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LM Investment Management - Lack of confidence

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2 long term directors resign/leave in a matter of months.!!! Maybe neither wanted to sign off on the financials and or know what is going to be in the audit report.

Lisa Darcy signed off on the 2011 reports even though Grant Fischer was the CFO.

Looking grim...
 
I think it's obvious that if things go pear-shaped, what career-minded director wants to be associated with a failed fund: certainly not good for the CV in the modern internet age.

In saying this, I have no idea why the good folk at LM are no more with the fund - maybe LM will disclose why they left - it really isn't a good look.

Time for a liquidator?
 

Board of Directors

Grant Fischer - Executive Director Finance
As Executive Director Finance, Grant is responsible for the overall financial management of LM and its registered schemes. Grant works closely with the CEO, Portfolio Manager and Board to position LM for further growth.

Grant's experience as a financial executive for over 20 years has covered many different industries with extensive exposure to business operations within the Asia Pacific region. Having worked for many large multinationals, Grant has a solid understanding of financial compliance and strong internal systems to manage company growth and informed decision making.

Grant is a member of LM's Board of Directors, Credit Committee, Funds Management Committee and Arrears Management Committee.

Grant is a Certified Practising Accountant (CPA) and holds a Bachelor of Commerce and Master of Commerce, majoring in Accounting and Taxation.
 

Here's Mr Fischer's CV as it was before he was deleted from the LM website (Grim? I'd be looking grim too if I was responsible for the matters proclaimed)

Board of Directors

Grant Fischer - Executive Director Finance
As Executive Director Finance, Grant is responsible for the overall financial management of LM and its registered schemes. Grant works closely with the CEO, Portfolio Manager and Board to position LM for further growth.

Grant's experience as a financial executive for over 20 years has covered many different industries with extensive exposure to business operations within the Asia Pacific region. Having worked for many large multinationals, Grant has a solid understanding of financial compliance and strong internal systems to manage company growth and informed decision making.

Grant is a member of LM's Board of Directors, Credit Committee, Funds Management Committee and Arrears Management Committee.

Grant is a Certified Practising Accountant (CPA) and holds a Bachelor of Commerce and Master of Commerce, majoring in Accounting and Taxation.
 

Time for a liquidator? Apparently looks can sometimes be deceiving - here's the latest rosy news from LM (seems to have been pretty hastily written and I can't see any mention of Mr Fischer's demise). ALL AHEAD FULL it seems on the good ship LM

RE: UPDATE ON THE CLOSED LM MORTGAGE FUNDS


We are happy to provide some further information for you regarding the activity we have been undertaking across a number of areas which are important for the management of the Funds and to the realisation of liquidity for investors. .


Update on Asset Report and Financial Modelling


Due to the scope and detail of work included, the BIS Shrapnel review has taken a little longer than originally expected. We now have that report, and are currently conducting a thorough analysis of that information for integration into the financial modelling which is to be provided to you. This process will take our portfolio manager and our asset and development managers a couple of weeks, following which we are allowing a two week period for consultation with ASIC in relation to its presentation for investors. As you would appreciate, it is important that ASIC has sufficient time to consider the information and we wish to have their input in finalising its presentation for you.

At this stage, we envisage being in a position to provide further information for you within the next four weeks.


Deutsche Bank


We have further reduced the Deutsche Bank facility to AUD 33 million and are in discussion with them regarding a renegotiated facility specifically for facilitating the work on the “hold” assets. We will provide further information on this as we proceed.

We maintain a good working relationship with Deutsche Bank and appreciate that though the interest rate is commercial, it is matched by the professional and commercial approach they have demonstrated since refinancing the Fund to allow the Commonwealth Bank of Australia to be repaid.


Managment Fees



We have reviewed our fees and detail the forward fee plan as follows:

1.50%pa calculated on the FUM of the “sale” assets; and
2.50%pa calculated on the FUM of “hold”/development assets.
We have received some criticism in relation to our management fees within the Fund. We are mindful that our fees are fair and reasonable for the work undertaken in managing the Funds.

The perception that there may be less attention required in managing a closed Fund, totally contradicts the reality.

