21 November 2011

Report to Investors

As foreshadowed in my last report the Fund is again unable to make a distribution for this quarter due to the continued effect of loan impairments. 

An impairment is provided when the stress tested value of the loan security is less than the balance of the loan. Until the property is actually sold, the impairment is a ‘book’ loss only.

Stress testing of all loans is carried out, using current day estimates of value, notwithstanding that hopefully, values will improve prior to the sale of the secured property. Property sales and values, particularly home units and vacant land, are still being adversely affected by current market uncertainty.

As a result of significant loan impairments in the August quarter, the value of each unit has decreased to 97 cents. In this current quarter, ending 30 November, there has been a further impairment of $1.1m provided in the financial statements, resulting in no change in the ongoing value of each Fund unit. The Board’s number one priority is to preserve investor capital by restoring the Unit value to $1 as soon as possible.

The Board’s current policy is to continue to repay capital at the rate of 7 cents per unit, with the next payment due 30 November, 2011. This payment is non-taxable. The value of Fund units will not affect the actual amount repaid to investors. If you have not provided your relevant bank details, or if those details have changed, please contact our staff as soon as possible.

Mayne continues with its policy of unit consolidation after each return of capital. This means that the number of units and the amount invested by members remains equal.

The value of Fund units does however, have an effect on hardship payments. At the current value of 97 cents, a hardship payment of $1,000 would result in the redemption of 1030.9 units. We continue to approve all hardship applications which meet the ASIC guidelines.

Management continues to actively follow up on recovery of amounts owing on overdue loans and guarantees. All proceeds from sales of property, under security to Mayne, are paid direct to Mayne.

The return of confidence in the property market, on which Mayne is totally reliant, is the subject of much debate. While hopeful of a recovery in time, the Board’s expectation is that it is unlikely that a further distribution of profit will be paid in this current financial year.

Barry Wappett

Chairman of Directors