Re: Octaviar MFS Premium Income Fund PIF
This in today's Australian:
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Wellington accused of restrictions on Octaviar
by Anthony Klan | September 05, 2008
THE Brisbane finance company that snared control of the failed $750 million Octaviar Premium Income Fund is attempting to alter the fund's constitution in a move that would hand it millions of dollars, if it was removed as manager.
An independent report by Hicksons Lawyers partner Kalinda Cobby has warned that Wellington Investment Management was attempting to impose "onerous" restrictions on the PIF that "fetter" the ability of investors to remove Wellington as manager.
In an offer to investors allegedly riddled with errors, Wellington -- controlled by former Gold Coast financier Jenny Hutson -- was also attempting to alter the voting procedure required to remove Wellington as manager.
Ms Hutson told The Australian that proposed changes would make it more difficult for PIF's 10,000-plus investors to remove Wellington, but claimed it was a move to help investors who "wanted to ensure we were there for the long-run".
Under the proposed severance fee -- of 2 per cent of "gross assets" -- Wellington would receive a fee of more than $8 million if PIF investors voted to replace it as manager.
Ms Cobby, who is also the vice-president of the Commercial Law Association of Australia, was employed to undertake the review of Wellington's offer by a group of angered PIF investors.
Those investors, who have formed a body named the PIF Initiative, were angered by claims from Wellington that they would recover only 14c in the dollar unless investors approved the proposed changes to PIF's constitution.
"Claims from (Ms Hutson) that if we don't agree to the proposal there will be a fire sale of assets and we'll only get back 14c in the dollar are just not correct," said PIF Initiative spokesman Dennis Chapman.
"This has been confirmed by the solicitor's letter."
Retiree Mr Chapman, 61, suffering from emphysema, said he had about $1.25 million invested in the failed Octaviar group, with about $200,000 of that in the Octaviar PIF.
Octaviar was known as MFS until the empire -- which held about $5.4 billion of investors' funds -- suffered a meltdown in January and later changed its name to Octaviar. Ms Hutson created waves in May when Octaviar announced it had sold PIF to Wellington because Ms Hutson is a close business associate of Octaviar's executive director Chris Scott.
The pair built up a Gold Coast company known as S8, which bought the letting rights to predominantly Gold Coast apartments -- and Mr Scott had owned part of Wellington.
Ms Hudson and Wellington contracted to buy PIF in May, but it is not required to make any payment for the company until the middle of next year.
Ms Hutson said Octaviar had given Wellington $750,000 to manage PIF, but that Wellington was expected to pay Octaviar a fee -- based on performance of the fund -- of "between $15 million and $20 million".
She defended Wellington's push to implement a severance fee into PIF's constitution.
"We've done the hard yards (and) if we're to be removed that would be some compensation for the work we have done," Ms Hutson said.
Wellington is proposing to float PIF on minor trading platform the National Stock Exchange to provide "liquidity" for investors.
Ms Hutson said that under corporations law PIF would face liquidation by January, because by that time its redemption facility would have been frozen for 12 months.
However, PIF's members have argued that investors have not been properly informed of all the options open to them -- such as appointing a new manager -- and that claims of a fire sale are unrealistic.
PIF members claim the fund could face an "orderly wind-up" -- similar to those undertaken by the failed Fincorp and Westpoint property empires -- if receivers were appointed.
Ms Hutson said the vast majority of investors that Wellington had been in contact with supported its proposal.
Ms Cobby's report said Wellington's 80-page "explanatory memorandum" was "complex" and contained more than a dozen errors.
Investors will vote on Wellington's proposal on September 18.
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direct link:
http://www.theaustralian.news.com.au/story/0,25197,24295338-643,00.html