pfmfnews ISSUE #2
THE CEO’S REPORT CONTENTS
On behalf of the team at Balmain Trilogy Investment Management and Trilogy Funds
The CEO Report: We close off 2010
Management, we would like to welcome you to our first newsletter for 2011 and wish
and outline the strategy for 2011
you and your family a happy New Year.
Asset update: Our strategy in action
The year ahead will be a critical one for our Unitholders. We will continue in earnest to
with assets that have been realised
recover and return the greatest possible value on your investment and seek to bring those
to date and the ongoing completion
responsible to account for the significant losses that have been incurred by the Fund.
and value-add to the Fund’s Non
In this newsletter, we offer you information on our progress to date and the Fund’s Development assets
strategy for 2011 and beyond.
During November, the Balmain Trilogy asset team conducted a series of information
sessions in five major cities across Australia. Attended by over 1500 Unitholders, it was
a great opportunity to hear from you on an informal basis.
Martha Cove: Our approach to the
Martha Cove group of assets and why
we believe it offers the best prospect
of recovery for Unitholders
Legal Action: Stage one in our
pursuit of commercially viable legal
claims is underway
Further updates: The Hardship Policy
has been approved by ASIC and the
At each session, a detailed overview of the situation of the Fund as we found it creation of the Litigation Unit.
was presented, what we have done since to improve it and our plans for the future.
Critically, Unitholders were also able to ask questions and receive answers about their Capital Repayment: A further look at
investments. this April’s capital repayment
We are aiming to conduct more information sessions in late 2011. Queensland flooding: Update on
the effects of the recent floods on the
For those of you who were unable to attend, a copy of the presentation is available Fund’s assets
on the Balmain Trilogy website at www.balmaintrilogy.com.au or telephone our Client
Services Team on 1800 194 500 to receive a DVD copy in the mail. Investor Committee Report:
A commentary provided by the
This year we will continue to implement our core strategy - to complete, add value Investor Committee
and realise the Fund’s ‘Non Development Assets’ for the minimum possible risk and
outlay, and to promptly return these proceeds to our Unitholders. Frequently Asked Questions: Answers
to your most pressing questions
1 Pacific First Mortgage Fund PFMF News
However, we are unable to deal with the Martha Cove assets in a similar manner.
These require more intensive development management and structuring if they are
to provide maximum opportunity for recovery and return. As we work through various
strategies on Martha Cove, we assure you at the forefront of our considerations is each
Unitholder’s right to determine their individual participation. Further details on the
Martha Cove strategy for Unitholders’ consideration will be delivered later this year.
In this newsletter, we detail essential information about several matters that we know
are important to you, including:
• Assets of the Fund
• Legal actions, including the involvement of IMF Australia
• The Hardship Policy
• Communications to Unitholders
• Our actions and commitments.
We would also like to reiterate our commitment to the targeted $295 million return of
capital by October 2012. While this will not be easy, we are still determined to do all
we can to achieve this in a challenging market. At this stage, current market conditions
and unforseen flooding impacts have made the second instalment of $35 million to
all Unitholders in April a difficult prospect. Our current cashflow forecasts project that
a part payment of the $35m will occur in April with the residual amount to be repaid
by June 2011. It is a commitment not to jeopardise the total return to Unitholders by
undertaking a fire sale of the assets to meet repayment schedules; to ensure the assets
are realised at their highest attainable value.
As we all know, the recent flooding in Queensland has devastated much of the region.
While several of the Fund’s assets are in this area, the natural disaster has affected
others far worse. Balmain Trilogy has elected to donate $20,000 dollars of our own
money to the Premiers Disaster Relief Appeal to aid flood victims.
The next stage going forward from this natural disaster is a long rebuilding process,
not just for Brisbane but for the state of Queensland. We must therefore remain very
conscious of the effects that this could have on the recovery of the Fund’s assets in
Queensland and will do everything in our power to mitigate the effects going forward.
Finally, and most importantly, we are fully committed to keeping you informed and
involved in an improved future for our Fund.
