Global market woes weigh on Hubbard Management Funds
Volatility on the world’s sharemarkets has seen the value of Hubbard Management Funds (HMF) drop to $46 million from $49.3 million at May 31, 2011, and $47.8 million at the time of the appointment of statutory managers in June 2010.
In the eighth report, the statutory managers of HMF said that the volatility of the fund is expected to continue for some time given the uncertainty of the global economic and financial markets and this could result in further losses.
The good news for investors is that significant progress has been made towards filing the required documents for the Court hearing which will ultimately determine the distribution of HMF to investors.
“We have engaged expert actuaries to advise on the appropriate approach to allocate funds equitably between investors. The advice received indicates that we base the calculation on the 31 March 2010 statements that Mr Hubbard prepared last year. Adjustments should be made for transactions in the period from 1 April 2010 to 20 June 2010. The advice further recommends a calculation of a shortfall in shares held as at 20 June 2010 and the allocation of these shortfalls proportionately to investors based on the securities recorded in their individual portfolios as at 20 June 2010.”
The shortfall includes listed stock market shares, and also incorporates shares in Hubbard entities such as Scales, Southbury, and South Canterbury Finance.
“Some of the shortfalls will have been reduced while others may have been made worse. Generally, it appears Mr Hubbard made purchases and sales in the period 1 April to about 30 June each year to correct issues he found in the statements.
“In addition, the value of the surplus shares held should be used to offset any shortfalls in the cash holdings. In the past it seems Mr Hubbard used the cash labelled on statements as "cash on hand" or "uninvested funds" to fund other share purchases. We are told he had a view that money in the bank was not working so he invested it. As a result it could be argued that the surplus shares were really part of uninvested cash so the actuaries have advised us to regard surplus shares as part of cash.
“The restated investor balances after these calculations will determine each investor’s share in the assets remaining under the proposal. The advice provided is that from the date of the statutory management the assets should be treated as a pool. It is this advice that we will recommend to the Court.”
The statutory managers are now formally documenting all these matters and preparing revised statements for individual investors to 20 June 2010 so that each investor may understand the impact of the proposals on them.
“Once these calculations and the related documents are filed with the Court, we will contact all investors to provide them with access to a documentation package to assist them in understanding our recommendations to the Court.
“We will also ask the Court to appoint independent counsel to represent investors’ interests in this matter and there will be a process to allow investors to have input to the Court processes.
“Once we have the Court’s order, we will immediately commence work to make distributions to investors in the manner the Court orders,” they said.
Aorangi Securities
In an abbreviated report brought about by the circumstances following the recent death of Mr Hubbard, the statutory managers announced that they were distributing a further 5 cents to investors on 7 October 2011 thanks to the completion of the refinancing of a $5 million loan.
“We are working through the effect of Mr Hubbard's death on the statutory management process with the Government agencies, the Hubbard family and their advisers.
“There is a significant group of assets which the Hubbards held personally and stated that they intended to introduce into Aorangi Securities Limited for the benefit of investors.
“The availability of those assets to Aorangi remains a significant factor in the ultimate return to investors and we continue our work to determine the availability of those assets, as well as managing and realising them in the meantime as appropriate.”
During September action was taken to control a property development where the refinance did not come to fruition. Liquidators were appointed to this company and they will now control the sale process of the properties.
“Aorangi’s exposure to this borrower is $750,000 with Mr Hubbard owed a further $2.5 million. Steps are being taken through a court process to place a related company with exposure of $2.5 million to Aorangi and $3.8 million to Mr Hubbard in liquidation. This process is required due to the lack of valid security to Aorangi,” they said.
Further enquiries, please contact:
John Durning
Durning PR
M +64 (0)274 373 286
E john@durningpr.co.nz