Wellington Capital PIF/Octaviar (MFS) PIF

[k.smith]

Re: Octaviar MFS Premium Income Fund PIF

I see on the NSX that 2,000 units have been sold@ 45cents and there is another 81,015 on offer for sale @ 45cents. Seamisty

Seamisty....I was at the City Pacific meeting in Melbourne yesterday. I was interested to hear Lee D from CPFMF just mention in passing comment that when City Pacific did their duediligence on MFSPIF earlier this year they valued the units at 90cents....City Pacific at the moment are saying that our CPFMF units are worth 97cents....my conclusion is either JH had foreseen and factored in the massive turmoil in the markets, and been ultra conservative in her valuations, or City Pacific are over the top in their estimates.....????????????

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Seamisty....I was at the City Pacific meeting in Melbourne yesterday. I was interested to hear Lee D from CPFMF just mention in passing comment that when City Pacific did their duediligence on MFSPIF earlier this year they valued the units at 90cents....City Pacific at the moment are saying that our CPFMF units are worth 97cents....my conclusion is either JH had foreseen and factored in the massive turmoil in the markets, and been ultra conservative in her valuations, or City Pacific are over the top in their estimates.....????????????

Thats really interesting k.smith.Perhaps the real figures were still cleverly concealed at that point!!! Also in a shareholder announcement dated 28th Feb, Citi Pacific quoted "the City Pacific First Mortgage Fund has a clear strategy of only investing in
registered first mortgages over real property in Australia in locations where the property
market is strong and supported by population growth and the assets of the MFS financial
services business did not meet this strict criteria." From memory Citi expressed an earlier interest of doing some sort of merger with MFS. By the time they conducted due dilligence the 2nd time the writing was on the wall with MFS shares in suspension and I think their next offer was based on the contingency of the PIF. The rest is history!!! All unit holders can hope for in the present economic meltdown is that our unit valuation does not go any lower. Seamisty

 

[Duped]

Re: Octaviar MFS Premium Income Fund PIF

http://www.businessspectator.com.au/bs.nsf/Article/g-KMP58?OpenDocument
More mortgage funds freeze redemptions
Published 5:17 AM, 22 Oct 2008
Investment and Financial Association chief executive Richard Gilbert told the paper that the group is going to meet with treasury officials in Canberra to lobby for the government to provide support to "reassure investors."

Here's an interview with Richard Gilbert on the ABC yesterday.
http://www.abc.net.au/news/video/2008/10/21/2397038.htm

Thanks Dora. There's also an artice in the Australian http://www.theaustralian.news.com.au/business/story/0,28124,24531049-643,00.html

All.
Looks like the non bank funds industry has finally found their blanket scapegoat to protect their business interests. Even sending heavies to Canberra to make sure it isn't challenged. Seems like an improbable causal link to me. They've plucked that one element; out of all that's going on? More likely it's propaganda to protect the business model and keep them all in business. Blame an element that forms no part of the business model. They're still trying to make these investments look lower risk than they are.

Banks v Non-bank funds. Stand back and enjoy this massive sibling power struggle. You think businesses like competition? That banks like competitors bidding on the limited number of investment opportunities? I don't.

So where's the protective legislation that limits fees to RE's while funds are frozen. Talk about all care, no responsibility.

 

[Jadel]

Re: Octaviar MFS Premium Income Fund PIF

If you look at many of my previous posts i stated repeatedly that it would be wise to get an independent valuation

letting JH do the valuations was tantamount to commiting Hari Kari with a blunt sword

I have a brother in law in the buisness and he has informed me repeatedly that Asset valuations done by fund mnanagers are not worth the paper they are written on .

He estimated a 30 %to 50 % cut by WC and that according to Lonsec is exactly what WC did

All this means of course is that our assets can now be flogged off at bargain basemet prices on the NSX and ultimately to some Institutional buyers when the inevitable Rights issue is made

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

If you look at many of my previous posts i stated repeatedly that it would be wise to get an independent valuation

letting JH do the valuations was tantamount to commiting Hari Kari with a blunt sword

I have a brother in law in the buisness and he has informed me repeatedly that Asset valuations done by fund mnanagers are not worth the paper they are written on .

