HALF-YEAR FINANCIAL REPORT

Transcription

1 AUSTRALIAN PROPERTY OPPORTUNITIES FUND () HALF-YEAR FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2014 (ACN ) (AFSL )

2 Contents Report to unitholders Funds from operations i iii Directors report 1 Auditor s independence declaration 2 Condensed consolidated statement of profit or loss and other comprehensive income 3 Condensed consolidated statement of financial position 4 Condensed consolidated statement of changes in equity 5 Condensed consolidated statement of cash flows 6 Notes to the condensed consolidated financial statements 7 Directors declaration 15 Independent auditor s review report 16 Directory 18

3 Report to unitholders Dear Unitholders Welcome to the half-year report for the Australian Property Opportunities Fund (Fund) for the six months ended 31 December Overview During the half-year to 31 December 2014, Fort Street Real Estate Capital, the Fund s Manager, completed the Fund s final two investments with the purchases of Windsor Riverview and Noosa Village Shopping Centre. The Fund is now fully invested, having successfully secured six highly attractive commercial properties across the East Coast of Australia. The six properties generated initial unlevered yields between 6.5% and 8.3% with fully leased yields of 7.1% to 9.6%, at the upper end of the Fund s target 7% to 9% yield range. During the period, the Fund s bank facility limit was increased to $115 million (30 June 2014: $82.8 million) in order to complete the Fund s final purchases. As at period end, the Fund s gearing now sits at 40%, at the lower end of the Fund s target gearing range of 40-50%. Further, the interest rate on the most recent drawdown was fixed at an attractive all-in cost below 5%, resulting in a blended rate of approximately 5.4%. As the Fund has grown and acquired properties, it has been able to maintain or increase its quarterly distribution to unitholders. The September and December distributions represented a 6.6% annualised yield. With the final acquisition of Noosa Village Shopping Centre and continuing asset management of the existing properties, the Fund expects to increase the distribution yield in Acquisitions Windsor Riverview Shopping Centre In July 2014, the Fund acquired Windsor Riverview Shopping Centre for $47.5 million, a modern neighbourhood shopping centre located at Windsor, in the heart of the Hawkesbury region, in north-western Sydney. Located 55km north west of the Sydney CBD, Windsor Riverview Shopping Centre is anchored by a full-line Coles supermarket, with a good mix of national retailers including The Reject Shop, Dick Smith, Commonwealth Bank, Westpac and Flight Centre. The property has a weighted average lease expiry (WALE) of 7.4 years with total lettable area of 7,900m² and underground parking for 325 cars. The property attracts annual customer traffic in excess of 2 million people per annum. As part of the acquisition, the Fund entered into an option to acquire four residential houses adjacent to the centre for $2.5 million. Settlement was completed in February 2015 with the additional land providing flexibility to undertake future expansion. - i -

4 Report to unitholders Noosa Village Shopping Centre In November 2014, the Fund acquired its final property, Noosa Village Shopping Centre, for $25.1 million. The shopping centre is strategically located at Noosaville on the Sunshine Coast. The centre is fully leased and was acquired on a yield of 8.0%. Noosa Village Shopping Centre is the dominant shopping centre in its trade area and comprises a full-line Woolworths, 21 specialty stores and on-grade parking for 260 cars, with national retailers accounting for 72% of total income. Notable tenants include BWS, The Reject Shop, Amcal Chemist, Australia Post, Flight Centre, Optus and the Bank of Queensland. Asset management Portfolio occupancy has increased to 97% across the Fund, up from 94% at the time of acquisition, and provides a WALE of 5.7 years. We are pleased with the significant progress made at the properties in the second half of Key asset management highlights include: The remediation and repainting of the external façade at 390 St Kilda Road, which is expected to be completed by April 2015 The addition of 80 new car parking spaces at Lake Innes Village Increasing occupancy at Lynbrook Village Shopping Centre to 99% and progressing plans to refurbish the mall entrance The Directors are exceptionally pleased with the Fund s progress through its initial investment phase, having fully invested the Fund s capital and secured an appropriate amount of the debt funding. Focus now turns to further improving the performance of the assets and the distribution yield of the Fund. Our thanks go to the Fund s manager, Fort Street Real Estate Capital, and the Investment Committee chaired by Stuart Nisbett of Archerfield Capital Partners, for delivering such excellent results. We also thank our unitholders for their continued support. Yours faithfully Alex MacLachlan Chairman of Walsh & Company Investments Limited 27 February ii -

