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6
abacus
annual financial report 2006
abacus property group
Level 34 Australia Square
264-278 George Street
Sydney NSW 2000
T. 612 9253 8600
F. 612 9253 8616
E. enquries@abacusproperty.com.au
www.abacusproperty.com.au
abacus property group
At 30 June 2006, the Abacus Property Group (APG) comprised the Abacus Trust (AT), the Abacus
Income Trust (AIT), Abacus Group Holdings Limited (AGHL) and Abacus Group Projects Limited
(AGPL). A summary of the corporate structure is illustrated below:
ABACUS
ProPerTy
GroUP
ABACUS GroUP
HoLDINGS
LImITeD
ABACUS TrUST
ABACUS INCome
TrUST
ABACUS GroUP
ProJeCTS
LImITeD
AGHL has been identified as the parent entity for the purpose of producing a consolidated
financial report for the APG. That is, the concise financial report for AGHL serves as a summary
of the financial performance and position of APG as a whole. It consolidates the financial reports
of AGHL, AT, AIT and AGPL and their controlled entities.
To comply with Australian reporting requirements, the concise financial reports of AT, AIT and
AGPL are also provided.
CoNTeNTS
01 ABACUS ProPerTy GroUP
43 ABACUS TrUST
63 ABACUS INCome TrUST
81 ABACUS GroUP ProJeCTS LImITeD
99 CorPorATe GoVerNANCe
103 ASX ADDITIoNAL INFormATIoN
glossary
Abacus Abacus Funds Management Limited, the responsible entity of the trusts
ADIF
Abacus Diversified Income Fund, made up of AIT and AGPL, which became part of APG on 31 March 2006
AGHL Abacus Group Holdings Limited
AGPL Abacus Group Projects Limited
AIT
Abacus Income Trust
APG
Abacus Property Group
AT
Abacus Trust
I
D
E
T
I
M
I
L
Y
T
P
P
U
O
R
G
N
G
S
E
D
E
P
O
C
S
Y
B
D
E
C
U
D
O
R
P
D
N
A
D
E
N
G
S
E
D
I
abacus property group
DIRECTORY
Abacus
Abacus funds management limited
level 34, Australia square
264-278 george street
sYDneY nsw 2000
tel (02) 9253 8600
fax (02) 9253 8616
website www.abacusproperty.com.au
Directors of Abacus
John thame, chairman
frank wolf, Deputy chairman (executive)
David bastian, managing Director
Dennis bluth
phillip green
malcolm irving
Directors of Abacus Group Holdings Limited
John thame, chairman
frank wolf, Deputy chairman (executive)
David bastian, managing Director
Dennis bluth
phillip green
malcolm irving
len lloyd
Company secretary
sean o’Donoghue
Custodian
perpetual trustee company limited
level 12, Angel place
123 pitt street
sYDneY nsw 2000
Auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
Compliance plan auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
Registry
computershare investor services pty ltd
level 3, 60 carrington street
sYDneY nsw 2000
tel (02) 1800 635 323 toll free
fax (02) 8234 5050
apg
contents
02 Directors’ report
17 AuDitor’s inDepenDence DeclArAtion
18 consoliDAteD income AnD Distribution stAtements
19 consoliDAteD bAlAnce sheet
21 consoliDAteD stAtement of recogniseD income AnD expense
22 consoliDAteD cAsh flow stAtement
23 notes to the concise finAnciAl stAtements
40 Directors’ DeclArAtion
41
inDepenDent AuDit report
It is recommended that this annual financial report be read in conjunction with the annual financial reports of Abacus Trust, Abacus
Income Trust and Abacus Group Projects Limited for the year ended 30 June 2006. It is also recommended that the report be
considered together with any public announcements made by the Abacus Property Group in accordance with its continuous disclosure
obligations arising under the Corporations Act 200.
annual financial report / continued
CorPorATe sTruCTure
on 3 March 2006, APG implemented a merger with the
previously unlisted Abacus Diversified Income fund (ADIf).
APG is now comprised of AGHL, Abacus Trust (AT), Abacus
Group Projects Limited (AGPL) and Abacus Income Trust
(AIT). shares in AGHL and AGPL and units in AT and AIT
have been stapled together so that none can be dealt with
without the other. An APG security consists of one share
in AGHL, one unit in AT, one share in AGPL and one unit in
AIT. A transfer, issue or reorganisation of a share or unit in
any of the component parts is accompanied by a transfer,
issue or reorganisation of a share or unit in each of the other
component parts.
AGHL and AGPL are companies that are incorporated and
domiciled in Australia. AT and AIT are Australian registered
managed investment schemes. Abacus funds Management
Limited (Abacus), the responsible entity of AT and AIT, is
incorporated and domiciled in Australia and is a wholly owned
subsidiary of AGHL.
The registered office and principal place of business of AGHL
and Abacus is located at Level 34, Australia square, 264-278
George street, sydney nsW 2000.
oPerATInG ProfIT
APG earned a net profit attributable to securityholders of
$0.2 million for the year ended 30 June 2006 (June 2005:
$52.0 million).
APG earned a net profit attributable to securityholders
(excluding net property and derivative financial instruments
revaluation movements, net of related minority interests
attributable thereto) of $54.0 million (June 2005: $39.9
million).
directors’ report
The directors present their report together with the
consolidated financial report of Abacus Group Holdings
Limited (AGHL) and the auditor’s report thereon.
AGHL has been identified as the parent entity of the group
referred to as the Abacus Property Group (APG or the Group).
The consolidated financial reports of AGHL for the year
ended 30 June 2006 now comprise the consolidated financial
reports of AGHL and its controlled entities, Abacus Trust and
its controlled entities, Abacus Group Projects Limited and its
controlled entity and Abacus Income Trust and its controlled
entities.
DIreCTors
The directors of AGHL in office during the financial year and
until the date of this report are set out below:
John Thame
Chairman (non-executive)
frank Wolf
Deputy Chairman (executive)
David bastian
Managing Director (executive)
Dennis bluth
non-executive
Phillip Green
(resigned /9/06)
non-executive
Malcolm Irving
non-executive
Len Lloyd
executive
PrInCIPAL ACTIVITIes
The principal activities of the Group during the course of the
year ended 30 June 2006 include:
• investment in commercial, retail and industrial properties;
• property-related funds management and property
syndication;
• property and project management;
• mortgage lending; and
• participation in other property-related activities and
developments.
2
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
eArnInGs Per sTAPLeD seCurITY
basic and diluted earnings per stapled security
basic and diluted earnings per stapled security (excluding revaluation movements
in investment properties and derivative financial instruments, net of related minority
interests attributable thereto)
YeAr enDeD
30 June 2006
CenTs
YeAr enDeD
30 June 2005
CenTs
24.22
6.8
2.92
2.42
DIsTrIbuTIons
The Group paid cash distributions to securityholders of $45.4 million (.70 cents per unit) during the year
ended 30 June 2006 (June 2005: $35. million; .50 cents per unit). In addition, a distribution of $5.5 million
(3.0 cents per unit) was declared and provided for in respect of the quarter ended 30 June 2006.
The AT funded all distributions to securityholders for the year ended 30 June 2006.
The full year distribution of .80 cents per stapled security reflects a 3.5% increase over the full year
distribution of .40 cents per stapled security for the year ended 30 June 2005.
Distributions were paid in respect of the year ended 30 June 2006 to securityholders as follows:
Interim distribution paid 0 november 2005
Interim distribution paid 0 february 2006
Interim distribution paid 0 May 2006
final distribution paid 0 August 2006
Total
CenTs
2.90
2.90
3.00
3.00
11.80
$’000
,79
,79
3,2
5,49
50,961
3
annual financial report / continued
directors’ report
reVIeW of oPerATIons
GrouP oVerVIeW
The Group principally operates within Australia (except for an investment of approximately $23 million in a hotel in new Zealand
and an investment of approximately $2 million in a joint venture in the united Kingdom. The hotel was acquired as a seed asset
of a new fund, the Abacus Hospitality Trust, which will be marketed in the next financial year). The Group holds an investment
portfolio of commercial, retail and industrial properties, operates funds and property management businesses, holds mortgage
loan investments and participates in development projects and other property-based investments.
oPerATInG resuLTs for THe PerIoD
A summary of combined revenue and profits is as follows:
Business segments
Property rental and sales()
funds and property management
other property-based investments
Hotel business
Combined entity adjustments
Combined entity revenue and operating profit
() profit includes net revaluation increment on investment properties
Geographic segments
Australia
new Zealand
united Kingdom
Combined entity revenue and operating profit
YeAr enDeD 30 June 2006
reVenue
ProfIT
$’000
$’000
87,480
2,837
28,202
9,058
0,230
8,967
25,077
982
96
(34,396)
138,538
101,860
YeAr enDeD 30 June 2006
reVenue
ProfIT
$’000
$’000
38,270
95
73
0,930
(06)
36
138,538
101,860
During the financial year under review, APG achieved strong growth in all its key business activities. excluding properties
acquired through the merger with ADIf, over $530 million of property was acquired or has been contracted to be acquired.
4
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
MerGer WITH AbACus DIVersIfIeD InCoMe funD
on 4 february 2006, securityholders in both the APG and
ADIf (an unlisted fund managed by Abacus) agreed, by special
resolution, to merge the two entities effective on 3 March
2006. on 20 february 2006, the supreme Court of new south
Wales gave orders that Abacus was justified in implementing
the merger proposal.
The merger with ADIf and the other acquisitions noted above
bring the value of the total investment property portfolio to
over $740 million (including hotel and car park assets which
have been classified as property, plant and equipment) at
30 June 2006;
• The Group has contracted to acquire five additional
properties for approximately $47 million, including:
The merger was implemented on 3 March 2006 and resulted
in AGPL and AIT being listed on the AsX alongside AGHL and
AT under a stapled security structure.
The net assets of ADIf as at 3 March were essentially
aggregated with APG to form the expanded APG at that date.
The key impacts on the Group’s balance sheet resulting from
the aggregation of ADIf as at 3 March 2006 were:
• total assets increased by $243.4 million;
• total liabilities increased by $44. million, including interest
bearing liabilities of $37.2 million;
• net assets increased $99.3 million, net tangible assets
increased $98.3 million;
• APG issued a further 79,309,59 stapled securities to
effect the merger.
InVesTMenT ProPerTY PorTfoLIo
• With the merger of APG and ADIf on 3 March 2006, the
Group added approximately $20 million of assets to its
investment property portfolio (including hotel assets);
• The Group acquired ten additional properties for
approximately $7 million, including:
– a number of hotel assets including the Tradewinds
Hotel & resort in Cairns, the Twin Waters resort on the
sunshine Coast in Queensland, and the Chateau on the
Park Hotel in Christchurch, new Zealand. These assets
have been acquired for approximately $22 million and
it is intended that they will provide the seed assets for a
new hospitality funds management vehicle. In addition,
the Group acquired three small hotels in both sydney and
regional new south Wales for approximately $8 million
(including rights and entitlements);
– retail properties in Aspley, brisbane and Midlands Central,
Perth and two small retail properties adjoining Liverpool
Plaza in sydney for approximately $3 million;
– the Carlton Hotel in Auckland, new Zealand for
approximately $79 million;
– a bulky goods retail centre in Moorabbin, Victoria for
approximately $37 million and a small regional shopping
centre in Townsville, Queensland for approximately
$7 million;
– a 50% direct interest in a commercial office building in
Adelaide, south Australia for approximately $5 million; and
– a tract of industrial land in Dandenong, Victoria for
approximately $9 million.
• The revaluation of 3 existing properties in the portfolio
resulted in a net increase of $4 million in the carrying value
of investment properties;
• In January 2006, the Group completed the sale of an
investment property in Glebe, new south Wales realising a
profit of approximately $2 million.
• recurring net income from contracted rental receipts
comprised approximately 55% of Group earnings before
interest, tax, depreciation and amortisation for the year.
funDs MAnAGeMenT
• In funds management, as responsible entity, the Group
acquired or contracted to acquire over $270 million of
property assets during the year and to the date of this
report including:
– establishment of the Abacus storage fund in August
2005 with total assets of approximately $80 million at
30 June 2006.
In August 2005, the Group completed the acquisition of
an initial portfolio of storage facility assets totalling $93
million and acquired further assets during the year of
approximately $87 million for the Abacus storage fund
(a stapled security fund comprising a new managed
investment scheme and an operating company). At 30
June 2006, the Group had $33 million outstanding as a
loan to the Abacus storage fund to assist in settlement
of assets acquired during the year ahead of raising
external equity from retail investors.
A total of $47 million of external capital had been raised
by the Abacus storage fund as at 30 June 2006.
5
annual financial report / continued
directors’ report
funDs MAnAGeMenT / continued
– established the Abacus Prime Property fund (APPf) in
october 2005. APPf acquired or contracted to acquire
approximately $52 million of additional properties to
the date of this report. Total assets of APPf were
approximately $37 million as at 30 June 2006. It is
intended that this fund become the Group’s diversified
income fund and will include real property, investments in
mortgages and listed and unlisted securities.
– As mentioned above, it is intended to establish
the Abacus Hospitality fund with initial assets of
approximately $200 million including the Twin Waters
resort, Tradewinds resort, Chateau on the Park and the
Carlton Hotel. As at 30 June 2006, the Group has invested
approximately $50 million to acquire this portfolio.
Total assets under management, combining assets owned by
the Abacus Property Group and assets managed by the Group
on behalf of external investors, increased $450 million to
approximately $.4 billion at 30 June 2006 from approximately
$950 million at 30 June 2005.
MorTGAGe LenDInG
The mortgage portfolio now comprises the Abacus Mortgage
fund, ADIf Investment Trust, loans to build the Group’s fund
management business, mortgages to Abacus associated
developments and joint ventures and other mortgage
investments.
• The Group added approximately $23 million in principal and
interest to its mortgage investment portfolio through the
merger with ADIf as mortgages in ADIf Investment Trust
are now included in the portfolio.
• The Abacus Mortgage fund increased the size of its
mortgage book (including accrued interest) by $43 million
to $00 million at 30 June 2006 compared to $57 million
at 30 June 2005.
The combined Abacus Mortgage fund and ADIf Investment
Trust have an average loan balance of approximately $4 million
and average term of 6 months. Loans are provided to both
property developers and investors.
• A subsidiary of AGHL had loans totalling $93 million
outstanding at 30 June 2006 compared to $96 million at
30 June 2005. of the outstanding balance at 30 June 2006,
$54 million had been advanced to Abacus storage fund and
Abacus Prime Property fund ahead of raising equity capital
from retail investors. other funds have been advanced to
existing schemes where Abacus is either the responsible
entity or has joint venture interests, or for other mortgage
purposes.
6
AbACus AnnuAL fInAnCIAL rePorT 2006
ProJeCTs AnD JoInT VenTures
The Group has a number of joint venture investments with
experienced property investors and developers in new south
Wales, Queensland and Victoria. These joint venture activities
enable the Group to participate in a range of property-related
opportunities with industry leaders who have local knowledge
and a depth of management experience.
During the year ended 30 June 2006, the Group earned a
profit of approximately $2 million from joint venture activities
through the sale of certain development sites in Victoria.
reVIeW of fInAnCIAL ConDITIon
During the year ended 30 June 2006, the contributed equity
of the Group increased $220.7 million (63%) to $572.5 million
compared to $35.8 million at 30 June 2005.
Capital raisings were made through institutional placements
in August 2005 for $55 million (42.6 million stapled
securities at $.29) and february 2006 for approximately
$7 million (50.0 million stapled securities at $.4). of the
total $26 million capital raised, approximately $8 million was
allocated to AGHL and $4 million allocated to AT (after issue
costs). This additional capital was directed towards acquisition
of property assets for the Group and for growth of the funds
management business (particularly the Abacus Prime Property
fund, Abacus storage fund and proposed Abacus Hospitality
fund). In addition, in early July 2006, the Group completed
a $20 million capital raising via a security Purchase Plan
(3.8 million securities at $.4).
Total equity increased $268.5 million (66%) to $673. million
at 30 June 2006 compared to $404.6 million at 30 June 2005.
The addition of ADIf to the Group increased total equity by
$99.3 million. net tangible assets per security increased 2%
to $.22 at 30 June 2006 compared to $.09 at 30 June 2005.
At 30 June 2006, existing bank loan facilities totalled
approximately $387 million, of which $376 million was drawn.
The Group manages interest rate exposure on debt facilities
through the use of interest rate swap contracts. At 30 June
2006, approximately $239 million or 62% of total debt facilities
were covered by interest rate swap arrangements at an
average interest rate (including bank margin) of 6.93% and an
average term to maturity of 6.3 years.
The Group’s net debt gearing ratio (calculated as total interest
bearing liabilities less cash assets divided by total assets) was
35.5% at 30 June 2006 compared to 28.3% at 30 June 2005.
abacus property group
sIGnIfICAnT CHAnGes In THe sTATe of AffAIrs
The following significant changes in the state of affairs of the
Group occurred during the financial year:
• on 3 March 2006, APG implemented a merger with the
ADIf increasing the Group’s investment property portfolio
(including hotel assets) by approximately $20 million,
increasing total assets by approximately $243 million and
increasing net assets by $99 million;
• retained earnings (including the impact of revaluations of
investment properties and derivative financial instruments)
increased $46 million to $97 million at 30 June 2006
compared to $5 million at 30 June 2005;
• Total equity increased 66% or $268 million to $673 million
at 30 June 2006 compared to $405 million at 30 June 2005,
reflecting the impact of the merger with ADIf, additional
capital raised, growth in retained earnings and net positive
revaluations during the year;
• The Abacus Prime Property fund and Abacus storage fund
increased their combined total assets to approximately
$206 million at 30 June 2006.
sIGnIfICAnT eVenTs AfTer bALAnCe DATe
on 3 July 2006, the Group completed a capital raising
via a security Purchase Plan for $9.5 million and issued
approximately 3.8 million securities at $.4 per security. of
the total $9.5 million capital raised, approximately $. million
has been allocated to AGHL, approximately $5.3 million has
been allocated to AT, approximately $2.9 million has been
allocated to AIT and approximately $0.2 million has been
allocated to AGPL.
In July 2006, AGHL, through a 50% owned joint venture
project trust, exchanged contracts to acquire a parcel of
potential development land in Dandenong, Victoria for
an aggregate purchase price of $8.9 million (with final
settlement deferred until July 2007). In addition, AGHL
entered into bank guarantee obligations (for approximately
$5 million) on behalf of certain joint venture project entities and
also entered into a contract settlement performance guarantee
obligation (for approximately $9 million) in respect
of the Dandenong land purchase noted above.
During August 2006, AT completed the acquisition of a bulky
goods retail property at Moorabbin, Victoria for an purchase
price of approximately $37 million and exchanged contracts to
acquire a 50% direct interest in a commercial office property
in Adelaide, sA for approximately $5 million. In addition, AIT
exchanged contracts to acquire a small shopping centre in
Townsville, Queensland for approximately $7 million and also
exchanged contracts to sell its property at Kings Park, nsW
for approximately $20 million. The sale is expected to be
completed in early september 2006.
other than as disclosed in this report and to the knowledge of
directors, there has been no matter or circumstance that has
arisen since the end of the financial year that has significantly
affected, or may affect, the Group’s operations in future
financial years, the results of those operations or the Group’s
state of affairs in future financial years.
LIKeLY DeVeLoPMenTs AnD eXPeCTeD resuLTs
The directors have excluded from this report any other
information on the likely developments in the operations of the
Group and the expected results of those operations in future
financial years which are not of a material nature or would in
the directors’ view be likely to result in unreasonable prejudice
to the operation of the Group.
reMunerATIon rePorT
reMunerATIon & noMInATIon CoMMITTee
The remuneration & nomination Committee is responsible
for making recommendations to the board on remuneration
policies and practices applicable to board members and senior
executives of the Group. The board’s remuneration policy
is to ensure that remuneration packages properly reflect
each individual’s duties, responsibilities and performance.
In addition, the board seeks to ensure that remuneration
offered by the Group is competitive in attracting, retaining and
motivating high quality people.
The remuneration & nomination Committee is comprised of:
Malcolm Irving (Chairman)
John Thame
Dennis bluth
7
annual financial report / continued
directors’ report
reMunerATIon rePorT / ConTInueD
The primary responsibilities of the remuneration &
nomination Committee include:
• determining and reviewing remuneration policies to apply to
members of the board and to the executives of the Group;
• determining the specific remuneration packages for
executive directors and key members of the senior
management team (including base pay, incentive payments
and other benefits);
• reviewing contractual rights of termination of executive
directors and, where applicable, members of the senior
executive team;
• reviewing managements recommendations of the total
proposed incentive payment awards to be provided;
• reviewing and approving the appointment of senior
executives to the Group.
CoMPensATIon of non-eXeCuTIVe DIreCTors
The compensation policy for non-executive directors seeks to
appropriately remunerate them for their time, commitment and
responsibilities.
non-executive director’s are paid a director’s fee and do not
receive any retirement benefits (other than superannuation
which is inclusive in the director’s fee) or performance-related
compensation. Where a non-executive director serves on
the Group’s Credit Committee, they receive compensation
for this service in addition to a director’s fee. The aggregate
pool available for payment of directors’ fees to non-executive
directors of the Group is an amount not to exceed $400,000
(inclusive of superannuation guarantee contributions) and
represents a pool to incorporate a base fee together with fees
for specific service on various board committees. This amount
and structure was approved by securityholders at the Annual
General Meeting held in november 2005.
The compensation of non-executive directors for the year
ended 30 June 2006 and 30 June 2005 is set out below:
Non-executive directors
J Thame, Chairman
30 June 2006
30 June 2005
M Irving
30 June 2006
30 June 2005
P Green
30 June 2006
30 June 2005
D bluth
30 June 2006
30 June 2005
Total non executive directors
30 June 2006
30 June 2005
bAse
fees
$
AuDIT reMunerATIon
CoMMITTee
fees
CoMMITTee
fees
$
$
5,000
–
10,000
–
–
–
5,000
–
5,000
–
–
–
152,120
72,880
65,000
29,50
65,000
29,50
65,000
33,45
Due
DILIGenCe
CoMMITTee
fees
CreDIT
CoMMITTee
fees
$
–
–
–
–
–
–
$
–
–
–
–
–
–
5,000
–
5,000
–
10,000
–
4,800
3,200
ToTAL
fees
$
162,120
72,880
80,000
29,50
65,000
29,50
89,800
36,65
347,120
64,595
20,000
–
15,000
–
10,000
–
4,800
3,200
396,920
67,795
noTe: no fees were specifically paid for Committee representation for 2005.
8
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
CoMPensATIon of eXeCuTIVe DIreCTors
AnD senIor eXeCuTIVes
Executive employment contracts
The Group has entered into agreements with executive
director, Dr fM Wolf, and the Managing Director, DJ bastian
in relation to compensation and, more specifically, the notice
period required should their services no longer be required by
the board or either voluntarily terminate their employment with
the Group. The agreements stipulate base salary, allow for
annual review and inflation adjustment and provides for short-
term incentive payments in addition to the executives’ base
salaries, subject to certain performance criteria determined by,
and at the discretion, of the board.
should the board seek to terminate the services of either Dr
Wolf and or Mr bastian, a notice period of twelve months is
required to be given. If either Dr Wolf or Mr bastian voluntarily
terminates their employment with the Group, a notice period
of 6 months is required.
Mr bastian has announced his intention to retire as Managing
Director effective 30 september 2006.
There are no other executive service agreements.
Executive pay
The board’s policy on executive pay is to ensure compensation
is reasonable, competitive, motivating and appropriate for the
results delivered. The remuneration & nomination Committee
takes external advice in its deliberations.
The current compensation structure has two components,
the combination of which comprises the executive’s total
compensation:
• base pay and benefits (fixed); and
• short term incentive (variable ‘at risk’)
The total compensation package seeks to provide an
appropriate mix of base salary with short-term incentives.
