martha Cove and/or Grande Pacific)
- I'd guess this is 100% at risk too. Keep in mind what Fortress did at 'Pacific Beach', massive losses to the fund there.

3. Total Number of unit holders 880.283m (page 14 of the fund's 2009 report)

4. Total Assets attributable to unit holders $426.243m (page 12 of the fund's 2009 report)

*** 5. Total Assets $517m

*** So, ($517m - $36m - $61m)/880 = $0.4147c


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## Nyden (4 December 2009)

mellifuous, you seem to post in here every day - but I am quite unsure as to what your objective is. In fact, I'm not even sure as to what FMF is. 

Am I to understand that you have a lot of money tied up in this lot?


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## mellifuous (4 December 2009)

Nyden said:


> mellifuous, you seem to post in here every day - but I am quite unsure as to what your objective is. In fact, I'm not even sure as to what FMF is.
> 
> Am I to understand that you have a lot of money tied up in this lot?




FMF is the First Mortgage Fund - once managed by a City Pacific Limited (now in liquidation), and now by Balmain/Trilogy, a JV by Balmain and Trilogy.

Yes, and so have another 10,000 unit holders .. collectively we all invested $880m - now worth $426m.

I want my money back - that's what I'm working for.

I guess a lot of investors don't really understand where they are.

How can I best put it ? I'm trying to keep the dream alive.

I'm not concerned that you don't know what my objective is.


Thanks for asking.


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## lightlystrung (4 December 2009)

Dear Mellifuous,

I'm enjoing a laugh over your last posting, where you say:-
           "I'm trying to keep the dream alive"

Your information to unitholders is terrific....but I do not think your posts achieve that objective!

Best regards,
lightlystrung


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## mellifuous (4 December 2009)

lightlystrung said:


> Dear Mellifuous,
> 
> I'm enjoing a laugh over your last posting, where you say:-
> "I'm trying to keep the dream alive"
> ...




lol  - you're right, talking to the dead has never been successful, but I'm a stickler for punishment.

I could just imagine what might have happened if even just a few unit holders didn't realise what a trap they would have found themselves in if they were saddled with a V.U.P.

Without information we are all lost - but, since there is no one else giving information, then I try my best to fill the void.

It might be said that generally managers thrive on two things (1) the ignorance of investors, and (2) a frozen fund.

so, tell me how to achieve the objective?

do you think B/T has the answers?


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## Mary Lynch (4 December 2009)

Just a small aside...as these amounts seem ridiculous in the whole scheme of things.      Wright, Patton and Shakespeare have commenced legal proceedings in the Supreme Court of QLD seeking recovery of their $3,275,356 investment in the PFMF.

With a foot in both camps I don't really care what happens, except that I hope not too much of my $$$ in BT is squandered in defence.  WPS is not using unitholders money either directly nor indirectly.


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## mellifuous (4 December 2009)

Mary Lynch said:


> Just a small aside...as these amounts seem ridiculous in the whole scheme of things.      Wright, Patton and Shakespeare have commenced legal proceedings in the Supreme Court of QLD seeking recovery of their $3,275,356 investment in the PFMF.
> 
> With a foot in both camps I don't really care what happens, except that I hope not too much of my $$$ in BT is squandered in defence.  WPS is not using unitholders money either directly nor indirectly.




Well, that's an interesting development Mary - Gore  (WPS) seems to be pathfinder here for us - I would imagine that any claim he's making may be  just as applicable to us - that is, we could make a similar claim (I guess), unless he's pleading different facts and causes of action.

As an investor in the PFMF, he can't get any of the fund's money to press his case, however, the manager will defend with our money.

Do you have a copy of the claim/defence?

Thanks.


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## Mary Lynch (4 December 2009)

Actually, Mellifuous, Craig Gore is no longer a director at WPS, he resigned on 19th June 2009. His shares and John Atkinson's shares were purchased by Propel Consolidated Holdings P/L (Propel) whose subsidiary Companies trade in Oz as WPS Financial Group. They are now the sole shareholders and owner of the Manager.    Propel is 100% owned by Mayfair Ltd, a company registered in Belize.   They have eliminated all WP's bad debts.

