8th March 2023
Dear Investors,
We are pleased to provide this investor update with respect to the ASCF Private Fund.
Since our last quarterly update, the fund has continued to perform strongly, and we would like to take this opportunity to provide you with detailed information on each of the investments in the fund as at 31st December 2022.
Key Fund Information
Funds under management as at 31st December 2022: $32,736,938.31
Current unit price – $1
Income Distribution for February 2023: Paid
Fund Investments
ASCF Private Fund, via its wholly-owned sub-fund Australian Mortgage Finance Services Fund (AMFS), has undertaken several investments under its mandate since inception and listed below are the current list of investments as at the 31st December 2022.
ASCF High Yield $20,064,297.45 (refer note 1.)
ASCF Managed Investments Pty Ltd C Class Notes $3,000,000 (refer note 2.)
ASCF Managed Investments Pty Ltd C Class Notes $4,040,000 (refer note 3.)
Direct Loan Investments $2,497,451.41 (refer note 4.)
Cash at Bank ASCF Private $247,298.56
Cash at Bank AMFS $229,196.43
Note 1. ASCF High Yield
AMFS currently has $20,064,297.45 invested in ASCF High Yield Fund, and $3,000,000 invested in ASCF Select Income Fund, both are retail funds managed by Australian Secure Capital Fund Ltd.
AMFS, as a wholesale investor, receives a preferential rate of 8.60% per annum paid monthly from the funds due to the amount invested.
All interest payments have been made on time and in full by ASCF High Yield to AMFS at the prescribed rate on the due dates.
The audited financials for ASCF High Yield Fund for the financial year ended 30th June 2022 have been completed and are available for viewing or download by clicking here.
The audited financials for ASCF High Yield Fund and ASCF Select Income Fund for the half year ending 31st December 2022 are currently being completed and will be available for viewing on our website on the 15th March 2023.
For further information concerning ASCF High Yield Fund, please refer to the Product
Disclosure Statement by clicking here or visit our website ascf.com.au where you will be able to view our monthly updates on each of our retail funds.
Note 2. ASCF Managed Investments Pty Ltd C Class Notes
ASCF Managed Investments Pty Ltd (ASCFMI) is a part of the ASCF Group of Companies and issued a $35m bond in September 2018 by issuing A, B and C Class Notes which were fully subscribed.
A copy of the IM for ASCF Managed Investments Pty Ltd is available by clicking here.
ASCF Private, via its sub-fund AMFS, acquired the C Class notes on the 14th of September 2021 for a consideration of $3,000,000 at par value. These notes currently earn 15% per annum, payable monthly by the Mortgage Capital Australia Trust, which acts as the service entity to the ASCF Group. This transaction was foreshadowed in the ASCF Private Information Memorandum under clause 3.2(b).
Since the completion of the transaction, all interest payments have been made on time and in full by the Mortgage Capital Australia Trust to AMFS at the prescribed rate on the due dates.
Note 3. ASCF Managed Investments Pty Ltd C Class Notes
On the 7th December 2021, ASCF Managed Investments Pty Ltd issued additional C Class notes totalling $4,040,000. On the same day, it redeemed the B Class notes then on issue totalling $4,000,000.
These notes were issued on the same terms as the existing C class notes. The notes were acquired by AMFS and earned interest of 15% per annum payable monthly by the Mortgage Capital Australia Trust.
Since the completion of the transaction, all interest payments have been made on time and in full by the Mortgage Capital Australia Trust to AMFS at the prescribed rate on the due dates.
The audited financials for ASCF Managed Investments Pty Ltd for the financial year ended 30th June 2022 have been completed and are available for viewing or download by clicking here.
The loan book for ASCF Managed Investments Pty Ltd continues to track well and aligns with the prior year’s performance.
ASCF Managed Investments Pty Ltd is required to undertake quarterly audit reports to ensure it is not in breach of any of its note covenants or eligibility criteria. The audits are undertaken by Grant Thornton and are due 45 days after the end of each quarter. Please click here to view the quarterly audit reports for the September and December 2022 quarters.
