LM calls Trilogy bid opportunistic

A hostile attempt by Trilogy Funds Management to replace LM Investment Management as manager of two LM feeder funds is opportunistic and without any consideration of investors’ interests according to LM.

Wednesday, October 10th 2012, 6:58AM

Trilogy is seeking to replace LM as the Responsible Entity for the LM Wholesale First Mortgage Income Fund and the LM Currency Protected Australian Income Fund, feeder funds of the LM First Mortgage Income Fund (FMIF).

“LM believes that Trilogy’s extraordinary action is based on inaccurate and misleading information, and it is not in the best interests of fund investors,” it says in a statement.

LM alleges the takeover bid has been started by three investors indirectly holding less than 10% of interests in the LM First Mortgage Income Fund, via its feeder funds.

“The 48% quoted in Trilogy’s headline is incorrect and misleading.”

The LM Wholesale First Mortgage Income Fund holds 20% investment in the FMIF, and the LM Currency Protected Australian Income Fund holds 24% investment in the FMIF.

LM chief executive, Peter Drake says that the information Trilogy is using to gain support is “superficial at best.”

“Trilogy has no knowledge of the assets of the fund. It is important that investors understand the position of the fund and its assets entirely and comprehensively, before making any decision with respect to any offer or vote that Trilogy or any entity presents.”

“LM questions the relevant property expertise of Trilogy, and their understanding of the intensive development management that needs to be applied to the assets”, Drake says.

He says his company has an in-house team of 20 property asset managers.

He also challenges Trilogy’s claims around fees.

“Our management fees for the First Mortgage Income Fund have been historically low, averaging 1.41%. These assets need to be worked through, not simply sold down, and certainly not to be offset by a rapidly diminishing unit price as proven by previous Trilogy takeovers.”

“Trilogy Funds Management is offering no magic solution to investors in the funds. The hollow promises that are being made by Trilogy are along the same lines as they made to investors of City Pacific. The result of those promises saw the unit price slashed from 61 cents in December 2008 to 13 cents in June 2012.”

“Investors in the LM funds would not want to see Trilogy achieve the same disastrous result for them,” Drake says.

The fund was closed in March 2009 due to the GFC, “not due to bad or poor performing loans”. Since then, LM has maintained regular, comprehensive communications with fund investors, as well as to its global network of financial intermediaries, through whichthe LM funds are available on recommendation as part of a planned investment portfolio.

“We have also totally supported our New Zealand markets throughout this time, with two full time offices up until the closure of Auckland in August, when its full time client support was amalgamated to one office in Queenstown, which continues to service advisers and investors in New Zealand.”

Drake says that LM is currently finalising thorough asset information, which includes an independent property asset review by BIS Shrapnel, and financial information in relation to the fund. LM is currently liaising with ASIC with respect to the finalisation of the fund strategy and this comprehensive investor information.

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