Wellington Capital PIF/Octaviar (MFS) PIF

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

On the subject of taxation everyone has a different problem and it is really for them to sort out. I think we are worrying prematurely about any return of capital, redemption or liquidation by stealth. It will be some time, in my humble opinion, before we see anything from Wellington Capital. Since Wellington Capital became RE it has been all smoke and mirrors,complaints and inquiries unanswered. Perhaps we should devote some of our time and energy and follow the developments of the Wollongong Hotel saga. The people who have possession of our property, you cannot really call it a sale, a $20 company have demonstrated to our RE the way the hotel should have been handled in the first place. Unfortunately the profits generated by our give away will not be ours. This matter deserves more attention from this forum. Any suggestions. My emails to the RE have been unanswered since April, 2009.

I agree the Wellington Capital investment management handling of the disposal of one of our potentially best PIF assets, the Wollongong Hotel resort is a total disgrace. The true details of the disposal have had to be researched and revealed by investors, ie the original auction price turned down by WC being a far better deal than the one accepted much later. With the help of another PIF investor I am compiling a complete 'dossier' on the handling of the Wollongong deal for future reference. If anyone has any extra info on this that has not been posted here please make sure I get it so it can be added to the file. thanks, Seamisty

 

[Duped]

Re: Octaviar MFS Premium Income Fund PIF

Thanks for your postings mellifuous. I'm not convinced the NSX listing has an effect on the tax position.

I understand that transfer of ownership of PIF units could always occur off market. I assume that if you buy your units off market from a former owner (as opposed to directly from MFS) then you won't be treated differently under the tax law. The NSX is just a mechanism (market) for matching buyers and sellers.

The PIF securities traded on the NSX are Trust Units, not shares.

So why would the NSX listing change the nature of the tax relationship between the PIF Trust and PIF Unit holders/beneficiaries?

I'm open to being corrected. To save you the effort of typing a posting you can just point me to the relevant material.

My understanding is that WC can choose the Trust's accounting methods and that this CAN have an effect on how payments to unit holders is taxed.

I think it's clear that I want a Return of Capital and not a 'distribution' that is assessable for tax. Other unit holders may want the opposite. I can't imagine why. Even if units are held by Private Superannuation, a 3c 'distribution' will attract 15% tax won't it? If so then there's another 0.5 cents per unit vaporised. At 30% tax (i.e. company tax rate or if your taxable income is more than $653 a week), kiss about 1c per unit goodbye. At 39.5% tax (ie if you earn between $80K and $180K a year), another 1.2 cents per unit of our SAVINGS gets flushed.

All - Make no mistake. The 3c ditribution/RoC WILL happen. WC is HIGHLY motivated to pay us 3c. First and foremost, because WC can then start profiting from PIF and secondly: she told a Judge she would.

On what planet does WC think we can tax-plan if it won't confirm what form the payment will be.

 

[selciper]

Re: Octaviar MFS Premium Income Fund PIF

Thanks to those who are examining the Wollongong deal. Hotel property transactions are well beyond my expertise, but as a layman I am becoming increasingly worried about the way WC operate. They give the impression that they don't know whether they are Arthur or Martha. My concern is that they actually do know the difference.

 

[mellifuous]

Re: Octaviar MFS Premium Income Fund PIF

Thanks for your postings mellifuous. I'm not convinced the NSX listing has an effect on the tax position.

I understand that transfer of ownership of PIF units could always occur off market. I assume that if you buy your units off market from a former owner (as opposed to directly from MFS) then you won't be treated differently under the tax law. The NSX is just a mechanism (market) for matching buyers and sellers.

The PIF securities traded on the NSX are Trust Units, not shares.

So why would the NSX listing change the nature of the tax relationship between the PIF Trust and PIF Unit holders/beneficiaries?

I'm open to being corrected. To save you the effort of typing a posting you can just point me to the relevant material.

My understanding is that WC can choose the Trust's accounting methods and that this CAN have an effect on how payments to unit holders is taxed.

I think it's clear that I want a Return of Capital and not a 'distribution' that is assessable for tax. Other unit holders may want the opposite. I can't imagine why. Even if units are held by Private Superannuation, a 3c 'distribution' will attract 15% tax won't it? If so then there's another 0.5 cents per unit vaporised. At 30% tax (i.e. company tax rate or if your taxable income is more than $653 a week), kiss about 1c per unit goodbye. At 39.5% tax (ie if you earn between $80K and $180K a year), another 1.2 cents per unit of our SAVINGS gets flushed.

