Equititrust?

Either Kostag is a whistle blower and we should congratulate him for bringing this in hindsight quite obvious deteriorating of corporate structure in EquitiTrust, or he's on a crazed rant because he was a margin called in, investor.

I'd like to read Kostag's reply to the very detailed response by EquitiTrust.

Disclosure: I have no commercial relationship with EquitiTrust, I'm merely curious as to what's really going on.

Olman,

Just interested to know if you took up the CEO's invitation to talk to him direct. If you are as concerned as you suggest then why don't you simply call him.

I am guessing (and it's only a guess) that the CEO was referring to your abusive messages (which have since been removed) rather than the ones which raised valid points. He did say that he would not be replying to all posts and that he was only replying to the last one by way of example.

I'd be most interested in what he tells you on the phone - please keep us posted.

Cheers

Buffetman

Sorry - I didn't realise I had to jump on the phone immediately. I tend to do things at my own pace.

The "abusive posts" you refer to were removed and of no consequence. Here's an exerpt from the infraction notice from the forum:

You have received an infraction at Aussie Stock Forums.
Reason: No/Low Content Post
Please ensure your posts add something to the discussion, rather than just add to your post count.

I wasn't expecting any response to the two posts removed, which were throwaway lines to get my post count up, and properly dealt with by the forum admin.

My concerns are clearly expressed in my remaining posts.

It's true "He did say that he would not be replying to all posts and that he was only replying to the last one by way of example". Bully for him, but I see this statement as a poor exit line to avoid discussion.

Have you spoken to the CEO about this particular issue?

Re: EquitiTrust - let's be fair......