The remuneration Committee is currently working through
the structure of a long-term incentive program for senior
executives.
(a) Base pay
executives are offered a base pay that comprises the fixed
component of their total compensation. subject to meeting
minimum superannuation obligations, executives are able
to nominate the mix between cash and superannuation
contributions.
base salary is set by reference to the executive’s position,
experience and performance. The Group aims to ensure
base salaries are competitive in the market. base salaries
are reviewed annually having regard to individual and Group
performance and external market conditions. The base pay of
executive directors and senior executives are reviewed and
approved by the remuneration & nomination Committee.
(b) Short-term incentives
At the discretion of the board, executives and senior
managers may receive short-term incentive payments
based on reference to a variety of measures, both financial
and non-financial. These measures primarily include Group
profitability targets, returns to securityholders and certain key
performance indicators such as assets under management.
The board considers that performance-linked objectives that
have an operational and financial impact focus are best suited
to the outcomes desired by securityholders. non-financial
measures are also taken into account.
The actual level of short-term incentive payments awarded
to each executive at the end of each year is determined
by reference to achievement of the targets and the extent
to which executives were able to contribute to such
achievement.
(c) Share based payments
In April 2006, the board approved an arrangement, forming
part of the employment contract for a particular executive only,
whereby APG provides loan funds to enable the executive
to acquire APG securities on-market at prevailing market
prices. The maximum amount that can be drawn under
the arrangement is $2.5 million; it has an initial term of five
years and expires in May 20. The loan is interest free.
for compensation purposes however, an amount is deducted
from the executive’s base compensation at an estimated
commercial interest rate of 7.5% per annum and this amount
is included in the table below for the year ended 30 June
2006. The loan is limited recourse against the securities
purchased and repayment is satisfied by the sale of the
securities upon termination of employment and repayment
of the outstanding loan balance, appropriate application
of other compensation during the term or via a specified
repayment schedule at the end of the term. The arrangement
is not currently available to directors or other executives.
9
annual financial report / continued
directors’ report
reMunerATIon rePorT / ConTInueD
Compensation of executive directors
(i) The compensation of key management personnel – executive directors for the year ended 30 June 2006 and
30 June 2005 (consolidated) is set out below:
Executive directors
f Wolf, Deputy Chairman
30 June 2006
30 June 2005
D bastian, Managing Director
30 June 2006
30 June 2005
L Lloyd
30 June 2006
30 June 2005
Total executive directors
30 June 2006
30 June 2005
sALArY
& fees
$
CAsH
bonus()
suPer-
AnnuATIon
sHAre
bAseD
$
$
779,167
55,250
440,000
400,000
501,907
484,540
275,000
250,000
224,220
69,500
120,000
60,000
70,833
–
98,093
,585
30,780
5,000
1,505,294
,205,290
835,000
70,000
199,706
62,585
ToTAL
$
1,290,000
95,250
875,000
746,25
375,000
280,500
2,540,000
,977,875
$
–
–
–
–
–
–
–
–
() Cash bonus relates to amounts paid in August 2006 and August 2005 and referrable to the years ended 30 June 2006 and 2005 respectively
0
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
Compensation of executives
(i) The compensation of key management personnel - executives for the year ended 30 June 2006 and 30 June 2005
(consolidated) is set out below:
Key management personnel
sALArY
& fees
$
CAsH
bonus()
suPer-
AnnuATIon
sHAre
bAseD(2)
$
$
219,861
96,94
150,000
00,000
30,139
28,086
59,050
–
–
–
187,861
94,44
100,000
30,000
245,000
88,904
100,000
65,000
187,861
73,44
100,000
60,000
140,775
–
–
–
2,023
–
12,139
,586
15,000
2,058
12,139
,586
5,058
–
ToTAL
$
400,000
325,000
$
–
–
5,594
–
66,667
–
–
–
–
–
–
–
–
–
300,000
236,000
360,000
265,962
300,000
245,000
145,833
–
J L’estange
30 June 2006
30 June 2005
T Hardwick (3)
30 June 2006
30 June 2005
K Kitchen
30 June 2006
30 June 2005
s o’Donoghue (4)
30 June 2006
30 June 2005
P strain
30 June 2006
30 June 2005
e Varejes (5)
30 June 2006
30 June 2005
Total executives
30 June 2006
30 June 2005
1,040,408
753,646
450,000
255,000
76,498
63,36
5,594
–
1,572,500
,07,962
() Cash bonus relates to amounts paid in August 2006 and August 2005 and referrable to the years ended 30 June 2006 and 2005 respectively
(2) share based represents an amount deducted from the executive’s base compensation during the year associated with the executive’s
share loan arrangement
(3) Commenced employment in May 2006
(4) Commenced employment in september 2004
(5) Commenced employment in february 2006
annual financial report / continued
directors’ report
InforMATIon on DIreCTors AnD offICers
The directors and company secretary of AGHL, Abacus (the responsible entity of AT and AIT) and AGPL, in office during the
financial year and until the date of this report are as set out below, with qualifications, experience and special responsibilities.
JoHn THAMe AIbf, fCPA
Chairman (non-executive)
Member of Audit Committee
Member of remuneration & nomination Committee
frAnK WoLf PhD, bA Hons
Deputy Chairman (executive)
Director, Abacus Group Projects Limited
DAVID bAsTIAn CPA
Managing Director
Director, Abacus Group Projects Limited
MALCoLM IrVInG AM, fCPA, sf fin, bCom, Hon DLitt
non-executive director
Chairman of Audit Committee
Chairman of remuneration & nomination Committee
Mr John Thame has over 30 years experience in the retail financial
services industry in senior management positions. His 26-year career
with Advance bank included 0 years as Managing Director until the
bank’s merger with st George bank Limited in 997. Mr Thame is
Chairman of st George bank Limited, a director of reckon Limited and
a former director of AWb Limited.
Dr frank Wolf has over 20 years experience in the property
and financial services industries, including involvement in retail,
commercial, industrial and hospitality-related assets in Australia, new
Zealand and the united states. Dr Wolf has been instrumental in over
$2 billion worth of property related transactions, corporate acquisitions
and divestments and has financed specialist property-based assets
in retirement and hospitality sectors. Dr Wolf is the Chairman of fsP
Group Pty Limited and a director of financial planning groups financial
services Partners Pty Limited, Vector financial services Limited
and Kingston Capital Limited as well as of HGL Limited, a diversified
publicly listed investment company.
Mr David bastian has almost 40 years experience in the financial
services industry, in particular in the packaging of commercial, retail
and residential property projects. He was Managing Director of the
Canberra building society for 20 years and an executive Director
of Godfrey Pembroke financial services Pty Limited for 7 years.
Mr bastian is also a director of financial planning groups fsP Group
Pty Limited, Vector financial services Limited and Kingston Capital
Limited.
Mr Malcolm Irving has over 40 years experience in company
management, including 2 years as Managing Director of CIbC
Australia Limited. Mr Irving is Chairman of Australian Industry
Development Corporation, the Australian river Company Limited,
Willis Australia Limited Group and Keycorp Limited. He is also a
director of o’Connell street Associates Pty Ltd, ADI Limited and
resimac Limited.
2
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
PHILLIP Green LLb, bCom
non-executive director
Mr Phillip Green is Managing Director of babcock & brown Limited.
Mr Green has over 25 years experience in corporate finance
specialising in taxation and structured domestic and international
corporate acquisitions. He is also a director of a number of companies
including Chairman of babcock & brown Infrastructure Limited,
babcock & brown environmental Investments Limited and of the
responsible entity of the MTM entertainment Trust, and is a director
of babcock & brown Capital Limited, everest babcock & brown
Alternative Investments, Thakral Holdings Limited, the trustee of
the babcock & brown Japan Property Trust, Tourism Asset Holdings
Limited, fsP Group Pty Limited and Prime Infrastructure Management
Limited.
Mr Green holds bachelor of Commerce and bachelor of Law degrees
and qualified as a Chartered Accountant.
DennIs bLuTH LLM, LLb, bA
non-executive director
Chairman of Credit Committee
Chairman of Due Diligence Committee
Member of Audit Committee
Member of remuneration & nomination Committee
Mr Dennis bluth holds bachelor of Arts, bachelor of Law and Masters
of Law degrees and has practised as a solicitor for over 25 years,
principally in the area of property law. Mr bluth is a Chairman with
Abbott Tout solicitors of sydney, Canberra and brisbane and is a
member of a number of Law society and Law Council Committees.
He was formerly a director of Godfrey Pembroke financial services
Limited.
Len LLoYD fAPI, LreA
executive director
Director, Abacus Group Projects Limited
seAn o’DonoGHue bCom, CA, MbA
Company secretary
Mr Len Lloyd is a licensed real estate Agent and a registered real
estate Valuer. His experience includes the development, management
and funding of commercial, retail and residential property. Mr
Lloyd joined the Abacus Group in october 2000 and now holds the
position of Managing Director of Abacus Property services Pty
Limited responsible for property administration and development
opportunities in the Abacus portfolio. In previous positions Mr Lloyd
held responsibility for the property portfolios of the Advance bank and
st George bank and provided valuation and lending advice while with
the Commonwealth Development bank.
Mr sean o’Donoghue has been the Company secretary since joining
the Abacus Group in september 2004. Mr o’Donoghue has over 5
years experience in the property and financial services industries
having held various senior roles with MLC, Lend Lease Corporation
and Commonwealth bank over that period.
3
annual financial report / continued
directors’ report
InforMATIon on DIreCTors AnD offICers / ConTInueD
The directors and officers were in office from the beginning of
the financial year until the date of this report unless otherwise
stated.
As at the date of this report, the relevant interests of the
directors and specified executives in the stapled securities of
APG and outstanding loans provided to acquire APG securities
were as follows:
A number of board sub-committees exist to ensure efficient
monitoring and delivery of board policies.
The Audit Committee is chaired by Malcolm Irving. Its purpose
is to ensure that an effective framework exists through the
establishment and maintenance of adequate internal controls
to safeguard assets and to ensure the integrity and reliability of
the financial and management reporting systems.
The Due Diligence Committee is chaired by Dennis bluth. The
Committee reviews and makes recommendations for major
acquisitions, new syndications and preparation of associated
product disclosure statements.
The remuneration & nomination Committee is chaired
by Malcolm Irving. The committee reviews and makes
recommendations on remuneration packages and other items
of employment for executive and non-executive directors
and the senior management of the Group. In addition, the
committee review and approve nominations for new senior
management appointments.
Directors
J Thame
f Wolf
D bastian
M Irving
P Green
D bluth
TOTAL
APG seCurITIes
LoAn To funD
HeLD APG seCurITIes
50,000
6,828,546
7,059,549
27,993
9,370,430
–
23,336,518
–
–
–
–
–
–
–
The directors are not party to any contract under which the
directors may be entitled to a benefit or that confers a right to
call for or deliver interests in the Group.
Executives
T Hardwick
K Kitchen
P strain
TOTAL
APG seCurITIes
HeLD
LoAn To funD
APG seCurITIes
,750,000
3,492
2,496,822
–
0,000
1,773,492
2,496,822
4
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
DIreCTors’ MeeTInGs
The number of meetings of directors (including meetings of committees of directors) of AGHL and Abacus held during the year
and the number of meetings attended by each director were as follows:
Number of meetings held
Number of meetings attended
J Thame
f Wolf
D bastian
D bluth
P Green
M Irving
L Lloyd(2)
D brodie(3)
G broome(3)
Due
AuDIT
CoMMITTee
noMInATIon &
DILIGenCe reMunerATIon
CoMMITTee
CoMMITTee()
CreDIT
CoMMITTee
3
3
–
–
3
–
3
–
–
–
5
–
5
5
3
–
–
–
–
–
3
3
–
–
–
3
–
–
–
27
–
–
–
27
–
–
–
27
27
boArD
9
9
9
9
7
0
6
8
–
–
() Membership to the due diligence committee changes in relation to projects. The directors attended all meetings of the committee in which they have
been appointed as members
(2) Mr Len Lloyd is a director of AGHL and AGPL only. Meetings of AGHL and Abacus were held concurrently
(3) Mr G brodie and Mr G broome are external members of the Credit Committee
DIreCTors’ benefITs
since the end of the previous financial year, no director
has received or become entitled to receive a benefit, other
than any benefit disclosed in the financial statements as
compensation or the fixed salary of key management
personnel of the Group or a related company by reason of a
contract made by the Group or a related body corporate with
the director or a with a firm of which he is a member, or with
an entity in which he has a substantial financial interest.
enVIronMenTAL reGuLATIon AnD PerforMAnCe
The Group’s environmental responsibilities, such as waste
removal and water treatment, have been managed in
compliance with all applicable regulations and licence
requirements and in accordance with industry standards. no
breaches of requirements or any environmental issues have
been discovered and brought to the board’s attention. There
has been no known significant breaches of any environmental
requirements applicable to the Group.
InDeMnIfICATIon AnD InsurAnCe of DIreCTors
AnD offICers
Abacus has paid an insurance premium in respect of a contract
insuring all directors and full time executive officers and
secretary. The terms of this policy prohibit disclosure of the
nature of the risks insured or the premium paid.
sTAPLeD seCurITY oPTIons
no options were granted over any stapled securities in
the Group during the financial year nor are there options
outstanding as at the date of this report.
5
annual financial report / continued
directors’ report
reGIsTer of seCurITYHoLDers
The register of securityholders has, during the year ended
30 June 2006, been properly drawn up and maintained so as
to give a true account of the securityholders of the Group.
AuDITors InDePenDenCe DeCLArATIon
We have obtained an independence declaration from our
auditor, ernst & Young, and such declaration is shown on the
following page.
CorPorATe GoVernAnCe
In recognising the need for the highest standards of corporate
behaviour and accountability, the directors of the Group
support and adhere to the principles of corporate governance.
The Group’s Corporate Governance statement is contained in
the Corporate Governance section of the annual report.
rounDInG
The amounts contained in this report and in the annual
financial report have been rounded to the nearest $,000
(where rounding is applicable) under the option available to the
Group under AsIC Class order 98/000. The Group is an entity
to which the Class order applies.
signed in accordance with a resolution of the directors.
Abacus Group Holdings Limited (Abn 3 080 604 69)
JoHn THAMe
Chairman
DAVID bAsTIAn
Managing Director
sydney, september 2006
6
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
auditor’s independence declaration
to the directors of abacus group holdings limited
In relation to our audit of the financial report of Abacus Group Holdings Limited for the financial year ended
30 June 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 200 or any applicable code of professional conduct.
ernsT & YounG
MArK osuLLIVAn
Partner
sydney, september 2006
7
annual financial report / continued
consolidated income and distribution statements
YeAr enDeD 30 June 2006
Revenue
rental income
Hotel-related income
finance income
rendering of services
Profit from equity accounted investments
Income from distributions
net profit on sales - other
Total revenue
employee benefits expense
Depreciation and amortisation expense
finance costs
other expenses
Profit / (loss) from operating activities
net realised gains on investments
net unrealised gains on investments
ConsoLIDATeD
PArenT
noTes
2006
$’000
2005
$’000
2006
$’000
2005
$’000
4,907
8,073
24,83
2,837
2,630
,070
985
30,56
–
6,43
8,894
,56
505
–
563
–
232
444
2,347
3,782
–
535
–
532
9
3,748
–
92,315
57,952
7,368
4,825
(9,07)
(,346)
(7,832)
(7,86)
56,844
4,603
4,57
(6,0)
(9,27)
(7,444)
35,227
3,40
4,226
–
–
(,36)
(884)
(4,652)
–
(,97)
–
–
(8,089)
(582)
(3,846)
–
(500)
3a
3b
3e
3f
3g
3h
3c
3d
Profit / (loss) before income tax
102,604
52,854
(5,849)
(4,346)
Income tax expense
Net profit / (loss) for the period
net profit attributable to minority interests - external
(744)
(223)
101,860
52,631
(624)
(678)
(74)
(6,590)
–
(223)
(4,569)
–
Net profit / (loss) attributable to Group securityholders
101,236
51,953
(6,590)
(4,569)
represented by:
Abacus Group Holdings Limited
Abacus Trust
Abacus Income Trust
Abacus Group Projects Limited
(26)
82,72
9,352
(72)
,24
50,739
–
–
–
–
–
–
–
–
–
–
Basic and diluted earnings / (loss) per security (cents)
4
24.22
16.18
(1.58)
(1.42)
sTATeMenT of DIsTrIbuTIon
net profit/(loss) attributable to securityholders
net transfer of undistributed income to members’ funds
Distributions paid and payable
0,236
(50,275)
5
50,961
5,953
(5,04)
36,939
Distribution per security (cents per security)
.80
.40
Weighted average number of securities (‘000)
4
48,056
32,69
(6,590)
6,590
(4,569)
4,569
–
–
–
–
–
–
8
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
consolidated balance sheet
As AT 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Investment properties
other financial assets
other
Total current assets
Non-current assets
Deferred tax assets
other financial assets
ConsoLIDATeD
PArenT
noTes
2006
$’000
2005
$’000
2006
$’000
2005
$’000
20,07
4,47
630
–
9,565
7,78
6,89
,024
340
–
7
8,255
9,329
33,497
98,309
2,209
,500
–
–
–
–
–
–
33
193,973
141,336
6,820
1,057
,335
64
393
64
,69
7,80
88,696
88,493
Investments accounted for using the equity method
67,874
3,763
,777
8,930
Property, plant and equipment
Investment properties
Intangible assets and goodwill
other
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Total equity
8
7
6,299
33
–
–
582,32
333,46
6,900
7,557
4,096
32,394
32,394
32,394
3,700
,339
–
–
969,307
452,839
140,160
137,988
1,163,280
594,175
146,980
139,045
5,982
6,7
(8)
5,42
29,850
3,654
939
96
–
4,388
–
–
104,063
46,163
3,646
41,388
383,387
42,94
25,59
84,968
,8
908
–
,544
–
505
–
–
386,106
143,419
127,063
84,968
490,169
189,582
130,709
126,356
673,111
404,593
16,271
12,689
673,111
404,593
16,271
12,689
9
annual financial report / continued
consolidated balance sheet
As AT 30 June 2006
Equity
Total equity attributable to AGHL
Internal Group entities:
Abacus Trust
Abacus Group Projects Limited
Abacus Income Trust
Total equity attributable to internal Group entities
outside equity interests – external
Total equity attributable to outside interests
Total equity
Equity
Contributed equity
reserves
retained earnings/(accumulated losses)
9c
Total parent interest in equity
Total outside equity interest
Total equity
Total equity attributable to members of AGHL
ConsoLIDATeD
PArenT
noTes
2006
$’000
2005
$’000
2006
$’000
2005
$’000
30,95
2,687
53,907
38,073
4,929
2,776
640,62
2,304
642,96
673,111
–
–
38,073
,833
382,906
404,593
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,271
12,689
9a
572,503
35,825
20,725
2,043
,678
96,626
(20)
5,45
670,807
402,760
2,304
,833
22
(4,476)
6,27
–
–
646
2,689
–
673,111
404,593
16,271
12,689
Contributed equity
reserves
retained earnings
Total equity AGHL
Total equity attributable to unitholders of AT
Contributed equity
retained earnings
Total equity AT
Total equity attributable to members of AGPL
Contributed equity
retained earnings
Total equity AGPL
Total equity attributable to unitholders of AIT
Contributed equity
reserves
retained earnings
Total equity AIT
20,725
2,043
20,725
2,043
(230)
(20)
22
9,700
9,854 (4,476)
30,95 2,687
6,27
–
646
2,689
446,550 339,782 – –
67,357 4,29 – –
53,907 38,073 – –
5,557 – – –
(628) – – –
4,929 – – –
99,67 – – –
,908 – – –
20,97 – – –
2,776 – – –
Total equity attributable to members of the Group
670,807 402,760 6,27 2,689
Total equity attributable to outside equity interest:
Contributed equity
retained earnings
Total equity outside interest
Total equity
,32 797 – –
983 ,036 – –
2,304 ,833 – –
673,111 404,593 16,271 12,689
20
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
consolidated statement of recognised income and expense
YeAr enDeD 30 June 2006
foreign currency translation
(4)
(20)
–
–
fair value revaluation of property, plant and equipment
,049
– – –
ConsoLIDATeD
PArenT
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Application of AAsb 32 and AAsb 39
Income tax on items taken directly to or
transferred from equity
other
Net income recognised directly in equity
Profit for the period
(5,249)
– – –
22
– – –
65
(279)
–
(4,054)
(489)
–
0,860
52,63
(6,590)
–
–
(4,569)
(4,569)
Total recognised income and expense for the period
97,806
52,142
(6,590)
Attributable to:
stapled securityholders
Minority interest – external
97,82
5,464
(6,590)
(4,569)
624
678
–
–
97,806
52,42
(6,590)
(4,569)
2
annual financial report / continued
consolidated cash flow statement
YeAr enDeD 30 June 2006
Cash flows from operating activities
Income receipts
Interest received
Distributions received
Income tax expense (paid)/received
Audit fees
Custody fees paid
Interest paid
operating payments
ConsoLIDATeD
PArenT
2006
$’000
2005
$’000
2006
$’000
2005
$’000
55,46 34,83 3,982
2,73
2,629 7,636 62
867 300 857
276
(56) 39 00
39
(75)
(2) (64)
(2) (73) –
(2,43) (9,29) (80)
(4,393) (9,479) (773)
(6)
–
–
(472)
Net cash flows from/(used in) operating activities
50,375 24,113
4,184 2,101
Cash flows from investing activities
Payments for investments
(62,458) (332,064) (2,920)
(5,780)
Proceeds from sale and settlement of investments
90,724 235,642 7,27
733
Consolidation of a controlled entity
Cash acquired on ADIf merger
Advances to related entities
Purchase of a controlled entity
Purchase of plant and equipment
Purchase of investment properties
Disposal of investment properties
– 5,40 –
–
3,082 – –
–
828
– (38,437)
– (34) (,058)
(9,56) (27) (20)
–
–
–
(7,387) (30,580) –
–
29,202 7,474 –
–
Net cash flows from/(used in) investing activities
(219,525) (204,179) (45,408)
(15,047)
Cash flows from financing activities
Proceeds from issue of stapled securities
repayment of borrowings
Proceeds from borrowings
Distributions paid
44,07 85,46 8,682
5,38
(86,06) (88,870) (230,38)
(22,849)
74,523 298,954 263,553
30,44
(47,730)
(35,4) –
–
Net cash flows from/(used in) financing activities
184,749 160,116 41,854
12,946
Net increase/(decrease) in cash and cash equivalents
5,599 (9,950) 630
–
net foreign exchange differences
9 – –
–
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
4,47 24,367 –
–
20,107 4,417 630
–
22
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
notes to the concise financial statements
30 June 2006
. summary of significant accounting policies
(a) Listed property trust units
The constitutions of both AT and AIT were amended to
remove the finite maximum term of the Trusts which allows
unitholders’ funds to continue to be treated as equity in
accordance with AASB 132 Financial Instruments:
Presentation & Disclosure. AT and AIT both deferred the
adoption of AASB 132 Financial Instruments: Presentation &
Disclosure and AASB 139 Financial Instruments: Recognition
and Measurement to July 2005. Accordingly, AAsb 32 and
AAsb 39 were not been applied to the comparatives and the
Trust’s units were accounted for as equity.
(b) Basis of Preparation
The concise financial report has been prepared in accordance
with the requirements of the Corporations Act 2001 and
Australian Accounting standards.
The concise financial report has been derived from the
annual financial report but does not include all notes of the
type normally included within the annual financial report
and therefore cannot be expected to provide as full an
understanding of the financial performance, financial position
and financing and investing activities of the Group as the full
financial report.