Rodger Bacon Andrew Griffin
Joint Chief Executive Joint Chief Executive
Pacific First Mortgage Fund PFMF News 2
“Total recoveries from sales to date exceed $153,000,000”
So we can give you a clear overview and update of the Fund’s assets, we have divided them into the three distinct groups:
Group 1: Assets that have been realised
Group 2: Assets to be completed, value added and realised (‘Non Development Assets’)
Group 3: Martha Cove assets
We’re pleased to report that we have sold 315 individual security properties which have enabled us to discharge 17 separate loans.
We have also made partial sales relating to a further six loans. The recoveries from these sales have exceeded $153,000,000.
Because of the background to most of these assets, the sales that took place were not straightforward. They were complex
transactions, in the most part involving the resolution of litigation, fixing significant legal and physical defects, and the
management of operating businesses.
However, despite the challenges, all of the assets have been realised at fair market value or above. As we have repeatedly
promised, there will be no fire sales. We are fully committed to recouping and delivering the fullest possible value for our
Unitholders in all Fund management activities.
The assets which have been realised in the last six months are detailed below.
Asset 4 Hervey Bay, QLD
Originally, this loan facility had not been cross-collateralised/secured with an adjacent
vacant land lot, which was controlled by the same borrower to which the Fund had
exposure. As the individual sales of Asset 4 would have resulted in the borrower
withdrawing equity, we were able to cross-collateralise the surplus sales of Asset 4 to
repay the adjacent land lot facility. This restructuring has led to a further recovery of $2
Asset 11 Spring Hill, Brisbane
All 52 apartments and the commercial unit have now been sold following the
rectification of building defects, representing a $29.38 million gross recovery to the
Asset 15 Hope Island, QLD
We successfully negotiated the adoption of the GST Margin Scheme (reduced tax
calculation) on the security lots that had been sold previously, resulting in a further
recovery of $0.14 million.
3 Pacific First Mortgage Fund PFMF News
Asset 19 Melbourne
The Fund held a second mortgage position against completed residential units and
a first mortgage position against an adjoining part of the site. The immediate sale of
the asset would have resulted in a recovery of $3 million; however, we were able to
successfully bring action against the borrower, resulting in a recovery of $8.9 million.
Asset 27 Pimpama QLD
The Fund held a second mortgage position secured against a vacant land lot. The first
mortgagee exposure was well in excess of the security value, with a Loan-to-Value-Ratio
of 120%, resulting in a zero assessed value for the Fund. We were able to recover $0.5
million from the borrower through successful restructuring of the borrowers total asset
Non Development Assets
The 18 assets in this category require intensive management approach before we can achieve optimum market value from their
sale. These assets are in various stages of completion and require value add work so that they can be realised at their optimal
value with minimum capital outlay. Below is an update on some of these assets.
Asset 16 The Entrance, NSW
Comprising 32 residential units and a retail component, the building was suffering
from structural defects, incomplete works on the ground floor and façade, and no
statutory approvals for external works. A Completion Deed with the builder was
negotiated and implemented allowing for building works to be completed and
certification of works to be actioned.
The improvements and rectifications made to the asset have allowed the Fund to sell the
units individually. To date 8 units have been presold with an anticipated total realisation
of $16 million, this compares well to an “in one line” offer received at $9 million.
Asset 18 Wakerley, QLD
A part complete development for 72 attached and detached dwellings, the site
was derelict for over 2 years; the builder on site was unable to provide satisfactory
evidence of the quality of work completed and was also found to be negligent. 12 of
the partially completed dwellings were required to be demolished due to structural
With the builder removed from the site, a fixed price and fixed time building contract
was negotiated with a national builder over 3 stages allowing for the progress on
the development to be tied to market conditions. A total realisation in excess of $35
million is anticipated to be achieved. Together with rectifying and defending claims
from the previous builder, the borrower has sought to bring action against the Fund
in an attempt to delay the completion of the development. We continue to vigorously
defend these actions
Pacific First Mortgage Fund PFMF News 4
“Maximising value and returns with minimum outlay”
Asset 26 Broadbeach, QLD
The original security was 15 units within a 36-unit beachfront block, owing the Fund
more than $1.6 million per unit. Each unit (on average) is currently valued at less than
25% of that amount.
We believe the entire site would sell to a developer for $25-30 million if all owners
aligned to obtain development approval from Council. Such a sale would represent an
approximate return of $10-12.5 million to the Fund. We are continuing to pursue this
strategy as it only requires time and effort, with little additional expense.
