australian property opportunities fund ii · 2017-12-04 · australian property opportunities fund...

(ACN 152 367 649) (AFSL 410 433)

AUSTRALIAN PROPERTY OPPORTUNITIES FUND II(ARSN 169 190 498)

ANNUAL FINANCIAL REPORT 2015FOR THE YEAR ENDED 30 JUNE 2015

Australian Property Opportunities Fund II

ARSN 169 190 498

Contents

Chairman’s letter i

Property manager report iii

Funds from operations vi

Directors’ report 1

Auditor’s independence declaration 6

Consolidated statement of profit or loss and other comprehensive income 7

Consolidated statement of financial position 8

Consolidated statement of changes in equity 9

Consolidated statement of cash flows 10

Notes to the consolidated financial statements 11

Directors’ declaration 29

Independent auditor’s report 30

Directory 32


ARSN 169 190 498

Chairman’s letter

For the financial year ended 30 June 2015

- i -

Dear Unitholders

It is my pleasure to welcome you to the Annual Report for Australian Property Opportunities Fund II (Fund) for the

financial period ended 30 June 2015 (FY15).

The Australian Property Opportunities Fund series was established to provide individual investors with the opportunity

to gain exposure to the domestic commercial property market. Established in June 2014, the Fund, the second in the

series, continues the successful strategy of targeting small-to-medium-sized assets in the office, retail and industrial

sectors, predominantly located in major real estate markets on Australia’s eastern seaboard. The Fund seeks assets

that deliver reliable income and capital returns to investors.

FY15 marks the Fund’s first full year of operations. During the year, the Fund was able to successfully deploy over

$85 million of capital and, as a result, was able to commence distributions to investors during the second half of the

year. In total, the Fund announced two distributions totalling 4.06 cents per unit during the year, representing an

annualised yield of 5.1%. The June 2015 distribution of 2.06 cents per unit represents an annualised yield of 5.2%. As

the Fund invests its remaining equity and optimises its capital structure via a debt facility, we can expect the

distribution to unitholders to increase in FY16.

Portfolio update

Since inception of the Fund, Fort Street Real Estate Capital Pty Limited (Investment Manager) has identified, sourced

and screened a number of potential investments and, through its relationships with Fort Street Advisers and

Archerfield Capital Partners, has forged networks with vendors, real estate agents, property valuers, property

managers and banks.

The Fund’s ability to execute transactions quickly by using committed capital or pre-agreed external financing has also

proved positive, providing access to greater deal flow, including off-market transactions and enhanced our position

during deal negotiations.

Reflecting these points, the management team successfully acquired three high quality properties during FY15;

Northpoint Shopping Centre, a major shopping centre in Toowoomba, Queensland; Birkdale Fair, an enclosed shopping

centre 23km east of Brisbane; and Newtown Central, a prominent neighbourhood shopping centre in Sydney’s vibrant

inner west.

Northpoint Shopping Centre was acquired in September 2014 for $36.5 million. Located in Toowoomba, Queensland,

the centre was completed in February 2014 and is prominently located on the New England Highway. It is the major

shopping centre of the area, and located only 3km north of the Toowoomba CBD. The centre is anchored by a full-line

Coles supermarket and has a diverse specialty tenant mix, with strong nationally recognised tenants across the food

and service sectors including The Reject Shop, Priceline, Australia Post, BWS, Subway, The Coffee Club, Domino’s and

Brumby’s Bakery. The centre has on-grade parking for 300 cars, a seven-tenant food lane and a medical precinct

providing GP, dental and pathology services. Given the centre’s recent construction, minimal capital expenditure is

required in the short-to-medium term.

Birkdale Fair in Brisbane was acquired by the Fund in March 2015. A fully leased neighbourhood shopping centre, it

was acquired for $23.3 million on a yield of 7.4%. The property is centrally-located in Birkdale, 23km east of Brisbane,

Queensland. Anchored by a full-line Woolworths, the centre has 18 specialty stores and on-grade parking for 315 cars.

It also has numerous independent and national specialty tenants across the food and service sectors, including Flight

Centre, Brumby’s Bakery and Bank of Queensland. The property has received development approval for an extension,

which will enhance the yield of the investment once completed.


ARSN 169 190 498

Chairman’s letter


- ii -

The Fund’s third acquisition was Newtown Central in Sydney. Acquired for $26.4 million, the property is a prime asset

in Sydney’s thriving inner-west. Conveniently located on busy King Street, the centre was redeveloped in 2008. It

immediately adjoins Newtown Railway Station, making the centre a convenient retail service to passing foot traffic.

Newtown Central is a well positioned shopping centre, with strong tenants including Foodworks, Fitness First and

Optus. Given the high-profile location and long-term leases in place, the property provides a defensive cash flow profile

with long term growth potential. Newtown Central is the first New South Wales-based asset in the Fund, and

compliments the two Queensland assets.

Together, the three properties in the Fund’s portfolio are generating an initial unlevered yield of 7.0% with a fully

leased yield estimate of 7.4%, which is within the Fund’s target 7.0% to 9.0% yield range.

Financial performance and distributions

At June 2015, the Fund recorded a statutory profit of $2.4 million and underlying operating earnings of Funds From

Operations (FFO) of $3.4 million. This was a strong result, reflecting solid contributions from the investment portfolio

as we began deploying the capital raised into quality commercial property assets.

Outlook

In FY16, we will look to build on the Fund’s success of this year by investing the remaining capital and increasing

distributions to unitholders. Further, there are a number of exciting projects across the Fund’s portfolio, which are

being progressed.

We would like to take this opportunity to thank you for your support of the Australian Property Opportunities Fund II.

Yours sincerely

Alex MacLachlan

Chairman of Walsh & Company Investments Limited

Dated 16 September 2015


ARSN 169 190 498

Property manager report


- iii -

It has been a busy year since the launch of the Australian Property Opportunities Fund II (Fund) and we are pleased to

report on a number of key achievements –

- Acquired three high quality neighbourhood shopping centres in Sydney, Brisbane and Toowoomba, after assessing

over 200 opportunities

- Improved portfolio occupancy from 94% to 98% at 30 June 2015

- Post year end, agreed terms with National Australia Bank for a new $43 million debt facility for a term of about

5 years.

Portfolio performance

The performance of the portfolio that we acquired has been pleasing and progress has already been made leasing

vacant space and beginning to optimise the tenancy mix across the portfolio.

Portfolio highlights

Northpoint Shopping Centre is trading strongly with Coles sales growth continuing to exceed expectations. Specialty

sales growth continues to track higher than initial forecasts with the majority of retailers performing well. There has

been strong leasing enquiry at the centre with new leases signed by Dominos Pizza and a local hairdresser. Further to

this, terms have been agreed with two new tenants and upon completion of these deals, occupancy for the centre will

sit at 98%.

At Birkdale Fair, an agreement for lease was signed over the only vacant shop during due diligence negotiations and as

a result the centre was fully occupied at 30 June 2015. We are in the early stages of planning for the repositioning of

the asset with the view to maximising long-term value for investors.

