NZ Mortgage Income Trust (No. 2 Fund) Group Investment Fund

Fund Managers Otago Limited is a Fund Manager and does not offer investors investment advice. For investment advice we recommend that you make contact with a qualified registered investment advisor.

Fund Managers Otago Ltd is licensed under the Financial Markets Conduct Act 2013 as a Manager of the NZ Mortgage Income Trust (No. 2 Fund), the Capital Mortgage Income Trust and the NZ Mortgage Income Trust. VIEW licence here. To view our schemes on the NZ Companies Office website – the Disclose Register.

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2017 Annual Report

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Notice of Withdrawal

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Product Disclosure Statement

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Statement of Investment Policy Objectives

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Amended and Restated Trust Deed

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Investment Application Form

Key Investment Points

    • The minimum Investment is $500.
    • The Fund was established in October 2007.
    • Returns to investors are on a floating rate and are paid at the end of each quarter (three-month period). The quarterly income received from the Fund’s mortgage portfolio determines the level of return to investors. The Fund aims to offer an investment in a diversified portfolio of registered first mortgages and term deposits with registered banks within New Zealand, providing returns to investors benchmarked against the weighted average six month term deposit rate as published by the Reserve Bank of New Zealand at www.rbnz.govt.nz/statistics/tables/b3. This rate is the advertised interest rate paid for a six month term deposit of $10,000. It is weighted by each of the surveyed registered banks share of household deposits from the aggregate bank statistical returns supplied to the Reserve Bank of New Zealand.
    • Returns can either be paid into an investors bank account or re-invested in further units in the Fund.
    • The No. 2 Fund that invests solely in registered first mortgages and term deposits with registered banks within New Zealand. The Fund distributes its income to investors quarterly on the first day of April, July, October and January of each year.
    • There is no fixed term for investments, although the fund is geared towards medium to long term investors (2+ years). Withdrawals will be paid within 90 business days after the Manager receives a withdrawal notice.
    • There are no entry fees and no application fees. The Manager has discretion to charge a fee of up to 2% on any money withdrawn 12 months after investment and up to 1% on any money withdrawn more than 12 months but less than 24 months after investment.
    • Investors can make regular contributions to their investment.
    • This investment is available to NZ residents only.
    • To see more key investment points click here

Material Matters

During 2016, the Fund received notice of District Court proceedings issued by the Crown seeking an order for the forfeiture of properties over which the fund held first mortgages. At the time of the notification the first mortgages supported two loans owing to the Fund. Since then all of the relevant securities have been sold and some of the cash realised was being held in the trust account of the Fund’s lawyers, pending the outcome of these proceedings. The forfeiture proceedings followed a criminal offence committed by one of the legal owners of the securities with the case being heard in the Christchurch District Court late December 2016. Further to previous updates on the forfeiture application, the Fund is constrained in how much detail it can provide at this stage, but the dispute is ongoing.

During October 2017 the Fund was required to transfer the cash held by its solicitors to the Crown and, as a result changed the manner in which the forfeiture claim is treated in the Fund’s accounts. The amount transferred to the Crown has reduced the net assets of the Fund and accordingly the unit valuation has been reduced to 92.5 cents per unit as at 30 September 2017.

The lawyer acting for the Fund and Borrowers at the time of the original loans being made has admitted negligence in relation to the transaction. As a result, the Fund has filed a civil action against this lawyer to recover any loss incurred as a result of his actions.

In the meantime, the Fund will be paying out redemptions to 90 cents in the dollar rather than the unit valuation to take into account the impact of these proceedings. All new units in the Fund will be issued at current unit valuation. This is to ensure that all investors are treated fairly if at a later date a loss was to occur. If the effect on the value of the units in the Fund is less than 10 cents per unit then the difference between the funds retained and the loss suffered by the Fund will be paid out to redeeming investors once the matter is finalised.