All - Make no mistake. The 3c ditribution/RoC WILL happen. WC is HIGHLY motivated to pay us 3c. First and foremost, because WC can then start profiting from PIF and secondly: she told a Judge she would.

On what planet does WC think we can tax-plan if it won't confirm what form the payment will be.

Hi Duped,

Well, I'm just giving my opinion - I'm not skilled in tax - The best 'advice' I can give you is to ask your manager (as Danielle did, and hasn't got an answer), or phone the ATO help line.

You say, "... So why would the NSX listing change the nature of the tax relationship between the PIF Trust and PIF Unit holders/beneficiaries? ..." Actually, my point wasn't at all directed to whether one sells one's units on the NSX (or privately), it was just about tax. Of course, any purchasers of units would be entitled to any monies paid by the fund (but would not benefit from your class action unless that was assigned separately).

"...Cash Payments to Unitholders
The amounts paid to Unitholders for accounting purposes are treated as a financing cost expense. For taxation purposes, these payments continue to represent distributions under the Income Tax Assessment Act. ..."
(pg. 57 Memorandum - Notes to the Balance Sheet)

In an unlisted managed fund with so much loss, there is no profit, and therefore distributions will never be paid again. However, in a listed fund, 'distributions' are able to be paid as a 'fund expense - financing cost'.

To my mind, the words 'continue to represent' are misleading because 'distributions' after the listing are not of the same character as distributions before the listing. Again, before the listing, distributions are only able to paid from profits, whereas after the listing, 'distributions' are able to be paid from your capital.

The First Distinction - It would be a breach of the tax act to pay distributions to you if the fund was still unlisted and in its present state. But, now, no problems - if investors aren't going to give a hoot now, then let them give a hoot later, especially the ones who expect a large amount of money.

Under the proposal put by W.C. you are only entitled to one offer and 3% 'distributions' if available for payment - but I can't see where you're entitled to anything more - that is, you get your money back from selling your units (on the NSX or elsewhere).

I can't see anywhere that W.C. is obligated to wind the fund up.

This section deals with the dilemma facing the manager, payment as a tax assessable 'distribution', or a tax deferred 'redemption'.

"... 6.4 Cash payments
The responsible entity intends to make cash payments to Unitholders totalling 3 cents per Unit with the first payment to be made in October 2008, the second in December 2008 and thereafter quarterly.

Due to the significant impairment recognised at 31 May 2008 it is anticipated that the cash distribution will be a capital repayment and tax deferred. See section 9 in relation to taxation issues. ..."

The Second Distinction - the unlisted fund would made a payment to you $xxxx = y units * $ (unit price) - no tax treatment except a loss to offset somewhere or other, but now as a listed fund, such payments are 'tax deferred'.

I think these issues are important, because even if you're going to get back $20k/$30k, depending on your income now, then you may be forced to pay tax on all or some of that money.

I just wonder if it really is treating unitholders equally (corporations act s. 601FC(1)(d)) if some pay tax and some don't?

I just wonder what anyone thought the benefits of listing the fund would be?

There is no good offers on the NSX (or elsewhere), no income (except redirected capital to 'distributions' (if at all)), and tax deferred payments of damaged capital (if any).

Yes, we're in the same position in the PFMF, and one has to really start getting some transparency from these managers otherwise it's starting to make a lot more sense to see them all wound up rather than play this stupid game where we'll all mushroomed as managers, receivers, lawyers, liquidators, auditors, custodians, real estate agents and others make big bucks - and yes, I can't imagine W.C. isn't making something nice out of this mess.

I should point out that W.C. explained all this in the memorandum to the proposals.

I won't raise this issue again, but I do recommend that you ask your manager to explain the tax considerations of any payments made to you, or perhaps put those questions to the free ATO infoline.

Thanks.

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Its a pity this type of deal wasn't implemented two years ago for PIF investors rather than fire sale $200mill worth of premium assets and then have to watch the remaining dead wood dwindle away to nothing. Seamisty


Pacific First avoids fire sale January 28, 2010 - 11:34AM
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AAP

Pacific First Mortgage Fund has avoided an asset fire sale after Commonwealth Bank of Australia Ltd (CBA) extended a $82 million loan facility for the beleaguered fund.

Fund manager BalmainTRILOGY (BalmainTRILOGY) says the new loan facility will now expire on June 30, 2010 and will be renewable every year if CBA remains comfortable with the fund's performance.