I refer to the posting from Equititrust Limited.
I believe that forums such as this one are very valuable because they allow individuals to raise matters of concern where, for example, regulatory authorities and others so often fall short.
The collapse of MFS, City Pacific and a raft of others was foreseen by a number of smaller investors who were being dealt with shabbily well prior to the final collapse of those institutions.
In the same light, individual direct queries with Equititrust Limited, yield what? Are redemption requests honoured?
In reply, it is commented that redemptions have reduced from $50m to $40m because $10m have reinvested in term deposits.
What choice do they have? Remain in limbo? Or accept their position, reluctantly, and reinvest.
By Mr Kennedy’s own admission – they were an outstanding redemption which was presumably not met and on that basis they reinvested. Before I respond to the responses, let me say simply this:
(a) I do know a number of Equititrust Limited borrowers.
(b) I do know some investors who are facing enormous hardship.
What do they want (and what would seem appropriate) is for the independent corporate watchdog, ASIC, to appoint a proper independent administrator whose interests are aligned with the investors rather than the RE. I accept that from Equititrust Limited’s standpoint that they may feel or genuinely believe that they are best to do the job of working out what is clearly a troubled loan book.
In reality the RE draws enormous management fees and dividends (well over $10M per annum as per Olman POST) and these are being paid when substantial redemptions ($40 million) are still unable to be met and the Fund is unable to repay the National Bank and luckily received a reprieve and was allowed to repay the debt to the NAB over 12 months at $3m per month. Again, repayments to the National Bank will be made in priority to repayments to outstanding investors.
Again, clearly the interests of the RE are not aligned with those of the underlying investors - the true stakeholders of Equititrust and whose interests are protected by nobody. The NAB gets paid first but where presumably the last ones to invest by comparison.
In such circumstances, the only way to move forward responsibly would surely be with the appointment of an independent Administrator.
To deal with the responses:
1. Redemptions not paid from new funds: I did not suggest this. I made the statement that banks are being repaid; Equititrust Limited is in the marketplace soliciting for new funds; and existing investors who want their money back are not being repaid.
This is the facts of the matter.
Redemptions have been frozen for quite some considerable time and there is no prospect of them being paid anytime soon.
This fact is not highlighted in material in the marketplace which solicits for new investor funds. I have just seen a prospectus for a Meridien fund on the Equititrust web site, looking for an extra $10million.
2. Changes to the Board are not unusual: With respect, in relation to Equititrust Limited which has had such a stable Board for many years and a very tight-knit one at that, the changes made to the management of the Fund are enormous. In fact, only the founder remains with his brother, his solicitor and partner gone. The new Directors and senior management are in reality all commercially beholden in some shape or form (either through professional service contracts or employment) to the interests of the major shareholder, not the investors whose money is at risk.
People must be sensitive enough to appreciate that when 2 out of 3 directors, responsible for the management of the business and presumably building the business during a period when it did run with a successful track record, suddenly jump ship when there are enormous changes in the management structure of the underlying entity, of course it raises all manner of concern.
I note the comment that the outgoing directors expressed “complete support” for the changes. What it does not say is, at whose instigation or why they resigned. Surely, new additional directors (if that was needed) could have joined without existing experienced directors jumping ship.
3. Reference to MFS is not worthy of comment: With respect, MFS represents one of the biggest corporate collapses in financial services industry in the past 20 years. I have been told that Equititrust has taken over some of their securities. Equititrust has also appointed to two very senior management positions, Mr David Kennedy CEO and Mr David Anderson Director of Strategy – both also very senior executives with MFS. In fact Mr Kennedy has signed this posting to this website as CEO and was COO of MFS.
The auditors and other professional advisors are also common between MFS and Equititrust Limited. I also understand both Mr Anderson and Mr Kennedy are also ex-KPMG staffers.
In relation to the MFS Court proceedings, I will not comment on my interpretation of those proceedings. I would invite any reader to do a Google search on those proceedings and read independent reporting of those proceedings and, particularly, the criticism of evidence and in some instances the incredulous revelations with respect to the transfers of large amounts of funds under the watch of Mr Kennedy and Mr Anderson.
I think it is fair to say that Mr Anderson’s evidence was considered less than satisfactory and his declaration as to his own financial position was alarming, particularly having regard to the fact that Equititrust Limited has now elevated him to Director status. Does Mr Anderson have any skin in the game?
4. KPMG: I acknowledge that they are one of the largest and prestigious firms in the world. So too was Arthur Andersen. I note that the firm conducts some major audits. That is not the point, is it? The reality is that the Gold Coast office has looked after the affairs of both Equititrust Limited and MFS. I do not imply any wrongdoing here whatsoever. Simply, those two new executives of Equititrust including its new CEO are former KPMG partners; KPMG was the auditor of MFS; both Messrs Kennedy and Anderson are ex-MFS Executives; and KPMG continues as the auditor of Equititrust. Or am I being unnecessarily squeamish?
Sensible, logical, basic independence and governance would surely require better independence than this, particularly at a time when values and assets are under scrutiny and the issue of “going concern” is a major issue for all investors.
5. Staff Numbers: A comment is made that these have increased to protect investors’ interests in order to monitor and manage the Loan Book.
However, the response from Mr Kennedy raises two issues.
Firstly, if one analyses the financial statements and PDS material on-line from Equititrust, there is little if any evidence of any major loan trauma. In fact, the reader is left with the very distinct impression that the majority of the loans are up-to-date and that in fact there is no cause for concern. That being the case, one would expect that the same staffs, who presumably have done such a fine job to date, would continue doing a fine job. This ought to include past directors who we note have resigned. Coupled with a 5 fold increase in staff numbers.
Whilst keen on the one hand to differentiate the Equititrust business model from that of the banks, Mr Kennedy justifies these swelling staff numbers by reference to similar increases in the bank numbers. Has Equititrust suffered the same trauma and losses as the major banks have suffered, which seems to have caused them to withdraw from commercial property lending and required such large staff numbers? If so, surely the investors would like to know what has changed.
The justification for large staff numbers is also that it would have been irresponsible not to have done it. The cost justification is that the cost is borne entirely by the RE and not by investors.
Now this is not entirely correct, is it? If I can’t get my money back from Equititrust, aren’t I somehow paying for this indulgence?
If investors are not being repaid and the RE is collecting management fees, dividends and profits (as outlined in the posting by Olman) then in fact aren’t we investors are paying for this directly or indirectly?
If the loan assets of the Fund are in good shape (which we would all hope and believe they are) it does not need a major five fold staff increase to administer what presumably was being responsibly administered previously with no more than 3 or 4 people.
Finally, I would invite anyone to take a look at the Equititrust website and look at the senior management and the positions that they now fill. If they were all loan Administration people or recovery people, then there might be some justification in Mr Kennedy’s argument. But, in fact (and perhaps I am being unkind), there appears to be a plethora of spin doctors now on board.
This is a shame.
I feel that much of this cost and loss could be dealt with if there was a proper financial “fessing up” in relation to the Loan Book – its status, its arrears and what is needed to move forward.
If major support is needed to sort out a problem loan book, and then let all stakeholders be involved in that decision process. After all it’s our money.
CONTINUED:

