Revised prospectus fails to clear up Huljich questions

Peter Huljich

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QUESTIONS REMAIN over the performance of Huljich KiwiSaver funds as regulators continue to investigate Huljich Wealth Management, despite its publication of a revised prospectus showing how top-up payments affected its returns.

On February 18 Huljich admitted its principal, Peter Huljich, had personally boosted its KiwiSaver funds with his own money on two occasions, describing the payments as "compensation" for poor investment decisions.

Concerns have since been raised that because Huljich funds were promoted on the basis of their strong investment performance, Huljich's payments may have misled investors over their prospects.

However, although some information about those transactions was disclosed in the new prospectus, a great deal is still unclear.

For example, the second payment in October 2008 was described as a compensation for a "loss" incurred through a lack of diversification, although a lack of diversification cannot in itself cause loss.

The Ministry of Economic Development's Insurance and Superannuation Unit manager, Gavin Quigan, whose office supervises KiwiSaver providers, said Huljich had provided no further details of the transaction.

"We have some questions out with the trustee still.

"To date I've received a comment from the trustee that they have `reviewed the transaction details in relation to the two compensation payments and they have assured themselves that the compensation has been fairly and equitably distributed to those members affected'." "The loss was determined, I think, along the basis that if they were fully diversified, other markets would have performed better, and as such a figure was calculated.

"My understanding is they moved from cash to Australian shares, and didn't go into New Zealand shares, property, global bonds, etc, whatever the mandate was for full diversification."

Unit prices for the three Huljich funds at the time reveal no significant losses. The Growth fund's unit price at the end of September 2008 was 97.5c, the Balanced fund's 99.7c and the Conservative fund's $1.04.

In October 2008, the month of the "compensation", the Conservative fund reported a huge unit price gain from $1.04 to $1.11, while the Growth and Diversified funds gained 0.5c and 1.3c respectively.

The Sunday Star-Times asked Huljich Wealth Management director Don Brash, former National Party leader, to clarify how the funds lost money and when.

He said: "On balance, I think that Huljich Wealth Management and I have, between us, said all that needs to be said at this stage."

Peter Huljich told the Star-Times there was a lot of information available and "at the moment I don't think it's necessary to add to that".

Restated accounts for the year to March 2009 filed a week ago show the funds paid $5 to Peter Huljich for shares that were worth $141,540, producing a gain for the Conservative fund of $11,982 in the year to March 2009, and for the Diversified and Growth funds of $31,782 and $97,771 respectively.

The money affected performance figures significantly because the funds were small at the time.

The accounts also revealed a number of transactions post balance date, including the purchase of $3.9m of units in the Century Property Trust, an Australian fund run by Peter Huljich's brother Jason. The accounts said the transaction was on "arms-length commercial terms and Peter Huljich removed himself from the investment decision".

WORKERS CLAIM NEW IMAGE OWES $500k

One of the Huljich KiwiSaver investee companies, New Image Group, is subject of a claim by former employees of an associated company in Australia alleging it owes them more than $500,000 in redundancy, long-service leave and holiday payments. New Image, now 10% owned by Huljich KiwiSaver, bought West Australian multi-level marketing company Omegatrend out of administration in 2006, with a deed of company arrangement recording that it would undertake to pay the entitlements of about 30 continuing employees.

New Image subsequently shut down Omegatrend and absorbed its remaining assets, but some employees say they were left in the lurch. "They said `we are closing the doors and you're all redundant'," said one. "[They said] we don't have the cash flow to pay your entitlements so can we pay you at your normal salary rate until the entitlements are paid out. "After a number of months we stopped receiving payments."

The group has sought help from the Australian Workplace Ombudsman to recover the money. New Image told Unlimited magazine last year it had paid $A1.5 million cash and guaranteed $A2.4m in bank loans in buying Omegatrend. But after investing a further $2m, New Image gave up on it in July 2007, suggesting the administrator had misrepresented its true position before the sale.

On Friday the company said it had received a claim from the liquidators of Omegatrend International and it was listed as a contingency in the notes of New Image's annual report for the year ended June 30, 2009. "The board does not believe that the claim is with foundation and accordingly no provision for the claim has been made in these accounts," it said.

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