Tuesday 8th March 2011
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Investors in Hubbard Management Funds have received little good news with the publishing of the sixth report from the statutory managers.
Not only has the earliest time frame for repayment from the fund been extended to 2012, but the fund has incurred a $7.152 million loss between September 30, 2010 and January 31, 2011.
Overall, however, the valuation of HMF at January 31, 2011 is slightly ahead of the value at the start of the Statutory Management in June 2010, at $48.75 million.
The main reason for the decline between September and January, when the NZX50 rose by 5.03% and the ASX 200 by 3.73%, were investments in Pike River Coal, NZ Oil and Gas, the reconstruction of the Mercer Group and the share price volatility around Olympus Pacific, the statutory managers said.
"The impact of these declines could have been much worse had steps not been taken to reduce risk. 400,000 HMF shares in NZ Oil and Gas Limited were sold along with 446,386 shares in Pike River Coal shortly before the Pike River disaster.
"We also reduced HMF's holdings in Olympus Pacific by 534,683 shares so that this stock is not as dominant in the portfolio. By taking these actions, we were able to save investors from a loss of over $675,000.
"Since January 31, 2011, HMF has invested $1 million back into Mercer Group, following much research and many discussions with Mercer directors and executives and Mr Hubbard. The result of this investment is that the holding of HMF in Mercer Group is approximately 17.75%."
The statutory managers continue to work towards the ultimate distribution of HMF to investors.
They state that some shares recorded as belonging to HMF are subject to possible claims from others. They say shares have been pledged as security to financiers for borrowings made by Hubbard or parties related to him.
"As we have earlier stated, our reconciliation as at March 31, 2010 indicates that there were insufficient assets to provide investors the investments noted on their statements. There were also investments that were not allocated to investors and some valuations in our opinion were incorrect. "
Once all adjustments and corrections were processed, the shortfall of assets compared with the investor statements is estimated at about $31 million.
"In our opinion, investors will suffer a considerable loss compared with what was shown on their statements as at March 31, 2010 and because there are not enough shares to give investors the investments that were on their statements, we need assistance from the courts to determine the entitlement of investors to the assets of HMF.
"The in-depth research that we have been doing since the last report has revealed a number of issues that will need to be taken into account in the distribution process.
"Based on our current understanding, it is realistic to expect that the next application will be filed with the Court during the next six months, although we are working to reduce this time period. The Court hearing and submission processes could take several months after this and as a result the earliest any form of distribution will occur will be in 2012.
"We will be do everything we can to expedite the process."
No further comment will be provided.
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