During the year, a review was undertaken of the centre management and leasing appointments for all of our shopping

centres in Queensland. Following this review, it was decided to award the property management and leasing to Race

Property, an experienced local retail specialist who focuses on neighbourhood shopping centres. We are confident the

new team will assist us in unlocking the value at both Northpoint Shopping Centre and Birkdale Fair as we continue to

drive the performance of both assets.

Newtown Central has been trading well since acquisition in March. With occupancy at 96% we have been focused on

leasing up the two vacancies at the centre and are in discussions with a number of prospective tenants. We increased

the car park rates, which has driven the income 25% above our original forecasts. We are also looking at options to

improve the centre in order to continue to drive returns higher.

Fund statistics

Portfolio summary Occupancy (%) Acquisition value ($m)

Northpoint Shopping Centre, Toowoomba, QLD 98 36.5

Birkdale Fair, Birkdale, QLD 100 23.3

Newtown Central, Newtown, NSW 96 26.4

Average 98 86.2


ARSN 169 190 498



- iv -

Geographic diversification (by current value)

69%

31%

QLD

NSW

Top Tenants

1 (by gross income)

Wesfarmers (including Coles) 19%

Woolworths 17%

Fitness First 10%

Foodworks 8%

Priceline Pharmacy 4%

1. At 30 June 2015, the portfolio consists of c.75 tenants

Weighted average lease expiry (by gross income)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Vacant 2015 2016 2017 2018 2019 2020 2021 2022 2023+


ARSN 169 190 498



- v -

Market Outlook

Our outlook for FY16 remains positive with buoyant investment markets supported by relatively stable underlying

conditions.

In retail markets, the outlook for short term retail spending should be supported by a number of key factors including,

the decline in world oil prices, record low cash rates and the household wealth effect given the strong house price

growth, particularly in Sydney and Melbourne. Despite this, consumer sentiment remains volatile given economic

uncertainty. The forecast for further yield tightening reflects greater competition for assets.

In office markets, increased demand for office space, particularly in Sydney and Melbourne, is forecast to be offset by a

large increase in office supply additions. We expect this to result in moderate rental growth in these markets with

incentives forecast to remain elevated in the short term. In investment markets, new sources of capital are expected to

result in further yield tightening as overseas pension funds and sovereign funds increase their allocation to real estate.

Strategy and outlook

Looking forward we are anticipating another busy year with our strategy to include the following –

- Actively pursuing opportunities in the market for suitable acquisitions, to be funded by debt up to our target

gearing range of 40-50%

- Continue our program of renewing leases with existing tenants, leasing up any vacancies and improving tenancy

mix

- Proactively engaging with tenants to renegotiate and extend leases and drive rental returns

- Continue work on the repositioning of Birkdale Fair with the aim of driving the maximum value possible

- Providing sustainable and growing distributions for investors.

We look forward to delivering on this strategy during FY16 and providing you with further updates as we progress.


ARSN 169 190 498

Funds from operations


- vi -

Funds From Operations (FFO) is a non-IFRS financial measure. FFO is a market accepted measure of a real estate

investment fund’s operating performance. FFO is used to facilitate understanding of a fund’s performance. The

Property Council of Australia provides best practice guidelines for the calculation of FFO, which have been followed by

the Fund.

FFO is determined by adjusting statutory net profit or loss after tax for certain non-cash items such as depreciation,

impairment and amortisation. Other one-off items may also be adjusted to provide a clearer indication of the Fund’s

current year FFO.

2015

$

Profit after tax for the year 2,374,154

Adjustments:

Depreciation charge for the year 1,073,237

Straight-lining of rental revenue (167,955)

Other items (47,944)

FFO 3,231,492

Distributions for the year 2,786,977

Cents per unit

FFO 4.71

Distributions 4.06

Distributions for the year represented a payout ratio of 83% of FFO.


ARSN 169 190 498

Directors’ report


- 1 -

The directors of Walsh & Company Investments Limited, as Responsible Entity of Australian Property Opportunities

Fund II (Fund), present their report together with the annual financial report for the Fund and the entities it controls

(collectively referred to as the ‘Group’) for the financial year from 1 July 2014 to 30 June 2015.

Directors

The directors of the Responsible Entity at any time during the financial period are listed below:

Alex MacLachlan

Tristan O’Connell

Tom Kline

Directors were in office from the start of the financial year to the date of this report, unless otherwise stated.

Information on directors

Alex MacLachlan BA (Cornell), MBA (Wharton) | Chairman

Alex joined Dixon Advisory in 2008 to lead the then newly formed Funds Management division. Alex focused the efforts

of the Funds Management division on providing Dixon Advisory clients with access to asset classes and investment

opportunities that would normally only be available to institutional investors. From funds under management of under

$100 million at the time of his commencement, Alex has grown the Funds Management division to over $2 billion of

funds under management today, with investments across residential and commercial property, fixed income, private

equity, and listed equities and commodities.

Prior to joining Dixon Advisory, Alex was an investment banker at UBS, where he rose to Head of Energy for Australasia.

During his tenure in investment banking, Alex worked on more than $100 billion in mergers and acquisitions and

capital markets transactions, advising some of the world’s leading companies.

Alex has a Bachelor of Arts from Cornell University and a Master of Business Administration from The Wharton School,

University of Pennsylvania.

During the past three years, he has acted as a non-executive director or director of a responsible entity of the following

Australian listed entities:

- Asian Masters Fund Limited (since 2009)

- Australian Masters Corporate Bond Fund No 4 Limited (since 2008, delisted 14 January 2013)

- Australian Masters Corporate Bond Fund No 5 Limited (since 2009)

- Australian Masters Yield Fund No 1 Limited (since 2010)





- Emerging Markets Masters Fund (since 2012)

- Global Resource Masters Fund Limited (since 2008)

- US Masters Residential Property Fund (since 2011)

- US Select Private Opportunities Fund (since 2012)

- US Select Private Opportunities Fund II (since 2013).


ARSN 169 190 498

Directors’ report


- 2 -

Tristan O’Connell BCom (ANU), CPA | Director

Tristan O’Connell joined Dixon Advisory in 2005 after 10 years’ experience in corporate financial and management

roles within the wholesale financial markets industry. He is currently a director of the responsible entity for Emerging

Markets Masters Fund, US Masters Residential Property Fund, US Select Private Opportunities Fund I, US Select Private

Opportunities Fund II and Australian Property Opportunities Fund.

Among Tristan’s previous roles were Financial Controller of Tullett Prebon in Australia, one of the world’s leading inter-

dealer broker firms, specialising in over-the-counter interest rate, foreign exchange, energy and credit derivatives. He

subsequently held senior finance roles for the Tullett Prebon Group in Singapore and London and returned to Australia

to be responsible for the financial management and growth of Dixon Advisory.

Tristan has a Bachelor of Commerce from the Australian National University, is a member of CPA Australia and is a

Fellow of the Financial Services Institute of Australasia.







Tom Kline BCom, LLB (HONS) (ANU) | Director

Tom Kline is the Chief Operating Officer of the Funds Management division of the Dixon Advisory Group.

