Abacus Property Group
Annual Report 2009

Plain-text annual report

annual financial report 2009 AbAcuS ProPerty GrouP GLoSSAry At 30 June 2009, 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. 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 of AGHL services 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. Abacus Abacus Funds Management Limited, the responsible entity of the trusts AGHL Abacus Group Holdings Limited AGPL Abacus Group Projects Limited AIT APG AT Abacus Income Trust Abacus Property Group Abacus Trust Abacus Group Holdings Limited Abacus Trust Abacus Income Trust Abacus Group Projects Limited 02 18 19 21 23 25 26 90 91 93 97 annual financial report abacus property group 30 June 2009 contentS Directors’ Report Auditor’s Independence Declaration Consolidated Income and Distribution Statements Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements Directors’ Declaration Independent Audit Report Corporate Governance Report ASX Additional Information Directory responsible entity: Abacus Funds Management Limited ABN: 66 007 415 590 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, Managing Director William Bartlett David Bastian Dennis Bluth Malcolm Irving Len Lloyd Directors of Abacus Group Holdings Limited: John Thame, Chairman Frank Wolf, Managing Director William Bartlett David Bastian Dennis Bluth Malcolm Irving Len Lloyd company Secretary: Ellis Varejes 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 Share registry: Registries Limited Level 7, 207 Kent Street SYDNEY NSW 2000 Tel: (02) 9290 9600 Fax: (02) 9279 0664 It is recommended that this Annual Financial Report should be read in conjunction with the Annual Financial Reports of Abacus Trust, Abacus Group Projects Limited and Abacus Income Trust as at 30 June 2009. 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. 01 corPorAte Structure The Group is comprised of Abacus Group Holdings Limited (“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 and have been stapled together so that none can be dealt with without the others. 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 (“AFML”), the Responsible Entity of AT and AIT, is incorporated and domiciled in Australia and is a wholly-owned subsidiary of AGHL. directors report 30 June 2009 The Directors present their report together with the consolidated financial report of Abacus Group Holdings Limited and the auditor’s report thereon. Abacus Group Holdings Limited 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 the Abacus Property Group for the year ended 30 June 2009 comprises the consolidated financial reports of Abacus Group Holdings Limited (“AGHL”) and its controlled entities, Abacus Trust (“AT”) and its controlled entities, Abacus Group Projects Limited (“AGPL”) and its controlled entities and Abacus Income Trust (“AIT”) and its controlled entities. DirectorS The Directors of Abacus Group Holdings Limited in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. John Thame Frank Wolf William Bartlett David Bastian Dennis Bluth Malcolm Irving Len Lloyd Chairman (Non-executive) Managing Director Non-executive Director Non-executive Director Non-executive Director Non-executive Director Executive Director PrinciPAL ActiVitieS The Group operates predominantly in Australia and its principal activities during the course of the year ended 30 June 2009 included: • investment in commercial, retail and industrial properties; • property funds management; • property finance; and • participation in property joint ventures and developments. abacus property group reVieW oF oPerAtionS The Group incurred a net loss attributable to members of $102.4 million for the year ended 30 June 2009 (June 2008: $71.5 million profit). This loss has been calculated in accordance with Australian Accounting Standards and includes certain significant items that need adjustment to enable securityholders to obtain an understanding of the Group’s underlying profit of $72.0 million (June 2008: $91.0 million). The Underlying Profit reflects the statutory profit / (loss) as adjusted in order to present a figure which reflects the Directors’ assessment of the result for the ongoing business activities of the Group, in accordance with the AICD / Finsia principles for reporting Underlying Profit. Statutory net profit / (loss) attributable to securityholders certain significant items: Net change in fair value of investments held at balance date Net change in fair value of derivatives Net change in fair value of investment properties and derivatives included in equity accounted profits from associates / joint ventures Impairment of loan as part of the restructuring of ADIFII underlying profit 2009 $’000 2008 $’000 (102,412) 71,460 113,426 22,641 51,420 (3,137) (1,467) 11,000 - - 71,967 90,964 The statutory loss was principally caused by a devaluation of the property portfolio by $107.5m and adverse fair value movements of $48.3 million in the Group’s interest rate swap book which is used to fix the cost of borrowings and align these borrowings with the net revenue earned by the property portfolio. The 4.25% fall in official interest rates during the year was unprecedented. It resulted in a fair value adjustment in the accounts from an asset of $11.3 million at 30 June 2008 to a liability of $37.0 million at 30 June 2009, a fair value decrement of $48.3 million which was taken to profit and loss. Basic earnings / (loss) per security (cents) Diluted basic earnings per security (cents) Underlying earnings per security (cents) Diluted underlying earnings per security (cents) Distributions per security (cents) (including proposed distribution) 2009 20081 (11.81) 10.98 (11.81) 10.80 8.30 13.98 8.30 13.75 7.75 13.50 The Group’s gearing was significantly reduced following the $211 million capital raising through a rights issue and a placement. The impact of the fair value adjustments in respect of property devaluations and interest rate swaps on the Group’s financial condition was as follows: Total Assets ($ million) Gearing (%) Net Assets ($ million) Net Tangible Assets ($ million) NTA per security ($) Retained earnings / (Accumulated losses) ($ million) Securities on issue (million) Weighted average securities on issue (million) 2009 2008 1,445.8 26.6 989.7 940.5 0.62 1,636.0 37.5 925.0 883.9 1.37 (14.6) 134.6 1,509.6 645.6 867.5 650.91 1 Prior period weighted average number of securities and EPSs have been adjusted in accordance with AASB 133 “Earnings per Share” (“AASB 133”). The weighted average number of securities on issue for the current period, prior to the Equity Raisings, have also been adjusted as required by AASB 133. 02 02 03 directors report 30 June 2009 abacus property group Joint ventures & Developments Investments managed within the Joint Ventures & Developments division comprise direct and indirect property investments and at 30 June 2009 totalled $126.5 million (30 June 2008 $77.3 million). The joint venture investments are with experienced property investors and developers in New South Wales, Victoria and overseas. These joint ventures enable the Group to participate in a range of property- related opportunities with participants who have local knowledge and specialist property expertise. Joint Ventures including equity accounted income contributed $19.7 million to the Group result (30 June 2008 $9.3 million). reVieW oF oPerAtionS (continueD) Business activities which contributed to the Group’s operating performance and financial condition for the financial year were: Property Total property assets at 30 June 2009 were $897 million (30 June 2008 $1,090 million). The property portfolio was independently revalued during the year ended 30 June 2009, on a staggered basis, which resulted in a net full year devaluation charge of $107.5 million. During the year the Group acquired six properties for $42 million and sold eleven self-storage properties for $71 million to the Abacus Storage Fund which realised a profit of $3.3 million. Rental income increased from $76.4 million in 2008 to $78.9 million due to net rental increases. Funds Management Following the acquisition of the additional properties Abacus Storage Fund released a new offer document in December seeking to raise $37 million. The Fund now holds forty-one self storage facilities and is one of the largest storage operator/investor in Australasia. Funds Management was affected by the extreme change in market conditions which resulted in potential investors preferring cash to property based products. Despite these conditions Funds Management contributed $13.2 million (30 June 2008 $38.9 million) to the Group result. Property Finance Total property finance assets including accrued interest (and net of provisions) at 30 June 2009 were $146.2 million (30 June 2008 $144.7 million). Revenue earned from interest and fees (net of provisions) totalled $14.4 million for the year (30 June 2008 $13.2 million). reVieW oF FinAnciAL conDition SiGniFicAnt cHAnGeS in tHe StAte oF AFFAirS During the year ended 30 June 2009, the contributed equity of the Group increased $216.0 million to $987.5 million compared to $771.5 million at 30 June 2008 due principally to the $24.4 million placement to the Kirsh Group and the $187 million rights issue in March 2009. Total equity increased by $64.7 million to $989.7 million at 30 June 2009 compared to $925.0 million at 30 June 2008. Net tangible assets per security were $0.62 at 30 June 2009 compared to $1.37 at 30 June 2008. At 30 June 2009, existing bank loan facilities totalled approximately $612.4 million, of which $392.2 million was drawn. The weighted average maturity of its secured, non-recourse