annual financial report 2013 - home - fort street real ... · north sydney nsw 2060 t: 1300 454 801...

AUSTRALIAN PROPERTY OPPORTUNITIES FUND

(ARSN 163 688 346)

(ACN 152 367 649) (AFSL 410 433)

ANNUAL FINANCIAL REPORT 2013FOR THE PERIOD FROM 23 MAY 2013 (DATE OF REGISTRATION) TO 30 JUNE 2013

AUSTRALIAN PROPERTY OPPORTUNITIES FUND

Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060

T: 1300 454 801 F: 1300 883 159 E: [email protected]

www.australianpropertyopportunitiesfund.com.au

RESPONSIBLE ENTITY

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



www.dixon.com.au/walshandco

Directors Alex MacLachlanTom KlineTristan O’Connell

SecretariesTristan O’ConnellHannah Chan

FUND MANAGER

Walsh & Company Asset Management Pty Limited (ACN 159 902 708)

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



SOLICITORS

Watson Mangioni Lawyers Pty Limited

Level 13, 50 Carrington Street SYDNEY NSW 2000

T: +61 2 9262 6666 F: +61 2 9262 6666 E: [email protected]

www.wmlaw.com.au

AUDITOR

Deloitte Touche Tohmatsu

Grosvenor Place, 225 George Street SYDNEY NSW 2000

T: +61 2 9322 7000 F: +61 2 9322 7001

www.deloitte.com.au

SHARE REGISTRAR

Boardroom Limited

Level 7, 207 Kent Street SYDNEY NSW 2000

T: 1300 737 760 (Australia) T: +61 2 9290 9600 (International) F: 1300 653 459

www.boardroomlimited.com.au

DIRECTORY

Australian Property Opportunities Fund

ARSN 163 688 346

Contents

Chairman’s Letter i

Directors’ Report 1

Auditor’s Independence Declaration 9

Statement of Profit or Loss and Other Comprehensive Income 10

Statement of Financial Position 11

Statement of Changes in Equity 12

Statement of Cash Flows 13

Notes to the Financial Statements 14

Directors’ Declaration 34

Auditor’s Report 35


ARSN 163 688 346

Chairman’s Letter

For the period from 23 May 2013 (date of registration) to 30 June 2013

- i -

Welcome to the inaugural Annual Report for the Australian Property Opportunities Fund (Fund) for the

financial period ended 30 June 2013 (FY13).

The Fund was established to provide retail investors with the opportunity to gain exposure to a highly

attractive part of the commercial property market.

Through the Australian Property Opportunities Trust (Trust), the Fund targets small-to-medium-sized

assets in the office, retail and industrial sectors, predominantly located in major real estate markets on

Australia’s eastern seaboard. It targets assets that deliver reliable income and capital returns to

investors and does not intend to undertake developments projects.

The Fund was registered with the Australian Securities Investments Commission (ASIC) on 23 May 2013

and is required under the Corporations Act 2001 to report to unitholders for FY13. However, as

allotment of units for the Fund’s capital raising was completed after 30 June 2013 (Reporting Date),

there were no activities in the Fund during FY13.

Initial public offer

The initial public offer (Offer) was successfully completed in June 2013, with the allotment of units on 3

July 2013. The Offer was substantially oversubscribed, with applications totalling approximately $160.7

million, more than $60 million above the initial maximum offer size.

The successful capital raising places the Fund in an excellent position to engage with vendors of small-

to-medium-sized assets that meet the Fund’s investment criteria. The Fund aims to be invested in a

diversified portfolio of assets in the next 12 to 24 months.

Investment and property management

Since the 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.


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Chairman’s Letter


- ii -

Investment outlook

The Responsible Entity believes Australian commercial property conditions remain positive, with strong

underlying fundaments and a rich pipeline of investment opportunities in the small-to-medium market.

With the difference between commercial property yields and cash rates at 10-year highs, we believe

there is an attractive opportunity to generate stable rental income, and potentially longer-term capital

gains, through an investment in commercial property. Taking advantage of historically low interest

rates, the Fund is targeting a consolidated gearing level of up to 50%.

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

Opportunities Fund.

