LM takes critical steps to provide further comfort to closed fund investors
LM Investment Management Ltd (LM) has moved decisively to further reassure its investors in the closed LM First Mortgage Income Fund (Fund).
Chief Executive Peter Drake said that LM was determined to continue its orderly sales of Fund assets, commenced before its closure;and to commence periodic capital distributions to investors in 2013.
He said that investors would also receive catch-up income, with two months of payments to be distributed in January 2013.
“We have conducted a thorough review of all aspects of the closed Fund and its operations, and we’ve listened very, very closely to the wishes of our investors.
“We believethat on balance, it is in the best overall interests of closed fund investors to continue the sales program, with an orderly sale of all remaining assets.
“All investors will share pro-rata in the liquidity generated by the asset sales program. The first pro-rata capital distribution is scheduled for March 2013 and will most likely occur quarterly.
“Every investor will automatically receive their pro-rata share of any capital distribution made from the Fund, without having to lodge a withdrawal request.
“I need to emphasize that this is a strategy for an orderly, commercial sale and not a damaging fire sale of assets. Our team has been working diligently to prepare assets for sale at the most appropriate time.
“We want to see investors’ investment capital returned as quickly as commercially possible and estimate that this program will take two to three years to complete,” he said.
Mr Drake said that LM had also moved to provide certainty to the Fund and investors by successfully renegotiatingits loan facility with the Fund’s current financier, Deutsche Bank AG.
He said the facility, capped at $25 million, would be in place from1 January 2013 until 30 June 2014, with an option for a further 12 months at LM’s discretion.
“The Deutsche Bank facility is an important component of the fund’s orderly sales program. It provides certainty of required capital for those assets where additional development or enhancement of the asset will help in achieving a more favourable sales price.
“The extension of this facility also means that the fund can immediately begin a catch up of investor distributions and commence the program of capital distributions with liquidity from the sales campaign, which otherwise would have gone to the repayment of the Deutsche Bank facility,” he said.
Mr Drake said that LM Directors had written to all closed fund advisers and investors to outline the current strategy.
The strategy update also advised:
- Confirmation of the unit price at 59 cents as reflected in the latest audited financial statements for the year ending 30 June 2012.
- The background to the current unit price
- Ernst & Young’s ongoing independent review of the values of each Fund asset at a minimum of every six months
- The timing of a BIS Shrapnel report to investors in the Fund, expected to be distributed in the New Year.
- The finalising the RG45 Report to all investors by January 2013. This report is for the purposes of ASIC’s Regulatory Guide 45 Mortgage Schemes, improving disclosure for retail investors.
- Further advice of redemptions and monthly income distributions
LM’s products hold Australian only assets and are distributed and available for investment only via a global network of independent financial advisers, intermediaries, wholesale platforms, private banks, superannuation and pension funds, corporate and institutional investment consultants spanning 73 countries.