FMF [First Mortgage Fund]

A Conversation with ASIC

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

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

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

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

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

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

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

Fidicuary standards are of no interest to ASIC.

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

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

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

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

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

how much balmain hair extensions?

do Boots sell Trilogy shampoo?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

All I can say is...

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

My sympathies...

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

Hi Melli,

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

Take my advice Melli...

Fargeddaboudit.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

mellifuous said:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Click to expand...

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

Bring out the rod!

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

Cheers,

Fleetz

Hello Melli,

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

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

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

lightlystrung

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

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

BUSINESS MODEL ISSUES..

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

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

k.smith said:

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

Click to expand...

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

lightlystrung said:

Maybe a web page, promoting a petition, to be signed by 100's of unitholders, then sent to ASIC, demanding that they investigate unitholders treatment at the hands of City Pacific.

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

Click to expand...

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

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

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

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

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

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

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

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

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

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

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

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

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

The managers 'idiotic fundamentals' are just unbelievable.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

k.smith said:

http://www.goldcoast.com.au/article/2009/09/30/142401_gold-coast-business.html can't help but wonder if we will even get a look in after the bank retrieves their $112 million...is there enough land to go around????????????

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

Click to expand...

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

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

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

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

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

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

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

k.smith said:

http://www.goldcoast.com.au/article/2009/09/30/142401_gold-coast-business.html can't help but wonder if we will even get a look in after the bank retrieves their $112 million...is there enough land to go around????????????

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

Click to expand...

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

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

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

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

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

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

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

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

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

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

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

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

I think the CBA has a lot to answer for.

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

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

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

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

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

Is the past an indicator of the future?

Mirvac Aqua - a JV between Mirvac and Balmain

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

29 June 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

Finally, the penultimate paragraph carried the nut cruncher:-

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

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

Hi Melli,

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

lightlystrung

Hi Melli,

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

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

lightlystrung