He estimated a 30 %to 50 % cut by WC and that according to Lonsec is exactly what WC did

All this means of course is that our assets can now be flogged off at bargain basemet prices on the NSX and ultimately to some Institutional buyers when the inevitable Rights issue is made

Jadel isn't Price Waterhouse Coopers Independant Auditors? Don't they have to comply with the Australian Accounting Standards? Seamisty

 

[mgr2118]

Re: Octaviar MFS Premium Income Fund PIF

Hi Seamisty

I seem to recall that before City Pacific made an offer for MFS, that MFS actually performed due diligence on City Pacific with the view that MFS would acquire City Pacific sometime in 2007.

In trying to find the evidence for that, I came across this article from SMH on 28Apr07 titled "Homework tips to help avaid another Fincorp".

I have included an extract, which includes quotes from Grant Harris, the MFS PIF Fund Manager at the time --- makes for some interesting reading, given the date, and his comments.


But mortgage funds or diversified high-yield income funds are not like equity investments, where the price of an underlying security moves up and down every day on a stock market. Instead, the funds will often quote a "target rate" of return.

Assessing the risk of a fund that offers a target rate of return is a tricky proposition. How do you rate the risk of a fund that has, for example, a target rate of 8.5 per cent a year, and has achieved this rate of return every year for the past five years?

There's no volatility - the traditional measurement of risk - in the target rate. And, unlike a fund that invests in equities, where an announcement by a company to the stock market can trigger a sudden price movement (up or down), investors in a mortgage fund or diversified high-yield fund often don't know about risk until an event has occurred - and by then it can be too late. Just ask investors in the failed Fincorp group.

If those investors had been guided solely by the ability of Fincorp to pay distributions, few investors would have recognised that there was any risk at all.

The target rate of return that Fincorp offered did not fluctuate from day to day, or even from month to month, in line with the financial health of the company.

Investors' views of Fincorp may have been quite different if the returns they received moved up and down regularly, or if the returns had reflected the financial well-being of the company itself.

There is the investment adage that the higher the return you get from an investment, the greater the risk must be.

But for reasons attributable to human nature, this warning often goes unheeded.

Besides, as the Herald reported recently, it can be difficult to recognise a "high" return in the first place - whether a particular return is high depends, among other things, on what underlying assets you're investing in, the risks associated with those assets, and how long you plan to invest for.

Even so, every investment involves risk. The potential trap in fixed-term products that offer some "certainty" of return, such as a target rate paid monthly, is that investors see the funds as low-risk. Or, at least, they fail to recognise the risk inherent in the product. They see a steady, stable rate of return and conclude (either consciously or subconsciously) that, because there's no volatility, there's no risk.

But the target rate of return quoted by the fund must be generated somehow and, if the target rate is greater than the prevailing cash rate (at the moment, that's 6.5 per cent a year), the investment simply must involve higher risk than investing in cash.

The risks of fixed-interest and mortgage portfolios are monitored closely by advisers and researchers. In early April the research firm Lonsec downgraded its recommendation on the LM Mortgage Income Fund from "fund watch" to "redeem".

"Lonsec recommends advisers commence action to withdraw client funds," the researcher said. "Where the fixed-term option is being used, Lonsec recommends that advisers withdraw client funds when those investments reach maturity.

"The primary reason for the recommendation downgrade to 'redeem' is the overall assessed risk/return profile of the fund."

Lonsec says the LM fund is one of only two funds it rates that offer a fixed return. "Whilst fixed returns are attractive to end clients in providing certainty, for large funds in the current environment, mortgage managers may face operational and market risk," it says.

"Funds adopting the fixed-return model are required to generate a portfolio return sufficient to pay the target return to all investors regardless of market conditions.

