RG 46 Disclosures

In September 2008, the Australian Securities and Investments Commission (ASIC) released Regulatory Guide 46 – Unlisted property schemes – improving disclosure for retail investors (RG 46) setting out eight principles for improved disclosure to help retail investors understand the risks associated with investing in unlisted property funds and to decide whether such investments are suitable for them.

The Guide covers the following disclosure requirements:

Disclosure Principle 1 – Gearing Ratio

The Trust does not have any direct borrowings.

However, the Trust’s investment in the CorVal 17 Moore Street Trust (100%) does have borrowings.

The gearing ratio of the CorVal 17 Moore Street Trust is approximately 19.2%.

This ratio has been calculated in accordance with ASIC RG 46 which states that entities should disclose a gearing ratio using the following formula:

Gearing ratio = Total interest bearing liabilities(1) / Total assets(2)

(1) Interest bearing liabilities exclude deferred transaction costs.

(2) Based on financial statements as at 30 June 2017.

Disclosure Principle 2 – Interest Cover

Currently, the interest cover for the CorVal 17 Moore St Trust is approximately 6.37 times. This figure indicates that the Trust currently has sufficient earnings to satisfy interest repayments.

The interest cover has been calculated for the year in accordance with ASIC RG 46 which states that the entity’s interest cover should be disclosed and calculated using the following formula:

Interest cover = EBITDA(1) – unrealised gains + unrealised losses / Interest expense

EBITDA = earnings before interest, tax, depreciation and amortisation

Disclosure Principle 3 – Borrowing

CorVal 17 Moore Street Trust

This trust owns the property located at 17 Moore Street, Canberra

The trust has obtained a loan from Westpac Banking Corporation. The amount currently drawn down is $3.7 million from a total facility limit of $4.1 million. The maturity date of this loan is December 2018.

As at 30 June 2017, the CorVal 17 Moore Street Trust is in compliance with its loan covenants and is not aware that any covenants are likely to be breached in the future.

Investors’ interests in the Trust will generally rank behind lenders and other creditors of the Trust. This means, if the Trust was to be wound-up, then the Trust’s lenders and other creditors would be repaid first, before any capital or outstanding distributions were paid to investors.

Disclosure Principle 4 – Portfolio Diversification

Property:17 Moore Street, Canberra
Property value:$19.1m (June 2017)
% of Trust:100
Geographical location:Canberra, ACT
Sector:Office
Weighted average lease expiry:N/A
Occupancy rate:N/A
Major tenant:N/A

The Trust does not intend to acquire any other properties or make any other investments.

Disclosure Principle 5 – Valuation Policy

Pursuant to the constitution of the Trust, the Responsible Entity may determine the valuation methods and policies it will apply from time to time in determining the net asset value of the Trust. Independent valuations are performed as at 30 June each year by registered valuers who are appropriately qualified to undertake the valuation, based on the type and locality of the property being valued. All independent valuations comply with relevant industry standard and codes.

Disclosure Principle 6 – Related Party Transactions

The Responsible Entity has established a policy for proposed or potential related party transactions, to ensure that any actual or potential conflicts of interest are identified and appropriately dealt with. Any potential transactions with related parties go through an assessment process, and must be approved unanimously by the Board. No related party transactions can be approved or entered into unless they are strictly on arms-length, commercial terms (unless otherwise approved by Unitholders , with any possible conflicts of interest having been fully disclosed). Any related party transactions are then monitored to ensure they are carried-out as approved and continue to be on arms-length terms.

The following related party fees were paid or payable to the Responsible Entity during the half year:

Fees to Responsible Entity Year ended 30 June 2017 Management fees $95,652 and sale fee $564,384.

Disclosure Principle 7 – Distributions

Year ended 30 June 2017

Quarter endedDistribution rate (cpu)
30 September 20161.15
Distribution of sale proceeds90.0

Year ended 30 June 2016

Quarter endedDistribution rate (cpu)
30 September 20152.1995
31 December 20152.1995
31 March 20162.1755
30 June 20162.1755
8.7500

Year ended 30 June 2015

Quarter endedDistribution rate (cpu)
30 September 20142.2055
31 December 20142.2055
31 March 20152.1575
30 June 20152.1815
8.7500

Year ended 30 June 2014

Quarter endedDistribution rate (cpu)
30 September 20132.2055
31 December 20132.2055
31 March 20142.1575
30 June 20142.1815
8.7500

Year ended 30 June 2013

Quarter endedDistribution rate (cpu)
30 September 20122.2055
31 December 20122.2055
31 March 20132.1575
30 June 20132.1815
8.7500

Year ended 30 June 2012

Distribution rate (cpu)
Month ended 31 August 2011 (1)0.1600
Month ended 30 September 20110.6986
Month ended 31 October 20110.7219
Month ended 30 November 20110.6986
Month ended 31 December 20110.7219
Quarter ended 31 March 20122.1192
Quarter ended 30 June 20122.1192
7.2394

(1) Units in the CorVal Property Trust No 2 were first allotted on 25 August 2011. The first income distribution was therefore in the month ended 31 August 2011.

Disclosure Principle 8 – Withdrawal Rights

Investors have no rights to withdraw from the Trust as it is a fixed term investment with no ongoing liquidity.