bank debt is 1.6 years. The Group manages interest rate exposure on debt facilities through the use of interest rate swap contracts. At 30 June 2009, 76.3% (2008: 75.4%) of total debt facilities were covered by interest rate swap arrangements at an average interest rate (including bank margin) of 7.31% (2008: 7.69%) and an average term to maturity of 4.69 years (2008: 5.07 years). DiStributionS Group distributions in respect of the year ended 30 June 2009 were $58.6 million (June 2008: $85.0 million), which is equivalent to 7.75 cents per stapled security (June 2008: 13.5 cents). This distribution includes 0.75 cents (11.3 million) that was paid on 7 August 2009. Further details on the distributions are set out in note 9 of the financial statements. The following significant changes in the state of affairs of the Group occurred during the financial year: • Retained earnings (including the impact of revaluations of investment properties and derivative financial instruments and distributions) decreased $149.2 million to accumulated losses of $14.6 million at 30 June 2009 compared to $134.6 million of retained earnings at 30 June 2008; and • Total equity increased by 6.99% from $925.0 million to $989.7 million at 30 June 2009 reflecting the additional capital raised and net movements in retained earnings, distributions and property devaluations during the year. SiGniFicAnt eVentS AFter bALAnce DAte Other than as disclosed already in this report, 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 periods, the results of those operations or the Group’s state of affairs in future financial periods. LiKeLy DeVeLoPMentS AnD eXPecteD reSuLtS In the opinion of the Directors, disclosure of any further information on future developments and results than is already disclosed in this report or the financial statements would be unreasonably prejudicial to the interests of the Group. 04 04 05 directors report 30 June 2009 abacus property group reMunerAtion rePort (AuDiteD) reMunerAtion & noMinAtion coMMittee reMunerAtion rePort (AuDiteD) (continueD) This Remuneration Report outlines the director and executive remuneration arrangements of the company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the parent company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the parent and the Group receiving the highest remuneration. For the purposes of this report, the term ‘executive’ encompasses the Managing Director, senior executives, general managers and secretary of the parent and the Group. Details of key management personnel (including the five highest paid executives of the Company and the Group). i) Directors J. Thame F. Wolf W. Bartlett D. Bastian D. Bluth M. Irving L. Lloyd ii) executives R. de Aboitiz T. Hardwick Chairman (Non-executive) Managing Director Director (Non-executive) Director (Non-executive) Director (Non-executive) Director (Non-executive) Executive Director Chief Financial Officer Director Funds Management J. L’Estrange General Manager Property Finance P. Strain E Varejes Director Property Chief Operating Officer and Company Secretary The Remuneration & Nomination Committee of the Board of Directors is responsible for determining and reviewing remuneration arrangements for the Board and executives. The Remuneration & Nomination Committee assesses the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality, high performing Board and executive team. reMunerAtion PoLicy The performance of the group depends upon the quality of its directors and executives. To prosper, the Group must attract, motivate and retain highly skilled directors and executives. The Group’s policy is competitive and is critical to achieving the Group’s overall objective of producing superior performance and growth. The Group’s policy is designed to reward individual performance and closely align the interests of the Board and executives to those of shareholders through the use of short-term and long- term incentives. To this end, the Group embodies the following principles in its remuneration framework: • provide competitive rewards to attract high calibre executives; • • • link executive rewards to the Group’s performance and the creations of securityholder value; have a reasonable portion of executive remuneration at risk; and establish performance hurdles for variable executive remuneration. remuneration structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. non-executive director remuneration objective The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain directors of the highest calibre, while incurring a cost that is acceptable to securityholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held on 14 November 2007 when securityholders approved an aggregate remuneration limit of $600,000 per year. The aggregate remuneration limit and the fee structure is reviewed annually. The Board considers advice from an external consultant as well as the fees paid to non-executive directors of comparable groups when undertaking the annual review process. Fees payable to non-executive directors are as follows: board/committee Board Board Audit Committee Audit Committee Compliance Committee Credit Committee Due Diligence Remuneration Abacus Storage Funds Management Limited Board role Fee Chairman $183,000 Member Chairman Member Chairman Member Member Member Member $69,000 $12,000 $6,000 $6,000 $5,760 $6,000 $6,000 $9,000 The payment of additional fees for serving on a committee recognises the additional time commitment required by directors who serve on one or more sub- committees. The non-executive directors do not receive retirement benefits. Nor do they participate in any incentive programs. The remuneration of non-executive directors for the years ended 30 June 2009 and 30 June 2008 is detailed in Table 1 of this report. executive remuneration objective The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group so as to: • • • reward executives for Group, business unit and individual performance against targets set by reference to appropriate benchmarks; align the interests of executives with those of securityholders; and ensure total remuneration is competitive by market standards. 06 06 07 directors report 30 June 2009 abacus property group VAriAbLe reMunerAtion – SHort terM incentiVe (Sti) objective The objective of the STI program is to link the achievement of the Group’s operational targets with the remuneration received by the executives charged with meeting those targets. Structure At the discretion of the Board, executives and senior managers may receive STI payments based on reference to a variety of measures, both financial and non- financial. These measures primarily include Group capital management and profitability targets, returns to security holders 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 aggregate of annual STI payments available for executives across the Group is subject to the approval of the Remuneration Committee. Payments made are delivered as a cash bonus in the following reporting period. reMunerAtion rePort (AuDiteD) (continueD) Structure In determining the level and make-up of executive remuneration, the Remuneration Committee engages external consultants as needed to provide independent advice. The Remuneration Committee has negotiated a detailed contract of employment with the Managing Director. Details of this contract are provided below. Remuneration consists of the following key elements: • • fixed remuneration (base salary, superannuation and non-monetary benefits). variable remuneration - short term incentive (STI); and - long term incentive (LTI). The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) for each executive is set out in Table 1. No bonuses were paid in respect of the year ended 30 June 2009 as a consequence of the difficult economic environment, other than a bonus to the Managing Director for his role in developing and achieving the Group’s capital management strategy. FiXeD reMunerAtion objective Fixed remuneration is reviewed annually by the Remuneration Committee. The process consists of a review of Group, business unit and individual performance, relevant comparative remuneration in the market and internally and, where appropriate, external advice on policies and practices. The Committee has access to external advice independent of management. Structure Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group. The fixed remuneration component of executives is detailed in Table 1. reMunerAtion rePort (AuDiteD) (continueD) (b) executive Security Loan Plan (eSLP) Executives were offered limited recourse loans to acquire Group securities on market. The executive entered into a salary sacrifice arrangement under which base remuneration, approximately equal to a notional interest amount on the loan, was foregone by the executive. The interest rate for a financial year was equivalent to the Group distribution rate for that year. The securities acquired under the ESLP were purchased on market and were fully vested. The loans provided under the ESLP were made in 2006 and 2007. The loans will be repaid with the proceeds of securities that were acquired under the ESLP. The loans were accounted for in accordance with AASB 2 Share Based Payments, as follows: • • The loans were not recorded on the balance sheet, as they were regarded as options. The value of a loan was determined by an option valuation model calculation (Binominal Tree American put option model) and this amount is treated as an employee expense with a corresponding increase in reserves. • A repayment of the loan is treated as an increase to Contributed Equity. Variable remuneration – Long term incentive (Lti) objective The objective of the LTI plans was to reward executives in a manner that aligns remuneration with the creation of securityholder wealth. As such, LTI grants are only made to executives who are able to influence the generation of securityholder wealth and thus have an impact on the Group’s performance against the relevant long term performance hurdle. The LTI plans were no longer sustainable and in the current form they no longer met the Group’s objective that executives be rewarded in a manner that aligns remuneration with the interests of securityholders. Accordingly, effective 30 June 2009 the Group, with the agreement of the participants, cancelled the LTI plans that were in operation and are described below. The remuneration committee is evaluating alternatives and a new LTI proposal will be put to securityholders in due course. (a) executive Performance Award Plan (ePAP) Security options were granted to executives employed on the first day of the relevant financial year. The security options were to vest over a period of 3 years subject to meeting performance hurdles, with no opportunity to retest. Executives were able to exercise the security options for up to 7 years after vesting before the options lapsed. The cancellation of the EPAP has resulted in bringing forward the remaining share based payment expenses (fair value adjustment) to the current year. The amount of the charge is $1.5m. No LTI options were granted or exercised during the year. Table 2 provides details of LTI options granted during the prior year. 08 08 09 directors report 30 June 2009 abacus property group reMunerAtion rePort (AuDiteD) (continueD) employment contracts Managing Director The Managing Director, Dr Wolf, is employed under a rolling contract. The current employment contract commenced on 10 October 2002. Under the terms of the present contract: Dr Wolf receives a base salary which is reviewed annually. He is entitled to participate in the LTI plans that are made available and to receive short-term incentive payments. Dr Wolf may resign from his position and thus terminate this contract by giving 6 months written notice. The Group may terminate this employment agreement by providing 12 months written notice or providing payment in lieu of the notice period (based on the fixed component of Dr Wolf’s remuneration). other executives There are no formal service agreements with other executives. The Group may terminate an executive’s service at any time without notice if serious misconduct has occurred. Where termination with cause occurs the executive is only entitled to remuneration up to the date of termination. tAbLe 1: reMunerAtion oF Key MAnAGeMent PerSonneL SHORT-TERM POST EMPLOYMENT SECURITY- BASED PAYMENT* TOTAL % PERFORMANCE RELATED SALARY & FEES CASH BONUS NON- MONETARY BENEFITS SUPER- ANNUATION OPTIONS 2009 non-executive Directors J Thame – Chairman W Bartlett D Bastian D Bluth M Irving Sub-total non-executive Directors executive directors F Wolf – Managing Director L Lloyd – Managing Director, Property Services other Key Management Personnel R de Aboitiz – Chief Financial Officer T Hardwick – Director Funds Management J L’Estrange – General Manager Property Finance P Strain – Director Property E Varejes – Chief Operating Officer 177,904 75,229 - - 98,000 351,133 - - - - - - 1,100,000 500,000 250,000 456,255 456,255 398,255 300,000 396,250 - - - - - - Sub-total executive KMP 3,357,015 500,000 total 3,708,148 500,000 - - - - - - - - - - - - - - 13,745 6,953 97,400 91,400 - 209,498 - - - - - - 191,649 82,182 97,400 91,400 98,000 560,631 100,000 473,718 2,173,718 100,000 147,115 497,115 13,745 97,115 567,115 13,745 147,115 617,115 31,745 147,115 577,115 50,000 130,449 480,449 73,750 147,115 617,115 382,985 1,289,742 5,529,742 592,483 1,289,742 6,090,373 - - - - - - 45% 30% 17% 24% 25% 27% 24% 10 10 11 *These payments relate to options issued in prior periods. The options were cancelled on 30 June 2009 with the termination of the Executive Performance Award Plan. directors report 30 June 2009 abacus property group tAbLe 1: reMunerAtion oF Key MAnAGeMent PerSonneL SHORT-TERM POST EMPLOYMENT SECURITY- BASED PAYMENT TOTAL % PERFORMANCE RELATED SALARY & FEES CASH BONUS NON- MONETARY BENEFITS SUPER- ANNUATION OPTIONS 2008 non-executive Directors J Thame – Chairman W Bartlett D Bastian D Bluth M Irving Sub-total non-executive Directors executive directors F Wolf – Managing Director L Lloyd – Managing Director, Property Services 146,871 46,069 - - 80,000 272,940 - - - - - - 1,100,000 650,000 220,000 150,000 other Key Management Personnel R de Aboitiz – Chief Financial Officer T Hardwick – Director Funds Management J L’Estrange – General Manager Property Finance P Strain – Director Property E Varejes – Chief Operating Officer 436,871 150,000 436,871 150,000 386,871 150,000 252,189 150,000 382,500 150,000 Sub-total executive KMP 3,215,302 1,550,000 total 3,488,242 1,550,000 - - - - - - - - - - - - - - 13,129 21,431 84,800 79,800 - 199,160 - - - - - - 160,000 67,500 84,800 79,800 80,000 472,100 100,000 311,859 2,161,859 100,000 98,558 568,558 13,129 48,558 648,558 13,129 98,558 698,558 13,129 98,558 648,558 47,811 81,891 531,891 67,500 98,558 698,558 354,698 836,540 5,956,540 553,858 836,540 6,428,640 - - - - - - 44% 44% 31% 36% 38% 44% 36% reMunerAtion rePort (AuDiteD) (continueD) tAbLe 2: coMPenSAtion oPtionS: GrAnteD AnD VeSteD DurinG tHe yeAr executive Performance Award Plan No options were issued under the Executive Performance Award Plan during the year. The following options were issued under the Executive Performance Award Plan in the prior year. These options have now been cancelled with the termination of the Plan. GRANTED 30 JUNE 2008 NO. GRANT DATE TERMS & CONDITIONS FOR EACH GRANT FAIR VALUE PER OPTION AT GRANT DATE ($) (NOTE 24) EXERCISE PRICE PER OPTION ($) (NOTE 24) F Wolf L Lloyd 2,403,846 31/08/07 721,154 31/08/07 R de Aboitiz 721,154 31/08/07 T Hardwick 721,154 31/08/07 J L’Estrange 721,154 31/08/07 P Strain E Varejes 721,154 31/08/07 721,154 31/08/07 0.202 0.202 0.202 0.202 0.202 0.202 0.202 2.01 2.01 2.01 2.01 2.01 2.01 2.01 executive Security Loan Plan No options were issued under the Executive Security Loan Plan during the current or the prior year. 12 12 13 directors report 30 June 2009 abacus property group abacus property group inForMAtion on DirectorS AnD oFFicerS The Directors and Company Secretary of AGHL, AFML (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) Chairman of Due Diligence Committee Member of Audit Committee Member of Remuneration & Nomination Committee Mr Thame has over 30 years’ experience in the retail financial services industry in senior management positions. His 26-year career with Advance Bank included 10 years as Managing Director until the Bank’s merger with St George Bank Limited in 1997. Mr Thame was Chairman (2004 to 2008) and a director (1997 to 2008) of St George Bank Limited and St George Life Limited. He is also a director of Reckon Limited and The Village Building Co Limited (Group). Frank Wolf PhD, BA Hons Managing Director Dr 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 Kingston Capital Limited (financial planning groups). He is also a director of HGL Limited, a diversified publicly listed investment company. David bastian CPA Non-executive Director Member of Due Diligence Committee Member of Remuneration & Nomination Committee Mr Bastian has almost 40 years’ experience in the financial services industry and was the Managing Director of the Group until September 2006. 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. Malcolm irving AM FCPA, SF Fin, BCom, Hon DLitt Non-executive Director Chairman of Audit Committee Chairman of Compliance Committee Member of Remuneration & Nomination Committee Member of Due Diligence Committee Mr Irving has over 40 years’ experience in company management, including 12 years as Managing Director of CIBC Australia Limited. He was a director of Keycorp Limited (2001 to 2007). He is also a director of O’Connell Street Associates Pty Ltd and Thales Australia Limited. Dennis bluth LLM, BA, FAPI Non-executive Director Member of Due Diligence Committee Mr Bluth has practised as a solicitor for over 25 years, principally in the area of property law. Mr Bluth is a partner of HWL Ebsworth, Lawyers and is a member of a number of Law Society and Law Council Committees. He is also a member of the Australian Valuation & Professional Standards Board and part-time Judicial Member of the Administrative Decisions Tribunal, Retail Leases Division. William J bartlett FCA, CPA, FCMA, CA(SA) Non-executive Director Chairman of Remuneration & Nomination Committee Member of Audit Committee Member of Due Diligence Committee Mr Bartlett has strong accounting, financial and corporate credentials. During his 23 year career with Ernst & Young, he held the roles of Chairman of Worldwide Insurance Practice, National Director of Australian Financial Services Practice and Chairman of the Client Service Board. Mr Bartlett is a director of Suncorp-Metway Limited, GWA Limited, Reinsurance Group of America Inc and RGA Reinsurance Company of Australia Limited. Mr Bartlett was a director of Retail Cube Limited (2004 to 2006) and Arana Therapeutics Limited (2004 to 2007). He is also a director of the Bradman Foundation and Museum. Len Lloyd FAPI, WDA Executive Director Mr Lloyd is a licensed Real Estate Agent and a registered Real Estate Valuer. He has 40 years experience in 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 for 21 years. ellis Varejes BCom, LLB Company Secretary and Chief Operating Officer Mr Varejes has been the Company Secretary since September 2006. He has over 25 years’ experience as a corporate lawyer in private practice. 