Re: EquitiTrust? CONTINUED

CONTINUATION:

6. Landsolve: I cannot really comment any further because Mr Kennedy is right, my assessment is based on hearsay and I acknowledge that.
It is my suspicion , based on third party material from sources that I feel have some reasonable information, that Landsolve takes control and manages defaulting properties in the Equititrust book.
My question is this, “Is it appropriate for a mortgagee to take over active development management of a real estate asset when clearly, whilst under its own loan administration, the loan went bad?”
That is not to say that the mortgagee is responsible for the bad practices, stupidity or worse of borrowers – simply that there is a process that once a loan has gone bad then surely it is not for the mortgagee on the one hand to maintain the asset on its books as a good, performing loan whilst on the other hand, ladling out money, which does have spare, and has adverse affect on investors, to prop up such assets and in turn become the (un-disclosed) de facto borrower. Equititrust prided itself for many years on not being a developer and not lending to itself. Isn’t that what is now happening?
In my mind it is all about proper commercial transparency to the true stakeholders.
I believe the position is simply that Landsolve has in effect become the developer and the borrower that is what MFS and City Pacific did.
It is therefore financially propped up by Equititrust Limited, which must have an adverse affect upon investors. In turn, this means that Equititrust does not close out or sell up underlying assets and realise cash to repay us, and face, perhaps, the harsh reality that there was a capital loss which must be realised and we all must face.
At what point does a responsible mortgagee turn off the life support systems to a dead mortgagor?
7. National Bank ratios have not been breached: Well, there is not much that I can say in response because I do not have access to the detailed loan records. However, if the foregoing comments about poor loans is correct and there are in fact bad loans festering away, kept alive on internal “life support” systems, then more than likely prudent loan value ratios have been breached and National Bank loan covenants breached as well.
Without external checking of the financial reporting, how do any of us know, and when will we fund out? If MFS is any guide and the actions of their then senior management are any comfort, we will only learn if this is the case when it is too late.
In conclusion, Mr Kennedy is correct when he states in relation to Equititrust that:
(a) In its history no investor has had a capital loss; and
(b) Income distributions have always been paid.
BUT he does not add that in that same period, the investors have never not been able to get their capital back. And this is the deal breaker, isn’t it. The game has changed whether we like it or not.
Now to reflect on that, this was all during a period under tight prudent and cautious management; tight limited staff numbers; and very tight Board control.
Two-thirds of that Board are now gone.
New parties have taken over management.
A new CEO presides. That CEO’s more recent history in financial services is under some cloud. The business model of Equititrust Limited has changed substantially. There is cause for concern as to major loan assets and their ongoing management. There are substantial outstanding loans to banks which could no be repaid on time and it was only the forbearance of those banks (whom Equititrust so soundly attacks), that Equititrust has survived.
Loyal investors who have stuck with Equititrust for its stellar 17 years history are not being paid their redemptions and are being asked to sit behind the payment of management fees and dividends to Equititrust Limited; and bank loan repayments; and an explosion in overheads and staff numbers and costs. It’s not fair, mate, is it?
Yes, Mr Kennedy, it is unfortunate that redemptions have been frozen. Perhaps, rather than blame everyone else, including government and banks, that you need to look long and hard within your organisation.
Cut costs and overheads; defer payment of your own large dividends and fees; tell the bank that we are owed money first, and get us repaid before them.
Then once we are repaid, then you can do what you want, when you want and how you want to do it.
Mr Kennedy, you know all the figures. Are you prepared to state in clear words that no investor will suffer any capital loss as it stands today?
We are all victims of the GFC but there is a point in blaming that event for ever , when we all have to get over it and take responsibility for our own actions.
Let us also be fair, Mr McIvor did an incredible job over a period of 17 years to build a very formidable and supportive lending institution. It is tragic that he, like so many, got caught up in changes in both world and local finance such that an asset that he has built up so well is at threat. He is not different than many others.
Sometimes it is hard to let go. I admire anyone who fights on. However, there is a time, particularly when you have substantial external stakeholders, to be frank and open in disclosures and not a deliverer of spin.
I was always comforted by messages from the CEO because I knew that he held a substantial personal stake in the business. Whilst I suspect with bad and doubtful debts that stake has unfortunately eroded, I am not comforted with announcements made by a CEO of such short history who I presume has no personal stake in the business, but is rather the recipient of a large salary.
Finally, I am aware that a number of individual investors have made representations and approaches for their money. This has not seen them repaid. Individual investors, as we have all witnessed so many times in this country, have little if any voice and little if any redress. They are usually sadly let down by the authorities charged with responsibility to oversee such matters.
I personally hope Equititrust Limited survives. Contrary to Mr Kennedy’s suggestion, it is does not assist a borrower or an investor for their to be further loss or turmoil.
If it does not survive, there are many of us who stand to lose much.
HK