The Fund is in control of the majority of assets, and managing those assets is an important and intense part of our daily focus. We have the expertise required to do this and as an active Fund manager, we utilise our experienced asset management and asset development teams to optimise assets and the outcomes to be realised by Fund investors.

LM has taken on the role of ensuring proper maintenance, expenditure, sales and control of the assets with a firm hand on what needs to be done to protect and enhance the property value. Whilst receivers can fulfil the sale of assets, they lack the specific property skills required to manage optimum outcomes. This is why we fulfil this role inhouse.



Management of Foreign Currency


Investors in the Funds have invested in several different currencies and the relationship and arrangements we have in place with our four foreign exchange providers have ensured that the hedged position required for the benefit of the Fund, is maintained.

We have a currency team of five personnel with expertise in managing this on a daily basis. We have specifically tailored our funds administration system to facilitate the reporting and management of the foreign currency. We feel the management of foreign currency and the system we have developed to administer it are unique to LM.


Updated ASIC Benchmark Document


We are currently updating the ASIC Benchmark Disclosure document to release to you, together with the asset and financial information.


Audit

We advise that Ernst & Young has commenced the financial year end audit of the Fund, to deliver the financials by the end of September.


Investor Income Catch Up
We have continued with the sales program of assets within the Fund. The pipeline of settlements of those sales has strengthened in the last quarter of the year, and as a result we expect to recommence the catch up of investor distribution payments moving into the end of this year.


Assets
Whilst you await the information above, we attach a profile of the assets of the Fund, which also includes brief information on the skills and duties of the team responsible for managing the assets. Photographs of the properties we have prospectively earmarked as "sell" as well as artist’s impressions of "hold" assets, are included.

We hope you find this useful for a better understanding of the nature of the assets. Market values have softened and the unit price has been adjusted downwards to reflect this. Sales rates are generally slow as is market recovery.

All asset classes have been affected as a result of the financial crisis. Whilst Australia has fared well when compared with the other developed economies of the world, we are generally still dealing with issues. Specifically for the Fund, issues related to the credit crunch, a lack of readily available funding across the commercial property sector, as well as softened property market conditions remain to be managed.

Our commitment is to creating liquidity and managing the assets for the best results in the prevailing market conditions.

We thank you for your patience. We are doing all we can to ensure that you receive the information as quickly as possible, and that the information covers all the detail you require whilst being presented in a format that is as easy to understand as possible.




We will provide further information shortly. In the meantime, should you have any queries, please contact your, please contact your financial adviser or intermediary.


Yours faithfully


LM Investment Management Ltd
The global pathway to Australian Investment Solutions
 
Thanks for providing the latest update Dinga. Yes, you're right, it's upbeat, and it even mentions the security of ASIC.

“As you would appreciate, it is important that ASIC has sufficient time to consider the information and we wish to have their input in finalising its presentation for you.” - You'd be forgiven if you thought that ASIC's input would protect you - but then you'd have to ignore the reality that ASIC is NOT a prudential regulator. Whether one makes a profit or a loss is not a matter of concern for ASIC. ASIC's task is all about form, not substance.

I note that after some extensive fund raising efforts (paid for pre-existing investors), that new investors bought into Trilogy's Healthcare REIT. In 2009, $3,555,000 was invested into the fund and 3,555,000 new units were issued, that's $1.00 per unit. The fund raising was quite effective – but how did the new investment fare? The unit price as at 30 June 2008 was $0.63 and so the new investment lost $0.37/unit the very moment it was made. So, I thought I'd have a grumble to ASIC – it just didn't seem right – they didn't care: Buyer beware & don't rely on ASIC.
http://www.moneymagik.com/

“We have further reduced the Deutsche Bank facility to AUD 33 million and are in discussion with them regarding a renegotiated facility specifically for facilitating the work on the “hold” assets.” - Of course they're “renegotiating” – does anyone think that LM has much negotiating power? - when a prudent lender lends, that lender makes sure the security is right for the loan, unlike a great number of managed fund managers. The bank probably holds a charge of some sort over some or all of the fund's assets, so it's probably the case that nothing is able to be sold without the bank's say-so.