"As a result, managers in the mortgage fund sector employing this model are required to maintain a high investment level or charge favourable rates on funds lent to borrowers. In the current market it has been difficult to charge attractive rates to high-quality borrowers.

"Lonsec's research of mortgage fund managers and originators indicates that there is 'margin compression' in the lending market due to aggressive activity and the weight of money in the mortgage sector.

"Lonsec does note, however, that LM has a history of capital stability and meeting its advertised term return rates."

Lonsec says that where it "identifies high risk within a product/manager, it is appropriate that a suitable return is provided to investors for bearing that risk".

"In Lonsec's opinion, LM's return currently falls short of the return required to adequately compensate for the level of risk assumed relative to the risk-free rate and higher-yielding 'at-call' cash accounts.

"The risk profile of the product/manager is a function of internal factors specific to LM and external factors generic to all mortgage fund managers."

Investors, either on their own or with an adviser, have to identify what the risks are and then decide if the return they're likely to get from the investment justifies the risk.

Grant Harris, fund manager for MFS Investment Management's Premium Income Fund, says it can be like unscrambling an egg.

"For an investor attempting to measure the risk associated with a mortgage fund or an income fund, the challenge is to understand the investments in the fund's underlying portfolio, from which it's intended that the target rate of return will be earned, and to effectively pull it apart and assess what each component would earn in the market in its own right," Harris says.

He says Fincorp may serve as a textbook example of how to do this, and how different the investment picture might have looked if investors had done so. But it's a technique that investors can use for investment opportunities being promoted right now, because some still have the same structure as Fincorp.

"To understand the risks involved in an investment in Fincorp's income fund, investors needed to understand the underlying pool of investments in that fund from which Fincorp derived the returns that they then used to pay investors their return in the form of regular monthly distributions," Harris says.

"If an investor had read the fund's product disclosure statement [PDS] and the fund's annual report they would have learned that, at the time Fincorp announced it was in financial trouble, about 75 per cent of the fund's assets were 'related-party' loans.

"In other words, Fincorp was using the funds raised from investors to lend to its construction and development business, which in turn used the funds to secure vacant blocks of land for future development.

"In return for providing these funds, investors received an annual distribution of 8 per cent a year."

Investors could have gauged whether that was an adequate return for the risk only by comparing the underlying assets of Fincorp's fund with the assets of other funds that offer a similar return. Then they'd have to compare the risks and returns of each.

But in the case of Fincorp, Harris says, there was another warning sign. As well as its income fund, Fincorp offered a return of 9.75 per cent a year to investors who bought debentures issued by the company.

Given what we know about the relationship between risk and return, it would have been reasonable to conclude that the money raised from debentures was invested in a riskier pool of underlying assets.

But no.

"It turns out the funds were being used to finance exactly the same property developments as the 75 per cent of those funds invested in Fincorp's income fund, for which investors received a return of only 8 per cent," Harris says.

"Effectively, investors in the debentures and in the income fund were being exposed to similar underlying investment risks but receiving very different returns.

"This should raise alarm bells in investors' minds, and should make them wary of investing in structures like this in the first place."

Harris says investors need three pieces of information to compare one fund's assets with another fund's: first, how much related-party lending is going on; second, the size, number and purpose of the related-party loans; and third, the interest rates being charged on the loans.

Harris says this information should be disclosed in a PDS or annual report, or you could contact the manager's investor relations department. If they cannot or will not tell you, look for somewhere else to put your money.

Once you've got this information, you need to work out a few other things, such as what sort of construction and development the loans have been made on, whether the loans create a concentration of risk (is all the money lent for the same type of construction or development?), and whether the interest charged on the loans is similar to what the borrower would have to pay on the open market.

In this context, "related-party lending is problematic because it involves a situation where an investment fund owned by Parent Company A is lending to a construction and development company also owned by Parent Company A", Harris says.