He works closely with the Dixon Advisory Group Investment Committee and Corporate Finance teams to deliver

investment opportunities for clients. He is chairman of Australian Masters Yield Fund No 4 Limited, Australian Masters

Yield Fund No 5 Limited, Fort Street Real Estate Capital and a director of the responsible entity for Emerging Markets

Masters Fund, US Select Private Opportunities Fund I, US Select Private Opportunities Fund II, US Masters Residential

Property Fund and Australian Property Opportunities Fund I.

Before joining Dixon Advisory, Tom was at UBS AG in Sydney. During his time at UBS, he was a member of the

Infrastructure and Utilities team and advised on a wide range of public and private mergers & acquisitions and capital

market transactions. Prior to joining UBS AG, Tom worked at Deloitte in the Corporate Finance division, working in the

Transaction Services, Business Modelling and Valuation teams.

Tom has a Bachelor of Commerce and a Bachelor of Laws (with honours) from Australian National University.










ARSN 169 190 498

Directors’ report


- 3 -

Fund information

Australian Property Opportunities Fund II (Fund) is an unlisted managed investment scheme registered in Australia.

Walsh & Company Investments Limited, the responsible entity of the Fund, is incorporated and domiciled in Australia.

The registered office and principal place of business of the responsible entity is located at Level 15, 100 Pacific

Highway, North Sydney, New South Wales 2060.

The Fund had no employees during the financial year (2014: nil).

Principal activities and changes to nature of activities

The principal activity of the Group, during the financial year, was investing in Australian commercial properties for the

purposes of deriving rental income and capital growth. There has been no significant change in the nature of this

activity during the year.

Review and results of operations

The operations of the Group during the financial year and the results of these operations are reviewed on pages i to v

of this report and included in the accompanying financial statements. This includes information on the financial

position of the Group and its business strategies and prospects for future financial years.

Distributions

Distributions paid or declared to unitholders during or since the end of the year were as follows:

2015 Date of paymentDistribution per

unit ($)

Total amount

($)

For the period ended 31 March 2015 30 April 2015 0.0200 1,372,894

For the period ended 30 June 2015 6 August 2015 0.0206 1,414,083

0.0406 2,786,977

Significant changes in the state of affairs

Refer to review and results of operations on pages i to v of the report. Other than as noted, there were no further

changes in the state of affairs during the financial year.

Events subsequent to reporting period

On 3 September 2015, the Group entered into a loan facility with National Australia Bank Limited, maturing on 30

August 2020. The facility amount is up to the lesser of $43 million and 50% of the value of the secured property

according to the most recent valuations. As at the date of this report, the facility had not been drawn against.

Other than those disclosed in the financial report, there are no other matters or circumstances that have arisen since

the end of the financial year that will significantly affect the operations of the Group, the results of those operations or

the state of affairs in future financial years.


ARSN 169 190 498

Directors’ report


- 4 -

Likely developments and expected results of operations

The investment strategy of the Group will be maintained in accordance with the Fund’s constitution and investment

objectives as detailed in the most recent Product Disclosure Statement.

Likely developments in and expected results of the Group in subsequent years are referred in the Chairman's letter and

the Property manager’s report on pages i to v.

Environmental regulation

The Directors of the Responsible Entity are satisfied that adequate systems are in place for management of the Group’s

environmental responsibility and compliance with various requirements and regulations.

The Directors are not aware of any material breaches to these requirements, and to the best of their knowledge, all

activities have been undertaken in compliance with environmental requirements.

Indemnities and insurance of directors and auditors

Under the Fund’s constitution, the Responsible Entity, including its officers and employees, is indemnified out of the

Fund’s assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of

its powers, duties or rights in relation to the Fund.

Insurance premiums have been paid, during or since the end of, the financial year for all directors of the Responsible

Entity of the Fund. The contract prohibits disclosure of the nature of the liability and the amount of the premium.

No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for the

auditor of the Group.

Other relevant information

The following lists other relevant information required under the Corporations Act 2001:

- Details of fees paid to the Responsible Entity and its associates are disclosed in note 14 to the consolidated

financial statements.

- Details of the interests in the Group held by the Responsible Entity and its associates at the end of the year are

disclosed in note 14 to the consolidated financial statements.

- Details of issued interests in the Group during the financial year are disclosed in note 10 to the consolidated



ARSN 169 190 498

Directors’ report


- 5 -

Auditor’s independence declaration

The auditor’s independence declaration is set out on page 6 and forms part of the Directors’ Report for the financial

period ended 30 June 2015.

Made in accordance with a resolution of the directors pursuant to section 298(2) of the Corporations Act 2001.

On behalf of the directors

Tom Kline

Director of Walsh & Company Investments Limited


Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Touche Tohmatsu Limited

-6-

Deloitte Touche Tohmatsu

ABN 74 490 121 060

Grosvenor Place

225 George Street

Sydney NSW 2000

PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

Tel: +61 2 9322 7000

Fax: +61 (0)2 9322 7001

www.deloitte.com.au

The Board of Directors

Walsh & Company Investments Limited as Responsible Entity for:


Level 15, 100 Pacific Highway

NORTH SYDNEY NSW 2060

16 September 2015

Dear Board Members


In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of

independence to the directors of the Responsible Entity of Australian Property Opportunities Fund II.

As lead audit partner for the audit of the financial statements of Australian Property Opportunities Fund II for the

financial year ended 30 June 2015, I declare that to the best of my knowledge and belief, there have been no

contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Michael Kaplan

Partner

Chartered Accountants


ARSN 169 190 498

Consolidated statement of profit or loss and other comprehensive income


- 7 -

Notes 30 June 2015

Period from 6

May to 30 June

2014

$ $

Revenue

Rental income 3,338,291 -

Other property income 682,690 -

Finance income 2 1,849,014 85,494

Total revenue 5,869,995 85,494

Expenses

Depreciation expense (1,073,237) -

Respons ible enti ty and trustee fees 14 (138,923) (25,745)

Management fees 14 (883,182) -

Investment property expenses (1,048,444) -

Accounting and audit fees (95,573) (8,000)

Other operating expenses 3 (256,482) (33,623)

Total expenses (3,495,841) (67,368)

Profit before tax 2,374,154 18,126

Income tax expense - -

Profit after tax for the year 2,374,154 18,126

Other comprehensive income -

Total other comprehensive income - -

Total comprehensive income for the year 2,374,154 18,126

Earnings per unit

Bas ic and di luted earnings (cents) 4 3.46 0.15

The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the notes to

the consolidated financial statements.