It seems to me that bank loans to managed funds demand quite low LVRs. For example, up until August 2012, the PFMF's loan from the CBA had a 10% LVR covenant – eg. $30m debt requires $300m in security assets – if the assets drop to $200m, then $10m of the debt has to be repaid.

“We maintain a good working relationship with Deutsche Bank and appreciate that though the interest rate is commercial, it is matched by the professional and commercial approach they have demonstrated since refinancing the Fund to allow the Commonwealth Bank of Australia to be repaid.” - I'd say that the rate reflects the risk – While I've only looked into a couple of funds, I've never seen a fund paying such high interest rate on debt as paid in the LMIF.

“”it is matched by the professional and commercial approach” - of course it is - it's not lending with LVR's over 70%.

LM says, “We have received some criticism in relation to our management fees within the Fund.” - Let's hope there's a lot of grumbles coming from other investors about interest rates.

LM adds, “We are mindful that our fees are fair and reasonable for the work undertaken in managing the Funds.”- of course they are, but I wonder how many others are so-minded?

More on fees, “We have reviewed our fees and detail the forward fee plan as follows: 1.50%pa calculated on the FUM of the “sale” assets; and 2.50%pa calculated on the FUM of “hold”/development assets.” - My view? Over the top – way, way over the top unless they increase value – actually, I think it's quite an impost in a fund which has suffered such an enormous loss.

0.75% FUM is much fairer – keep in mind, FUM includes bank debt (and LM cites its fee is calculated on FUM (funds under management) – debt is sometimes a nice earner for fund managers – to my mind, there's more incentive for a manager to maintain debt than to pay it down – although the spruik is quite often the opposite.

Also, it's plain to me that if punters are paid back something, they generally become placid and compliant, but if the bank is paid back first, punters become aggravated. If the bank is paid back first, punters press for some money, but if punters are paid back first, the manager is free to make fees on the bank debt (where fees are calculated on FUM).

LM says, “The perception that there may be less attention required in managing a closed Fund, totally contradicts the reality.” - that's an interesting statement, especially when LM is making bucks of the delinquent loans it took over from the receivers and managers, and those bucks are made ON TOP OF it's excessive management fee – after all, it was LM which made the loans, such loans now defaulting, and as a consequence, bemoans the effort rather than making the least effort to console punters for the losses it (LM) has inflicted on them ! Crikey, even with such pain for investors, it still saps investors money with over-the-top fees !

LM says, “The Fund is in control of the majority of assets, and managing those assets is an important and intense part of our daily focus.” - and, as I understand it, LM is charging EXTRA for that control (– a really nice little earner. LM adds, “We have the expertise required to do this and as an active Fund manager, we utilise our experienced asset management and asset development teams to optimise assets and the outcomes to be realised by Fund investors.” - let's hope it's not that same experience which has already lost 27% of the fund !

“LM has taken on the role of ensuring proper maintenance, expenditure, sales and control of the assets with a firm hand on what needs to be done to protect and enhance the property value.“ - now, how the hell is a 'firm hand' able to “enhance the property value”? I know, it's magic – after all, without magic, it just wouldn't be possible.

“Whilst receivers can fulfil the sale of assets, they lack the specific property skills required to manage optimum outcomes. This is why we fulfil this role inhouse.” - this seems to me to be an effort to justify the fact that they're making some serious money on top of the management fee by taking over from receivers and managers whose expertise is getting the best value from defaulting loans.

LM says, “We hope you find this useful for a better understanding of the nature of the assets. Market values have softened and the unit price has been adjusted downwards to reflect this. Sales rates are generally slow as is market recovery.” - there, it had to be said sometime ! After all, the fund is stressed and assets have to be sold in a depressed market to pay fund expenses including bank interest, bank repayments, and of course all those fees to LM, as well as LM's charges on, and the maintenance expenses of, all those defaulted-on loans - punters are queued right at the rear behind EVERYONE else, behind general creditors, auditors, lawyers, custodians, LM etc. etc.

However, if a real crash in unit price is going to happen, it'll happen when assets are disposed of to repay investors – as I've previously posted, WC's PIF lost over $94m in what was an about $200m fund.

“Specifically for the Fund, issues related to the credit crunch, a lack of readily available funding across the commercial property sector, as well as softened property market conditions remain to be managed.” - it's magic again – now LM is managing the “softened property market conditions”.