5 Funds from operations Funds From Operations (FFO) is a non-international Financial Reporting Standards (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. 31-Dec-14 $ Profit after tax for the period 2,091,229 Adjustments: Depreciation charge for the period 3,013,334 Straight-lining of rental revenue (211,470) Other items 14,314 FFO 4,907,407 Distributions for the period 5,330,840 Cents per unit FFO 4.88 Distributions 5.30 Distributions for the half-year represented a payout ratio of 109% of FFO. - iii -

6 Directors report The directors of Walsh & Company Investments Limited, as Responsible Entity of Australian Property Opportunities Fund (Fund), present their report together with the half-year financial report for the Fund and the entities it controlled, (collectively referred to as the Group ) for the half-year ended 31 December Directors The directors of the Responsible Entity at any time during or since the end of the half-year are listed below: Alex MacLachlan Tristan O Connell Tom Kline Directors were in office from the start of the half-year to the date of this report, unless otherwise stated. Review and results of operations During the half-year, the Group invested $72.6 million to acquire two investment properties, Windsor Riverview and Noosa Village, acquired in July 2014 and November 2014 for $47.5 million and $25.1 million, respectively. These acquisitions bring the total portfolio purchase price to $238.6 million. The Group s profit was $2,091,229 for the halfyear ended 31 December 2014 (31 December 2013: $2,132,674). At 31 December 2014, the Group s net assets are $146,172,974 (30 June 2014: $152,563,165), representing a net asset value per unit of $1.45 (30 June 2014: $1.52). Further details are included in the report to unitholders which forms part of this report. Events subsequent to reporting period On 16 February 2015, the Group made a further drawdown of $3 million to fund acquisition of the adjoining land at Windsor Riverview Shopping Centre and to fund future capital expenditure requirements. Settlement of the adjoining land was completed on 18 February 2015 for a total acquisition price of $2.5 million. 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 significantly affect the operations of the Group, the results of those operations or the state of affairs in future financial years. Auditor s independence declaration The auditor s independence declaration is set out on page 2 and forms part of the director s report for the half-year ended 31 December Made in accordance with a resolution of the directors made pursuant to section 306(3) of the Corporations Act On behalf of the directors Alex MacLachlan Chairman of Walsh & Company Investments Limited 27 February

7 Deloitte Touche Tohmatsu ABN Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia 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 Tel: Fax: +61 (0) February 2015 Dear Board Members Australian Property Opportunities Fund 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 review of the financial statements of Australian Property Opportunities Fund for the financial half-year ended 31 December 2014, 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 review; and (ii) any applicable code of professional conduct in relation to the review. Yours sincerely DELOITTE TOUCHE TOHMATSU Michael Kaplan Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited -2-

8 Condensed consolidated statement of profit or loss and other comprehensive income Notes 31-Dec Dec-13 $ $ Revenue Rental income 10,213,530 2,058,372 Other property income 2,127, ,158 Finance income 94,151 1,787,832 Total revenue 12,435,387 4,126,362 Expenses Finance expens es (2,101,752) - Depreciation expens e (3,013,334) (554,335) Inves tment property expens es (3,628,270) (558,913) Res pons ible entity and trus tee fee 10 (216,086) (91,959) Management fees 10 (1,188,305) (618,409) Accounting and audit (32,249) (24,461) Other operating expens es (164,162) (145,611) Total expenses (10,344,158) (1,993,688) Profit for the period 2,091,229 2,132,674 Other comprehensive income Items that may be reclassified subsequently to profit or loss Effective portion of changes in fair value of cas h fl ow hedge (3,150,580) - Total other comprehensive loss, net of income tax (3,150,580) - Total comprehensive (loss)/income for the period (1,059,351) 2,132,674 Earnings per unit Bas ic and diluted earnings (cents per unit) The condensed consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the condensed consolidated financial statements

