ING fund investors must make their own call

The price ING is offering to pay for units in its two frozen funds is "fair and reasonable" but investors must decide for themselves the value of signing a release which stops them from taking or benefiting from legal action or claims, a report by independent assessors Grant Samuel states.

The release is a condition of accepting the offer by ING to buy back the units in the Diversified Yield Fund (DYF) and Regular Income Fund (RIF) which have been frozen since March last year.

ING is offering 60c a unit for DYF and 62c a unit for RIF and investors have the choice of either taking the cash up front or keeping it in an ANZ on-call account with an 8.3 per cent interest rate for five years.

The Grant Samuel report, which was included in the documentation sent out to more than 13,000 investors by ING, said investors needed to "weigh up the financial outcomes available under the offer with the risks and uncertainty associated with the prospect of realising a better financial outcome from holding units in the funds and retaining the rights that would otherwise be surrendered and waived under the release".

The funds invested into complicated securities called collateralised debt obligations (CDOs) which bundled up different types of loans - the majority of the investments were made into securities with bundled company loans.

The Grant Samuel report found it was very difficult to value the CDOs in the current challenging environment.

But based on a report by New York structure credit specialists Dynamic Credit Partners, which was commissioned by ING, Grant Samuel put the net asset values of the DYF units at 24c and the RIF units at 21c as of December 31.

"The offer price is substantially higher than the net asset value calculated for the funds ... and, in Grant Samuel's opinion, is fair and reasonable."

But it said the analysis did not take into account the value of the release.

"Unit holders will need to assess for themselves the value of the release based on their own individual circumstances."

Some investors had already been successful in making claims against the ANZ through the Banking Ombudsman and the Commerce Commission was also investigating ANZ, ING and some advisers, the report said.

But the assessor said it did not have the expertise to assess the strength or likely success rate of any potential claim investors could take.

However, they could choose to reject the offer and stay in the funds, retaining their right to make claims or take legal action.

The report said there remained a "remote possibility' of realising a higher value for the units but warned investors of the uncertainty over the timing of a better return.

For those who choose to accept the offer, Grant Samuel said the five-year on-call account option was preferable to the cash out choice.

Investors must decide by July 13 whether to accept the offer.

THE OFFER

* ING is offering 60c or 62c depending on the fund.
* Investors can take the cash or keep it in the ANZ.
* Over five years it would pay interest of 8.3 per cent.