In answer to your question, I have only received a copy of their annual report (up to June 2009), and interim financial report(to 31st Dec. 2008 (must mean 2009 surely).

They are still paying distributions, despite freezing redemptions when CP froze their cash flow. In fact they reduced us to 6%, and have just raised us to 6.25%, with another rise anticipated next month.  Units are worth 88c-94c depending on the return we get from BT. CP is solely responsible for them NOT being $1.


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## mellifuous (4 December 2009)

Mary Lynch said:


> Actually, Mellifuous, Craig Gore is no longer a director at WPS, he resigned on 19th June 2009. His shares and John Atkinson's shares were purchased by Propel Consolidated Holdings P/L (Propel) whose subsidiary Companies trade in Oz as WPS Financial Group. They are now the sole shareholders and owner of the Manager.    Propel is 100% owned by Mayfair Ltd, a company registered in Belize.   They have eliminated all WP's bad debts.
> 
> In answer to your question, I have only received a copy of their annual report (up to June 2009), and interim financial report(to 31st Dec. 2008 (must mean 2009 surely).
> 
> They are still paying distributions, despite freezing redemptions when CP froze their cash flow. In fact they reduced us to 6%, and have just raised us to 6.25%, with another rise anticipated next month.  Units are worth 88c-94c depending on the return we get from BT. CP is solely responsible for them NOT being $1.




Sounds like you've got two reports, the mid-term to 31 December 2008, and the full-term to 30 June 2009.

Ok Mary, thanks for your posting.  Please amend my posting to be in line with your information, deleting Gore.

Well, it seems you're paying tax on income in that fund which is impaired  too..  especially if your fund doesn't get its money from the PFMF.  Doesn't your fund provide for the manager to put distributions to capital? It doesn't matter to me, but it might to you.

Me, I don't trust managed funds anymore.  With valuations that can be out by 20%, how can any investor ever feel safe?   A managed fund is one of the few places that a movie facade can be made to look like a solid building.

Once burnt, twice shy.


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## mellifuous (4 December 2009)




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## mellifuous (5 December 2009)

I don't think this committee will do anything more than be a mouthpiece for the manager.  What could the manager tell the committee that it couldn't tell us? In my view, nothing.  What could we tell the committee that we couldn't tell the manager? In my view, nothing.

What could the committee tell us that the manager couldn't? In my view, nothing.

There is a real danger that investors might see the committee as a conduit to the manager - members should realize that the manager is liable to all of us, both in the collective and as individuals.

The inclusion of an Investors' Committee is not a substitute for direct bi-directional communication between the manager and investors - IMO it is an unnecessary inclusion into the operation of the fund.

Just keep in mind the promises made by this manager, including the one to be transparent - keep them to their promises.


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## mellifuous (6 December 2009)

Got a letter you've sent to the manager?

Got a complaint you've sent to ASIC?

We're starting to put some complaints and letters together on moneymagik.com.

For complaints to ASIC:-
http://www.moneymagik.com/complaints.php


For letters:-
http://www.moneymagik.com/letters.php


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## caroljace (7 December 2009)

Thank you once again Mellifous for doing something constructive and having the knowledge and expertise to draft these complaints and letters.    They say what we all want to say but don't have the ability to take action.   Do you think it would be advantageous for us to all put our names to your complaints or to communicate with ASIC separately stating that we go along with all the points you have raised.   Keep up the good work  Carol


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## mellifuous (7 December 2009)

caroljace said:


> Thank you once again Mellifous for doing something constructive and having the knowledge and expertise to draft these complaints and letters.    They say what we all want to say but don't have the ability to take action.   Do you think it would be advantageous for us to all put our names to your complaints or to communicate with ASIC separately stating that we go along with all the points you have raised.   Keep up the good work  Carol




Thanks for your kind words Carol.  You (and anyone else) is welcome to copy any of the complaints on my site and sent same to ASIC as their own.

I caution that anyone who wishes to do so should verify the facts for themselves.

You will need to seek appropriate professional advice if you wish to republish any complaint, however if you intend only to make a private complaint to ASIC then there is no need to seek that advice.

I understand that many people like to keep to their stage names, and so simply copying a complaint (if the contents are agreed to, and the facts checked) and sending it to ASIC is the next best thing - in that way their real names are protected and they are contributing in a positive way.