ARSN 169 190 498

Consolidated statement of financial position

As at 30 June 2015

- 8 -

Notes 30 June 2015 30 June 2014

$ $

ASSETS

Current assets

Cash and cash equiva lents 5 15,171,920 106,244,472

Trade and other receivables 6 604,305 141,882

Prepayments 90,056 -

Total current assets 15,866,281 106,386,354

Non-current assets

Investment properties 7 91,645,392 -

Other 8 229,974 -

Total non-current assets 91,875,366 -

Total assets 107,741,647 106,386,354

LIABILITIES

Current liabilities

Trade and other payables 9 550,497 199,972

Dis tribution payable 1,417,591 -

Total current liabilities 1,968,088 199,972

Total liabilities 1,968,088 199,972

Net assets 105,773,559 106,186,382

EQUITY

Is sued capita l 10 106,168,256 106,168,256

(Accumulated losses)/Retained earnings (394,697) 18,126

Total equity 105,773,559 106,186,382

The consolidated statement of financial position should be read in conjunction with the notes to the consolidated



ARSN 169 190 498

Consolidated statement of changes in equity


- 9 -

NotesIssued

capital

(Accumulated

losses)/

Retained

earnings

Total

$ $ $

Balance at 6 May 2014 - - -

Profi t for the period - 18,126 18,126

Other comprehens ive income - - -

Total comprehensive income for the period - 18,126 18,126

Is sued capita l 10(i ) 108,019,859 - 108,019,859

Issue costs 10(i ) (1,851,603) - (1,851,603)

Balance at 30 June 2014 106,168,256 18,126 106,186,382

Balance at 1 July 2014 106,168,256 18,126 106,186,382

Profi t for the year - 2,374,154 2,374,154

Other comprehens ive income - - -

Total comprehensive income for the year - 2,374,154 2,374,154

Distributions - (2,786,977) (2,786,977)

Balance at 30 June 2015 106,168,256 (394,697) 105,773,559

The consolidated statement of changes in equity should be read in conjunction with the notes to the consolidated



ARSN 169 190 498

Consolidated statement of cash flows


- 10 -

Notes 30 June 2015

Period from 6

May to 30 June

2014

$ $

Cash flows from operating activities

Rental income received 3,782,755 -

Interest income received 1,868,862 39,956

Payments to suppl iers (2,503,985) (90,782)

Net cash flows generated by/(used in) operating activities 5(i ) 3,147,632 (50,826)

Cash flows from investing activities

Payments for investment properties (92,676,822) -

Payments for capita l expenditure (173,976) -

Net cash flows (used in) investing activities (92,850,798) -

Cash flows from financing activities

Proceeds from the issue of units - 108,019,859

Is sue costs pa id - (1,724,561)

Dis tributions paid (1,369,386) -

Net cash flows (used in)/generated by financing activities (1,369,386) 106,295,298

Net (decrease)/increase in cash and cash equivalents (91,072,552) 106,244,472

Cash at the beginning of the year 106,244,472 -

Cash and cash equivalents at the end of the year 5 15,171,920 106,244,472

The consolidated statement of cash flows should be read in conjunction with the notes to the consolidated financial

statements.


ARSN 169 190 498

Notes to the consolidated financial statements


- 11 -

General information

Australian Property Opportunities Fund II (Fund) is an unlisted managed investment scheme registered and domiciled

in Australia. The financial statements comprise the Fund and its subsidiaries (collectively referred to as the ‘Group’).

The principal activity of the Group is to invest in Australian commercial property.

The comparative period is the period from 6 May 2014 to 30 June 2014.

Statement of compliance

The consolidated financial statements are general purpose financial statements which have been prepared in

accordance with the Australian Accounting Standards, Australian Accounting Interpretations, other authoritative

pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Australian

Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report

containing relevant and reliable information about transactions, events and conditions. Compliance with Australian

Accounting Standards ensures that the financial statements and notes comply with International Financial Reporting

Standards (IFRS).

For the purposes of preparing the consolidated financial statements, the Group is a for-profit entity.

The financial statements were authorised for issue by the board of directors of the Responsible Entity, Walsh &

Company Investments Limited (Walsh & Co) on 16 September 2015.

Application of new and revised Accounting Standards

Amendments to AASBs and the new Interpretation that are mandatorily effective for the current year

In the current year, the Group has applied a number of amendments to AASBs and a new Interpretation issued by the

Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on

or after 1 July 2014, and therefore relevant for the current year end.

- AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financials Assets and Financial

Liabilities’

- AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets’

- AASB 2013-4 ‘Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of

Hedge Accounting’

- AASB 2013-5 ‘Amendments to Australian Accounting Standards – Investment Entities’

- AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (Part A: Annual Improvements 2012 – 2012

and 2011 – 2013 Cycles)

- Interpretation 21 ‘Levies’

- AASB 1031 ‘Materiality’, AASB 2013-9 ‘Amendments to Australian Accounting Standards’ – Conceptual

Framework, Materiality and Financial Instruments’ (Part B: Materiality), AASB 2014-1 ‘Amendments to

Australian Accounting Standards’ (Part C: Materiality).

The adoption of the above standards had no material impact on the financial statements.


ARSN 169 190 498



- 12 -

Application of new and revised Accounting Standards (continued)

Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue

but not yet effective. The potential impact of the new or revised Standards and Interpretations has not yet been

determined, but is not expected to be material.

Standard/Interpretation Effective for annual

reporting periods

beginning on or after

Expected to be

initially applied in the

financial year ending

AASB 9 ‘Financial Instruments’, and the relevant amending

standards

1 January 2018 30 June 2019

AASB 15 ‘Revenue from Contracts with Customers’ and AASB

2014-5 ‘Amendments to Australian Accounting Standards arising

from AASB 15’


AASB 2014-3 ‘Amendments to Australian Accounting Standards –

Accounting for Acquisitions of Interests in Joint Operations’



Clarification of Acceptable Methods of Depreciation and

Amortisation’



Equity Method in Separate Financial Statements’


AASB 2014-10 ‘Amendments to Australian Accounting Standards

– Sale of Contribution of Assets between an Investor and its

Associate or Joint Venture’



Annual Improvements to Australian Accounting Standards 2012-

2014 Cycle’



Disclosure Initiative: Amendments to AASB 101’


AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality’ 1 July 2015 30 June 2016


Financial Reporting Requirements for Australian Groups with a

Foreign Parent’

1 July 2015 30 June 2016


Investment Entities: Applying the Consolidation Exception



ARSN 169 190 498



- 13 -

1. Summary of significant accounting policies

(a) Basis of preparation

The financial statements have been prepared on an accruals basis and are based on historical cost except for

certain financial instruments which are measured at fair value.

(b) Functional and presentation currency

The functional and presentation currency of the Group is Australian dollars.

All amounts are presented in Australian dollars and are rounded to the nearest whole dollar unless otherwise

noted.

(c) Removal of parent entity financial statements

The Group has applied amendments to the Corporations Act 2001 that remove the requirement for the

Group to lodge parent entity financial statements. Parent entity financial statements have been replaced by

the specific parent entity disclosures in note 13.

(d) Basis of consolidation

Subsidiaries are those entities in which the Fund has power over the investee, it is exposed, or has rights, to

variable returns from its involvement in the investee, and has the ability to use its power to affect its returns.

All inter-entity balances and transactions, incomes and expenses and profits and losses resulting from intra-

group transactions are eliminated in full on consolidation.