9 Condensed consolidated statement of financial position As at 31 December 2014 Notes 31-Dec Jun-14 $ $ ASSETS Current assets Cas h and cas h equivalents 5,660,146 11,528,087 Trade and other receivables 376, ,778 Property acquis ition depos it 125,040 - Other 423, ,861 Total current assets 6,584,929 12,014,726 Non-current assets Inves tment properties 3 251,348, ,170,976 Other 1,711, ,766 Total non-current assets 253,060, ,991,742 Total assets 259,645, ,006,468 LIABILITIES Current liabilities Trade and other payables 4 2,985,439 1,815,926 Borrowings 5 26,132 31,007 Provis ions 36,534 36,534 Dis tribution payable 2,665,423 2,617,376 Derivative financial liability 717, ,716 Total current liabilities 6,430,889 4,792,559 Non-current liabilities Borrowings 5 103,765,778 29,099,935 Derivative financial liability 3,275, ,809 Total non-current liabilities 107,041,522 29,650,744 Total liabilities 113,472,411 34,443,303 Net assets 146,172, ,563,165 EQUITY Is s ued capital 6 154,087, ,087,816 Cas h flow hedge res erve 7 (3,993,105) (842,525) Accumulated los s es (3,921,737) (682,126) Total equity 146,172, ,563,165 The condensed consolidated statement of financial position should be read in conjunction with the notes to the condensed consolidated financial statements

10 Condensed consolidated statement of changes in equity Notes Issued capital Cash flow hedge reserve (Accumulated losses)/retained earnings Total $ $ $ $ Balance at 1 July (3,000) (2,999) Profit for the period - - 2,132,674 2,132,674 Other comprehensive income Total comprehesive income for the period - - 2,132,674 2,132,674 Issued capital 6(i) 160,809, ,809,659 Issue costs 6(i) (6,721,844) - - (6,721,844) Balance at 31 December ,087,816-2,129, ,217,490 Balance at 1 July ,087,816 (842,525) (682,126) 152,563,165 Profit for the period - - 2,091,229 2,091,229 Other comprehensive loss - (3,150,580) - (3,150,580) Total comprehesive (loss)/income for the period - (3,150,580) 2,091,229 (1,059,351) Distributions (5,330,840) (5,330,840) Balance at 31 December ,087,816 (3,993,105) (3,921,737) 146,172,974 The condensed consolidated statement of changes in equity should be read in conjunction with the notes to the condensed consolidated financial statements

11 Condensed consolidated statement of cash flows Notes 31-Dec Dec-13 $ $ Cash flows from operating activities Rental income received 13,141,695 2,296,186 Interes t income received 89,117 1,776,948 Payments to s uppliers (6,437,759) (1,557,222) Net cash flows generated by operating activities 6,793,053 2,515,912 Cash flows from investing activities Payments for inves tment properties (79,813,669) (117,616,560) Payments of depos its for purchas e of inves tment properties (125,040) (2,800,000) Net cash flows (used in) investing activities (79,938,709) (120,416,560) Cash flows from financing activities Proceeds from the is s ue of units 6(i) - 160,809,660 Is s ue cos ts paid - (6,721,844) Proceeds from borrowings 74,725,575 - Payments of trans action cos ts related to loans and borrowings (2,165,066) - Dis tributions paid (5,282,794) - Net cash flows generated by financing activities 67,277, ,087,816 Net (decrease)/increase in cash and cash equivalents (5,867,941) 36,187,168 Cas h at the beginning of the period 11,528,087 1 Cash and cash equivalents at the end of the period 5,660,146 36,187,169 The condensed consolidated statement of cash flows should be read in conjunction with the notes to the condensed consolidated financial statements