Thanks for posting here - it helps to take that monkey of being one of the few posters here off my back.


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## mellifuous (8 December 2009)

a draft copy of a complaint to ASIC with respect to unit price
is located at:-

http://www.moneymagik.com/complaint_ag_unit_price.pdf

Thanks.


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## k.smith (8 December 2009)

How safe are we....??

http://www.goldcoast.com.au/article/2009/12/08/166945_gold-coast-business.html

".....BALMAIN NB Corporation, the lead partner controlling the former City Pacific First Mortgage Fund, slumped to a $1 million loss last financial year.

The result represents a $1.3 million reversal of fortune for the Sydney-based company, which manages the formerly Gold Coast-based fund in partnership with Trilogy Funds Management........

..........Trilogy Funds Management has yet to reveal its results for 2009, after posting a $103,320 profit in the 2008 financial year............"


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## mellifuous (13 December 2009)

http://www.moneymagik.com/huh.php

The link is self-explanatory.


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## mellifuous (13 December 2009)

Philg wants you to receive your capital back as taxable income.

Does such a payment breach Corporations Act s. 601FC(1)(d)?
http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s601fc.html


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## mellifuous (13 December 2009)

http://www.moneymagik.com/new_proposal.php

Anyone care to comment?


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## k.smith (21 December 2009)

http://www.courts.qld.gov.au/esearc...36/09&Court=Supreme&Location=BRISB&print=true

There seems to be a lot of litigation happening at the moment...I wonder who pays for all this ?:


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## mellifuous (22 December 2009)

The unit holder's creed:-

http://www.moneymagik.com/the_reason.php

http://www.moneymagik.com/utopia.php

Rodger's Bakery
http://www.moneymagik.com/bakery.php

Rodger The Dodger - comics
Click on each comic to see the next one
http://moneymagik.com/rodger_1.php

Andrew Graffiti - cartoon
[to be upgraded soon]
http://moneymagik.com/graffiti.php


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## mellifuous (24 December 2009)

Merry Xmas and Happy New Year.


http://moneymagik.com/index.php

http://moneymagik.com/fact_sheet.php

:band:

:bier:


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## mellifuous (27 December 2009)

http://www.moneymagik.com/question_time.php

No doubt you're all aware by now that the FMF has a a preselected ICC.

A couple of us are creating some questions for the ICC.

The questions are being completed at this time and will be sent to the ICC tomorrow.   Any answers received will also be posted on that link.

The email address of the ICC is ::  investorcommittee@pfmf.com.au

Thanks.


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## Mary Lynch (1 January 2010)

Just trying to get a New Year status on the potential for some return.

Are we likely to gain anything from ASIC's investigations, or does BT follow their findings up with a long drawn out court case?

Is there any move being made towards a class action say along the lines of the MFS CA?

Does the fund fund the IMDM legal claim,(if they lose) or does that fall on the shoulders of BT management?


----------



## mellifuous (1 January 2010)

Mary Lynch said:


> Just trying to get a New Year status on the potential for some return.
> 
> Are we likely to gain anything from ASIC's investigations, or does BT follow their findings up with a long drawn out court case?
> 
> ...




1. ASIC is in a world of its own - I would guess that the FMF has escaped ASIC's notice while it's been chasing Jodie Rich, Fortescue et al - my guess is that ASIC is not a real consideration - a total waste of taxpayers' money.

2. No class actions - investor apathy will cause us to wallow until some bright/greedy law firms approach us.

3.  The FMF will fund all legal actions against the FMF and the manager of the fund, that is, City or b/t  providing such entities are sued as 'manager of the FMF'.

Sadly, too many of our investors are in walking frames or unable to understand this newfangled invention, the internet.  If we rely on the wider investor base, then we are doomed.


----------



## mellifuous (6 January 2010)

Taxation

Today I had an interesting conversation with an employee of ASIC. I asked the employee why wasn't ASIC doing anything about members of various group encouraging member of the FMF to vote in support of distributions from the FMF.

I complained why didn't ASIC make the manager retract its statements about possible future distributions.