"In other words, they are lending to themselves. Where this exists, investors who want to minimise their risk should assume that the interest being charged is below the market rate. Then it should be up to the fund manager to prove that it is not."


I'm sure that many will have comments!! Isn't hindsight a wonderful tool??

 

[JohnH]

Re: Octaviar MFS Premium Income Fund PIF

If you look at many of my previous posts i stated repeatedly that it would be wise to get an independent valuation

letting JH do the valuations was tantamount to commiting Hari Kari with a blunt sword

I have a brother in law in the buisness and he has informed me repeatedly that Asset valuations done by fund mnanagers are not worth the paper they are written on .

He estimated a 30 %to 50 % cut by WC and that according to Lonsec is exactly what WC did

All this means of course is that our assets can now be flogged off at bargain basemet prices on the NSX and ultimately to some Institutional buyers when the inevitable Rights issue is made

Jadel, Price Waterhouse can hardly not be called independent. ................. and why would Wellington want to under value the fund ---------- their fee is based on the value!!!

 

[Duped]

Re: Octaviar MFS Premium Income Fund PIF

Has anyone got any info on NSX brokers? Preferably a comparison of their costs and details on how to do a trade like do I have to open an account, what proof of ownership do I need and when and how to pay/get paid. I've called two so far, Macquarie bounced me around their phone system and then never called back and Freeman Fox advised they're listed purely to trade for themselves and don't trade for clients. I don't fancy calling all of them.

There's a announcement just out http://www.nsxa.com.au/ftp/news/021720802.PDF

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Hi MGR2118, perhaps Grant Harris picked up a few tips from Fincorp on how to rort a fund with inter related company loans etc!! I wonder where all these self professed gurus are now? I will make sure I never invest in anything that employs any of those former employees that were in responsible positions in charge of running MFS. Seamisty

 

[Jadel]

Re: Octaviar MFS Premium Income Fund PIF

If you look at the Lonsec report you will see that they state unequivocally WC made an immediate across the board cut in asset Valuations of 35% a soon as they took over the Fund

Just like that with a flick of the wrist

And Auditors are not as independent as you might think

Most people have wives and kids to feed

And guess who pays for the Audit

Its pretty damn hard to go agaist the wishes of a fund manager when they state something is only worth XXX amount

Its near impossible to calculate what a particular asset would get at Auction that is why their is an unwriiten understanding within the valuation Industry a sort of buffer Zone that they allowed to play with.

Now you have forced me into one of my long winded anecdotes and i am only a slow one fingured typist with incipient Alzheimers desease

Many years ago a friend of mine was involved in a property trust the propert only had ten year leases to government tenants who had never ever missed a payment in over five years

Same old predictable story property trust went belly up (not his property mind you )

Then in comes another manager with another Audit and Valuers

Next minute he is hit with a 50% devaluation

Of course two years later the very same property is sold at Auction for more than its original valuation

Always remember Seamisty

He who pays the piper plays the tune

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Hi Jadel,He who pays the piper plays the tune. You mean like Kalinda Cobby did for PIFI after she had previously personally told a unit holder that "The PIF could do a lot worse that have WC/JH at the realm"? Many funds of all types, shares, etc have had falls of up to 60% and more since earlier this year. We know the PIF was mismanaged and robbed by the previous board, it is totally unrealistic to think that our units are still worth close to their original value. WC has had ASIC all over them and some on here still think that there is a huge cover up!!!!! This is sheer stupidity but it is quite obvious that it is not going to matter what WC does it will be unacceptable to a few. Your energies would be better spent and more appreciated pursuing those responsible as in the previous board of directors. I would still be doing that myself but have run out of people to complain to!!!(and disallusioned from lack of action and response from those who are meant to be our corporate watchdogs) Have you got any ideas as to how we could convince Mr King to go on a fishing trip, I have just the right size gum boots here for him!!!Seamisty

 

[DoraNBoots]

Re: Octaviar MFS Premium Income Fund PIF

Has anyone got any info on NSX brokers? Preferably a comparison of their costs and details on how to do a trade like do I have to open an account, what proof of ownership do I need and when and how to pay/get paid. I've called two so far, Macquarie bounced me around their phone system and then never called back and Freeman Fox advised they're listed purely to trade for themselves and don't trade for clients. I don't fancy calling all of them.

