LM Investment Management - Lack of confidence

[ASICK]

Hi PJSUAE,

I'm sincerely sorry that you've lost money in the LMMPF, but you are in good company. Probably a hundred thousand (or even more) good folk have lost likewise in these types of schemes. I'm pleased you made your posting.

I recommend you read all of KM's updates, especially the eighth. I think the eighth update makes it quite clear that whether NewCo comes into existence or Suncorp appoints a receiver, pre-existing investors have no equity left in the loan to "Maddison".

Yes, KM mentioned the $250m loan to Maddison comprised capital of about $113m and interest (accrued interest) - but accruals are assets (unless impaired/written off). Whatever the impaired value of the loan (including accrued interest) was, that is value that is now, for all practical purposes, lost.

As I understand it, there's also an (about) $48m second mortgage behind an LMFMIF first mortgage. If the first mortgage can't be recovered (which seems to be the case), then the MPF second mortgage of $48m will be lost if the FMIF causes the disposal of the security asset. Surprisingly, LM disclosed much about the MPF second mortgage in its recent RG45 and financial statements for the LM FMIF - these documents are worth a read too.

Whatever the value of the fund prior to KM's appointment, that value (without regard to other MPF loans), could immediately drop by as much as $300m (plus costs).

I hope other MPF members will post their views and answer some of your questions.

 

[TuftyDXB]

Hi,

I've digested most of the information in this thread, in particular PJSUAE's reply and questions 3 & 4.

My IFA/Broker advised me at the eleventh hour to seek financial and legal advice (not withstanding the latter, can someone remind me what IFA stands for!!!?) PJSUAE, I guess you are with a different broker to me.

I can stomach the facts and figures but the shunning I have faced is leaving a bitter taste! Is anyone else in a similar situation? If so what course of action in seeking advice (collective?) are you taking?

 

[ASICK]

ASIC Getting Tougher

http://www.timebase.com.au/topics/2...13-fcafc-52-responsibile-entities-and-managed

http://www.wellcap.com.au/assets/pif/updates/2013/021727095.pdf

http://www.asic.gov.au/asic/asic.ns...dings against Wellington Capital?opendocument

Meeting Cancelled: http://www.wellcap.com.au/assets/pif/updates/2013/021727096.pdf

 

[am262327]

Wishing to take collective action

I'm an investor who is also about to lose everything. I would be keen to see what options are available to me to sue their pants off.

* Can I sue the financial advisors who recommended it as a conservative option?
* Can I sue Peter Drake himself?
* Can I sue the government for not enforcing its own protections?

Please if someone could explain or else contact me privately I would be interested in taking action and LM.

 

[Taja]

The Investor Vote today on RE for FMIF

Notice on the FTI/LM website on the investor vote today on the FTI vs. Trilogy resolution, posted very very promptly .. I wonder why .. ?! They have been very slow to post updates on most other things:

""Resolution 1:

“That, subject to the passage of Resolution 2, LM Investment Management Limited (Administrators Appointed) ACN 077 208 461 be removed as the responsible entity of the LM First Mortgage Income Fund ARSN 089 343 288.”

In respect of this resolution, 1.26% of the fund were in favour of the resolution, 23.51% of the fund voted against the resolution and 20.04% of the fund were recorded as an abstention.

Accordingly, Resolution 1 was lost and LM Investment Management (Administrators Appointed) remains the Responsible Entity of FMIF and its Feeder Funds.

Resolution 2:

“That, subject to the passage of Resolution 1, Trilogy Funds Management Limited ACN 080 383 679 be appointed as the responsible entity of the LM First Mortgage Income Fund ARSN 089 343 288.”

In respect of this resolution, 1.03% of of the fund were in favour of the resolution, 23.74% of the fund voted against the resolution and 20.04% of the fund were recorded as an abstention.

Accordingly, Resolution 2 was lost and Trilogy Funds Management Limited was not appointed Responsible Entity of FMIF and its Feeder Funds.""

The actual vote tallies are on http://u.b5z.net/i/u/10199052/f/Voting_Poll_2013_06_13.pdf

FTI will no doubt be emboldened by this seeming vote of confidence in them (due I suspect to a lot of lobbying by IFAs with the investors on their books) and will hope that at the 15th July Court hearing it may persuade a decision by the judge in their favour .. But, as an FMIF investor I really hope the Court has more sense and opts for wind-up by an independent entity.

 

[Taja]

Investor Vote on RE for FMIF

Quick follow up: let me hasten to add that I am also very happy that Trilogy did not get a vote in their favour. Trilogy of course has gone on record as questioning the whole FTI-managed meeting and voting process, and has said that it would not accept an Investor vote nominating them as RE (nor the opposite ..!) - hoping no doubt that they might still get a verdict in their favour at the next Court hearing.

 

[ASICK]

The Vote

As I understand it, to abstain, one has to vote YES and NO for each resolution.

There are a large number of abstainers, and while LM (FTI) made it across the line with more than 50% of the units voted, less than 50% of the fund actually voted - that could represent a protest.