The concise financial report should be read in conjunction
with the annual financial report of AT, AGPL and AIT. It is also
recommended that the annual financial report be considered
together with any public announcements made by the APG
during the year ended 30 June 2006 in accordance with
the continuous disclosure obligations arising under the
Corporations Act 200.
The financial report has also been prepared on a historical cost
basis, except for investment properties and derivative financial
instruments which have been measured at fair value, interests
in joint ventures which are accounted for using the equity
method, and certain investments measured at net market
value. The carrying values of recognised assets and liabilities
that are covered by interest rate swap arrangements, are
adjusted to record changes in the fair values attributable to the
risks that are being covered by derivative financial instruments.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated under the option available to the
Group under AsIC Class order 98/00. The Group is an entity
to which the class order applies.
(c) Statement of compliance
This financial report complies with Australian Accounting
standards, which include Australian equivalents to
International financial reporting standard (AIfrs). Compliance
with AIfrs has ensured that the financial report, comprising
the financial statements and notes thereto, complies with
International financial reporting standards (Ifrs).
This is the first financial report prepared based on AIfrs and
comparatives for the year ended 30 June 2005 have been
restated accordingly except for the adoption of AASB 132
Financial Instruments: Disclosure and Presentation and AASB
139 Financial Instruments: Recognition and Measurement. The
Group has adopted the exemption under AASB 1 First-time
Adoption of Australian Equivalents to International Financial
Reporting Standards from having to apply AAsb 32 and
AAsb 39 to the comparative period.
reconciliations of AIfrs equity and profit for 30 June 2005
to the balances reported in the 30 June 2005 financial report
and at transition to AIfrs are detailed in note 2. As at 30 June
2006, a number of accounting standards have been issued
with applicable commencement dates subsequent to year end.
The impact of these accounting standards will not materially
alter the accounting polices of the Group.
(d) Basis of consolidation
The consolidated financial statements comprise the
financial statements of AGHL and its subsidiaries, AT and
its subsidiaries, AGPL and its subsidiaries, and AIT and
its subsidiaries as from the date AGHL is deemed to have
obtained control until such time control ceases. for the
purposes of these financial statements, the consolidated
entities noted above are collectively referred to as the APG.
The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using
consistent accounting policies. Adjustments are made to bring
into line any dissimilar accounting policies that may exist. All
intercompany balances and transactions, including unrealised
profits arising from intra-group transactions, have been
eliminated in full.
subsidiaries are consolidated from the date on which control
is transferred to the Group and cease to be consolidated from
the date on which control is transferred out of the Group.
Where there is loss of control of a subsidiary, the consolidated
financial statements include the results for the part of the
reporting period during which the Group has control.
23
annual financial report / continued
This note explains the material adjustments made by the
Group in restating its AGAAP balance sheet as at July 2004,
its previously published AGAAP balance sheet and Income
statement for the year ended 30 June 2005, and adjustments
to opening total equity upon the adoption of AAsb 32 and
39 on July 2005.
a) AASB 1 transitional exemptions
The Group has made its election to the transitional exemptions
allowed by AASB 1 First Time Adoption of Australian
Equivalents to International Financial Reporting Standards as
follows:
ii) AASB 3 Business Combinations was not applied
retrospectively to business combinations undertaken before
the date of transition to AIfrs;
iii) The Group has elected to defer the application of AASB
132 Financial Instruments: Presentation and Disclosure
and AASB 139 Financial Instruments: Recognition and
Measurement. As a result of the deferral, the opening
retained earnings at July 2005 has been adjusted
to account for the application of AASB 132 Financial
Instruments: Presentation and Disclosure and AASB 139
Financial Instruments: Recognition and Measurement as at
that date. refer note 3(e) for the reconciliation between
30 June 2005 total equity closing balance and July 2005
total equity opening balance.
notes
. summary of significant accounting policies /
continued
The merger of ADIf (comprising AIT and AGPL), whereby
the units in AIT and shares in AGPL were stapled to shares
in AGHL and units in AT, on 3 March 2006 has been
accounted for on the basis of an aggregation of the net assets
of the respective entities on the implementation date. The
consolidated financial statements include the net assets of
ADIf and results for the three month period from the merger
implementation date of 3 March 2006.
Minority interests represent the interests in Abacus Hobart
Growth Trust, The Wollongong Property Trust, Abacus
Independent retail Property Trust and Abacus Matson
Holdings Limited that are not held by the Group and are
presented separately in the income statement and within
equity in the consolidated balance sheet.
2. Impact of adopting AIfrs
for all periods up to and including the year ended
30 June 2005, the Group prepared its financial statements
in accordance with Australian generally accepted accounting
practice (AGAAP). These financial statements for the year
ended 30 June 2006 are the first the Group is required to
prepare in accordance with AIfrs. Accordingly, the Group
has prepared financial statements that comply with AIfrs
applicable for periods beginning on or after January
2005 and the significant accounting policies meeting those
requirements are described in note . In preparing these
financial statements, the Group has started from an opening
balance sheet as at July 2004, the Group’s date of transition
to AIfrs, and made those changes in accounting policies and
other restatements required by AASB 1 First-time adoption of
AIFRS.
24
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
b) Reconciliation of profit after tax between AGAAP and AIFRS
Profit after tax as previously reported
Write-back of goodwill amortisation()
recognition of leasing incentives for amortisation (2)
reversal of profits on sales settled after period end(3)
revaluation of investment properties(4)
Adjustment to income tax expense(5)
Profit after tax under AIFRS
ConsoLIDATeD
YeAr enDeD
30 June 2005
$’000
PArenT
YeAr enDeD
30 June 2006
$’000
39,784
,775
480
(,600)
2,059
33
(4,202)
–
–
–
(500)
33
52,631
(4,569)
() Goodwill is not amortised under AAsb3 ‘business Combinations’, but was amortised under previous AGAAP. This caused an increase in
profit for the year.
(2) Lease incentives including rent-free periods that have not been recognised previously have been recognised and will be amortised over the
lease term under AAsb 7 Leases and UIG Interpretation 115 Operating Leases - Incentives.
(3) sales not settled within the reporting period have been reversed and taken up in the period of settlement pursuant to AAsb 8 Revenue
which provides that revenue on the sale of goods is recognised when the significant risks and rewards of the ownership of the goods have been
transferred to the buyer.
(4) fair value movements in investment properties are charged to the income statement under AAsb 40 ‘Investment Property’, but were taken
to the asset revaluation reserve under previous AGAAP. The gains from the fair value adjustment resulted in an increase in profit for the year.
(5) The adjustments above led to an increase in deferred tax expense.
c) Reconciliation of total equity between AGAAP and AIFRS
Total equity under AGAAP
Adjustments to equity:
Asset revaluation reserve()
Transfer of asset revaluation reserve to retained earnings()
Write-back of goodwill amortisation(2)
reversal of profits on sales settled after period end(3)
Amortisation of leasing incentives(4)
Adjustment to income tax expense(5)
ConsoLIDATeD
PArenT
30 June 2005
$’000
JuLY 2004
$’000
30 June 2005
$’000
JuLY 2004
$’000
403,805
302,744
2,556
,878
38,0
26,398
(38,0)
(26,398)
806
(806)
,653
(,653)
,775
–
–
(,600)
(2,993)
480
43
–
–
–
–
–
33
807
33
807
Total equity under AIFRS
() Asset revaluation reserve relating to investment properties has been reclassified to retained earnings. Gains or losses on revaluation of investment
300,971
404,593
12,689
12,685
properties are recognised in profit or loss for the period in which they arise under AASB 140 Investment Property.
(2) under AASB 3 Business Combinations goodwill acquired in business combinations will not be amortised but will be subject to annual (or more
frequent) impairment testing. Accordingly, goodwill amortised in the previous year has been reversed resulting in an increase in retained earnings.
(3) sales not settled within the reporting period have been reversed and taken up in the period of settlement pursuant to AASB 118 Revenue which
provides that revenue on the sale of goods is recognised when the significant risks and rewards of the ownership of the goods have been transferred
to the buyer.
(4) Lease incentives including rent-free periods have been recognised and will be amortised over the lease term under AASB 117 Leases and UIG
Interpretation 115 Operating Leases – Incentives.
(5) The above changes resulted in an increase in deferred tax liability as follows:
Tax effect of the above adjustments
Increase/(decrease) in tax deferred liability
ConsoLIDATeD
PArenT
30 June 2005
$’000
JuLY 2004
$’000
30 June 2005
$’000
JuLY 2004
$’000
33
33
807
807
33
33
807
807
25
annual financial report / continued
notes
2. Impact of adopting AIfrs / continued
d) Cashflow statement under AIFRS
There are no material differences between the AGAAP and AIfrs cash flow statements.
e) Reconciliation of total equity opening balance upon adoption
of AASB 132 and 139 on 1 July 2005
Total equity as at 30 June 2005
Interest rate swap arrangements not covered by hedge accounting()
Total opening equity under AIFRS as at 1 July 2005
ConsoLIDATeD
ToTAL eQuITY
JuLY 2005
PArenT
ToTAL eQuITY
JuLY 2005
$’000
404,593
(4,869)
$’000
2,689
–
399,724
12,689
As a result of applying AASB 132 Financial Instruments: Presentation and Disclosure and AASB 139 Financial Instruments: Recognition and Measurement
on July 2005 various adjustments have been made between reserves and retained earnings which have been disclosed in note 9.
() Interest rate derivatives are determined to be ineffective as they do not meet the hedge effectiveness criteria under AASB 139 Financial Instruments:
Recognition and Measurement, accordingly, the derivatives are measured at fair value and the gains and losses are recorded in the income statement.
under AGAAP, interest rate derivatives were accounted for on an accrual basis.
3. revenue and expenses
(a) Finance income
Interest on mortgage loans
bank interest
Total finance income
(b) Rendering of services
Asset management fee
Property management fee
Consulting and other income
Total income from rendering of services
(c) Net realised gains on investments
sale of 50% interest in put options
sale of shares and units
sale of investment properties
Total net realised gains on investments
(d) Unrealised gains on investments
Change in fair value of investment options
Change in fair value of units and shares
Change in fair value of investment properties
Total unrealised gains on investments
26
AbACus AnnuAL fInAnCIAL rePorT 2006
ConsoLIDATeD
PArenT
2006
$’000
2005
$’000
2006
$’000
2005
$’000
23,852
5,266 207
96
,65 25
24,813
16,431 232
–
1
3,075
580
9,82
12,837
2,540
692
5,662
8,894
–
–
444
444
–
2,043 –
– 770
4,603
4,603
588
3,401
748
(98)
,89
978
40,507
2,059
41,157
14,226
–
–
–
–
(98)
(,099)
(1,197)
–
–
532
532
–
–
–
–
–
–
(500)
(500)
abacus property group
(e) Employee benefits expense
Wages and salaries
Leave provisions
other
Total employee benefits expense
(f) Depreciation and amortisation expense
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of leasing incentives
Amortisation of intangible assets
Total depreciation and amortisation expense
(g) Finance costs
Interest on loans
Amortisation of finance costs
unrealised gains on interest rate swaps
Total finance costs
(h) Other expenses
Property outgoings
Hotel related expenses
bad and doubtful debts
Auditor’s remuneration
Custody fees
registry maintenance costs
rental expenses
other
Total other expenses
ConsoLIDATeD
PArenT
2006
$’000
2005
$’000
2006
$’000
2005
$’000
8,78
5,936
24
48
0
65
9,107
6,011
599
24
693
30
1,346
48
6
(65)
–
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,659
9,25
,36
8,089
342
(7,69)
7,832
8,462
5,05
42
68
24
338
332
2,705
17,186
20
–
–
–
–
–
9,271 11,136
8,089
5,548
3
–
(86)
79
82
37
34
2,045
7,444
–
–
23
–
254
–
476
884
03
–
9
77
–
05
–
278
582
27
annual financial report / continued
notes
4. earnings per security
a) Attributable to Abacus Property Group securityholders
basic and diluted earnings per stapled security
basic and diluted earnings per stapled security
(excluding fair value movements in properties and derivatives)
net profit attributable to stapled securityholders
net profit attributable to stapled securityholders
(excluding fair value movements in properties and derivatives)
Weighted average number of stapled securities
ConsoLIDATeD
2006
CenTs
24.22
2005
CenTs
6.8
2.92
2.42
$‘000
$‘000
0,236 5,953
53,560
39,894
‘000
‘000
48,056
32,69
on 3 July 2006, the Group completed a $9.5 million capital raising via a security Purchase Plan and issued 3,842,334
stapled securities at $.4. on 0 August 2006, the Group paid the final distribution in respect of the June 2006 quarter
and issued 2,27,85 stapled securities pursuant to the Distribution reinvestment Plan. Apart from the issuance of these
securities, there have been no other transactions involving stapled securities or potential stapled securities between the
reporting date and the date of completion of these financial statements.
(b) Attributable to Shareholders of the parent company
basic and diluted earnings per share
net profit attributable to shareholders
Weighted average number of shares
5. Distributions paid and proposed
(a) Distributions paid during the year
final distribution for financial year 30 June 2005:
2.90 cents per unit (2004: 3.00 cents)
Interim distributions paid during the year:
september: 2.90 cents per unit (2005: 2.80 cents)
December: 2.90 cents per unit (2005: 2.80 cents)
March: 3.00 cents per unit (2005: 2.90 cents)
Total
(b) Distributions proposed and recognised as a liability
final distribution payable for the June quarter:
3.00 cents per unit (2005: 2.90 cents)
The parent entity, AGHL, did not pay or propose to pay any distributions for the year
28
AbACus AnnuAL fInAnCIAL rePorT 2006
ConsoLIDATeD
2006
CenTs
(.58)
2005
CenTs
(.42)
$‘000
$‘000
(6,590)
(4,569)
‘000
‘000
48,056
32,69
ConsoLIDATeD
2006
$’000
2005
$’000
9,942
8,7
,79
,79
3,2
45,412
8,328
8,727
9,942
35,114
5,49
9,942
abacus property group
6. net tangible asset backing
net tangible asset backing per security
ConsoLIDATeD
PArenT
2006
$
.22
2005
$
.09
2006
$
(0.03)
2005
$
(0.06)
net tangible asset backing per security increased 3.8 cents or 2.7% to $.224 at 30 June 2006 compared to $.086
at 30 June 2005.
net tangible asset backing per security is calculated by dividing net assets less intangible assets of the Group by the
number of securities on issue. The number of securities used in the calculation of net tangible assets backing for both
Consolidated and Parent is 56,38,609 securities (2005: 342,836,28).
7. Investment properties
Investment properties are carried at the directors’ determination of fair value and are based on independent valuations
where appropriate. The determination of fair value includes reference to the original acquisition cost together with capital
expenditure since acquisition and either the latest full independent valuation or latest independent update. Total acquisition
costs include incidental costs of acquisition such as property taxes on acquisition, legal and professional fees and other
acquisition related costs.
Independent valuations of investment properties are conducted at least once every two years. Independent valuations
are prepared using both the capitalisation of net income method and the discounting of future cashflows to their present
value method. Capital expenditure since valuation may include purchases of sundry properties (and associated expenses
of stamp duty, legal fees etc) and other capital refurbishment and repair expenditure.
ProPerTY
(a) Current asset
09 Pitt street, sydney, nsW()(c)
Current asset - Investment properties
(b) Non-current assets
66 Christina road, Villawood, nsW(6)
CsIro, Limestone Ave., Campbell, ACT(5)
4 ray road, epping, nsW(2)
43 Glebe Point road, Glebe, nsW(3)
Ashfield Mall, Ashfield, nsW(4)
0-2 Pike street, rydalmere, nsW(6)
Liverpool Plaza, Liverpool, nsW(3)
Macquarie street, Liverpool, nsW(3)
Moore street, Liverpool, nsW(3)
Aspley Village shopping Centre Aspley, QLD(3)
santos House, Adelaide, sA(2)
50 Miller street, north sydney, nsW(2)
ACQuIsITIon CosT InCLuDInG
DATe(a) ALL ADDITIons
$’000
InDePenDenT
VALuATIon
DATe
2006
noTe(b)
$’000
2005
$’000
ConsoLIDATeD VALue
22 Jun 999
9,924
30 Jun 2006
8,255
9,329
8,255
9,329
28 May 2002
8,87
7 Jun 2006
2,400
2 Jun 2002
2,686
30 Jun 2006
8,000
30 Apr 997
26,960
30 Jun 2006
5,000
23 sep 997
–
–
–
5 sep 997
82,963
30 Jun 2006
3,000
oct 998
4,262
02 Jun 2006
9,300
6 Aug 2004
32,840
30 Jun 2006
37,000
2 sep 2005
5,45
30 Jun 2006
4 oct 2005
2,265
30 Jun 2006
5,503
2,297
5 feb 2006
6,579
feb 2006
6,579
8,47
5,200
44,000
2,562
98,700
7,000
32,600
–
–
–
5 oct 2004
54,327
30 Jun 2006
5,000
7 Dec 2004
38,349
30 Jun 2006
40,000
5,000
38,600
Properties owned by AT and its controlled entities
366,079
317,809
29
annual financial report / continued
notes
7. Investment Properties / continued
ProPerTY
ACQuIsITIon CosT InCLuDInG
DATe(a) ALL ADDITIons
$’000
InDePenDenT
VALuATIon
DATe
2006
noTe(b)
$’000
2005
$’000
ConsoLIDATeD VALue
30 Jun 2003
3 nov 2003
27 nov 2003
22 feb 2004
9 Dec 2003
28 May 2003
-5 Lake Drive, Dingley, Melbourne()
8 station street, Wollongong, nsW(2)(d)
367 Peel street, Tamworth, nsW(3)
500 Princes Highway,noble Park,VIC(2)
3-33 Windorah Avenue, stafford, QLD(3)
Lennons Plaza, 66 Queen st, QLD(4)
23-43 Tattersall rd, Kings Park, nsW(4)
6 feb 2004
26 savage street & 68 Curtin Avenue, Pinkenba, QLD(3) 23 Jan 2004
67 Gympie rd, Chermside, QLD()
9-4 Yates street, Mawson Lakes, sA(8)
Gympie Market Place, Gympie, QLD()(e)
29-47 & 8-20 becker st, Cobar, nsW(3)(e)
208 Howick street, bathurst, nsW(4)(e)
50 Mostyn street, Castlemaine, VIC(3)(e)
36-52 national blvd, Campbellfield, VIC(3)
29 Queen street, north bundaberg, QLD(5)(e)
93 Victoria street, eaglehawk, VIC(3)(e)
2 Docker street, Wangaratta, QLD(4)(e)
Kingscote Kangaroo Island, sA(7)(e)
96-98 Victoria street, st.George, QLD()(e)
293-295 Grt eastern Highway, Midland WA(4)(e)
8 Aug 2005
7 Dec 2004
5 Aug 2004
7 Jun 2004
May 2005
May 2005
2 Dec 2005
3 oct 2005
8 Jul 2005
2 Jun 2006
7 Jun 2005
8 Jul 2005
29 sep 2005
Properties owned by AIT and its controlled entities
,956
30 Jun 2006
3,300
7,866
30 Jun 2006
2,000
,96
30 Jun 2006
2,700
9,222
30 Jun 2006
9,920
5,09
30 Jun 2006
5,740
32,272
30 Jun 2006
39,000
5,937
30 Jun 2006
7,00
5,040
4,745
6,857
7,340
30 Jun 2006
8,970
30 Jun 2006
5,900
30 Jun 2006
5,700
30 Jun 2006
7,450
,58
30 Jun 2006
,650
3,490
8,09
8,832
9,20
6,50
2,946
4,337
3,029
7,222
30 Jun 2005
3,490
30 Jun 2006
9,342
30 Jun 2006
9,000
Aug 2005
9,20
30 Jun 2006
6,580
30 Jun 2006
2,700
9 sep 2005
4,337
30 Jun 2006
2,830
May 2006
7,223
204,133
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
244 Liverpool road, Ashfield, nsW(4)
252 Liverpool road, Ashfield, nsW(4)
254 Liverpool road, Ashfield, nsW(4)
256 Liverpool road, Ashfield, nsW(4)
26 Mar 998
2,507
02 Mar 2000
,07
3 Aug 200
2,662
29 sep 998
820
2,507
,07
2,662
820
Independent valuation, 244-256 Liverpool road
30 Jun 2006
6,900
(96)
Project development costs
,099
Macarthur Avenue, Pinkenba, Qld
4-8 Jacobs street, bankstown(7)
02 Dec 2002
5,6
30 Jun 2006
5,200
4,900
Properties owned by AGHL and its controlled entities
12,100
15,607
Non-current – Investment properties
Total investment properties
582,32
333,46
600,567
352,745
() As valued by Knight frank Pty Limited
(2) As valued by Colliers International Consultancy and Valuation Pty Ltd
(3) As valued by urbis Property Consultants
(4) As valued by Cb richard ellis Pty Ltd
(5) As valued by fPD savills (nsW) Pty Limited
(6) As valued by DTZ Australia
(7) As valued by Carter Property
(8) As valued by savills (sA) Pty Limited
30
AbACus AnnuAL fInAnCIAL rePorT 2006
–
657
6,900
7,557
–
3,50
abacus property group
Notes:
(a) refers to the date of acquisition by the underlying entity
(b) The aggregated value at 30 June 2006 includes capital expenditures after the last valuation date.
(c) The property at 09 Pitt street is currently under refurbishment and has been subdivided into strata units. The retail
component and the leasehold interest in the car park were sold in prior financial years while the sale of the commercial
units continues at 30 June 2006.
(d) The Abacus Income Trust owns 98.4% of the units in the Wollongong Property Trust which owns 8 station street, Wollongong.
(e) The Abacus Income Trust owns 00% of the units in Abacus retail Property Trust which owns 75% of the units in
Abacus Independent retail Property Trust which owns:
Gympie Market Place, Gympie, QLD
29-47 & 8-20 becker st, Cobar, nsW
208 Howick street, bathurst, nsW
50 Mostyn street, Castlemaine, VIC
93 Victoria street, eaglehawk, VIC
96-98 Victoria street, st.George, QLD
2 Docker street, Wangaratta, QLD
Kingscote Kangaroo Island, sA
29 Queen street, north bundaberg, QLD
Midland, WA
(f) The investment properties are used as security over bank loans.
Reconciliations
reconciliation of the carrying amounts of investment properties at the beginning
and end of the current and previous financial year:
Investment properties
Carrying amount at beginning of the financial year
Additions
Acquisition through business combinations
net revaluation increments
Disposals/transfer
Carrying amount at end of the financial year
ConsoLIDATeD VALue
2006
$’000
2005
$’000
352,744
29,526
47,788
23,930
79,596
–
40,507
2,060
(20,068)
(2,77)
600,567
352,745
3
annual financial report / continued
notes
8. Property, plant and equipment
Land and buildings
At July, net of accumulated depreciation
Additions
revaluations
Acquisition through business combination
Depreciation charge for the year
At 30 June, net of accumulated depreciation
Cost or fair value
Accumulated depreciation
net carrying amount at end of period
Plant and equipment
At July, net of accumulated depreciation
Additions
Disposals
Depreciation charge for the year
At 30 June, net of accumulated depreciation
Cost or fair value
Accumulated depreciation
net carrying amount at end of period
ConsoLIDATeD
2006
$’000
–
2005
$’000
–
30,235 –
,049 –
30,424 –
(543) –
6,65 –
6,708 –
(543) –
6,65 –
33 7
77 36
–
(76)
(0)
(64)
34 33
637
560
(503)
34
(427)
33
Recoverable amount of land and buildings
Land and buildings relate to hotel assets acquired during the year including the rydges esplanade Hotel, Cairns, the Chateau on
the Park Hotel, Christchurch, new Zealand, the forest Lodge Hotel and Dry Dock Hotel in sydney and the Mariners Lodge Hotel
in batemans bay, nsW. In addition, land and buildings include the car park at 09 Pitt street, sydney.