Re: EquitiTrust? BUFFETMAN

I think BUFFETMANs conciliatory approach is probbaly reasonable and I think we should all try that - even those with issues and complaints should try to work through this mess not rail against the powers that be

I refer to the posts of Olman and Kostag.

Your posts raise some relevant points which, if based on accurate information, would have merit. Unfortunately they appear to be based on either inaccurate or misunderstood information.

It is simply inappropriate for us at Equititrust to continue a dialogue on a forum such as this. Once again I invite both of you (or any other investor) to contact me should they have any genuine areas of concern and I will address them. If, after speaking to me, you wish to continue to post comments, that is a matter for you but at least you will be better informed prior to doing so.

What I will say is this:

(i) The two directors who have retired from the Board have done so by mutual agreement at the company's instigation in order to inject fresh blood onto the Board. They have not resigned due to any dissatisfaction with the way the company has been operated and Equititrust is extremely grateful for the role they have played in Equititrust's development;

(ii) Equititrust Ltd has taken no dividends whilst the fund has been frozen and has received no net cash distributions on account of its subordinated yield. Almost all of the yield on the subordinated investment of circa $10m has been utilised to fund impairments on various loans in order to shield such impairment from investors. The balance has been used to fund operating costs (for which the management fee is insufficient). Whilst Equititrust is entitled to use its principal subordinated investment to absorb such impairments and take the cash distribution it has not done so. It has made a conscious decision to leave its subordinated investment at $40m in the Income Fund and to use its distribution instead to absorb such impairments and operating costs which could have been charged to the funds. There can be no doubt this has provided additional protection to investors over and above what is required;

(iii) Mark McIvor remains firmly in control of Equititrust and his commitment to protect investor's interests has not wavered. Furthermore, his investment in Equititrust has continued to increase over the past two years.

I further confirm that no Equititrust shareholder has received any net distribution from the subordinated yield whilst the Income Fund has been frozen.

