Managed fund co-operation group

[mellifuous]

Welcome to this new thread which has been created in the hope that members all all managed funds might find ways of solving issues of common concern.

Issues such as how to put pressure on government for a changes in applicable law in order to give (better) protection to investors in managed funds, how to pressure ASIC to look into alleged wrongdoings by fund managers, and how to gain co-operation with the media to present the plight of investors in a constructive and beneficial way.

If you are a member of a manager fund, or if you are not but feel you are able to contribute in a constructive way, then I sincerely hope you will join to express your view and co-operate to alleviate our mutual concerns.

This new thread is a joint effort of members of FMF and MFS at this time.

 

[seamisty]

This has been posted on the OCV thread but I want it included on this thread as a record of investor grievances.
The following is a headline in todays Financial Review (I can' access the full article);;;Creditors shiver as ATO freezes Octaviar funds
Monday, 19 October 2009 | The Australian Financial Review | Lisa Allen

The Australian Taxation Office has ordered the freezing of $60 million worth of Octaviar funds to prevent creditor access.;;;

I want to know why the ATO's claim would rank ahead of other OCV creditors' claims? PIF investors had a legally binding agreement with OCV by way of the $50 mill support facility which was triggerd in FEB 2008, before there was a list of other creditors. Why should the ATO have extra powers that excludes and is detrimental to the rights of the 'little man'? Seamisty

 

[mellifuous]

Hi Seamisty, I think the ATO ranks ahead of every other entity apart from salaries/wages - the tax act is the only act more scarier than the corporations act.



My concerns about how the FMF was run are generally encapsulated in my three submissions to the parliamentary enquiry:-

http://www.aph.gov.au/SENATE/committee/corporations_ctte/fps/submissions/sub182.pdf

http://www.aph.gov.au/SENATE/committee/corporations_ctte/fps/submissions/supsub182a.pdf

http://www.aph.gov.au/SENATE/committee/corporations_ctte/fps/submissions/supsub182b.pdf

There is at least one more that I'm aware of:-

http://www.aph.gov.au/SENATE/committee/corporations_ctte/fps/submissions/sub355.pdf

Three of the most important issues were (1) conflicts of interests, eg. the deconsolidation of the fund, (2) disclosure, eg. limited disclosure in financial statements, and (3) related party transactons.

We didn't know the name (and structure/ownership) of all lenders. We didn't know how much debt there really was, and we didn't know the true status of loans.

Rolling over of loans was a big problem for us because it allowed the manager to carry on with what I regard were the 'idiotic fundamentals of the fund', that is, continue to lend to defaulters based on a belief that pressing defaulters for payment would not return the money in the end: that is, the finished product would return the money regardless of the state of default.

There are just a few issues that might be of interest to flesh out some paragraphs to a final document somewhere.

 

[mellifuous]

Ok, I know I'm a prolific poster, but please let me remind you that I have a lot of money at stake in the FMF and I'm concerned about getting back as much as I can. I'm not out to do anything but better my chances - I would be foolish to do otherwise.

I'm not for replacing the manager or for winding up the fund (at this time), but I am for improving the rights of investors (particularly in the FMF), ensuring more current information is given to investors, ensuring a more active role by the regulator wrt managed funds, and ensuring (as best I can) the return of at least a reasonable proportion of our investments which have been decimated at the hands of the funds' respective managers.

In the FMF the manager stated in its BRW release that investors would be given a choice about the future of the fund. Now, just days ago the manager stated that it wasn't going to release the promised 'reports' on the reviews, rather a summary report.

How many months do investors think we sould wait to get a promised report on the state of the FMF? How do investors think that we will be able to make a decision on the fund's future without a comprehensive report? Are there investors who think we've not going to get such a report?

Even hardship payments seem not to be forthcoming until next year (if at all) - but the manager will take its millions before those in need, even though the manager knew the need of members before it took the fund - cleary those in need were critical to Trilogy's success - but those in need are still in need.

Interstingly, 'occupants' (not owners) of Grande Pacific have been promised tenure and the manager has experessed the view that it will run Grande Pacific as a long term business even before we've been fully advised (by way of a comprehensiive report) and without any decision by members about the long term future of the fund: a decision we can't make without the reports which are not forthcoming (at this time).

These sorts of action alone give rise to concerns which FMF members cannot oppose/resolve because we simply lack cohesion, and we get no support from ASIC because we lack the overall 'managed fund' collective to press ASIC and the government into action to help/protect us.