32
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
Independent valuations were obtained upon acquisition and subsequently to assess the recoverable amount of the assets.
ProPerTY
Resort hotel properties
rydges esplanade Hotel, Cairns, QLD(2)
Tradewinds esplanade Hotel, Cairns, QLD(3)
Chateau on the Park, Christchurch, nZ(4)
novotel Twin Waters resort, sunshine Coast, QLD(5)
Other hotel properties
forest Lodge Hotel, Glebe, nsW(6)
Mariners Lodge Hotel, batemans bay, nsW(6)
Dry Dock Hotel, balmain, nsW(6)
Other
09 Pitt street, sydney – Car park(7)
office equipment
ACQuIsITIon CosT InCLuDInG
DATe() ALL ADDITIons
$’000
InDePenDenT
VALuATIon
DATe
ConsoLIDATeD VALue
2006
$’000
2005
$’000
Mar 2005
7,993
30 Jun 2005
7,499
2 Mar 2006
36,459
28 feb 2006
36,334
26 May 2006
22,32
0 Mar 2006
22,62
28 Jun 2006
60,95
3 Jan 2006
60,95
28 nov 2005
2,432
2 Jun 2005
2,428
29 nov 2005
4,543
25 nov 2005
4,543
28 feb 2006
3,84
27 Jan 2006
3,84
22 Jun 999
2,92
30 Jun 2006
4,00
–
–
–
–
–
–
–
–
636
34
33
161,299
133
() refers to the date of acquisition by the underlying entity
(2) rydges esplanade resort is included in the property portfolio pursuant to the merger with Abacus Diversified Income fund implemented on 3 March
2006. The property is 75% owned by the Group as a tenant in common with a 25% joint venture partner and through a 75% owned subsidiary. The
property was independently valued by Colliers International on 30 June 2005.
(3) Tradewinds esplanade Hotel was acquired on 2 March 2006 and was Independently valued by Cb richard ellis dated february 2006;
(4) Chateau on the Park Hotel was acquired on 26 May 2006 for nZ$27.0 million and was independently valued by Cb richard ellis dated 0 March 2006
at nZ$28.5 million. nZ Dollar amounts have been converted to Australian dollars at an exchange rate of A$.00 to nZ$.259;
(5) novotel Twin Waters resort was acquired on 28 June 2006 and was Independently valued by Jones Lang Lasalle dated 3 January 2006;
(6) forest Lodge Hotel was independently valued by roberts baker Magin dated 2 June 2005, the Mariners Lodge Hotel and the Dry Dock Hotel were
independently valued by own Property Valuations dated 25 november 2005 and 27 January 2006 respectively.
(7) 09 Pitt street car park was independently valued by fDP savills dated 30 June 2006.
The useful life of the assets was estimated as follows both for 2005 and 2006:
buildings
40 years
Plant and equipment
5 to 5 years
33
annual financial report / continued
notes
9. Contributed equity and reserves
(a) Issued stapled securities
Issued capital
finance and issue costs
Total contributed equity
ConsoLIDATeD
PArenT
2006
$’000
2005
$’000
2006
$’000
2005
$’000
590,748
360,600
20,725
2,043
(8,245)
(8,775)
–
–
572,503
351,825
20,725
12,043
sTAPLeD seCurITIes
sHAres
(b) Movements in contributed equity for the year
At July 2004
– security purchase plan
– institutional equity raising
nuMber
$’000
VALue
$’000
nuMber
$’000
270,420 266,334 270,420
4,249 6,85 4,250
58,67 7,30 58,66
– less institutional equity raising transaction costs
–
(2,454)
–
VALue
$’0000
6,662
998
4,383
–
At July 2005
– net impact of merger with ADIf()
– institutional equity raising
– distribution reinvestment plan
– less institutional equity raising transaction costs
End of the financial year
342,836 35,825 342,836
2,043
79,30
92,636
,600
–
96,98
25,500
2,257
(3,277)
79,30
92,636
,600
–
79
8,452
5
–
516,382
572,503
516,382
20,725
() net impact of merger with ADIf represents the aggregation of outstanding contributed equity (net of issue costs) as at 3 March 2006
(merger implementation date).
since the end of the financial year:
– on 3 July 2006, 3,842,334 stapled securities were issued for a cash consideration of $9.5 million pursuant to
completion of a security Purchase Plan and has been approximately allocated among the Group stapled entities as
$. million allocated to AGHL, $5.3 million allocated to AT, $2.9 million allocated to AIT and $0.2 million allocated
to AGHL;
– on 0 August 2006, 2,27,85 stapled securities were issued for a cash consideration of $3.3 million pursuant
to the Abacus Property Group Distribution reinvestment Plan and has been approximately allocated among the
Group stapled entities as $0.2 million allocated to AGHL, $2.5 million allocated to AT and $0.6 million allocated
to AIT.
securityholders have the right to receive dividends from AGHL and AGPL, as declared, and distributions from
AT and AIT, and in the event of winding up of the Group entities, to participate in the proceeds from sale of all
surplus assets in proportion to the number of securities held.
Holders of securities can vote their shares and units in accordance with the Corporations Act, either in person
or by proxy, at a meeting of either AGHL, AGPL, AT and AIT (as the case maybe).
34
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
(c) Retained profits/(accumulated losses)
balance July 2005
ConsoLIDATeD
PArenT
2006
$’000
2005
$’000
2006
$’000
2005
$’000
5,45
0,02
646
3,563
Application of AAsb 32 and 39 effective July 2005
(4,869)
Initial retained earnings contributed by ADIf pursuant to the merger
,48
–
–
–
–
Distributions from subsidiaries taken directly to equity
reversal of prior years’ goodwill amortisation
–
–
–
4,599
–
(3,06)
–
–
–
–
recognition of unearned revenue for amortisation
(380)
–
–
–
revaluation of investment properties
net profit attributable to securityholders
(858)
26,398
–
,652
0,236
5,953
(6,590)
(4,569)
Adjustment resulting from changes in associated entities
65 (279) (25)
Total available for appropriation
Distributions provided for or paid
Balance 30 June 2006
47,587
88,084
(4,476)
(50,96)
(36,939)
–
96,626
51,145
(4,476)
–
646
–
646
0. Merger with Abacus Diversified Income fund
on 4 february 2006, securityholders in both the APG and ADIf agreed, by special resolution, to merge
the two entities effective on 3 March 2006. on 20 february 2006, the supreme Court of new south Wales
gave orders that Abacus was justified in implementing the merger proposal.
The merger was implemented on 3 March 2006 and resulted in AGPL and AIT being listed on the AsX
alongside AGHL and AT under a stapled security structure. The merger was effected by a restructure of
the shares on issue and units on issue in AGPL and AIT respectively, an aggregation of the net assets of
both APG and ADIf and the issuance of an appropriate number of securities in each respective entity.
The net assets of ADIf as at 3 March were essentially aggregated with APG to form the expanded
APG at that date.
35
annual financial report / continued
notes
0. Merger with Abacus Diversified Income fund / continued
The net assets of ADIf as at the date of implementation of the merger are set out below:
Assets
Cash
receivables
Investment properties
Property, plant and equipment
Mortgage investment loans
Intangible management rights
other assets
Total assets
Liabilities
Creditors and payables
Provisions
Interest bearing liabilities and loans
Total liabilities
Net assets
Contributed equity (net of issue costs)
retained earnings
Minority interest
Total equity
neT AsseT VALue
$’000
3,082
4,627
79,596
30,42
22,948
,064
,669
243,407
4,274
2,646
37,68
144,088
99,319
97,27
,48
900
99,319
To facilitate the merger, a series of stapling distributions were made by AT and AIT to their respective unitholders. AIT paid
a stapling distribution of approximately $6 million to unitholders on the record date which was then applied to acquire
approximately 79.3 million units in AT and approximately 79.3 million shares in AGHL on behalf of existing ADIf investors.
AT paid a stapling distribution of approximately $69 million to unitholders on the record date which was then applied to acquire
approximately 437. million units in AIT and approximately 437. million shares in AGPL on behalf of existing APG investors.
The result of making the stapling distributions and subscription for shares and units in respective Group entities was that each
of AGHL, AT, AGPL and AIT had shares or units (as the case may be) on issue at 3 March 2006 of 56,38,609 and effectively
redistribute contributed equity among the stapled entities.
36
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
. events after the balance sheet date
on 3 July 2006, the Group completed a capital raising via a security Purchase Plan of $9.5 million and issued
approximately 3.8 million securities at $.4 per security. of the total $9.5 million capital raised, approximately
$. million has been allocated to AGHL, approximately $5.3 million has been allocated to AT, approximately
$2.9 million has been allocated to AIT and approximately $0.2 million has been allocated to AGPL.
In July 2006, AGHL, through a 50% owned joint venture project trust, exchanged contracts to acquire a parcel
of potential development land in Dandenong, Victoria for an aggregate purchase price of $8.9 million (with final
settlement deferred until July 2007). In addition, AGHL entered into bank guarantee obligations (for approximately
$4.5 million) on behalf of certain joint venture project entities and also entered into a contract settlement
performance guarantee obligation (for approximately $9 million) in respect of the Dandenong land purchase
noted above.
During August 2006, AT completed the acquisition of a bulky goods retail property at Moorabbin, Victoria for a
purchase price of approximately $37 million. In addition, the AIT, through a 75% subsidiary, exchanged contracts
to acquire a small shopping centre in Townsville, Queensland for approximately $7 million. AIT also exchanged
contracts to sell its property at Kings Park, nsW for approximately $20 million. The sale is expected to be completed
in early september 2006.
other than as disclosed in this report and to the knowledge of directors, there has been no matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may effect, the Group’s operations
in future financial years, the results of those operations or the Group’s state of affairs in future financial years.
37
annual financial report / continued
notes
2. segment information
The consolidated entity operates within four business segments within the property industry, being property rental
and sales, hotel business, other property-based investments and funds management. The property rental and sales
operations comprise the leasing and maintenance of commercial, retail and industrial properties and the conversion of
commercial properties into commercial strata units intended for sale. The hotel business comprise the cooperation of
hotels and pubs. The other property-based investments comprise mortgage lending and investment in joint venture
activities and in securities of other listed and unlisted property trusts. funds management comprise property and funds
management and other consulting activities. revenue is derived from property rentals, interest, fees and property sales.
busIness seGMenTs
YeAr enDeD 30 June 2006
Revenue
ProPerTY renTAL &
sALes
$’000
oTHer
HoTeL ProPerTY-bAseD
InVesTMenTs
$’000
busIness
$’000
funDs
MAnAGeMenT
$’000
ToTAL
$’000
revenue from external customers
87,480
9,058
28,202
2,837
37,577
bank interest
Total consolidated revenue
Results
segment results
Interest income
unallocated expenses
Profit/(loss) before tax and finance costs
finance costs
Profit/(loss) before income tax and minority interest
Income tax expense
Net profit for the year
Assets
segment assets
Total assets
Liabilities
segment liabilities
Interest bearing liabilities
Total liabilities
Other segment information:
Depreciation and amortisation
96
138,538
0,230
982
25,077
8,967
36,256
96
(2,200)
35,07
(32,43)
02,604
(744)
101,860
763,343
44,54
248,57
5,290
,6,33
47,954
2,555
22,487
3,65
1,161,331
76,6
4,609
488,220
,302
296
3
77
,688
38
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus property group
busIness seGMenTs
YeAr enDeD 30 June 2005
Revenue
revenue from customers outside the Group
bank interest
Total consolidated revenue
Results
segment results
unallocated result/(expense)
Profit/(loss) before tax and finance costs
finance costs
Profit/(loss) before income tax and minority interest
Income tax expense
Net profit for the year
Assets
segment assets
unallocated assets
Total assets
Liabilities
segment liabilities
unallocated liabilities
Total liabilities
Other segment information
Depreciation and amortisation
oTHer
ProPerTY renTAL ProPerTY-bAseD
InVesTMenTs
$’000
& sALes
$’000
funDs
MAnAGeMenT
$’000
46,350
9,499
8,894
ToTAL
$’000
74,743
,65
75,908
33,740
8,000
9,200
60,940
,65
62,05
(9,25)
52,854
(223)
52,631
374,67 83,28
36,266
593,56
64
594,175
3,39
2
2,908
6,229
83,353
189,582
200 –
74
274
39
directors’ declaration
In accordance with a resolution of the directors, we state that:
() in the opinion of the directors:
(a) the concise financial statements and notes of the company and the consolidated entity are in accordance with the
Corporations Act 200, including :
(i) give a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2006 and of their
performance for the year ended on that date; and
(ii) complying with Accounting standards and the Corporations regulations 200; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with
sections 295A of the Corporations Act 200 for the financial period ending 30 June 2006.
on behalf of the board of Abacus Group Holdings Limited
JoHn THAMe
Chairman
DAVID bAsTIAn
Managing Director
sydney, september 2006
40
AbACus AnnuAL fInAnCIAL rePorT 2006
independent audit report
to members of abacus group holdings limited
sCoPe
The concise financial report and directors’ responsibility
The concise financial report comprises the balance sheet, income and distribution statements, statement of
recognised income and expense, cash flows statement, accompanying notes to the financial statements and
the directors’ declaration for the consolidated entity for the year ended 30 June 2006. The consolidated entity
comprises both Abacus Group Holdings Limited (the company) and the entities it controlled during the year.
The directors of the company are responsible for preparing a concise financial report that complies with Accounting
standard AAsb 039 Concise financial reports, in accordance with the Corporations Act 200. This includes
responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent
and detect fraud and error, and for the accounting policies and accounting estimates inherent in the concise financial
report.
Audit approach
We conducted an independent audit on the concise financial report in order to express an opinion to the members
of the company. our audit was conducted in accordance with Australian Auditing standards in order to provide
reasonable assurance as to whether the concise financial report is free of material misstatement. The nature of an
audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations
of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot
guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the concise financial report is presented fairly
in accordance with Accounting standard AAsb 039 Concise financial reports.
We formed our audit opinion on the basis of these procedures, which included:
• examining, on a test basis, the information to provide evidence supporting that the amounts and disclosures in
the concise financial report are consistent with the full financial report; and
• examining, on a test basis, information to provide evidence supporting the amounts, discussion and analysis, and
other disclosures in the concise financial report that were not directly derived from the full financial report.
We have also performed an independent audit of the full financial report of the company for the year ended 30 June
2006. our audit report on the full financial report was signed on september 2006, and was not subject to any
qualification. for a better understanding of our approach to the audit of the full financial report, this report should be
read in conjunction with our audit report on the full financial report.
4
independent audit report
to members of abacus group holdings limited
Independence
We are independent of the company and the consolidated entity and have met the independence requirements of
Australian professional ethical pronouncements and the Corporations Act 200. We have given to the directors of
the company a written Auditor’s Independence Declaration, signed on september 2006 a copy of which is included
in the Directors’ report.
Audit opinion
In our opinion the concise financial report and directors declaration of Abacus Group Holdings Limited complies
with Accounting standard AAsb 039 “Concise financial reports”.
ernsT & YounG
MArK osuLLIVAn
Partner
sydney, september 2006
42
AbACus AnnuAL fInAnCIAL rePorT 2006
Auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
Compliance plan auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
Registry
computershare investor services pty ltd
level 3, 60 carrington street
sYDneY nsw 2000
tel (02) 1800 635 323 toll free
fax (02) 8234 5050
abacus trust
DIRECTORY
Responsible entity
Abacus funds management limited
level 34, Australia square
264-278 george street
sYDneY nsw 2000
tel (02) 9253 8600
fax (02) 9253 8616
website www.abacusproperty.com.au
Directors of responsible entity
John thame, chairman
frank wolf, Deputy chairman (executive)
David bastian, managing Director (executive)
Dennis bluth
phillip green
malcolm irving
Company secretary
sean o’Donoghue
Custodian
perpetual trustee company limited
level 12, Angel place
123 pitt street
sYDneY nsw 2000
at
contents
44 Directors’ report
49 AuDitor’s inDepenDence DeclArAtion
50 consoliDAteD income AnD Distribution stAtements
51 consoliDAteD bAlAnce sheet
52 consoliDAteD stAtement of recogniseD income AnD expense
53 consoliDAteD cAsh flow stAtement
54 notes to the concise finAnciAl stAtements
60 Directors’ DeclArAtion
61
inDepenDent AuDit report
It is recommended that this annual financial report should be read in conjunction with the annual financial reports of Abacus Property
Group, Abacus Income Trust and Abacus Group Projects Limited as at 30 June 2006. It is also recommended that the report be
considered together with any public announcements made by the Abacus Property Group in accordance with its continuous disclosure
obligations arising under the Corporations Act 2001.
43
annual financial report / continued
MerGer of AbACus ProPerTY GrouP AnD AbACus
DIVersIfIeD InCoMe funD
on 31 March 2006, APG implemented a merger with the
unlisted ADIf. To effect the merger, AT made a stapling
distribution to its unitholders to facilitate the acquisition of
units in AIT and shares in AGPL. similarly, AIT made a stapling
distribution to facilitate the acquisition of units in AT and
shares in AGHL by its unitholders. As a result of the stapling
distribution made by AIT, 79,309,591 additional AT units
were issued to effect the merger. The stapling distributions
were effectively returns of capital and AT’s contributed equity
decreased by $9.1 million as a net result of making the stapling
distributions.
oPerATInG ProfIT
AT earned a net profit attributable to unitholders of
$82.2 million for the year ended 30 June 2006 (June 2005:
$50.7 million).
The Trust earned a net profit attributable to unitholders
(excluding net property and derivative financial instruments
revaluation movements) of $54.0 million (June 2005:
$37.8 million).
directors’ report
DIreCTors rePorT
The directors of Abacus, the responsible entity of the Abacus
Trust (AT or the Trust), submit their report for the Trust for the
year ended 30 June 2006 and the auditors report thereon.
DIreCTors
The directors of the responsible entity in office during the
financial year and until the date of this report are set out
below:
John Thame
Chairman
frank Wolf
Deputy Chairman (executive)
David bastian
Managing Director (executive)
Dennis bluth
non-executive
Phillip Green
non-executive
Malcolm Irving
non-executive
PrInCIPAL ACTIVITIes
The principal activities of the Trust during the course of the
year ended 30 June 2006 include investment in commercial,
retail and industrial properties and mortgage lending.
TrusT sTruCTure
The Abacus Property Group (APG) represents the
consolidation of Abacus Group Holdings Limited (AGHL),
Abacus Trust (AT), Abacus Income Trust (AIT) and Abacus
Group Projects Limited (AGPL). units in AT and AIT and shares
in AGHL and AGPL have been stapled together so that neither
can be dealt with without the other. An APG security consists
of one unit in AT, one unit in AIT, one share in AGHL and one
share in AGPL. A transfer, issue or reorganisation of a unit
or share in any of the component parts is accompanied by a
transfer, issue or reorganisation of a unit or share in each of
the other component parts.
AT is an Australian registered managed investment scheme.
Abacus, the responsible entity of AT, is incorporated and
domiciled in Australia and is a wholly owned subsidiary of
AGHL. The registered office and principal place of business of
AGHL and of Abacus is located at Level 34 Australia square,
264-278 George street, sydney nsW 2000.
44
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus trust
eArnInGs Per unIT
basic and diluted earnings per unit
basic and diluted earnings per unit (excluding revaluation movements in
investment properties and derivative financial instruments)
YeAr enDeD
30 June 2006
CenTs
YeAr enDeD
30 June 2005
CenTs
19.66
15.80
12.93
11.77
As part of effecting the merger of APG and ADIf on 31 March 2006, an additional 79,309,591 units were issued. no additional
net income was directly contributed to AT as a result of effecting the merger. excluding the impact on weighted average units on
issue resulting from the additional units issued pursuant to the merger, earnings per unit for the year ended 30 June 2006 would
have been 20.63 cents per unit.
DIsTrIbuTIons
The Trust paid cash distributions to unitholders of $45.4 million (11.7 cents per unit) during the year ended 30 June 2006
(June 2005: $35.1 million; 11.50 cents per unit). In addition, a distribution of $15.5 million (3.0 cents per unit) was declared
and provided for in respect of the quarter ended 30 June 2006.
AT funded all distributions to APG securityholders for the year ended 30 June 2006. The full year distribution of 11.80 cents per
unit reflects a 3.5% increase over the full year distribution of 11.40 cents per unit for the year ended 30 June 2005.
Distributions were paid in respect of the year ended 30 June 2006 as follows:
Interim distribution paid 10 november 2005
Interim distribution paid 10 february 2006
Interim distribution paid 10 May 2006
final distribution paid 10 August 2006
Total
CenTs
2.90
2.90
3.00
3.00
11.80
$’000
11,179
11,179
13,112
15,491
50,961
45
annual financial report / continued
directors’ report
reVIeW of oPerATIons
Trust Overview
The Trust operates wholly within Australia and holds an
investment portfolio of commercial, retail and industrial
properties and mortgage loan investments.
Operating Results for the Period
Investment property portfolio:
• The Trust acquired three additional properties for
approximately $24 million, being a retail property in Aspley,
brisbane and two small retail properties adjoining Liverpool
Plaza in sydney.
In addition, the Trust acquired a 50% interest in a group
of entities that hold direct interests in the Virginia Park
industrial estate in Melbourne, Victoria.
These acquisitions bring the value of the total investment
property portfolio to $418 million at 30 June 2006;
• In addition, the Trust has contracted to acquire a bulky
goods retail centre in Moorabbin, Victoria for approximately
$37 million.
• The revaluation of ten existing properties in the portfolio
resulted in a net increase of approximately $23 million in the
carrying value of investment properties;
• In January 2006, the Trust completed the sale of an
investment property in Glebe, nsW realising a profit of
approximately $2 million.
Mortgage lending:
• The Abacus Mortgage fund increased the size of its
mortgage book (including accrued interest) by $43 million to
$100 million at 30 June 2006 compared to $57 million at 30
June 2005.
The Abacus Mortgage fund had an average loan balance
of approximately $4.5 million and average term of
approximately 3 months. Loans are provided to both
property developers and investors.
• In addition, AT advanced significant funds to AGHL and its
subsidiaries to support the growth of its funds and property
management activities, where assets under management
(combining assets owned by APG and assets managed
by Abacus on behalf of external investors) have grown to
approximately $1.4 billion.
AT provided loan funds to settle acquisitions and provide
working capital in respect of managed investment schemes
for which Abacus is the responsible entity. As at 30 June
2006, AT had advanced approximately $65 million to
associated Group entities in respect of these schemes,
including the Abacus storage fund and Abacus Prime
Property fund, which were established during the year.
Review of financial condition
During the year ended 30 June 2006, the contributed equity
of the Trust increased $107 million to $447 million compared
to $340 million at 30 June 2005.
APG undertook a number of capital raisings during the year
through institutional placements in August 2005 for $55
million (42.6 million stapled securities at $1.29) and in february
2006 for $70.5 million (50.0 million stapled securities at $1.41).
of the total $126 million capital raised, approximately $114
million has been allocated to AT (after issue costs) and $8
million allocated to AGHL. This additional capital was directed
towards acquisition of property assets for the Group and
for growth of the funds management business (particularly
the Abacus Prime Property fund, Abacus storage fund and
proposed Hospitality fund). In addition, in early July 2006,
APG completed a $19.5 million capital raising via
a security Purchase Plan (13.8 million securities at $1.41).
Total equity increased net $133 million to $514 million at
30 June 2006 compared to $381 million at 30 June 2005.
net tangible assets per unit was $1.00 at 30 June 2006.
excluding the impact of the additional units issued and
reduction in contributed equity to effect the merger of
APG and ADIf noted above, net tangible assets per unit
increased 6.3% to $1.18 at 30 June 2006 compared to
$1.11 at 30 June 2005.
At 30 June 2006, existing bank loan facilities totalled
approximately $192 million, of which $181 million was drawn.
