KEY POINTS:
Investors in Guardian Trust's $249 million frozen mortgage fund could get an initial payout of 10c in the dollar in the next few months if they vote to change its trust deed.
But uncertainty remains over when further payments will be made and if investors will continue to be paid interest on their investment.
The company will hold a meeting in Auckland today although most of its 3700 investors are expected to have already voted by proxy on whether to allow the fund to wind-up.
The mortgage fund manager stopped investors from withdrawing money in July last year when the level of cash in the fund dropped below 5 per cent, causing liquidity problems.
Guardian Trust managing director Greg Campbell would not speculate on how many would attend the meeting but he expected at least 100.
He would not comment on the result of the proxy votes which had already been collected but said the company was confident of meeting the 75 per cent turnout needed to change the trust deed.
Information supplied to investors before the meeting show the fund's interest payments have dropped off significantly over the past three months.
The return on the fund was 6 per cent per annum last year but for the first three months of this year it is expected to be less than 3 per cent - lower than what investors could be getting from a bank.
Campbell said the key reason for the drop was the increase in provisioning for potential losses on unpaid loans.
Before the freeze the fund had not put aside any money for loan defaults but that had now increased to $2 million.
Campbell said it was possible it would have to increase provisioning further which could see interest payments reduced to zero.
He said his focus would be on returning capital to investors if they voted in favour of the wind-up.
Since freezing, the fund had increased its cash reserve to $50 million and Campbell said it hoped to use some of this money to make a partial payment to investors.
But no further payment dates have been signalled by the fund management which has estimated it could take two to three years to wind up the mortgage fund.
Campbell said it was too difficult to speculate on what could happen in the next six months.
Guardian would continue to take a management fee of 1.1 per cent of assets under management on the fund.
But one investor said the documentation had left him with a number of unanswered questions.
"I don't know if we are going to lose capital or not ... how bad things are? If they have gone outside the lending policy - will they make up the shortfall," said William Cairns, a former mortgage manager at Guardian Trust.
"I am very surprised that a once very conservatively managed fund with only first mortgages could find itself in this predicament," he said.