Note 4. Direct Loan Investments
AMFS does not intend to originate new loans at this point, but rather acquire via assignment loans that are in default from the ASCF retail funds and ASCF Managed Investments Pty Ltd at reasonably conservative loan to valuation ratios.
The benefit of acquiring defaulting loans is that the interest rate applicable to these loans is much higher than the standard rate charged to borrowers who pay their interest on time.
These loans, therefore, offer a high internal rate of return on the capital invested in the loan presuming the full loan value including all loan interest and fees are recovered.
AMFS may however in the future jointly fund loans with the ASCF Retail Funds.
Listed below are the details of the direct loan investments made by AMFS to date via assignment.
Loan No. 1
| Loan Assignment Date | 11th March 2022 |
| Loan security | 1st registered mortgage |
| Loan balance at standard interest rate as at 31/12/22 | $2,280,450.62 |
| Loan value on assignment | $1,534,611.49 |
| Valuation | $4,000,000 |
| Estimated current LVR | 57.01% |
| Standard loan interest rate | 15% p.a. |
| Default loan interest rate | 30% p.a. |
| Property details | 10 lot residential subdivision Old Beach, Tasmania. |
On the 11th of March 2022, AMFS made its first direct loan investment by accepting an assignment of a defaulting loan from ASCF Managed Investments Pty Ltd for a total consideration of $1,534,611.49.
The assignment granted AMFS mortgagee in possession rights over a development approved 10 lot subdivision in Tasmania, which the borrower never completed plus residual land.
AMFS has subsequently paid for all the civil works associated with the subdivision and all works have now been completed but we are still awaiting the issue of titles as the local council required some additional engineering certifications which have now been provided.
This has slightly delayed the sale process and the balance now owing on the loan including accrued interest at the standard interest rate applicable to the loan is $2,280,450.62. This includes the costs associated with all the subdivision works.
Each lot is expected to sell for between $350,000 to $400,000 on completion and upon issue of the titles marketing of the lots will commence. Please click here to view a short marketing teaser video of the subdivision. The agent has now commenced marketing of the lots and the marketing signage can be viewed by clicking here.
We are also exploring the possibility of a further 3 lot subdivision on the remaining residual land in respect of which we expect to lodge a subdivision application with council in the coming weeks.
We are confident that the full amount owing under the loan will be repaid in full upon completion of the sale of each of the lots and that we will also recover the majority of the default interest owing on the loan.
Loan No. 2
| Loan Assignment Date | 1st June 2022 |
| Loan security | 2nd registered mortgage |
| Loan as at 31/12/22 at standard interest rate | $217,000.79 |
| Loan value on assignment | $198,682.83 |
| Valuation | $1,300,000 |
| Standard loan interest rate | 18% p.a. |
| Default loan interest rate | 36% p.a. |
| Property details | 2.64 ha vacant land Avoca Beach, NSW |
This property was sold on the 6th of October by the borrower under our supervision for $1,745,198 and settled on the 16th January 2023. The current amount owing to the 1st mortgagee was repaid in full as was our loan including interest in the sum of $263,451.73 representing an internal rate of return of 52% p.a. from the date of the loan assignment.
Loan No. 3
| Loan Assignment Date | 27th June 2022 |
| Loan security | 1st registered mortgage |
| Loan value on assignment | $1,108,955.83 |
| Valuation at loan inception | $1,530,000 |
| Standard loan interest rate | 18% p.a. |
| Default loan interest rate | 36% p.a. |
| Property details | Residential house Forest Hill, Victoria |
This property was sold on the 15th of October by the borrower under our supervision for $1,380,000 and settled on the 25th November 2022.
The net amount paid to AMFS in repayment of the loan was $1,238,046.54 after legal and selling costs representing an internal rate of return of over 27% p.a. from the date of the loan assignment.
We will continue to provide additional updates with respect to the ASCF Private Fund every quarter, but should you have any queries or questions in the interim, please do not hesitate to contact me directly.
Regards,
Filippo Sciacca
Director
Investor Relations, Asset Management & Compliance – Australian Secure Capital Fund Ltd