Asset 28 Hervey Bay, QLD
Located in dense bush land in the Wide Bay precinct, a moratorium was placed over
the site due to flora and fauna issues. After successful lobbying to the Local and State
Governments, we have now lodged a development application for a 114 residential lot
subdivision. This will now enable the asset to be realised at its optimal value.
Asset 29 Labrador, QLD
This development site was approved for a 173-apartment vertical retirement village, with
the borrower being a City Pacific joint venture. The site owes the Fund approximately
$15 million and the land is currently valued at less than half of this amount.
We are currently negotiating with council to gain development consent for 200-plus
residential apartments. If successful, this will add significant value to the site prior to its
sale. This strategy does not require significant additional capital investment.
Asset 32 Gold Coast, QLD
The original borrower of this waterfront site was a related party to City Pacific
Limited and $40 million was paid for the asset in 2008. The Fund only holds a second
mortgage on the property and this is now worth considerably less.
However, the dress circle location of the site represents a significant redevelopment
opportunity, adjacent to Marina Mirage and opposite the Sheraton Mirage. We are
preparing development applications for its complete redevelopment into a multi-use
development. At this stage, this strategy requires a relatively small capital investment.
Asset 34 Carrara, QLD
This is a 40 ha ‘potential’ residential subdivision at Carrara, with a 1km Nerang River
frontage close to prestige housing estates, including Royal Pines and Emerald Lakes.
The loan was to a City Pacific joint venture.
We are preparing development applications for the sub-division of the site into 300-
400 residential lots. This approach requires time and effort with only a relatively small
Notwithstanding our strategy to complete and add value to underlying assets, we continue to bring action against the
Borrowers and Guarantors of all defaulted loan facilities. To date we have served statements of claim on the 11 Borrowing
groups and Guarantors. We have been successful in many circumstances in securing the Fund’s residual debt position against
other assets of the Borrower. In other instances the loan facilities were lent against the property alone with no recourse to the
directors of the company or to individuals with nil asset backing. Actions against defaulting borrowers will continue until every
avenue of recovery is exhausted.
5 Pacific First Mortgage Fund PFMF News
“Every Unitholder will be given the opportunity to choose whether or not to
participate in the future development of Martha Cove.”
Martha Cove Assets
The Fund holds six assets in Martha Cove and this represents about 80 per cent ownership of the whole development. The
remaining 20 per cent is owned by various companies, which have competing interests and agendas. This has resulted in
disagreements around property rights, duties, liabilities and obligations.
We believe the various owners are not acting in the best interests of Martha Cove site as a whole and its future development
potential. For example, the development is currently without essential services i.e. a retail or amenity centre, a general store,
café, community facilities or amenities for the boat owners.
As the Fund is the majority stakeholder in the Martha Cove precinct, we are recommending a strategy whereby we take
ownership of the whole development and undertake a structured development of the existing assets. We believe this will
provide the best chance of Unitholders receiving the maximum possible recovery.
To achieve this, we will need the approval of Unitholders. Accordingly, a detailed proposal will be prepared and delivered
for your consideration during the year. The proposal will include our best estimates as to the likely improvements in value to
Unitholders and the timeframe to achieve it. Every Unitholder will be given the opportunity to determine whether they will
participate in the Martha Cove future development.
So our Unitholders can fully understand the underlying issues and opportunities of Martha Cove, we will be holding an
information session on a weekend in the first half of 2011. Investors will hear presentations about what we have done and what
we plan to do with development. For those who would like to attend, please complete the registration form on page 8.
Some of the key steps which need to be taken if our proposed strategy for Martha Cove is to proceed are as follows:
• Identify which assets should be developed including those not controlled by the Fund
• Formulate an appropriate structure which must be implemented to allow for the development of selected assets.
• Identification and procurement of a funding source to allow for the development, including funds for the development
We are firmly of the view that, of all the Fund’s opportunities, the completion of Martha Cove via the properly structured
development of the existing assets provides the best possible potential upside for Unitholders.
