IMPORTANT NOTICE – PLEASE READ IMMEDIATELY AND ENTIRELY14 April...

IMPORTANT NOTICE – PLEASE READ IMMEDIATELY AND ENTIRELY
14 April 2008
Dear Investor
UPDATE ON YOUR INVESTMENT IN THE MFS PREMIUM INCOME FUND
(‘Now known as Octaviar Premium Income Fund’)
On 19 March 2008 MFS Investment Management Limited, now known as
Octaviar Investment Management Limited’ (‘Octaviar IM’), as Responsible
Entity of the recently renamed Octaviar Premium Income Fund (‘Fund’) wrote
to update you on the latest developments and events surrounding the Fund.
We write to you today to give you a further update and endeavour to respond
to a number of enquiries we have received from unit holders over the past
few weeks.
Octaviar IM understands that during the current period of investment market
volatility and while redemptions and distributions have been deferred from the
Fund, unit holders have many concerns and queries.
Below we set out an update on key issues presently facing the Fund. We will
continue to update unit holders on developments with the Fund on a regular
basis.
LOAN FACILITY AGREEMENT
In our Investor Letter dated 19 March 2008, we advised that a loan facility
with a third party bank is in default. Negotiations with the bank resulted in a
standstill agreement which means that Octaviar IM cannot deal with the
assets of the Fund without the approval of the Bank. This standstill
agreement expired on 31 March 2008.
Octaviar IM has successfully negotiated an extension of the Standstill
agreement to 30 April 2008. While the Bank’s approval is required to deal
with the assets Octaviar IM is continuing to seek an orderly realisation of
assets to repay the loan.
It is Octaviar IM’s objective to pay down the bank loan facility as soon as practicable. To
manage this situation, Octaviar IM has commenced implementation of a considered plan
to repay the bank as soon as practicable and maximise the recovery of all Fund assets.
The loan balance currently stands at $168m. A further $10m is expected to be repaid by
the middle of April.
UPDATE ON THE CESSATION OF PAYMENT OF DISTRIBUTIONS
On 12 March 2008 we wrote to advise you that the Board had resolved to cease the
payment of distributions to members until further notice.
Cessation of payment of distributions means that distributions will cease and not be paid
during the period of the cessation. If, or when, the Fund resumes payment of
distributions, unit holders will continue to be paid distributions from that date forward.
Unit holders will not receive interest payments during the period of the cessation, nor will
any interest accrue to unit holders during this period. In the event that there is a surplus
in the fund when the deferment of payment of distributions ceases, Octaviar IM may pay
an additional distribution to all unit holders.
Octaviar IM has not yet set a date to recommence the processing and payment of
distributions; however we will advise all unit holders as soon as processing and payment
recommences.
DEFERMENT OF PAYMENT OF REDEMPTIONS
The Funds constitution allows Octaviar IM up to 180 days to process and pay any valid
withdrawal request. However, the Fund’s constitution also allows this 180 day period to
be extended to 360 days in certain limited circumstances including where Octaviar IM
believes the Fund has insufficient available cash reserves to pay redemptions in the
short term. Octaviar IM considers that, under the current circumstances, it will extend the
period to pay withdrawal requests to 360 days, as stated in the Fund’s constitution.
Additionally, under the terms of a standstill agreement with an external lender, Octaviar
IM cannot deal with the assets of the Fund, this includes making distributions or paying
redemptions, without the approval of the lender (for more information regarding this,
please refer to our letter dated 19 March 2008).
INVESTMENT MATURITY PROCESS
Ordinarily, at maturity of your investment we would offer you the option of either making
a withdrawal request with respect to your investment, or electing to continue your
investment in the Fund. However, as the PDS for the Fund has been withdrawn, we are
currently unable to issue units. This means that we are unable to roll over your
investment into another term and upon maturity of your investment, you cannot continue
your investment in the Fund and will be required to lodge a withdrawal request.
Octaviar Investment Management Limited (ABN 20 101 634 146) is the Responsible Entity and issuer of
units in the Octaviar Premium Income Fund (ARSN 090 687 577) and holds an AFSL No 246 553. Octaviar
Investment Management is a subsidiary of Octavia Limited (ACN 101 579 999).
OCTAVIAR SUPPORT FACILITY
On 26 February 2008, Octaviar IM provided Octaviar Limited, (formerly MFS Limited)
with an Option Notice to notify Octaviar Limited of the requirement to draw-down on the
Support Facility. The Support Facility has a callable value of $50m. The Fund has not
yet received this payment and Octaviar IM continues to discuss the Support Facility with
Octaviar Limited.
LOANS CURRENTLY HELD IN THE FUND
Commercial confidentiality does not allow us to provide specific details about the loans
in the portfolio; however you can find Investor Updates on our website for your
information. These updates report the Fund’s asset allocations, Fund size and a market
commentary. You can access Investor Updates from our Website at
www.octaviar.com.au or call Client Services on 131 637 and we will be happy to provide
copies.
FUTURE FUND DEVELOPMENTS
The Board of Octaviar IM continue to be committed to working in the best interests of our
unit holders during this difficult time to ensure that, given current market conditions and
the position of the Fund, the capital value of the Fund is preserved.
The Octaviar IM team continues to focus on the strategic review of the Fund and
initiatives relating to liquidity and payment of income. Once the strategic review is
resolved we will advise all unit holders.
We invite unit holders to call Client Services on 131 637 or email: [email protected]
with any queries to be included in future Fund updates
Yours sincerely
OCTAVIAR INVESTMENT MANAGEMENT LIMITED
GUY HUTCHINGS
CHIEF EXECUTIVE OFFICER