The Trust manages interest rate exposure on debt facilities
through the use of interest rate swap contracts. At 30 June
2006, approximately $139 million or 72% of total debt facilities
were covered by interest rate swap arrangements at an
average interest rate (including bank margin) of 7.06% and an
average term to maturity of 6.8 years.
The Trust’s net debt gearing ratio (calculated as total interest
bearing liabilities less cash assets divided by total assets) was
26.5% at 30 June 2006 compared to 29.6% at 30 June 2005.
46
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus trust
unITs on Issue
At 30 June 2006, 516,381,609 units in AT were on issue
(2005: 342,836,128). units on issue increased 173,545,481
during the year ended 30 June 2006 - including 79,309,591
issued as part of effecting the merger of APG and the
previously unlisted ADIf, implemented on 31 March 2006.
fees PAID To THe resPonsIbLe enTITY AnD AssoCIATes
AT paid a management fee out of scheme property to the
responsible entity of $1.5 million (2005: $1.2 million) for
the year ended 30 June 2006. In addition, AT paid property
management fees to an associate of the responsible entity,
Abacus Property services Pty Limited of $0.4 million
(2005: $0.4 million) for the year ended 30 June 2006.
sIGnIfICAnT CHAnGes In THe sTATe of AffAIrs
The following significant changes in the state of affairs of
the Trust occurred during the financial year:
• Total equity increased by $133 million to $514 million at
30 June 2006 compared to $381 million at 30 June 2005.
• Acquisition of three additional properties and invested in
a 50% interest in entities that own an industrial property
in Melbourne, Victoria for an aggregate $418 million.
• revaluations of properties during the year resulted in a
net increase in the carrying value of investment properties
of approximately $23 million.
• net assets increased $133 million reflecting the impact
of various capital raisings and property revaluations during
the year.
• 79,309,591 additional units in the Trust were issued and
contributed equity decreased net $9 million as a result of
stapling distributions made by AT and AIT to effect the
merger of APG and ADIf on 31 March 2006.
sIGnIfICAnT eVenTs AfTer bALAnCe DATe
on 3 July 2006, the Group completed a capital raising
via a security Purchase Plan for $19.5 million and issued
approximately 13.8 million securities at $1.41 per security.
of the total $19.5 million capital raised, approximately
$15.3 million has been allocated to AT, approximately
$1.1 million has been allocated to AGHL, approximately
$2.9 million has been allocated to AIT and approximately
$0.2 million has been allocated to AGPL.
During August 2006, the Trust completed the acquisition of
a bulky goods retail property at Moorabbin, Victoria for an
aggregate purchase price of approximately $37 million and
exchanged contracts to acquire a 50% interest in a commercial
office property in Adelaide for approximately $5 million.
other than as disclosed in this report and to the knowledge of
directors, there has been no matter or circumstance that has
arisen since the end of the financial year that has significantly
affected, or may affect, the Trust’s operations in future
financial years, the results of those operations or the Trust’s
state of affairs in future financial years.
LIKeLY DeVeLoPMenTs AnD eXPeCTeD resuLTs
The directors have excluded from this report any other
information on the likely developments in the operations of
the Trust and the expected results of those operations in
future financial years which are not of a material nature or
would in the directors’ view be likely to result in unreasonable
prejudice to the operation of the Trust.
enVIronMenTAL reGuLATIon AnD PerforMAnCe
The Trust’s environmental responsibilities, such as waste
removal and water treatment, have been managed in
compliance with all applicable regulations and licence
requirements and in accordance with industry standards.
no breaches of requirements or any environmental issues
have been discovered and brought to the board’s attention.
There has been no known significant breaches of any
environmental requirements applicable to the Trust.
InDeMnIfICATIon AnD InsurAnCe of DIreCTors
AnD offICers
The responsible entity of the Trust, Abacus, has paid an
insurance premium in respect of a contract insuring all
directors and full time executive officers and secretary.
The terms of this policy prohibit disclosure of the nature
of the risks insured or the premium paid.
reGIsTer of unITHoLDers
The register of unitholders has, during the year ended
30 June 2006, been properly drawn up and maintained so
as to give a true account of the unitholders of the Trust.
47
annual financial report / continued
directors’ report
AuDITors InDePenDenCe DeCLArATIon
We have obtained an independence declaration from our auditor, ernst & Young, and such declaration is shown
on the following page.
CorPorATe GoVernAnCe
In recognising the need for the highest standards of corporate behaviour and accountability, the directors
of the responsible entity support and adhere to the principles of corporate governance. The Group’s
Corporate Governance statement is contained in the Corporate Governance section of the annual report.
rounDInG
The amounts contained in this report and in the annual financial report have been rounded to the nearest
$1,000 (where rounding is applicable) under the option available to the Trust under AsIC Class order 98/0100.
The Trust is an entity to which the Class order applies.
signed in accordance with a resolution of the directors.
Abacus funds Management Limited (Abn 66 007 415 590)
JoHn THAMe
Chairman
frAnK WoLf
Deputy Chairman
sydney, 1 september 2006
48
AbACus AnnuAL fInAnCIAL rePorT 2006
auditor’s independence declaration
to the directors of abacus funds management limited as the
responsible entity for abacus trust
In relation to our audit of the financial report of Abacus Trust for the financial year ended 30 June 2006,
to the best of my knowledge and belief, there have been no contraventions of the auditor independence
requirements of the Corporations Act 2001 or any applicable code of professional conduct.
ernsT & YounG
MArK osuLLIVAn
Partner
sydney, 1 september 2006
49
annual financial report / continued
consolidated income and distribution statements
YeAr enDeD 30 June 2006
noTes
2006
$’000
2005
$’000
3(a)
3(e)
3(d)
3(f)
3(b)
3(c)
35,959
37,770
255
–
28,439
24,237
–
–
73,984
52,676
(653)
(6,421)
(9,232)
57,678
1,767
22,727
82,172
(346)
(9,077)
(5,449)
37,804
–
12,935
50,739
CenTs
19.66
CenTs
15.80
2006
$’000
2005
$’000
82,172
(31,211)
50,961
37,804
(865)
36,939
11.80
11.40
418,056
321,169
Revenue
rental income
finance income
Profit from equity accounted investments
Income from distributions
Total revenue
Depreciation and amortisation expense
finance costs
other expenses
Profit from operating activities
net realised gains on investments
net unrealised gains on investments
Net profit attributable to unitholders of Abacus Trust
Basic and diluted earnings per unit
sTATeMenT of DIsTrIbuTIon
net profit attributable to unitholders
net transfer of undistributed income to unitholders’ funds
Distributions paid and payable
Distribution per unit (cents per unit)
Weighted average number of securities (‘000)
50
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus trust
consolidated balance sheet
As AT 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
other financial assets
other
Total current assets
Non–current assets
Investment properties
Investments accounted for using the equity method
other financial assets
other
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
undistributed income
Total equity
2006
$’000
2005
$’000
11,843
6,789
83,401
1,102
103,135
1,564
2,260
56,506
1,355
61,685
366,079
317,808
52,411
–
250,214
180,029
3,410
1,317
672,114
499,154
775,249
560,839
43,559
8,250
51,809
11,985
26,750
38,735
209,533
209,533
141,030
141,030
261,342
179,765
513,907
381,074
446,550
339,782
67,357
513,907
41,292
381,074
51
annual financial report / continued
consolidated statement of recognised income and expense
YeAr enDeD 30 June 2006
Application of AAsb 132 and AAsb 139
net unrealised gains on investments
Net income recognised directly in equity
Profit for the period
Total recognised income and expense for the period
2006
$’000
2005
$’000
(5,146)
–
(5,146)
82,172
77,026
–
–
–
50,739
50,739
52
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus trust
consolidated cash flow statement
YeAr enDeD 30 June 2006
Cash flows from operating activities
Income receipts
Interest received
Audit fees
responsible entity fees paid
Custody fees paid
Interest paid
operating payments
Net cash flows from operating activities
Cash flows from investing activities
Payments for mortgage lending
Proceeds from settlement of mortgage loans
Purchase of plant and equipment
Purchase of investment properties
Disposal of investment properties
Acquisition of interest in JV
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issue of units
Payment of issue costs
repayment of borrowings
Proceeds from borrowings
Distributions paid
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2006
$’000
2005
$’000
27,640
8,630
(39)
(1,518)
(91)
(11,251)
(62)
24,610
7,431
(39)
(1,159)
(69)
(8,792)
(757)
23,309
21,225
(327,342)
(196,336)
259,846
150,371
(2,856)
–
(38,115)
(125,879)
14,035
(13,605)
–
–
(108,037)
(171,844)
130,436
(3,277)
(91,000)
104,260
(45,412)
80,110
–
(57,000)
140,780
(35,114)
95,007
128,776
10,279
(21,843)
1,564
11,843
23,407
1,564
53
annual financial report / continued
notes to the concise financial statements
1. summary of significant accounting policies
(a) Listed property trust units
The constitution of AT was amended to remove the finite
maximum term of the Trust, which allows unitholders’ funds to
continue to be treated as equity in accordance with AASB 132
Financial Instruments: Presentation & Disclosure. AT deferred
the adoption of AASB 132 Financial Instruments: Presentation
& Disclosure and AASB 139 Financial Instruments: Recognition
and Measurement to 1 July 2005. Accordingly, AAsb 132
and AAsb 139 were not applied to the comparatives and the
Trust’s units were accounted for as equity.
(b) Basis of preparation
The concise financial report has been prepared in accordance
with the requirements of the Corporations Act 2001 and
Australian Accounting standards.
The concise financial report has been derived from the
annual financial report but does not include all notes of the
type normally included within the annual financial report
and therefore cannot be expected to provide as full an
understanding of the financial performance, financial position
and financing and investing activities of the Trust as the full
financial report.
The concise financial report should be read in conjunction
with the annual financial report of APG, AGPL and AIT. It
is also recommended that the annual financial report be
considered together with any public announcements made by
the APG during the year ended 30 June 2006 in accordance
with the continuous disclosure obligations arising under the
Corporations Act 2001.
The financial report has also been prepared on a historical cost
basis, except for investment properties and derivative financial
instruments which have been measured at fair value, interests
in joint ventures which are accounted for using the equity
method, and certain investments measured at net market
value. The carrying values of recognised assets and liabilities
that are covered by interest rate swap arrangements are
adjusted to record changes in the fair values attributable to the
risks that are being covered by derivative financial instruments.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated under the option available to the
Trust under AsIC Class order 98/100. The Trust is an entity
to which the class order applies.
(c) Statement of compliance
This financial report complies with Australian Accounting
standards, which include Australian equivalents to
International financial reporting standard (AIfrs). Compliance
with AIfrs has ensured that the financial report, comprising
the financial statements and notes thereto, complies with
International financial reporting standards (Ifrs). This
is the first financial report prepared based on AIfrs and
comparatives for the year ended 30 June 2005 have been
restated accordingly except for the adoption of AASB 132
Financial Instruments: Disclosure and Presentation and AASB
139 Financial Instruments: Recognition and Measurement.
The Trust has adopted the exemption under AASB 1 First-time
Adoption of Australian Equivalents to International Financial
Reporting Standards from having to apply AAsb 132 and
AAsb 139 to the comparative period.
reconciliations of AIfrs equity and profit for 30 June 2005 to
the balances reported in the 30 June 2005 financial report and
at transition to AIfrs are detailed in note 2.
As at 30 June 2006, a number of accounting standards
have been issued with applicable commencement dates
subsequent to year end. The impact of these accounting
standards will not materially alter the accounting polices
of the Trust.
(d) Basis of consolidation
The consolidated financial statements comprise the financial
statements of AT and its subsidiaries as from the date the AT
obtained control until such time control ceases.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent trust, using consistent
accounting policies. Adjustments are made to bring into
line any dissimilar accounting policies that may exist. All
intercompany balances and transactions, including unrealised
profits arising from intra-group transactions, have been
eliminated in full.
subsidiaries are consolidated from the date on which control
is transferred to the Trust and cease to be consolidated from
the date on which control is transferred out of the Trust.
Where there is loss of control of a subsidiary, the consolidated
financial statements include the results for the part of the
reporting period during which the Trust has control.
54
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus trust
2. Impact of adopting AIfrs
for all periods up to and including the year ended 30 June
2005, the Trust prepared its financial statements in accordance
with Australian generally accepted accounting practice
(AGAAP). These financial statements for the year ended
30 June 2006 are the first the Trust is required to prepare
in accordance with Australian equivalents to International
financial reporting standards (AIfrs).
a) AASB 1 transitional exemptions
The Trust has made its election to the transitional exemptions
allowed by AASB 1 First Time Adoption of Australian
Equivalents to International Financial Reporting Standards
as follows:
i) AASB 3 Business Combinations was not applied
retrospectively to business combinations undertaken before
the date of transition to AIfrs.
Accordingly, the Trust has prepared financial statements that
comply with AIfrs applicable for periods beginning on or after
1 January 2005 and the significant accounting policies meeting
those requirements are described in note 2. In preparing these
financial statements, the Trust has started from an opening
balance sheet as at 1 July 2004, the Trust’s date of transition
to AIfrs, and made those changes in accounting policies and
other restatements required by AASB 1 First-time adoption of
AIFRS.
This note explains the material adjustments made by the
Trust in restating its AGAAP balance sheet as at 1 July 2004,
its previously published AGAAP balance sheet and Income
statement for the year ended 30 June 2005, and adjustments
to opening total equity upon the adoption of AAsb 132 and
139 on 1 July 2005.
ii) The Trust has elected to defer the application of AASB
132 Financial Instruments: Presentation and Disclosure
and AASB 139 Financial Instruments: Recognition and
Measurement. As a result of the deferral, the opening
retained earnings at 1 July 2005 has been adjusted
to account for the application of AASB 132 Financial
Instruments: Presentation and Disclosure and AASB 139
Financial Instruments: Recognition and Measurement as
at that date. refer note 2(e) for the reconciliation between
30 June 2005 closing balance and 1 July 2005 opening
balance.
55
annual financial report / continued
notes
2. Impact of adopting AIfrs / continued
b) Reconciliation of profit after tax between AGAAP and AIFRS
Profit after tax as previously reported
recognition of leasing incentives for amortisation(1)
revaluation of investment properties(2)
Profit after tax under AIFRS
YeAr enDeD
30 June 2005
$’000
37,340
464
12,935
50,739
(1) Lease incentives including rent-free periods that have not been recognised previously have been recognised and will be
amortised over the lease term under AASB 117 Leases and UIG Interpretation 115 Operating Leases – Incentives.
(2) fair value movements in investment properties are charged to the income statement under AASB 140 Investment Property,
but were taken to the asset revaluation reserve under previous AGAAP. The gains from the fair value adjustment resulted
in an increase in profit for the year.
c) Reconciliation of total equity between AGAAP and AIFRS
Total equity under AGAAP
Adjustments to equity:
Asset revaluation reserve(1)
Transfer of asset revaluation reserve to retained earnings(1)
Amortisation of leasing incentives(2)
Total equity under AIFRS
30 June 2005
$’000
1 JuLY 2004
$’000
380,610
287,164
37,680
24,745
(37,680)
(24,745)
464
413
381,074
287,577
(1) Asset revaluation reserve relating to investment properties has been reclassified to retained earnings. Gains or losses
on revaluation of investment properties are recognised in profit or loss for the period in which they arise under
AASB 140 Investment Property.
(2) Lease incentives including rent-free periods that have not been recognised previously have been recognised and
will be amortised over the lease term under AASB 117 Leases and UIG Interpretation 115 Operating Leases – Incentives.
d) Cashflow statement under AIFRS
There are no material differences between the AGAAP and AIfrs cash flow statements.
e) Reconciliation of total equity opening balance upon adoption of AASB 132 and 139 on 1 July 2005
As a result of applying AASB 132 Financial Instruments: Presentation and Disclosure and AASB 139 Financial Instruments:
Recognition and Measurement on 1 July 2005, various adjustments have been made between reserves and retained
earnings.
Total equity as at 30 June 2005
Interest rate swap arrangements not covered by hedge accounting(1)
recognition of unearned revenue for amortisation
Total opening equity under AIFRS as at 1 July 2005
(1) Interest rate derivatives are determined to be ineffective as they do not meet the hedge effectiveness criteria under
AASB 139 Financial Instruments: Recognition and Measurement, accordingly, the derivatives are measured at fair value
and the gains and losses are recorded in the income statement. under AGAAP, interest rate derivatives were accounted
for on an accrual basis.
ToTAL equITY
1 JuLY 2005
$’000
381,074
(4,869)
(277)
375,928
56
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus trust
abacus trust
3. revenue and expenses
(a) Finance income
Interest on mortgage loans
bank interest
Total finance income
(b) Net realised gains on investments
sale of investment properties
expenses on sale of investment properties
Total net realised gains on investments
(c) Net unrealised gains on investments
Change in fair value of investment properties
Total unrealised gains on investments
(d) Finance costs
Interest on bank loans
Amortisation of finance costs
Total finance costs
unrealised loss (gains) on interest rate swaps
Total finance costs
(e) Depreciation and amortisation
Amortisation of leasing incentives
(f) Other expenses
Property outgoings
bad and doubtful debts
Auditor’s remuneration
Custody fees
registry maintenance costs
other
Total other expenses
2006
$’000
2005|
$’000
37,088
23,278
682
959
37,770
24,237
1,950
(183)
1,767
–
–
–
22,727
22,727
12,935
12,935
11,495
322
11,817
(5,396)
6,421
8,851
226
9,077
–
9,077
653
346
7,332
21
62
98
60
1,659
9,232
4,873
(880)
35
77
26
1,318
5,449
57
annual financial report / continued
notes
4. events after the balance sheet date
on 3 July 2006, the APG completed a capital raising via a security Purchase Plan for $19.5 million and issued approximately
13.8 million securities at $1.41 per security. of the total $19.5 million capital raised, approximately $15.3 million has been
allocated to AT, approximately $1.1 million has been allocated to AGHL, approximately $2.9 million has been allocated to AIT
and approximately $0.2 million has been allocated to AGPL.
During August 2006, the Trust completed the acquisition of a bulky goods retail property at Moorabbin, Victoria for an aggregate
purchase price of approximately $37 million and exchanged contracts to acquire a 50% interest in a commercial office property
in Adelaide for approximately $5 million.
other than as disclosed already in this report and to the knowledge of directors, there has been no matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may effect, the Group’s operations in future
financial years, the results of those operations or the Group’s state of affairs in future financial years.
5. segment information
The consolidated entity operates within two business segments within the property industry, being property rental and sales
and other property-based investments. The property rental and sales operations comprise the leasing and maintenance of
commercial, retail and industrial properties and the conversion of commercial properties into commercial strata units intended
for sale. The other property-based investments comprise mortgage lending and investment in joint venture activities. revenue
is derived from property rentals, interest, and property sales.
busIness seGMenTs
YeAr enDeD 30 June 2006
Revenue
revenue from external customers
bank interest
Total consolidated revenue
Results
segment results
Interest income
Profit/(loss) before finance costs
finance costs
Net profit for the year
Assets
segment assets
Total assets
Liabilities
segment liabilities
Interest bearing liabilities
unallocated liabilities
Total liabilities
58
AbACus AnnuAL fInAnCIAL rePorT 2006
oTHer
ProPerTY ProPerTY-bAseD
InVesTMenTs
$’000
renTAL & sALes
$’000
ToTAL
$’000
60,636
37,343
97,979
51,319
36,592
682
98,661
87,911
682
88,593
(6,421)
82,172
440,843
334,416
775,249
27,111
1,484
775,249
28,595
217,256
15,491
261,342
abacus trust
busIness seGMenTs
YeAr enDeD 30 June 2005
Revenue
oTHer
ProPerTY ProPerTY-bAseD
InVesTMenTs
$’000
renTAL & sALes
$’000
ToTAL
$’000
revenue from customers outside the Trust
41,374
23,278
64,652
bank interest
Total consolidated revenue
Result
segment results
Interest income
Profit/(loss) before finance costs
finance costs
Net profit for the year
Assets
segment assets
Total assets
Liabilities
segment liabilities
Interest bearing liabilities
unallocated liabilities
Total liabilities
959
65,611
35,155
23,702
58,857
959
59,816
(9,077)
50,739
560,839
560,839
324,301
236,538
2,045
(2)
2,043
167,780
9,942
179,765
59
annual financial report / continued
directors’ declaration
In accordance with a resolution of the directors of the responsible entity, we state that:
(1) in the opinion of the directors:
(a) the concise financial statements and notes of the consolidated entity are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2006 and
of their performance for the year ended on that date; and
(ii) complying with Accounting standards and the Corporations regulations 2001; and
(b) there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they
become due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors
in accordance with sections 295A of the Corporations Act 2001 for the financial period ended 30 June 2006.
on behalf of the board of Abacus funds Management Limited
JoHn THAMe
Chairman
frAnK WoLf
Deputy Chairman
sydney, 1 september 2006
60
AbACus AnnuAL fInAnCIAL rePorT 2006
independent audit report
to unitholders of abacus trust
sCoPe
The concise financial report and directors’ responsibility
The concise financial report comprises the balance sheet, income and distribution statements, statement of
recognised income and expense, cash flows statement, accompanying notes to the financial statements and
the directors’ declaration for the consolidated entity for the year ended 30 June 2006. The consolidated entity
comprises both Abacus Trust (the trust) and the entities it controlled during the year.
The directors of the responsible entity of the trust are responsible for preparing a concise financial report that
complies with Accounting standard AAsb 1039 Concise financial reports, in accordance with the Corporations Act
2001 and the trust’s constitution. This includes responsibility for the maintenance of adequate accounting records
and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and
accounting estimates inherent in the concise financial report.
Audit approach
We conducted an independent audit on the concise financial report in order to express an opinion to the unitholders
of the trust. our audit was conducted in accordance with Australian Auditing standards in order to provide
reasonable assurance as to whether the concise financial report is free of material misstatement. The nature of an
audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations
of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot
guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the concise financial report is presented fairly
in accordance with Accounting standard AAsb 1039 Concise financial reports.
We formed our audit opinion on the basis of these procedures, which included:
• examining, on a test basis, the information to provide evidence supporting that the amounts and disclosures in
the concise financial report are consistent with the full financial report; and
• examining, on a test basis, information to provide evidence supporting the amounts, discussion and analysis,
and other disclosures in the concise financial report that were not directly derived from the full financial report.
We have also performed an independent audit of the full financial report of the trust for the year ended 30 June
2006. our audit report on the full financial report was signed on 1 september 2006, and was not subject to any
qualification. for a better understanding of our approach to the audit of the full financial report, this report should be
read in conjunction with our audit report on the full financial report.
61
independent audit report
to unitholders of abacus trust
Independence
We are independent of the trust and the consolidated entity and have met the independence requirements of
Australian professional ethical pronouncements and the Corporations Act 2001. We have given to the directors of
the trust a written Auditor’s Independence Declaration, signed on 1 september 2006 a copy of which is included in
the Directors’ report.