Pacific First Mortgage Fund PFMF News 6
LEGAL ACTION MARTHA COVE
As some of you are aware, ASIC has granted the Fund leave to publicly examine
some of the parties involved in the previous management of the Fund. The public INFORMATION
examination process involves both the subpoena of the books and records of these
parties as well as requiring certain individuals to appear in court to be questioned. SESSION
We are confident this process will uncover the truth behind many of the transactions
into which the Fund entered, which we have reason to believe were not in the best
interests of the Unitholders.
The likely court date for proceedings will depend on the records produced and should
be early this year. As you might appreciate, there is no way of knowing the outcome of
legal actions which follow from the examination.
However, what we do know is that the cost of these matters will be significant. For that
reason and to protect both the value of the Fund and the interests of Unitholders, we
appointed a well-regarded and professional litigation funder, called IMF, to fund the
litigation. In summary, IMF will:
• Fund 100% of the cost of the proceedings
• Fund 100% of any security required by the defendants
• Fund 100% of any adverse costs orders in the event that we lose the actions.
If we lose the proceedings, IMF will not receive any money from the Fund and will
absorb all costs. In this case, while we will certainly spend significant management
time and resources planning and preparing for the court proceedings, there will be no
expenditure relating to the actual litigation costs.
If we win, IMF will be entitled to recover these costs which are a normal outcome for
these procedures. IMF will also be entitled to a share of the net proceeds. IMF share
of the net proceeds from successful litigation is 26%.
All residual proceeds from successful litigation, which will comprise the most significant
portion, will be returned directly to the Fund for the benefit of Unitholders.
On 16 November 2010, ASIC approved the Fund’s Hardship Policy. As part of the
approved policy and in accordance with our own legal advice, these hardship payments
must occur at the prevailing unit price, this will ensure that non-hardship applicants are
not disadvantaged via the redemption of units through the Hardship Policy.
To implement the Hardship Policy, changes to the Fund’s constitution are required to
take place. These changes have now been finalised and we refer Unitholders to the
enclosed letter further explaining the Hardship Policy and how relevant Unitholders
7 Pacific First Mortgage Fund PFMF News
MARTHA COVE “This will ensure that all Unitholders can benefit
from potential litigation proceeds, irrespective
INFORMATION of their current financial situation.”
The Martha Cove on site Information
Session for PFMF Unitholders will be LITIGATION RECOVERY RIGHT
taking place in the first half of 2011. The
While the ASIC decision is great news, management does have a concern about
information session will allow Unitholders
determining the amount of hardship payments. While the current value unit price
to get a first hand look at the Martha
takes into account the value of the current assets of the Fund, there is one potential
Cove assets and hear from the Balmain
asset that is not included in that price and that is any increased future value of the
Trilogy Asset Managers on the issues the
Fund if the litigation is successful.
Fund faces, work that the Balmain Trilogy
has completed, our plans for the future To ensure that any Unitholder who redeems units under a future hardship program
and the opportunities that are available. does not lose any future entitlement to proceeds from this successful litigation, we
therefore propose to create a separate and transferable Unitholder entitlement for the
The date of the Information Session will
legal proceedings. Our legal advice is that this separate entitlement can be provided
be finalised at the end of February to
via an amendment to the Fund’s constitution.
ensure we are able to cater for those
who wish to attend. We request for At the same time we amend the Fund constitution to implement the Hardship Policy;
Unitholders to register their interest via we have also implemented the legal recovery entitlement. This will ensure that all
completing and returning the below Unitholders can benefit from potential litigation proceeds, irrespective of their current
form or registering their interest on the financial situation.
Balmain Trilogy website
Please refer to the enclosed letter for further information regarding the Litigation
YES, I wish to attend the
Martha Cove Information Session CAPITAL REPAYMENT
As you know, Balmain Trilogy is working to a program of a timely realisation of
Number of attendees*
Fund assets to enable capital to be returned to all Unitholders. As we have already
*Limited 2 attendees per registered Unitholder indicated, both in newsletter and various Unitholder meetings, our aim is to target
a return of $295 million to Unitholders by October 2012 via a series of repayment
Unitholder Name instalments over the period.
The first instalment of $35 million was returned to Unitholders in October 2010, the
second $35 million instalment being scheduled for April 2011.
However, current market conditions coupled with the knock-on effects of recent
flooding in Queensland means the realisation of several Fund assets that are
scheduled for settlement prior to April 2011 may not occur as originally anticipated.
