ANZ and ING Frozen Funds Fiasco – Update

- by Sue Newberry

In March 2010 it was announced that the ANZ had won the Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand in 2009*, largely for the treatment of its retail clients who, on ANZ advice had invested in two ING managed funds (the Diversified Yield Fund [DYF] and the Regular Income Fund [RIF]). These funds were frozen in March 2008, preventing any withdrawal of investments. In December 2008, ANZ and ING announced plans to “wind down” both funds, and to continue the freeze on withdrawals until completion of the wind down. * The 2009 Roger Award Judge’s Report, including Sue Newberry’s Financial Analysis of ANZ, can be read online at http://canterbury.cyberplace.co.nz/community/CAFCA/publications/Roger/Roger2009.pdf. Ed.

By this time, the global financial crisis was at its height. A range of complex financial instruments known as collateralised debt obligations (CDOs) was at the heart of this crisis, and the role of major financial institutions in the promotion and distribution of CDOs was controversial. Not surprisingly, governments’ taxpayer-funded bail outs of financial institutions and governments’ provision of taxpayer guarantees for financial institutions was highly unpopular. Both of the frozen funds had invested heavily in CDOs, and it was apparent that the wind down would be slow and that major losses would be incurred. For investors who needed access to their money, the ANZ offered a loan of 15c per unit until completion of the wind down. Investors and some financial advisors were already concerned that ANZ’s and ING’s promotion of these funds had been misleading. The announcements of the wind down and loan prompted some financial advisers, who until then had been affiliated to ING, to protest publicly. Subsequently, the Frozen Funds Group of investors and financial advisers was formed to protest and shame the ANZ and ING into taking responsibility for the frozen funds fiasco and to repay the investors.

Holding A Gun To Investors’ Heads

In mid 2009, ANZ and ING offered investors 60 cents in the dollar as recompense, or (if they left the money invested in a special ANZ investment account until 2014 to earn “above market interest” of 8.3%) 62 cents in the dollar. This offer was subject to the conditions that the payment be accepted as full recompense, and that those accepting payment take no further action. The Frozen Funds Group described these conditions as holding a gun to investors’ heads. Following the Commerce Commission’s recent investigation into the two funds in which the Commission found “sufficient evidence to commence criminal and/or civil proceedings against ING and ANZ”, the ANZ and ING agreed to pay a further $45 million to investors. This means that by 2014, investors will be restored to approximately 96c for each dollar invested, that restoration coming partly from the $45 million further settlement plus the compensation offered in 2009, and partly courtesy of the New Zealand taxpayer. The Frozen Funds Group has announced its agreement to this settlement but acknowledges the moral question raised by the taxpayer-funded component because it means “poorer New Zealanders subsidising financial losses of the wealthier ones.” Meanwhile the ANZ, in addition to having offloaded this cost onto the New Zealand taxpayer, and receiving taxpayer-backed government guarantees from both Australia and New Zealand during the financial crisis, has gone on to announce a record profit of $4.5 billion for 2010. (1)

Although the Frozen Funds Group has now gone out of existence, before doing so it reported a continuing worry about “ANZ/ING [being] in charge of a Government-endorsed default KiwiSaver programme – managed by the same directors, executives and experts” as those involved in the frozen funds fiasco.(2) The Commerce Commission’s report suggests the Frozen Funds Group had good grounds for that concern. The Commission’s expert witness reported findings that, at the very least, raise serious doubts about the competence of those involved in managing the funds, while the Commission’s report suggests recklessness, as well as conflicts of interest and ethical dilemmas among those involved in promoting the funds that would not have been clear to investors.

Both of the frozen funds invested heavily in CDOs and similar financial instruments known for being problematic, but material quoted in the Commerce Commission report suggests neither ING nor the ANZ gave adequate consideration to what would happen should the funds fail. ING was aware, but seemed not to care. As evidence of its lack of care, the Commission reports an ING internal email prior to launching the funds commenting on the risks of investments concentrated in CDOs, but seemingly dismissing those risks because if “credit craps out … we won’t have a business anyway!!(3) For ANZ, it was profitable to direct its retail customers into the funds, and it directed so many into them that they held around 40% of the total invested. Banks place great emphasis upon risk management – and despite all the comment in the ANZ’s Annual Reports about its risk management policies and practices, it seems that it was not until problems emerged with the funds that the ANZ realised it could not advise all its customers to withdraw their investments - the total amount invested by ANZ’s retail clients was too great for the funds to withstand their withdrawal.