ASIC would say that managers comply with the law, and they probably do - but, 'compliance' didn't help us before, We know that ASIC will act with enough public pressure, and Storm investors prove the point with their successes in getting a lot (properly) done for them.

I know that many people are lookers, and are so for a myriad of reasons, but I want to express my view that 'lookiing' does not bring about change, only actions do. If you're a looker and you have money at risk in a managed fund, and you feel you can't add to the content of the thread, then perhaps you might like to post a message of support.

Readers should also note that we will need the support of funds' members' names in order to give effect to documents sent to government and to the media on behalf of a 'group'.

It's early days yet.

The one thing we should be able to agree on is that we have lost an enormous amount from our respective investments - I'm sure we'll also agree that the losses should not be put down solely to the global financial crisis.

Thanks.

 

[k.smith]

Across the forums and action groups there are many angry investors who are trying to make themselves heard. We should combine our efforts. There are many issues that we share in common

1. Lack of disclosure, such as accrued accounting where the true financial state of the fund is obscured from investors, where interest and capital paid are not clearly presented in financial reports

2. The lack of action on behalf of unitholders by the regulators -e.g the inaction on recent comments made in the media regards to the value of the PIF units on the NSX
http://www.theaustralian.news.com.au/story/0,25197,26149214-601,00.html

3.Conflicts of interests e.g the deconsolidation of the CPFMF from the parent company.

4.Related party transactions...

5. The role the auditors play.....
http://www.ilovebig4.org.ua/2009/06/big4s-billion-dollar-errors-lawyers.html
".....However, in some cases auditors appear content to authorise financial statements which are incorrect, due to incompetence, personal interest or a combination of the two. As with ratings agencies, the independence of auditors has been called into question, given that they are being paid by the very people they are supposed to be monitoring.

Auditors are officially appointed by a board's audit committee to review management accounts, but in many cases that company's board is on very friendly terms with its executive team. As such, questioning the auditors' conclusions may be akin to questioning the performance of management....."

We should aspire to draft a collective letter, from collective unitholders, from collective funds, and get our story into the open.

 

[seamisty]

mellifuous, being a prolific poster is fine if at the end of the day attention is drawn to the lack of regulation and the total disregard to the thousands of investors left in limbo because not one single govt appointed employee, journalist, or anyone else in a delegated position to look after our interests do nothing but continue to zip their lips, plug their ears and put their sunglasses on!! What does it take to expose those responsible for blatantly misleading and offering nothing but broken promises and highly inflated figures to achieve their own financial reward? For example, recently Mr Steven Pritchard, chairman of the NSX reported the following incorrect information regarding the Wellington capital Premium income fund:::
National Stock Exchange to list frozen funds;; Anthony Klan | October 01, 2009
Article from: The Australian
THE nation's second largest share trading platform, the National Stock Exchange, is preparing to list dozens of frozen mortgage and property funds - holding hundreds of millions of dollars - in a bid to return funds to desperate investors.

NSX chairman Steven Pritchard said the exchange was negotiating with several property and income fund managers representing "more than a dozen funds", which were seeking to list their frozen funds in a bid to provide liquidity to investors.

"Many of these frozen mortgage and property funds hold good-quality assets and I have no doubt many investors in those funds will receive all their capital back as well as their distributions," Mr Pritchard said.

"This is about providing a liquidity mechanism for investors who want to exit the funds."

In October last year more than 30 funds, holding more than $25 billion on behalf of 250,000 investors, froze redemption facilities after a run on non-bank deposits.

That run on mortgage and property funds was prompted by a federal government move to guarantee bank deposits amid the turmoil in financial markets.

Mr Pritchard said listing on the NSX, which operated similarly to the Australian Stock Exchange but typically attracted far smaller companies and lower levels of transactions, would help improve liquidity.

"With the inability of investors to currently redeem their investments in the many mortgage and property funds which have suspended redemptions, NSX Ltd and its subsidiary exchanges are in an ideal position to list the securities of those funds," Mr Pritchard said.

He said the frozen Octaviar Premium Income Fund - which had raised $750m from investors and listed on the NSX late last year after the collapse of parent company MFS Ltd - was an example of how frozen funds could trade.

Units in the fund began trading at 11c on listing with the NSX and are now selling for 28c, although they are relatively thinly traded.

Consumer groups yesterday expressed concerns cash-strapped investors desperate to access funds might sell their frozen funds for much less than they were worth.

"The danger here is desperate investors might be forced into selling their investments for much less than they're worth because they can't afford to hold out until funds are unfrozen," consumer advocate Denise Brailey said.