BalmainTRILOGY's joint chief executive Andrew Griffin said the bank's decision enhanced the fund's ability to improve recoveries from its assets and prevented a fire sale of some assets.

"As a lender to the fund CBA is entitled to act immediately to recover its loan funds," Mr Griffin said in a statement on Thursday.

"Had they done this a fire sale of some fund assets would have been forced.

"Their decision to extend the loan removes this damaging consequence and enables us to better protect the asset values," he said.

BalmainTRILOGY took over responsibility for the unlisted fund last July after former manager City Pacific Ltd went into receivership and then liquidation.

City Pacific froze redemptions and distributions to more than 11,000 investors in the first half of 2008, and loan defaults in the portfolio drove writedowns in 2009, leaving the fund valued $521.1 million by November, 2009.

Mr Griffin said CBA's loan extension was a significant win for unitholders of the fund and BalmainTRILOGY was comfortable the fund could comply with the new terms.

"We are now able to map the future of the fund with greater certainty and finalise a strategy to restarting some payments to unitholders," he said.

Unitholders, CBA and the Australian Securities and Investments Commission will be consulted throughout this process, he added.

 

[mellifuous]

Re: Octaviar MFS Premium Income Fund PIF

Its a pity this type of deal wasn't implemented two years ago for PIF investors rather than fire sale $200mill worth of premium assets and then have to watch the remaining dead wood dwindle away to nothing. Seamisty.

Thanks for the link Seamisty. Members of the PFMF are always the last to find out about anything.

Well, that means the fund pays about $20m/year in bank and management fees + others ... yes, a great deal for some - but not for unit holders. That means a fire sale of $400k per week, just to keep the FUM (and management fee) high.

Just as bt took over 'Pacific Beach' at the Gold Coast was sold for $80m - $40m went to Fortress, $40m to the CBA - the fund lost $70m - great management. The PFMF holds 43% of the fund in vacant land - and just about every loan is under external receivership. Fees to the manager, the bank, and to the receivers.

The list of fire sales just goes on - Hope Island, Martha Cove.

And some negotiations - the CBA got us into this mess by giving the fund $90m when it couldn't back $150m it already owed. For the generosity of lending the fund money, they again tie up the whole of the funds assets - the bank and the manager are fine, but members?

Yes, a great deal (meant to be sarcastic).

By the way, members were going to have a meeting about the fund's future, now they're just going to 'consult' us.

Wow... aren't we lucky?

..

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Below is my last two formal complaints made to Wellington Capital today. I will keep you updated on the response.I was also told by Caroline Snow by email today that " Investor updates are published every four months - April, August and December, and are published during the following month. The December update is due to be released in January, and will be released via the NSX. '' :::band So only today and tomorrow left of January, the long awaited for update must be 'IMMINENT'!!!!!!Seamisty

COMPLAINT 2
I wish to make a formal complaint regarding the release of PIF quarterly updates.

PIF 17 Oct 2008 update was released on the NSX on the 22nd Oct 2008.
11 Dec 2008 update was released on the NSX on the 11th Dec 2008. =7 week interval
30 April 2009 update was released on the NSX on the 29th May 2009. =24week interval
31 Aug 2009 update was released on the NSX on the 1st Sept 2009. =14week interval
Dec update =21week+ interval


Considering we were initially told we would be provided with regular reports/quarterly updates, approx 5 months between investor updates can hardly be considered as being provided with 'regular' PIF information. I consider a quarterly report to be just that, delivered regularly every four months. Can PIF investors expect more of this type of erratic provision of information reporting or is it possible for WC to deliver quarterly fund updates at regular four monthly intervals?

COMPLAINT 3

I would like to lodge a formal complaint as to why Jenny Hutson of Wellington Capital has not given PIF investors the option to be kept updated by email as opposed to the expensive alternative of a mail out?
Ms Hutson has been involved with the PIF in a managerial capacity for approx two years and has not made this option available which was ALREADY in place with Octaviar when she first became involved with the PIF.
In view of the fact that the PIF is severely impaired financially and appears to be getting more so, why is money being unnecessarily wasted in this manner?
It is my understanding that of the approx 5,000 investors who signed up with the IMF PIF Class Action, approx three quarters of those supplied an email contact which is being utilised by IMF rather than costly mail outs of which investors ultimately will have to cover the costs. Email is a far more efficient, less expensive option and I would consider any professional business would implement this cost saving strategy. I discussed it with Justine Buckley on the WC hotline well over a year ago and was told it was definitely an option and WC was collating a data base of PIF investor email addresses.
Does Print Mail Logistics provide the printing and mail out service for WC? If they have not in the past will they be in the future?