The $45 million further compensation to investors was agreed in a deed of settlement between the ANZ/ING and the Commerce Commission, with a second similar deed between the ANZ/ING and the Securities Commission. The deed refers to a separate investigation summary obtainable after application under the Official Information Act, and to Professor Robin Grieves’ expert report on the funds prepared for the Commerce Commission*. Both of these reports have been obtained together with additional material from the Frozen Funds Group’s Website and news media. For those interested in a more detailed understanding of the frozen funds fiasco, and of the Frozen Funds Group’s expressed concern about the wisdom of leaving ANZ/ING in charge of a default Kiwisaver programme, the following summary of events draws on the additional material now released. * Professor Grieves’ 76 page expert report is available online at http://www.frozenfunds.org.nz/Frozen/Newsletters/Grieves%20Report%20on%20ANZ-ING%20for%20ComCom%2029%20March%202010.pdf. Ed.

Specific Findings And Deed Of Settlement

The Commerce Commission found that: “ING (NZ)/ANZN (and, through their conduct, some of their related companies) engaged in misleading or deceptive conduct and/or made false or misleading representations as to:

In the deed of settlement, between the ANZ/ING and the two Commissions, ANZ/ING acknowledged some of their actions “may have” breached the Fair Trading Act and securities legislation”, and agreed to pay the additional $45 million to investors. Both Commissions agreed not to take or encourage legal action against the ANZ or ING or “against any other person.”(5) Other organisations that had also been the subject of complaint in relation to the frozen funds fiasco included Morningstar Research Limited and Strategi Limited. Provided the ANZ and ING meet their agreed obligations, there will be no legal action taken or encouraged by the Commission against the other organisations.

The ANZ’s “product-focused” approach to its activities in key business segments seems to have been at the heart of the frozen funds fiasco. The products the ANZ promoted to its retail business segment customers included managed funds investments which were presented as viable alternatives to term deposits. Although the Diversified Yield Fund (DYF) and the Regular Interest Fund (RIF) that were frozen were called ING products, throughout the life of the two funds, ING’s activities in New Zealand were a joint venture formed in 2002 between ING and the ANZ.(6)

The ANZ promoted and sold these ING funds to its retail clients and by mid 2007 3,283 of those clients had invested some $365 million in the two funds. By selling these funds to its retail clients the ANZ stood to improve its own profits, partly because it took commissions from the joint venture, and partly by including in its own profits 49% of ING (NZ) Holdings Limited’s profits which included ongoing management fees charged to the funds. In some ways, therefore, throughout the life of the DYF and RIF funds, ING’s operations in New Zealand might be viewed as a secondary but differently branded arm of the ANZ. And selling these products through the ANZ’s financial advisory services arouses concern about ethics and conflicts of interest.

The Commission reported complaints about Strategi and Morningstar: “in regard to the allocation of the Funds in model portfolios prepared by Strategi with the assistance of Morningstar, for the benefit of ING aligned financial advisers”.(7)As will be seen below, when in 2007, the global financial crisis was becoming evident, and concerns mounted internationally about exactly the type of investments that the DYF and RIF had invested in, the advice of Strategi and Morningstar, seemingly independent advisers, appeared to support the ING’s and ANZ’s recommendations, especially to retail customers, that they should not withdraw their investments in the funds. But how independent were these Strategi and Morningstar? They had links with ING that raise additional questions about conflicts of interest. Since 2002, ING’s international operations had been involved in an “alliance to deliver Morningstar’s proprietary investment advice to ING’s … clients and its financial advisers”(8) In New Zealand, Strategi had been engaged in an exclusive contract with ING.(9)

The first fund, the Diversified Yield Fund (DYF) was launched on 1 July 2003, a year after the formation of the ANZ-ING joint venture. The cover page of the investment statement contained few words thus making the words that were there stand out: “Enjoy a competitive interest rate return without unnecessary risk”. The “Quick Outline” on p.2 of the investment statement classified the DYF fund’s risk as “moderate” and added a side comment that the fund would provide “a healthy balance between risk and return”. The Quick Outline also said (in this order) that:

In the more detailed material (the small print) from p.4, the comment is made that the “Trustee intends to invest the assets of the Fund primarily in CDOs” and intended to invest in other types of investments only during the initial offer period while accumulating sufficient funds to invest in CDOs”(12) The second fund, the Regular Income Fund (RIF) was launched in September 2005. At the time of launch, and subsequently, its declared risk profile was “low to moderate”, and its performance target was to outperform the NZ 90-day bank bill rate by 1% per annum after fees.(13)

In his expert report about these funds for the Commerce Commission, Professor Grieves highlighted the misleading statements in the marketing of the funds. He said that neither fund could be described by the “moderate” and “low to moderate” risk profiles declared in the investment statements. He also pointed out that: “Fund managers convey the context for investors to understand risk statements through their choice of benchmark”. The benchmark for both funds was “90-day bank bills ... the CDO tranches selected… were dissimilar from traditional fixed interest rate securities from the outset”. Further, Grieves reported that: “the funds contained multiple, large risks that ING did not measure or manage, which led to a loss of nearly 80% of the capital. This outcome is impossible with either low to moderate risk or moderate risk. It would be nearly unheard of with conventional investments of high risk”.(14)

Most of the Commerce Commission comment about the contents of the investment statement relate to the DYF fund. The material documented by the Commerce Commission suggests at least some of the inconsistency between the claims in the investment statement and the risk profile of the DYF fund was known within ING. Further, the Commerce Commission report says the ANZ approved the DYF before it was launched, thus suggesting a level of knowledge in the ANZ as well. The ANZ says that ING merely discussed the DYF with the “ANZ and other possible future distributors prior to the launch”.(15) The Commerce Commission, however, views the ANZ as “more than a mere distributor because of the Joint Venture relationship; it was a 49% effective ultimate owner of ING (NZ); it had directors sitting on the ING (NZ) board, it did review draft ING (NZ) investments statements; it requested amendments to the DYF investment statement when the tax laws were changing in 2005”(16)

Credit Market Did Crap Out

In March 2003, presumably before preparation of the DYF’s investment statement, an internal (ING (NZ)) email commented that: “The real risk to the fund, given its total exposure to credit, is that credit craps out. This will happen if equity markets take a massive pasting – and then it will act more like an equity fund. If the credit market craps out to this extent, we won’t have a business anyway!!(17) In late June 2003, the specific content of the investment statement had clearly been under discussion among senior staff at ING. The importance to the investor of the Quick Outline in the investment statement was stressed, and ING senior staff concerns raised that the wording may:

“significantly understate the potential risk and volatility with these type of investments and given that this is a new fund which is using relatively new securities which have experienced a number of difficulties that it is better to err on the side of caution. … I am reasonably comfortable with the word ‘moderate’ in the risk profile section … The only other question mark is the statement on the front cover ‘without taking unnecessary risk’. Based on my comments above I think this is potentially misleading to an average investor, however agree that we could debate the statement either way for a long time. As a result we are prepared to accept the statement provided the risk profile of the fund is more adequately described in the introduction… The statement should be reviewed/changed next time the whole document is reprinted. [ie that investors in addition to enjoying competitive returns… may suffer capital losses etc]”.

The Commerce Commission report states that “this was not done expressly but rather the reader was directed to page 6 on “What are my risks”. The statement “without taking unnecessary risk” remained on the cover of the DYF investment statement throughout the life of the DYF.(18)While the investment statement and official promotional materials made fairly consistent representations about the risk of these investment funds, other ING correspondence cited by the Commerce Commission’s investigation made different representations. The Commerce Commission quotes from two of these. The first responded to queries from ANZ financial advisors shortly after the launch of the DYF. The financial advisors had sought “further clarification of the ‘targeted average credit rating of BBB’ stated in the promotional materials.” The ING clarification stated that:

“The DYF will not invest in any CDO that is below investment grade, i.e. BBB. It will however invest into any CDO above investment grade, so there may be situations where the average credit rating is above BBB. That said, there is always the possibility that the CDO tranche we originally invested into was downgraded. Should this occur we would look at that CDO and make an assessment as to how we manage the risk associated with being in this particular tranche… Decisions and the resulting actions will be on a case by case basis. Would really appreciate if you could send this out to your financial advisors asap”(19)