Telephone The funds that are appropriated for capital repayments are garnered through the sale
of assets. Currently, we do not believe that it is possible to further accelerate these
sales without resorting to a fire sale, something we are utterly opposed to because
Email fire sales will never achieve the optimal result for Unitholders. We are, however,
confident that the delay in settling these asset sales should not exceed eight weeks.
Please complete and return this form to As a consequence the projected next repayment of $35 million planned for April 2011
the Balmain Trilogy Client Services Team will be partly paid, with the residual amount to be repaid by June 2011.
by any of: We know that this delay is regrettable and will come as disappointing news to many
Mail to: Unitholders. However, we firmly believe that, if we are to maintain our undertaking to
Balmain Trilogy – Client Services to optimise the selling price of the Fund’s assets the delay is also unavoidable.
GPO Box 548, Brisbane QLD 4001 Our first and foremost commitment is always to act in the best interests of all
Email to: Unitholders. To demonstrate this commitment, Trilogy Funds Management Limited will
firstname.lastname@example.org forego any management fees in relation to this delayed payment. In other words, we
will exclude any unpaid part of the $35m from the calculation of the gross assets
Fax to: of the Fund when calculating the management fee from 1 April 2011 onwards.
07 3039 2829
We will continue to repay any excess liquidity to Unitholders as and when it becomes
Balmain Trilogy will confirm the details available and we will not allow the Fund to retain any unrequired cash.
Martha Cove information session on
the website and in writing to those who
Please call the Balmain Trilogy Client
Services Team on 1800 194 500
Pacific First Mortgage Fund PFMF News 8
JANUARY 2011 FLOODING
The recent floods have caused considerable devastation to many thousands in
Southeast Queensland, and also in parts of Victoria and New South Wales. It will be
months, if not years, before many families can start to rebuild their lives.
Many Unitholders have asked us how the Fund’s investments have been affected by
the recent flooding in Queensland.
Thankfully, none of our properties were directly affected by flooding from rivers, creeks
or overflowing drainage systems. However, some of the properties have been affected
by inundation due to the heavy rainfall in the Brisbane area.
Not only does the water damage to these properties need to be repaired, but
structural components must be reassessed and access roads rebuilt. These works have
caused delays to the construction schedule and incurred unforeseen costs.
We have also found that many of our construction workers have taken leaves of
absence, choosing to work on the flooded properties of friends or family instead. This
has added to the delays and extra costs we are experiencing.
We will keep you updated on progress in the next newsletter.
IMPROVING INVESTOR COMMUNICATIONS
We understand that clear and regular communication with you is important and to
improve this, Stephen Tunley has been brought on board. Stephen is CEO of Balmain CONTACT US
Funds and he brings considerable experience in investor communication, experience
that will be applied in relaying information to you and taking your feedback onboard.
Stephen is a great believer in consistent and clear communications. We are confident At all times we welcome Unitholders
that he will deliver an improved communications platform to the Funds Unitholders to ask questions and to provide
feedback. Unitholders can contact
As detailed earlier in the newsletter, we will also hold a Martha Cove information the Balmain Trilogy Client Services
session on a weekend in the first half of 2011. At this weekend information session, team on 1800 194 500, via email on
investors will be invited to hear presentations on Martha Cove. We will keep you Contact@balmaintrilogy.com.au or
informed about details relating to that weekend. by post GPO Box 548, Brisbane
ACTION AND COMMITMENTS
We continue to stand by our other commitments made at the September meeting,
• Promptly return any excess liquidity by way of a capital repayment to Unitholders.
• Act in the best interests of all Unitholders in maximising the value of recoveries and
ensure no fire-sales occur.
• Continue to work to find ways to ensure the maximum returns from the
development assets with minimal additional risk and minimal additional capital
• Improve communications to all Unitholders.
• Act in the best interests of Unitholders to maximise the value of the Fund and
minimise the time period for the return of your funds.
9 Pacific First Mortgage Fund PFMF News
PFMF INVESTOR COMMITTEE (IC) ADDRESS TO UNITHOLDERS
Dear fellow Unitholders,
It has been some time since we have been able to communicate with you somewhat independently of Balmain Trilogy
Investment Pty Limited (BT), and we are very pleased to be provided the opportunity to do so.