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Minister Bowen unveils ASIC's proposed new powers


Source: Bloomberg
AUSTRALIA'S securities regulator will be given greater powers to pursue and penalise individuals and corporations for market misconduct under proposed changes unveiled by the government today.

The government will introduce legislation later this year that, if passed into law, will increase the maximum penalties that can be imposed by the Australian Securities and Investments Commission for the breach of market misconduct provisions, Financial Services Minister Chris Bowen said in a statement.

"These changes will ensure that ASIC is properly equipped to investigate and prosecute serious corporate misconduct which has the potential to cause significant harm to the economy and investors," Bowen said.

ASIC's telephone interception and search warrant powers will also be improved, he said.

"Importantly, these reforms will bring ASIC's investigative powers into line with other regulators, such as the Australian Competition and Consumer Commission," Bowen said.
The changes will increase the pecuniary penalties for individuals to $500,000 or three times the profit made or loss avoided, whichever is greater.

For corporations, the penalty will be the greater of $5 million, three times the profit made or loss avoided, or 10 per cent of the company's annual turnover during the period the breach occurred.

And, the maximum term of imprisonment for these offenses will be increased to 10 years from five years currently.

Mr Bowen told reporters in Sydney the changes were prompted in part by "ASIC's advice to me that they find one hand tied behind their backs" when investigating some cases.

As part of the proposals, ASIC will be able to access telecommunications interception material collected by the Australian Federal Police (AFP) under a court-issued warrant.

ASIC's search warrant powers will also be improved to dispense with the need to issue a notice to produce before a warrant is enforced.

"The proposed change to ASIC's search warrant power will significantly reduce the potential for evidence to be destroyed before a warrant is executed," Mr Bowen said.

The government will release an exposure draft of the proposed changes later this year.

Other related article links below. Cheers, Seamisty
http://www.smh.com.au/business/corporate-crooks-face-tougher-penalties-20100128-n0g1.html

http://www.abc.net.au/news/stories/2010/01/28/2803589.htm?section=australia

 

[Duped]

Re: Octaviar MFS Premium Income Fund PIF

Its a pity this type of deal wasn't implemented two years ago for PIF investors rather than fire sale $200mill worth of premium assets and then have to watch the remaining dead wood dwindle away to nothing. Seamisty


Pacific First avoids fire sale January 28, 2010 - 11:34AM
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8.34%pa since inception. Invest frm$1000 in registered 1st mortgages.

www.ProvidentCapital.com.au

...

My guess why:

• 
  Our lender RBOS was in a far more desperate situation than CBA and was trying to get repatriate capital any way it could.

• Unlike RBOS, CBA is on home turf, meaning public backlash is more damaging?

• Unlike RBOS, CBA has a massive exposure to Australia property and is hence far more motivated than any private lender on the planet to do anything it can to preserve property value in Oz. I.e. it would be stupid not to do a deal and hence prevent more property hitting the market at fire-sale prices.

It seems that in everyway possible MFSIM under King & Co exposed PIF to as much risk as possible. His selection of counterparties .... is there anything positive I can say.

Apparently, it turns out Lehman Bros were a substantial lender to Fortress. And guess whose firm's people have been reported as hitting King hard with questions on that fateful phone conference in Jan 08. None other than, Lehman Bros. Does the expression Bunny in Headlights apply here. At least McGrath had the humility to admit he wsn't a batsman. Perhaps King should have stuck with practicing law.

 

[Duped]

Re: Octaviar MFS Premium Income Fund PIF

Hi Duped,

Well, I'm just giving my opinion - I'm not skilled in tax - The best 'advice' I can give you is to ask your manager (as Danielle did, and hasn't got an answer), or phone the ATO help line.

You say, "... So why would the NSX listing change the nature of the tax relationship between the PIF Trust and PIF Unit holders/beneficiaries? ..." Actually, my point wasn't at all directed to whether one sells one's units on the NSX (or privately), it was just about tax.
...
In an unlisted managed fund with so much loss, there is no profit, and therefore distributions will never be paid again. However, in a listed fund, 'distributions' are able to be paid as a 'fund expense - financing cost'. ...
Thanks.

Thanks but I don't follow. I'll just try calling WC AND the ATO for an answer - AGAIN.