An early 2007 ING report to the Inland Revenue Department was less reassuring than the 2003 advice to ANZ’s financial advisors. ING says this report was prepared for a submission to the IRD on behalf of investors. Apparently, this report to the IRD provided detailed information about the investments of both funds. The Commerce Commission report reproduces almost a page of material from the IRD report. The following is the last paragraph of the material reproduced by the Commerce Commission:

“Concluding comments. DYF invests in CDOs and COFs(20) These structured vehicles borrow heavily to leverage their structure and invest in predominantly below-investment grade securities. These structures generate relatively high returns, which are needed to compensate for their inherent sensitivity to credit cycles, their structural complexity and their limited liquidity. DYF, and the CDOs and COFs that the Fund invests in, share very few characteristics normally associated with typical government or investment grade debt securities. Rather their deeply subordinated nature, the degree of leverage and the variability of returns more closely aligns their characteristics alongside stocks/equities”.(21)

While there is a four year time difference between the advice to ANZ financial advisors for selling purposes (2003) and the report for the IRD (2007), these documents do suggest a level of knowledge within ING that, regardless of the investment grading attached to the CDOs/COFs that the DYF and RIF funds invested in, ING knew that the CDOs/COFs were highly leveraged (i.e. the funds themselves could borrow and they had borrowed heavily to invest in other securities) and that the securities the CDOs/COFs invested in were below investment grade (ie below the BBB rating the claimed for the CDOs themselves).

Risks Presented As Low To Moderate

Professor Grieves, in addition to his comments that neither the DYF fund nor the RIF Fund could be described in the terms used (moderate and low to moderate), also commented further about the risks associated with them, Because his comments are similar for each fund, excerpts from them are combined below:(22)

ING had acknowledged as much in its IRD report, but not in its promotional material.

ANZ Selling Of Funds And Advice As The Funds Declined

The ING’s investment statement for the DYF appeared to limit investments from any investor to 10% of the total fund. It also stated that withdrawals could be made(23)

The ANZ’s internal segmentation of its services meant its wealthy private banking clients received services that differed from those provided to retail clients by the ANZ’s financial advisory group. This difference in services meant each group received different advice about investing in, and retaining or withdrawing their investments in the DYF and the RIF funds. By mid 2007, the DYF and RIF funds invested totalled about $900 million. ANZ’s private banking clients held around $8 million (0.9%) in the DYF and RIF funds, and the ANZ’s retail clients held around $365 million (40%). One complaint about ANZ’s behaviour is that it withdrew its private banking clients’ funds from the DYF and RIF and then advised its retail clients differently, that is, against withdrawing from the funds.(24)

According to the Commerce Commission, it is unreasonable for ANZ to seek to rely on the information provided by ING (NZ) “without exercising proper due diligence about the nature of the Funds and their risks, given its claims it was a professional advisory services and because of the fiduciary relationship with its customers”. It is also worth noting that while the ANZ’s financial advisory staff might not receive commissions or benefits from the funds managers they recommend, the ANZ itself clearly did benefit financially when its staff sold the products of ANZ’s joint venture with ING, and it incurred financial losses when the products collapsed. Both the Commerce Commission’s report and the Frozen Funds Group’s website provide documentation that suggests ANZ advisory staff were expected to promote the DYF and RIF. Within the ANZ, it seems that financial advisory staff were expected to meet particular performance targets. The Commerce Commission reported direct instructions issued to sales officers “in relation to referrals regarding the DYF over the 2003-2004 Christmas period with a view to assisting them to meet their ‘KRA’ [‘Key Result Area’ – possibly performance review criteria] sales targets. He instructed the sales officers to select ten potential clients, send them a template letter regarding the DYF, follow up with a telephone call three days later”.(25) The Commerce Commission also reported that in July 2006, an ANZ advisor ran a “referral competition” which focused on ANZ clients who held money on term deposit but were dissatisfied about rates, or wanted a top up of income, or were “very conservative investors who just want better returns”. The communication does not refer expressly to the RIF but the stated features of the investment and the timing indicate the RIF.(26)

One Last Opportunity (To Lose Your Money)