"Investors looking to get out of frozen investments need to be very careful about the price they seek to sell at.

"Just because some funds are frozen now does not necessarily mean they are worth far less than they were before they were frozen," she said.

One of those aggrieved investors holding frozen funds is Roy Abrims, the former chief executive of photographic chain Rabbit Photo, who personally has about $540,000 invested in the AMP Capital Enhanced Yield Fund which he has been unable to withdraw.

Mr Abrims said he would rather the AMP Capital Enhanced Yield Fund move to unfreeze redemptions than list on an exchange.

The AMP Capital Enhanced Yield Fund is not understood to be considering listing on any exchange.:::

To my knowledge, Mr Pritchard was contacted re his mistake:ear Mr Pritchard,
I am contacting you in response to the media article http://www.theaustralian.news.com.au...14-601,00.html regarding the listing of other frozen mortgage and property funds. I am a investor in the Wellington Capital Premium Income Fund, previously Octaviar PIF, currently trading on the NSX as PIN. I and other investors would appreciate it if you would please not mislead other investors in these type of funds by using our Fund as an example as to the success of how frozen funds can trade as your figures were totally incorrect and misleading.
Upon listing the units traded at 45cents, one trade of 2,000 units and have steadily declined to trade at around 10-12 cents at present, reaching as low as 0.056 cents per unit with a total of 99 trades since listing almost a year ago. From first hand knowledge of some investors who have sold on the NSX, they sold because they are destitute or have serious health issues. One investor had to sell a parcel of units to buy medication for a terminal illness. The majority of investors of this Fund were vehemently opposed to the listing at all but were left with no alternative.
Wellington Capital has been the Responsible entity of the Fund since May 2008 promising PIF investors distributions, a buyback of units and an increase in unit value. To date we have not received a cent in distributions, no buyback has occurred and unit values have declined by at least 6 cents. Redemptions are non existent and investor morale is very low.
Having been 'conned' by Wellington Capital' I do not appreciate reading media articles with further misleading information in relation to our Fund. Perhaps a retraction is in order or at the very least in future please do some research before making incorrect statements in the public domain.::::
Yep , as usual, no response and no media retraction, even after Asic, media watch and News Ltd were notified as was the Gold Coast Bulletin and the NSX. So it is ok to print unresearched incorrect data but when you are notified that the information is misleading and in fact not true, nothing is done to rectify the problem. NO ONE has the GUTS to admit publically that they GOT IT WRONG!!!! When and how do we make them accountable?
Today I again contacted the NSX as follows:::
I am an investor in Wellington Capital premium income Fund trading as PIN and am concerned that our RE has not updated current and potential investors to the fact that Wellington Investment Management Limited as former RE of the PIF is still a named respondent in the Class Action. It is my understanding that WC reneged on the negotiations with Carney Lawyes and was not removed as a result. I consider this to be price sensitive information and should be publically revealed:::: I included a contact no for Carney lawyers and have had no acknowledgement from the NSX.
Who regulates the NSX? I quote from the NSX:::REGULATORY NEWS SERVICE
The NSX Listing Rules requires that listed entities report market significant events to the NSX. This information is important to keep the market informed of their activities :: I have run out of time but will continue to post other examples when time permits. Regards, Seamisty

 

[mellifuous]

It seems my subconscious has been working overtime again - and thanks to the remnants of my neural connexions, I've awoken with what might be the key issue in mind, and that is THE FROZEN FUND and a way to resolve the problem.

While there are issues that need to be addressed from the past, it is the present that is most pressing to us all.

In my submissions to the Inquiry I suggested that an independent entity be appointed to assess any frozen fund to determine whether the fund should be wound up or continued in some form or other.

This entity should publish a complete report on the fund, the assets, the market, and management, and make enforeable orders as to the future direction of the fund, with such orders monitored for compliance.

In the event a manager intends to declare a fund frozen, then at the time of such a declaration, that manager should be compelled to publish a strategy which it intends to follow in order to bring the fund back to liquidity. The proposd statutory body would take the manager's proposed strategy into account when assessing the fund.

I've noticed that the managers of MFS / FMF / Mirvac Aqua / Balmain made a lot of promises, but how many were fulfilled, delayed, or left hanging? - are they aware that the promises they make are incapable of fulfilment? Are some promises no more than stalling tactics?

I propose that we draft a letter to Mr. Ripoll of the Parliamentary Inquiry suggesting that he consider recommending to Parliament that legislation be enacted to create an independent entity charged with the assessment of frozen managed funds (responsibilities/powers/etc to be discussed).