The employee said she wouldn't comment - I was disappointed. I said (words to the effect of) "well, if I went to a bank and invested $1000, and then the bank lost $500, but in a week's time contacted me and said 'We've found $100 of the missing $500 but were going to pay you as interest', what would you expect would happen?'

I said (words to the effect of) that no one would accept that - getting one's own money back as an interest payment and having it taxable is just a nonsense.

I then said the FMF was like that and with all its debt, losses, and impairments, the fund would not be capable of deriving an income and so could not pay distributions.

She would not comment and said it was not a matter for ASIC. I was stunned, if the payment of capital from a fund as distributions is not a matter for ASIC, then what was a matter for ASIC?

She suggested I phone the tax office.

I phoned the tax office and the officer told me that ASIC should have dealt with the issue. The officer further advised me that there was nothing I could do until such a payment was made, and then I would be able to make a complaint to the ATO about the payment. That was good news.

It was also good news that the ATO would accept a complaint from an investor if that investor believed that he/she had paid tax on distributions from a managed fund in the event that managed fund had done no more than return capital as distributions - that investor may be entitled to a tax refund.

It seems that today was a day of enlightenment, ASIC failed to act, but the ATO was ready to act - impressive thought - I'm not normally happy about the ATO but I confess I was today.

For whatever reason, completely isolated from my experiences, this afternoon the manager of the FMF issued this statement by email to a member of the FMF Coffee Club:-

"... Good afternoon Ian,

It is a delightfully short answer for you: We are acutely aware of the tax consequences of different types of potential “payments” (our preferred choice of word) to Unitholders and would seek professional advice regarding the best interests of Unitholders before proceeding with any payment. My further comments are that in its present form there is no way I can see in the foreseeable future that the Fund could generate “accounting net income” which could be “distributable” to Unitholders and thus taxable in their hands. Conventional redemptions are not currently possible due to the $1 per unit fixed redemption price (stuff-up by CPL) in the Constitution. Hence any potential payment from the Fund to Unitholders would be in the character of a “return of capital”.

Regards, Rodger Bacon......" (emphasis added)

httphttp://finance.groups.yahoo.com/group/FMF_coffee_club/join

If the manager wants to change the 'form' of the FMF, then let's see the meeting, and at that meeting it will be the manager that has to jump the 75% hurdle.

Even introducing a VUP will not allow for distributions, but the manager is free to dream as managers do.

We have been battling this issue for a long time - there have been far too many trading on the needs of investors by promising them something that cannot be delivered.

I live in sincere hope that there will be no more false promises about distributions from the FMF.

Damn those who live to deceive.

No thanks to ASIC - thanks to the ATO for giving me a backstop to my beliefs.


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## mellifuous (6 January 2010)

Are you interested in joining the PFMF READY RESERVE?

Things move so quickly these days in the corporate world - one never knows when the need arises to support a proposal by unit holders to protect their interests.

The FMF Coffee Club forum has started to become proactive in order to reactive more quickly to moves by the manager of the PFMF which we may not agree with.

http://finance.groups.yahoo.com/group/FMF_coffee_club/join

It is of great concern to a number of us that the manager has taken had a focus on amending the constitutionally set value of the unit.  To date, the manager has been unsuccessful.

Further, the manager has made representations about 'distributions' - however, the manager now concedes that distributions cannot be paid because of the 'form' of the PFMF.

The manager believes (as I understand it) that redemptions cannot be paid because of the $1.00.   That is the manager's belief, it is certainly not mine.

A member of the steering group has posted that he believes the manager is considering calling a meeting of the PFMF over certain matters.

We have decided that we would like to be in a position (at short notice) to be able to put a proposal to any meeting called by the manager.

There is no particular proposal in mind and if one arises, it will be determined by the actions of the manager.

Joining the list merely lets us know that you're willing to consider a proposal, there is no obligation to support any particular proposal that might be put forward.

There are attempts to channel the ICC into a 'united front'.

There are storm clouds brewing, and our sky is darkening.

Protect your interests - get involved.

Join here:-

http://moneymagik.com/action_list.pdf


Thanks.


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## mellifuous (7 January 2010)

b/t informed a unit holder that the RG45 (the following benchmarks) are contained on pages 4 and 5 of the Asset Report.

Your task, should  you choose to acccept it, is to find the benchmarks interwoven into the colorful pages of the Asset Report.