In September 2006, another ANZ advisor distributed a letter promoting the DYF. The ANZ advisor’s full letter may be seen on the Frozen Fund’s group’s Website http://www.frozenfunds.org.nz/Frozen/Newsletters/ANZ%20Adviser%201%20Sep06.pdf According to this letter, clients had “one last opportunity” to invest in the DYF before it was closed to new investment:

“Due to the continued success of the fund, and with existing policyholders topping up their accounts, ING have indicated the need to close the [DYF] to additional investments in the very near future to ensure future returns for existing investors are not ‘watered down’. … This news does however give you one last opportunity to invest new money into an account that returned 10.42% for the year ending 30 June 2006. This is a low risk highly diversified account … which does not contain direct equities, property or finance company debentures”(27) (emphasis added – the DYF investment statement classified the risk as “moderate”, and Professor Grieves considered moderate to be an understatement).

In hindsight, the timing of this “one last opportunity” could be viewed as an effort to bring in new cash in order to be able to repay other investors. The Commerce Commission report says that by June 2007 the ANZ “began to seek more detailed and comprehensive information about the Funds’ makeup and composition”. An ING internal memo dated 30 July 2007 was headed “Worst Case Planning, July 07” and identified the next two fund redemption dates as 15 August 2007 and 15 October 2007:

“Best case: We do not see significant outflows over the next two weeks. This means the next redemption date is pushed out to 15th October. Given our liquidity profile, we could arguably cover, between 5% to 10% ($45 to $90m) of the combined Funds outstanding being redeemed on the 15th October redemption date, before contemplating closing the gate.
“Worst case: NZ Funds has a run on funds and closes the gate – a real risk given their virtual daily liquidity. This creates panic in NZ and, as a consequence, we see redemption dramatically increase over the next two and a half weeks. Alternatively, noise out in the market continues to gather momentum and redemptions dramatically increase over the next two and a half weeks. … My feel is that if combined redemptions over the next two weeks get up to 5% of the Funds (i.e. around $45m), we should consider closing the gate (suspension of payment and redemption…). … If the best case plays out, we effectively push our next redemption date out to mid Oct – and we didn’t have to suspend redemptions to get there.
“What happens if redemptions are suspended?
“Given the current level of cash balances, realisable securities and cash coupon, we could repay a sizeable portion of the combined Funds back to investors in a relatively short period of time – without having to sell any CDO securities. This would give CDO security prices time to claw their way back before they are sold to cover redemptions.”(28)

Rich Clients Warned “Get Out, Now!”

The figures above, that is, the maximum of about 10% ($90 million), allowed the estimation of the $900 million total invested in the funds. If withdrawal requests were to exceed the $90 million, the funds would have to be frozen (i.e. closing the gate). The ANZ’s “Private Banking decided to redeem its clients’ units valued at around $8m”.(29) Evidently, some private banking clients were telephoned and advised to “Get out, Now!”(30) The ANZ Managed Funds Governance Committee meeting minutes of 22 August 2007 record for private banking clients who held discretionary portfolios: “The ANZNB [ANZ National Bank] Private Banking Committee has made the decision to exit the above funds …. This amounts to approximately $7m of FUM [funds under management] and will have minimal effect on the products overall (there is adequate liquidity to cope with a withdrawal of this size). The redemption notices were lodged and the redemption will take place at the next scheduled withdrawal window for these products. [two ANZ people] are visiting ING on 23 August to review the exposures and risks involved in the two funds, with a view to fully understanding the reputational risk to the Bank and the viable options available for Bank customers in these products… a paper from [name] on ANZ Financial Advisory’s approach and response to date is pending”.(31)

It was another week before the ANZ Financial Advisory’s report on its approach and response went to the ANZ’s Investment Management Governance Committee. This reported that ANZ Financial Advisory had 3,283 clients invested in the fund with a total of $365 million and commented that:

“Many of the Advisory’s clients are looking for a return slightly greater than Bank deposits but are not prepared to enter the Equity market in a substantial way. This results in a fairly heavy weighting towards fixed interest type assets. As a joint venture partner producing 50% of the inflows it is inevitable that we will own 50% of some of their funds. Other than some external Capital Guaranteed products, some (very few) quality Finance Co debentures there is not a lot available for diversification. … The predominant position within these funds means that we are not able to make a decision to withdraw the investments. Although Advisory’s view is that we would not be doing so at this time, with this product, we are in the difficult position of not being able to do so at all (on a total client basis)”.(32)

ANZ’s “Difficult Position”

In other words, were Financial Advisory to advise its retail clients to withdraw their investments ($365m) from the funds, the amounts to be withdrawn represented such a large percentage of the funds’ investments (seems around 40%) that it would have exceeded the 5% limit specified in the investment statement and far too much for the funds to cope with, hence the ANZ’s “difficult position” of being unable to advise its retail clients to withdraw their funds. Having got its private banking clients out of the DYF and RIF funds, the ANZ decided to talk up the funds and advise its clients against withdrawing.

