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12 February 2010

PFMF Investor Committee - Meeting #1 Report

The inaugural pfmf investor committee meeting, a detailed transcript of meeting one.

The Inaugural Meeting...

The first meeting of the Pacific First Mortgage Fund (PFMF or the Fund) Investor Committee (IC) took place in Brisbane on Friday the 18th December. The ten appointed Investor Members (IM's) met the four BalmainTRILOGY representatives. Following introductions and formalities led by the Chairman, the purpose of the meeting was reaffirmed: To be a forum where Investor Members can openly discuss issues relevant to the interests of PFMF Investors as a whole with the Responsible Entity (RE) and the Asset Manager (AM). The Committee will be an important forum to provide feedback to the RE and AM on proposals they may have for the PFMF. Below is a summary of the meeting, the key issues raised by committee members, proposals for the PFMF in the future and the responses provided.

What is the Role of the Responsible Entity?...

The meeting began with a RE report provided by Joint CEO of Balmain Trilogy, Mr Rodger Bacon. Mr Bacon described the role and structure of the RE and the difficult handover process from City Pacific.

Some questions were raised about the management approach of City Pacific. Mr Bacon explained that the role of the RE is to ensure compliance with its Australian Financial Services Licence, the Constitution of the Fund, and the Compliance Plan for the Fund. Mr Bacon stressed that Trilogy follows strict principles of proper governance within its management structure and embodies these in its ethos.

What is the Status of the Review of the Fund's Assets?...

Mr Andrew Griffin Joint CEO of Balmain Trilogy provided a report on the Asset Management of the Fund. He confirmed that the Asset Review was being finalised and would be provided to unitholders in the coming week. [The Asset Review has now been published and can be found on the BalmainTRILOGY home page www.balmaintrilogy.com.au] After some discussion, Mr Griffin reiterated that most of the loans were in default with the exception of a very few. He clarified to the IC that none of the loans were producing any 'cash' income. He described and discussed each of the Fund's Assets in accordance with the Asset Review Report.

Mr Griffin explained that a future strategy was being developed and was in a formative stage. Discussion regarding these options occurred. It was stressed that BalmainTRILOGY ('BT') would consider all the options before engaging the unitholders with proposals. He said that nothing would be finalised without consultation with unitholders so that any course of action took into consideration the various key objectives of unitholders. This approach should result in a choice of actions for unitholders reflecting differing objectives. The concept of choice was endorsed by the IC. The strategy will be further developed and discussed at the next IC meeting.

What is the Status of the Legal Review?...

The legal review was performed by Clayton Utz. Mr Griffin reiterated that any criminal proceedings would be dealt with by ASIC with whom BT would cooperate fully. Any other actions would only be pursued if there was a clear and achievable benefit for the Fund. Work is proceeding.

When are Distributions and Redemptions Likely to Occur?...

The issue of future distributions and redemptions were raised by the IC. It was stated that the Fund is unable to provide income distributions or withdrawals of any nature to unitholders at this stage. It was highlighted that there had been a determination that the Fund was a non-liquid scheme according to the definition contained within the Corporations Act 2001 by the Board of Directors of City Pacific Limited (in 2008). Currently all of the mortgages within the Fund's assets are failing to produce any significant income and the default rate is almost 100%. It was also communicated that, due to agreements entered into by the management of City Pacific, the Fund has significant commitments to other financial institutions which must be satisfied as a legal priority.

It was highlighted that a number of Hardship requests were being made to BT each week. BT stated that they take these seriously and are working hard to find a way(s) that the Fund can meet valid requests.

Communicating to Unitholders Continues to be Important...

The IC raised the importance of consulting and keeping unitholders updated and abreast of all issues surrounding the Fund. It was highlighted that communications had been greatly improved since the handover from City Pacific. Members agreed to continue the regular communications with the unitholders via traditional and digital channels.

BT management committed to providing a quarterly newsletter, regular updates on the BT web site and, for major matters, mailing hardcopies to all unitholders. It was agreed to communicate IC meeting topics, discussion points, and responses to all unitholders

All statements and releases regarding the Investor Committee are made jointly by it's members and are issued by its chairman Mr Ken Atchison.