Re: Octaviar MFS Premium Income Fund PIF
Hello All,
I see a lot of unit holders have voted already. The following is my opinion only. I am not advising anyone as to how to vote.
WCIM is Wellington Capital Investment Management, the present Responsible Entity, previously known by other names including MFS Investment Management. WC is Wellington Capital of which WCIM is a subsidiary company. WC is named as the new R E in Item 3 of the proxy voting form commonly referred to as Resolution 3.
There are valid arguments for and against the proposals from WCIM. JH has a good reputation sullied somewhat by a perceived close association with some previous MFS board members. I think her intentions are well placed and the goals of WCIM are admirable. Of course the goals we are aware of will be only those that she thinks we need to know of. Others may be deduced from the evidence in the changes to the constitution and statements in the explanatory memorandum. I am alarmed that there are no provisions in the proposed constitution to allow the operation of the 10,000 unit redemption scheme nor the Investor Advisory Committee. Hence I am suspicious that WC may not really intend to honour these promises. There is further disparity between the Deed Poll cited in the proposed constitution and reality and the explanatory memorandum. I am deeply suspicious that WC has an agenda far different from ours.
The mathematics of the WCIM touted recovery reveal that the recovery in the WCIM anticipated timeframe, nominally six or seven years,is very difficult to achieve and by no means certain even if we were to immediately enter economic conditions the same as the last seven or so years prior to last October. Earnings in excess of 25% on the proportion of our portfolio which is capable of doing so are required. A lot of outstanding debt has to be recovered from building construction loans, at least 20 going back to November 2005.
There is another option which WCIM has not discussed in the explanatory memorandum nor given us the opportunity to vote upon and that is of an orderly wind up. This would not be to WCIM's benefit as the income to be made from this option as far as I can make out is costs and expenses only. Remember that at present WCIM have not made any income from PIF and have been managing the scheme from 3 million paid to WC by MFS(Octavia). WCIM make no fees until the first dividend is paid. This is proposed to be in October with a further amount to give return of 6% by the end of the financial year. We cannot count on the exact yields because WCIM have the power to determine the exact sums depending on circumstances at the time of payment. We could get anything but so that WCIM can begin to be paid from the PIF scheme they will make a dividend payment as soon as possible.
An orderly wind up which involves selling the assets at going market value without undue haste could take three years or more depending on the commercial property market and the stock market. Unit holders are entitled as I see it to returns during this period at the discretion of the RE. At present the PWC assessed value is 65 cents per unit. If unit holders could vote and pass a resolution to mandate this course with or without having voted in favour of the present voting options we would receive according to the mathematical model evolved by Iceman and verified by others, 65 or so cents per unit in 7 years but with a return of 6% in the meantime. If the resolutions we have before us are approved YYY then after seven years we can sell our units on the NSX and get 65 cents per unit. WCIM will have surrendered the RE job to WC and they may have decided that they no longer want to be RE and then jump ship earning 2% of our money for doing so. They could even do this almost immediately the ink is dry on the paperwork giving WC the RE's job in a few weeks time.
If the resolutions are not approved ie voted NNN I believe that WCIM will have to propose another option to pay some dividend to us in order to commence an income stream for themselves, and a different proposal will be needed from them for management of the scheme.
So there is the situation as I see it. I would like to have an orderly wind up because I want my money returned so that I can do something with it. Otherwise I fear it will earn a relatively poor return and then I will get the same value by sale on the NSX in seven years as I can in three or maybe four years by orderly wind up . I also see that WC intend to open the scheme to more investors so diluting the value of our holdings further. I am very skeptical that we will ever see units valued at 1$ again.
A strategy for achieving a vote by all members for an orderly wind up of the scheme follows.
Because a motion for adjournment of a general meeting must be heard first at the meeting (assuming the chair has been appointed) then I propose:
1) that the RE be requested to notify all members that a special resolution is to be put at the meeting. This request has to be made by at least 100 members in writing or members holding at least 5% of the units. Because this notice is after the notice of meeting that you already have and the forms cannot be sent simultaneously, the cost of doing so could possibly be at the requesting members' expense.
2) that the resolution request:
a)the adjournment of the meeting until the RE has explained the benefits and risks of an orderly wind up of the scheme as an option and has included these details in an explanatory memorandum.
b)the inclusion of the option of an orderly wind up of the scheme in a proxy voting form
c)the reimbursement by the RE to the requesting members of costs, if any, of the distribution of the notice of special resolution
d)the meeting be reconvened at the earliest opportunity after unit holders have received proxy voting forms and the associated explanatory memorandum.
The meeting can then be held with the orderly wind up option on the table.
Of course members can ask for a meeting to approve an orderly windup at any time including after the present vote has been taken and the resolutions dealt with whatever happens. If we want to act now then a motion for adjournment is the only option I can see which will postpone the taking of the present vote. This would postpone, under a successful YYY vote, the replacement of WCIM by WC as the RE and the adoption of a constitution which penalises our fund if the RE is replaced, removes our rights to redemptions and lists our units on the NSX.
I suggest that members of the Action Group or PFIF who wish to support an adjournment motion as outlined above could indicate their support to Breaker1. Should we have sufficient numbers we could then proceed with the precise wording of the request generally as outlined above, circulate it to all supporters for signature (Corp Act allows many signed copies, each copy has to be identical) and put it to WCIM for action.
I hope this assessment is helpful. I would like to see considered comment not facile interjections.
Mutchy