In late September 2007, ING issued a five page question and answer sheet (Q&A) about the funds, presumably as a script for advisors. The full Q&A sheet is on the Frozen Funds Group’s Website(33). The Q&A sheet acknowledged falling returns, attributing this to market sentiment, but stated that:

It should be noted that some of these statements seem inconsistent with earlier internal material. For example, the statements that “DYF and RIF are not leveraged” and that the average credit ratings of both funds constitute investment grade while not necessarily contradicting the letter to the IRD seven months previously which stated that the CDOs and COFs that the funds invested in had borrowed “heavily to leverage their structure and invest in predominantly below investment grade securities”, do suggest at least knowledge that the statements in the Q&A are misleading.(35)

Statements from ING’s Q&A sheet were reproduced in an ANZ Financial Advisor’s early October 2007 letter to clients which enclosed the full Q&A sheet. Highlighted in that letter were the advice that valuations would improve again as investors return; and Morningstar’s advice not to invest new money in the funds but that “redeeming units would crystallise ‘paper’ losses”, in other words that existing units be held.(36) In late November 2007 a different ANZ financial advisor reported that “the message from our fund manager remains the same”, this message being that the funds manager was “not concerned”. The letter then provided some “facts” concluding with, “alternatively, if we applied a write down to zero of the entire sub-prime tranche, and when we write back to par all our Collateralised Loan Obligations and loan product, the impact on returns, from a mark to market perspective, would be positive 1 to 2%.”(37) In December 2007, the ANZ mailed a DVD to its fund customers, this DVD warning that: “Jumping out of one investment due to volatility … is unfortunately a fast way to lose funds.”(38)

Advice Too Late; Funds Frozen

In January 2008, the ANZ’s Private Banking and Financial Advisory Risk and Compliance Monthly Report noted likely future losses in relation to the sale of the funds due to poor performance after being sold as “low risk” income type products.(39) Advice to clients then became a little mixed. For example, in February 2008 ING ran a Roadshow for its financial advisors about CDOs. In this roadshow, ING reported that “irrespective of market sentiment… the value of CDO securities will migrate to par (100%) over time”.(40) In a February 2008 letter to a client, however, one ANZ financial advisor reported that: “The current recommendation is to hold your position and wait for a recovery in the market. … I believe it important to discuss the alternatives, particularly if you require capital in the near term.”(41) That advice seems to have been too late. On 12 March, 2008, ING froze both funds.

Sue Newberry is Associate Professor of Accounting at the University of Sydney and the writer of the Financial Analysis section of the Judges’ Report for the annual Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand.

