FMF [First Mortgage Fund]

[mellifuous]

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

 

[k.smith]

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]

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.

 

[mellifuous]

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.

 

[mellifuous]

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.

 

[mellifuous]

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

 

[k.smith]

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. ...."

 

[mellifuous]

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.

 

[k.smith]

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!

 

[mellifuous]

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.

 

[mellifuous]

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? ..."

 

[mellifuous]

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?

 

[k.smith]

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

 

[mellifuous]

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/

 

[mellifuous]

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/

 

[mellifuous]

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.

 

[mellifuous]

'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).

 

[mellifuous]

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

 

[k.smith]

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...

 

[mellifuous]

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.