WO2006047828A1

WO2006047828A1 - A coordinated investment management system

Info

Publication number: WO2006047828A1
Application number: PCT/AU2005/001691
Authority: WO
Inventors: Craig Robert Wilson
Original assignee: One On One Developments Pty Ltd
Priority date: 2004-11-03
Filing date: 2005-11-03
Publication date: 2006-05-11

Abstract

Provided is a coordinated investment management system (10) for pooled investments from investors (24) and project developers (28) borrowing funds for developing projects. The system includes a share issuing arrangement (18) for issuing shares in accordance to share applications from the investors, a share conversion arrangement (26) for converting the issued shares into one or more of a range of share classes (36) nominated by the investors, a funding processing arrangement (32,34) for processing applications for funds for project developments, and a loyalty arrangement (40) for receiving dividends and coupons, and the rights to obtain established rights to purchase end products of a third party in accordance with relevant terms in agreements to provide funds to the funding applications and/or the rights to invest a proportion of equity in an end product, and for transferring in accordance with predetermined rules payable dividends and/or coupons to the investors. Investors can access the system online including the Internet, and apply for shares while online.

Description

A COORDINATED INVESTMENT MANAGEMENT SYSTEM

TECHNICAL FIELD OF THE INVENTION

THIS INVENTION relates to a coordinated investment management system for pooled investments from investors and project developers borrowing funds for developing projects.

BACKGROUND OF THE INVENTION The inventor has observed that investments into shares in publicly and/or privately listed companies or corporations are relatively inflexible as the shares are usually not easily convertible. The expected returns of the investments are periodic dividends and capital gains over time. The dividends are considered incomes and are subject of income tax law. When the shares are sold, the capital gains are also subject to income tax law.

Developers of projects generally need to borrow funds from financial institutions to pay for development costs associated with the projects. The financial institutions tend to be reluctant to lend unless there is proven market acceptability of the end products of the developers. That means, the developers need to promote the end products widely in an attempt to attract investors and buyers to commit to purchase at least a proportion of the end products off the plan. This may take considerable time. Accordingly, work on the projects is invariably delayed until such time when development funds are obtained.

The end products (e.g. lots in a property subdivision) are offered to the public and the investors do not have established rights of option to purchase the end products.

Investors generally borrow monies to invest in shares, and/or to purchase properties, and/or to finance a business venture. They must have sufficient income to service their investment portfolios as the financial institutions require regular payments on interest of the borrowed monies, and to pay for expenses incurred. As a result, the investors' equity for investing decreases when their investment portfolios grow.

OBJECT OF THE PRESENT INVENTION

An object of the present invention is to alleviate or to reduce to a certain level one or more of the above prior art disadvantages. OUTLINE QF THE PRESENT INVENTION

In one aspect the invention provides a coordinated investment management system for pooled investments from investors and project developers borrowing funds for developing projects. The system includes a share issuing arrangement for issuing shares in accordance to share applications from the investors, a share conversion arrangement for converting the issued shares into one or more of a range of share classes nominated by the investors, a funding processing arrangement for processing applications for funds for project developments, and a loyalty arrangement for receiving dividends and coupons, and the rights to obtain established rights to purchase end products of a third party in accordance with relevant terms in agreements to provide funds to the funding applications and/or the rights to invest a proportion of equity in an end product, and for transferring in accordance with predetermined rules payable dividends and/or coupons to the investors. In preference, said range of share classes includes:

(a) Payment of a fixed coupon rate and participating in a fixed proportion of profit share;

(b) Payment of a fixed coupon rate and entitlement to a loyalty program; (c) Guaranteed payment of a fixed rate of coupon;

(d) Modified (a), (b) and (c) for a developer

(e) Modified (a), (b) and (c) for an investor or a group of investors

The project developments may provide end products in the forms of subdivisions of properties, commercial and residential properties, and the like.

Preferably, the agreements to provide funds include a term providing one or more entities with marketing rights to selected end products of the project developments. Advantageously, the marketing rights are associated with indemnity to developers of the project developments. Said loyalty program may include offerings of rights to nominees of the investors to purchase one of the selected end products.

In the event of an investor being a Self Managed Super Fund (SMSF), the SMSF may nominate itself and become the nominee, but never a third party. The SMSF may waive the right to become the nominee or divest the established right of nomination by an actual sale to a third party at par value of $1 , or at such value agreed between the SMSF and the subsequent buyer. The right that the nominee or SMSF obtains is limited to the right to obtain established rights to purchase the end products of a third party in accordance with relevant terms in agreements that establish such rights. This may include but is not limited to a right exercisable as a secondary right of first refusal and the like. Preferably, the investors taking up the rights to invest a proportion of equity in an end product are rewarded with a coupon valued at a predetermined interest rate of their investment and/or a predetermined dividend. More preferably, where an end product is a new project being acquired for development, the investors taking up the rights to invest a proportion of equity in an end product are further rewarded with an incentive payment.