Finally, on a personal note the continued references to MFS and myself are misguided and ill-informed. I was employed at MFS for a little over 9 months and left 6 months before it collapsed. The Court records (to which Kostag alludes) show that my employment was terminated when I raised corporate governance issues with the then CEO which were exacerbated after I refused to backdate various documents. At no stage have I been criticized for any part of the role I played at MFS - in fact quite the opposite has transpired.

As discussed above, I feel it is inappropriate to continue this dialogue and therefore won't be posting in this capacity again.

Regards
David Kennedy
Chief Executive Officer

Further to the last post I omitted to mention that the information about NAB is completely false. There is no luck involved in NAB agreeing the repayment program of $3m per month. It was a negotiated term with NAB that should either NAB or Equititrust decide not to continue with the rolling LOC facility then we had the option of repaying them at the rate of $3m/mth. This was simply responsible fiscal management by Equititrust.

Re: EquitiTrust? National Bank

Correct: far better to negotiate an instalment repayment program with regard to your NAB debt than to have it called up etc, however the question or statement was, that clearly the NAB is being repaid in prioirity to repayment to investors. That was not denied, so presumably, the confirmation is that investors capital repayments in fact rank last. Is this a correct statement or not? Was the repayment of $3M a month a part of the original National Bank facility? or was it the case that the NAB wanted to be repaid; Equititrust could not repay them, because they could not obtain repayment from loans that were made to Borrowers; so the NAB had to accept $3M a month or otherwise, commence legal action.

Secondly, in regard to a request for a definitive statement from you as CEO as to whether or not any investor will face a capital loss, you have been silent on that point. This is, I imagine, some degree of the comfort that we would like to hear.

Thirdly, in regard to Mr Mark McIvor remaining firmly in charge, if he is not CEO and not the Chairman, and you are the CEO, in what capacity does he remain in charge?

Fourthly, in regard to MFS and your conduct, when in your senior capacity you were asked to backdate documents, which would sounds to me to be horribly illegal, did you report the matter to Police or ASIC, as I presume would be your responisbility , or were you simply dismissed?

Thankyou.

Kostag/olman,

Have either of you called the CEO? If so what did he say?

If you haven't then it is fairly obvious that you don't want answers but are more interested in spreading rumors. Makes me think that Mr Kennedy is right when he suggested you are probably disgruntled borrowers rather than investors if you haven't called him.

I think it's high time you guys either put up or shut up as your apparent malicious conduct has the potential to cause damage to us genuine investors.

Buffetman,

Take it easy, mate. Nobody here is carrying arms. I reiterate that I am an investor in Equititrust. I also see no reason to disbelieve Kostag's statement that he is an investor. The CEO's insinuations otherwise are pure conjecture and a tad paranoid.

The concerns raised by myself and Kostag are genuine concerns. The Equititrust response is welcome information, and furthers the debate. I have more to think about before I respond any further.

We all want a successful outcome, but this does not mean we should grasp at straws and settle for an imperfect understanding. I think the debate has progressed in the posts on this board.

I found this quote in another member's post - it seems relevant:

Do you have patience to wait till your mud settles and the water is clear? Can you remain unmoving till the right action arises by itself?
老子 - Laozi, circa 350BC.

Have a cuppa tea and relax, mate!

Re: EquitiTrust? National Bank

kostag said:

Correct: far better to negotiate an instalment repayment program with regard to your NAB debt than to have it called up etc, however the question or statement was, that clearly the NAB is being repaid in prioirity to repayment to investors. That was not denied, so presumably, the confirmation is that investors capital repayments in fact rank last.

Click to expand...

Not sure of the structure of EquitiTrust and your investment, but in every single deal I've seen debt is senior to equity and quasi-equity (in fact, it's the point of debt...)

Re: EquitiTrust : Debt Vis Equity QUESTION ?

