Founders buy-back Liontamer
21 January 2009

Liontamer's investment director, Janine Starks, left, and managing director, Laetitia Peterson.

As the original founders of Liontamer, it gives us great pleasure to announce that we have successfully negotiated to buy-back our structured products business from KBC Asset Management NV.

We’re sure that this buy-back will come as an interesting piece of news and you’ll be wondering what has inspired us to take back full control of the business we founded six years ago. As you’ll be aware, Belgium-based KBC Asset Management became 51% owners in our business in 2007.

However, KBC recently decided to conduct a review of its non-core operations outside of its home markets. The review arose because of the depth and seriousness of the global economic situation and is symptomatic of many large financial institutions currently seeking to consolidate their businesses in tough conditions.

Given the global turmoil in the banking market in October and November 2008, we were not entirely surprised by KBC’s wish to retrench to home markets, simplify their business, and consolidate their position within their geographical core area of operations. In fact, it’s likely to become a common trend during 2009, with many other international banks following suit.

On a very positive note, this move by KBC presented us with a unique opportunity which was too good to let pass by. Acquiring full control and ownership of Liontamer gives us an opportunity to show our support and belief in the NZ market. We won’t deny that it’s going to be a tough few years in the markets, as investors have certainly suffered some significant knocks. But on the back of tough times, we believe capital protected funds will become a cornerstone in rebuilding investor confidence. With ownership returned into our hands, we are looking forward to taking the business forward and making a few changes which we feel will benefit investors over the coming years. This is a business we understand well – after all, we built it from the ground up and along with our team, we’re incredibly passionate about it.

Regards

Laetitia Peterson, Managing Director
Janine Starks, Investment Director.

We’re sure you’ll have a number of questions about the changes which are taking place and we’d like to answer a few of those which immediately spring to mind:

What will happen to funds where KBC are the capital protection counterparty?
There is no effect on these funds. This is simply a change at shareholder level. KBC Bank maintains its Standard & Poor's credit rating of A+ and just like any other bank providing protection, it has a legal commitment to support the funds that it’s a counterparty to.

Will you continue to work with KBC in any way?
Yes we will. They will continue to provide us with valuations for the funds which we have launched with KBC, along with back office support for redemptions and maturities. We’ll also have access to their research and pricing capability.

What will happen to the current Fallen Angels fund?
Due to the change in shareholders, we will now need to close the fund at the end of January, otherwise offer documents would need to be reissued. We were planning to keep the offer open in the market for another few weeks (because pricing can move very rapidly), however the current environment is very tough as 5-6 year interest rates have slipped away significantly and volatility has risen. After recently re-pricing the fund, we have reached the conclusion that we can’t achieve the minimum terms for launching the fund and so have decided to close the offer and return investors' money.

What will happen to the KBC Global Water Fund?
As part of our agreement with KBC, once the share transfer has taken place we will have acquired full control of the Liontamer structured products business and KBC will have acquired full control of KBC Asset Management (Australia) Ltd. Their review of the Australian market is still in progress, which means there are no changes occurring to the KBC Global Water Fund at this point. This is simply a change at shareholder level, which means there is no need for investors to take any immediate action. We’re expecting their review to be completed in the next few weeks and if any changes occur, they will communicate these to investors. Personally, we are still unitholders in this fund and we can assure you that KBC’s Dublin-based portfolio managers are continuing to run the fund in the normal manner.

Who will provide the capital protection for your funds now?
Right now we are taking the opportunity to make some changes to the way our funds are structured and while they are in no way final, we’d like to share them with you, because we feel it will give you an indication of how hard we are working behind the scenes to adjust to the new investment environment and the needs of investors.

One option is to use NZ banks to provide the capital protection for some of our new funds. This would give investors the comfort that their money was held by a well-known local bank. In terms of the equity-linked returns, we’ll still use global banks to provide the financial instruments required, as they have the best expertise. Rest assured, this is not a large change in any way. We’ll still be using our Australian Unit Trust structure and will just widen the spectrum of capital protection counterparties we can use. Quality of protection will be a major theme for us in 2009. We’ll keep you updated on how we’re progressing with this as it may be a few months away from implementation.

When will the next fund launch occur?
Right now there is no rush, as we need to wait for the markets to calm down a little more and the pricing environment to improve. Our next fund is likely to be index-based as this is more stable and easier to hedge than single stocks in the current environment. Our team are busy coming up with fund ideas and working away on implementing the new local capital protection idea.