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Brookfield>Australian Investment Platforms>Unlisted Securities>Multiplex Property Income Fund (deregistered)>Enhanced Disclosure - RG 46


Enhanced Disclosure - RG 46

As at 26 March 2018

Multiplex Property Income Fund

This Enhanced Disclosure is issued by Brookfield Capital Management Limited as responsible entity of the Multiplex Property Income Fund (Fund) or MPIF pursuant to ASIC Regulatory Guide 46 (RG 46): “Unlisted property schemes – improving disclosure for retail investors.” The Regulatory Guide lists eight disclosure principles and six benchmarks that responsible entities of unlisted property schemes are required to apply to their upfront and ongoing disclosures for retail investors.

The Fund has applied these guidelines in accordance with the form and content stated in RG 46. Investors should be aware that previous disclosures made by the Fund reflect market standard practices which may be different to the requirements of RG 46. Investors are invited to have reference to the Fund’s Product Disclosure Statement dated 13 March 2007 (PDS) and other publicly released materials which are available at www.au.brookfield.com.

The responsible entity is committed to providing investors with timely and balanced disclosure of all material matters concerning the Fund in accordance with its continuous disclosure obligations, including RG 46. Key information in this Enhanced Disclosure and any material changes will be updated by the responsible entity as soon as practicable and in any event on at least a semi annual basis and made available at www.au.brookfield.com.

A hard copy of this Enhanced Disclosure is available to investors upon request by contacting Brookfield Customer Service on 1800 570 000, or by emailing clientservices@au.brookfield.com.

The information in this Enhanced Disclosure is based on the Funds final financial statement for the period 1 July 2017 to 12 March 2018.  The responsible entity is not aware of any material changes since the review of the accounts.

The information below contains an overview of ASIC’s description of the disclosure principles and benchmarks, the responses of the Fund’s responsible entity to those key risk features and then the practical application of each of the disclosure principles to the Fund.

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Risk Feature

What this means

Gearing Ratio

This indicates the extent to which the Fund's assets are funded by external liabilities. RG 46 defines gearing ratio as total interest bearing liabilities divided by total assets

ASIC's description of this key risk states that "a higher gearing ratio means a higher reliance on external liabilities (primarily borrowings) to fund assets. This exposes the scheme to increased funding costs if interest rates rise. A highly geared scheme has a lower asset buffer to rely upon in times of financial stress."

The gearing ratio represents the percentage of debt compared to the gross assets of the Fund. The gearing ratio can help investors assess risks. It shows how much the Fund owes in debt to its financiers as a proportion of what the Fund owns (assets).

The Fund's Response and Practical Application of the Disclosure Principle and benchmark

The Fund has no borrowings and therefore no Gearing Ratio.

Interest Cover Ratio

This indicates the Fund's ability to meet interest payments from earnings. RG 46 defines interest cover ratio as (EBITDA1 minus unrealised gains plus unrealised losses) divided by interest expense.

ASIC's description of this key risk states that "interest cover is a key indicator of financial health. The lower the interest cover, the higher the risk that the scheme will not be able to meet its interest payments. A scheme with a low interest cover only needs a small reduction in earnings (or a small increase in interest rates or other expenses) to be unable to meet its interest payments."

The Fund's Response and Practical Application of the Disclosure Principle and benchmark

The responsible entity will use the interest cover ratio to monitor the Fund’s overall profitability as a ratio of finance costs. The Fund’s ability or inability to meet interest payments depends on a variety of factors. Changes to market interest rates may or may not impact the Fund’s interest cover ratio, as interest rate hedging or other activities designed to mitigate risk can reduce the impact of market changes on scheme profitability.

The Fund has no borrowings and therefore no Interest Cover Ratio.

Interest Capitalisation

This relates to whether or not the interest expense of the scheme is capitalised

ASIC’s description of this key risk states that “ when a scheme capitalises interest expense, it is important for investors to understand how the scheme will meet its interest obligations when deciding whether to invest in the scheme”.