Endnotes

1 “ANZ full steam ahead as profits hit $5b”, Sydney Morning Herald, 29/10/10.
2 Frozen Funds Group Newsletter, Number 16, 1/1010 http://www.frozenfunds.org.nz/index.html.
3 Commerce Commission, (2010) ““Investigation Into The Promotion, Marketing And Distribution Of The ING Diversified Yield Fund And Regular Income Fund”, JI11055, Note 1 http://www.comcom.govt.nz/fair-trading-settlements-register/detail/684.
4 Commerce Commission, (2010) “Investigation Into The Promotion, Marketing And Distribution Of The ING Diversified Yield Fund And Regular Income Fund”, JI11055, para 4.
5 Commerce Commission, ANZ National Bank Limited, ING (NZ) Limited, “Deed Of Settlement: Regarding Commerce Commission Investigation Into ING Diversified Yield Fund And Regular Income Fund”, 22/6/10 and Securities Commission, ANZ National Bank Limited, ING (NZ) Limited, “Deed Of Settlement: Regarding Commerce Commission Investigation into ING Diversified Yield Fund And Regular Income Fund”, 22 June 2010, para 1.3 and 3.1.1.
6 ING Investment statement: www.frozenfunds.org.nz/Frozen/ING%20DYF%20Leaflet%20Jul2003.pdf.
7 Commerce Commission, 2010, “Investigation Into The Promotion, Marketing And Distribution Of The ING Diversified Yield Fund And Regular Income Fund”, J11066, p. 1, para 3.
8 American Banker, 11/11/02, Vol 167, Issue 216, p.7, “In Brief: ING Adopts Tools For Morningstar Advice”.
9 See www.goodreturns.co.nz/article/976495358/ing-ends-exclusive-deal-with-strategi.html.
10 In the glossary to the investment statement, ING defined CDOs or collateralised debt obligations as: “A structured debt security backed by a portfolio consisting of … secured or unsecured ‘senior’ or ‘junior’ bonds, issued by a variety of corporate or sovereign obligors; secured or unsecured loans made to a variety of corporate commercial and industrial loan customers of one or more lending banks; other receivables”. In a February 2008 “roadshow” by ING a CDO was described as “a funding vehicle for the assets bought for the equity holder by a manager” with a structure “like a mini investment company: purchases assets (in our case managed by an experienced manager); assets are purchased on behalf of the equity holder by the manager; assets are funded by issuing liabilities (debt) that are called tranches”.
11 ING Investment statement, 2003, p. 2 www.frozenfunds.org.nz/Frozen/ING%20DYF%20Leaflet%20Jul2003.pdf.
12 ING Investment statement, 2003, p. 4 www.frozenfunds.org.nz/Frozen/ING%20DYF%20Leaflet%20Jul2003.pdf.
13 Grieves (2010) p4 http://www.frozenfunds.org.nz/Frozen/Newsletters/Grieves%20Report%20on%20ANZ-ING%20for%20ComCom%2029%20March%202010.pdf.
14 Grieves, (2010) p. 48, para 191.
15 Commerce Commission, (2010), J11066 Page 7, para 23 and Annex 2, re para 23.
16 Commerce Commission, (2010), J11066 page 7-8, para 23 and Note 7.
17 Commerce Commission, (2010), J11066 Note 1.
18 Commerce Commission, (2010), J11066 Note 2, and p. 7, para 21.
19 Commerce Commission, (2010), J11066 Page 13, para 28.
20 COF = Credit Opportunity Fund.
21 Commerce Commission, (2010), J11066 p5-6.
22 Grieves, (2010) p. 3-4 (a) (i) (iii) (vi) (xiii); Quoted sections from p23, para 66, p 27, para 90, p34, para 131, p. 35, para 138; Grieves, p. 4-5 (b) (i) (iii) (iv) (vi) (xiii); p. 44, para 168, p46, para 179, p. 47, para 186.
23 ING Investment statement, 2003, p.7.,6.
24 Frozen Funds Group Newsletter, Number 16, 1/10/10, p.1.
25 Commerce Commission, (2010), J11066, Page 10, para 28.
26 Commerce Commission, (2010), J11066 Page 10, para 28.
27 Commerce Commission, (2010), J11066, Page 10, para 28.
28 Grieves, (2010) p. 39, para 146. Attachment 7.
29 Commerce Commission, (2010), J11066, p. 8, para 25.
30 Frozen Funds Group Newletter, No 16, 1 October 2010, p. 1.
31 Commerce Commission, (2010), J11066 p.8, para 26.
32 Commerce Commission, (2010), J11066 p.8,-9 para 27.
33 Frozen Funds Group Website http://www.frozenfunds.org.nz/index.html.
34 Frozen Funds Group Website http://www.frozenfunds.org.nz/index.html.
35 Commerce Commission, (2010), J11066 p5-6.
36 Commerce Commission, (2010), J11066, p. 8, para 25.
37 Frozen Funds Group Website http://www.frozenfunds.org.nz/index.html.
38 Frozen Funds Group Website http://www.frozenfunds.org.nz/index.html.
39 Commerce Commission, (2010), J11066 p.12, para 28.
40 Frozen Funds Group Website http://www.frozenfunds.org.nz/index.html.
41 Frozen Funds Group Website http://www.frozenfunds.org.nz/index.html.

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