I think trust is in short supply, and I don't think any of us really want to retain our investments in funds in which we have no confidence.

If one thinks about it, a frozen fund really is a 'Manager's Delight' - investors cannot get their money back and there is nearly an expectation that income will not be forthcoming. Fund value diminishes, income dries up, but managers and facility providers have a hay day.

The frozen fund does no more than provide managers with the optimum conditions to secure their incomes - they do not have to go to the market for capital, and the capital value of does not necessarily have to be diminished. Even valuations might favour managers (remember, valuations might be 20% in error) - impairments seem to be at a manager's discretion.

Managers and faciility providers incomes are secure. Another issue that might be canvassed in such a letter about the creation of the proposed entity might relate to tax - perhaps the entity could assess whether any tax payable/paid by the fund in recent years related to REAL profit, or to 'profit' calculated on some false or fraudlent basis.

If one looks at the Madoff affair, one will see an interesting example - investors in Madoff's enterprises paid tax on their 'returns', but the enterprises were doing no more than repaying recent investors money to past investors. In order words, over many years, investors were at best being paid back capital and not income - however, investors paid tax on those 'payments'.

Under the applicable taxation act, 'income' has a specific meaning - if a fraud has been committed and there really was not any 'income', then perhaps there really should not have been any assessable tax to pay.

I'd guess there's going to be (if there hasn't been already), a lot of Madoff investors seeking tax credits/refunds as a consequence of the fraud. I'll bet the US government won't be wanting to pay them back either, so the matters might gain prominance in the court system at some time in the future.

With respect to the FMF, I believe that from last September 2007 (of some time after), the FMF was also non-income producting and that money paid to investors really could not be regarded as 'income' (as defined by the taxation act) but rather a repayment of capital since the fund was not really making money - in fact, I believe it was losing money at that time.

Further, I believe that any tax paid for that period should not have been paid and should be credited back to the fund.

These are personal beliefs and each members should read the financial statements of the fund to determine the matter for themselves.

Thanks.

 

[seamisty]

I agree investors should be credited or reimbursed for bonuses paid to managed fund employees if it is proved those bonuses were calculated on over inflated performance figures or related party transactions also. I will post part of an old article from Crikey from Mar2008. Seamisty http://www.crikey.com.au/2008/03/04/mfs-does-an-alan-bond-as-fire-sale-continues/;;;
On a proportional basis, the sale of GIPL back to Gersh represented even worse value to MFS shareholders than the disposal of Stella, which was sold for around one billion less than MFS paid to assemble the tourism business.

The man who guided those purchases was recently terminated MFS CEO, Michael King. In what must have been MFS’s “pay for underperformance” bonus scheme, King last year received a cash bonus of more than $2 million (as well as base salary of $800,000). Unlike other MFS executives like CFO David Anderson and Investment Banking boss, Luke Gannon (who received almost 70% of their remuneration in worthless MFS scrip), King wisely chose to accept only cash. Sadly for MFS shareholders, that appeared to be the only wise move the polo-playing former lawyer seemed to make.

If and when MFS is placed in liquidation, creditors will no doubt be imploring legal action against King to recover the bonus payments in a similar manner to those of infamous One.Tel founders, Jodee Rich and Brad Keeling, who had their $7.5 million bonuses clawed back after One.Tel slid into oblivion

 

[mellifuous]

The proposed statutory entity and unit value.

I've made postings that if presented with a low unit price offer that I'd refuse it in order to stay in the fund to take advantage of any future increase in unit price.

I've also stated that I believe that the needy amongst us would grab such offers with both hands simply because they need the money. I believe these folk would obviously lose out on any future fund increases.

It was only during a conversation yesterday that I realised what I had posted on my site some time before, and this is, WE ALL LOSE.

Yes, those who take the money lose, but so do the ones who stay - the ones who stay on are compelled by the very mechanism that many would say got us into this position in the first place - greed. We will be compelled to stay in the fund for a perceived benefit.

And what is the 'switch' for the ones who stay? It's the fund value based on valuations. I'm sure we're all aware by now that valuations could be up to 20% in error, so we've making a decision based on a potentially erroneous proposition. Valuing is not a science: valuations produce estimates, not precise values.

It seems to me that valuations would be used as the 'switch' to determine whether one stays in the fund or not - that is, we turn one way or the other based on an estimate. If we look to the past, are any of us able to say that we have any degrees of confidence in past estimates relating to fund asset?

