Investment Entities – Changes to Reporting of NTA Backing and Annual Report Disclosures

Introduction

Currently, investment entities (IEs) must disclose the net tangible asset backing (NTA Backing) of its securities within 14 days after the end of each month. Following the amendments to the Listing Rules, which came into effect in December 2019, changes to:

• the timing of this disclosure; and
• the definition of NTA Backing;

will apply from the quarter ending 31 March 2020 and onwards.

Annual Report disclosures have also changed and will apply to Annual Reports currently under preparation and subsequent Annual Reports.

Change to Timing

As mentioned earlier, currently IEs must disclose the NTA backing of their securities within 14 days of the end of each month, rather than when it becomes aware of the information. IEs will now need to provide that information at the end of each month immediately once it is “available for release to the market” and, in any event, no later than 14 days after the end of each month. “Available for release to the market” means when it has been properly compiled, verified and approved. Consequently, this may shorten the time when the NTA Backing information must be provided to the ASX.

Change to Definition of NTA Backing

A change has been made to the definition of “net tangible asset backing” in ASX Listing Rule 19.12 (see https://www.asx.com.au/documents/rules/Chapter19.pdf) . Generally, the values used to determine the NTA Backing must be determined in accordance with Australian Accounting Standards (including in particular, Australian Accounting Standard AASB 13 Fair Value Measurement) or other standards agreed by ASX.

New Annual Report Disclosures

The changes to ASX Listing Rule 4.10.20 requires IEs to disclose the following additional information in their Annual Report:

• The level 1, level 2 and level 3 inputs used to value the IE’s investments in accordance with Australian Accounting Standards AASB 13 Fair Value Measurement (this can be disclosed in a note to the financial statements in the Annual Report);
• The NTA Backing of its securities at the beginning and end of the reporting period and an explanation of any change therein over that period; and
• The total number of transactions in listed and unlisted securities and derivatives during the reporting period, together with the total brokerage paid or accrued during that period.

ASX Listing Rules 4.10.4 and 4.10.7 require Annual Reports to also disclose the following (this applies to IEs and all other entities):

• Substantial holding notices whether given to the entity under the Corporations Act 2001 or any equivalent overseas law; and
• In a distribution schedule of holders, inclusion of the total percentage of securities held by the holders in each category. For example:

Category	Number	Percentage
1-1,000	500	35.71%
1,001 – 5,000	300	21.43%
5,001 – 10,000	200	14.29%
10,001 – 100,000	300	21.43%
100,001 – and over	100	7.14%

Recommendation

We recommend that IEs review the changes with their accountants to ensure that the same are captured for the next and subsequent NTA Backing disclosures and Annual Reports.

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