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

I was originally told by WC hotline staff (when I still had faith in WC) that we would receive regular quarterly PIF updates and any other general fund related news would be released intermittently to the NSX in between updates as part of Jenny Hutson's committment of honesty and transparency. Unfortunately I never received this in writing. Has any one else got a record of promised quarterly updates in writing? Also thanks to those of you who have provided/offered other PIF related info. Seamisty

 

[mellifuous]

Re: Octaviar MFS Premium Income Fund PIF

Thanks but I don't follow. I'll just try calling WC AND the ATO for an answer - AGAIN.

Well, my meaning is:-

(assuming the fund is damaged with severe losses which are never going to be recovered.)

I think that the proper meaning of the word 'distribution' is a 'distribution of profit' - each member receives, on a pro rata basis (according to his/her unit holding) a share of that profit.

Under normal circumstances, that is, in a liquid unlisted fund, each member is entitled to redeem his/her capital directly from the fund - the reward for making the investment is being paid a distribution (or share of the profit).

So, if no profit is made, then no distribution is able to be made. Actual losses and impairments must be taken into account when calculating profit. So, if losses and impairments cannot be overcome, then no profit is realised, and therefore no distribution can be paid (there is no share of profit).

However, payments of redemptions can be made in the case of non-liquid unlisted fund but only to the extent of any surplus cash in the fund. There is no tax consideration - investors are merely getting some of their investment back.

In a unlisted fund, if a manager attempted to pay members capital as distributions (in the circumstances with such losses and impairment), then that manager would clearly breach the Tax Act.

So, no income, no profit, no distributions.

Now, if one consider the PIF as listed, then clearly one might assume the situation to be the same, that is, distributions would not be able to be paid because the fund's losses could not be overcome in order to make a profit - so, no profit, no distribution.

One might further assume that one is entitled to redemptions.


But the foregoing is not true of a listed fund, members are no longer entitled to be paid a share of profits (that is, no longer entitled to be paid distributions' in the ordinary sense of the word - a share of profits).

Your manager defines distributions (Page 74 of the memorandum) as:-

"... Calculation of Distribution Entitlement
Calculation of distributable amount
The ‘distributable amount’ for a distribution period is to be determined in accordance with the
following formula:
DA = I + C
Where:
DA is the amount of distributable amount;
I is the income of the Fund for the distribution period minus any amount of the income that is set aside during the distribution period as reserves or provisions under the Constitution; and
C is any additional amount (including capital, previous reserves or previous provisions) that the responsible entity has determined during the distribution period is to be distributed. ..."

Really, "I" more or less equals net profit - since the provisions will be the fund's ligitimate expenses.

So, before in the unlisted environment where the Tax Act would prohibit capital being repaid as distributions, now that the fund is listed, capital is able to be paid as a 'distribution'.

This means, an investors capital is able to paid (as a fund expense, that is, 'cost of capital') to investors as tax assessable income ("distributions").

I think it is misleading to use the word 'distribution' in circumstances whereby capital is being repaid to investors and those investors will be required to add any 'distribution' amount to any taxable income. Many investors think that distributions and 'distributions' are the same, but they are not.

In fact, in the PIF, only capital is capable of being repaid as 'distributions' because there is no income to generate profit (because of the huge losses and impairments). The formula for the PIF is in fact "D = 0 + C" (since there is no income, I = 0).

If one wants to look to a specific example of the difference, then one has only to look to "Calculation of Distribution Entitlement" (Page 74 Memorandum).

So, if we look to page 59 of the memorandum, the manager states:-

"... 6.4 Cash payments
The responsible entity intends to make cash payments to Unitholders totalling 3 cents per Unit with the first payment to be made in October 2008, the second in December 2008 and thereafter quarterly.
Due to the significant impairment recognised at 31 May 2008 it is anticipated that the cash distribution will be a capital repayment and tax deferred. See section 9 in relation to taxation issues. ..."

Given the state of the fund (that is, the massive losses and impairments), one would think that a capital payment (tax deferred) would be order, but that's not how it's panning out either:-

In a letter to a unit hoder, the manager stated (in part), "... at this time we have been provided with guidance in relation to whether the cash payment will be in the form of a capital return or distribution ..."

It seems that the waters are a lot muddier than one might think. The manager now requires 'guidance' before any payment is to be made. My guess is that the 'guidance' is coming from the ATO, and there are going be a heap of folk more than a little disappointed when they their first payments (if they in fact do receive a payment).