(e) Financial instruments

Financial Instruments, incorporating financial assets and financial liabilities, are recognised when the Group

becomes a party to the contractual provisions of the instrument. The Group has early adopted AASB 9

Financial Instruments issued on 7 December 2009 and the subsequent amendments issued in 2010 and 2013.

AASB 9 includes requirements for the classification and measurement of financial investments.

i. Financial assets

When financial assets are recognised initially, they are measured at fair value, plus in the case of financial

assets not at fair value through profit and loss, directly attributable transaction costs. Financial assets are

subsequently measured at amortised cost using the effective interest rate method only if the following

conditions are met, otherwise they are measured at fair value:

- where a financial asset is held within a business model for the objective to collect contractual cash flows;

and

- contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments

of principal and interest on the principal amount outstanding.

The effective interest rate method is used to allocate interest income or interest expense over the relevant

period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts

(including fees, transaction costs and other premiums or discounts) through the expected life (or when this

cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of

the financial asset or financial liability.

ii. Financial liabilities

Financial liabilities are classified as derivative and non-derivative instruments as appropriate. The Group

determines the classification of its financial liabilities at initial recognition. All financial liabilities are

recognised initially at fair value. Non-derivative instruments are subsequently measured at amortised cost

using the effective interest rate method.


ARSN 169 190 498



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1. Summary of significant accounting policies (continued)

iii. Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the

asset is transferred to another party whereby the entity no longer has any significant continuing

involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised

where the related obligations are discharged or cancelled or expire. The difference between the carrying

value of the financial liability extinguished or transferred to another party and the fair value of

consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit

or loss.

iv. Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date. Fair value is determined based on

the bid price for all quoted investments in an active market. Valuation techniques are applied to

determine the fair value for all unlisted securities and securities in markets that are not active, including

recent arm’s length transactions, and reference to similar instruments and valuation techniques

commonly used by market participants. At 30 June 2015, the fair value of financial assets and financial

liabilities approximates their carrying value.

(f) Impairment of assets

The directors of the Responsible Entity assess at each reporting date whether there is an indication that an

asset may be impaired. If any such indication exists, an estimate is made of the asset’s recoverable amount.

When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and

is written down to its recoverable amount through profit or loss.

(g) Investment property

Investment property is commercial real estate investments held to earn long-term rental income and for

capital appreciation and comprises of land, buildings and plant and equipment. Investment properties are

measured at cost, including transaction costs directly attributable to acquisition, less accumulated

depreciation (see below) and impairment losses (see note 1(f)). Subsequent to initial measurement, the

Group applies the cost model for the measurement of all its investment properties.

An investment property is derecognised upon disposal or when the investment property is permanently

withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising

on derecognition of the property (calculated as the difference between the net disposal proceeds and the

carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.

Depreciation

Depreciation is charged to profit or loss on a straight-line basis for separate items of investment property

over their estimated useful lives. The estimated useful lives in the current period are as follows:

Class of asset Estimated useful life

Buildings 40 years

Plant and Equipment 4 to 20 years

The residual value, the useful life and depreciation method applied to the asset are measured at least

annually.


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Subsequent costs

The cost of replacing part of an item of land, buildings or plant and equipment is recognised in the carrying

amount of such an item when that cost is incurred if it is probable that the future economic benefits

embodied within the item will flow to the Group and the cost of the item can be measured reliably. All other

costs are recognised in profit or loss as an expense as incurred. The present value of the expected cost for

decommissioning of an asset after its use is included in the cost of the respective asset if the recognition

criteria for a provision are met.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original

maturity of three months or less that are readily convertible to known amounts of cash and which are subject

to an insignificant risk of changes in value.

(i) Receivables

Receivables are financial assets with a contractual right to receive fixed or determinable payments.

Receivables are recorded at amounts due less any impairment losses. Balances are written off when the

probability of recovery is assessed as being remote.

(j) Trade and other payables

Trade and other payables are recognised when the Group becomes obliged to make payments resulting from

the purchase of goods or services. The balance is unsecured and is recognised as a current liability with the

amount being normally paid within 30 days of the recognition of the liability.

(k) Provisions

Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event

and it is probable an outflow of resources embodying economic benefits will be required to settle the

obligation and a reliable estimate can be made of the amount of obligation.

(l) Taxes

i. Income tax

Under current Australian income tax laws, the Fund is not liable to pay income tax provided it is not a

public trading trust and its distributable income for each income year is fully distributed to unitholders, by

way of cash or reinvestment.

ii. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except to the extent the amount

of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the

unrecoverable GST is recognised as part of the cost of acquisition of the asset or as part of an item of

expense. Where fees are stated to be exclusive of GST and GST is payable on any fee, the fee will be

increased by an amount equal to the GST payable.

Cash flows are presented in the statement of cash flows on a gross basis.

(m) Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received or receivable to the

extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably

measured. The following specific recognition criteria must also be met before revenue is recognised.


ARSN 169 190 498



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i. Interest income

Interest income is recognised in profit or loss using the effective interest method. This is a method of

calculating the amortised cost of a financial asset and allocating the interest income over the relevant

period using the effective interest rate, which is the rate that exactly discounts estimated future cash

receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

ii. Rental income

Rental income from operating leases is recognised as income over the lease term. Where a lease has

fixed annual increases, the total rent receivable over the operating lease is recognised as revenue on a

straight-line basis over the lease term. When the Fund provides lease incentives to tenants, the cost of

the incentives are initially capitalised and then recognised over the lease term on a straight-line basis, as

a reduction in rental income.

Costs that are directly associated with negotiating and executing ongoing renewal of tenant lease

agreements (including commissions, legal fees and costs of preparing and processing documentation for new

leases) are expensed over the lease term on the same basis as the lease income.

All income is stated net of goods and services tax (GST).

(n) Earnings per unit

Basic earnings per unit is calculated by dividing the profit or loss attributable to unitholders by the weighted

average number of units outstanding during the financial period. Diluted earnings per unit is the same as

there are no potential dilutive ordinary units.

(o) Unit capital

i. Ordinary units

Ordinary units are classified as equity. Issued capital is recognised at the fair value of consideration received

by the Fund. Incremental costs directly attributable to the issue of ordinary units are recognised as a

deduction from equity.

ii. Distribution to unitholders

Distributions are recognised in the reporting period in which the distributions are declared, determined, or

publicly recommended by the board of the Responsible Entity.

(p) Critical accounting estimates and judgements

In the application of the Group’s accounting policies, management is required to make judgements,

estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from

other sources. The estimates and associated assumptions are based on historical experience and other

factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and

underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised

in the period in which the estimate is revised if the revision affects only that period or in the period of the

revision and future periods if the revision affects both current and future periods.

Accounting policies which are subject to significant accounting estimates and judgements include impairment

assessment of investment properties carried at cost.

i. Impairment of assets

The directors of the Responsible Entity, having assessed the recoverable amount of the investment

properties held at 30 June 2015, have determined that there is no impairment in the carrying values of the

properties.