The Fund's Response and Practical Application of the Disclosure benchmark

The Fund does not have an interest capitalisation policy because the Fund has no borrowings.

Scheme borrowing

This relates to the Fund's borrowing maturity and credit facility expiry and any associated risks

ASIC's description of this key risk states that "relatively short-term borrowings and credit facilities with short expiry dates are a risk factor if they are used to fund assets intended to be held long term. If the scheme has a significant proportion of its borrowings that mature within a short timeframe, it will need to refinance. There is a risk that the refinancing will be on less favourable terms or not available at all. If the fund cannot refinance, it may need to sell assets on a forced sale basis with the risk that it may realise a capital loss. Breach of a loan covenant may result in penalties being applied, or the loan becoming repayable immediately. This means that the fund may need to refinance on less favourable terms or sell assets. Termination of critical financing could also mean the scheme is no longer viable."

The Fund's Response and Practical Application of the Disclosure Principle

The Fund has no borrowings.

Portfolio diversification

This information addresses the Fund's investment practices and direct property investment portfolio risk

ASIC's description of this key risk states that "generally, the more diversified a portfolio is, the lower the risk that an adverse event affecting one property or one lease will put the overall portfolio at risk."

The Fund's Response and Practical Application of the Disclosure Principles

The Fund completed wind up on 12 March 2018 and paid a final distribution to unitholders on 8 March 2018.

Therefore, at 12 March 2018, the Fund had zero total assets. 

Related party transactions

This relates to the responsible entity's approach to related party transactions

ASIC's description of this key risk states that "a conflict of interest may arise when property schemes invest in, make loans or provide guarantees to related parties."

The Fund's Response and Practical Application of the Disclosure Principle and benchmark

The responsible entity maintains and complies with a written policy on conflicts of interest and related party dealings, including the assessment and approval processes for such transactions, that provides guidance to the business on the management of conflicts of interest and related party transactions. A copy of the Conflict of Interest and Related Party Dealings Policy is available here. Please refer to the related party transaction disclosure note in the full year end financial report to 30 June 2017.

The responsible entity manages related party transactions and conflicts of interest issues through the application of its governance arrangements, which include board consideration and approval of all investment related transactions. All related party transactions are scrutinised by the responsible entity to ensure compliance with Chapter 2E of the Corporations Act.

Distribution practices

This relates to information on the Fund's distribution practices.

ASIC's description of this key risk states that "some property schemes make distributions partly or wholly from unrealised revaluation gains and/or capital rather than solely from realised income. This may not be commercially sustainable over the longer term, particularly where property values are not increasing."

The Fund's Response and Practical Application of the Disclosure Principle and benchmark

The Fund paid a final distribution of 0.427707 cents per unit on 8 March 2018 and completed wind up on 12 March 2018.

Withdrawal arrangements

This relates to investors' withdrawal rights from the Fund

ASIC's description of this key risk states that "unlisted property schemes often have limited or no withdrawal rights. This means they are usually difficult to exit."

The Fund's Response and Practical Application of the Disclosure Principle

The Fund completed wind up and all units were cancelled on 12 March 2018.

Net tangible assets and Valuation policy

The NTA calculation helps investors understand the value of the assets upon which the value of their unit is determined”.

ASIC's description of this key risk states that “Open-end schemes regularly disclose the NTA for the scheme or a similar measure such as net asset backing or net asset value to support the pricing of units in the scheme. These measures are not generally disclosed for closed-end schemes”.

The Fund's Response and Practical Application of the Disclosure Principles

The Fund completed wind up on 12 March 2018 and paid a final distribution to unitholders on 8 March 2018. At 12 March 2018, the Fund's net asset value was zero. 

   

 

 

[1] Multiplex Property Income Fund - The fund is currently closed to the issue and redemption of income units and no unit price for these purposes is calculated.
  
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