The accruals accounting system coupled with asset valuations leaves margins of errors that I believe make decisions about future investment in the fund no more than guesswork for investors. I believe we will not be privy to all of the financial details and would be severely disadvantaged.

Where is the fairness in an offer a 'fair value' unit price (that is, a price calcuated by the Net Value of the Fund/Number of units) rather than a $1 unit price?

Where is the fairness for the needy who leave the fund and take the low offer? I believe there is none.

Where is the fairness for the one who is able to afford to stay and does so based on a perceived benefit? I believe there is none.

The only fair propostion is to maintain a full value ($1) unit price and make pro-rata payments at that value from time to time. Example if there is the potential to pay 5% of the fund, then each unit holders would be paid 5% of their holdings directly to their accounts without the need to accept/reject an offer - a holding of 1000 units ($5000 at $1) would receive $500.

There is no need to make an offer, there is a need to make a payment, and there is aneed to maintain equity for everyone within the fund - without fear or favor.

In this way, ALL unit holders would retain an equal amount of equity within the fund REGARDLESS of the funds value and would retain the ability to make decisions about the fund's future from time to time as more proper assessments would be able to be made.

I think we should keep in mind that managers have two self-intersted goals, (1) income, and (2) the long term continuation of that income.

A low offer is an offer than many will deem too low to accept, and as a consequence they will unwittingly remain in a fund that they would otherwise abandon had they the 'free' choice to do so.

While a low offer certainly does reduce the funds under management ("FUM") (and thereby reduce the manager's income which is calculated as a percentage of FUM), that same low offer will cause members to stay in fund and thereby enhance the manager's long term continaution of its fees.

An example is the MFS (Oct/PIF), the offers are so low that only a few have sold, every one hangs in their for an improvement - and who is the winners? the manager and the facility provides (oh! and the developers).

For us, our funds are frozen in time, but for managers and facility providers these frozen funds represent cash cows capable of being milked for years.

I would submit that in the event a fund is frozen, and in the event it has not been determined to wind that fund up, that its unit price should be pegged at $1/unit (regardless of the unit's 'fair value'). In this way all investors in that fund would be treated equally.

Of course, if a fund is to be wound up, then the unit price is irrelevant.
I further propose that managed funds should be prohibited from being listed in the event they are frozen.

Again, my own opinion.

 

[mellifuous]

sorry for the error about the rate of payment to a unit holder in my previous posting.

An offer of $250 (5% of the original example) could be made in either of two ways:-

(1) a payment to all of 5% of original holding (250 units at $1.00/unit) is $250

(2) if the unit price is reduced to say $.50c, then 5000 units = $2500
then an offer of $250 (5% of the original), would require 10% or 500 units.

Clearly, any member who takes the offer leaves the fund with 5% of his/her original investment at a cost of 10% of that investment. If example (1) was adopted then all members would retain their original pro-rata equity in the fund.

Under option (2) most will remain in the fund in the hope of improvement.

Does anyone think that those who stay in would accept only $.50 if they stay in for yet another 6 months? or 12 months? probably not, so the game just goes on and on.

Unless members have precise knowledge of the market and the state of the fund, how could they make a decision to know they would be better or worse off than those who took the offer?

In my own opinion, I have not seen a fund manager yet who have given adequate information to members in order than members are really capable of making an informed decision.

I think the worst offer you can get is one that you can't accept..

Thanks.

 

[k.smith]

The fundamental of a managed investment fund is an investment in which all unitholders are treated equally.

When the fund is frozen, this fundamental should be sustained - no unitholder should be disadvantaged.

The law is wrong because when offers are made it forces the needier unitholders who take their money to take the brunt of the loss, and this is contrary to the fundamental of the PDS under which we all invested.The needier unitholders who take the offer are immediately disadvantaged, and unitholders who stay then fall into a different category...of either success or further failure..!!
http://www.balmaintrilogy.com.au/pdf/BRW_Aug20.pdf "..Griffin is confident the fund will have a future.....and with proper management there is every chance the fund can even reopen.." So there is a prospect of success, which the needier will lose out on if they are presented with an offer, while the more fortunate can "be strong again"...

Offers should not be made, managers should be compelled to pay pro-rata redemptions based on a fixed percentage of units the investor has.

 

[Mary Lynch]

Hello all, I appreciate enormously the amount of work that you have put into your research Mellifluous and Seamisty (yet again) and others. Thank you all, from the bottom of my heart.