We have always seen our position as one where our views are formed as a result of collaborative opinions & thoughts of
individual Unitholder IC members. These views are the result of continual dialogue, regular meetings with & investigation of BT
actions and intentions in management of the PFMF.
BT has communicated with unit holders via a number avenues including the website, information seminars & and news print
articles with the occasional letter. We believe that some Unitholders have even been telephoned! A vast improvement on the
City Pacific Limited (CPL) days!
However, we believe to achieve the greatest “reach” of all Unitholders that nothing beats a good NEWSLETTER!
We are aware of the informative content that you have just read so at this stage we think some comment (& criticism) would be
more valid rather than a rehash of what has been detailed by BT.
SCHEDULED CAPITAL RE-PAYMENTS
Unitholders are entitled to an explanation as to the non-payment of the anticipated “additional” repayment in Dec 2010.
The failure to pass Resolution 1 at the September Meeting of Unitholders resulted in the inability for the Fund to enter into
Joint Venture agreements and therefore development opportunities that would have allowed for assets to be fully or partially
realised, thus, not providing for the necessary cash resources to fund an “additional” repayment.
We are also disappointed that a full scheduled payment of 4c/Unit for April is also in doubt, though we do understand BT’s
reasons. These are connected to adverse weather in QLD from November 2010 through to January. Certain assets scheduled for
completion and sale have been stalled by lack of contractor availability (floods & the extreme wet). Contractors were unable to
work in sodden conditions & then the ensuing flood damage in Brisbane & elsewhere in QLD has taken priority above all else.
Realisation of Fund assets required to make the full April payment have been delayed.
A further complication for the expected revenue was the sale of several Gold Coast assets that have been subjected to the
prevailing adverse market conditions. Reasonable asset values have been significantly eroded to a point where really only fire
sale values have been offered. Had these low offers been accepted then a below par “market” value for the significantly larger
remaining portion of the development would have been set, thus generating a future loss situation. BT believes that this is not a
long term market condition and will wait until better conditions return for assets to recover their true value for the Fund.
Of general note it is important for Unitholders to appreciate that some cash resources will be utilised to “improve” certain
assets to bring them to a marketable condition for realisation at a “fair value” level, thus minimising losses and even generating
some additional profit where possible.
BT have demonstrated in a number of cases where sound project management practises have resulted in a better than
expected sales result. Their objective, we believe, is to where necessary, spend relatively few dollars to maximise the best asset
sale proceeds for the Fund and Unitholders.
BT’S COMMITMENT ON PAYMENTS
On the question of BT’s commitment to repay unit holders $295M within the next 20-22 months we are somewhat sceptical of
the schedule proposed (but we remain hopeful they will deliver). As it stands BT was not able to make the Dec 2010 “additional”
repayment due to the failure to pass resolution at the 1 September Unitholder meeting, with a further condition that the April
2011 repayment may only be partially made (the remainder to be paid within 8 weeks).
This means that BT will have to now make larger (or schedule more) repayments in the future over a shorter time scale to meet
their commitment! Their track record at this stage makes this somewhat doubtful.
We shall see.
Pacific First Mortgage Fund PFMF News 10
Some progress is being made with regard to the Legal proceedings against the
guilty parties whose conduct during the ‘bad old’ CPL days was deplorable. In
plain words Trilogy (the Responsible Entity) have engaged Maurice Blackburn
Lawyers to pursue damages from various parties on behalf of Unitholders under
the complete discretion of BT and Trilogy’s guidance.
Whereas it would be satisfying to see all of the Board & CEO of CPL behind
bars, unfortunately these proceedings can only be of a civil nature.
The recent action taken by ASIC against KPMG in the Westpoint case, and the
subsequent payout by KPMG, is an encouraging sign.
ASIC have now given permission for public hearings to commence & it can only
be hoped that they will in turn institute criminal proceeding against certain
parties associated with the defunct CPL & associated companies.
Brought about by an amendment to the constitution, the proposed ownership
HOW DO I CONTACT
of a “Legal“ unit will entitle all present Unitholders to participate in any
settlements or court ordered payments as a result of cases being won. Opinion THE INVESTOR
has it that it may be possible for as much as 10c in the dollar recovery! COMMITTEE?
