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..... of West & co's rubbishCity Pacific ClarificationCity...

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    ..... of West & co's rubbish

    City Pacific Clarification
    City Pacific would like to take this opportunity to clarify certain points raised in two recent press articles.
    The articles used selective information and omitted important and relevant information available from City Pacific Limited (City Pacific) and the City Pacific First Mortgage Fund (First Mortgage Fund).
    City Pacific Limited and City Pacific First Mortgage Fund
    City Pacific and the First Mortgage Fund are, and always have been, separate entities. City Pacific is responsible for the management of the First Mortgage Fund.
    The results released to the market on Thursday 21 February 2008 confirmed City Pacific's record half year profit was up 13.3% on the previous half year. These were the results of City Pacific Limited, the manager of the First Mortgage Fund.
    The accounts of the First Mortgage Fund will be released to the market later this week.
    Cash position
    City Pacific's cash balance at 31 December 2007 stood at $2.7 million with gross assets of $449 million including current assets of $141 million. These numbers are separate to the cash and facilities available within the First Mortgage Fund which at 31 December 2007 stood at $46.9 million cash and $50 million in undrawn facilities.
    One article accused City Pacific of "burning cash" - City Pacific does not "burn" cash - on the contrary City Pacific makes strategic acquisitions of property assets and adds value to those assets. City Pacific invests its cash in carrying out further works on new and existing projects to increase their long term value for City Pacific and our shareholders.
    Gearing
    The bank facility held by City Pacific of $100 million has no bearing on the First Mortgage Fund. City Pacific was geared to less than 30% of gross assets at 31 December 2007.
    The First Mortgage Fund at 31 December 2007 was geared to 16.5% of gross assets of $1.15 billion.
    Deconsolidation
    The Directors of City Pacific consider the deconsolidation of the First Mortgage Fund an appropriate accounting treatment given that the First Mortgage Fund is a separate entity. The assets of the First Mortgage Fund are, and always have been, held separate to those of City Pacific by the Public Trustee of Queensland on trust for the investors.
    This accounting treatment is standard industry practice and is consistent with the majority of Australian mortgage fund managers.
    The management of the First Mortgage Fund remains the cornerstone of City Pacific's business delivering significant revenue each year. City Pacific has absolutely no intention of "cutting the fund loose" as suggested in the article.
    Loans due
    One of the strengths of the loan book of the First Mortgage Fund is that it turns over on average 80% per annum and has done so for the last 5 years. For example, $326 million of loans are due back to the First Mortgage Fund by the end of March and a further $707 million by the end of the 2008 calendar year. These loans are all expected to be repaid in full in the normal course of the First Mortgage Fund's operations.
    The consistent turnover of the First Mortgage Fund's loan book gives City Pacific the ability to fund projects that are in areas where the property market and population growth figures are strong. This ensures the registered first mortgages held by the First Mortgage Fund for investors are in quality property assets.
    City Pacific First Mortgage Fund only lends funds secured by registered first mortgages over real property in Australia.
    At 30 June 2007 the City Pacific First Mortgage Fund had loans past due of $94 million. One of the articles stated "what would that figure be now? We can only speculate." There is no need to speculate because at 31 December 2007 loans past due had been reduced to $41.6 million - this information was included in our results announcement on Thursday 21 February 2008.
    City Pacific has successfully managed the loan book of the First Mortgage Fund for over 10 years ensuring that any past due loans are closely monitored and collected without loss to the First Mortgage Fund.
    The Directors reaffirm these past due loans are expected to be recovered in full with no loss to the First Mortgage Fund.
    As at 31 December 2007 the average loan to valuation ratio for the First Mortgage Fund, if all loans were fully drawn, would have been 74.3%.
    MFS
    City Pacific's proposal to acquire the rights to manage certain MFS financial services assets is currently subject to due diligence and confidentiality. It is part of our normal course of business to assess any growth opportunities. The due diligence will be completed by Friday 29 February 2008.
    If the transaction was to proceed City Pacific would acquire the right to manage the MFS Premium Income Fund on behalf of investors but this acquisition would not deliver ownership of those assets to City Pacific.
    City Pacific encourages shareholders and investors to contact us with any enquiries you may have to ensure you are kept informed of the facts.
    CITY PACIFIC LIMITED
    Phil Sullivan
    Managing Director & CEO

    Well said Phil

    rodmor

    DYOR

 
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