City Pacific First Mortgage Fund
Important Notice
19 August 2008
City Pacific First Mortgage Fund (the Fund) distributions
City Pacific Limited (City Pacific), as responsible entity of the Fund for over 10 years, continues to take all the necessary steps to preserve the value of the Fund's assets and protect investors' investments in light of the continuing and rapidly changing global and local market conditions. The Board and management team are not in a position to forecast or predict when the current market instability will return to normal. It is important for investors to understand that this is a worldwide phenomenon which has impacted property and funds management globally.
The ongoing global credit and liquidity crisis continues to have a direct impact on the Australian property market and a potential impact on the value of some of the first mortgage securities in the loan portfolio held by the Fund. Management's review of the Fund's loan portfolio, in consultation with the Fund's auditors, has indicated that an accounting provision (for potential losses) of approximately 5% of the portfolio may be necessary.
It is important for investors to understand that this is an accounting provision and management are of the view that with the continued effective management of the loan portfolio and allowing for the orderly completion and sale or refinance of the existing projects, the provision may not need to be utilised in full.
The Constitution of the Fund sets the unit price at one dollar and the Fund can only recoup the above mentioned accounting provision through the non-payment (or reduction) of distributions. Therefore in order to preserve the capital value of the investors' investments in the Fund the Board of City Pacific have resolved to suspend the Fund's payment of distributions for the months of July and August 2008. The Fund will not accrue or pay these suspended distributions at a later date as the amount is required to off-set the accounting provision.
It should also be noted that over the last 8 months a number of other major funds in Australia and globally, have chosen to defer the payment of redemptions and reduce or cease distributions from their funds in order to preserve the value of investors' investments. This similar course of action has been taken by Fund Managers to ensure that the interests of investors are protected during this period of market instability.
The Board and management understand that many of our investors, who also include many of our staff and a number of our Directors, are relying on these distribution payments and that not receiving these payments may cause financial hardship. The Board must however ensure that the value of the Fund's assets and investors' investments are preserved and this can only be achieved by deferring redemptions and temporarily suspending distributions from the Fund and ensuring the projects financed by the Fund continue to be funded and completed in their usual course.
Please find attached a 'question and answer' sheet that has been compiled to provide you with a better understanding of the status of the Fund and the environment it is currently operating in.
Reduction of the Fund's finance facility
City Pacific Limited as responsible entity for the Fund, has reduced the Fund's finance facility from $240 million to approximately $120 million since January 2008.
Loans scheduled to be repaid during September and October will generate sufficient funds to fully repay the Fund's finance facility.
City Pacific's management team have and continue to proactively manage the Fund's borrowers in pursuit of securing the timely repayment of loans to the Fund to facilitate the continued reduction of the finance facility.
City Pacific's offer to investors
We have previously informed investors that we have been working on a proposal, in conjunction with our advisors, to provide those investors who require access to their funds (liquidity) with a solution.
We are pleased to confirm that the Board of City Pacific, on Friday 15 August, announced that it has now finalised the terms of the proposal which is to be offered to the investors of the Fund. A summary of the terms are contained in the attached Fund Update however further detailed information about the proposal will be forwarded to you in the next week.
We will continue to keep you informed about the First Mortgage Fund and we ask that you contact our Client Relations Team on 13 47 69 or via email to enquiries@citypac.com.au should you have any questions.
CITY PACIFIC LIMITED
Phil Sullivan
Managing Director & CEO
| Filename | Size | Date |
|---|---|---|
2008 |
||
| CPFMF Fund Update - 19 August 2008 | 146 KB | 19 Aug 2008 |
| Questions and Answers - CPFMF and Distributions | 53 KB | 19 Aug 2008 |
| Letter to investors - 28 July 2008 | 31 KB | 28 Jul 2008 |
| Letter to investors - 3 March 2008 | 107 KB | 3 Mar 2008 |