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 in the stapled securities of Abacus Property Group were as follows: Directors J Thame F Wolf W Bartlett D Bluth D Bastian M Irving L Lloyd APG securities held 200,756 14,073,226 16,000 286,953 5,000,000 80,651 55,925 14 14 15 directors report 30 June 2009 abacus property group abacus property group inForMAtion on DirectorS AnD oFFicerS (continueD) Directors’ Meetings The number of meetings of directors (including meetings of committees of directors) of Abacus Group Holdings Limited and Abacus Funds Management Limited, the manager of the Abacus Property Group, held during the year and the number of meetings attended by each director were as follows: BOARD AUDIT COMMITTEE DUE DILIGENCE COMMITTEE NOMINATION & REMUNERATION COMMITTEE HELD ATTENDED HELD ATTENDED HELD ATTENDED HELD ATTENDED 22 22 22 22 22 22 22 22 20 20 20 20 22 19 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 3 3 2 J Thame F Wolf W Bartlett D Bastian D Bluth M Irving L Lloyd indemnification and insurance of Directors and officers The Group has paid an insurance premium in respect of a contract insuring all directors, full time executive officers and secretary. The terms of this policy prohibit disclosure of the nature of the risks insured or the premium paid. 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. AuDitorS inDePenDence DecLArAtion We have obtained an independence declaration from our auditor, Ernst & Young, and such declaration is shown on page 18. non-AuDit SerViceS The following non-audit services were provided by the Group’s auditor, Ernst & Young. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amounts for the provision of non-audit services: Other assurance and compliance services $34,500 $34,500 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 group under ASIC Class Order 98/100. The group is an entity to which the Class Order applies. Signed in accordance with a resolution of the directors. John Thame Chairman Sydney, 27 August 2009 Frank Wolf Managing Director 16 16 17 abacus property group conSoLiDAteD incoMe StAteMent reVenue Rental income Finance income Funds management income Share of profit from equity accounted investments Net change in fair value of investments derecognised during the year Income from distributions Other income total revenue and other income Property expenses & outgoings Depreciation and amortisation expense Net change in fair value of derivatives Net change in fair value of investments held at balance date Finance costs Administrative expenses ProFit / (LoSS) beFore tAX Income tax benefit / (expense) ProFit / (LoSS) AFter tAX ProFit / (LoSS) AttributAbLe to: Equity holders of the parent entity Equity holders of other stapled entities (minority interest) Abacus Trust Abacus Group Projects Limited Abacus Income Trust Stapled security holders Net profit / (loss) attributable to external minority interests net ProFit / (LoSS) basic earnings / (loss) per stapled security (cents)1 Diluted earnings / (loss) per stapled security (cents)21 10 10 (11.81) (11.81) Basic earnings / (loss) per parent share (cents) Diluted earnings / (loss) per parent share (cents) NOTES 6a 6b 16b 6c 7a 7b 7c 7d 8a CONSOLIDATED 2009 $’000 2008 $’000 78,927 18,243 20,065 8,801 10,894 1,512 - 138,442 (11,406) (1,994) (51,420) (113,426) (44,864) (19,500) (104,168) 76,436 16,442 43,859 12,948 9,118 1,261 1,000 161,064 (12,350) (2,104) 3,137 (22,641) (41,557) (16,157) 69,392 2009 $’000 484 1,049 715 9,107 4,824 30,652 - 46,831 (177) - (3,447) (8,805) (6,969) 683 28,116 PARENT 2008 $’000 555 1,137 101 - - 5,075 - 6,868 (141) - 123 (6,888) (10,948) 1,874 (9,112) 1,178 (102,990) 3,034 72,426 866 28,982 3,409 (5,703) 8,553 (8,750) (105,975) (3,161) (1,829) (102,412) (578) (102,990) 55,490 1,935 22,785 71,460 966 72,426 10.98 10.80 - - - - - - - - - - 3.34 3.34 (0.12) (0.12) 18 19 1 Prior period weighted average number of securities and EPSs have been adjusted in accordance with AASB 133 “Earnings per Share” (“AASB 133”). The weighted average number of securities on issue for the current period, prior to the Equity Raisings, have also been adjusted as required by AASB 133. directors report 30 June 2009 abacus property group conSoLiDAteD DiStribution StAteMent conSoLiDAteD bALAnce SHeet StAteMent oF DiStribution Net profit/(loss) attributable to stapled security holders Transfer from / (to) retained earnings Distributions paid and payable Distribution per stapled security (cents per security) Weighted average number of securities (‘000) CONSOLIDATED PARENT 2009 $’000 2008 $’000 2009 $’000 2008 $’000 NOTES (102,412) 149,666 47,254 7.00 867,488 71,460 13,523 84,983 13.50 650,891 (28,982) 28,982 - - - 9 9 10 (5,703) 5,703 - - - current ASSetS Cash and cash equivalents Trade and other receivables Investment properties Property loans and other financial assets Other totAL current ASSetS non-current ASSetS Property, plant and equipment Investment properties Property loans & other financial assets Equity accounted investments Deferred tax assets Intangible assets and goodwill Other totAL non-current ASSetS totAL ASSetS current LiAbiLitieS Trade and other payables Interest-bearing loans and borrowings Other totAL current LiAbiLitieS non-current LiAbiLitieS Trade and other payables Interest-bearing loans and borrowings Derivatives at fair value Deferred tax liabilities Other totAL non-current LiAbiLitieS totAL LiAbiLitieS net ASSetS totAL eQuity 11 12 15 13a 14 15 13b 16 8c 17 18a 19a 18b 19b 8c CONSOLIDATED NOTES 2009 $’000 2008 $’000 2009 $’000 9,124 22,093 44,289 106,144 6,655 188,305 46,777 26,154 3,849 157,278 11,753 245,811 32,276 708,550 339,044 125,821 11,329 38,225 2,243 31,840 928,591 281,474 104,093 1,177 41,139 1,796 1,257,488 1,390,110 275 6,889 - 16,933 104 24,201 - 6,450 145,161 - 4,283 32,394 - 188,288 PARENT 2008 $’000 2,340 2,018 - 19,894 73 24,325 - 8,280 105,437 - 4,176 32,394 50 150,337 1,445,793 1,635,921 212,489 174,662 13,272 61,829 2,832 77,933 67,973 63,704 2,102 133,779 134,025 601 - 134,626 78,897 3,937 - 82,834 9,676 329,555 37,035 355 1,512 378,133 456,066 989,727 989,727 - 580,874 (11,272) 2,614 4,927 577,143 710,922 924,999 924,999 3,000 2,637 313 - 1,143 7,093 - 61,746 (134) - 3,918 65,530 141,719 70,770 70,770 148,364 26,298 26,298 20 20 21 directors report 30 June 2009 abacus property group conSoLiDAteD bALAnce SHeet (continueD) StAteMent oF cHAnGeS in eQuity equity attributable to members of AGHL: Contributed equity Reserves Retained earnings / (accumulated losses) total equity attributable to members of AGHL equity attributable to members of At: Contributed equity Retained earnings / (accumulated losses) total equity attributable to members of At equity attributable to members of AGPL: Contributed equity Reserves Retained earnings / (accumulated losses) total equity attributable to members of AGPL equity attributable to members of Ait: Contributed equity Retained earnings total equity attributable to members of Ait equity attributable to external minority interest: Contributed equity Retained earnings / (accumulated losses) total equity attributable to external minority interest CONSOLIDATED PARENT 2009 $’000 2008 $’000 2009 $’000 2008 $’000 NOTES 45,734 2,868 13,020 61,622 31,761 830 3,671 36,262 47,064 5,448 18,258 70,770 33,116 3,906 (10,724) 26,298 745,141 (53,713) 691,428 595,512 86,326 681,838 8,392 (400) (3,144) 4,848 7,259 (483) 367 7,143 188,230 29,190 217,420 136,970 44,226 181,196 14,493 (84) 14,409 2,544 16,016 18,560 - - - - - - - - - - - - - - - - - - - - - - - - totAL eQuity 989,727 924,999 70,770 26,298 eQuity Contributed equity Reserves Retained earnings / (accumulated losses) Total stapled security holders’ interest in equity Total external minority interest totAL eQuity 21 987,497 2,468 (14,647) 975,318 14,409 989,727 771,502 347 134,590 906,439 18,560 924,999 47,064 5,448 18,258 70,770 - 70,770 33,116 3,906 (10,724) 26,298 - 26,298 CONSOLIDATED At 1 July 2008 Revaluation of land & buildings Foreign currency translation Total income and expense for the year recognised directly in equity Net loss for the year total income / (expense) for the year Equity raisings Issue costs Distribution reinvestment plan Units issued Acquisition of interest in Abacus Wollongong Trust Minority interest in acquisition of Abacus Jigsaw Trust Sale of interest U-Stow-It Holdings Sale of interest Fern Bay Sale of interest in Hobart Growth Distribution to security holders Share based payments ISSUED CAPITAL $’000 771,502 - - - - - 211,880 (4,881) 8,996 - - - - - - - - ATTRIBUTABLE TO THE STAPLED SECURITY HOLDER EXTERNAL ASSET REVALUATION RESERVE $’000 FOREIGN CURRENCY TRANSLATION $’000 EMPLOYEE EQUITY BENEFITS $’000 RETAINED EARNINGS $’000 MINORITY INTEREST $’000 - 1,048 - 1,048 - 1,048 - - - - - - - - - - - (3,559) - (469) (469) - (469) - - - - - - - - - - - TOTAL EQUITY $’000 924,999 1,048 (469) 3,906 - - 134,590 - - 18,560 - - - - - - - - - - - - - - - 1,542 5,448 - - 579 (102,412) (102,412) - - - - - - (286) (65) - (46,474) - (14,647) (578) (578) - - - 8,461 (126) (102,990) (102,411) 211,880 (4,881) 8,996 8,461 (126) 5,680 5,680 (15,586) - (2,002) - - 14,409 (15,872) (65) (2,002) (46,474) 1,542 989,727 At 30 June 2009 987,497 1,048 (4,028) CONSOLIDATED At 1 July 2007 Foreign currency translation Total income and expense for the year recognised directly in equity Net income for the year total income / (expense) for the year Equity raisings Issue Costs Distribution reinvestment plan Disposal of the Matson Resort Acquired