Mounting a class action was difficult for the MFS action group, as apart from other obstacles, like the infernal, incestuous group of fatcats around JH, it was hard work obtaining the unitholder register. However, you have the CP register, so we are well ahead in the job of getting support from unitholders.

So, does the register have email addresses? Can we round up unitholders, and put them in touch with this site? Then we can detect the talent....barristers/ collective knowhow etc that there is available out there....or have you already done that.

Forward movment from here I hope! Less talk, more action!

 

[mellifuous]

The fundamental of a managed investment fund is an investment in which all unitholders are treated equally.

When the fund is frozen, this fundamental should be sustained - no unitholder should be disadvantaged.

The law is wrong because when offers are made it forces the needier unitholders who take their money to take the brunt of the loss, and this is contrary to the fundamental of the PDS under which we all invested.The needier unitholders who take the offer are immediately disadvantaged, and unitholders who stay then fall into a different category...of either success or further failure..!!
http://www.balmaintrilogy.com.au/pdf/BRW_Aug20.pdf "..Griffin is confident the fund will have a future.....and with proper management there is every chance the fund can even reopen.." So there is a prospect of success, which the needier will lose out on if they are presented with an offer, while the more fortunate can "be strong again"...

Offers should not be made, managers should be compelled to pay pro-rata redemptions based on a fixed percentage of units the investor has.

That makes sense - what is the point of an offer when it could be that no one is the winner? The needy run, and they greedy stay - managers promise but seldom deliver.

The concept of the 'offer' is flawed. Perhaps the government simply did not invisage that so many prominent managed funds would fail while even a larger percentage would become frozen.

What is the point of reducing the unit price if it does no more than cause the needy to feel they have to take less while forcing the greedy (I'm one of them) to stay in with the hope of recouping losses?

Fixing the unit price at the constitutionally determined price at the time of freezing the fund is fair and equatable to all. In this way the needy are not advantaged and the greedy don't have to retain funds that could otherwise be withdrawn without fear of loss.

I propose that the concept of 'offer' be erasef from the Corporatons Act, and be replaced with compulsory redemptions paid by the manager of frozen funds as soon as some predetermined level of surplus cash appears in the fund, say every 2% - each member should be paid a fixed percentage on a pro rata basis - that is, for example, each member be paid 2% of their holdings.

It's easy to see here that this woud effectively cause members to begin winding down the fund - now, managers would not be happy with this because it's not in their best interests. So, they would say, the offer is good, and 'fair value' is fair, and they would be right, but only for them, not for the needy and the greedy.

The the example of the MFS, a few left early, but have they done that much worse than the one's that stayed? Probably not.

Unless managers are capable of proving on some real factual basis that the fund will grow to return to liquidity, then the funds should necessarily be wound down by mandatory redemption payments (as proposed) while the funds are frozen.

Many funds like MFS and FMF have suffered extraordinary losses which will not be recouped, and to think that these funds could ever become a shadow of their previous selves is a pipe dream.

Accurals accounting, lack of disclosure, and self-interest by managers will always cause investors to be disadvantaged.

There can never be any payment unless there is cash in the fund anyway. This is real problem, investors want their money back - so, while there is a demand on the return of capital and the fund cannot return that capital, then a frozen fund will remain illiquid. It requires the majority of members to agree to stay in the fund to enable the fund to gain liquidity - there is no other mechanism that is fair to investors.

Some time ago I tried to get up constitutional amendments and as a 'quid-pro-quo' condition to offset draconian conditions imposed on the manager, I proposed that members retain their investments in the fund for a set period of time, with an ability to draw down funds over set period of time. Without this mechanism, the fund will remain illiquid while there is a demand by members for the return of their capital.

A 'fair value' unit price is a croc and should be smashed from existence, it is the mechanism a manager uses to compel those who believe 'the future to be strong' spiel (per. M. Griffin/BRW bull), and to negate the desire by members for the return of their capital. MFS investors were put in a similar position and now find themselves trapped in la la land - I wonder if they'd make the same choices now that some water has gone under the bridge?

If a manager really thinks that the 'fund will be strong again'', then that manager should call a meeting, give members A COMPREHENSIVE REPORT on the state of the fund, put forward A DETAILED STATEGY, and seek members' support - otherwise, leave the unit price at the constitutionally determined price at the time the fund was frozen and progress to wind up the fund.

Members should never allow their units to be valued at what is called 'fair value', it's a croc, and you'll be the loser - you'll never be able to make a decision without all the information - don't ever give up a right you will never get back.

