Jurisdiction - Australia
Additional Disclosure by Infrastructure Entities for Retail Investors.

25 February, 2012

In response to some highly publicised retail investor losses, the Australian Securities and Investments Commission has introduced new disclosure benchmarks and principles applying to listed and unlisted infrastructure entities.
How does it affect you?
  • Regulatory Guide 231 (RG 231) introduces nine disclosure benchmarks and 11 disclosure principles that apply to disclosure to retail investors in listed and unlisted infrastructure entities. Disclosure against the benchmarks and principles is not mandatory, but represents ASIC's guidance on information that would reasonably be expected to be included as part of an infrastructure entity's disclosure.
  • The Australian Securities and Investments Commission (ASIC) expects affected entities to update their product disclosure statement (PDS) or prospectus (if one is in use), or otherwise to disclose against the benchmarks and disclosure principles by way of regular investor updates or website disclosure (where no PDS or prospectus is in use), by 1 July 2012.
  • New PDSs and prospectuses dated on or after 1 July 2012 should reflect the new benchmarks and principles, and material changes to an infrastructure entity's performance against the benchmarks, or in the disclosure principle information, should be dealt with as part of the entity's general ongoing disclosure obligations.
Who do the new disclosure rules apply to?
RG 231 applies to infrastructure entities. It defines an infrastructure entity as a listed or unlisted registered managed investment scheme, company or stapled structure investment that has been offered to retail investors on the basis that the primary strategy is to invest in any of:
a) the physical plant, property or equipment of infrastructure assets (including roads, railways, ports, airports, telecommunications facilities, electricity generation, and gas or electricity transmission or distribution);
b) the right to operate infrastructure assets; or
c) other unlisted entities that, either directly or indirectly, primarily invest in the assets referred to in (a) or (b) above.
Why have the disclosure requirements changed?
In response to losses suffered by retail investors in certain infrastructure entities, ASIC conducted investigations and invited interested parties to tender submissions on the issue1. Following this process, ASIC determined that the existing disclosure requirements did not effectively explain to investors the characteristics and risks of infrastructure entities. RG 231 is ASIC's attempt to improve disclosure and better inform retail investors.
What needs to be disclosed?
To achieve ASIC's intention to 'provide meaningful and constant information, enabling investors to understand the characteristics of infrastructure entities and the risks associated with them', RG 231 introduces nine disclosure benchmarks and 11 disclosure principles, as well as guidance on the form and method of PDS disclosure, ongoing disclosure and website disclosure.
Disclosure benchmarks
RG 231 applies an 'if not, why not' benchmark disclosure model to infrastructure entities, requiring entities to state whether they meet the relevant benchmark and, if they do not, to explain why.
RG 231 introduces the following disclosure benchmarks:



Corporate structure and management

The infrastructure entity's corporate governance policies and practices conform with ASX Listing Rules Guidance Note 9A, which provides for transparency about the context within which directors and other officeholders fulfil their duty to prioritise the interests of investors; or, for a company, the company as a whole.

Remuneration of management

Incentive-based remuneration paid to management is derived from the performance of the infrastructure entity.

Classes of units and shares 

All units or shares are fully paid and have the same rights.

Substantial related party transactions

The infrastructure entity complies with ASX Listing Rule 10.1 for substantial related party transactions. (Listing Rule 10.1 requires an entity to obtain member approval for certain transactions with related parties and associates.)

Cash flow forecast 

The infrastructure entity has, for the current financial year, prepared and had approved by its directors: 

  • a 12-month cash-flow forecast for the infrastructure entity and has engaged an independent suitably qualified person or firm to provide, according to the auditing standards:
    • negative assurance on the reasonableness of the assumptions used in the forecast; and
  • positive assurance that the forecast is properly prepared on the basis of the assumptions and on a basis consistent with the accounting policies adopted by the entity; and
  • an internal unaudited cash flow forecast for the remaining life, or the right to operate (if less), for each new significant infrastructure asset acquired by the infrastructure entity.

Base-case financial model

Before any new material transaction, and at least once every three years, an assurance practitioner performs an agreed-upon procedures check on the infrastructure entity's base-case financial model.

Performance and forecast 

For any operating asset developed by the infrastructure entity, or completed immediately before the infrastructure entity's ownership, the actual outcome for the first two years of operation equals or exceeds any original publicly disclosed forecasts used to justify the acquisition or development of that asset.


If the infrastructure entity is a unit trust, it will not pay distributions from scheme borrowings.

Updating the unit price 

If the infrastructure entity is an unlisted unit trust, after finalising a new valuation for an infrastructure asset, the infrastructure entity reviews, and updates if appropriate, the unit price before issuing new units or redeeming units.


