A new blast has been fired in the battle by Australian fund manager Trilogy to take control of a frozen Australian mortgage fund in which around 2750 New Zealand investors have had money trapped in since 2009.

LM's First Mortgage Income Fund made mortgage loans on Australian property developments.

The window of opportunity has closed for Trilogy to launch a second tilt at the fund before the new year, having so far managed to only secure control of one of its two "feeder" funds which channelled assets into it.

But investment analyst David Jansen, who has helped Trilogy co-ordinate the New Zealand leg of its takeover campaign, has issued a report to New Zealand-based financial advisers with clients invested with LM. It calls into question the way in which LM is valuing the fund's assets.

This week has already brought bad news for Kiwi investors in the frozen fund.

On Monday, BusinessDay reported that the late filed financial statements for the fund showed a drop in unit price from A73 cents a unit to A59c, but Jansen warned there was significant "valuation uncertainty" on the new unit price. Some 93 per cent of the fund's loans are in default.

In his report, Jansen said that price reflected a loss of A$105 million ($134 million) in net assets attributable to shareholders in the year to the end of June.

"The Directors have valued the assets under construction on an 'on complete basis' based on the Directors' expectation that the external funding can be secured in-order to complete the projects," he said.

Jansen also noted auditor KPMG had qualified its opinion following concerns there was no guarantee that LM can get the funding it needs to complete the property development projects.

"It is going to be challenging to find an external funder over the near term given the poor prospects of each project," he told advisers.

Jansen believed some loans held should have been valued on a different basis, which would have resulted in an even lower unit price after LM took a gamble on holding certain asset sales in the hope the market would strengthen.

His report also questioned the time frame for winding up the fund.

"Even if funding is provided and the projects are further developed, it is unrealistic to believe that LM will be successful in selling-down the completed apartments, townhouses or lots, in the 2 to 3 year time frame promised to NZ Advisers recently by Peter Drake," he wrote.

LM's Peter Drake issued bullish statements earlier this week in conjunction with the release of the overdue financial statements, saying the asset realisation programme was going "full steam ahead".

Many of the fund's investors put their money in on the recommendation of the now-defunct Money Managers nationwide financial advisory company.

ANZ, one of several institutions which shoulder-tapped Trilogy to make its takeover attempt, holds a chunk of units after concerns about LM's performance led it to buy out its own clients with money stuck in the fund.

- © Fairfax NZ News