Audit opinion
In our opinion the concise financial report and the directors’ declaration of Abacus Trust complies with Accounting
standard AAsb 1039 “Concise financial reports”.
ernsT & YounG
MArK osuLLIVAn
Partner
sydney, 1 september 2006
62
AbACus AnnuAL fInAnCIAL rePorT 2006
Custodian
perpetual trustee company limited
level 12, Angel place
123 pitt street
sYDneY nsw 2000
Auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
Compliance plan auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
Registry
computershare investor services pty ltd
level 3, 60 carrington street
sYDneY nsw 2000
tel (02) 1800 635 323 toll free
fax (02) 8234 5050
abacus income trust
DIRECTORY
Responsible entity
Abacus funds management limited
level 34, Australia square
264-278 george street
sYDneY nsw 2000
tel (02) 9253 8600
fax (02) 9253 8616
website www.abacusproperty.com.au
Directors of responsible entity
John thame, chairman
frank wolf, Deputy chairman (executive)
David bastian, managing Director
Dennis bluth
phillip green
malcolm irving
Company secretary
sean o’Donoghue
ait
contents
64 Directors’ report
68 AuDitor’s inDepenDence DeclArAtion
69 consoliDAteD income AnD Distribution stAtements
70 consoliDAteD bAlAnce sheet
71 consoliDAteD stAtement of recogniseD income AnD expense
72 consoliDAteD cAsh flow stAtement
73 notes to the concise finAnciAl stAtements
78 Directors’ DeclArAtion
79
inDepenDent AuDit report
It is recommended that this annual financial report should be read in conjunction with the annual financial reports of Abacus Property
Group, Abacus Trust and Abacus Group Projects Limited as at 30 June 2006. It is also recommended that the report be considered
together with any public announcements made by the Abacus Property Group in accordance with its continuous disclosure obligations
arising under the Corporations Act 2001.
63
annual financial report / continued
MerGer of AbACus ProPerTY GrouP AnD AbACus
DIVersIfIeD InCoMe funD
on 31 March 2006, APG implemented a merger with the
unlisted ADIf. To effect the merger, AT made a stapling
distribution to its unitholders to facilitate the acquisition of
units in AIT and shares in AGPL. similarly, AIT made a stapling
distribution to facilitate the acquisition of units in AT and
shares in AGHL by its unitholders. As a result of the stapling
distribution made by AT, 437,072,018 additional AIT units
were issued to effect the merger. The stapling distributions
were effectively returns of capital and AIT’s contributed
equity increased by $8 million as a net result of the stapling
distributions.
oPerATInG ProfIT
AIT earned a net profit attributable to unitholders of
$26.1 million for the year ended 30 June 2006
(June 2005: $11.1 million).
The Trust earned a net profit attributable to unitholders
(excluding net property and derivative financial instruments
revaluation movements, net of related minority interest
attributable thereto) of $7.9 million (June 2005: $7.6 million).
directors’ report
The directors of Abacus funds Management Limited (Abacus),
the responsible entity of the Abacus Income Trust (AIT or the
Trust) submit their report for the Trust for the year ended
30 June 2006 and the auditor’s report thereon.
DIreCTors
The directors of the responsible entity in office during
the financial year and until the date of this report are set
out below:
John Thame
Chairman
frank Wolf
Deputy Chairman (executive)
David bastian
Managing Director (executive)
Dennis bluth
non-executive
Phillip Green
non-executive
Malcolm Irving
non-executive
PrInCIPAL ACTIVITIes
The principal activities of the Trust during the course of the
year ended 30 June 2006 include investment in commercial,
retail and industrial properties and mortgage lending.
TrusT sTruCTure
The Abacus Property Group (APG) represents the
consolidation of Abacus Group Holdings Limited (AGHL),
Abacus Trust (AT), Abacus Income Trust (AIT) and Abacus
Group Projects Limited (AGPL). units in AT and AIT and shares
in AGHL and AGPL have been stapled together so that neither
can be dealt with without the other. An APG security consists
of one unit in AT, one unit in AIT, one share in AGHL and one
share in AGPL. A transfer, issue or reorganisation of a unit
or share in any of the component parts is accompanied by a
transfer, issue or reorganisation of a unit or share in each of
the other component parts.
AIT is an Australian registered managed investment scheme.
Abacus, the responsible entity of AIT, is incorporated and
domiciled in Australia and is a wholly owned subsidiary of
AGHL. The registered office and principal place of business of
AGHL and of Abacus is located at Level 34 Australia square,
264-278 George street, sydney nsW 2000.
64
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus income trust
eArnInGs Per unIT
basic and diluted earnings per unit
YeAr enDeD
30 June 2006
CenTs
YeAr enDeD
30 June 2005
CenTs
12.71
12.57
basic and diluted earnings per unit (excluding revaluation movements in investment
properties (net of related minority interest attributable thereto) and derivative financial instruments)
3.89
8.42
As part of effecting the merger of APG and ADIf on 31 March 2006, units on issue were restructured and reduced by
22,369,372 and an additional 437,072,018 units were issued (a net increase 414,702,646). no additional net income was
directly contributed to AIT as a result of effecting the merger. excluding the impact on weighted average units on issue
resulting from the additional units issued pursuant to the merger, earnings per unit for the year ended 30 June 2006
would have been 25.64 cents per unit (including revaluations) or 7.85 cents per unit (excluding revaluations).
DIsTrIbuTIons
The Trust paid cash distributions to unitholders of $9.4 million (9.24 cents per unit) during the year ended 30 June 2006
(June 2005: $7.0 million; 9.25 cents per unit).
The AT funded the distributions to APG securityholders for the quarter ended 30 June 2006.
Distributions were paid in respect of the year ended 30 June 2006 to unitholders as follows:
Interim distribution paid 10 november 2005
Interim distribution paid 10 february 2006
Interim distribution paid 10 May 2006
Total
CenTs
2.3125
2.3125
2.3125
6.9375
$’000
2,366
2,370
2,319
7,055
reVIeW of oPerATIons
Trust overview
The Trust operates wholly within Australia and holds an investment portfolio of commercial, retail and industrial
properties and mortgage loan investments.
Operating results for the period
Investment property portfolio:
• The Trust directly acquired one additional industrial property for approximately $9 million.
In addition, through a 75% owned subsidiary, the Trust acquired 6 additional retail properties for approximately $29 million.
• The revaluation of 18 existing properties in the portfolio resulted in a net increase of $16 million in the carrying value of
investment properties;
Mortgage lending:
• The ADIf investment Trust decreased the size of its mortgage book (including accrued interest) by $15 million to $17 million
at 30 June 2006 compared to $32 million at 30 June 2005.
The ADIf investment Trust had an average loan balance of approximately $6 million and average term of approximately
7 months. Loans are provided to both property developers and investors.
• In addition, to effect the merger noted, the AIT advanced approximately $8 million in loan funds to a subsidiary of AGHL.
At 30 June 2006, the balance of the loan to associated Group entities was approximately $15 million.
65
annual financial report / continued
directors’ report
reVIeW of fInAnCIAL ConDITIon
During the year ended 30 June 2006, the contributed equity
of the Trust increased $8 million to $100 million compared to
$92 million at 30 June 2005.
In early July 2006, the APG completed a $19.5 million capital
raising via a security Purchase Plan (13.8 million securities
at $1.41) and approximately $2.9 million has been allocated
to AIT.
Total equity increased net $27 million to $122 million at
30 June 2006 compared to $95 million at 30 June 2005.
net tangible assets per unit is $0.24 at 30 June 2006
compared to $0.94 at 30 June 2005. excluding the impact
of the additional units issued and increase in contributed
equity to effect the merger of APG and ADIf noted above,
net tangible assets per unit increased 28% to $1.20 at 30 June
2006 compared to $0.94 at 30 June 2005.
At 30 June 2006, existing bank loan facilities totalled
approximately $116 million, of which approximately
$115 million was drawn. The Trust manages interest rate
exposure on debt facilities through the use of interest rate
swap contracts. At 30 June 2006, approximately $73 million or
63% of total bank debt facilities were covered by interest rate
swap arrangements at an average interest rate (including bank
margin) of 6.76% and an average term to maturity of
5.9 years.
The Trust’s net debt gearing ratio (calculated as total interest
bearing liabilities less cash assets divided by total assets) was
52.6% at 30 June 2006 compared to 53.1% at 30 June 2005.
unITs on Issue
At 30 June 2006, 516,381,609 units in AIT were on issue
(2005: 101,479,051). units on issue increased net 414,902,558
during the year ended 30 June 2006 predominantly as a result
of restructuring by reducing units on issue by 22,369,372 and
issuing 437,072,018 units as part of effecting the merger of
APG and ADIf on 31 March 2006.
sIGnIfICAnT CHAnGes In THe sTATe of AffAIrs
The following significant changes in the state of affairs of the
Trust occurred during the financial year:
• Total equity increased by $27 million to $122 million at
30 June 2006 compared to $95 million at 30 June 2005.
• Acquisition of seven additional properties.
• revaluations of properties resulted in a net increase in the
carrying value of investment properties of $16 million.
• net assets increased $27 million reflecting the impact of
the merger with APG and property revaluations.
• 437,072,018 additional units in the Trust were issued and
contributed equity increased net $8 million as a result of
stapling distributions made by AT and AIT to effect the
merger of APG and ADIf on 31 March 2006.
sIGnIfICAnT eVenTs AfTer bALAnCe DATe
on 3 July 2006, the APG completed a capital raising
via a security Purchase Plan for $19.5 million and issued
approximately 13.8 million securities at $1.41 per security.
of the total $19.5 million capital raised, approximately
$15.3 million has been allocated to AT, approximately
$1.1 million has been allocated to AGHL, approximately
$2.9 million has been allocated to AIT and approximately
$0.2 million has been allocated to AGPL.
During August 2006, a 75% owned subsidiary of the Trust
exchanged contracts to acquire a small shopping centre
in Townsville, queensland for approximately $7 million. In
addition, the Trust exchanged contracts to sell its property at
Kings Park, nsW for approximately $20 million. The sale is
expected to complete in mid september 2006.
other than as disclosed in this report and to the knowledge of
directors, there has been no matter or circumstance that has
arisen since the end of the financial year that has significantly
affected, or may affect, the Trust’s operations in future
financial years, the results of those operations or the Trust’s
state of affairs in future financial years.
fees PAID To THe resPonsIbLe enTITY AnD AssoCIATes
AIT paid a management fee out of scheme property to the
responsible entity of $1.9 million for the year ended 30 June
2006 (2005: $1.3 million). In addition, AIT paid property
management fees to an associate of the responsible entity,
Abacus Property services Pty Limited, of $0.5 million (2005:
$0.4 million) for the year ended 30 June 2006.
LIKeLY DeVeLoPMenTs AnD eXPeCTeD resuLTs
The directors have excluded from this report any other
information on the likely developments in the operations of the
Trust and the expected results of those operations in future
financial years which are not of a material nature or would in
the directors’ view be likely to result in unreasonable prejudice
to the operation of the Trust.
66
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus income trust
enVIronMenTAL reGuLATIon AnD PerforMAnCe
The Trust’s environmental responsibilities, such as waste
removal and water treatment, have been managed in
compliance with all applicable regulations and licence
requirements and in accordance with industry standards.
no breaches of requirements or any environmental issues
have been discovered and brought to the board’s attention.
There has been no known significant breaches of any
environmental requirements applicable to the Trust.
rounDInG
The amounts contained in this report and in the annual
financial report have been rounded to the nearest $1,000
(where rounding is applicable) under the option available to the
Trust under AsIC Class order 98/0100. The Trust is an entity
to which the Class order applies.
signed in accordance with a resolution of the directors.
Abacus funds Management Limited (Abn 66 007 415 590)
InDeMnIfICATIon AnD InsurAnCe of DIreCTors
AnD offICers
As responsible entity of the Trust, Abacus has paid an
insurance premium in respect of a contract insuring its
directors and full time executive officers and secretary.
The terms of this policy prohibit disclosure of the nature
of the risks insured or the premium paid.
reGIsTer of unITHoLDers
The register of unitholders has, during the year ended 30 June
2006, been properly drawn up and maintained so as to give a
true account of the unitholders of the Trust.
JoHn THAMe
Chairman
AuDITor’s InDePenDenCe DeCLArATIon
We have obtained an independence declaration from our
auditor, ernst & Young, and such declaration is shown at the
end of this Directors report.
frAnK WoLf
Deputy Chairman
sydney, 1 september 2006
CorPorATe GoVernAnCe
In recognising the need for the highest standards of corporate
behaviour and accountability, the directors of the responsible
entity support and adhere to the principles of corporate
governance. The Group’s Corporate Governance statement
is contained in the Corporate Governance section of the
annual report.
67
annual financial report / continued
auditor’s independence declaration
to the directors of abacus funds management limited as the
responsible entity for abacus income trust
In relation to our audit of the financial report of Abacus Income Trust for the financial year ended
30 June 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
ernsT & YounG
MArK osuLLIVAn
Partner
sydney, 1 september 2006
68
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus income trust
consolidated income and distribution statements
YeAr enDeD 30 June 2006
Revenue
Property income
finance income
Income from distributions
Total revenue
Depreciation
finance costs
other expenses
Profit from operating activities
net realised gains on investments
net unrealised gains on investment
Profit before and after income tax
net profit attributable to minority interests – external
net profit attributable to unitholders
Basic and diluted earnings per unit
sTATeMenT of DIsTrIbuTIon
net profit attributable to unitholders
net transfer of undistributed income to members’ funds
Distributions paid and payable
Distribution per unit (cents per unit)
Weighted average number of units (‘000)
noTes
2006
$’000
2005
$’000
3a
3f
3d
3e
3b
3c
19,842
3,528
–
14,787
4,623
–
23,370
19,410
(922)
(6,413)
(5,777)
10,258
–
16,219
26,477
(445)
(7,347)
(5,332)
6,286
1,168
3,655
11,109
(424)
(45)
26,053
11,064
CenTs
12.71
CenTs
12.57
2006
$’000
2005
$’000
26,053
(18,998)
7,055
11,064
(2,931)
8,133
6.93
9.25
204,997
87,998
69
annual financial report / continued
consolidated balance sheet
As AT 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
other financial assets
other
Total current assets
Non-current assets
Investment properties
Property, plant and equipment
other financial assets
other
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Asset revaluation reserve
undistributed income
Total parent entity interest in equity
Total outside equity interest
Total equity
70
AbACus AnnuAL fInAnCIAL rePorT 2006
2006
$’000
2005
$’000
1,348
2,959
12,818
552
825
4,228
12,921
288
17,677
18,262
204,132
146,050
30,725
19,304
274
30,154
19,632
174
254,435
196,010
272,112
214,272
4,861
39,238
44,099
4,170
430
4,600
105,702
105,702
114,262
114,262
149,801
118,862
122,311
95,410
99,672
1,907
20,197
92,029
857
2,411
121,776
95,297
535
113
122,311
95,410
abacus income trust
consolidated statement of recognised income and expense
YeAr enDeD 30 June 2006
fair value revaluation of property, plant and equipment
fair value revaluation of derivative financial instruments
Net income recognised directly in equity
Profit for the period
Total recognised income and expense for the period
Attributable to:
unitholders
Minority interest
2006
$’000
1,050
(1,212)
(162)
2005
$’000
857
–
857
26,477
26,315
11,109
11,966
26,053
11,064
424
45
26,477
11,109
71
annual financial report / continued
consolidated cash flow statement
YeAr enDeD 30 June 2006
Cash flows from operating activities
Income receipts
Income from mortgage investments
Interest received
Audit fees
responsible entity fees paid
Custody fees paid
Interest paid
operating payments
Net cash flows from/(used in) operating activities
Cash flows from investing activities
Payments for investments
Proceeds from sale and settlement of investments
Advances to related entities
Purchase of investment properties
Disposal of investment properties
Payments for other investments
Net cash flows from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of units
Payment of issue costs
Payment of establishment fees
repayment of borrowings
Proceeds from borrowings
Distributions paid
Net cash flows from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
72
AbACus AnnuAL fInAnCIAL rePorT 2006
2006
$’000
2005
$’000
16,445
6,289
342
(48)
11,280
1,989
89
(45)
(1,884)
(1,286)
(18)
(7,980)
(1,585)
11,561
(14,411)
12,821
2,945
(16)
(7,315)
(830)
3,866
(8,800)
5,000
(237)
(42,470)
(41,942)
–
1,966
13,868
(1,966)
(39,149)
(34,077)
7,909
(47)
–
(23,318)
52,964
(9,397)
28,111
523
825
1,348
39,871
–
(1,774)
(37,929)
37,679
(7,037)
30,810
599
226
825
abacus income trust
notes to the concise financial statements
30 June 2006
1. summary of significant accounting policies
(a) Listed property trust units
The constitution of AIT was amended to remove the finite
maximum term of the Trust which allows unitholders’ funds
to continue to be treated as equity in accordance with AASB
132 Financial Instruments: Presentation & Disclosure. The AIT
deferred the adoption of AASB 132 Financial Instruments:
Presentation & Disclosure and AASB 139 Financial
Instruments: Recognition and Measurement to 1 July 2005.
Accordingly, AAsb 132 and AAsb 139 were not applied to
the comparatives and the Trust’s units were accounted
for as equity.
(b) Basis of preparation
The concise financial report has been prepared in accordance
with the requirements of the Corporations Act 2001 and
Australian Accounting standards.
The concise financial report has been derived from the
annual financial report but does not include all notes of the
type normally included within the annual financial report
and therefore cannot be expected to provide as full an
understanding of the financial performance, financial position
and financing and investing activities of the Trust as the full
financial report.
The concise financial report should be read in conjunction
with the annual financial report of APG, AT, and AGPL. It
is also recommended that the annual financial report be
considered together with any public announcements made by
the APG during the year ended 30 June 2006 in accordance
with the continuous disclosure obligations arising under the
Corporations Act 2001.
The financial report has also been prepared on a historical cost
basis, except for investment properties and derivative financial
instruments which have been measured at fair value, interests
in joint ventures which are accounted for using the equity
method, and certain investments measured at net market
value. The carrying values of recognised assets and liabilities
that are covered by interest rate swap arrangements, are
adjusted to record changes in the fair values attributable to the
risks that are being covered by derivative financial instruments.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated under the option available to the Trust
under AsIC Class order 98/100. The Trust is an entity to which
the class order applies.
(c) Statement of compliance
This financial report complies with Australian Accounting
standards, which include Australian equivalents to
International financial reporting standard (AIfrs). Compliance
with AIfrs has ensured that the financial
report, comprising the financial statements and notes
thereto, complies with International financial reporting
standards (Ifrs).
This is the first financial report prepared based on AIfrs and
comparatives for the year ended 30 June 2005 have been
restated accordingly except for the adoption of AASB 132
Financial Instruments: Disclosure and Presentation and AASB
139 Financial Instruments: Recognition and Measurement.
The Trust has adopted the exemption under AASB 1 First-time
Adoption of Australian Equivalents to International Financial
Reporting Standards from having to apply AAsb 132 and
AAsb 139 to the comparative period.
reconciliations of AIfrs equity and profit for 30 June 2005 to
the balances reported in the 30 June 2005 financial report and
at transition to AIfrs are detailed in note 2.
As at 30 June 2006, a number of accounting standards
have been issued with applicable commencement dates
subsequent to year end. The impact of these accounting
standards will not materially alter the accounting polices
of the AIT.
(d) Basis of consolidation
The consolidated financial statements comprise the financial
statements of AIT and its subsidiaries as from the date the
AIT obtained control until such time control ceases.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent trust, using consistent
accounting policies.
Adjustments are made to bring into line any dissimilar
accounting policies that may exist. All intercompany balances
and transactions, including unrealised profits arising from
intra-group transactions, have been eliminated in full.
subsidiaries are consolidated from the date on which control
is transferred to the Trust and cease to be consolidated from
the date on which control is transferred out of the Trust.
Where there is loss of control of a subsidiary, the consolidated
financial statements include the results for the part of the
reporting period during which the Trust has control.
73
annual financial report / continued
a) AASB 1 transitional exemptions
The Trust has made its election to the transitional exemptions
allowed by AASB 1 First Time Adoption of Australian
Equivalents to International Financial Reporting Standards
as follows:
i) AASB 3 Business Combinations was not applied
retrospectively to business combinations undertaken before
the date of transition to AIfrs.
ii) The Trust has elected to defer the application of AASB 132
Financial Instruments: Presentation and Disclosure and AASB
139 Financial Instruments: Recognition and Measurement.
As a result of the deferral, the opening retained earnings at
1 July 2005 has been adjusted to account for the application
of AASB 132 Financial Instruments: Presentation and
Disclosure and AASB 139 Financial Instruments: Recognition
and Measurement as at that date. refer note 2(e) for the
reconciliation between 30 June 2005 closing balance and
1 July 2005 opening balance.
notes
1. summary of significant accounting policies /
continued
(d) Basis of consolidation / continued
The Trust has elected to apply the option available under AAsb
1 of adopting AAsb 132 and AAsb 139 from 1 July 2005.
outlined below are the relevant accounting policies applicable
for the years ended 30 June 2006 and 30 June 2005. The
Trust assesses at each balance sheet date whether a financial
asset or group of financial assets is impaired.
2. Impact of adopting AIfrs
for all periods up to and including the year ended 30 June
2005, the Trust prepared its financial statements in accordance
with Australian generally accepted accounting practice
(AGAAP). These financial statements for the year ended
30 June 2006 are the first the Trust is required to prepare
in accordance with AIfrs.
Accordingly, the Trust has prepared financial statements that
comply with AIfrs applicable for periods beginning on or after
1 January 2005 and the significant accounting policies meeting
those requirements are described in note 2. In preparing these
financial statements, the Trust has started from an opening
balance sheet as at 1 July 2004, the Trust’s date of transition
to AIfrs, and made those changes in accounting policies and
other restatements required by AASB 1 First-time adoption
of AIFRS.
This note explains the material adjustments made by the
Trust in restating its AGAAP balance sheet as at 1 July 2004,
its previously published AGAAP balance sheet and Income
statement for the year ended 30 June 2005, and adjustments
to opening total equity upon the adoption of AAsb 132 and
139 on 1 July 2005.
74
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus income trust
b) Reconciliation of profit after tax between AGAAP and AIFRS
Profit after tax as previously reported
revaluation of investment properties(1)
Profit after tax under AIFRS
(1) fair value movements in investment properties are charged to the income statement under AASB 140 Investment Property,
but were taken to the asset revaluation reserve under previous AGAAP. The gains from the fair value adjustment resulted
in an increase in profit for the year.
YeAr enDeD
30 June 2005
$’000
7,903
3,206
11,109
c) Reconciliation of total equity between AGAAP and AIFRS
Total equity under AGAAP
Adjustments to equity:
Asset revaluation reserve
Transfer of asset revaluation reserve to retained earnings(1)
Total equity under AIFRS
30 June 2005
$’000
1 JuLY 2004
$’000
95,410
53,352
2,491
(2,491)
95,410
–
–
53,352
(1) Asset revaluation reserve relating to investment properties has been reclassified to retained earnings. Gains or
losses on revaluation of investment properties are recognised in profit or loss for the period in which they arise under
AASB 140 Investment Property.
d) Cashflow statement under AIFRS
There are no material differences between the AGAAP and AIfrs cash flow statements.
e) Reconciliation of total equity opening balance upon adoption of AASB 132 and 139 on 1 July 2005
As a result of applying AASB 132 Financial Instruments: Presentation and Disclosure and AASB 139 Financial
Instruments: Recognition and Measurement on 1 July 2005 various adjustments have been made between
reserves and retained earnings.
Total equity as at 30 June 2005
Interest rate swap arrangements not covered by hedge accounting(1)
Total opening equity under AIFRS as at 1 July 2005
(1) Interest rate derivatives are determined to be ineffective as they do not meet the hedge effectiveness criteria under
AASB 139 Financial Instruments: Recognition and Measurement, accordingly, the derivatives are measured at fair value
and the gains and losses are recorded in the income statement. under AGAAP, interest rate derivatives were accounted
for on an accrual basis.