ThERE IS NO NEED TO LIVE IN FAIRY LAND AND BE SPRINKLED WITH MOON DUST - SOONER OR LATER, REALITY WILL BITE.

 

[seamisty]

I also personally believe that staff/employees, authorised representatives, national business development managers etc of managed funds need to have intensive training courses to qualify them for these positions of responsibility. Every PIF investor who I know that dealt on a personal level with these 'sales persons' are totally disgusted that they gave their trust to someone who blatantly lied to them, as in the fact that PIF assets and I quote from Donna Meadows, the MFS National Business Development manager on the 18th Mar 2008 after our distributions had ceased, 'The assets In PIF are held by the custodian Perpetual Nominees Ltd for the investors, not MFS Ltd.'
Investors were totally convinced and reassured by former MFS/OCV staff that the PIF assets were untouchable which was in fact, incorrect. We also did not receive a new updated PDS when we re invested funds. Should these same highly qualified people that convinced thousands of innocent unsophisticated investors to invest in a so called bullet proof product not be held accountable in some way? Should there not be a mechanism in place to hold these people accountable for false information? Should these same people be allowed to move on to other companies/funds and remain employed in the same/similar positions? Seamisty

 

[mellifuous]

As soon as a manager changes the value of a unit to 'fair value', or makes an offer, the hopeful are hooked and the needy are dumped. The manager is able to cotinue to 'reel in' the money.

Make no mistake about it, no manager wants to pay you out at $1.00 because its not in the manager's best interests - it's in your best interests.

 

[k.smith]

http://www.smh.com.au/business/government-moves-to-protect-mis-investors-20091021-h7rc.html

Government moves to protect MIS investors

"....The Federal Government is taking steps to protect investors who might be unfairly affected by the collapse of forestry managed investment schemes.

Presently, an investor has to invest in such a scheme for four years to retain their full entitlement for taxation relief.

The collapse of the Timbercorp and Great Southern schemes was expected to lead to a number of other schemes being wound-up or restructured, Assistant Treasurer Nick Sherry said.

As a result, investors might fall shot of the four-year requirement for an up-front tax deduction.

"The Government doesn't consider that to be a desirable outcome," Senator Sherry said, adding it unduly penalised investors for events outside their control......"

...this article should add to our enthusiasm to participate on this thread because it shows that the government is seeking "desirable outcomes"...if an outcome is in our best interests (as voters) then its probably in the governments best interests....

 

[mellifuous]

http://www.smh.com.au/business/government-moves-to-protect-mis-investors-20091021-h7rc.html

Government moves to protect MIS investors

"....The Federal Government is taking steps to protect investors who might be unfairly affected by the collapse of forestry managed investment schemes.

Presently, an investor has to invest in such a scheme for four years to retain their full entitlement for taxation relief.

The collapse of the Timbercorp and Great Southern schemes was expected to lead to a number of other schemes being wound-up or restructured, Assistant Treasurer Nick Sherry said.

As a result, investors might fall shot of the four-year requirement for an up-front tax deduction.

"The Government doesn't consider that to be a desirable outcome," Senator Sherry said, adding it unduly penalised investors for events outside their control......"

...this article should add to our enthusiasm to participate on this thread because it shows that the government is seeking "desirable outcomes"...if an outcome is in our best interests (as voters) then its probably in the governments best interests....

"... "The Government doesn't consider that to be a desirable outcome," Senator Sherry said, adding it unduly penalised investors for events outside their control.

The four-year holding rule was introduced in 2007 as part of a package to regulate secondary trading of forestry interests.

Senator Sherry said many of the investments in question were made before the holding requirement was put in place.

"At the time they decided to invest, these investors had no way of knowing that their deductions were at risk," he said.

An amended tax law will allow an investor's deduction to stand where the four-year holding rule failed due to events beyond the control of the investor. ..." (emphasis added)

Yes, this is the case - laws relating to managed funds may not have invisaged the fallout that we've experienced. Don't take it for granted that the government intended that we should languish in frozen funds for years and years.

How is it realistic that laws purporting to treat members of a managed fund on an equal footing (Corp Act - that all members of a fund should be treated equally) allow needy members to be forced out of the fund through economic necessity (Corp act relating to illiquid funds allowing the manager to make offers - of, manager changing the consitutional interpretation of the value of a unit) ? That is not treating those people fairly - therein lies an argument not to support a change from the unit price form $1.00 to 'fair value'.