Yours sincerely

Alex MacLachlan

Chairman of Walsh & Company Investments Limited

23 September 2013


ARSN 163 688 346

Directors’ Report


-1-

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

Opportunities Fund (Fund), present their report together with the first Annual Report for the Fund and

its subsidiaries (the Group) for the financial period from 23 May 2013 (date of registration) to 30 June

2013.

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

Alex MacLachlan

Tristan O’Connell

Tom Kline

Kevin Smith (resigned 28 June 2013)

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


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Directors’ Report


-2-

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 start, Alex has grown

the Funds Management division to over $1.5 billion of funds under management today, with

investments across residential and commercial property, fixed income, private equity, and listed

equities and commodities.

Following his success in growing the Funds Management division, Alex moved to New York in mid-2013,

where, in addition to his role as CEO of Funds Management, he now also leads the strategy and growth

of Dixon USA, a leading provider of urban single-family home rentals in the New York metropolitan

area.

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

- Australian Masters Corporate Bond Fund No 1 Limited





- Australian Masters Yield Fund No 1 Limited

- Australian Masters Yield Fund No 2 Limited

- Emerging Markets Masters Fund

- Global Resource Masters Fund Limited

- Van Eyk Three Pillars Limited (resigned on 31 October 2011)

- US Masters Residential Property Fund

- US Select Private Opportunities Fund

- US Select Private Opportunities Fund II.


ARSN 163 688 346

Directors’ Report


-3-

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 and of the responsible entity for US Masters

Residential Property Fund, US Select Private Opportunities Fund I and US Select Private Opportunities

Fund II.

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.

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:


- US Masters Residential Property Fund

- US Select Private Opportunities Fund



ARSN 163 688 346

Directors’ Report


-4-

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 and Australian Masters Yield Fund No 5 Limited and a director of the responsible entity for

Emerging Markets Masters Fund and US Select Private Opportunities Fund II.

Before joining Dixon Advisory, Tom was an Associate Director 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 163 688 346

Directors’ Report


-5-

Kevin Smith BSc (Econ) (Hons) (Brunel)| Director

(resigned 28 June 2013)

Kevin Smith is an internationally respected investment expert with over 25 years’ experience in global

finance and asset management. His previous roles include managing 50 investment teams (in 17

countries) responsible for more than $115 billion in equity, listed property and alternative investments

as Global Chief Investment Officer, Equities at ABN AMRO Asset Management in London. Kevin has also

previously managed investment and business development activities in the Asia region as Chief

Executive Officer, Standard Life Investments (Asia) Limited.

Working for Foreign & Colonial in London in the early 1990s, Kevin managed Asian portfolios worth $5

billion and advised on asset allocation for global pension client portfolios worth $50 billion.

Kevin was awarded a first class honours degree in Economics from Brunel University in London.


- Asian Masters Fund Limited (resigned 28 June 2013)

- Emerging Markets Masters Fund (resigned 28 June 2013)

- US Select Private Opportunities Fund II (resigned 28 June 2013).


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Directors’ Report


-6-

Principal activities and changes to nature of activities

The principal activity of the Group during the financial period was its establishment and the

undertaking of a capital raising which was completed subsequent to the financial period, on 3 July

2013.

The Group will invest in Australian commercial property.

Review and results of operations

The Fund was registered on 23 May 2013. There were no investment activities during the financial

period.

Distributions recommended, declared or paid

No distributions were recommended, declared or paid during, or since the end of, the reporting period.

Significant changes in the state of affairs

There were no changes in the state of affairs during the financial period.

Events subsequent to reporting period

On 3 July 2013, the Fund raised $160,809,659 from the issue of 100,506,037 fully paid ordinary units.

The units were issued pursuant to the Product Disclosure Statement issued by the Responsible Entity

on 11 June 2013.

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

have arisen since the end of the financial period that will have significantly affected the operations of

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

Future developments and expected results of operations

It is expected that the Group will seek investment opportunities in Australian commercial property. The

objective of the Group is to build a property portfolio to achieve capital growth as well as generate

attractive and stable rental income. The Group intends to hold property investments for the medium-

to-long-term.