“Our commitment is to creating liquidity and managing the assets for the best results in the prevailing market conditions.” - Could it be that investors might form quite a different view?

“We thank you for your patience.” - really? What else are investors able to do? Are investors being “patient”? Or are they simply trapped in what they perceive as a hopeless situation? My view is that it's the latter.

“We are doing all we can to ensure that you receive the information as quickly as possible, and that the information covers all the detail you require whilst being presented in a format that is as easy to understand as possible.” - as an outsider (and non-unit holder), I think the whole deal has been slower than investors deserve.

“in a format that is as easy to understand as possible”? - let's hope so. However it seems it's might be a tad complex, “Due to the scope and detail of work included, the BIS Shrapnel review has takena little longer than originally expected. We now have that report, and are currently conducting a thorough analysis of that information for integration into the financial modelling which is to be provided to you.”
 
Another senior person who would have been involved with disclosure and reporting issues....

Bruce MacKenzie (LinkdIn profile)

CFO Minpac Properties Pty Ltd
July 2012 – Present (3 months) Brisbane Area, Australia

Previous

Business Standards & Compliance Manager LM Investment Management Privately Held; 51-200 employees; Financial Services industry

March 2011 – September 2012 (1 year 7 months) Surfers Paradise, Australia
 
And another:-

http://au.linkedin.com/in/kenscotthamilton

''Ken Scott-Hamilton's Experience
State Manager WA/SA/VIC/Qld
LM Investment Management

Privately Held; 51-200 employees; Financial Services industry

July 2011– August 2012 (1 year 2 months)Australia

Based in Perth, responsible for WA, SA, VIC & QLD
General Manager MEA
LM Investment Management

Privately Held; 51-200 employees; Financial Services industry

April 2008– August 2010 (2 years 5 months)United Arab Emirates

Based in Dubai, responsible for the Middle East & Africa region"
 
HAPPY "10,000th VIEW" ANNIVERSARY DINGA !

Well, things are moving along - slowly, but surely, even with a small number of contributors things are moving along. At least a place has been established for members of the LMIF (and feeder funds) and others (like myself) to have a say about the issues which in some way relate to the fund. There is no doubt that without threads such as this, investors have no other source of information other than from the manager.

I don't know if the view counter is smart enough to make sure that each IP is limited to one count per 24 hour period regardless of the number of views from each IP, but if it does, then about 100 unique IPs are looking in each day. Of course the number varies and a number of the viewers might be looking in from more than one IP.

The bottom line - the move by Dinga to start the thread was a good one - and I for one wish him and all other LM investors the best possible outcome for what's left of their respective investments.

Happy "10,000th View" Anniversary Dinga !
 
Re: HAPPY "10,000th VIEW" ANNIVERSARY DINGA ! (Sub-Title: The Joke is on us)


Many thanks to all who have contributed to this great result - special thank you to those who have contributed such great advice - especially ASICK.

While I'm chuffed that my humble attempt to create some networking and critical discussion has reached such a milestone, I am still baffled as to why the vast majority of my fellow sufferers remain mute.

Perhaps LM is right <http://www.lmaustralia.com/news/2012/the-joke-is-on-us.aspx>
 
"A Frozen Fund is a Manager's Delight"

I'm really pleased to assist in any way I can - Don't feel too bad about lack of fellow investor support, it's the norm - most investors do very little. While some understand, and some of us want to learn more, the vast majority do nothing other than await the next mail out by the manager.

Many investors believe managers because they (the investors) are fearful of wind-ups because they think winding up is firesaling the assets - such fearful thinking is of great benefit to any manager who wants to remain on the drip feed - and it's so often quoted in explanatory memoranda to drive fearful investors to support the aims of managers (The PIF is a good case in point where the manager cited massive losses if the fund was to be wound up - in the end, I'm sure most investors would not believe that it would have been much better to wind up the fund rather than have gone thru what they've endured).

I'm sure there's a myraid of reasons why investors stick with a manager, eg. sticking with Trilogy as the unit price slips away into the sunset. I think that for PFMF members, not taking up Stacks was a BIG mistake, but then, I can understand investors' collective fear about Phil Sullivan, even though (in my view) such fear was entirely irrational - fear of fear itself has a strong influence on the decision making process.