A Greek Example, "Compared to the last elections, PASOK lost about 1 million votes and New Democracy about half a million ”” a rather unpleasant outcome for both parties. It’s also quite worrying for them not knowing the political meaning of the high abstention rate and what the huge feelings of discontent might lead to." (emphasis added)
http://www.greenleft.org.au/node/46205#sthash.VGewTpNU.dpuf

I think, so goes the LM vote - "a rather unpleasant outcome for both parties (LM and Trilogy)".

 

[Taja]

Re: The Vote

As I understand it, to abstain, one has to vote YES and NO for each resolution.

There are a large number of abstainers, and while LM (FTI) made it across the line with more than 50% of the units voted, less than 50% of the fund actually voted - that could represent a protest.

A Greek Example, "Compared to the last elections, PASOK lost about 1 million votes and New Democracy about half a million ”” a rather unpleasant outcome for both parties. It’s also quite worrying for them not knowing the political meaning of the high abstention rate and what the huge feelings of discontent might lead to." (emphasis added)
http://www.greenleft.org.au/node/46205#sthash.VGewTpNU.dpuf

I think, so goes the LM vote - "a rather unpleasant outcome for both parties (LM and Trilogy)".

The voting form has a YES, NO and ABSTAIN box for each resolution. Although I did wonder whether those who voted YES and then NO (ie neither FTI nor Trilogy) have also been put in the Abstain box ! That aside, some 75% of investors (investor units) have NOT voted for either FTI or Trilogy. Let's hope the Court takes notice in July.

 

[ASICK]

The Absenters Hava it.

The voting form has a YES, NO and ABSTAIN box for each resolution. Although I did wonder whether those who voted YES and then NO (ie neither FTI nor Trilogy) have also been put in the Abstain box ! That aside, some 75% of investors (investor units) have NOT voted for either FTI or Trilogy. Let's hope the Court takes notice in July.

Thanks Taja. I went hunting for the voting form after reading your post, but the form had been removed from LM's site. Yes, I agree with your conclusions - seems a manager (Trilogy or LM) isn't the favoured path to take.

I think the absenters have it.

 

[ASICK]

Correction

... There are a large number of abstainers, and while LM (FTI) made it across the line with more than 50% of the units voted, less than 50% of the fund actually voted - that could represent a protest.

The statement should have indicated that neither of the proposals made it across the line of 50% (plus one vote) of all units on issue (not units voted).

 

[am262327]

I don't understand the vote that took place here, any background?

Also, I really want to help get the investors together. Any update on obtaining the register?

I'm an investor based overseas (currently in China) and would need to keep in contact mostly electronically.

 

[Taja]

I don't understand the vote that took place here, any background?

Also, I really want to help get the investors together. Any update on obtaining the register?

I'm an investor based overseas (currently in China) and would need to keep in contact mostly electronically.

There are several LM Funds, all in trouble. This vote concerns the First Mortgage Income Fund and its feeder funds - the vote was whether to change FTI to Trilogy as the Responsible Entity, or not. In the end most people abstained, but of those 45% who actually voted the majority was for FTI. This is probably of not much importance since on 15th July the Queensland Supreme Court will decide what is to be done - and whether the Fund should no longer be "managed" but instead be wound up - which many of us feel is the best option.

 

[am262327]

If I were to create a website for people affected by LM, for them to register so that we can start a community, what would the questions be on the sign-up form?

How much did you invest?
Was the investment advertised as conservative?
What's the ID number of your investment? (I'm thinking for later in case an official registrar is obtained)

The website aspect I'll host and maintain (I'm a sysadmin by day), but I could use some help in knowing what sort of content to put up there.

 

[ASICK]

If I were to create a website for people affected by LM, for them to register so that we can start a community, what would the questions be on the sign-up form?

How much did you invest?
Was the investment advertised as conservative?
What's the ID number of your investment? (I'm thinking for later in case an official registrar is obtained)

The website aspect I'll host and maintain (I'm a sysadmin by day), but I could use some help in knowing what sort of content to put up there.

For starters, you're welcome to copy as much of the LM content as you like, and of course, reformat it as you please:
http://moneymagik.com/lm_investment_management.php

 

[seamisty]

http://www.propertyobserver.com.au/...-of-lm-investment-mortgage-fund/2013061362221
Consulting to seek winding up of LM Investment mortgage fund


By Larry Schlesinger
Friday, 14 June 2013

 

[am262327]

Does that mean that we'd be able to use those funds and and return investors' original investments?

 

[ASICK]

LMFMIF

Does that mean that we'd be able to use those funds and and return investors' original investments?

If you're referring to the media article : yes, it means that if the court orders FTI (LM) to manage the LMFMIF, then LM will be winding the fund up in the short term. Further, it means that FTI(LM) is (in effect) necessarily winding up the fund (in order to manage the fund) even though it's given the court an undertaking that it won't. I don't want my language to infer in any way that FTI(LM) is disregarding the court, I mean that it simply has no other choice other than to do as it has to do.