Environmental regulation

The Fund is not subject to any particular and significant environmental regulations under a law of the

Commonwealth, State or Territory.


ARSN 163 688 346

Directors’ Report


-7-

Indemnities and insurance premiums

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 period 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.

Options

No options were granted over issued or unissued units in the Fund during, or since, the end of the

period.

Beneficial and relevant interest of directors of the responsible entity in units

The following table details each director’s relevant interest in the Fund at the date of this report:

Director

Alex MacLachlan 31,250

Tristan O'Connell -

Tom Kline 12,501

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 - refer to note 10 to the

consolidated financial statements.

- The Responsible Entity did not hold any interest in the Fund at the end of the financial period.

- Details of issued interests in the Fund during the financial period - refer to note 8 to the

financial consolidated financial statements.


ARSN 163 688 346

Directors’ Report


-8-

Auditor’s independence declaration

The auditor’s independence declaration is set out on page 9 and forms part of the Directors’ Report for

the period ended 30 June 2013.

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

Act 2001.

On behalf of the directors

Alex MacLachlan


23 September 2013

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

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: Australian Property Opportunities Fund Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060 23 September 2013 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. As lead audit partner for the audit of the financial statements of Australian Property Opportunities Fund for the period 23 May 2013 to 30 June 2013, 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 163 688 346

Consolidated Statement of Profit or Loss and

Other Comprehensive Income


- 10 -

Notes 2013

$

Revenue -

Accounting and audit costs (3,000)

Loss before tax income tax expense (3,000)

Income tax expense -

Loss for the period (3,000)

Other comprehensive income -

Total other comprehensive Income -

Total comprehensive loss for the period (3,000)

Earnings per unit

Basic loss per unit 3 (3,000)

Diluted loss per unit 3 (3,000)

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 163 688 346

Consolidated Statement of Financial Position

As at 30 June 2013

- 11 -

Notes 2013

$

Assets

Current assets

Cash and cash equivalents 4 1

Total current assets 1

Non-current assets

Investment properties -

Total non-current assets -

Total assets 1

Liabilities

Current liabilities

Payables 6 3,000

Total current liabilities 3,000

Total liabilities 3,000

Net liabilities (2,999)

Equity

Issued capital 8 1

Accumulated losses (3,000)

Total equity (2,999)

The Consolidated Statement of Financial Position should be read in conjunction with the notes to the



ARSN 163 688 346

Consolidated Statement of Changes in Equity


- 12 -

NotesUnit

capital

Accumulated

lossesTotal

$ $ $

Balance at registration - - -

Loss for the period - (3,000) (3,000)

Other comprehensive income for

the period (net of tax) - - -

Total comprehensive loss for the

period - (3,000) (3,000)

Issued capital 8 1 - 1

Balance at 30 June 2013 1 (3,000) (2,999)

The Consolidated Statement of Changes in Equity should be read in conjunction with the notes to the



ARSN 163 688 346

Consolidated Statement of Cash Flows


- 13 -

Notes 2013

$

Cash flows from operating activities

Net cash flows from operating activities 4 -

Cash flows from investing activities

Net cash flows from investing activities -

Cash flows from financing activities

Proceeds from the issue of ordinary units 1

Net cash flows generated by financing activities 1

Net increase in cash and cash equivalents 1

Cash and cash equivalents at the beginning of the

period-

Cash and cash equivalents at the end of the period 4 1

The Consolidated Statement of Cash Flows should be read in conjunction with the notes to the



ARSN 163 688 346

Notes to the Consolidated Financial Statements


-14-

General information

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

with the Australian Securities and Investment Commission (ASIC) and domiciled in Australia.

The financial statements comprise the Fund and its subsidiaries (Group). At the reporting date, the

Fund’s only subsidiary is Australian Property Opportunities Trust (Trust), in which the Fund has a 100%

interest.

This is the first Annual Financial Report for the Group. The Fund was registered on 23 May 2013 and

accordingly only the current year figures covering the period from the Fund’s registration to 30 June

2013 are shown.

