distributions - redemptions - tax

City is foreshadowing paying some sort of distributions. Trilogy (if successful) is foreshadowing paying distributions (as soon as possible) too. Now, these utterances are there to placate the malcontents amongst us ... but for many of us who already have incomes it is the the worst thing that could happen in the circumstances.

On the one hand we've got an increasing loss within the fund which most of us just can't remedy any time soon, and we have an income on which we're paying tax - in any event, we can't offset the capital loss within the fund until such time as the loss is actually realised in the investors own account (ie, transfer of the unit at a loss/discount).

So, what about the proposed distributions? Well, they'll come out bit by bit and just add to assessable income in the hands of the investor. And what about the capital loss within the fund? Well, there is nothing we can do about it.

I propose that City (or Trilogy) should pay any distribution amount (and operating net profit, if any) to capital and pay us a value equal to that distribtution amount as redemption. In this way, there are no tax consequences, we are simply receiving back capital.

For example, if an investor is already paying .30c/$1 tax, then .30c/$1 of the distribution will be lost. If distributions are paid as redemptions, then NO tax.

Now, why wouldn't City like to do this? Well, I think that its because of self-interest: the self-interest that City wants to believe that the fund actually has a future. So, to project this illusion it causes us further loss (tax) while the FMF continues along with capital losses.

I think we all have to face the fact that the FMF will not continue for the long haul and that the value of the fund is impaired (with more to come) so we should press that all distributions (and operating net profit, if any) be directed to capital, and paid to investors as redemptions.

City doesn't care - do you? Well, you should if you're still supporting Kevin707's overseas adventures.