FMF [First Mortgage Fund]

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?

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'?

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

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.

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.

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

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.

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?

"... 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).

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'. ..."

Are you the only one impacted by this thing?

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.

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

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

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.

White ants eat away at your savings.

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

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

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.

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?

Click to expand...

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.

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.

Click to expand...

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.

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}