It's important to collect information and to have that information available to investors, even though they remain mute. We can only learn from the past, and hope that those lessons protect us in the future. Many of us had no idea of the extent of lost possible - but we know now. Your fund is down 27% and the manager's foreshadowed more losses. Second mortgage, loans "behind" LMIF loans, a substantial loan to a relative, a HIGH interest bank debt, over the top management fees - in the meantime, investors suffer - such is what LMIF (and feeder fund) investors endure in a frozen fund (see below my submission to the Senate Finance Inquiry, in particular to "A Frozen Fund is a Manager's Delight").

There's some news and updates on; http://moneymagik.com/

Next week's a BIG week for the PFMF - a claim for $81m begins against the fund, and Trilogy has to file evidence in its case against four of the former directors of City Pacific Limited (links to the matters are provided). Balmain Trilogy took its most recent update of 20 September 2012 off its website - we wonder why? (of course), and Balmain spruiks a return by BT to investors of $295m by October 2012 when at one month out, Balmain Trilogy is $216.4m away for making its spruiked target (Balmain Trilogy hasn't spoken to the $295m for THIRTEEN MONTHS!):-
http://www.moneymagik.com/yardy_yardy_yah.php

On the front page of moneymagik.com you'll notice on the table with links relating to City Pacific that there's some links to submissions to the Senate Finance Inquiry. There's only TWO submissions. I made a submission (182)(and two supplementary submissions 182a and 182b) - another member made another (355). That's out of thousands of investors in the (then) City Pacific First Mortgage Fund. Trilogy did not make a submission on behalf of members of the PFMF (Pacific First Mortgage Fund, renamed from the City Pacific First Mortgage Fund).

As I understand it, only a couple also made submissions from the thousands of investors in the Premium Income Fund (PIF). That fund lost $90m from its (about) $200m value in fiscal year 2012! Of course investors in the Equititrust and LM funds were feeling quite comfortable in those days.

Many investors in Storm made a submission, some in writing, some writers showing the signs of age by way of shaking hands. I'm sure emotions were evoked in the Inquiry members. Storm members were smart to make those submissions, because as a result of the large number of Storm submissions, the Inquiry become known as the "Storm Inquiry" - if a few hundred City Pac investors would have made submissions it might have been known as the "City Pac Inquiry" and our outcome might have been entirely different.

Still, we struggle and I'm sure we all look forward to seeing an end to it all.

"A Frozen Fund is a Manager's Delight"
 
Trilogy and The Trust Company

While we've awaiting LM or another posting in relation to the LMIF (or feeder funds), a little more about Trilogy (one half of Balmain Trilogy which has reportedly (by LM) written to a number of members of the LMIF) - this time Trilogy as responsible entiity for the Pacific First Mortgage Fund (PFMF) and The Trust Company as custodian for the PFMF.

Here's an excerpt from Bransgrove's case note (linked below):

"The lender sought judgment for $20m against the guarantors. The guarantors argued that the Trust Company which was suing them, had no standing to sue them as it was not the company they originally contracted with.

... The judge decided in favour of the guarantors, commenting:

The steps which the lender took on the question of standing, ought to have been taken long before. The issue of standing had long been pressed by the defendants, in the face of obvious deficiencies of the original statement of claim." (emphasis has been added)


http://www.bransgroves.com.au/banking-and-finance/the-trust-company-v-perry-2012-nswsc-604.html

The full judgment is linked in the Bransgrove case note.
 
Re: HAPPY "10,000th VIEW" ANNIVERSARY DINGA !

You have our support Dinga... Each one of these funds from the "Gold Coast" has to be scrutinised and brought to account. When we applied the pressure to Equititrust and their false claims the cracks started to appear... In the end we were proven to be right despite repeated attacked by company stooges...
Forums like this are an invaluable tool for the sharing of information. The funds hate it but if they have nothing to hide they have nothing to worry about...



 
Got sick of waiting for detailed and substantial information, so I've just sent the following email to the Director who provided the advice dated 27 August 2012 (see above). Hope she's still with LM....