Even if every investor remained 'hooked' (hopeful) in a fund, how are those same laws fair when the same potential to make an offer persists while a fund is illiquid? While the fund is illiquid the manager is obliged to make offers, and the value contained in each offer could be more of less than previous offers and will depend on the value calculated as 'fair value'.

I would press the point, that when managers are forced to value units as constitutionally determined at the moment a respective fund is frozen, and when each manager is further obligated to make repayments of a set proporation of each investor's capital on a pro rata basis, then the onus falls upon the managers to make smart decisions and justify to members why the fund should continue.

If there is no offer, and there is no reduction in value, then there is no need for the needy to take losses and there is no need for others to be hopeful.

It's worth nothing this letter relating to a redemption letter from Mirvac Aqua (Balmain is a JV partner in these funds) to its unit holders:-

http://http://www.mirvacaqua.com.au/downloads/20091001_september_quarter_redemption.pdf

and here is the 'hook':-

"... It is important to note that in the event that any monies accounted for in the loss provisions announced to date can be recovered, the proportion of your investment redeemed from your Fund would not receive the recovered sum. Similarly, redemption would reduce exposure to any future potential losses. ..."

It might be worth mentioning also that their funds were frozen at the end of June 2008 but have been delaying the release of a purported strategy for over 5 months to date. It's a good read to read the documents and see references to 'Going Forward', like as stated in documents referenced immediately below:-

"...
Going forward
The Manager, Mirvac AQUA, is completing a review of the Mirvac AQUA Income Funds from a structural viewpoint and will be writing to Unitholders shortly regarding its proposed strategy for the Funds ..."


http://http://www.mirvacaqua.com.au/

The world of the managed fund is full of reviews and strategys that don't seem to materialise. All investors seem to live on is hope. Well, hope doesn't pay the bills.

Right now, when a manager makes an offer, the manager has no onus to prove anything it states - after the offer, members just ignore the offer and live in hope, or alternatively take their money and run.

Take a look at a case where an entity promises that if I buy an item for $100, then I will be able to sell it for $120. If I buy the item and get only $110, then that entity will have to pay me $10 to compensate me for its misrepresentation (or however you might like to see it).

How about the manager of a managed fund when he says 'the fund will be strong' ? - what if it isn't? What is the manager's liability? There just might be a lof of liability - so, one should ask Mr. Griffin, 'just how strong will the fund be?' .. let's settle on a figure that we can rely on.

Any comments?

The real issue is that government didn't envisage the fallout we're suffering. I believe the government will respond to reasonable requests to solve the problems we're facing today.

 

[doctorj]

Don’t we already have a thread for this mellifluous?

Colour me sceptical. I know losing money is never much fun. Anyone who’s invested will have lost at some stage and I doubt any have enjoyed the experience. But come on! Drawing cartoons and claiming to champion the cause of the needy! I’m blown away.

The sad reality is that investments don’t only go up. From time to time, they go down and people lose. All the complaints you’ve raised (e.g. loss of liquidity, valuation methodology, disclosure requirements, fund mandate and manager remuneration) were well documented right from the start and should have been part of your decision making process before paying in the money.

 

[mellifuous]

Don’t we already have a thread for this mellifluous?

Colour me sceptical. I know losing money is never much fun. Anyone who’s invested will have lost at some stage and I doubt any have enjoyed the experience. But come on! Drawing cartoons and claiming to champion the cause of the needy! I’m blown away.

The sad reality is that investments don’t only go up. From time to time, they go down and people lose. All the complaints you’ve raised (e.g. loss of liquidity, valuation methodology, disclosure requirements, fund mandate and manager remuneration) were well documented right from the start and should have been part of your decision making process before paying in the money.

Well, no we don't. We have a thread for FMF .. and there is one for MFS .. but this is an attempt to get members from both groups to come together -- seamisty is from MFS .. to try to get some consodliated effort between the two funds, and hopefully more, to make a submission to goverment/media.. etc...

If you're going to can this thread - which has had a good look-in, then if you push it into FMF that would okay for me, but not for the MFS side.

As usual, you're the boss.. let's see in the morning where we're put.

thanks.

 

[zixo]

I think this is a brilliant idea. I've been looking for a thread which actually has an amalgamation of all the affected funds.

MAKING Money may be fun if you're an individual investor who doesnt mind profiting from other peoples losses.
But, when you put all your savings and trust into researched "professional" and "respected" financial firms who blatantly do the wrong thing. There is absolutly No avenue both politically or legally to get any justice.

Try looking... Its just not out there.

I guess some people just don't get that it, maybe they REALLY need to lose everything before they can see any sense.