The system may have a web server operating a web site that is accessible over a communications network. Typically, the web site has a registration process for registering investors and/or developers. The web site may also have an online application process for the investors/developers to make applications for shares/funds.

The system may be arranged to provide on the web site a prospectus for viewing and/or downloading by a registered investor. Desirably, the system includes a log of registered investors who have viewed and/or downloaded the prospectus, and the share issuing arrangement is configured to issue shares to applications for shares from the investors who are on the log.

BRIEF DESCRIPTION OF THE DRAWINGS

In order that the present invention can be more readily understood and be put into practical effect reference will now be made to the accompanying drawings which illustrate non-limiting embodiments of the present invention and wherein:-

Figure 1 is a schematic flow diagram of a prior art investment arrangement; Figure 2 is a schematic flow diagram of a coordinated investment system according to one embodiment of the present invention;

Figure 3 is a schematic flow diagram illustrating the coordinated management of the pooled investment funds and loans of the system shown in Figure 2;

Figure 4 shows a schematic flow diagram illustrating the returns of benefits to the investment; and

Figure 5 is a schematic flow diagram illustrating an alternative form of the coordinated management of the pooled investment funds and loans of the system shown in Figure 2.

DETAILED DESCRIPTION OF THE INVENTION Referring to Figure 1 , the prior art investment arrangement 50 as shown involves a legal entity 52 issuing shares in response to subscriptions from investors 54, and providing a loan to a third party company 56 for a property development 58. The loan and interest are paid back in installments. The end products of this development are individual lots 60 which are to be sold to the public. The investors 54 may receive periodic dividends from the entity 52.

The prior art arrangement is relatively rigid. The investors do not receive any benefits from the end products, and the shares are not usually convertible. The dividends are taxable incomes and any capital gains in the shares are also taxable. The developers generally need to borrow further funds from financial institutions to cover remaining costs estimated for the project developments.

These institutions typically require evidence of commitments to purchase a proportion of the end products before approving loans. Accordingly, the developers need to promote the developments widely and hope to attract sufficient investors to commit to purchase the end products. Invariably, this would lead to a delay in the developments.

Referring now to Figure 2, the system 10 according to the present invention has a web server 12 running the system's application software and allowing external access to certain modules of the software. Investors and developers can thus access the accessible modules over a communications network such as the Internet using communications terminals 14 such as personal computers. If an investor wishes to apply for shares in the entity nominated by the system 10, the investor must first enter data requested in forms on web pages generated by the system 10.

The data include the investor's assets and estate for the system to calculate the best mix of growth or income to balance the investment. The simple process may consist of a financial plan, but can also be set into operation by a simple questionnaire and checklist program. The checklist is contained in the format as contained in a "Blue Print" where a "to-do" list is established along with a priority of actions and a list of responsibilities allocated between clients, the entity's consultants and other professionals.

The assessment of information will lead to an overview of the investor's financial position and which mix of allocation should be the best in the circumstances. This would also enable the investor to ascertain whether he/she ought to take part in the issue of a mix of standard class (a) shares ("project shares") or (b) shares as well ("Capcar preference shares"). "Capcar preference shares" as used in this specification is intended to mean cumulative and participating, convertible and redeemable preference.

This process may lead to three situations, (1) the investor merely allocating all his/her interest in project shares (class (a)); or (2) the investor allocating all of his/her interest in Capcar preference shares; or (3) the investor patricians his/her allocation over both project and Capcar preference shares in a predetermined percentage allocation.

The investors' data are stored in a storage device 16 along with their share allocations that were computed by the above process module 18. Each registered investor has access to his/her own data which can be edited. The investor can also request the system 10 to convert his/her shares from one class to another class.

The system 10 can provide access to selected stored data 22 by a third party 20 which performs the processes involved in calculations, investment subscription reports, conversions, etc.

As shown in Figure 3, the system 10 receives share subscription applications from investors 24 for shares in the entity 25 and the applications are checked as described above before issuing shares. The system 10 has a share conversion arrangement 26 for converting the shares to a class in accordance with the investors' requests.

Project developers 28 can apply for loans for development projects such as a land subdivision. The system 10 will then process the loan applications for approval in accordance with predetermined requirements in an agreement 32.