12 Notes to the condensed consolidated financial statements General information Australian Property Opportunities Fund (Fund) is an unlisted managed investment scheme registered and domiciled in Australia. The financial statements comprise the Fund and entities controlled by the Fund (collectively referred to as the Group ). The principal activity of the Group is investing in Australian commercial property. This half-year financial report is intended to provide users with an update on the latest annual financial statements of the Group. The half-year financial report does not include notes of the type normally included in an annual financial report and it is therefore recommended that this half-year financial report be read in conjunction with the annual financial statements of the Group for the period ended 30 June 2014, together with any public announcements made during the half-year. Statement of compliance These condensed consolidated financial statements are general purpose financial statements which have been prepared in accordance with the Australian Accounting Standards issued by AASB, including AASB 134 Interim Financial Reporting, and the Corporations Act Compliance with Australian Accounting Standards ensures that the financial statements and notes comply with International Financial Reporting Standards (IFRS) and IAS 34 Interim Financial Reporting issued by International Accounting Standards Board (IASB). For the purposes of preparing the condensed consolidated financial statements, the Group is a for-profit entity. The condensed consolidated financial statements were authorised for issue by the board of directors of the Responsible Entity, Walsh & Company Investments Limited (Walsh & Co) on 27 February Basis of preparation The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Group s Annual financial report for the year ended 30 June New or revised Standards and Interpretations that are first effective in the current reporting period The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current half-year. No new or revised Standards and Interpretations effective for the period under review are considered to be applicable to the Group

13 Notes to the condensed consolidated financial statements 1. Earnings per unit (i) Calculated earnings per unit 31-Dec-14 cents 31-Dec-13 cents Basic and diluted earnings per unit (ii) Earnings used to calculate earnings per unit $ $ Profit from continued operations used to calculate basic and diluted earnings per unit 2,091,229 2,132,674 (iii) Weighted average number of units Weighted average number of units outstanding used to calculate basic and diluted earnings per unit No. No. 100,506,038 98,867,353 Effect of dilution ,506,038 98,867,353 There are no transactions that would significantly change the number of ordinary units at the end of the reporting period. 2. Distributions Distributions paid or declared to unitholders during or since the end of the period were as follows: Date of payment Distribution per unit ($) Total amount ($) For the quarter ended 30 September November ,665,420 For the quarter ended 31 December February ,665, ,330,

14 Notes to the condensed consolidated financial statements 3. Investment properties 31-Dec Jun-14 $ $ Land 43,209,765 34,531,750 Buildings 175,725, ,133,555 Accumulated depreciation - buildings (3,525,092) (1,628,276) Plant and equipment (including integral plant and equipment) 37,021,833 30,034,890 Accumulated depreciation - plant and equipment (2,153,921) (1,037,403) Capital expenditure - work in progress 1,070, , ,348, ,170,976 (i) Movements in investment properties Carrying amount of investment properties at beginning of period 174,170,976 - Add/(less): Additions through acquisitions 72,600, ,050,000 Acquisition costs 5,290,135 10,650,195 Capital improvements 2,300, ,460 Disposals - - Depreciation charge for the period (3,013,334) (2,665,679) Carrying amount of investment properties at end of period 251,348, ,170,