ARSN 169 190 498



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2. Finance income

30 June 2015

Period from 6

May to 30 June

2014

$ $

Recognised directly in profit or loss

Finance income - interest income from bank deposits 1,849,014 85,494

1,849,014 85,494

3. Other operating expenses

Legal and compliance costs (75,363) (2,260)

Other operating expenses (181,119) (31,363)

(256,482) (33,623)

4. Earnings per unit

(i) Calculated earnings per unit

cents cents

Basic and diluted earnings per unit 3.46 0.15

(ii) Earnings used to calculate earnings per unit

$ $

Profit from continued operations used to calculate basic and

diluted earnings per unit2,374,154 18,126

(iii) Weighted average number of units

No. No.

Weighted average number of units outstanding used to calculate

basic and diluted earnings per unit68,644,678 12,257,979

68,644,678 12,257,979

There are no transactions that would significantly change the number of ordinary units at the end of the reporting

year.


ARSN 169 190 498



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5. Cash and cash equivalents

30 June 2015 30 June 2014

$ $

Cash at bank 15,171,920 106,244,472

15,171,920 106,244,472

Cash at bank earns interest at floating rates based on daily bank deposit rates.

(i) Reconciliation of profit to net cash flows from operating activities

Profit for the year before tax 2,374,154 18,126

Depreciation expense 1,073,237 -

Movements in assets and liabilities:

(Increase) in receivables (409,270) (141,882)

(Increase) in prepayments (90,056) -

Increase in payables 429,541 72,930

(Increase) in other assets (229,974) -

Net cash flows provided by/(used in) operating activities 3,147,632 (50,826)

6. Trade and other receivables

Rent receivables 578,615 -

Allowance for doubtful debts - -

578,615 -

Interest receivable 25,690 45,538

GST receivable - 96,344

25,690 141,882

604,305 141,882

Rent receivables are non-interest bearing and are due in advance on the first day of each month. The Group’s exposure

to credit risk related to trade and other receivables is disclosed in note 11(ii).


ARSN 169 190 498



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7. Investment properties

30 June 2015 30 June 2014

$ $

Land 17,517,800 -

Buildings 68,583,493 -

Accumulated depreciation (833,225) -

Plant and equipment 6,443,360 -

Accumulated depreciation (240,012) -

Capital expenditure - work in progress 173,976 -

91,645,392 -

(i) Movement in investment properties

Carrying amount of investment properties at beginning of year - -

Add/(less):

Additions 86,179,990 -

Acquisition costs 6,364,663 -

Capital improvements 173,976 -

Disposals - -

Depreciation charge for the year (1,073,237) -

Carrying amount of investment properties at end of year 91,645,392 -

(ii) Leasing arrangements

Investment properties are leased to tenants under operating leases for a term of generally 20 years for major tenants

and 5 to 7 years for all other tenants. Rental income is payable monthly in advance. The minimum lease payments

receivable on investment property leases are as follows:

Leasing arrangements

Not later than one year 7,236,783 -

Later than one year and not later than 5 years 22,891,745 -

Later than five years 25,075,811 -

55,204,339 -


ARSN 169 190 498



- 20 -

7. Investment properties (continued)

(iii) Fair value

At reporting date, the Group’s investment properties consist of three commercial properties in Australia and are

carried at historical cost less provision for depreciation and impairment.

The fair value of the investment properties is considered to approximate their carrying amount at reporting date. The

Group has used a combination of ‘capitalisation rate’ and ‘discounted cash flow’ (DCF) methods in its determination of

the fair value of the investment properties at 30 June 2015. These methods are regarded as level 3 hierarchy

techniques, being based on unobservable market inputs. The key unobservable inputs include the maintainable

earnings and capitalisation rate applied in the capitalisation rate method, and the estimated rental values, rental

growth rates, long term vacancy rates, lease incentives and discount rates applied in the DCF method.

8. Other non-current assets

30 June 2015 30 June 2014

$ $

Rent smoothing 167,955 -

Other receivables 62,019 -

229,974 -

9. Trade and other payables

Trade payables 220,686 85,332

Accrued liabilities 170,412 114,640

Deferred income 106,246 -

GST payable 53,153 -

550,497 199,972

The average credit period for trade payables is generally 30 days. No interest is charged on trade payables from the

date of invoice. The Group has risk management policies to ensure payables are paid within credit terms.


ARSN 169 190 498



- 21 -

10. Issued capital

(i) Movements in issued capital

30 June 2015 30 June 2014

$ $

Balance at beginning of year 106,168,256 -

Registration unit - 1

Issue of 68,644,677 fully paid ordinary units at net price of $1.57 - 108,019,858

Issue costs - (1,851,603)

Balance at the end of year 106,168,256 106,168,256

(ii) Movements in ordinary units

No. No.

Balance at beginning of year 68,644,678 -

06-May-14 Registration unit - 1

20-Jun-14 Fully paid ordinary units - 68,644,677

Balance at the end of year 68,644,678 68,644,678

Issue costs comprises of a structuring fee (refer to note 14) and other costs associated with the issue of units such as

legal, accounting and tax advice costs.

All issued units are fully paid. The holders of ordinary units are entitled to receive distributions as declared from time

to time by the Responsible Entity and are entitled to one vote per unit at meetings of the Fund.


ARSN 169 190 498



- 22 -

11. Financial instruments

(i) Capital management

The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to

unitholders. The capital structure of the Group consists of issued capital amounting to $106,168,256.

The Group is not subject to any externally imposed capital requirements.

(ii) Financial risk management

Overview

The Group’s principal financial instruments comprise cash and cash equivalents, receivables and payables.

The Group is exposed to the following risks from its use of financial instruments:

credit risk

liquidity risk

market risk (interest rate risk)

Financial risk and risk management framework

The Responsible Entity has overall responsibility for the establishment and oversight of the risk management

framework, including developing and monitoring risk management policies. Financial risk and capital management is

carried out by the Investment Committee which provides advice in relation to commercial matters regarding the

Group.

Credit risk

Credit risk is the risk that contracting parties to a financial instrument will cause a financial loss for the Group by failing

to discharge an obligation.

The Group has exposure to credit risk on all its financial assets included in the Group’s consolidated statement of

financial position. The carrying amount of the financial assets represents the maximum credit exposure.

There were no impairment losses recognised on financial assets at 30 June 2015 (2014: nil).

Summary of exposure

Weighted average 30 June 2015 30 June 2014

interest rate $ $

Financial assets

Cash and cash equivalents 2.05% (2014: 2.5%) 15,171,920 106,244,472

Trade and other receivables - 604,305 141,882

15,776,225 106,386,354

Cash and cash equivalents

The Group manages credit risk on cash and cash equivalents by ensuring deposits are made with reputable financial

institutions with investment grade credit ratings.


ARSN 169 190 498



- 23 -

11. Financial instruments (continued)

Trade and other receivables

Credit risk is managed by requiring tenants to pay rentals in advance. The credit quality of the tenant is assessed at the

time of entering into a lease agreement and review on tenants arrears is performed regularly. No interest is charged

from the date of the invoice. The Group, having assessed all outstanding trade debtors, expect all debtors to be

recoverable. Therefore, the Group has not recognised an allowance for doubtful debts as at 30 June 2015 (2014: nil).