There's a announcement just out http://www.nsxa.com.au/ftp/news/021720802.PDF

Hi Duped,
I spoke to ABN AMRO Morgans and as you would have read they are offering a deal until 16 Jan 09 a fix rate of .5% (min $75). After that date it will be 1.5%. You open an account with them and if the units sell they put the money in your account after taking their cut. I would be interested to know what % other brokers are charging as I wouldn't count on being able to sell in the next 3 months so would compare against the normal rate of 1.5%.

We had an interesting conversation where he told me he doesn't like the small exchanges and that there is unlikely to be a buyer.

 

[Jadel]

Re: Octaviar MFS Premium Income Fund PIF

Seamisty

I did not state the units were worth close to their original value

Unfortunately King and Co has done to much damage for that and yes his Gumboots should be weighted with lead in a deep river

However as i stated given what was in all likelihood a firesale valuation by JH
they are probably conservatively valued as anothet poster has recenty pointed out

We are undoubtedly in the worst world equity crisis for fifty years
So all valluations have gone haywire at the moment

Lawyers will always do the the best they can for any particular client

 

[gimmster]

Re: Octaviar MFS Premium Income Fund PIF

I see the dummy sale for 2000 units went through. I guess that's now the official valuation as far as centrelink are concerned.

 

[simgrund]

Re: Octaviar MFS Premium Income Fund PIF

http://www.smh.com.au/news/business/money/planning/asic-clears-the-maze

If anyone's interested, here's a link to article on WESTPOINT case by ASIC.

 

[SPLITPIN]

Re: Octaviar MFS Premium Income Fund PIF

1. As a investor yourself Splitpin what do you suggest we do in addition to all of our combined phone complaints/letters/personal appointments/e-mails etc to numerous so called regulatory bodies and consumer watchdogs regarding the conduct of the former MFS board?
2. Do you not have the same concerns as your 'friend'?
3.I didn't realise pensioners could earn that much. My mum is an aged pensioner and gets nothing like that amount. Seamisty

Dear Seamisty

In response to your comments

Para 1 - It appears to be not working - maybe more affirmative action is needed.

Para 2 - No comment.

Para 3 - Please note it appears the pension rate for my friend is now $281-05 per week. He does not earn that money, he has paid tax all his life for that retirement entitlement. Maybe you mother does not qualify for the full pension.

Regards


Splitpin

 

[seamisty]

Re: Octaviar MFS Premium Income Fund PIF

Dear Seamisty

In response to your comments

Para 1 - It appears to be not working - maybe more affirmative action is needed.

Para 2 - No comment.

Para 3 - Please note it appears the pension rate for my friend is now $281-05 per week. He does not earn that money, he has paid tax all his life for that retirement entitlement. Maybe you mother does not qualify for the full pension.

Regards


Splitpin

Thanks for your response Splitpin, any ideas as to where we can go re more affirmative action? I have run out of ideas/options.Seamisty

 

[Juan Mortyme]

