UNITHOLDERS of the Praetorian Property Mutual Fund (PPMF) are calling on the sponsors of the closed-end mutual fund – RBC Royal Bank (Trinidad and Tobago) and Guardian Life of the Caribbean – to dissolve the fund and distribute the remaining proceeds to them , pursuant to the trust deed that established the investment.
Unitholders also complain that the latest audited financial statements of the fund were for the year ended September 30, 2019. This means that, unitholders complained, there was no independent verification of the value of the mutual fund for the years 2020, 2021. and financial years 2022.
The fund’s failure to publish audited financial statements “raises serious concerns about the transparency and accountability” of their investments, a unitholder told Sunday Business.
The unitholder stressed that it “will continue to incur unnecessary material costs such as property management fees, administration fees and audit fees that only benefit these third-party service providers while eroding the value of the fund considerably to the detriment of unitholders”.
“This adds to the opportunity cost of unitholders not being able to put their money into an alternative investment that generates interest and/or dividends.”
The valuation of one of the properties in which the fund has invested is at the heart of the PPMF’s inability to dissolve the fund and distribute the proceeds.
Responding to questions from Sunday Business yesterday, an RBC spokesperson cited “a technical issue with the valuation of one of the remaining properties in the fund, which was not possible given the condition of the property “. (See Q&A RBC Caribbean spokesperson Andrew Knowles answers below)
The RBC spokesperson did not respond to a follow-up question asking him to clarify which placement he was referring to. But a notice to unitholders on the liquidation of the mutual fund, published on October 29, 2021, noted that there were ongoing sales of properties in Marigot Bay in Saint Lucia and Port St Charles in Barbados. .
The notice noted that while the sale of the Port St Charles property was “in progress”, the sale of the Marigot Bay property “has experienced significant headwinds due to protracted deliberations. We have also been advised that the likelihood of a sale of this property is currently unlikely”.
The notice added that with “the withdrawal from sale of the Marigot Bay property, we had to engage an appraiser to provide a value of the property for the preparation of the audited financial statements”.
This October 2021 notice also noted that significant delays in the preparation of audited accounts were “due to property values being dependent on sales transactions”.
About the PPMF
The mutual fund has been established to provide an investment opportunity in a portfolio of real estate and other real estate related securities, debt securities and money market instruments in the Caribbean.
The fund issued 40 million Class A units at $5 each to the investing public. The fund also issued 20 Class B units at $10 each. Holders of Class B Units are the sponsors of the PPMF, RBC Royal Bank and Guardian Life, who determine the termination date of the fund in accordance with the Trust Indenture.
PPMF commenced operations on November 22, 2002 and, being a closed-end fund, it had an initial limited life of between seven and 12 years. This means that the fund should have closed in November 2014.
“The termination date may be extended for a further period of up to three years from the 12th birthday (i.e. until November 2017) on the advice of the portfolio managers and annually thereafter , given general economic and other market conditions,” according to the fund’s description in its 2019 annual report.
Class B unitholders have extended the termination date of the fund each year for the period from 2018 to 2021 and are expected to extend the termination date by another year by November 14, 2022.
The fund had total net assets of $81.34 million as of September 30, 2019.
The listing of the fund’s units on the T&T Stock Exchange was suspended on November 9, 2017.
Q&A with RBC Caribbean spokesperson
Q: Can you confirm that PPMF Class A unitholders have not received the fund’s audited financial statements for 2020 and 2021, as of today, November 4, 2022?
A: Although the process has been completed, we confirm that the 2020 audited financial statements have not yet been published. The delay is due to a technical issue with the valuation of one of the remaining properties in the fund, which was not possible given the condition of the property. We have agreed to close the matter with qualified accounts and expect to receive an approval from the auditors in the coming weeks.
Q: Is the PPMF aware that the TTSEC has imposed substantial fines on entities it supervises for not submitting audited financial statements in a timely manner?
A: Yes, the PPMF is aware, but the fund has been delisted from the Trinidad and Tobago Stock Exchange by order of the TTSEC. We are finalizing the publication to unitholders which will include the audited accounts until 2020 and the management accounts for 2021 and 2022.
Q: Is the reason for RBC’s inability to distribute the 2020 and 2021 audited financial statements to its Class A unitholders in a timely manner due to a dispute with the auditors, PWC?
A: No, the delay is due to a technical issue with the valuation of one of the remaining properties, which was not possible given the condition of the property.
Q: I have taken note that the latest audited financial statements of the PPMF, for the year ended September 30, 2019, show total expenses of $6.08 million and total revenues of $3.32 million . What percentage of the $6.08 million spend does RBC receive?
A: RBC does not charge any fees to the fund and has not charged any since 2016. The fund’s expenses relate to property management fees, administration fees and the cost of setting up accounts audited each year.
Q: Also, how does the fact that the fund is operating at a loss affect its asset allocation when the fund closes?
A: Any expense incurred by the fund has a negative impact on the amount of capital available for reimbursement to investors. That’s why RBC, as trustee, has worked to ensure that fund expenses are as low as possible.
Q: Does the PPMF intend to further extend the termination date of the fund to no later than November 14, 2022?
A: Yes, this has already been done by resolution of the holders of Class B units.