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to

meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or

risking damage to the Group’s reputation. The cash flow forecasts are regularly updated and reviewed to assist in

managing the Group’s liquidity. The following is the contractual maturity of financial liabilities. The table has been

drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group

can be required to pay. The table include both interest and principal cash flows.

Carrying

amount

Contractual

cash flows

12 months or

less

1-5 years More than 5

years

$ $ $ $ $

30 June 2015

Non-derivative financial liabilities

Trade payables 220,686 220,686 220,686 - -

Accrued liabilities 170,412 170,412 170,412 - -

Deferred income 106,246 106,246 106,246 - -

Other liabilities 53,153 53,153 53,153 - -

Distribution payable 1,417,591 1,417,591 1,417,591 - -

1,968,088 1,968,088 1,968,088 - -

30 June 2014

Non-derivative financial liabilities

Trade payables 85,332 85,332 85,332 - -

Accrued liabilities 114,640 114,640 114,640 - -

199,972 199,972 199,972 - -

Market risk

Market risk is the risk that changes in market prices, such as interest rates, will affect the Group’s income or the value

of its financial instruments.


ARSN 169 190 498



- 24 -

11. Financial instruments (continued)

Interest rate risk

Interest rate risk is the risk that cash flows associated with financial instruments will fluctuate due to changes in market

interest rates. The Group’s exposure to interest rate risk arises from its cash at bank.

Sensitivity analysis

The following sensitivity analysis shows the effect on the Group’s profit or loss, and equity and has been

determined assuming the variable interest cash balance outstanding at year end was outstanding for the whole year

and based on a 50 basis point change in interest rates taking place at the beginning of the financial year and held

constant throughout the reporting period, with all other variables held constant.

50 basis

points

increase

50 basis

points

decrease

50 basis

points

increase

50 basis

points

decrease

$ $ $ $

30 June 2015

Cash and cash equivalents 75,860 (75,860) 75,860 (75,860)

Impact on profit before tax and equity 75,860 (75,860) 75,860 (75,860)

30 June 2014

Cash and cash equivalents 14,554 (14,554) 14,554 (14,554)

Impact on profit before tax and equity 14,554 (14,554) 14,554 (14,554)

Profit before tax Equity

12. Controlled entities

Name of entity Principal activity 2015 2014

Australian Property

Opportunities Trust II

Holding entity Australia 100% 100%

APOFII No.1 Direct investment in

Australian commercial

property

Australia 100% –

Ownership interestPlace of registration

and operation

13. Parent entity information

During the year ended 30 June 2015, the parent entity of the Group was Australian Property Opportunities Fund II.

(i) Results of the parent entity

30 June 2015

Profit from 6 May

2014 to 30 June

2014

$ $

Profit for the year 2,012,138 37,277

Total comprehensive income for the year 2,012,138 37,277


ARSN 169 190 498



- 25 -

13. Parent entity information (continued)

(ii) Financial position of the parent entity

30 June 2015 30 June 2014

Assets

Current assets 14,913,455 106,384,438

Non-current assets 92,084,841 -

Total assets 106,998,296 106,384,438

Current liabilities 1,568,168 178,905

Total liabilities 1,568,168 178,905

Issued capital 106,167,690 106,168,256

(Accumulated loss)/Retained Earnings (737,562) 37,277

Total equity 105,430,128 106,205,533

The parent entity does not have any contingent liabilities, contractual commitments and has not entered into any

guarantees during or since the end of the financial year.

14. Related party disclosures

Key management personnel

Alex MacLachlan, Tristan O’Connell and Tom Kline are directors of the Responsible Entity of Australian Property

Opportunities Fund II (Fund), Walsh & Company Investments Limited, the Fund Manager, Walsh & Company Asset

Management Pty Limited, and are deemed to be key management personnel.

Alex and Tom are directors of the Trustee of Australian Property Opportunities Trust II (Trust), Walsh & Company

Investment Services Pty Limited.

Key management personnel are not compensated by the Fund or by the Responsible Entity directly for the

management function provided to the Fund.

As at 30 June 2015, details of directors who hold units for their own benefit or who have an interest in holdings

through a third party and the total number of such units held are listed below:

Balance at

1 July 2014

Received as

remunerationOther changes

Balance at

30 June 2015

No. No. No. No.

Alex MacLachlan - - - -

Tristan O'Connell - - - -

Tom Kline 3,126 - - 3,126


ARSN 169 190 498



- 26 -

14. Related party disclosures (continued)

Balance at

registration

Received as

remunerationOther changes

Balance at

30 June 2014

No. No. No. No.

Alex MacLachlan - - - -

Tristan O'Connell - - - -

Tom Kline - - 3,126 3,126

Related party investments in the scheme

Details of the investments in the scheme by the Responsible Entity or its associates are set out below:

30 June 2015Units held at

30 June 2015Interest held Acquired Disposed

Distribution

paid or payable

by scheme

No. % No. No. $

Australian Property Opportunities Fund II 250,000 0.36% - - 10,150

30 June 2014Units held at

30 June 2014Interest held Acquired Disposed

Distribution

paid or payable

by scheme

No. % No. No. $

Australian Property Opportunities Fund II 250,000 0.36% 250,000 - -

Responsible Entity Fees and other transactions

Responsible Entity Fee

Walsh & Company Investment Limited, as Responsible Entity of the Fund is entitled to receive a Responsible Entity Fee

for the performance of its duties under the constitution of the Fund. The Responsible Entity Fee is 0.08% per annum

(exclusive of GST) calculated on the gross asset value of the Fund and payable monthly in advance.

For the year ended 30 June 2015, $85,953 (2014: $2,604), exclusive of GST, was paid or payable to the Responsible

Entity. Total Responsible Entity Fees included in trade and other payables at 30 June 2015 was $7,844 (2014: $2,604).

Trustee Fee

Walsh & Company Investment Services Pty Limited in its capacity as Trustee of Australian Property Opportunities Trust

II, a wholly owned subsidiary of the Fund, is entitled to receive 0.10% per annum (exclusive of GST) for services

provided under the terms of the Trust’s trust deed. The Trustee fee is calculated on the gross asset value of the Trust,

payable monthly.

For the year ended 30 June 2015, $49,102 (2014: nil), exclusive of GST, was paid or payable to the Trustee. Total

Trustee Fee included in trade and other payables at 30 June 2015 was $nil (2014: nil).


ARSN 169 190 498



- 27 -

14. Related party disclosures (continued)

Issue Costs

The Responsible Entity is entitled to receive a Structuring Fee of 1.5% (exclusive of GST) on the gross proceeds raised

(referred to as ‘issue costs’) under the Product Disclosure Statement dated 23 May 2014. The issue costs were due to

the Responsible Entity upon allotment of units which occurred on 20 June 2014.

There were no issue costs paid to the Responsible Entity for the year ended 30 June 2015 (2014: $1,620,298, exclusive

of GST). No amount was outstanding at 30 June 2015 (2014: nil).

