15 April 2015

Cromwell Direct Property Fund Distributions Reduced To 4.75 Cents Per Unit From 1 May 2015

For some time now the Cromwell Direct Property Fund (“the Fund”) has been cautiously building up its cash reserves to fund an acquisition.  This cash build up has had a negative impact on the underlying earnings of the Fund. As a result the decision has been made that, from 1 May 2015, distribution payments will be reduced from the current 7.25 cents per unit to 4.75 cents per unit.  The reduction is consistent with the Fund’s Distribution Policy of distributing no more than 100% of the Fund’s expected profits available for distribution in the medium term (see Section 1.5 of the Fund’s PDS).  Distributions will continue to be paid monthly.

Australia’s official cash rate is currently 2.25% (its lowest level since the 1950s). Cash rates around most of the developed world are even lower. As a result, there continues to be a flood of short term money chasing relatively high yielding property assets in Australia.  In these market conditions it is challenging to acquire properties at prices that we believe will deliver long term value.  In other words, Cromwell believes that in some instances market risk is not being appropriately priced.  

We believe that property is a long term investment and that patience in the current market will pay off in the longer term. 

Notwithstanding these conditions Cromwell has been working hard to identify properties that meet the Fund’s investment strategy and further its investment objective.  We are well advanced in due diligence on a number of properties and, should the Fund acquire one or more of them, underlying earnings should increase and distributions are expected to increase accordingly.  

We will update investors within the next three months.

Until such time, Cromwell will not charge its ongoing management fee of 0.6% per annum of the Fund’s gross assets. We will continue to recover the costs of running the Fund, which are capped at 0.2% per annum of the Fund’s gross assets. 

We appreciate your patience in this matter and should you have any questions in regard to this decision please call Cromwell Investor Services on 1300 276 693.

Cromwell Funds Management Limited ABN 63 114 782 777 AFSL 333214 (“CFM”) has prepared this correspondence and is the responsible entity of, and the issuer of units in, the Cromwell Direct Property Fund ARSN 165 011 905 (“Fund”). In making an investment decision in relation to the Fund, it is important that you read the product disclosure statement dated 21 August 2013 (“PDS”) and the supplementary product disclosure statement dated 28 May 2014 (“SPDS”). The PDS and SPDS are issued by CFM and are available from www.cromwell.com.au/dpf or by calling Cromwell Investor Services on 1300 276 693. Applications for units in the Fund can only be made on the application form accompanying the PDS with approved wording, or an approved sticker, confirming that the applicant has received, read and understood the SPDS. This correspondence has been prepared without taking into account your objectives, financial situation or needs. Before making an investment decision, you should consider the PDS and SPDS and assess, with or without your financial or tax adviser, whether the Fund fits your objectives, financial situation or needs. CFM and its related bodies corporate, and their associates, do not receive any remuneration or benefits for the general advice given in this correspondence. If you acquire units in the Fund, CFM and certain related parties may receive fees from the Fund and these fees are disclosed in the PDS and SPDS.

Please note: Any investment, including an investment in the Fund, is subject to risk. If a risk eventuates, it may result in reduced distributions and/or a loss of some or all of the capital value of your investment. See the PDS and SPDS for examples of key risks. Past performance is not indicative of future performance. Forward-looking statements in this correspondence are provided as a general guide only. Capital growth, distributions and tax consequences cannot be guaranteed. Forward-looking statements and the performance of the Fund are subject to the risks and assumptions set out in the PDS and SPDS.