ToTAL equITY
1 JuLY 2005
$’000
95,410
(1,212)
94,198
75
annual financial report / continued
notes
3. revenue and expenses
(a) Finance income
Interest on mortgage loans
bank interest
Total finance income
(b) Net realised gains on investments
sale of investment properties
expenses on sale of investment properties
Total net realised gains on investments
(c) Unrealised gains on investments
Change in fair value of investment properties
Total unrealised gains on investments
(d) Finance costs
Interest on loans
Amortisation of finance costs
unrealised gains on interest rate swaps
Total finance costs
(e) Other expenses
Property outgoings
Audit fees
registry maintenance costs
other
Total other expenses
(f) Depreciation
Depreciation of property, plant and equipment
Total depreciation
2006
$’000
2005
$’000
3,357
171
3,528
–
–
–
16,219
16,219
8,662
57
(2,306)
6,413
4,444
179
4,623
1,364
(196)
1,168
3,655
3,655
7,336
11
–
7,347
3,448
2,864
55
50
2,224
5,777
922
922
53
71
2,344
5,332
445
445
4. events after the balance sheet date
on 3 July 2006, the Group completed a capital raising via a security Purchase Plan for $19.5 million and issued
approximately 13.8 million securities at $1.41 per security. of the total $19.5 million capital raised, approximately
$15.3 million has been allocated to AT, approximately $1.1 million has been allocated to AGHL, approximately
$2.9 million has been allocated to AIT and approximately $0.2 million has been allocated to AGPL.
During August 2006, a 75% owned subsidiary of the Trust exchanged contracts to acquire a small shopping centre
in Townsville, queensland for approximately $7 million. In addition, the Trust exchanged contracts to sell its property at
Kings Park, nsW for approximately $20 million. The sale is expected to complete in mid september 2006.
other than as disclosed already in this report and to the knowledge of directors, there has been no matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may affect, the Trust’s operations in future
financial years, the results of those operations or the Trust’s state of affairs in future financial years.
76
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus income trust
5. segment information
The consolidated entity operates within two business segments within the property industry, being property rental and sales
and other property-based investments. The property rental and sales operations comprise the leasing and maintenance of
commercial, retail and industrial properties and the conversion of commercial properties into commercial strata units intended
for sale. The other property-based investments comprise mortgage lending and investment in joint venture activities.
revenue is derived from property rentals, interest, and property sales.
ProPerTY
renTAL & sALes
fInAnCInG
ToTAL
June 2006
$’000
June 2005
$’000
June 2006
$’000
June 2005
$’000
June 2006
$’000
June 2005
$’000
Revenue
revenues from customers outside the Trust
bank interest
Total aggregated revenue
32,613
16,746
3,357
4,444
35,970
171
36,141
21,190
179
21,369
Results
segment result
bank Interest
borrowing costs
Trust net profit
Assets
segment assets
Total assets
Liabilities
segment liabilities
Interest-bearing loans
unallocated liabilities
Total liabilities
Other segment information
Depreciation
29,665
14,444
3,054
3,833
32,719
18,277
255,582
181,895
16,530
32,377
171
(6,413)
26,477
179
(7,347)
11,109
272,112
272,112
214,272
214,272
4,861
1,829
16,530
32,377
21,391
128,410
–
34,206
82,314
2,342
149,801
118,862
922
445
–
–
922
445
77
annual financial report / continued
directors’ declaration
In accordance with a resolution of the directors of the responsible entity, we state that:
(1) in the opinion of the directors:
(a) the concise financial statements and notes of the consolidated entity are in accordance with the
Corporations Act 2001, including :
(i) give a true and fair view of the consolidated entity’s financial position as at 30 June 2006 and of their
performance for the year ended on that date; and
(ii) complying with Accounting standards and the Corporations regulations 2001; and
(b) there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they
become due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors
in accordance with sections 295A of the Corporations Act 2001 for the financial period ended 30 June 2006.
on behalf of the board of Abacus funds Management Limited
JoHn THAMe
Deputy Chairman
frAnK WoLf
Chairman
sydney, 1 september 2006
78
AbACus AnnuAL fInAnCIAL rePorT 2006
independent audit report
to unitholders of abacus income trust
sCoPe
The concise financial report and directors’ responsibility
The concise financial report comprises the balance sheet, income and distribution statements, statement of
recognised income and expense, cash flow statement, accompanying notes to the financial statements and
the directors’ declaration for the consolidated entity for the year ended 30 June 2006. The consolidated entity
comprises both Abacus Income Trust (the trust) and the entities it controlled during the year.
The directors of the responsible entity of the trust are responsible for preparing a concise financial report that
complies with Accounting standard AAsb 1039 Concise financial reports, in accordance with the Corporations Act
2001 and the trust’s constitution. This includes responsibility for the maintenance of adequate accounting records
and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and
accounting estimates inherent in the concise financial report.
Audit approach
We conducted an independent audit on the concise financial report in order to express an opinion to the unitholders
of the trust. our audit was conducted in accordance with Australian Auditing standards in order to provide
reasonable assurance as to whether the concise financial report is free of material misstatement. The nature of an
audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations
of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot
guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the concise financial report is presented fairly
in accordance with Accounting standard AAsb 1039 Concise financial reports.
We formed our audit opinion on the basis of these procedures, which included:
• examining, on a test basis, the information to provide evidence supporting that the amounts and disclosures in
the concise financial report are consistent with the full financial report; and
• examining, on a test basis, information to provide evidence supporting the amounts, discussion and analysis, and
other disclosures in the concise financial report that were not directly derived from the full financial report.
We have also performed an independent audit of the full financial report of the trust for the year ended 30 June
2006. our audit report on the full financial report was signed on 1 september 2006, and was not subject to any
qualification. for a better understanding of our approach to the audit of the full financial report, this report should be
read in conjunction with our audit report on the full financial report.
79
independent audit report
to unitholders of abacus income trust
Independence
We are independent of the trust and the consolidated entity and have met the independence requirements of
Australian professional ethical pronouncements and the Corporations Act 2001. We have given to the directors of
the trust a written Auditor’s Independence Declaration, signed on 1 september 2006 a copy of which is included in
the Directors’ report.
Audit opinion
In our opinion the concise financial report and the directors’ declaration of Abacus Income Trust complies with
Accounting standard AAsb 1039 “Concise financial reports”.
ernsT & YounG
MArK osuLLIVAn
Partner
sydney, 1 september 2006
80
AbACus AnnuAL fInAnCIAL rePorT 2006
abacus group projects limited
DIRECTORY
Abacus group projects limited
Abn 11 104 066 104
level 34, Australia square
264-278 george street
sYDneY nsw 2000
tel (02) 9253 8600
fax (02) 9253 8616
website www.abacusproperty.com.au
Directors
frank wolf
David bastian
len lloyd
Company Secretary
sean o’Donoghue
Registry
computershare investor services pty ltd
level 3, 60 carrington street
sYDneY nsw 2000
tel (02) 1800 635 323 toll free
fax (02) 8234 5050
Auditor
ernst & Young
ernst & Young centre
680 george street
sYDneY nsw 2000
agpl
contents
82 Directors’ report
86 AuDitor’s inDepenDence DeclArAtion
87 consoliDAteD income AnD Distribution stAtements
88 consoliDAteD bAlAnce sheet
89 consoliDAteD stAtement of recogniseD income AnD expense
90 consoliDAteD cAsh flow stAtement
91 notes to the concise finAnciAl stAtements
96 Directors’ DeclArAtion
97
inDepenDent AuDit report
It is recommended that this annual financial report should be read in conjunction with the annual financial reports of Abacus Property
Group, Abacus Trust and Abacus Income Trust as at 30 June 2006. It is also recommended that the report be considered together with
any public announcements made by the Abacus Property Group in accordance with its continuous disclosure obligations arising under
the Corporations Act 2001.
81
annual financial report / continued
directors’ report
The directors present their report together with the
consolidated financial reports of Abacus Group Projects
limited (AGPl or the Company) and the auditor’s report
thereon.
DIreCTors
The directors of AGPl, together with their qualifications and
experience, in office during the year and until the date of this
report are set out below:
Frank Wolf PhD, bA Hons
Dr frank Wolf is the Chairman of fsP Group Pty limited
and a director of financial planning groups financial services
Partners Pty limited, Vector financial services limited
and Kingston Capital limited as well as of HGl limited,
a diversified publicly listed investment company. Dr Wolf
has over 20 years experience in the property and financial
services industry.
David Bastian CPA
Mr David bastian has almost 40 years experience in the
financial services industry, in particular in the packaging
of commercial, retail and residential property projects.
He was Managing Director of the Canberra building society
for 20 years and an executive director of Godfrey Pembroke
financial services Pty limited for 7 years. Mr bastian is also
a director of financial planning groups financial services
Partners Pty limited, Vector financial services limited and
Kingston Capital limited.
Len Lloyd WDA, fAPI, lreA
Mr len lloyd is a licensed real estate Agent and a registered
real estate Valuer. His experience includes the development,
management and funding of commercial, retail and residential
property. Mr lloyd joined Abacus in october 2000 and now
holds the position of Managing Director of Abacus Property
services Pty limited responsible for property administration
and development opportunities in the Abacus portfolio.
In previous positions, Mr lloyd held responsibility for the
property portfolios of the Advance bank and st George bank
and provided valuation and lending advice while with the
Commonwealth Development bank.
CoMPAnY seCreTArY
Sean O’Donoghue b.Com, CA, MbA
Mr sean o’Donoghue has been the company secretary since
joining the APG in september 2004. Mr o’Donoghue has over
15 years experience in the property and financial services
industries having held various senior roles with MlC, lend
lease and Commonwealth bank over that period.
82
AbACus AnnuAl fInAnCIAl rePorT 2006
Directors’ Meetings
The directors of AGPl held four meetings during the year in
which all the directors attended.
PrInCIPAl ACTIVITIes
The principal activities of AGPl during the year was
investment in joint ventures including participation in a
residential project in Cronulla, a beachside suburb of sydney,
and the management of hotel operations, specifically,
the rydges esplanade Hotel, Cairns.
CorPorATe sTruCTure
AGPl is a company incorporated and domiciled in Australia.
The registered office and principal place of business of AGPl
is located at level 34, Australia square, 264-278 George
street, sydney nsW 2000.
At balance date, a 75% owned subsidiary of AGPl,
Abacus Matson Holdings Pty limited, had 149 employees
(2005: 146).
MerGer of AbACus ProPerTY GrouP AnD AbACus
DIVersIfIeD InCoMe funD
on 31 March 2006, APG implemented a merger with the
unlisted ADIf. To effect the merger, AT made a stapling
distribution to its unitholders to facilitate the acquisition
of units in AIT and shares in AGPl. similarly, AIT made a
stapling distribution to facilitate the acquisition of units in
AT and shares in AGHl by its unitholders. As a result of the
stapling distribution made by AT, net 414,702,646 additional
AGPl shares were issued to effect the merger. The stapling
distributions were effectively returns of capital and AGPl’s
contributed equity increased by $0.4 million as a net result of
the stapling distributions.
oPerATInG ProfIT
AGPl incurred a consolidated net loss attributable to members
of $0.8 million for the year ended 30 June 2006 (June 2005:
$0.1 million profit).
abacus group projects limited
eArnInGs Per sHAre
basic and diluted earnings per share
YeAr enDeD
30 June 2006
CenTs
YeAr enDeD
30 June 2005
CenTs
(0.40)
0.17
As part of effecting the merger of APG and ADIf on 31 March 2006, shares on issue were restructured and reduced
by 22,369,372 and an additional 437,072,018 shares were issued (a net increase 414,702,646). no additional net income
was directly contributed to AGPl as a result of effecting the merger. excluding the impact on weighted average shares
on issue resulting from additional shares issued pursuant to the merger, earnings per share for the year ended
30 June 2006 would have been 0.82 cents loss per share.
DIVIDenDs
There were no dividends paid by AGPl during the year ended 30 June 2006 (June 2005: nil).
reVIeW of oPerATIons
Company Overview
AGPl operates wholly within Australia and holds an investment in a joint venture and operates a hotel business.
Operating Results for the Period
AGPl’s joint venture entity sold its only asset, the spotlight shopping centre at 147-157 Queen street,
Campbelltown, sydney contributing a profit of approximately $0.4 million.
The Company made a provision for diminution in value of its investments in the Cronulla joint venture of $1.5 million
and sold a commercial office suite during the year generating a profit of $0.1 million.
Review of Financial condition
As a result of the merger noted above, the contributed equity of the Company increased $0.4 million to $5.5 million
compared to $5.1 million at 30 June 2005.
In early July 2006, APG completed a $19.5 million capital raising via a security Purchase Plan (13.8 million securities
at $1.41) and approximately $0.2 million has been allocated to AGPl.
Total equity decreased net $0.3 million to $5.8 million compared to $6.1 million at 30 June 2005. net tangible assets
per share decreased 3.97 cents to 0.91 cents at 30 June 2006. excluding the impact of the additional shares issued
and increase in contributed equity to effect the merger of APG and ADIf noted above, net tangible assets per share
decreased 0.23 cents to 4.65 cents at 30 June 2006.
Total assets decreased $0.7 million to $7.9 million at 30 June 2006 compared to $8.6 million at 30 June 2005
largely reflecting the provision for diminution in the value of the Company’s investment in the Cronulla development
joint venture.
other than as disclosed already in this report, there has been no matter or circumstance that has arisen since the
end of the year that has significantly affected, or may affect, the Company’s operations in future financial periods,
the results of those operations or the Company’s state of affairs in future financial periods.
83
annual financial report / continued
directors’ report
sHAres on Issue
At 30 June 2006, 516,381,609 shares in AGPl were on
issue (2005: 101,479,051). shares on issue increased net
414,902,558 during the year ended 30 June 2006 as a result
of restructuring by reducing shares on issue by 22,369,372
and issuing 414,702,646 shares as part of effecting the merger
of APG and ADIf on 31 March 2006.
lIKelY DeVeloPMenTs AnD eXPeCTeD resulTs
The directors have excluded from this report any other
information on the likely developments in the operations of
the Company and the expected results of those operations
in future financial years which are not of a material nature or
would in the directors’ view be likely to result in unreasonable
prejudice to the operation of the Company.
enVIronMenTAl reGulATIon AnD PerforMAnCe
environmental responsibilities, such as waste removal and
water treatment, have been managed in compliance with
all applicable regulations and licence requirements and
in accordance with industry standards. no breaches of
requirements or additional environmental issues have been
discovered nor brought to the board’s attention. There have
been no known significant breaches of any environmental
requirements applicable to the Company.
InDeMnIfICATIon AnD InsurAnCe of DIreCTors
AnD offICers
The manager of AGPl, Abacus, has paid an insurance
premium in respect of a contract insuring its directors and full
time executive officers and secretary. The terms of this policy
prohibit disclosure of the nature of the risks insured or the
premium paid.
sHAre oPTIons
no options were granted over any share in the Company in the
financial year, nor are there options outstanding as at the date
of this report.
reGIsTer of sHAreHolDers
The register of shareholders has, during the year ended
30 June 2006, been properly drawn up and maintained so as
to give a true account of the shareholders of the Company.
AuDITor’s InDePenDenCe DeClArATIon
We have obtained on independence declaration from our
auditors, ernst & Young, and such declaration is shown at the
end of this report.
fees PAID To AbACus funDs MAnAGeMenT lIMITeD
AnD AssoCIATes
AGPl paid a management fee to Abacus of $0.04 million
(2005: $0.02 million) for the year ended 30 June 2006.
In addition, AGPl paid property management fees to an
associate company, Abacus Property services Pty limited
of $0.06 million (2005: $0.02 million) for the year ended
30 June 2006.
sIGnIfICAnT CHAnGes In THe sTATe of AffAIrs
The following significant changes in the state of affairs of
the Company occurred during the financial year:
• The spotlight shopping centre which underpinned a
50% joint venture was sold during the year;
• Total equity decreased by $0.3 million to $5.8 million at
30 June 2006 compared to $6.1 million at 30 June 2005;
• Total assets decreased $0.7 million largely reflecting
the provision for diminution made on the Company’s
investment in the Cronulla joint venture;
• net 414,702,646 additional shares in the Company were
issued and contributed equity increased net $0.4 million
as a result of stapling distributions made by AT and AIT to
effect the merger of APG and ADIf on 31 March 2006.
sIGnIfICAnT eVenTs AfTer bAlAnCe DATe
on 3 July 2006, the APG completed a capital raising via
a security Purchase Plan for $19.5 million and issued
approximately 13.8 million securities at $1.41 per security.
of the total $19.5 million capital raised, approximately
$15.3 million has been allocated to AT, approximately
$1.1 million has been allocated to AGHl, approximately
$2.9 million has been allocated to AIT and approximately
$0.2 million has been allocated to AGPl.
other than as disclosed already in this report and to the
knowledge of directors, there has been no matter or
circumstance that has arisen since the end of the financial
year that has significantly affected, or may effect, the
Company’s operations in future financial years, the results
of those operations or the Company’s state of affairs in
future financial years.
84
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus group projects limited
CorPorATe GoVernAnCe
In recognising the need for the highest standards of corporate
behaviour and accountability, the directors of AGPl and
Abacus support and adhere to the principles of corporate
governance. The Company’s Corporate Governance statement
is contained in the Corporate Governance section of the
annual report.
rounDInG
The amounts contained in this report and in the annual
financial report have been rounded to the nearest $1,000
(where rounding is applicable) under the option available to the
Company under AsIC Class order 98/0100. The Company is
an entity to which the Class order applies.
signed in accordance with a resolution of the directors.
Abacus Group Projects limited (Abn 11 104 066 104)
frAnK Wolf
Director
len lloYD
Director
sydney, 1 september 2006
85
auditor’s independence declaration
to the directors of abacus group projects limited
In relation to our audit of the financial report of Abacus Group Projects limited for the financial year ended
30 June 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
ernsT & YounG
MArK osullIVAn
Partner
sydney, 1 september 2006
86
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus group projects limited
consolidated income and distribution statements
YeAr enDeD 30 June 2006
Revenue
net hotel income
Income from distributions
finance income
Total revenue
employee benefits expense
Depreciation and amortisation expense
other hotel expenses
other expenses
(Loss)/profit from operating activities
net realised gains on investments
net unrealised gains on investments
(Loss)/profit before income tax
Income tax expense
Net (loss)/profit
net (loss)/profit attributable to minority interests – external
Net (loss)/profit attributable to members
Basic and diluted earnings per AGPL share
noTes
2006
$’000
2005
$’000
3a
12,265
3,748
383
9
82
1
12,657
3,831
3b
3c
3d
3e
3f
(5,188)
(192)
(3,778)
(4,511)
(1,012)
142
(280)
(1,150)
350
(800)
(30)
(830)
(2,090)
(40)
(1,249)
(760)
(308)
–
438
130
–
130
21
151
CenTs
(0.40)
CenTs
0.17
87
annual financial report / continued
consolidated balance sheet
As AT 30 June 2006
Current assets
Cash and cash equivalents
Trade and other receivables
other
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Investment properties
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
retained earnings/(accumulated losses)
Total parent interest in equity
Total outside interest in equity
Total equity
88
AbACus AnnuAl fInAnCIAl rePorT 2006
2006
$’000
2005
$’000
1,243
3,978
747
5,968
–
871
–
1,035
1,906
969
1,226
304
2,499
3,357
20
1,580
1,154
6,111
7,874
8,610
1,601
2,097
121
152
1,874
15
227
242
–
359
2,456
–
43
43
2,116
2,499
5,758
6,111
5,557
(628)
4,929
829
5,758
5,110
201
5,311
800
6,111
abacus group projects limited
consolidated statement of recognised income and expense
YeAr enDeD 30 June 2006
Net income recognised directly in equity
Profit for the period
Total recognised income and expense for the period
Attributable to:
shareholders
Minority interest
2006
$’000
–
(800)
(800)
(830)
30
(800)
2005
$’000
–
130
130
151
(21)
130
89
annual financial report / continued
consolidated cash flow statement
YeAr enDeD 30 June 2006
Cash flows from operating activities
Income receipts from hotel business
Interest received
Distributions received from JVs
other deposits from hotel business
Manager’s fee paid
lease rental
other operating payments
Net cash flows from/(used in) operating activities
Cash flows from investing activities
2006
$’000
2005
$’000
2,953
9
402
–
(99)
(2,653)
(271)
341
127
1
92
256
(44)
–
(24)
408
Payments for investment properties and management rights
–
(2,521)
Proceeds from sale of investments
Purchase of plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
repayment of borrowings
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2,384
(27)
2,357
478
–
(2,902)
(2,424)
274
969
1,243
–
(2,521)
2,889
193
–
3,082
969
–
969
90
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus group projects limited
notes to the concise financial statements
1. summary of significant accounting policies
(a) Basis of preparation of the consolidated
financial report
The concise financial report has been prepared in accordance
with the requirements of the Corporations Act 2001 and
Australian Accounting standards.
The concise financial report has been derived from the
annual financial report but does not include all notes of the
type normally included within the annual financial report
and therefore cannot be expected to provide as full an
understanding of the financial performance, financial position
and financing and investing activities of the Company as the
full financial report.
The concise financial report should be read in conjunction
with the annual financial report of APG, AT, and AIT. It is also
recommended that the annual financial report be considered
together with any public announcements made by the APG
during the year ended 30 June 2006 in accordance with
the continuous disclosure obligations arising under the
Corporations Act 2001.
The financial report has also been prepared on a historical cost
basis, except for investment properties and derivative financial
instruments which have been measured at fair value, interests
in joint ventures which are accounted for using the equity
method, and certain investments measured at net market
value. The carrying values of recognised assets and liabilities
that are covered by interest rate swap arrangements, are
adjusted to record changes in the fair values attributable to the
risks that are being covered by derivative financial instruments.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated under the option available to the
Company under AsIC Class order 98/100. The Company is an
entity to which the class order applies.
(b) Statement of compliance
The financial report complies with Australian Accounting
standards, which include Australian equivalents to
International financial reporting standard (AIfrs). Compliance
with AIfrs ensures that the financial report, comprising
the financial statements and notes thereto, complies with
International financial reporting standards (Ifrs).
This is the first financial report prepared based on AIfrs and
comparatives for the year ended 30 June 2005 have been
restated accordingly except for the adoption of AASB 132
Financial Instruments: Disclosure and Presentation and AASB
139 Financial Instruments: Recognition and Measurement.
The Company has adopted the exemption under AASB 1
First-time Adoption of Australian Equivalents to International
Financial Reporting Standards from having to apply AAsb 132
and AAsb 139 to the comparative period.
reconciliations of AIfrs equity and profit for 30 June 2005
to the balances reported in the 30 June 2005 financial report
and at transition to Ifrs are detailed in note 2.
As at 30 June 2006, a number of accounting standards
have been issued with applicable commencement dates
subsequent to year end. The impact of these accounting
standards should not materially alter the accounting polices
of AGPl.
(c) Basis of consolidation
The consolidated financial statements comprise AGPl
(the parent company) and Abacus Matson Holdings Pty
limited (the subsidiary). AGPl and its subsidiary are
collectively referred to as AGPl.
The financial statements of the subsidiary are prepared for
the same reporting period as the parent company, using
consistent accounting policies. Adjustments are made to bring
into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including
unrealised profits arising from intra-group transactions, have
been eliminated in full.
The subsidiary is consolidated from the date on which control
is transferred to the AGPl and cease to be consolidated
from the date on which control is transferred out of the
AGPl. Where there is loss of control of the subsidiary, the
consolidated financial statements include the results for
the part of the reporting period during which the AGPl
has control.
Minority interests representing the interests in Abacus
Matson Holdings Pty ltd not held by the AGPl are presented
separately in the income statement and within equity in the
consolidated balance sheet.
91
annual financial report / continued
notes
2. Impact of adopting AIfrs
for all periods up to and including the year ended 30 June 2005, AGPl prepared its financial statements in accordance
with Australian generally accepted accounting practice (AGAAP). These financial statements for the year ended 30 June 2006
are the first the AGPl is required to prepare in accordance with AIfrs.
Accordingly, AGPl has prepared financial statements that comply with AIfrs applicable for periods beginning on or after
1 January 2005. In preparing these financial statements, the AGPl has started from an opening balance sheet as at
1 July 2004, the AGPl’s date of transition to AIfrs, and made those changes in accounting policies and other restatements
required by AASB 1 First-time adoption of AIFRS.