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

Application of new and revised Accounting Standards and Interpretations

Standards affecting presentation and disclosure

Amendments to AASB 101 ‘Presentation of Financial Statements’

AASB 2011-9 ‘Amendments to Australian Accounting Standards - Presentation of Items of Other

Comprehensive Income’ introduce new terminology for the statement of comprehensive income and

income statement.

The amendments to AASB 101 require items of other comprehensive income to be grouped into two

categories in the other comprehensive income section:

a) items that will not be reclassified subsequently to profit or loss

b) items that may be reclassified subsequently to profit or loss

when specific conditions are met. Income tax on items of other comprehensive income is required to

be allocated on the same basis.

Standards and Interpretations affecting the reported results of financial position

There are no new and revised Standards and Interpretations adopted in these financial statements

affecting the reported results or financial position.


ARSN 163 688 346



-15-

Accounting Standards and Interpretations issued but not yet effective

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.

Standard/Interpretation

Effective for

annual reporting

periods beginning

on or after

Expected to be

initially applied

in the financial

year ending

AASB 10 ‘Consolidated Financial Statements’, AASB

2011-7 ‘Amendments to Australian Accounting

Standards arising from the Consolidation and Joint

Arrangements Standards’

1 January 2013 30 June 2014

AASB 11 ‘Joint Arrangements’ and AASB 2011-7

‘Amendments to Australian Accounting Standards

arising from the Consolidation and Joint Arrangements

Standards’


AASB 12 ‘Disclosure of Interests in Other Entities’ and

AASB 2011-7 ‘Amendments to Australian Accounting




AASB 13 ‘Fair Value Measurement’ and AASB 2011-8


arising from AASB 13’


AASB 119 ‘Employee Benefits’(2011) and AASB 2011-10


arising from AASB 119 (2011)’


AASB 127 ‘Separate Financial Statements’ (2011) and






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Effective for

annual reporting

periods beginning

on or after

Expected to be

initially applied

in the financial

year ending

AASB 128 ‘Investments in Associates and Joint

Ventures’(2011) and AASB 2011-7 ‘Amendments to

Australian Accounting Standards arising from the

Consolidation and Joint Arrangements Standards’



Standards to Remove Individual Key Management

Personnel Disclosure Requirements’

1 July 2013 30 June 2014


Standards – Disclosures – Offsetting Financial Assets

and Financial Liabilities’



Standards – Disclosures – Offsetting Financial Assets

and Financial Liabilities’



Standards arising from Annual Improvements 2009-

2011 Cycle’



Standards – Transition Guidance and Other

Amendments’


AASB 2013-3 ‘Amendments to AASB 136 - Recoverable

Amount Disclosures for Non-Financial Assets’



Standards - Novation of Derivatives and Continuation of

Hedge Accounting’



ARSN 163 688 346



-17-


Effective for

annual reporting

periods beginning

on or after

Expected to be

initially applied

in the financial

year ending


Standards – Investment Entities’


Interpretation 20 ‘Stripping Costs in the Production

Phase of a Surface Mine’ and AASB 2011-12


arising from Interpretation 20’


Interpretation 21 ‘Levies’ 1 January 2014 30 June 2015

At the date of authorisation of the financial statements, the following IASB were also in issue

but not effective, although an Australian equivalent Standard has not yet been issued:

None at time of publication


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1. Summary of significant accounting policies

Statement of compliance

The 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’s).

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 23 September 2013.

Significant accounting policies

The following accounting policies have been adopted in the preparation and presentation of the financial report.

(a) Basis of preparation

The financial statements have been prepared on an accruals basis.

(b) Functional and presentation currency

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

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

otherwise noted

(c) Basis of consolidation

Subsidiaries are those entities in which the Fund has the power to govern the financial and operational

policies so as to obtain benefits from their activities.

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

intra-group transactions are eliminated in full on consolidation.


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-19-

1. Summary of significant accounting policies (cont.)

(d) Financial instruments

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

Fund becomes a party to the contractual provisions of the instrument. The Fund has early adopted

“AASB 9 - Financial Instruments” issued on 7 December 2009. 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.


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-20-


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 amount for which an asset could be sold or a liability settled, between

knowledgeable, willing parties in an arm’s length transaction. 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.

(e) 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.