Doctor:
I agree debt does rank above equity, except investors in Equititrust were told taht we were secured by a quality mortgage book and further that the proprietors ranked after us through some sort of warranty protection. Now, nowhere was I told that a) at anytime a secured creditor could pop up in front of our secuirty in terms of security and or capital repayment, nor in fact that b) the proprietors would be entitled to receive very large fees and return on their funds, ranking ahead of the repayment of our capital. I did not understand (my fault) that I woudl finish up as an equity holder, ranking last in the list.

Now, as to the second part, re contacting the CEO, let me simply pose these questions and in the interests of transaparency, let us all be told:-

a) are their any defaults in terms of valutaion or solvency that cause a default in any arrangment on foot with the National Bank;

b) is there any likelihood of the National Bank taking moves to enforce their security, to our detriment; and should they do so, is there any likelihood of capital loss;

c) given what the CEO knows of the loan book, its values etc and the quality of Borrowers and the loans status in general , is there any risk of any further impairment or capital loss?

d) if I was to make formal request for repayment of a related series of investments of approx. $1.5million, would same be repaid within approx 14-21days?

e) is the Fund solvent?

f) are there any other secured creditors other than the National Bank who hold any security over any of the loans of the company or associated companies, and if so, do they rank ahead of our investments?

Re: EquitiTrust: what is going to happen to unsecured investors

Saw this article pop up - it outlines Equititrust's plans to raise about $50M and that $50M will rank ahead of all existing investors, some $40M of whom are still waiting for redepmtion since their moneys were frozen back in 2008 http://www.businessday.com.au/business/equititrust-wants-banks-out-investors-in-20101122-1847k.html

doesn't look to equitable to me

EquitiTrust

Re the Equititrust Income Fund:

I rang Equititrust yesterday and spoke to CEO David Kennedy and CFO Sid Super about the issues surrounding the Return on Subordinated Investment (RSI). They say that these funds for the past 3 years have been largely applied to impaired loans. There are no compensatory arrangements or fees payable to Equititrust for this facility, and they do not regain the funds foregone.

The RSI for the last 3 years has totaled in the vicinity of $40m. $30m has been applied to impaired loans, with the remainder being used to pay administrative costs over and above the annual administrative fee.

The 2010 Annual Report states impairment losses of $1.85m which is the current actual level of impairment (after application of the RSI). While any impairment is unwelcome, this figure represents .73% of the total loans. If the RSI was not applied to the impairments the level would be of greater concern.

Re Kostag’s post today, the Bank of Scotland loan mentioned in the news article is a loan within the Equititust Premium Fund (EPF) and does not apply to the Equititrust Income Fund (EIF), except insofar as statements about mergers are concerned. David Kennedy said today that a merger is not being pursued.

I get the impression that while Equititrust is sailing fairly close to the wind, the strategies in place to deal with the current difficult conditions deserve a chance to prove themselves. Lack of information to investors has been a key issue which is being addressed by the publication of future Equititrust Limited reports, which will allow investors to be more fully informed.

The lending banks seem to be out to kill. With their extraordinary profitable results of recent times, this is either because they want to stifle any competition, or they expect the property market to go leg up in the near future and are shoring up their funds to cope with rising mortgage defaults.

Remember the old adage - when America sneezes, Australia gets the flu. At least we have some remedy in a degree of regulation and a modicum of respect for the law, unlike our freewheeling freedom loving cousins in the US!

Re: EquitiTrust

Olman: good work. We cannot complain regarding Messrs Kennedy and Super's frankness.
Maybe a first step in the right direction.
Personally, talk about plan A and Plan B from a financial instituion does worry me. It implies some doubt as to the bank's acceptance of plan A. It also seems to me that survival of the Fund is dependant on $50Million of new funds being raised, correct? Is this likley in this climate?

Secondly, those new funds (as with the banks) are all secured and ahead of us.

Finally, if the RE's funds were $40M and there have bene <$40M of impairment losses, does this now mean that the capital warranty fund etc exists no longer? Or is the suggestion that there was at some stage say an $80Million fund, which has absorbed a $40Million hit and still stands at $40Million?

