PriceWaterhouseCoopers essentially says that in its present form it's stuffed. It says the structure is unworkable and likely to be inequitable for unitholders in the future.
While it concludes the proposed closure is "fair and reasonable" it raises questions over some of the elements of the proposal.
Perhaps the biggest issue is that unitholders aren't been given any other options over what to do with the trust. This appears to be solely because the major shareholder, MDC Investments won't support them.
PriceWaterhouseCoopers say an orderly wind-down of the trust is the base case scenario against which any other strategy should be evaluated.
However MDC "do not favour a wind-down of the trust at the present time and that any resolution to this effect is almost certain to be defeated."
Unitholders could expect to receive between 92 and 99c a unit under a wind up it says. This is about halfway between the net asset value of $1.25 (May 31) and the average secondary market price of 64 cents. (MDC paid $1.03 a unit earlier this year).
Likewise the option of listing the trust on the sharemarket isn't considered because of the manager's opposition.
PriceWaterhouseCoopers say an NZSE listing is preferable, as it would improve marketability and therefore the value of the units.
Yet the manager argues against this, citing the trust's small size, its lack of distribution history and the fact that the primary sector is out of favour with investors.
"These reasons are all existing circumstances, that affect investors and the value of their unitholding at the present time, whether or not units are listed on the NZSE," the report says.
One of the biggest trade-offs in the proposal is that unitholders give up their redemption rights and rely on the secondary market to sell their units, while the manager takes a cut in its fee. PriceWaterhouseCoopers say the new fee struture is not the optimum arrangement. Under the proposal the current fee would fall 4.4 per cent to $1.435 million.
An "Action Group" of unitholders which has opposed some of the manager's former decisions says the proposal is "onerous" and it urges unitholders to think carefully about it before voting at the special meeting in Wellington on October 5.
Good Returns will provide further coverage of this issue later today.
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