LMFMIF is only able to derive cash from assets sales, but there's a bank debt, and there's management fees and other fees and charges to be paid. By way of example, in Trilogy's PFMF from 1 July 2012 to 30 May 2013 (11 months), Trilogy sold $27.1m in assets. Only $0.0075/unit ($6.6m) was returned to investors. After bank facility repayments, only $4.4m remained. Fund expenses including management fees would be paid out of the $4.4m - nothing more for investors.

Unless there's a later financial statement for the LMFMIF, the unit price is $0.55 - remember, that price has been assessed with the LVR for each loan at 100% - in my view, as a result of the 100% LVR expect a substantial drop in unit price.

It means investors will get back somewhere between a few cents a unit to $0.55/unit - in my view, closer to the few cents a unit than the $0.55/unit, perhaps between $0.10/unit - $0.20/unit (just a guess).

 

[am262327]

Re: LMFMIF

It means investors will get back somewhere between a few cents a unit to $0.55/unit - in my view, closer to the few cents a unit than the $0.55/unit, perhaps between $0.10/unit - $0.20/unit (just a guess).

In other words, probably not more than half our money, correct?

I've contacted a class action suit that I found via google searches and also contacted the trustee by email given on our updates. The latter said that they were also prepared to pursue legal action in order to maximize returns to investors. Is there then any downside to pursuing independent class action lawsuit? (I mean strictly financially speaking, I'll take care of the 'is it worth it' angle.)

 

[PJSUAE]

Re: LMFMIF

Hi,

I've read the article and ASICK's synopsis. The references are predominantly LMFMIF, what impact, if any, does this have to investors in MPF?

 

[ASICK]

LMFMIF / LMMPF

In other words, probably not more than half our money, correct?

I've contacted a class action suit that I found via google searches and also contacted the trustee by email given on our updates. The latter said that they were also prepared to pursue legal action in order to maximize returns to investors. Is there then any downside to pursuing independent class action lawsuit? (I mean strictly financially speaking, I'll take care of the 'is it worth it' angle.)

As I understand it, there's a maximum total claim of $20m against LM by way of the directors' indemnity insurance. That would mean that the total claim available to all LM funds (including the LMFMIF and LMMPF) would be limited to $20m - if only one fund brings a claim, that claim would be limited to the total ($20m), if more funds sue, then each claim will be limited to a pro-rata share (according to the value of respective claims) of the $20m.

If a class action is commenced, up to half of any claim could go to a litigation funder (including the lawyers).

Whether there's any claim/s will depend on whether a cause of action (the evidentiary base to bring a claim) can be found. Even if successful against the directors, success against the insurer may very well be another issue altogether. Members should not think that a cause of action arises out of mere loss. There has to be a breach of statutory duty, or negligence, or the like: loss is the starting point on a journey of inquiry into the cause of that loss.

LMMPF members and LMFMIF (and feeder funds) interests are (in my view) not the same. LMMPF and LMFMIF members should seek advice from KM and LM (FTI) respectively in preference to advice from Piper Alderman. Don't sign ANYTHING or do anything in relation to your investment until you obtain independent legal/financial advice to all of KM, LM(FTI), and Piper Alderman - Don't limit your rights.

Be mindful that class actions are actions brought outside the fund by a collection of individuals of the same class (fund members) normally funded (and driven) by a litigation funder takes all the risks for a substantial slice of the action, not actions brought by the fund itself wherein individuals are members and where the costs and risks are borne by the fund.

Here's Piper Alderman's link: http://www.piperalderman.com.au/firm/lm-investment-management-limited

Hi,

I've read the article and ASICK's synopsis. The references are predominantly LMFMIF, what impact, if any, does this have to investors in MPF?

Yes, these are only my personal views - LMFMIF and LMMPF outcomes depend on the circumstances for each fund. I think that the outcome for LMFMIF members will be better than for LMMPF members. I base this view on the fact that there's probably no equity in the loan to "Maddison" (not accounting for any sprinkings from a deal such as KM's indicative proposal) and potential complete loss of the (about) $48m second mortgage behind the LMFMIF's first mortgage (which is unlikely to be recovered).

LMFMIF members and LMMPF members have a common purpose in recovering as much as possible of their respective investments. However, if there's a potential claim for one or both of the LMMPF and LMFMIF (and feeder funds), (which I'm not suggesting there is), then such claim/s will arise out of the particular facts relating to each of the fund/s itself/themselves. In other words, as I see it, a cause of action for the LMMPF must be found in LMIML's management of the LMMPF, and so it goes for the LMFMIF.

I think it's best to wait for the information as it comes from KM and LM (FTI) first, but also look in on what Piper Alderman has to say from time to time - if I was an investor in an LM fund (which I'm not), I wouldn't be making Piper Alderman my first port of call. Get independent professional advice and make considered decisions about your individual actions.

Don't forget, there's ASIC: http://www.asic.gov.au/asic/asic.nsf/byheadline/LM+Investment+Management+Limited?openDocument