Good work Olman.

Re: EquitiTrust

kostag said:

Personally, talk about plan A and Plan B from a financial instituion does worry me. It implies some doubt as to the bank's acceptance of plan A. It also seems to me that survival of the Fund is dependant on $50Million of new funds being raised, correct? Is this likley in this climate?

Secondly, those new funds (as with the banks) are all secured and ahead of us.

Finally, if the RE's funds were $40M and there have bene <$40M of impairment losses, does this now mean that the capital warranty fund etc exists no longer? Or is the suggestion that there was at some stage say an $80Million fund, which has absorbed a $40Million hit and still stands at $40Million?

Click to expand...

Equititrust has to find $20m to pay off the Bank of Scotland, or merge the two funds. If the capital raising succeeds, I imagine it would be used in the first instance to retire this debt. In effect it would result in a debt swap from BOS to the new corporate bond holders.

It is logical that this debt would be secured ahead of unitholders, along the same lines as in DoctorJ's earlier comments: ".... debt is senior to equity and quasi-equity (in fact, it's the point of debt...)". That's business. There is no loss to unitholders by this action - it's a debt swap.

The impairment losses were $30m, not $40m. Because the RSI payments were applied to these losses, they have been accounted for and the $40m capital guarantee remains unmolested to date.

If the capital raising fails, then it looks as if the merging of the Income and Opportunity Funds may have to happen, unless there is another angle that Equititrust are keeping mum about. There is not much we can do at present but wait it out.

Re: EquitiTrust - lok at Note 10 in the 30/6/10 accounts

Take a look at the 30th June 2010 on www.equititrust.com.au

Go to Note 10.

Note 10 deals with the Loan assets.

My very quick and ill-informed (perhaps) reading raises some issues:-

a) of some $255,338,826 of mortgage loans , some $163,088,936 are listed as 'static'. I presume that 'static' means ' do not pay interest'. I cannot find a definition of 'statis'. Does that mean we have $92,249,890 of loans that do pay interest? Now, if we assume that these loans return an interest rate of say 12% per annum, that is $11,069.986 of gross revenue. This revenue has to service i) interest to the National Bank on its $35,000,000 debt; ii) interest to external investors (you and me) - lets say 7% on how much - I cannot work out how much we all have tied up iii) interest on the $25million facility with Bank of Scotalnd, and finally iv) if last year and 2008 are anything to go on, over $14million to Equititrust Ltd. Now, if you expenses each year are substantially over your income, does not this mean, eiether 1. your are insolvent , or 2. you are operating by using capital bein repaid , or 3. relying on new investors to put in new money, when old investors are not being repaid. Now, in circumstances where existing investors find their investments stuck in behind the Banks; and payments of $14milliona year to the founder's company; and now the loan capital, which is presumably, our 'asset' is now being used to pay for all of this.

b) Loan categorised as 'mortgagee in possession' suddenly account for $71,247,884 or a staggering 28% of the overall loan book of $255,338,826. Is this normal? I can only assume that for a property to be mortgagee in possession, that would mean that the original borrower and property owner, could not generate sufficent sales or cash flow from the property to meet obligations or repay the loan, or worse, get anyone else to take over the loan. That being the case, surely, there must be some high level of anticpated impairment. The level of LVR reported on note 10 (c) (ii) on page 25 in the range 41% (I'd be looking at why the Borrower could not repay if that LVR was/is correct!) upt to 77%, seem to be based in the main on valuations done in 2009, atleast a year out of date and presumably since then there has bene further decline generally in line with the state of the real estate markets.

These are troubling disclosures. Sadly, KPMG, as auditor, does not address the issue of going concern and ability to survive.

I am none the wiser having read these reports.

Re: EquitiTrust: has KPMG issued a qualified AUDIT REPORT

you've earned the EQUITY - we'll give you a thrust!