Good Luck!



This is from ASICs' site.

It is the list of 8 benchmarks that BT say they have disclosed on pages 4-5 within the Asset Review 
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rg45.pdf/$file/rg45.pdf

Benchmark 1: Liquidity

RG 45.38 The responsible entity of an unlisted mortgage scheme (other than a contributory mortgage scheme) should:

(a) have cash flow estimates for the scheme for the next 3 months; and

(b) ensure that at all times the scheme has cash or cash equivalents (but not including undrawn amounts under bank overdraft or lending facilities)sufficient to meet its projected cash needs over the next 3 months.

Benchmark 2: Scheme borrowing

RG 45.47 If an unlisted mortgage scheme has borrowed funds (whether on or off balance sheet), the responsible entity should disclose:

(a) for each borrowing that will mature in 5 years or less—the amount owing and the maturity profile in increments of not more than 12 months;

Note: For borrowings that will mature within 12 months, the responsible entity should exercise judgment to determine whether it would be appropriate to disclose aggregate amounts for time bands within 12 months.

(b) for borrowings that mature in more than 5 years—the aggregate amount owing;

(c) for each credit facility—the aggregate undrawn amount and the
maturity profile in increments of no more than 12 months;

(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 purpose for which the funds have been borrowed, including whether they will be used to fund distributions or withdrawal amounts.

Benchmark 3: Portfolio diversification

RG 45.53 A responsible entity of an unlisted mortgage scheme (other than a contributory mortgage scheme) should disclose the current nature of the mortgage scheme's investment portfolio, including:

(a) by number and value, loans by class of activity (e.g. development
projects, industrial, commercial, retail, residential, specialised property,reverse mortgages);

(b) by number and value, loans by geographic region;

(c) by number and value, what proportion of loans are in default or arrears;

Benchmark 4: Related party transactions

RG 45.61 A responsible entity of an unlisted mortgage scheme who transacts with related parties of the scheme, including lending or investing scheme funds with related parties should disclose their approach to these transactions,including:

(a) details of any loans, investments and transactions they have made to or with any related party;

(b) their policy on related party transactions, including the assessment and approval process for related party lending and arrangements to manage conflicts of interest; and

(c) how the processes and arrangements are monitored to ensure their
policy is followed

Benchmark 5: Valuation policy

RG 45.64 A responsible entity of an unlisted mortgage scheme should take the following approach to valuations of properties over which it has taken security:

(a) Properties (i.e. real estate) should be valued on an `as is' and (for development property) also on an `as if complete' basis.

Note: See `Key terms' for definition of `as is' and `as if complete' valuations.

(b) The responsible entity should have a clear policy on how often they obtain valuations, including how recent a valuation has to be when they make a new loan.

(c) The responsible entity should establish a panel of valuers and ensure that no one valuer conducts more than 1/3 of the responsible entity's valuation work for the scheme, calculated by value of properties (other than for contributory mortgage schemes).

Benchmark 6: Lending principles—loan-to-valuation ratios

RG 45.70 A responsible entity of an unlisted mortgage scheme should maintain the following loan-to-valuation ratios for loans made by the scheme:

(a) where the loan relates to property development—70% on the basis of
the latest `as if complete' valuation; and

(b) in all other cases—80% on the basis of the latest market valuation.

Note 1: The loan-to-valuation ratio should be based on the unencumbered value of the property.

Note 2: The responsible entity of a contributory mortgage scheme will meet this benchmark for a particular investor if the loan in which the investor has an interest satisfies the above ratios.

Benchmark 7: Distribution practices

RG 45.75 If an unlisted mortgage scheme is making or forecasts making distributions to members, the responsible entity should disclose:

(a) the source of the current distribution (e.g. from income earned in the relevant distribution period, financing facility, application monies);

(b) the source of any forecast distribution;

(c) if the current or forecast distribution is not solely sourced from income received in the relevant distribution period, the reasons for making those distributions; and

(d) if the current distribution or forecast distribution is sourced other than from income, whether this is sustainable over the next 12 months.

Note 1: Any forward-looking statements should comply with s769C and RG 170. If a responsible entity does not have reasonable grounds for disclosing whether current or forecast distributions sourced other than from realised income are sustainable, it should explain this to investors: see RG 170.91.