This note explains the material adjustments made by the AGPl in restating its AGAAP balance sheet as at 1 July 2004,
its previously published AGAAP balance sheet and Income statement for the year ended 30 June 2005, and any adjustments
to opening total equity upon the adoption of AAsb 132 and 139 on 1 July 2005.
a) AASB 1 transitional exemptions
AGPl has made its election to the transitional exemptions allowed by AASB 1 First Time Adoption of Australian Equivalents
to International Financial Reporting Standards as follows:
i) AASB 3 Business Combinations was not applied retrospectively to business combinations undertaken
before the date of transition to AIfrs.
ii) AGPl has elected to defer the application of AASB 132 Financial Instruments: Presentation and Disclosure and AASB 139
Financial Instruments: Recognition and Measurement. As a result of the deferral, the opening retained earnings at 1 July 2005
has been adjusted to account for the application of AASB 132 Financial Instruments: Presentation and Disclosure and AASB
139 Financial Instruments: Recognition and Measurement as at that date.
b) Reconciliation of profit after tax between AGAAP and AIFRS
Profit after tax as previously reported
Adjustments to profit after tax:
reversal of profits on sales settled after period end(1)
revaluation of investment properties(2)
Profit after tax under AIFRS
YeAr enDeD
30 June 2005
$’000
(229)
(79)
438
130
(1) sales not settled within the reporting period have been reversed and taken up in the period of settlement pursuant to AASB 118 Revenue
which provides that revenue in the sale of goods is recognised when the significant risks and rewards of the ownership of the goods have
been transferred to the buyer.
(2) fair value movements in investment properties are charged to the income statement under AASB 140 Investment Property, but were taken
to the asset revaluation reserve under previous AGAAP. The gains from the fair value adjustment resulted in an increase in profit for the year.
92
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus group projects limited
c) Reconciliation of total equity between AGAAP and AIFRS
Total equity under AGAAP
Adjustment to equity:
Asset revaluation reserve
Transfer of asset revaluation reserve to retained earnings(1)
reversal of profits on sales settled after period end(2)
Total equity under AIFRS
30 June 2005
$’000
1 JulY 2004
$’000
6,190
3,601
325
(325)
(79)
6,111
–
–
–
3,601
(1) Asset revaluation reserve relating to investment properties has been reclassified to retained earnings. Gains or losses on revaluation
of investment properties are recognised in profit or loss for the period in which they arise under AASB 140 Investment Property.
(2) sales not settled within the reporting period have been reversed and taken up in the period of settlement pursuant to AASB 118 Revenue
which provides that revenue in the sale of goods is recognised when the significant risks and rewards of the ownership of the goods have
been transferred to the buyer.
d) Cashflow statement under AIRFS
There are no material differences between the AGAAP and AIfrs cash flow statements.
93
annual financial report / continued
notes
3. revenue and expenses
(a) Net hotel income
revenue
Cost of sales
Total gross hotel income
(b) Employee benefits expense
Wages and salaries
leave provisions
other
Total employee benefits expense
(c) Depreciation and amortisation expense
Depreciation of plant and equipment
Amortisation of intangible assets – management right
Total depreciation and amortisation expense
(d) Other expenses
expenses on sale of investment properties
Management fees
Auditor’s remuneration
lease rental
Provision for diminution in value of joint venture interest
other
Total other expenses
(e) Net realised gains on investments
sale of commercial office suite
(f) Net unrealised gains on investments
Change in fair value of property, plant and equipment
Change in fair value of investment in Queen street Trust
Total net unrealised gains on investments
2006
$’000
2005
$’000
14,702
(2,437)
12,265
4,525
(777)
3,748
4,184
1,525
379
625
402
163
5,188
2,090
73
119
192
132
99
16
2,739
1,500
25
4,511
–
40
40
–
44
28
668
–
20
760
142
–
(280)
–
(280)
280
158
438
4. events after the balance sheet date
on 3 July 2006, the APG completed a capital raising via a security Purchase Plan for $19.5 million and issued approximately
13.8 million securities at $1.41 per security. of the total $19.5 million capital raised, approximately $15.3 million was allocated
to AT, approximately $1.1 million was allocated to AGHl, approximately $2.9 million was allocated to AIT and approximately
$0.2 million was allocated to AGPl.
other than as disclosed already in this report and to the knowledge of directors, there has been no matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may affect, the AGPl’s operations in future
financial years, the results of those operations or the AGPl’s state of affairs in future financial years.
At 30 June 2006, AGPl employed 149 employees (June 2005:146).
94
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus group projects limited
5. segment information
The consolidated entity operates within two business segments within the property industry, being hotel business
and other property-based investments. The hotel business comprises the management and operation of a hotel in
Queensland. The other property-based investments comprise investments in joint venture activities. revenue is
derived from service charges, property rentals, interest, fees and plant and equipment sales.
The entity operates within the property industry in Australia.
busIness seGMenTs
HoTel busIness
oTHer ProPerTY
bAseD InVesTMenTs
ToTAl
June 2006
$’000
June 2005
$’000
June 2006
$’000
June 2005
$’000
June 2006
$’000
June 2005
$’000
Revenue
revenues from customers outside
the Company
Interest income
Total aggregated revenue
Results
segment result
Interest income
Company net profit
Assets
segment assets
Total assets
Liabilities
segment liabilities
Total liabilities
Other information
2,884
2,784
3
21
2,887
2,805
(70)
214
(12)
171
5,345
5,340
2,529
3,270
2,028
2,142
88
357
2
–
2,889
2,805
(82)
2
(80)
7,874
7,874
2,116
2,116
385
–
385
8,610
8,610
2,499
2,499
Depreciation and amortisation
192
–
–
–
192
–
95
annual financial report / continued
directors’ declaration
In accordance with a resolution of the directors of AGPl, we state that:
(1) in the opinion of the directors:
(a) the concise financial statements and notes of the Company are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s financial position as at 30 June 2006 and of its
performance for the year ended on that date; and
(ii) complying with Accounting standards and Corporations regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
(2) This declaration has been made after receiving the declarations required to be made to the directors
in accordance with sections 295A of the Corporations Act 2001 for the financial period ended 30 June 2006.
on behalf of the board
frAnK Wolf
Director
len lloYD
Director
sydney, 1 september 2006
96
AbACus AnnuAl fInAnCIAl rePorT 2006
independent audit report
to shareholders of abacus group projects limited
sCoPe
The concise financial report and directors’ responsibility
The concise financial report comprises the balance sheet, income and distribution statements, statement of
recognised income and expense, cash flows statement, accompanying notes to the financial statements and
the directors’ declaration for the consolidated entity for the year ended 30 June 2006. The consolidated entity
comprises both Abacus Group Projects limited (the company) and the entities it controlled during the year.
The directors of the company are responsible for preparing a concise financial report that complies with Accounting
standard AAsb 1039 Concise financial reports, in accordance with the Corporations Act 2001. This includes
responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent
and detect fraud and error, and for the accounting policies and accounting estimates inherent in the concise financial
report.
Audit approach
We conducted an independent audit on the concise financial report in order to express an opinion to the members
of the company. our audit was conducted in accordance with Australian Auditing standards in order to provide
reasonable assurance as to whether the concise financial report is free of material misstatement. The nature of an
audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations
of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot
guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the concise financial report is presented fairly
in accordance with Accounting standard AAsb 1039 Concise financial reports.
We formed our audit opinion on the basis of these procedures, which included:
• examining, on a test basis, the information to provide evidence supporting that the amounts and disclosures in
the concise financial report are consistent with the full financial report; and
• examining, on a test basis, information to provide evidence supporting the amounts, discussion and analysis,
and other disclosures in the concise financial report that were not directly derived from the full financial report.
We have also performed an independent audit of the full financial report of the company for the year ended 30 June
2006. our audit report on the full financial report was signed on 1 september 2006, and was not subject to any
qualification. for a better understanding of our approach to the audit of the full financial report, this report should be
read in conjunction with our audit report on the full financial report.
97
independent audit report
to shareholders of abacus group projects limited
Independence
We are independent of the company and the consolidated entity and have met the independence requirements
of Australian professional ethical pronouncements and the Corporations Act 2001. We have given to the directors
of the company a written Auditor’s Independence Declaration, signed on 1 september 2006 a copy of which is
included in the Directors’ report.
Audit opinion
In our opinion the concise financial report and directors declaration of Abacus Group Projects limited complies with
Accounting standard AAsb 1039 “Concise financial reports”.
ernsT & YounG
MArK osullIVAn
Partner
sydney, 1 september 2006
98
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus property group
corporate governance
Corporate governance of the Group is the responsibility of
the boards of Abacus Group Holdings limited, Abacus Group
Projects limited and Abacus funds Management limited,
which is the responsible entity of the trusts and a subsidiary of
Abacus Group Holdings limited.
This report sets out the Group’s position relating to each of
the AsX Corporate Governance Council Principles of Good
Corporate Governance during the year. Additional information,
including charters and policies, is available through a dedicated
corporate governance information section on the Abacus
website at www.abacusproperty.com.au under ‘About
Abacus’.
PrInCIPle 1: lAY solID founDATIons for
MAnAGeMenT AnD oVersIGHT
The roles and responsibilities of the Group board are
formalised in the board charter, a copy of which has been
posted to the Abacus website. Primary responsibilities are the
provision of strategic guidance for the Group and the effective
oversight of management. Particular functions include:
• Provide the overall corporate and business strategic
direction of the Group
• Determine key policies and procedures governing the
operations of the Group
• review the annual progress and performance of the Group
• Approve the annual budget
• Approve all acquisitions, disposals and expenditures in
excess of delegated limits
• Approve offer documents following due diligence process
• oversee risk management issues
• Appoint and approve the terms and conditions of the
employment of senior officers.
Details of each director’s attendance at board and committee
meetings is detailed in this report at page 15.
PrInCIPle 2: sTruCTure THe boArD To ADD VAlue
Board size and composition
The board is comprised of three executive directors and four
non-executive directors. John Thame, chairman of the board
and Malcolm Irving, chairman of the audit committee, are
independent members. The board has determined that an
independent director is one who is not:
• a current executive or a previous executive;
• a nominee of a major shareholder;
• involved in material contractual relationships with the
Group; or
• an adviser to the Group for fees or some other benefit.
Given the nature of the Group’s business and current stage
of development, the board considers its current composition
provides the necessary skills and experience to ensure a
proper understanding of, and competence to deal with, the
current and emerging issues of the business to optimise
the financial performance of the Group and returns to
securityholders. Details of the skills, experience and expertise
of each director are set out on pages 12-13 of this report.
Directors’ independent advice
Directors may seek independent professional advice on any
matter connected with the performance of their duties. In
such cases, the Group will reimburse the reasonable costs of
such advice.
Nomination Committee
The Group’s nomination and remuneration committee
is responsible for ensuring that the board maintains an
appropriate size and composition to effectively discharge its
responsibilities and duties. Membership of the committee
comprises three non-executive directors:
John Thame
Malcolm Irving (chairman)
Dennis bluth
independent
independent
A copy of the charter of the nomination and remuneration
committee has been posted to the Abacus website. The
procedure for the selection and appointment of new directors
to the board is contained in the board charter, also posted to
the website.
PrInCIPle 3: ProMoTe eTHICAl AnD resPonsIble
DeCIsIon-MAKInG
Standards of ethical behaviour
The Group’s commitment to ethical practices and internal
standards for professional conduct is set out in a formal code
of conduct. The code stipulates requirements relating to
client service, confidentiality of information, company assets,
disclosure of potential conflicts of interest and compliance
with laws and regulations, specifically including insider trading
provisions.
99
annual report / continued
corporate governance
PrInCIPle 3: ProMoTe eTHICAl AnD resPonsIble
DeCIsIon-MAKInG / ConTInueD
Trading in Group securities
The board has a policy limiting trading in Group securities by
directors to the six-week period commencing two business
days after half-year and full-year results are announced.
exceptions are limited to participation in a distribution
reinvestment plan or a security purchase plan that may be
offered from time to time.
Copies of the code of conduct and the trading policy have
been posted to the Abacus website.
PrInCIPle 4: sAfeGuArD InTeGrITY In
fInAnCIAl rePorTInG
Financial report accountability
To safeguard the integrity of its financial reporting, the Group
has put in place a structure of review and authorisation of the
presentation of the Group’s financial position. This structure
includes the review and consideration of the accounts by the
audit committee following the provision of a written statement
by the Managing Director and the Chief financial officer that
the financial reports present a true and fair view, in all material
respects, of the Group’s financial condition and operational
results and are in accordance with relevant accounting
standards.
Audit committee
The audit committee comprises three non-executive directors,
two of whom are independent:
Malcolm Irving (chairman)
John Thame
Dennis bluth
independent
independent
The primary function of the audit committee is to ensure that
an effective framework exists through the establishment and
maintenance of adequate internal controls to safeguard the
Group’s assets and to ensure the integrity and reliability of
financial and management reporting systems. The committee
meets with external auditors and reviews the adequacy,
scope and quality of the annual statutory audit and half-yearly
statutory audit review.
Procedures for the selection and appointment of the external
auditor are currently being developed. The current auditor
of the Group has a policy of rotation of audit engagement
partners which conforms with the Corporations Act.
The charter of the audit committee has been posted to the
Abacus Property Group website.
PrInCIPle 5: MAKe TIMelY AnD bAlAnCeD DIsClosure
The Group is committed to the continuous disclosure to
the market of material information concerning the Group’s
operations and has a policy and procedures designed
to ensure compliance with AsX listing rule disclosure
requirements. The primary responsibility for ensuring that the
Group complies with its disclosure obligations is held by the
Managing Director.
The Group’s disclosure policy has been posted to the Abacus
website.
PrInCIPle 6: resPeCT THe rIGHTs of seCurITYHolDers
The Group is committed to keeping securityholders informed
of significant developments and activities of the Group.
The Abacus website is updated regularly and includes
financial and general information on the Group’s operations.
Information made available through the website includes
annual and half-yearly reports, distribution history and all other
announcements lodged with the AsX.
In addition, the Group publishes a newsletter from time to
time which updates investors and their advisers on the current
activities of the Group and alerts them to any forthcoming
opportunities.
The Group’s securityholder communication policy has been
posted to the Abacus website.
External auditor
The external auditor attends the annual general meetings of
the Group and is available to answer securityholder questions
about the conduct of the audit and the preparation and content
of the auditor’s report.
100
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus property group
PrInCIPle 7: reCoGnIse AnD MAnAGe rIsK
The Group has in place a system of risk management and
internal control which includes:
• a comprehensive risk management business plan
• maintenance of board and other committees relevant to the
business of the Group
• detailed and regular budgetary, financial and management
reporting
• audits (including financial and compliance audits)
• compliance procedures, manuals and policies
• comprehensive insurance programs;
• retention of specialised staff and external advisers.
The Managing Director and Chief financial officer have
provided a written statement to the board that their statement
on the integrity of the financial statements is founded on a
sound system of risk management and internal compliance
and control which implements the policies adopted by the
board, and that this system is operating efficiently and
effectively in all material respects.
Compliance
The Group’s compliance regime is managed by a professional
compliance manager and overseen by a compliance
committee. The primary role of this committee is to ensure
that management follows written processes developed
to ensure compliance with the Corporations Act, trust
constitutions and other relevant parameters and that those
processes are adequate for ongoing compliance with the law
and to protect the interests of securityholders. It reports to the
board semi-annually or as required.
The compliance committee includes two external members
(who are not directors of the board):
Phillip leslie (chairman)
James beecher
David bastian
external member
external member
In addition to the work of the compliance manager and
compliance committee, the Group’s compliance program
is audited annually by an external auditor, currently ernst &
Young.
Review of lending proposals
new secured lending proposals which may be taken up by the
Group or by a trust under Abacus management are evaluated
by the credit committee against key investment criteria as
part of a rigorous due diligence process. The committee
reviews the feasibility analysis of the project and independent
valuations of the property and proposed improvements, and
assesses other relevant factors such as the experience and
financial capacity of the borrower, project risk, local planning
policies and market trends.
The credit committee includes two external members (who
are not directors):
Dennis bluth (chairman)
frank Wolf
David bastian
David brodie
Graham broome
external member
external member
Due Diligence
The Group has a standing due diligence committee to manage
the due diligence process of each transaction that involves the
issue of a disclosure document. The due diligence committee
comprises at least three members, currently:
Dennis bluth (chairman)
frank Wolf
David bastian
Additional members, such as other board members,
representatives of external advisers or independent experts,
may be appointed for particular projects.
The objectives of the due diligence committee are:
• to take all reasonable steps to ensure compliance with the
law, particularly the Corporations Act and, to the extent
relevant, the Trade Practices Act, applicable state fair
Trading Acts and taxation and stamp duty legislation;
• to obtain and verify information to be included in the
disclosure document; and
• to overview the comprehensive due diligence system
implemented in connection with the preparation of the
disclosure document.
The Group’s business risk management policy and procedures
have been posted to the Abacus website.
101
PrInCIPle 10: reCoGnIse THe leGITIMATe InTeresTs
of sTAKeHolDers
The Group is committed to meeting its obligations to non-
shareholder stakeholders such as employees, clients,
suppliers and the community as a whole. The code of conduct
discussed under Principle 3 sets standards of honesty,
integrity and ethical conduct to guide the personal behaviour
of staff.
A copy of the code of conduct has been posted to the Abacus
website.
annual report / continued
corporate governance
PrInCIPle 8: enCourAGe enHAnCeD PerforMAnCe
The Group is committed to ensuring that directors and key
executives are equipped with the knowledge and information
they need to discharge their responsibilities effectively.
Management supplies the board with information in a form,
timeframe and quality to enable it to make informed decisions.
Directors are entitled to request additional information and
have open access to the company secretary and senior staff.
Directors are also able to seek independent professional
advice, if necessary, at the Group’s expense.
Performance evaluation guidelines for the board and key
executives are annexed to the board charter, which has been
posted to the Abacus website.
PrInCIPle 9: reMunerATe fAIrlY AnD resPonsIblY
The aim of the Group’s remuneration policy is to attract and
retain talented and motivated directors and employees so as
to encourage enhanced performance of the Group. The policy
is overseen by the nomination and remuneration committee
which comprises three non-executive directors:
Malcolm Irving (chairman)
John Thame
Dennis bluth
A copy of the charter of the nomination and remuneration
committee has been posted to the Abacus website.
The remuneration of each director and the five most senior
officers is set out elsewhere in this Annual report. non-
executive directors are paid fees for their service and do not
participate in other benefits which may be offered other than
those which are statutory requirements.
The Group does not provide incentives as a percentage
of base pay to any director or member of staff, nor is any
equity provided. salary increases and bonus payments are
determined by the nomination and remuneration committee on
an annual basis.
102
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus property group
asx additional information
Abacus Property Group is made up of the Abacus Trust, Abacus Income Trust, Abacus Group Holdings limited
and Abacus Group Projects limited. The responsible entity of the Abacus Trust and Abacus Income Trust is
Abacus funds Management limited. unless specified otherwise, the following information is current as at
31 August 2006.
number of holders of ordinary fully paid stapled securities
Voting rights attached to ordinary fully paid stapled securities
one vote per stapled security
9,141
number of holders holding less than a marketable parcel of ordinary fully paid stapled securities
38
secretary, Abacus funds Management limited
secretary, Abacus Group Holdings limited
secretary, Abacus Group Projects limited
Registered office
Abacus funds Management limited
Abacus Group Holdings limited
Abacus Group Projects limited
Registry
sean o’Donoghue
level 34, Australia square
264-278 George street
sydney nsW 2000
612 9253 8600
Computershare Investor services Pty ltd
other stock exchanges on which Abacus Property Group securities are quoted
number and class of restricted securities or securities subject to voluntary escrow that are on issue
There is no current on-market buy-back
subsTAnTIAl seCurITYHolDer noTIfICATIons (current as at 11 september 2006)
seCurITYHolDers
ubs nominees Pty ltd
Deutsche bank Group
Australian executor Trustees
f M Wolf and entities controlled by him
babcock & brown Group
seCurITIes reGIsTer
nuMber of seCurITIes
1-1000
1,001-5000
5,001-10000
10,001-100000
100,001 – over
GPo box 7045
sydney nsW 1115
1300 855 080
none
none
nuMber of seCurITIes
43,874,239
36,650,881
46,865,154
28,839,181
23,537,211
nuMber of seCurITYHolDers
103
493
1,514
6,743
288
103
annual report / continued
asx additional information
ToP 20 lArGesT seCurITYHolDInGs
seCurITYHolDers
1 national nominees limited
2 Australian executor Trustees limited
3 Westpac Custodian nominees limited
4 J P Morgan nominees Australia limited
5 AnZ nominees limited
6 rbC Dexia Investor services Australia nominees Pty ltd
7 AnZ nominees limited
8 Avanteos Investments limited
9 rbC Dexia Investor services Australia nominees Pty ltd
10 AnZ nominees limited A/C
11 Citicorp nominees Pty limited
12 Citicorp nominees Pty limited
13 Assetinsure Pty ltd
14 Citicorp nominees Pty limited
15 Avanteos Investments limited
16 Craig securities (no. 2) Pty limited
17 Kendall securities (no. 2) Pty limited
18 Westpac financial services limited c/ Westpac Custodian
19 Pluteus (no. 164) Pty limited
20 Australian executor Trustees limited
nuMber of
seCurITIes
% of IssueD
seCurITIes
49,610,389
40,810,353
37,896,464
28,379,461
21,992,618
15,390,200
10,527,218
10,080,026
8,303,325
7,323,518
7,227,632
5,096,132
4,683,465
4,060,093
3,458,796
3,303,500
3,303,500
2,941,830
2,734,146
2,703,603
9.32
7.66
7.12
5.33
4.13
2.89
1.98
1.89
1.56
1.38
1.36
0.96
0.88
0.76
0.65
0.62
0.62
0.55
0.51
0.51
104
AbACus AnnuAl fInAnCIAl rePorT 2006
abacus property group
Level 34 Australia Square
264-278 George Street
Sydney NSW 2000
T. 612 9253 8600
F. 612 9253 8616
E. enquries@abacusproperty.com.au
www.abacusproperty.com.au
abacus property group
At 30 June 2006, the Abacus Property Group (APG) comprised the Abacus Trust (AT), the Abacus
Income Trust (AIT), Abacus Group Holdings Limited (AGHL) and Abacus Group Projects Limited
(AGPL). A summary of the corporate structure is illustrated below:
ABACUS
ProPerTy
GroUP
ABACUS GroUP
HoLDINGS
LImITeD
ABACUS TrUST
ABACUS INCome
TrUST
ABACUS GroUP
ProJeCTS
LImITeD
AGHL has been identified as the parent entity for the purpose of producing a consolidated
financial report for the APG. That is, the concise financial report for AGHL serves as a summary
of the financial performance and position of APG as a whole. It consolidates the financial reports
of AGHL, AT, AIT and AGPL and their controlled entities.
To comply with Australian reporting requirements, the concise financial reports of AT, AIT and
AGPL are also provided.
CoNTeNTS
01 ABACUS ProPerTy GroUP
43 ABACUS TrUST
63 ABACUS INCome TrUST
81 ABACUS GroUP ProJeCTS LImITeD
99 CorPorATe GoVerNANCe
103 ASX ADDITIoNAL INFormATIoN
glossary
Abacus Abacus Funds Management Limited, the responsible entity of the trusts
ADIF
Abacus Diversified Income Fund, made up of AIT and AGPL, which became part of APG on 31 March 2006
AGHL Abacus Group Holdings Limited
AGPL Abacus Group Projects Limited
AIT
Abacus Income Trust
APG
Abacus Property Group
AT
Abacus Trust
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6
abacus
annual financial report 2006