I should also point out at page 9 of the Memorandum:-

"... Tax Deferred that component of cash payments from the Fund that are not taxed. .."

My view is that this means capital payments made from the fund as NOT taxed by the fund, so investors will stand to deal with taxation on such payments on an individual basis.

Again, s. 601FC(1)(d) requires all unitholders to be treated equally - if some tax, and other don't, then are they being equally. I really don't know the anwer to this one.

So, I hope that gives you an insight to my twisted mind.

Thanks.

...

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

I stuffed up here, we were meant to get quarterly updates which were changed to four monthly which are currently five monthly. I will correct my complaint and re submit it as below.

COMPLAINT 2
I wish to make a formal complaint regarding the release of PIF four monthly investor updates.

PIF 17 Oct 2008 update was released on the NSX on the 22nd Oct 2008.
11 Dec 2008 update was released on the NSX on the 11th Dec 2008. =7 week interval
30 April 2009 update was released on the NSX on the 29th May 2009. =24week interval
31 Aug 2009 update was released on the NSX on the 1st Sept 2009. =14week interval
Dec update =21week+ interval


Considering we were initially told we would be provided with regular reports/quarterly updates, approx 5 months between investor updates can hardly be considered as being provided with 'regular' PIF information. In view of the fact that we are now meant to be receiving four monthly PIF investor updates can PIF investors expect more of this type of erratic provision of information reporting or is it possible for WC to deliver fund updates at regular four monthly intervals as opposed to five monthly?::::::::::


If we are to receive an announcement on the NSX regarding the update in January and the mailout is meant to occur in Jan also then that means the written copies will have to be ready to go tomorrow as well. Having been given wrong information many times previously from WC staff I am reluctant to believe we will even see it tomorrow. If we do it will probablly be after close of WC office so they don't have to man the phones. Some are placing bets off the forum as to when and if it will arrive!!! Seamisty

 

[mellifuous]

Re: Octaviar MFS Premium Income Fund PIF

In a letter to a unitholder, the manager stated (in part), "... at this time we have not been provided with guidance in relation to whether the cash payment will be in the form of a capital return or distribution ..."

(correct typo in previous post)

Just a little bit more information from W.C.'s Q & A:-http://www.newpif.com.au/pifreports/InvestorUpdate_Q&A_July2008.pdf

"... 4.7 For the foreseeable future, all cash payments will be in the form of capital payments to investors ..."

Clearly this statement was made given the severe impairments and capital losses in the PIF. Then one has to wonder why the statement to the unit holder, "... at this time we have not been provided with guidance in relation to whether the cash payment will be in the form of a capital return or distribution ..."

From an ordinary accounting perspective with respect to a distribution derived from income, such an income could NEVER be on the horizon for the PIF because of the substanital losses and impairments, as W.C. says "for the foreseeable future" - perhaps W.C. should have said that there will never be real income flowing into the PIF again.

"... Investors will need to speak to their accountant or tax agents, but for most investors, a capital payment means there is no tax payable on the amount received. ..." (emphasis added)

Clearly "most investors" does not include all investors, so W.C. anticipated some investors would have to pay tax on the return of what is left of their respective investments.

All the foregoing sits uncomfortably with the following excerpt from page 57 of the Memorandum:-

"... Cash Payments to Unitholders
The amounts paid to Unitholders for accounting purposes are treated as a financing cost expense. For taxation purposes, these payments continue to represent distributions under the Income Tax Assessment Act. ..." (emphasis added)

And sits uncomforably with this excerpt (Page 74 of the memorandum):-

"... Calculation of Distribution Entitlement
Calculation of distributable amount
The ‘distributable amount’ for a distribution period is to be determined in accordance with the
following formula:
DA = I + C
Where:
DA is the amount of distributable amount;
I is the income of the Fund for the distribution period minus any amount of the income that is set aside during the distribution period as reserves or provisions under the Constitution; and C is any additional amount (including capital, previous reserves or previous provisions) that the responsible entity has determined during the distribution period is to be distributed. ..." (emphasis added)

To me, it's a tad confusing, there are no more redemptions, but there are - cash payments / distributions / distributions being a mix of income and capital / distributions being assessable income / capital payments being tax deferred / distributions representing an expense to the fund (rather than a distribution of profits to investors in an unlisted fund).

I would have thought that 'guidance' would not be necessary because there is no income into the fund. This is the nub of my interest in this matter, because W.C. seems to be contemplating that a distribution (not income, and not capital) might be made simply as a fund expense - after all, it's one of the two options on which guidence is sought.