As usual, it seems what LM says it will do isn't what it does (ie. on 7 August I was advised that "We are preparing a full response for you which you will have shortly").

The latest Update of 18 September 2012 contains only very general information - I live in hope that investors will indeed shortly be provided with all of the necessary and detailed information that we need - including that specifically requested in my emails.

Given the level of investor discontent, I was not surprised to receive LM's 'warning' that investors may be approached by Balmain Trilogy. Given the Funds' performance in comparison with the level of fees and charges (and my recollection of the consistent failure to meet predictions/forecasts), little wonder others may think they can do better for the long suffering investors in these frozen funds.

In my view there are two fundamental questions that demand urgent answers, and I request that LM urgently provides investors with clarity on the following:

1. Will the investors in the feeder funds be given a vote on the future of the FMIF? If not, why not?

2. Will investors in FMIF and the feeder funds be specifically asked whether or not they want the funds to be wound up? If not, why not?

Regards

BTW You mentioned the online forum - LM's participation would no doubt be welcomed by all; if LM thinks information is incorrect, out of context - whatever - correct it.
 

Dinga, you are absolutely correct, let the fund manager participate in the forum and correct what they feel is misrepresented... Don't hold your breath...
 
Dinga, I'll bet that LM doesn't want to give investors too much time to think about the scheme it's attempting to win over investors with. Yes, I agree, LM seems slack with regard to providing members with a RG45 - I note the following excerpt in the article you provided:-

"Zenith Investment Partners senior investment analyst Dugald Higgins has been cautious about the LM fund’s prospects for some time but advised clients before the meeting that “there is no real merit in voting ‘no’ [to the split] as far as I can see as you get locked into a non-performing fund getting eaten up by prioritised external debt payments and severely impaired assets”. [and he didn't mention the over-the-top fees rewarding LM for losing investors' capital]
http://afr.com/p/personal_finance/s..._frozen_fund_investors_3lKdZ6kbAIJfLyvAommpAJ

Just to keep investors' eyes on exactly when LM files the LMIF return with ASIC, here's a link:-

http://www.asic.gov.au/asic/asic.nsf/byheadline/Introduction+to+ASIC+Connect?openDocument
Select "Search ASIC Registers" (bottom RHS of page)
From the drop down menu select "Organisations and Business Names"
Then enter the entity you wish to search:-

LM First Mortgage Income Fund
Trilogy Pacific First Mortgage Fund
Trilogy Healthcare REIT
Trilogy Cape Parks Fund

Yes, some might consider Trilogy, but I won't:-
http://moneymagik.com/three_part_trilogy_funds_management_tragedy.php
 
Trilogy's lawsuit against (now, since they've discontinued against the director who died TWO years ago) four former directors of City Pacific Limited (under external administration) has just become more complex - the directors have cross-claimed. Here's the latest order (27 September 2012) for those interested:
http://moneymagik.com/P_NSD604_2012_283083.pdf

Time had been extended until 28 September 2012 for Trilogy to file and serve evidence in support of its claims. A further extension has been ordered until 4 October 2012.

This is going to the one action worth following:
Federal Court Link:
https://www.comcourts.gov.au/file/Federal/P/NSD604/2012/actions

Maurice Blackburn's link"
http://www.mauriceblackburnnsw.com....tions/current-class-actions/city-pacific.aspx

Balmain Trilogy's site:
http://www.balmaintrilogy.com.au/
 
I just noticed this at ASIC listing for the LM First Mortgage Income Fund:-

Date: 16/05/2012
Document Number: 027850151
Document Type: Constitution For Managed Investment Scheme Modification Of Constitution (5101B)
Pages: 21

https://connectonline.asic.gov.au/R...t mortgage income fund&searchType=OrgAndBusNm

I wasn't aware of the amendments, but I guess investors in the fund were. By the way, LM still hasn't filed the fund's 2012 return - by my reckoning it's got until close of business tomorrow 2 October 2012 (since it was due on Sunday and Monday's a holiday in Queensland).

http://www.asic.gov.au/asic/asic.nsf/byheadline/Introduction+to+ASIC+Connect?openDocument
(use "Search ASIC Registers" - "Organizations & Business Names" - and enter "LM First Mortgage Income Fund"
 
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