(f) Investment property

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

for capital appreciation. Investment properties are measured initially at cost, including transaction

costs. Subsequent to initial recognition, investment properties are carried at fair value with changes in

fair value recorded in profit and loss. Investment properties are not depreciated.


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-21-


The basis of the valuation of investment properties is fair value, being the amounts for which the

properties could be exchanged between willing parties in an arm’s length transaction, based on current

prices in an active market for similar properties in the same location and condition and subject to

similar leases.

The Trustee, Walsh & Company Investment Services Limited, may determine the requirement for a

valuation at any time but expects to adopt a valuation program that provides for each property to be

independently valued by suitably qualified valuers once every three years. Changes in market

conditions may necessitate more frequent independent revaluations of properties.

(g) 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.

(h) 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.

(i) 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.

(j) 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.


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(k) 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.

(l) 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.

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.

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


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(m) 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.

(n) 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 payable are recognised in the reporting period in which the distributions are declared,

determined, or publicly recommended by the board of the Responsible Entity on or before the end of

the financial period, but not distributed at balance date.

(o) 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 includes fair

value of investment properties.


ARSN 163 688 346



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2. Operating segment

The Group operates a single reportable segment, that being the business of investing in Australian-

based commercial properties.

The Responsible Entity of the Fund is the Chief Operating Decision Maker (CODM) for the purpose of

resource allocation and assessing the performance of the operating segment.

Revenue, profit or loss, assets and liabilities and other financial information reported and monitored by

the CODM of the single identified segment are reflected in the financial statements and notes to the

financial statements of the Group.


ARSN 163 688 346



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3. Loss per unit

Calculated earnings per unit

2013

$

Basic and diluted (loss) per unit (3,000)

Loss used to calculated earnings per unit

(Loss) from continued operations used to calculate

basic and diluted loss per unit(3,000)

Weighted average number of units

No.

Weighted average number of units outstanding used to

calculate basic and diluted loss per unit1

Effect of dilution -

Weighted average number of ordinary units used to

calculate diluted loss per unit1

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

the reporting period.


ARSN 163 688 346



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4. Cash and cash equivalents

2013

$

Cash at bank and on hand 1

1

Reconciliation to net cash flows from operating activities

(Loss) for the period (3,000)

Movements in assets and liabilities:

Increase in payables 3,000

Net cash from operating activities -


ARSN 163 688 346



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5. Subsidiaries

Details of the Group’s subsidiaries at the end of the reporting period are as follows:

N ame o f

subsidiary

P rincipal act ivity P lace o f

registrat io n

and o perat io n

Ownership

interest

2013

Australian Property

Opportunities Trust

Direct investment in

Australian Commercial

property

Australia 100%

6. Payables

2013

$

Accrued liabilities 3,000

3,000

The average credit period for trade creditors is generally 30 days. No interest is charged on trade

creditors from the date of the invoice. The Group has risk management policies in place to ensure

invoices are paid within credit terms.


ARSN 163 688 346



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7. Distributions

No distributions were declared or paid during the period ended 30 June 2013.

8. Unit capital

2013

$

Balance at registration -

Registration unit 1

Balance at the end of period 1

No.

23-May-13 Balance at registration -

23-May-13 Registration unit 1

30-Jun-13 Balance at the end of period 1

All issued units are fully paid. The holders of ordinary units are entitled to one vote per unit at meetings

of the Group and are entitled to receive distributions declared from time to time by the Responsible

Entity.


ARSN 163 688 346



-29-

9. Financial instruments

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 $1.

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

Financial risk management

Overview

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

- credit risk

- liquidity risk

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

management framework, including developing and monitoring risk management policies.

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 manages credit risk by ensuring deposits are

made with reputable financial institutions.

The carrying amount of financial assets that represents the maximum credit risk exposure at the end of

reporting period are the cash and cash equivalents held at balance date.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated

with its financial liabilities that are settled by delivering cash or another financial asset.

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 liquidity is managed with the proceeds from the allotment which occurred immediately subsequent

to reporting date. At 30 June 2013, the Fund had outstanding liabilities of $3,000.


ARSN 163 688 346



-30-

10. Related-party disclosures

Key management personnel

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

Company Investments Limited, and are deemed to be key management personnel.