I only raise the matter as a point of discussion because it seems to me that in the double-entry accounting system, what is an expense to one party in a transaction must necessarily be income to the other party, otherwise there can be no tax deduction for the first-mentioned party.

If "distributions' are going to be an expense to the fund (whether they contain capital and/or income), then to my mind, such payments must necessarily be tax assessible income to members - but if such payments are not tax assessible for members, then if follows that such payments cannot be regarded as expenses in the fund.

All I say is that investors should follow W.C.'s advice and get professional help from a tax agent or accountant and post the results on the forum so everyone understands where they stand.

..

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Both Michael Kings and Phil Adams websites are both inaccessible at the same time when they were both operational until recently. Coincidence or something fishy going on here? The plot thickens!! Seamisty ::

Temporarily Disabledwww.elysiumfields.net/ -


Agilis Global Global Investment Management. ... This webpage is currently under construction. © 2010 Agilis Global.http://www.agilisglobal.com/WhoWeAre/MeetOurTeam/PhilAdams.html
http://www.agilisglobal.com/ContactUs/terms.html

 

[Duped]

Re: Octaviar MFS Premium Income Fund PIF

Thanks mellifuous.

I follow most of your postings but there's some statements that I'll have to take your word for.

Such as "However, payments of redemptions can be made in the case of non-liquid unlisted fund but only to the extent of any surplus cash in the fund." and "In a unlisted fund, if a manager attempted to pay members capital as distributions (in the circumstances with such losses and impairment), then that manager would clearly breach the Tax Act" and "But the foregoing is not true of a listed fund, members are no longer entitled to be paid a share of profits"

You're right about the conflicting messages WC are giving out about the form of any payments to unit holders.

And if you suspicion is correct, that the ATO is contradicting WC's statement that the fund can pay a return of capital then .... WC will have failed me again.

Thanks for the explanation of double-entry accounting. Can you explain tax deferred? What tax could there possibly be on capital that can be deferred? I lent PIF some capital and PIF is giving it back to me. There's not likely to be any capital gain to me. Any capital gains made by the fund are treated separately and dealt with in my tax return in accordance with the annual PIF tax statement.

The whole issue seems to be unfair trickery to try and screw more taxes and RE fees out of me. Pure wealth destruction. PIF is such a dog of an investment.

All - As for paying for advice from an accountant or tax agent. That's just a standard disclaimer. What's the point. If WC don't tell us what form the payment is going to be, how on any planet is the adviser going to be able to provide any meaningful advice. Any advice I pay for will be a waste of my savings.

 

[mellifuous]

Re: Octaviar MFS Premium Income Fund PIF

Thanks mellifuous.

I follow most of your postings but there's some statements that I'll have to take your word for.

Such as "However, payments of redemptions can be made in the case of non-liquid unlisted fund but only to the extent of any surplus cash in the fund." and "In a unlisted fund, if a manager attempted to pay members capital as distributions (in the circumstances with such losses and impairment), then that manager would clearly breach the Tax Act" and "But the foregoing is not true of a listed fund, members are no longer entitled to be paid a share of profits"

You're right about the conflicting messages WC are giving out about the form of any payments to unit holders.

And if you suspicion is correct, that the ATO is contradicting WC's statement that the fund can pay a return of capital then .... WC will have failed me again.

Thanks for the explanation of double-entry accounting. Can you explain tax deferred? What tax could there possibly be on capital that can be deferred? I lent PIF some capital and PIF is giving it back to me. There's not likely to be any capital gain to me. Any capital gains made by the fund are treated separately and dealt with in my tax return in accordance with the annual PIF tax statement.

The whole issue seems to be unfair trickery to try and screw more taxes and RE fees out of me. Pure wealth destruction. PIF is such a dog of an investment.

All - As for paying for advice from an accountant or tax agent. That's just a standard disclaimer. What's the point. If WC don't tell us what form the payment is going to be, how on any planet is the adviser going to be able to provide any meaningful advice. Any advice I pay for will be a waste of my savings.

Hi Duped,

Don't take my word for "But the foregoing is not true of a listed fund, members are no longer entitled to be paid a share of profits" - it was an error I noted after the edit period had closed. I don't correct it because it's not relevant anyway - no income, no share of profits. If the fund was liquid fund, members would be entitled to a share as determined by the manager/PDS.