retained earnings on acquisition of U-Stow-It Holdings Ltd Distribution to security holders Share based payments At 30 June 2008 ISSUED CAPITAL $’000 648,440 - - - - 107,422 (1,976) 17,616 - - - - 771,502 ATTRIBUTABLE TO THE STAPLED SECURITY HOLDER EXTERNAL ASSET REVALUATION RESERVE $’000 FOREIGN CURRENCY TRANSLATION $’000 EMPLOYEE EQUITY BENEFITS $’000 RETAINED EARNINGS $’000 MINORITY INTEREST $’000 TOTAL EQUITY $’000 - - - - - - - - - - - - - (165) (3,394) (3,394) - (3,394) - - - - - - - (3,559) 2,868 - 148,365 - 3,697 - 803,205 (3,394) - - - - - - - - - 1,038 3,906 - - (3,394) 71,460 71,460 - - - - - (85,235) - 134,590 966 966 - - - (702) 14,599 - - 18,560 72,426 69,032 107,422 (1,976) 17,616 (702) 14,599 (85,235) 1,038 924,999 22 22 23 directors report 30 June 2009 abacus property group StAteMent oF cHAnGeS in eQuity (continueD) conSoLiDAteD cASH FLoW StAteMent PARENT At 1 July 2008 Total income and expense for the year recognised directly in equity Net income for the year total income for the year Equity raisings Share based payments At 30 June 2009 PARENT At 1 July 2007 Total income and expense for the year recognised directly in equity Net income for the year total income for the year Equity raisings Share based payments At 30 June 2008 ISSUED CAPITAL $’000 33,116 - - - 13,948 - 47,064 ISSUED CAPITAL $’000 26,039 - - - 7,077 - 33,116 ASSET REVALUATION RESERVE $’000 FOREIGN CURRENCY TRANSLATION $’000 - - - - - - - - - - - - - - EMPLOYEE EQUITY BENEFITS $’000 3,906 RETAINED EARNINGS $’000 (10,724) TOTAL EQUITY $’000 26,298 - - - - 1,542 5,448 - - 28,982 28,982 - - 18,258 28,982 28,982 13,948 1,542 70,770 ASSET REVALUATION RESERVE $’000 FOREIGN CURRENCY TRANSLATION $’000 EMPLOYEE EQUITY BENEFITS $’000 RETAINED EARNINGS $’000 TOTAL EQUITY $’000 - - - - - - - 71 2,868 (5,069) 23,909 (71) - (71) - - - - 48 (23) - - - 1,038 3,906 (5,703) (5,655) - - (10,724) (5,703) (5,726) 7,077 1,038 26,298 cASH FLoWS FroM oPerAtinG ActiVitieS Income receipts Interest received Distributions received Income tax paid Borrowing costs paid Operating payments net cASH FLoWS FroM oPerAtinG ActiVitieS cASH FLoWS FroM inVeStinG ActiVitieS Payments for investments and funds advanced Proceeds from sale and settlement of investments and funds repaid Purchase of property, plant and equipment Disposal of property, plant and equipment Purchase of a controlled entity Disposal of controlled entity Purchase of investment properties Disposal of investment properties Payment for other investments net cASH FLoWS uSeD in inVeStinG ActiVitieS cASH FLoWS FroM FinAncinG ActiVitieS Proceeds from issue of stapled securities Payment of issue costs Repayment of borrowings Proceeds from borrowings Distributions paid net cASH FLoWS FroM/(uSeD in) FinAncinG ActiVitieS net increASe/(DecreASe) in cASH AnD cASH eQuiVALentS Net foreign exchange differences Cash and cash equivalents at beginning of year cASH AnD cASH eQuiVALentS At enD oF yeAr CONSOLIDATED NOTES 2009 $’000 2008 $’000 2009 $’000 156,870 1,215 688 (118) (43,967) (49,100) 169,152 1,957 1,281 (6,795) (38,939) (49,947) 7,635 31 591 - (727) (2,552) PARENT 2008 $’000 7,391 93 1,732 (2,158) (1,382) (2,530) 11 65,588 76,709 4,978 3,146 23 (179,692) (403,367) (49,685) (28,513) 83,400 204,446 (150) - - 25,424 (55,983) 54,020 10,336 (21,653) 20,946 (22,861) - (255,955) 57,090 (100) 29,245 - - - - (1,105) - - 19,072 - - - - - - (33) (62,645) (421,454) (21,545) (9,474) 211,463 (5,787) (309,424) 123,964 (60,895) 110,711 (4,230) (230,458) 555,962 (59,045) 13,948 - - 554 - 7,077 (6) (4,569) - - (40,679) 372,940 14,502 2,502 (37,736) 28,195 (2,065) (3,826) 83 46,777 9,124 (485) 19,067 46,777 - 2,340 275 - 6,166 2,340 11 24 24 25 notes to the financial statements 30 June 2009 abacus property group 1. corPorAte inForMAtion Abacus Property Group (“APG” or the “Group”) is comprised of Abacus Group Holdings Limited (“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 and have been stapled together so that neither can be dealt with without the other. The securities trade as one security on the Australian securities Exchange (“the “ASX”) under the code ABP. The financial report of the Group for the year ended 30 June 2009 was authorised for issue in accordance with a resolution of the directors on 27 August 2009. The nature of the operations and principal activities of the Group are described in the Directors’ Report. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (a) basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. 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 98/100. The Group is an entity to which the class order applies. (b) Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS), as issued by the IASB. (c) new accounting standards and interpretations Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ended 30 June 2009. These are outlined in the table below. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) APPLICATION DATE OF STANDARD* SUMMARY New standard replacing AASB114 Segment Reporting, which adopts a management reporting approach to segment reporting. 1 January 2009 REFERENCE AASB 8 and AASB 2007-3 AASB 123 (Revised) and AASB 2007-6 AASB 101 (Revised), AASB 2007-8 and AASB 2007-10 AASB 3 (revised) AASB127 (Revised) The amendment to AASB 114 requires all borrowing costs to be capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset, unless the qualifying asset is measured at fair value. Introduces a statement of comprehensive income. Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements. Main changes are as follows: - For each business combination entered into, entities will have a choice to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. - Acquisition related costs will be expensed through profit or loss at the time that such services are rendered. The changes apply prospectively. Under the revised standard, a change in the ownership interest of a subsidiary (whether that does not result in loss of control, or the reduction in non- controlling interests) will be accounted for as an equity transaction. APPLICATION DATE FOR GROUP* 1 July 2009 1 July 2009 1 July 2009 IMPACT ON GROUP FINANCIAL REPORT The Group will be required to assess if the current presentation of segments in the accounts is consistent with the segments used by our chief operating decision maker when monitoring the performance of the Group and whether any reallocation of goodwill is required. This revision will not have any impact on assets currently classified as Investment Properties and measured at fair value. For properties that are under development, interest incurred will need to be capitalised but this is not expected to have a significant impact on current practice of the Group and most in the market. These amendments are only expected to affect the presentation of the Group’s financial report and will not have a direct impact on the measurement and recognition of amounts disclosed in the financial report. The Group has not determined at this stage whether to present a single statement of comprehensive income or two separate statements. 1 January 2009 1 January 2009 1 July 2009 This will impact the financial statements in FY10 should the Group enter business combinations. 1 July 2009 1 July 2009 Impacts will be assessed upon actual transactions completed by the Group in FY10. 1 July 2009 26 26 27 notes to the financial statements 30 June 2009 abacus property group 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) REFERENCE APPLICATION DATE OF STANDARD* SUMMARY IMPACT ON GROUP FINANCIAL REPORT APPLICATION DATE FOR GROUP* The main amendments of relevance are those made to AASB 127 removing the ‘cost method’ and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity’s separate financial statements (i.e. parent company accounts) rather than just dividends from post-acquisition profits. The distinction between pre and post acquisition profits no longer exists. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment of the investment in that subsidiary. AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value. This interpretation requires that when the real estate developer is providing construction services to the buyer’s specifications, revenue may be recorded as construction progresses. Otherwise, revenue should be recognised on completion of the relevant real estate unit. AASB 140.8 has been amended to bring property that is being constructed or developed for future use as an investment property within the scope of AASB 140 (instead of AASB 116). The impact is that if the final intention of the owner is to use this property for capital appreciation or rent, the property through construction will be measured at fair value (versus at cost in the former standard). AASB 2008-7 AASB Int. 15 AASB 140 1 January 2009 This may impact the accounting of investments in subsidiaries, joint controlled entities and associates in certain circumstances, with respect to dividends from these entities going forward. Any pre-acquisition profits previously included in dividends from these entities, whilst going forward will be included in the P&L (rather than reducing the carrying value of investment), may result in an impairment of the investment. 1 July 2009 1 January 2009 This standard could impact the financial statement should the Group enter a construction-type arrangement, however as the Group recognises profit in construction upon practical completion and when all conditions of the contract have been met, this standard may not have a significant impact. 