The approved loan applications are subject to marketing and indemnity rights agreement 34 between the entity 25 and the individual developers 28. The marketing and indemnity agreement provides exercisable rights to the entity 25 to market selected end products, e.g. lots of land, at agreed prices when they are available for sale. In return, the entity 25 provides indemnity to the developers should the selected end products are not sold.

The indemnity assists the developers obtaining finance from financial institutions. Accordingly, the developers 28 can commence work on the projects much earlier than hitherto.

The system 10 may require some of the developers to enter into a project management agreement with a project management entity 30 before approving their loan applications.

The system 10 periodically receives coupon payments and dividend payments from the developers 28 , and calculates coupon values and dividends for individual investors 24. The system 10 also calculates reward points for the investors 24 participating in the loyalty program . The coupon values and the calculated dividends are transferred to nominated accounts of the investors 24.

Nominees of the participating investors 24 are also informed of the reward points.

An example of the loyalty program is shown more clearly in Figure 4. As can be seen, the conversion arrangement 26 coverts issued shares of investors 24 into class (b) shares 36 which are entitled to periodic coupon rate or points 38 and to participate in a loyalty scheme 40 where the investors' nominees can enter into a ballot to purchase any of the selected end products (lots) 42 at the agreed market value.

The alternative form of the system 10 shown in Figure 5 are substantially similar to the system shown in Figure 3. In the form shown in Figure 5, the investors 24 are given an optional rights 44 to invest a proportion of equity in accordance with preset terms and conditions which include regular payments according to the interest rate set by the entity 25 and coupons of rights.

In one example, the entity 25 sets a maximum of 20% of equity comprising the house and land package price in a development for the optional rights 44 to invest and the participating investors 24 are paid a rate totalling 15% per annum until settlement of the land. The 15% to be paid to the investors 24 are paid as 7% per annum coupon which is paid monthly, and 8% dividend which is paid at land settlement.

The participating investors 24 may also choose to leave an amount of 5% - 20% behind in the fund indefinitely with a minimum term of 18 months @ 15% paid monthly. If the investment is for a new project being acquired for development, the entity may offer incentive to invest. For example, the entity 25 may offer to pay the stamp duty and commissions to sales agents. The following table outlines yields in taking the optional rights 44 to invest for a $300,000.00 home and land package.

The system 10 shown in Figure 5 has the benefits of:

Providing immediate income streams for investors;

Combining investments to provide higher yielding properties;

Providing properties at wholesale prices to investors;

Building larger property portfolios sooner.

The system 10 allows the investors in project shares to initially obtain cumulative redeemable participating preference shares and obtain the right to a periodic such as monthly coupon rate or point and either a distribution of equity based on the success of the project denoted by the specific class of shares issued by the entity 25.

Each class of share is a unique and distinct class of share that is issued and maintained via an automatic software system designed specifically for this function ("the system"). The system also allows direct communication with each of the investor and allows smooth funds management transitions.

The user obtaining ownership of Capcar preference shares triggers the loyalty scheme. This means that the participation of the investor in the loyalty scheme is only possible where the investor has a direct interest in Capcar preference shares.

The Loyalty scheme operates on the basis that the Capcar preference shareholders have the right to participate in the loyalty buying facility. This entails that the investor obtains a right of first refusal of any stack that the Entity may be entitled to but not that the entity owns. In essence this would entitle the investor to third party stock although the investor has no direct access to the third party.

Said loyalty program may include offerings of rights to nominees of the investors to purchase one of the selected end products, in the event of an investor being a Self Managed Super Fund (SMSF) then the SMSF may nominate itself but never nominate a third party. The SMSF may waive the right to such nomination or divested the established right by an actual sale to a third party at par value of $1 or at such value agreed between the SMSF and the subsequent buyer. The right that the nominee or SMSF obtains is limited to the right to obtain established rights to purchase the end stock of a third party in accordance with relevant terms in agreements that establish such rights. This may include but is not limited to a right exercisable as a secondary right of first refusal and the like

In one example, the loyalty scheme is based on the ownership of a third party of a development with residential lots of land that is available for value adding. The value adding may include development approval, building approval and any accessory statutory requisites that the Integrated Planning Act or its equivalent nationally may require of the developer. The developer approaches the system 10 for a loan. The system 10 may if it is satisfied with the risk and equity position of the borrower decide to loan funds on the basis of mezzanine, equity or seed capital. The funding is delivered on the basis of a legal document denoting the legal relationship between the entity 25 and the borrower. This immediately requires the availability of funding. The entity 25 has the funding based on the existence of its cashbox. At this stage all the investors save those in project class shares are treated the same as redeemable cumulative participating redeemable share holders. If the investors decide to convert to a project that contains the availability of both project and Capcar preference shares, depending on their assessment the shareholders are then converted into both project and Capcar preference shares.