You acquired units in the fund, and you were entitled to redeem those units - however, the fund is now listed, and your rights to redeem as now extinguished. What W.C. didn't mention in its Q & A under the heading "Redemptions" was that redemptions were not part of the scene anymore - I think that was an important omission - I'll bet that a lot of members still believe that they're entitled to redemptions from the listed fund. I'd even bet that there are those who belive they're entitled to distributions from profit like the old days when the fund was liquid.

My guess there are quite a lot of investors who are in for a shock.

I have a law degree gained after retirement - I worked for short period as a junior barrister but got bored because I didn't need the money, so my experience is quite limited. I have no experience with tax other that what I have to pay in my super fund, company, and personally.

As far as I understand it, 'tax deferred' means that the tax treatment has to be applied at a later time - I'm sure there must be someone here who knows the correct description.

This is my guess, that W.C. didn't realise the distinction between the listed fund and the unlisted fund with respect to tax - I think also that many investors had no idea of the tax consequences (if any).

I think that if W.C. makes a payment and an investor has to pay tax then that investor (if not forewarned) will go troppo. It might be that the fund might have to pay the tax, and if it does, that each investor will be paying tax in the fund.

It's either going to be much adieu about nothing, or a really big deal. I was even thinking that it might be the downfall of W.C. as manager.

Of course these are only my unskilled opinions, but I find the whole thing very interesting.

As I've mentioned before, W.C. only operates while investors have confidence, but once confidence is destroyed then so will W.C. be destroyed (as manager of the PIF).

.

 

[simgrund]

Re: Octaviar MFS Premium Income Fund PIF

Hi Duped,
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
You acquired units in the fund, and you were entitled to redeem those units - however, the fund is now listed, and your rights to redeem as now extinguished.
What W.C. didn't mention in its Q & A under the heading "Redemptions" was that redemptions were not part of the scene anymore - I think that was an important omission - I'll bet that a lot of members still believe that they're entitled to redemptions from the listed fund. I'd even bet that there are those who belive they're entitled to distributions from profit like the old days when the fund was liquid.
.

Hi Mellifuous,
As to the "listing"; all of the unitholders present at forums and the printed glossaries which followed, will recall that the NSX listing measure was presented as "only to those who wished to cash out" for whatever reasons.
The rest were manipulated to believe JH promises in PIF $1 restoration when the "redemptions" would again be on the table.
Shock indeed. However, PIF Constitution was changed before.
Regards

 

[mellifuous]

Re: Octaviar MFS Premium Income Fund PIF

Hi Mellifuous,
As to the "listing"; all of the unitholders present at forums and the printed glossaries which followed, will recall that the NSX listing measure was presented as "only to those who wished to cash out" for whatever reasons.
The rest were manipulated to believe JH promises in PIF $1 restoration when the "redemptions" would again be on the table.
Shock indeed. However, PIF Constitution was changed before.
Regards

Hi Simgrund,

As I understand it, W.C. didn't want to run the fund unless it was listed. It doesn't make sense that W.C. wanted to list the fund to give investors their money back by way of redemptions, in fact, it would seem it was exactly the opposite (apart for the promised $0.45c offer and 3c/unit payments (if any)).

Managers like to have unimpeded access to capital - many managers hate redemptions - confidence (and returns) drives investment in funds, and the last thing a badly performing manager wants is the ability of investors to flee the fund. So, to avoid the ups and downs of the market (that is, redemptions), managers prefer a listed fund.

Of course, when a fund is listed, has no income and is badly damaged, then investors (not the manager) suffer the market - their units are worth very little to nothing. I imagine its a helpless feeling to be in such a position - I know I feel helpless being an investor in the PFMF which a manager that doesn't disclose much.

The PIF's unit price will never increase much from where it is now because any payments to investors (if any) may serve only to negate any growth within the fund. In fact, the PIF unit price is no more than guesswork, the real unit price is what is paid on the market for units from time to time.

While I can't say that I've looked at the memorandum and Q&A throughly, I would say that I'd be suprised if there is one word about the payment of redemptions - there is only mention of 'cash payments' and 'distributions'.

Yes,

 

[selciper]

Re: Octaviar MFS Premium Income Fund PIF

As Ms Hutson apparently rates her YouTube appearance a success (it hasn't been pulled yet) she might consider using the video medium to communicate with all the investors who voted for her in 2008. Mr Robert Pitt should also appear. Easy to organise, even nine year olds upload to YouTube.

No sign of the "imminent" update on the NSX site.