11 NOVEMBER 2008
Dear Investor
As you know, on Tuesday 21 October 2008 the Board of Mayne Investments took the unprecedented step of freezing your Fund for an initial period of up to 90 days to protect the integrity of your investment. Because of this event we have decided to write to you regularly to keep you up to date with the situation.
AT A GLANCE · Since 21 October 2008, Mayne have been actively lobbying Government to extend its guarantee to mortgage funds and provide for financial hardship provisions; · In relation to the guarantee, our submissions have not been adopted. However, we are vigorously exploring a range of options and will shortly be able to advise investors concerning ongoing arrangements; · The government has responded to our request to permit relief for investors facing severe financial hardship. Application forms for hardship redemptions are now available; · Your Board has determined that the distribution rate for the quarter ending 30 November 2008 will be 8.03%; and · We are actively planning in relation to the ongoing operation of the Fund and will call a meeting of investors in December to fully outline a comprehensive strategy for future Fund operations.
IN DETAIL The difficult decision to freeze redemptions from your Fund for an initial period of up to 90 days was taken with the best interests of investors. Whilst there was broad agreement from financial commentators that this was indeed an appropriate course of action, the Board is nonetheless aware of the hardships that this action has caused for some. ASIC Chairman Mr Tony D’Alosio said “Mortgage Trusts freeze redemptions in the best interests of all members to prevent withdrawals from destabilising the funds. A freeze does not necessarily mean that there has been a loss of asset value and it does not necessarily mean that investors will not get their money back”.
The Board understands that investors want to know what the future holds beyond the initial 90 day period.
Mayne have been actively lobbying the government for assistance on two main fronts. The first was for the government to extend their guarantee to the mortgage funds industry. It is now clear that the Government is firmly of the view that there is a major difference between a bank deposit and an investment in a mortgage fund and as such are unlikely to offer help with this request. Their suggestion to consider the idea of becoming a bank has significant difficulties although we continue to explore this approach.
The second, was for the government to provide relief for those investors facing severe financial hardship and in this regard we have been more successful, with ASIC announcing they are prepared to allow fund operators to apply for relief under the Corporations Act so that operators can allow withdrawals by members on certain hardship grounds.
Mayne immediately wrote to ASIC and has now received permission to allow for one-off hardship withdrawals which would be the lesser of the specific amount requested or $20,000 plus 50% of the balance of funds invested. Relief can only be provided on the following grounds:
· Where the member is unable to meet reasonable and immediate family living expenses; · On compassionate grounds (eg medical costs for serious illness, funeral expenses, to prevent foreclosure, etc); · In the case of permanent incapacity; and · Where the member has a contractual obligation, provided the contract was entered into prior to the Board resolving to defer redemptions.
We have attached ASIC’s eligibility guidelines. Investors who firmly believe they qualify for assistance are asked to contact Mayne as we will require significant documentation evidencing the need for assistance in order to comply with the government guidelines.
Whilst the current crisis is significant, we hope we have passed the point where decisions are driven by sentiment rather than economic reality. The panic that hit the industry following the governments announcement to give an unlimited guarantee to banks, building societies and credit unions appears to have passed. The media for their part appear to have adopted a less negative approach to the current situation and there are signs from the RBA, property industry and the share market that the worst is perhaps behind us.
Despite the freeze in redemptions, Mayne Investments loan book operations continue to operate on the same basis that has seen it deliver excellent returns to investors for forty years. The irony of our having to freeze redemptions as a result of a problem not of our making and at a time when the fund continues to perform well is not lost on many of our investors, whose messages of support and understanding have been well received.
As a result of this continued strong performance, the Board has determined that the distribution rate for the quarter ending 30 November 2008 will be 8.03% (calculated at 8.5% from 1 September to 2 September, 8.25% from 3 September to 3 November and 7.5% from 4 November to 30 November). This is considerably better than investment rates currently on offer at the banks. Investors who wish to have their distributions paid to their bank instead of being reinvested, can lodge their account details with Mayne.
