Final offer for suspended ING funds: 8.3% 5 yr call account with ANZ (update 3)

ING today announced its final offer to investors for two finds that were suspended near the start of 2008, the Diversified Yield Fund (DYF) and the Regular Income Fund (RIF). The offer follows discussions with investors and advisors after ING previously presented an offer in February, and includes an option for investors to place their money in a specially created ANZ call account at a five year fixed interest rate of 8.3%. (Update 3 includes interview with ANZ Managing Director of Private Banking and Wealth, John Body) If investors select the latest offer, they will be required to not pursue any further claims or legal action in relation to the funds, ING said. However, ANZ customers who were advised (by ANZ) to invest in the funds will have a window in which they can still pursue claims through ANZ's complaint process and then on to the banking ombudsman. Under the latest offer, investors will have three options, ING said. The first is that they will be able to withdraw cash now by selling their fund units to ING, for 60 cents per unit in the DYF, and 62 cents per unit in the RIF. ING said it expected payments to be made no later than August 22. This is the same as the cash out option in the February offer. However, the new five year option would allow for investors to sell their units in the funds to ING (at 60 and 62 cents, respectively) but then have them transferred to a special ANZ call account offering a five year fixed interest rate of 8.3% per annum. The before tax return under this offer would be approximately 91 cents per unit in the DYF and approximately 94 cents per unit in the RIF, after the five years, ING said. "Your actual returns from the ANZ Cash Account will depend on the rate at which resident withholding tax is deducted, any other tax payable and how long you keep your money in the ANZ Cash Account," ING said. Investors would not be able to deposit further money in the call accounts, apart from what they take out from the two suspended funds. As it is a call account, investors would be able to withdraw money at any time. ANZ owns 49% of ING New Zealand. It, combined with shareholder ING Group, would be committing more than NZ$400 million toward the new offer available to investors, ING said. ING New Zealand CEO Helen Troup said she could not answer questions on why the interest rate for the offer was 8.3%. (See comments from ANZ's John Body below.) A third option would be for investors to remain in the funds, Troup said. She said that at May 26, the respective values of units in the funds were 23 cents per unit in the DYF and 19 cents per unit in the RIF. "However, the current level of uncertainty, regarding how much money you'll get back on your investment in the funds and when, will remain. By remaining in the fund(s), you will only be able to access your money if the suspension is lifted or if the trustee makes the decision to wind up the fund(s), or you are able to sell your units to someone else," Troup said. "Since announcing our previous proposal, we have responded to the feedback from investors and advisers that five years was simply too long to wait for access to their money. The most recent assessment of the funds indicated that the future value of the units in the funds over the next five years is likely to remain lower than the offer prices," Troup said. "As a condition of accepting the offer, investors will be required to agree not to start or continue with any claims or legal action related to the funds. We believe that's a reasonable term as part of this very good offer, she said." ANZ Managing Director of Private Banking and Wealth, John Body Body told interest.co.nz that ANZ customers, if they accepted the offer, would have access to make further claims through ANZ's complaint process, and on to the banking ombudsman until July 31. ANZ had advised about 2,700 of the funds' 8,000 unit holders to invest in the funds. When asked how they came up with the 8.3% rate for the special call account, Body said ANZ felt they needed to come up with a rate that was fair to investors. He said that a rate that would have provided a 100% return for investors had not been discussed, and that ANZ felt they needed to balance out being fair to investors with the quality of the current environment. Body said he thought other ANZ customers, who would not be eligible for the special account because they had not invested in the two funds, would not be concerned about not being able to access an 8.3% call account rate. "I think our other customers will look at this in terms of the context of the funds," he said. "This offer is not detrimental to our other customers." "This is a strong proposal with an offer that provides investors with choice, flexibility and certainty. We have made a substantial financial commitment to this offer as a shareholder in ING New Zealand." "With the agreement of the Banking Ombudsman, ANZ customers will have the opportunity to accept the offer being made by ING New Zealand and, for a limited period, ask ANZ, and the Banking Ombudsman if necessary, to consider complaints that are not addressed through the ING offer." "In order to access this opportunity, customers will be required to fulfil all the conditions of accepting the ING New Zealand offer, which includes signing a release form giving up all other legal claims. They will also need to send ANZ a request, by 31 July, to have their position reviewed. ANZ customers will receive a letter next week with full details of this opportunity." "Customers who do not accept the offer retain the right to have a complaint considered by the Banking Ombudsman in the usual way." "We want customers to be able to access the Banking Ombudsman scheme for a certain period because it's important to us that all our customers are treated fairly." Troup said it was just a coincidence that the announcement took place at the same time as the budget lockup today.