Fund Manager Fee

Walsh & Company Asset Management Pty Limited, as Fund Manager of the Fund is entitled to receive a Fund Manager

Fee of 0.69% per annum (exclusive of GST) calculated on the gross asset value of the Fund and payable monthly in

arrears.

For the year ended 30 June 2015, $741,720 (2014: $22,462), exclusive of GST, was paid or payable to the Fund

Manager. Total Fund Manager Fee included in trade and other payables at 30 June 2015 was $67,655 (2014: $22,462).

Property Manager Fee

Fort Street Real Estate Capital Pty Limited is an established joint venture between Dixon Advisory Group Limited,

parent of the Responsible Entity, and Fort Street Capital Pty Limited. Alex MacLachlan and Tom Kline, directors of the

Responsible Entity, are also directors of Fort Street Real Estate Capital Pty Limited. Fort Street Real Estate Capital Pty

Limited acts as Property Manager of the Trust and is responsible for managing and maintaining the property portfolio

of the Trust, optimising tenancy profile and maximising returns. The Property Manager is entitled to receive a Property

Manager Fee of 3% per annum, payable monthly (exclusive of GST) calculated on the gross income value of the Trust.

For the year ended 30 June 2015, $122,956 (2014: nil), exclusive of GST, was paid or payable to the Property Manager.

Total Property Manager Fee included in trade and other payables at 30 June 2015 was $nil (2014: nil).

Acquisition Fee

Fort Street Real Estate Capital Pty Limited, in its capacity as Investment Manager, is responsible for sourcing,

undertaking due diligence investigations and recommending property acquisitions to the Trustee. The Investment

Manager receives an Acquisition Fee of 1.25% on the purchase price (excluding acquisition costs) of assets acquired by

the Trust. This fee is included in the acquisition cost of investment properties. The Acquisition Fee is payable to the

Investment Manager upon transfer of title to the Trust.

For the year ended 30 June 2015, $1,077,875 (2014: nil), exclusive of GST, was paid to the Investment Manager. Total

Acquisition Fee included in trade and other payables at 30 June 2015 was $nil (2014: nil).


ARSN 169 190 498



- 28 -

15. Auditor’s remuneration

2015 2014

$ $

Audit services


Audit of financial report 46,500 8,000

Other services


Taxation service 5,500 30,000

Investigating accountants report - 22,000

52,000 60,000

The auditor of the Group during the year ended 30 June 2015 was Deloitte Touche Tohmatsu.

16. Capital commitments

The Group had no capital commitments at 30 June 2015 (2014: nil).

17. Contingent liability

The directors of the Responsible Entity are not aware of any potential liabilities or claims against the Group as at the

end of the reporting period.

18. Events subsequent to reporting date

On 3 September 2015, the Group entered into a loan facility with National Australia Bank Limited, maturing on 30

August 2020. The facility amount is up to the lesser of $43 million and 50% of the value of the secured property

according to the most recent valuations. As at the date of this report, the facility had not been drawn against.

Other than those disclosed above or elsewhere in the financial report, there are no other matters or circumstances

that have arisen since the end of the financial year that will significantly affect the operations of the Group, the results

of those operations or the state of affairs in future financial years.


ARSN 169 190 498

Directors’ declaration


- 29 -

The directors of the Responsible Entity declare that, in the directors’ opinion:

a) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become

due and payable;

b) the financial statements are in compliance with the International Financial Reporting Standards as stated in the

notes to the consolidated financial statements; and

c) the financial statements and notes thereto are in accordance with the Corporations Act 2001, including

compliance with accounting standards and giving a true and fair view of the financial position and performance

of the Group.

This declaration is made in accordance with a resolution of the directors made pursuant to section 295(5) of the

Corporations Act 2001.

On behalf of the directors of the Responsible Entity, Walsh & Company Investments Limited

Tom Kline

Director of Walsh & Company Investments Limited


Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Touche Tohmatsu Limited

-30-


ABN 74 490 121 060

Grosvenor Place

225 George Street

Sydney NSW 2000

PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

Tel: +61 2 9322 7000

Fax: +61 (0)2 9322 7001

www.deloitte.com.au

Independent Auditor’s Report

to the Unitholders of Australian Property Opportunities Fund II

We have audited the accompanying financial report of Australian Property Opportunities Fund II (“the

Fund”), which comprises the statement of financial position as at 30 June 2015, the statement of profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity

for the year ended on 30 June 2015, notes comprising a summary of significant accounting policies and

other explanatory information, and the directors’ declaration of the consolidated entity, comprising the

Fund and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 7 to 29.

Directors’ Responsibility for the Financial Report

The directors of the Responsible Entity of the Fund are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the

Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the

preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard

AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with

International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with

relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain

reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial report. The procedures selected depend on the auditor’s judgement, including the assessment

of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the entity’s preparation of the

financial report that gives a true and fair view, in order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the directors, as well as evaluating the overall

presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion.

-31-

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act

2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Responsible Entity of Australian Property Opportunities Fund II, would

be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

In our opinion:

(a) the financial report of Australian Property Opportunities Fund II is in accordance with the

Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and

of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.

DELOITTE TOUCHE TOHMATSU

Michael Kaplan

Partner

Chartered Accountants Sydney, 16 September 2015


ARSN 169 190 498

Directory

- 32 -




T: 1300 454 801

F: 1300 883 159

E: [email protected]

www.australianpropertyopportunitiesfund.com.au

Responsible Entity Solicitors

Walsh & Company Investments Limited

(ACN 152 367 649) (AFSL 410 433)



T: 1300 454 801

F: 1300 883 159


www.dixon.com.au/walshandco

Watson Mangioni Lawyers Pty Limited

Level 13, 50 Carrington Street

SYDNEY NSW 2000

T: +61 2 9262 6666

F: +61 2 9262 2626


www.wmlaw.com.au

Directors Auditor

Alex MacLachlan

Tristan O’Connell

Tom Kline

Secretaries

Simon Barnett

Hannah Chan


Grosvenor Place, 225 George Street

SYDNEY NSW 2000

T: +61 2 9322 7000

F: +61 2 9322 7001

www.deloitte.com.au

Investment Manager & Property Manager Unit Registrar

Fort Street Real Estate Capital Pty Limited

(ACN 164 101 731)

Level 11, 1 O’Connell Street

SYDNEY NSW 2000

T: +61 2 8241 1300

F: +61 2 8241 1333


www.australianpropertyopportunitiesfund.com.au

Boardroom Pty Limited

Level 12, 225 George Street

SYDNEY NSW 2000

T: 1300 737 760 (Australia)

T: +61 2 9290 9600 (International)

F: 1300 653 459

www.boardroomlimited.com.au

Fund Manager

Walsh & Company Asset Management Pty Ltd

(ACN 159 902 708)



T: 1300 454 801

F: 1300 883 159


mailto:[email protected]

http://www.dixon.com.au/walshandco/

RESPONSIBLE ENTITY

Walsh & Company Investments Limited (ACN 152 367 649) (AFSL 410 433)

australian property opportunities fund ii · 2017-12-04 · australian property opportunities fund...

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