15 Notes to the condensed consolidated financial statements 4. Trade and other payables 31-Dec Jun-14 $ $ Trade creditors 624, ,699 Accrued liabilities 1,670,280 1,075,014 Deferred income 454, ,754 GST payable 185, ,263 Other liabilities 50,354 60,196 2,985,439 1,815,926 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. 5. Borrowings Current Secured bank loan - amortised cost 26,132 31,007 26,132 31,007 Non-current Secured bank loan - amortised cost 103,765,778 29,099, ,765,778 29,099, ,791,910 29,130,942 In November 2014, the Group increased its loan facility with National Australia Bank Limited (NAB) to $115 million. During the half-year, the Group made drawdowns totalling $74.7 million to fund the acquisition of additional investment properties, bringing the total drawn down amount to $104.2 million at 31 December To take advantage of the low interest rate environment, the Group entered into interest contracts, with a notional amount of $104.2 million, whereby it pays a fixed rate of interest and receives a variable rate based on BBSY (1 month) on the notional amount. At 31 December 2014, after taking into account the interest rate swap, 100% of the Group s borrowings are fully hedged. There is therefore no net interest rate exposure on the underlying borrowing at balance date. The Group s average cost of drawn debt is approximately 5.4% (excluding costs relating to undrawn debt). The drawdown amount is secured against investment properties held by the Group with a carrying value of $251.3 million at balance date. There were no defaults or covenant breaches with respect to the loan during the half-year

16 Notes to the condensed consolidated financial statements 6. Issued capital (i) Movements in issued capital 31-Dec Jun-14 $ $ Balance at beginning of period 154,087,816 1 Issue of 100,506,037 fully paid ordinary units at $ ,809,659 Issue costs - (6,721,844) Balance at the end of period 154,087, ,087,816 (ii) Movements in ordinary units No. No. Balance at beginning of period 100,506, Jul-13 Fully paid ordinary units - 100,506,037 Balance at the end of period 100,506, ,506, Cash flow hedge reserve $ $ Cash flow hedge reserve (3,993,105) (842,525) (3,993,105) (842,525) (i) Movements in cash flow hedge reserve Balance at the beginning of the financial year (842,525) - - Unrealised losses on cash flow hedge (3,441,794) (968,805) - Realised losses transferred to profit of loss 291, ,280 Balance at the end of the period (3,993,105) (842,525) The cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in the fair value of the interest rate swap held by the Trust, the wholly-owned subsidiary of the Fund

17 Notes to the condensed consolidated financial statements 8. Financial instruments (i) Fair value Fair value of the Group s financial assets and liabilities that are measured at fair value on a recurring basis The Group measures fair value using the following fair value hierarchy that reflects the significance of the input used in making the measurements: Level 1: quoted prices (unadjusted) in active markets for identical financial assets and liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the financial asset or liability, either directly or indirectly Level 3: inputs for the financial asset or liability that are not based on observable market data. The valuation technique applied to fair value the swap derivative include traditional swap models, using present value calculations. Level 1 Level 2 Level 3 30 June 2014 $ $ $ Cash flow hedge - (842,525) - Total financial liabilities carried at fair value - (842,525) - Level 1 Level 2 Level 3 31 December 2014 $ $ $ Cash flow hedge - (3,993,105) - Total financial liabilities carried at fair value - (3,993,105) - The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the transfer has occurred. There were no transfers between fair value hierarchy levels during the financial period ended 31 December Fair value of the Group s financial assets and liabilities that are not measured at fair value on a recurring basis The fair value of financial assets and financial liabilities which are not measured at fair value on a recurring basis approximate their carrying amounts at the reporting date. 9. Controlled entities Name of entity Australian Property Opportunities Trust Place of registration and Ownership operation interest Australia 100%

18 Notes to the condensed consolidated financial statements 10. 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 (Fund), Walsh & Company Investments Limited, the Fund Manager, Walsh & Company Asset Management Pty Limited, and the Trustee of Australian Property Opportunities Trust (Trust), Walsh & Company Investment Services Pty 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. 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 period ended 31 December 2014, $92,517 (2013: $62,244), exclusive of GST, was paid or payable to the Responsible Entity. Trustee Fee Walsh & Company Investment Services Pty Limited in its capacity as Trustee of Australian Property Opportunities 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. For the period ended 31 December 2014, $120,190 (2013: $26,914), exclusive of GST, was paid or payable to the Trustee. 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 period ended 31 December 2014, $798,338 (2013: $537,115), exclusive of GST, was paid or payable to the Fund Manager. 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. 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 period ended 31 December 2014, $373,765 (2013: $67,867), exclusive of GST, was paid or payable to the Property Manager