Disclosure principles
RG 231 expects infrastructure entities to 'clearly and prominently disclose' the information outlined in the following 11 disclosure principles. 

Disclosure principle 


Key relationships 

Recommends disclosure of an entity's key relationships (eg controlling arrangements), including for significant infrastructure assets under development.

Management and performance fees 

Recommends disclosure of how management fees and performance fees will be paid and the justification for those fees.

Related party transactions 

Recommends disclosure of arrangements with related parties, including: 

  • the nature of the relationship;
  • if the arrangements are on arm's-length terms;
  • if member approval has been sought for the arrangements;
  • the risks associated with the arrangements; and
  • for management agreements with related parties, the term of the agreement, details of any termination fees payable, whether the appointment is exclusive, arrangements that have the actual or potential effect of entrenching management, and how investors may obtain a copy of the agreement.

Financial ratios 

Recommends disclosure of an infrastructure entity's publicly disclosed target financial ratios (if any) and actual financial ratios, and how investors can use these ratios (eg to assess an entity's level of debt).

Capital expenditure and debt maturities 

Recommends disclosure of planned capital expenditure for the next 12 months, and how this is to be funded; and information on debt finance (including drawn and undrawn amounts, the weighted average interest rate, material debt maturities and whether the debt is limited recourse debt).

Foreign exchange and interest rate hedging 

Recommends disclosure of foreign exchange and interest rate hedging policies, and whether the actual foreign exchange and variable interest rate exposure conforms with these policies.

Base-case financial model 

Recommends disclosure of various aspects of an entity's base-case financial model (eg the assumptions underlying the model and details of the agreed-upon procedures check by an assurance practitioner), an analysis of the effect on the infrastructure entity if key assumptions were to be materially less favourable than expected, and details about the operation of the entity's significant operating assets.


Recommends disclosure of information relating to valuation, including details of an entity's valuation policy; whether valuations, or a summary of valuations for significant infrastructure assets, are available to investors; and any potential conflicts of interest that may arise in the preparation of valuations.

Distribution policy 

Applies to infrastructures entities that are unit trusts, and recommends disclosure of the entity's distribution policy, the source of distribution payments and the risks associated with distributions being paid from sources other than operating cash flow.

Withdrawal policy 

Applies to infrastructure entities that are unlisted trusts, and recommends disclosure of information relating to withdrawals, including the entity's withdrawal policy, how investors will be notified of changes to this policy and risks that may affect investors' ability to withdraw their money.

Portfolio diversification 

Recommends disclosure of an infrastructure entity's portfolio diversification policy, its actual portfolio diversification position and an explanation for any material variances between these positions.

Disclosure and timing
The benchmarks and principles contained in RG 231 apply both to existing and new infrastructure entities from 1 July 2012.
Where an infrastructure entity has an existing prospectus or PDS in use as at 1 July 2012
Infrastructure entities should:
  • issue a new or a supplementary PDS or prospectus, including the benchmark and additional disclosure-principle information; or
  • if the entity is a managed investment scheme, include the benchmark and additional disclosure-principle information on a website referred to in the PDS (provided the requirements for such disclosure in ASIC Class Order [CO 03/237] are met). These requirements include that the information is not information of a kind required to be included in a supplementary PDS in order to correct a deficiency under the Corporations Act 2001 (Cth)).
Where an infrastructure entity no longer has a prospectus or PDS in use as at 1 July 2012
Infrastructure entities should address the benchmarks on an 'if not, why not' basis, and update investors according to the disclosure principles, by using normal investor communication channels, such as:
  • regular investment updates;
  • periodic statements under section 1017D of the Corporations Act; or
  • website disclosure.
PDSs and prospectuses dated on or after 1 July 2012
Such PDSs and prospectuses should clearly and prominently disclose against the benchmarks on an 'if not, why not' basis, and apply the disclosure principles and explain how the entity proposes to update investors.
Ongoing disclosure
If there are material changes to an infrastructure entity's performance against the benchmarks or to the information provided under the disclosure principles, the entity should explain these in ongoing disclosure. ASIC also considers that it is good practice to update investors annually on performance against the benchmarks and disclosure principles.
Given the extent of the disclosure required by RG 231, infrastructure entities should begin preparing now to make the necessary disclosure by 1 July 2012. If you would like more information, please contact any of the people below.
For further information, please contact:
Susan Burns, Partner, Allens Arthur Robinson
Penny Nikoloudis, Partner, Allens Arthur Robinson
Mark Cerché, Partner, Allens Arthur Robinson
John Beckinsale, Partner, Allens Arthur Robinson


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