Re: Octaviar MFS Premium Income Fund PIF

PIF gets its first trade

by Anthony Klan | October 23, 2008

THE embattled $770 Premium Income Fund, formerly managed by failed financier MFS, has recorded just one share trade.
This comes a full week after being floated in a bid to bolster its liquidity.
The PIF only yesterday recorded its first share trade, a parcel of $35,000 worth of shares at 45c each, underlining the problems facing ordinary investors amid a crunch that has seen $14 billion of funds frozen.
Property Investment Research director Dugald Higgins said the lack of buyers for PIF shares highlighted the slump in investor sentiment in the mortgage trust sector. "The performance shows market sentiment is just non-existent in the current market," Mr Higgins said.
He said other mortgage funds with suspended redemptions that were unable to work themselves out of trouble could find themselves facing the same liquidity crisis as the PIF.
"If you list on a secondary exchange there are going to be bugger-all trades," Mr Higgins said. "But if you listed on the ASX I have no doubt that your share price would immediately plummet. By listing you could really find yourself out of the frying pan and into the fire."
Although PIF units were valued at $1 before the collapse of MFS in January, yesterday's sale of the small parcel of PIF units for 45c each represented a reasonable price as it was the three-year target share price set by new manager Wellington Capital.
However, those investors seeking to get out at a similar price yesterday afternoon would have been disappointed. There were only two other buyers in the market, one offering 15c per share and another a highly opportunistic 5c.
NSX managing director Robert Bladier said the lack of trades in PIF was unusual.*

"It has been interesting that such a large entity has listed and there have not been any trades," Mr Bladier said on Tuesday.

"There was a lot of speculation in the lead-up to listing, whether it was a good thing or a bad thing and the value of the units under different situations.

"You would think under that scenario you would see some activity and so far that has not been the case."

Jenny Hutson, managing director of Wellington Capital, a financier that acquired the rights to manage PIF, said she was aware of the solitary share trade.

"We are pleased the sale was at 45c -- it has been a pretty volatile market and a very challenging marketplace," Ms Hutson said.

"This was not about an instant fix, it was about a journey to liquidity.

"To finally get to listing is of great benefit to the fund in terms of our ongoing negotiations with potential buyers concerning the fund's assets."

Last week fellow embattled mortgage fund City Pacific indefinitely postponed an attempt at floating its First Mortgage Fund, citing market volatility.

 

[DoraNBoots]

Re: Octaviar MFS Premium Income Fund PIF

PIF gets its first trade

by Anthony Klan | October 23, 2008

THE embattled $770 Premium Income Fund, formerly managed by failed financier MFS, has recorded just one share trade.
This comes a full week after being floated in a bid to bolster its liquidity.
The PIF only yesterday recorded its first share trade, a parcel of $35,000 worth of shares at 45c each, underlining the problems facing ordinary investors amid a crunch that has seen $14 billion of funds frozen.
...
"We are pleased the sale was at 45c -- it has been a pretty volatile market and a very challenging marketplace," Ms Hutson said.
...

If Anthony thinks a parcel of $35,000 is a problem, wonder what he will think when he realises it was actually only $900.

Good to see Jenny's mate (maybe Phil?) is happy with their purchase Not sure it's so good for us being such a small parcel, the only parcel and the Centerlink implications.

 

[Burnt]

Re: Octaviar MFS Premium Income Fund PIF

PIF Investor Update October 2008 issued. Lets see if it contains any meaningful information, like distribution details, details of the plans for restoring full value back to unit holders, when buy-back can be expected :-

WC pleased blah blah, you all love us blah blah, momentous occassion blah blah, "viable going concern" - what ?, blah blah, to return value to all unitholders blah blah blah, encourage you to call if you have any questions - (what, I thought unitholders were a pestering nuisance ) blah blah blah blah blah................. NO REAL INFORMATION. Just promotional propaganda !!

Wait, here's some detail, oh results of meeting......lots of detail here. blah blah blah we're delighted blah blah you all love us so much blah blah blah way forward for PIF is now clearly defined - maybe to JH but not me.

Taxation statements mailed in 1st week Oct. (aren't returns due end Oct.?), hang on Ooooops it's happened again, another stuff up, tax statements were wrong - correct one is on its way. Well this seems like pretty important information - should it be highlighted instead of being at the end of the page. Should there be an apology at least for the inconvenience caused. It's propably not WC's fault - couldn't be.

Next page NSX trading, yes we know, information on Brokers - handy for those wanting to sell their units at 15c or 5c.

That's it ????

Got to go and get on the phone to JH..............