19 Notes to the condensed consolidated financial statements 10. Related party disclosures (cont.) 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 GST and 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 period ended 31 December 2014, $907,500 (2013: $1,375,625), exclusive of GST, was paid to the Investment Manager. 11. Capital commitments At 31 December 2014, the Group had total outstanding capital commitments of $2,387,976 (30 June 2014: $524,704) for improvements to its existing properties. In addition, a total of $284,889 (30 June 2014: $401,081) was committed for lease incentives arising from lease agreements entered into during the year. All commitments are expected to be paid within the next 12 months. 12. 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. 13. Events subsequent to reporting date On 16 February 2015, the Group made a further drawdown of $3 million to fund acquisition of the adjoining land at Windsor Riverview Shopping Centre and to fund future capital expenditure requirements. Settlement of the adjoining land was completed on 18 February 2015 for a total acquisition price of $2.5 million. Other than those disclosed above or in the financial report, there are no other matters or circumstances that have arisen since the end of the financial period that will significantly affect the operations of the Group, the results of those operations or the state of affairs in future financial years

20 Directors declaration For half-year ended 31 December 2014 The directors of the Responsible Entity declare that: a) in the directors opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable; and b) in the directors opinion, the attached 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. Signed in accordance with a resolution of the directors of the Responsible Entity made pursuant to section 303(5) of the Corporations Act On behalf of the directors Alex MacLachlan Chairman of Walsh & Company Investments Limited 27 February

21 Deloitte Touche Tohmatsu ABN Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia Tel: Fax: +61 (0) Independent Auditor s Review Report to the Unitholders of Australian Property Opportunities Fund We have reviewed the accompanying half-year financial report of Australian Property Opportunities Fund ( the Fund ), which comprises the condensed consolidated statement of financial position as at 31 December 2014, and the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in equity for the half-year ended on that date, selected explanatory notes and the directors declaration of the consolidated entity comprising the Fund and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 3 to 15. Directors Responsibility for the Half-Year Financial Report The directors of the Responsible Entity of the Fund are responsible for the preparation of the half-year 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 half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Australian Property Opportunities Fund s financial position as at 31 December 2014 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of Australian Property Opportunities Fund, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited -16-

22 Auditor s Independence Declaration In conducting our review, we have complied with the independence requirements of the Corporations Act 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 review report. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Australian Property Opportunities Fund is not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity s financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations DELOITTE TOUCHE TOHMATSU Michael Kaplan Partner Chartered Accountants Sydney, 27 February

23 Directory Australian Property Opportunities Fund Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060 T: F: E: Responsible Entity Walsh & Company Investments Limited (ACN ) (AFSL ) Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060 T: F: E: Directors Alex MacLachlan Tristan O Connell Tom Kline Secretaries Tristan O Connell Hannah Chan Solicitors Watson Mangioni Lawyers Pty Limited Level 13, 50 Carrington Street SYDNEY NSW 2000 T: F: E: mail@wmlaw.com.au Auditor Deloitte Touche Tohmatsu Grosvenor Place, 225 George Street SYDNEY NSW 2000 T: F: Investment Manager & Property Manager Fort Street Real Estate Capital Pty Limited (ACN ) Level 11, 1 O Connell Street SYDNEY NSW 2000 T: F: E: info@australianpropertyopportunitiesfund.com.au Unit Registrar Boardroom Limited Level 7, 207 Kent Street SYDNEY NSW 2000 T: (Australia) T: (International) F: Fund Manager Walsh & Company Asset Management Pty Limited (ACN ) Level 15, 100 Pacific Highway NORTH SYDNEY NSW 2060 T: F: E: info@australianpropertyopportunitiesfund.com.au

24 RESPONSIBLE ENTITY Walsh & Company Investments Limited (ACN ) (AFSL )