Unsolicited, Anonymous Misleading Letter to Unitholders

6 March 2013

Some Unitholders may have received an unsolicited and unsigned letter in January 2013 (Anonymous Misleading Letter). The Anonymous Misleading Letter contains information likely to mislead and deceive Unitholders in respect of Balmain Trilogy’s management of the Pacific First Mortgage Fund (Fund).

For the sake of clarity please note that:

  • the unit price of the Fund as at 30 June 2009 was $0.48 per unit, not $0.63 per unit as indicated in the Anonymous Misleading Letter (see the audited Financial Accounts of the Fund for the financial year ending 30 June 2009, which can be viewed here);
  • to date, we have returned a total of $79.63 million in capital to Unitholders (including Hardship Redemptions), which equates to $0.091 per unit;
  • we have reduced the CBA debt facility (Facility) by over $81 million, which equates to approximately $0.092 per unit; and
  • Trilogy Funds Management (Trilogy), the Responsible Entity (RE) of the Fund, has waived over $880,000 in management fees in accordance with its pledge to return $0.04 per unit to Unitholders in April 2011 and a further $0.04 per unit in October 2011.

The Anonymous Misleading Letter claims that the repayment of the Fund’s Facility has been unreasonably or unnecessarily delayed. This claim is inaccurate and misleading. At all times we have acted in the best interests of Unitholders in directing available liquidity towards either the repayment of the Facility or making payments to Unitholders. We have not retained surplus cash at any stage. In reality, we have sought extensions of the Facility to enable accelerated repayments of capital to Unitholders.

The Anonymous Misleading Letter also claims that a number of the Fund’s major assets have been sold at fire sale prices. This claim is false. We reconfirm that no fire sales have taken place and that all assets have been placed on the open market, comprehensively advertised through well-funded marketing campaigns and sold at fair market values.

The Anonymous Misleading Letter states that a select group of members have secured the support of One Investment Group (OIG) to take over as RE of the Fund. Representatives from OIG and Balmain Trilogy have met to discuss the Anonymous Misleading Letter and OIG has unequivocally advised Balmain Trilogy as follows:

  • OIG has no interest in seeking the replacement of Trilogy as RE unless the replacement is supported by Trilogy;
  • OIG acknowledges that the costs of a hostile (that is, unsupported) replacement of the RE would be substantial and not in the best interests of Unitholders; and
  • OIG was not responsible for drafting the Anonymous Misleading Letter and was previously unaware of the numerous inaccuracies contained therein.

We remain committed to the responsible stewardship of the Fund and structured realisation of the remaining assets, while retaining sufficient liquidity and maintaining the financial viability of the Fund. Maximising the return of capital to Unitholders remains our foremost objective and we firmly believe we are best placed to achieve this.