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 reporting date, 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 are listed as follows:

Director

Balance at

registration

Received as

remuneration

Other

changes

Balance at

30 June 2013

No. No. No. No.

Alex MacLachlan - - - -

Tristan O'Connell - - - -

Tom Kline - - 1 1

Responsible entity fees and other transactions

As at 30 June 2013, there were no fees paid or outstanding to the Responsible Entity and its related

parties. The following fees may be payable by the Group in subsequent periods.

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 period ended 30 June 2013, there were no responsible

entity fees paid or payable to the Responsible Entity.

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. No fees were paid to the Fund Manager for the financial period.


ARSN 163 688 346



-31-

10. Related-party disclosures (cont.)

Issue costs

The Responsible Entity is entitled to receive a Structuring & Arranging Fee of 2% (exclusive of GST) and

a Handling Fee of 2% (exclusive of GST), (collectively referred to as ‘issue costs’) on the gross proceeds

raised under the Product Disclosure Statement dated 11 June 2013. The issue costs are due to the

Responsible Entity upon allotment of units which occurred on 3 July 2013. No issue costs were paid for

the period ended 30 June 2013.

Trustee fee

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

Opportunities Trust (Trust), 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.

Property & investment manager fee

Fort Street Real Estate Capital Pty Limited is an established joint venture between Walker Street

Partners Pty Limited, a member of Dixon Advisory Group Limited and Fort Street Capital Pty Limited.

Fort Street Real Estate Capital Pty Limited acts as Investment and Property Manager of the Trust and is

responsible for managing the property portfolio of the Trust. The Investment and Property Manager is

entitled to receive a monthly Property Manager Fee of 3% per annum (exclusive of GST) calculated on

the gross income value of the Trust. There were no Property Manager Fees paid or payable for the

financial period.


ARSN 163 688 346



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11. Remuneration of auditors

2013

$

Deloitte Touche Tohamtsu

Audit of financial report 3,000

3,000

The auditor of the Group for the period ended 30 June 2013 was Deloitte Touche Tohmatsu.

In addition, fees totalling $91,200 were paid to Deloitte Touche Tohmatsu by Walsh & Company

Investments Limited for services rendered in connection with the capital raising pursuant to the Public

Disclosure document issued by Walsh & Company Investments Limited, in June 2013.

12. Capital commitments

The Group does not have any capital commitments existing at 30 June 2013.

13. 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.


ARSN 163 688 346



-33-

14. Events subsequent to reporting date

On 3 July 2013, the Fund raised $160,809,659 from the issue of 100,506,037 fully paid ordinary units.

The units were issued pursuant to the Product Disclosure Statement issued by the Responsible Entity

on 11 June 2013.

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

have arisen since the end of the financial period that will have significantly affected the operations of

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


ARSN 163 688 346

Directors’ Declaration


- 34 -

In the opinion of the directors of the Responsible Entity:

a) there are reasonable grounds to believe that the Fund 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 financial statements;

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 Fund;

d) the directors have been given the declarations required by section 295A of the Corporations

Act 2001.

The directors of the Responsible Entity have declared that:

a) financial records of the Fund for the financial period have been properly maintained in

accordance with section 286 of the Corporations Act 2001;

b) the financial statements, and notes for the financial period comply with the Australian

Accounting Standards; and

c) the financial statements and notes for the financial period give a true and fair view.

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

Alex MacLachlan


23 September 2013

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

Independent Auditor’s Report to the Unitholders of


We have audited the accompanying financial report of Australian Property Opportunities Fund (‘the Fund’), which comprises the statement of financial position as at 30 June 2013, the statement of profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the period from 23 May 2013 and ended on 30 June 2013, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the fund as set out on pages 10 to 34.

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 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.

Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1217 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au

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, 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 is in accordance with the Corporations

Act 2001, including:

(i) giving a true and fair view of the Fund’s financial position as at 30 June 2013 and of its performance for the period ended on that date; and

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

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

Note 1. DELOITTE TOUCHE TOHMATSU Michael Kaplan Partner Chartered Accountants Sydney, 23 September 2013

RESPONSIBLE ENTITY

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

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