Benchmark 8: Withdrawal arrangements

RG 45.81 A responsible entity of an unlisted mortgage scheme should provide details of whether investors will be able to withdraw from a scheme. If investors are given the right to withdraw from a scheme, the responsible entity should clearly disclose:

(a) the maximum withdrawal period allowed under the constitution for the scheme (this disclosure should be at least as prominent as any shorter withdrawal period promoted to investors);

REGULATORY GUIDE 45: Mortgage schemes—improving disclosure for retail investors

 © Australian Securities and Investments Commission September 2008 Page 24

(b) any significant risk factors or limitations that may affect the ability of investors to withdraw from the scheme (including risk factors that may affect the ability of the responsible entity to meet a promoted withdrawal period);

(c) the approach to rollovers, including whether the `default' is that
investments in the scheme are automatically rolled over; and

(d) if 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.

RG 45.82 If the scheme promotes a fixed redemption unit price for investments (e.g. $1 per unit), the responsible entity should clearly disclose details of the circumstances in which a lower amount may be payable, together with details of how that amount will be determined.

Note: The responsible entity of a contributory mortgage scheme will meet this benchmark for a particular investor if the responsible entity discloses the above information to the investor as it relates to the investor's ability to withdraw.


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## mellifuous (7 January 2010)

Re: Asset Report

Promised within 6 months of taking the fund.

This was received today by a member of the FMF Coffee Club:-
http://finance.groups.yahoo.com/group/FMF_coffee_club/join

"...Our solicitors have been examining certain records of the fund and this has been an ongoing process. If it is deemed that legal proceedings should occur (and this has not been decided as yet) it would only be untaken if it was financially beneficial to the fund. Also any criminal proceedings would only be dealt with by ASIC with whom the Fund would cooperate fully...."


Another one bites the dust - another one bites the dust - another one.. !!


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## mellifuous (13 January 2010)

For anyone interested, b/t has answered some of the questions I put to them.

The questions may be found at http://www.moneymagik.com/question_time.php

b/t's answers and some comments from myself are at:
http://www.moneymagik.com/answers_reply.pdf

my comments will be updated on the latter document from time to time. Hopefully over the next two days.

Thanks.


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## Mary Lynch (22 February 2010)

Article on Google News by Scott Rochford today hinting that we may be getting a bit of money back at the end of next month.


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## mellifuous (26 February 2010)

Hello Mary,

Here are links to forums that you will find useful.

http://finance.groups.yahoo.com/group/fmfuhag/
http://finance.groups.yahoo.com/group/cpfmf/

I think you misunderstand Scott's article - there will be no money back next month.

There will be no distributions - didn't you read the RG45?

Why don't you email Scott?  I'm sure he'll be helpful.

..


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## k.smith (1 March 2010)

I consider that the main focus of unitholders is the ultimate fate of their investments and we should draw on each others strengths and the information they bring to the forum to make the best of our situation.

I believe it is important that we really understand what a VUP will mean, and why we must fight to maintain the $1.00 unit value.

Under a VUP, unitholders would be given "offers" to redeem. A good example of an "offer" is in the letter to unitholders such as this one...
http://www.avivagroup.com.au/files/...ome_Fund_-_December_2009_Redemption_Offer.pdf

If I received an offer to redeem 4% of a unitholding of say, 120,000 units, my
FIRST thought would be the memory of those units having been worth $120,000.

I would then calculate that 4% of my unitholding would be worth 4,800 units,an amount that in my memory would still equate to an amount of $4,800.

Because the manager is making the offer at the VUP of say, 48cents (the last
price that Balmain Trilogy gave us), I would calculate that 4,800 units at
48cents would return me a cash amount of $2304.00

I would consider that amount to be not worth accepting....not only for the loss that I would incur ($4,800 - $2304 = a loss of $2496) but that the small return is of little use...BUT I would think of all the people who would NEED to take this offer, and the LOSS that they would accept by doing so.

But by not accepting the offer I face another dilemma..

The fate of my investments would be revealed to me twice a year, in the form of an annual and half yearly report..(or at times when the manager wants to communicate other offers.) This will cause an ongoing stress...will the VUP go up or down..?? Should I accept the next round of offers if the VUP goes down, in case it goes down even further??