Since making the announcement to freeze redemptions, the Board and management have been working hard to find a solution to the current extraordinary situation which we and many other high quality mortgage funds find ourselves in.
The Directors remind all investors to consider the following information:
· The Fund continues to perform well with distributions comparing most favourably with those on offer with banks, building societies and credit unions; · The Fund has no borrowings; · Mayne has no exposure to the share market or the sub prime residential market; · There are no loans to directors and staff or their related parties; · 80% of all loans secured by property located in the Northern Rivers; · We have sufficient liquidity on hand to maintain normal activity; and · It is not expected that there will be any loss of capital.
The way ahead is by no means certain and much work needs to be done to return confidence to the industry. Mayne remains firmly of the belief that it still offers an attractive and secure investment and asks you to consider our more than forty years of sound management.
We are actively planning in relation to the ongoing operation of the Fund and anticipate being in a position to call a meeting of investors in December to fully outline comprehensive arrangements for future fund operations.
We will continue to write to you from time to time to keep you appraised of developments.
Greg Andersen Pat Rummery General Manager Chairman
7 NOVEMBER 2008 NOTICE TO INVESTORS
Since 21 October 2008, the Board of Mayne Investments has been actively working to ensure the best possible outcome for our investors. This includes exploring the various options currently available to us. In the meantime the Fund continues to operate successfully and will make its quarterly distribution on 30 November 2008. Investors who have not yet done so can lodge their bank account details with Mayne so that their distribution can be paid direct to their bank account. Investors will receive a letter in the following week giving them a more detailed explanation of developments to date.
Greg Andersen General Manager
22 OCTOBER 2008
Following the announcement by the Federal Government last Sunday 12 October 2008 to guarantee all funds in Banks, Building Societies & Credit Unions, Mayne Investments Limited, as well as a number of similar funds, has received a steadily increasing number of redemption requests. Extensive publicity has yesterday been given to Australia’s largest mortgage trust, Challenger Howard Mortgage Trust, and their decision to suspend redemption requests. As a result of this sudden and unexpected publicity Mayne Investments and other local funds have received accelerated redemption activity. Accordingly, the directors of Mayne Investments & East Coast Mortgage Trust have both taken the decision to suspend redemption requests for an initial period of up to 90 days. Even though the Fund retains good liquidity, the continued increase in redemptions could not prudently be sustained indefinitely. It is disappointing that the current situation has been caused by the government’s decision not to include managed funds such as Mayne Investments in the support package. This difficult decision has not been taken lightly in the certain knowledge that it will no doubt cause distress to some investors. However, the Board could not let the situation continue to deteriorate. Once this decision was made, the Board could not, under the Corporations Act, give preferential treatment to some investors. The Board is firmly of the view that Mayne Investments remains in a very strong financial position. Quarterly distributions are expected to be unaffected. Directors do not currently anticipate there will be any loss of capital. Investors should note that Mayne has operated successfully through good and bad times for over forty years without loss of capital to any investor. Mayne Investments has:
We expect the 90 day period will allow the Board of Directors sufficient time to conduct a thorough and orderly review of the situation and make representation to the government for the guarantee to be extended to mortgage trusts. In the interim, the Board has resolved to withdraw the current product disclosure statement until the market volatility has subsided. Those investors who have their distributions automatically reinvested can contact our office and arrange for the distribution to be paid rather than reinvested. Those investors who have invested in the Fund within the last 14 days may be entitled to apply to have their investment redeemed under the “cooling off” provisions and affected investors who wish to use this process should contact our Lismore office. We would urge investors to contact their federal member of parliament and express their concerns about how the government has chosen to favour the banks, building societies and credit unions to the disadvantage of the investment and funds management industry. We thank our investors for their continued support at a time when factors beyond our control had led us to this disappointing situation.
Greg Andersen |