It is very disappointing that hardship payments have taken an inordinate BalmainTRILOGY encourages on
amount of time to come through. Following a change to the Fund’s constitution going participation in the Investor
there should be no reason for these to be delayed any further. We have a very Committee. If you have any questions
aged unit holder base and our people have suffered for too long already. or comments that you would like to
be raised by the Investor Committee
Please be assured that we, in the IC, have the best interests of the vast majority
Members at a committee meeting,
of unit holders at heart as we are in fact one of you. Our only reward can be
please forward to the following
your satisfaction with our efforts and results.
PFMF Investor Committee
PFMF Investor Committee GPO Box 548, Brisbane QLD 4001.
The Investor Committee Members
will review these questions and raise
them at a subsequent meeting, if not
before hand. The Committee at its
discretion will respond to any relevant
11 Pacific First Mortgage Fund PFMF News
YOUR QUESTIONS ANSWERED
We have compiled the answers to the questions most frequently asked by Unitholders. You can also ask any question about your
Fund and our plans for the future via our dedicated Unitholder Feedback email, Freecall number or Reply Paid address, which
can be found in the ‘Contact Us’ section of this newsletter.
1. Why haven’t legal proceedings begun?
These matters require considerable planning and preparation to give us the best chance of success and the completion of the
public examinations is critical to assist to achieve this.
2. In terms of the litigation action you intended to undertake, how much will we get back, how long will it take
and how much will it cost the fund?
This will, in the first instance be subject to the results of the examinations. We believe that the claims could exceed $100m
- perhaps even more. Our job is to maximise the potential recovery. However, it will likely take some years to finalise any
proceedings. IMF will incur all costs of the litigation process; no fees will be borne by the Fund. If the Fund is successful in its
proceedings IMF will charge a fee of 26% of the settlement.
3. Why haven’t you commenced criminal proceedings?
We can only bring civil suits against past officers/directors of CPL. We cannot commence criminal proceedings. However,
we encourage the authorities to do more in this regard.
4. What proportion of these claims relate to borrowers from the fund?
The actions against borrowers are already underway and paid by your Fund in the ordinary course of business, and are not
funded by IMF.
5. Can you disclose the names of non-borrowing entities which the fund intends to take legal action against?
To forewarn is to forearm, but the list includes professional advisors, service providers, executives and financiers.
6. Will there be any legal action taken against City Pacific Limited and its executives/directors and will this be
using Unitholder money?
These entities are on our list. We will not use Unitholder money; these actions will be funded by IMF.
7. Will we ever receive income from the Fund?
The nature of your Fund is and always has been substantially different from the way it was portrayed to you by City Pacific.
You were told it was an income producing mortgage fund however, in reality, it was a non income producing fund, holding
mortgages relating to speculative development assets. Due to the development nature of the assets held in your Fund they
do not generate income, capital can only be returned to investors.
Balmain Trilogy Investment Management Pty Limited ABN 55 136 832 945
Investment Manager of the Pacific First Mortgage Fund
Level 14, 60 Castlereagh Street, Sydney NSW 2000 www.pfmf.com.au
GPO Box 3570, Sydney NSW 2001 www.balmaintrilogy.com.au
Tel: 1800 194 500 Fax: 1800 194 516 BTI 4665
This document has been prepared by Balmain Trilogy Investment Management Pty Limited ACN 136 832 945 in its capacity as the Investment Manager of the Pacific First
Mortgage Fund ARSN 088 139 477 (Investment Manager). None of Trilogy Funds Management Limited, the Investment Manager, and their respective associates, related
entities and directors guarantee the performance of the Pacific First Mortgage Fund or the repayment of monies invested. While every care has been exercised in the
preparation of this document, the Investment Manager does not give any warranty as to the accuracy, reliability or completeness of the information. Past performance is
not an indication of future performance. This document does not contain financial product advice, is provided for general information purposes only and does not have
regard for the particular objectives, financial situation or needs of any specific person who may read it and who should seek their own professional advice. The information
contained in this document is current as at 9 February 2011 and may change from time to time without notice.
Pacific First Mortgage Fund PFMF News 12