What will the manager do with the 43% of our fund that is vacant land, and 
what will the manager do with the "long term" assets to make the VUP increase in value ? Will holding on to these assets long term actually return more of unitholders investments, and should I keep pressing the manager to give me information to support his view? What if he doesn't tell me? Should I believe him...I trusted a manager once before.

And then I would think about how it would work if the $1.00 unit price were to
be maintained.

The manager would focus on managing the assets so that they could be sold within a reasonable time frame of say, five years.

Once assets were sold in suitable market conditions, an amount would be sent to ALL unitholders as a percentage of their $1.00 investment....if it were 4%, say, in my example it would mean a return of $4800.00.The balance of this investment would remain in the fund until further assets are sold, and further payments made to unitholders, until all the assets have been sold and there are no more assets, and as big a percentage of our $1.00 unit has been returned as the sales of the assets brings over time.

The rate of appreciation by which the properties would increase in value in an
improving market would increase my chances of some recovery of the balance of my $1.00 units in the fund...the manager says the units are worth 48cents now, but with appreciation over the time it takes to sell the assets, this COULD increase.

http://www.smh.com.au/business/property/property-market-continues-its-redhot-run-20100228-pb9v.html

All the payments that I receive back would not be subject to tax, as I would
just be getting back the capital that I had originally invested.People who need
their money back now are not disadvantaged. I would take my $4800 and put it in the best bank term deposit, where I am guaranteed growth of up to 7.85% on that portion of capital returned to me.

http://www.theage.com.au/news/busin...n-term-deposits/2010/02/23/1266687064283.html

I would certainly keep reading all the property news reports, but I would be
relieved that the burden of making decisions regarding the ongoing VUP would not apply... the properties are only worth what they are worth , and the total sum of the assets sold within the windup period is what percentage of my $1.00 I will ultimately recover....and so will it be for every other unitholder in the fund under the $1.00 unit value.

.I believe we should be pressing the manager to elaborate on keeping the $1.00 unit value , and that information regarding this option must be made available to ALL unitholders

I believe that we are approaching D-Day...that is, Decision Day..

Everyone should get as much advice as possible, and this is my opinion, and
everyones situation is their own.

Danielle.


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## Mary Lynch (4 March 2010)

I am pretty tired of chasing these FMF Forums.  

I was told yesterday by BT that we will be getting an offer of two options in June. I am sure you all know about them. 

He said that he thought (from speaking to many investors), that  about 50% of investors would choose to withdraw their $$ in two chunks, and 50% would leave them to grow.  He said that all should be paid out within a few years, with people choosing option no.1 being paid out in a couple of chunks about 6 mths apart..the first payment being made before the end of this year.

The FMF as a trading interest is winding up.

He said the people who left their $$ with them for the longer haul would stand to gain from court cases yielding payouts into the fund. (Today's (4/3)article throws a bit of a query over that hope though).


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## lightlystrung (31 August 2010)

*Re: Pacific FMF proxy vote 1st September 2010*

Hello fellow investors in this terrible mess.

If you are wondering what to do, join the large mass that are voting against all of BT's horrid proposals.

Vote against BT's 20% performance fee and all their other cash grabs.

You have probably already sent in your proxy to Computershare, but it you go to the meeting in Bribane tomorrow, you automatically go to extinguish your original vote and cast a new proxy.

Do not follow BT's example.   We unitholders who want a fair go have all voted:-

Resolution 1:   Against
Resolution 2:   Issue Price
Resolution 3:   For

BT are running around making desperat phone calls now, they know we only need 25.1 percent of the vote to squash resolution 1.   

If you've changed your mind join the millions of units/unitholders that have voted as above.   Its not too late to change your proxy at the meeting tomorrow.

lightlystrung


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## lightlystrung (5 September 2010)

THANK YOU to all those who saw the light and voted against Resolution 1.

We now have a much better and fairer way forward.

AND Balmain Trilogy can see we are a force of collective informed unitholders.

There is a new RE out there about to make a run for the management of our fund and this too will keep BT on their toes.

Unitholders need to keep fully informed and work together.


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