The same rights that attach to the legal agreement are transferred to the investor in as far as he/she may share in the profits of that project. Additionally the entity 25 may have a marketing agreement with an assignable first right of refusal of the stock of the borrower. The loyalty scheme allows participation in his first right of refusal.

The character may be defined as follows:

A cashbox investment (i.e. a pooling of funds for specific purpose investments) that allows the investor a coupon rate of return using several classes of redeemable preference shares. Each class of share is a different class. ^■ A specific class of share that allows the investor to capitalise his/her dividends by way of Dividend Reinvestment Plan, then to have discretion to convert the dividend into other rights. ^■ A specific class of share that allows the investor to participate in the Loyalty scheme of the system 10.

The uniqueness is the combination of all these components in one system that allows the certain flexibility in one investment. Whilst the above has been given by way of illustrative example of the present invention many variations and modifications thereto will be apparent to those skilled in the art without departing from the broad ambit and scope of the invention as herein set forth in the following claims.

Claims

1. A coordinated investment management system for pooled investments from investors and project developers borrowing funds for developing projects, the system including a share issuing arrangement for issuing shares in accordance to share applications from the investors, a share conversion arrangement for converting the issued shares into one or more of a range of share classes nominated by the investors, a funding processing arrangement for processing applications for funds for project developments, and a loyalty arrangement for receiving dividends and coupons, and the rights to obtain established rights to purchase end products of a third party in accordance with relevant terms in agreements to provide funds to the funding applications and/or the rights to invest a proportion of equity in an end product, and for transferring in accordance with predetermined rules payable dividends and/or coupons to the investors.

2. The system according to claim 2 wherein said range of share classes includes:

(f) Payment of a fixed coupon rate and participating in a fixed proportion of profit share;

(g) Payment of a fixed coupon rate and entitlement to a loyalty program;

(h) Guaranteed payment of a fixed rate of coupon; (i) Modified (a), (b) and (c) for a developer (j) Modified (a), (b) and (c) for an investor or a group of investors

3. The system according to claim 1 or 2 wherein the project developments are arranged to provide end products in the forms of subdivisions of properties, commercial and residential properties.

4. The system according to any one of claims 1 to 3 wherein the agreements to provide funds include a term providing one or more entities with marketing rights to selected end products of the project developments.

5. The system according to claim 4 wherein the marketing rights are associated with indemnity to developers of the project developments.

6. The system according to any one of claims 1 to 5 wherein said loyalty program includes offerings of rights to nominees of the investors to purchase one of the selected end products.

7. The system according to claim 6 wherein any investor representing a group of people and/or entities is categorised as an investment institution which is allowed to choose to nominate itself as a nominee or waive the right to become a nominee or divest the established right of nomination by an actual sale to a third party at an value agreed between an institution investor and a buyer.

8. The system according to claim 7 wherein the right that the nominee or institution investor obtains is limited to the right to obtain established rights to purchase the end products of a third party in accordance with relevant terms in agreements that establish such rights.

9. The system according to claim 8 wherein the nominee has a right exercisable as a secondary right of first refusal.

10. The system according to any one of claims 7 to 9 wherein an investor being a Self Managed Super Fund (SMSF) is categorised as an investment institution.

11. The system according to any one of claims 1 to 10 wherein the investors taking up the rights to invest a proportion of equity in an end product are rewarded with a coupon valued at a predetermined interest rate of their investment and/or a predetermined dividend.

12. The system according to any one of claims 1 to 11 wherein where an end product is a new project being acquired for development, the investors taking up the rights to invest a proportion of equity in an end product are further rewarded with an incentive payment.

13. The system according to any one of claims 1 to 12 further comprising a web server operating a web site that is accessible over a communications network, the web site having a registration process for registering investors and/or developers, and an online application process for the investors/developers to make applications for shares/funds.

14. The system according to claim 13 wherein the web site is arranged to produce a prospectus for viewing and/or downloading by a registered investor.

15. The system according to claim 13 or 14 further including a log of registered investors who have viewed and/or downloaded the prospectus, and the share issuing arrangement is configured to issue shares to applications for shares from the investors who are on the log.

16. The system according to any one of claims 13 to 15 wherein the web site is arranged to present an investment assessment process for assessing financial information provided by an investor and generating a report with a mix of allocation of share classes according to predetermined assessment criteria applied to assess the provided financial information.