1 January 2009 This standard could impact the financial statements should the Group have properties undergoing significant construction and development for future use as investment property, in terms of measuring the property through construction at fair value and not only at construction costs incurred. 1 July 2009 1 July 2009 REFERENCE Amendments to International Financial Reporting Standards APPLICATION DATE OF STANDARD* SUMMARY IMPACT ON GROUP FINANCIAL REPORT APPLICATION DATE FOR GROUP* The amended IFRS 7 requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy: - Quoted prices in active markets for identical assets or liabilities (Level 1) e.g. investment in listed securities - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, whether directly (as prices) or indirectly (derived from prices) (Level 2) e.g. investment in unlisted securities - Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3) 1 January 2009 This will impact the disclosures of the Group’s related entities in FY10, with respect to financial instruments such as investment in listed and unlisted securities or options. 1 July 2010 *designates the beginning of the applicable annual reporting period AASB 2008-1 and AASB 2008-2 will have no application to the Group. 28 28 29 notes to the financial statements 30 June 2009 abacus property group 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (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 collectively referred to as the Group. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies with adjustments made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits from intra-group transactions, have been eliminated in full and 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 a 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. The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Minority interests represent those equity interests in Abacus Jigsaw Trust and Abacus Independent Retail Property Trust that are not held by the Group and are presented separately in the income statement and within equity in the consolidated balance sheet. (e) Foreign currency translation Functional and presentation currency Both the functional and presentation currency of the Group are in Australian dollars. Each entity in the Group determines its own functional currency and items are included in the financial statements of each entity are measured using that functional currency. transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. At reporting date the assets and liabilities of these entities are translated into the presentation currency of the Group at the rate of exchange prevailing at balance date and the financial performance is translated at the average exchange rate prevailing during the reporting period. The exchange differences arising on translation are taken directly to the foreign currency translation reserve in equity. net change in fair value of investments held at balance date Change in net market value of investments is recognised as revenue or expense in determining the net profit for the period. Refer note 2(o) for detailed commentary on investment properties. (g) expenses Expenses including rates, taxes and other outgoings, are brought to account on an accrual basis and any related payables are carried at cost. (h) cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash which are subject to an insignificant risk of changes in value. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above. (i) trade and other receivables Trade receivables, which generally have 30 day terms, are recognised at amortised cost, which in the case of the Group, is the original invoice amount less an allowance for any uncollectible amounts. Collectibility of trade receivables is reviewed on an ongoing basis. An allowance for doubtful debts is raised when there is objective evidence that collection of the full amount is no longer probable. Bad debts are written off when identified. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (f) revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Hotel and storage related income Revenue from rendering of services is recognised in accordance with the terms and conditions of the service agreements. rental income Rental income from investment properties is accounted for on a straight-line basis over the lease Contingent rental income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an integral part of the total rental income. term. Finance income Revenue is recognised as interest accrues using the effective interest method. This is a method of the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. calculating Dividends and distributions Revenue is recognised when the Group’s right to receive the payment is established. net change in fair value of investments derecognised during the year Revenue from sale of investments is recognised on settlement when the significant risks and rewards of the ownership of the investments have been transferred to the buyer. Risks and rewards are generally considered to have passed to the buyer at the time of settlement of the sale. 30 30 31 notes to the financial statements 30 June 2009 abacus property group Financial assets at fair value through profit or loss For investments where there is no quoted market or unit price, fair value is determined by reference to the current market value of another instrument which is substantially the same or is calculated based on the expected cash flows of the underlying net asset base of the investment. After initial recognition, investments, which are classified as held for trading, are measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Gains or losses on investments held for trading are recognised in the income statement. For investments that are actively traded in organised financial markets, fair value is determined by reference to Securities Exchange quoted market bid prices at the close of business on the balance sheet date. Loans and receivables Loans and receivables including loan notes and loans to key management personnel are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Subsidiaries Investment in subsidiaries are held at lower of cost or recoverable amount. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (j) Derivative financial instruments and hedging The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss for the year. The fair values of interest rate swaps are determined by reference to market values for similar instruments. (k) investments and other financial assets All investments are initially recognised at cost, being the fair value of the consideration given. Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, or available-for-sale financial assets. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. At 30 June 2009 the Group’s investments in listed and unlisted securities have been classified as either financial assets at fair value through profit or loss and property loans are classified as loans and receivables. recognition and derecognition Purchases and sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place are recognised on the trade date i.e. the date that the Group commits to purchase the assets. Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or been transferred. (m) interest in joint ventures Joint venture entities The Group’s interest in joint venture entities is accounted for under the equity method of accounting in the consolidated financial statements. The investment in the joint venture entities is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint ventures, less any impairment in value. The consolidated income statement reflects the Group’s share of the results of operations of the joint ventures. Investments in joint ventures are held at cost in the investing entities. Joint venture assets The Group’s interest in joint venture assets is accounted for in the financial statements by proportionately consolidating its interests in the assets and liabilities of the joint venture. The Group also recognises its share of the expenses that the joint venture incurs and its share of the income that the joint venture earns. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (l) investment in associates The Group’s investment in its associates is accounted for under the equity method of accounting in the consolidated financial statements. The associates are entities over which the Group has significant influence but not control and accordingly are neither subsidiaries nor joint ventures. The investment in the associates is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates, less any impairment in value. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivable and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The reporting dates of the associates and the Group are identical and the associates’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances. Investments in associates held by the parent are held at cost in the parent’s financial statements. 32 32 33 notes to the financial statements 30 June 2009 abacus property group 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (n) Property, plant and equipment Land and buildings are measured at fair value, based on periodic valuations by external independent valuers, less accumulated depreciation on buildings and less any impairment losses recognised after the date of the revaluation. Plant and equipment is stated at historical cost less accumulated depreciation and any impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Buildings – 40 years Plant and equipment – over 5 to 15 years revaluations of land and buildings Any revaluation increment is credited to the asset revaluation reserve included in the equity section of the balance sheet except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. Any revaluation decrease is recognised in profit or loss except to the extent that it offsets a previous revaluation increase for the same asset in which case the decrease is debited directly to the asset revaluation reserve to the extent of the credit balance existing in the revaluation reserve for that asset. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the income statement. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amounts of the assets and the net amounts are restated to the revalued amounts of the assets. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Disposal An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised. (o) investment properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing parts of an existing investment property at the time that the cost is incurred if the recognition criteria are met, and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise. Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal. Transfers are made to investment property when, and only when, there is a change in use, evidenced by commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of development with a view to sale. Under AASB 140, investment properties, including any plant and equipment, are not subject to depreciation. However, depreciation allowances in respect of certain buildings, plant and equipment are currently available to investors for taxation purposes. Gains and losses arising from changes in the fair value of investment properties are included in the income statement in the year in which they arise. Any gains or losses on the sale of investment properties are recognised in the income statement in the year of sale. (p) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Group as lessee Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense. Group as a lessor Leases in which the Group retains substantially all the risks and benefits of ownership of the lease assets are classified as operating leases. The initial direct cost incurred in negotiating an operating lease is added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (o) investment properties (continued) For a transfer from investment property to inventories, the deemed cost of property for subsequent accounting is its fair value at the date of change in use. For a transfer from inventories to investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss. When the Group completes the construction or development of a “self-constructed investment property”, any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss. Land and buildings are considered to have the function of an investment and are therefore regarded as a composite asset, the overall value of which is influenced by many factors, the most prominent being income yield, rather than diminution in value of the building content due to the passing of time. Accordingly, the buildings and all components thereof, including integral plant and equipment, are not depreciated. The directors obtain independent valuations on investment properties annually to ensure that the carrying amount does not differ materially from the assets’ fair value. The cycle of this review is staggered such that investment properties are independently revalued in either the June or the December reporting cycles. In determining fair value, the capitalisation of net income method and the discounting of future cashflows to their present value have been used. Lease incentives provided by the Group to lessees, and rental guarantees which may be received by the Group from third parties (arising from the acquisition of investment properties) are included in the measurement of fair value of investment property and are treated as separate assets. Such assets are amortised over the respective periods to which the lease incentives and rental guarantees apply, either using a straight-line basis, or a basis which is more representative of the pattern of benefits. 34 34 35 notes to the financial statements 30 June 2009 abacus property group 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) Impairment losses recognised for goodwill are not subsequently reversed. intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. Following initial recognition, intangibles are carried at cost less accumulated amortisation and impairment losses. Intangible assets created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred. The useful lives of these intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset maybe impaired. The amortisation period and the amortisation method for an intangible asset with a finite life is reviewed at least each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefit embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in an accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in the income statement through the ‘depreciation and amortisation expense’ line item. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. (q) Goodwill and intangibles Goodwill Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses and is not amortised. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash- generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated: • Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and • Is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with AASB 114 Segment Reporting. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash- generating units), to which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less that the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash- generating unit retained. tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. employee leave benefits i) Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non- monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. ii) Long service leave The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (r) impairment of non-financial assets other than goodwill Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other that goodwill that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. (s) trade and other payables Trade payables and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. (t) Provisions and employee leave benefits Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the effect of the time value of money is material, provisions are discounted using a current pre- 36 36 37 notes to the financial statements 30 June 2009 abacus property group 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (u) Distributions and dividends The Trusts generally distribute their distributable assessable income to their unitholders. Such distributions are determined by reference to the taxable income of the respective Trusts. Distributable income may include capital gains arising from the disposal of investments and tax-deferred income. Unrealised gains and losses on investments that are recognised as income are usually retained and are generally not assessable or distributable until realised. Capital losses are not distributed to security holders but are retained to be offset against any future realised capital gains. A liability for dividend or distribution is recognised in the Balance Sheet if the dividend or distribution has been declared, determined or publicly recommended prior to balance date. (v) interest-bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of transaction costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid in the establishment of loan facilities that are yield related are included as part of the carrying amount of loans and borrowings. Borrowings are classified as current liabilities where the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. borrowing costs Borrowing costs are recognised as an expense when incurred unless they relate to a qualifying asset or to upfront borrowing establishment and arrangement costs, which are deferred and amortised as an expense over the life of the facility or five years whichever is shorter. A qualifying asset is an asset that generally takes more than 12 months to get ready for its intended use or sale. In these circumstances, the financing costs are capitalised into the cost of the asset. Where funds are borrowed by the Group for the acquisition or construction of a qualifying asset, the amount of the borrowing costs capitalised are those incurred in relation to the borrowing. (w) Securities-based payment transactions The Group provided benefits to its employees (including key management personnel) in the form of securities- based payments, whereby employees render services in exchange for stapled securities or rights over stapled securities (equity-settled transactions). The Executive Performance Award Plan (EPAP) and the Executive Security Loan Plan (ESLP) which provided benefits to senior executives were cancelled on 30 June 2009. The cost of these equity-settled transactions with employees was measured by reference to the fair value of the equity instruments at the date at which they were granted. The fair value was determined by an external valuer using a binomial model, further details of which are given in note 26. In valuing equity-settled transactions, no account was taken of any vesting conditions, other than conditions linked to the price of the stapled securities of the Group (market conditions) if applicable. The cost of equity-settled transactions was recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional security dilution in the computation of diluted earnings per stapled security (see note10). (x) contributed equity Issued and paid up capital is recognised at the fair value of the consideration received by the Group. Stapled securities are classified as equity. Incremental costs directly attributable to the issue of new shown in equity as a deduction, net of tax, from the proceeds. securities are (y) transfers to (from) total equity In respect of the Group, revaluation increments or decrements arising from changes in the fair value of investment properties and derivative financial instruments, unrealised gains and losses in the net value of investments, accrued income not yet assessable and expenses provided for or accrued not yet deductible, net capital losses and tax free or tax deferred amounts maybe transferred to equity and may not be included in the determination of distributable income. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (w) Securities-based payment transactions (continued) At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period. The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity. Equity-settled awards granted by AGHL to employees of its subsidiary were recognised in the parent’s separate financial statements as an additional investment in the subsidiary with a corresponding credit to equity. These amounts are eliminated on consolidation. As a result of all employees in the Group being employed by Abacus Funds Management Limited there is no expense incurred by AGHL. The expense recognised by the Group is the total expense associated with all such awards. Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the security based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement 38 38 39 notes to the financial statements 30 June 2009 abacus property group 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (z) taxation The Group comprises taxable and non-taxable entities. A liability for current and deferred tax and tax expense is only recognised in respect of taxable entities that are subject to income tax and potential capital gains tax as detailed below. Abacus trust and Abacus income trust Under current Australian income tax legislation neither AT or AIT are liable to Australian income tax provided security holders are presently entitled to the taxable income of the Trusts and the Trusts generally distribute their taxable income. company income tax AGHL and its Australian resident wholly-owned subsidiaries have formed a Tax Consolidation Group. AGHL has entered into tax funding agreements with its Australian resident wholly-owned subsidiaries, so that each subsidiary agrees to pay or receive its share of the allocated tax at the current tax rate. The head entity, AGHL and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. In addition to its own current and deferred tax amounts, AGHL also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group. Any difference between the amounts assumed and amounts receivable of payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised, except:  when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or  when the deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (aa) earnings per stapled security (ePSS) Basic EPSS is calculated as net profit attributable to stapled security holders, adjusted to exclude costs of servicing equity (other than distributions) divided by the weighted average number of stapled securities on issue during the period under review. Diluted EPSS is calculated as net profit attributable to stapled security holders, adjusted for:  costs of servicing equity (other than distributions); the after tax effect of dividends and interest associated with dilutive potential stapled securities that have been recognised as expenses; and  other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential stapled securities; divided by the weighted average number of stapled securities and dilutive potential stapled securities, adjusted for any bonus element. 2. SuMMAry oF SiGniFicAnt AccountinG PoLicieS (continueD) (z) taxation (continued) Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences, except:  when the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or  when the taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, and the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Goods and services tax (GSt) Revenues, expenses and assets are recognised net of the amount of GST except when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. 40 40 41 notes to the financial statements 30 June 2009 abacus property group 3. FinAnciAL riSK MAnAGeMent The Group manages its exposure to risk by: The risks arising from the use of the Group’s financial instruments are credit risk, liquidity risk and market risk (interest rate risk , price risk and foreign currency risk). The Group’s financial risk management focuses on mitigating the unpredictability of the financial markets and its impact on the financial performance of the Group. The Board reviews and agrees policies for managing each of these risks, which are summarised below. The main purpose of the financial instruments used by the Group is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. The Group also enters into derivative transactions principally interest rate swaps. The purpose is to manage the interest rate exposure arising from the Group’s operations and its sources of finance. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in notes 2 and 4 to the financial statements. (a) credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers, investment in securities, secured property loans and interest bearing loans and derivatives with banks. - - - - - - derivative counterparties and cash transactions are limited to high credit quality financial institutions; policy which limits the amount of credit exposure to any one financial institution; providing loans as an investment into joint ventures, associates, related parties and third parties where it is comfortable with the underlying property exposure within that entity; regularly monitoring loans and receivables balances on an ongoing basis; regularly monitoring the performance of its associates, joint ventures, related parties and third parties on an ongoing basis; and obtaining collateral as security (where required or appropriate). The Group’s credit risk is predominately driven by its Property Finance business which provides loans to third parties, those using the funds for property development. The Group mitigates the exposure to this risk by evaluation of the application before acceptance. The analysis will specifically focus on: - the Loan Valuation Ratio (LVR) at drawdown; - mortgage ranking; - - - background of the developer (borrower) including previous developments; that the terms and conditions of higher ranking mortgages are acceptable to the Group; appropriate property insurances are in place with a copy provided to the Group; and - market analysis of the completed development being used to service drawdown. The Group also mitigates this risk by ensuring adequate security is obtained and timely monitoring of the financial instrument to identify any potential adverse changes in the credit quality. 3. FinAnciAL riSK MAnAGeMent (continueD) (b) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding though an adequate and diverse amount of committed credit facilities, the ability to close out market positions and the flexibility to raise funds through the issue of new stapled securities or the distribution reinvestment plan. The Group’s policy is to maintain an available loan facility with banks sufficient to meet expected operational expenses and to finance investment acquisitions for a period of 90 days, including the servicing of financial obligations. Current loan facilities are assessed and extended for a maximum period based on the Group’s expectations of future interest and market conditions. As at 30 June 2009, the Group had undrawn committed facilities of $220 million and cash of $9.1 million which are adequate to cover short term funding requirements. Further information regarding the Group’s debt profile is disclosed in Note 19. (c) refinancing risk Refinancing risk is the risk that unfavorable interest rate and credit market conditions result in an unacceptable increase in the Group’s credit margins and interest cost. Refinancing risk arises when the Group is required to obtain debt to fund existing and new debt positions. The Group is exposed to refinancing risks arising from the availability of finance as well as the interest rates and credit margins at which financing is available. The Group manages this risk by spreading maturities of borrowings and interest rate swaps and reviewing potential transactions to understand the impact on the Group’s credit worthiness. (d) Market ristMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Foreign currency risk The Group is exposed to currency risk on its investment in foreign operations, equity investments, investment in associates and property loans denominated in a currency other than the functional currency of Group entities. The currencies in which these transactions primarily are denominated in NZD and to much lesser extent GBP and SGD. As a result the Group’s balance sheet can be affected by movements in the A$/NZ$, A$/GBP$ and A$/SGD$ exchange rates. The Group borrows loan funds in New Zealand dollars to substantially match the foreign currency property asset value exposure with a corresponding foreign currency liability and therefore expects to substantially mitigate foreign currency risk on its New Zealand denominated asset values. interest rate risk The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with a floating interest rate. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. The Group’s aim is to keep between 60% and 100% of its borrowings at fixed rates of interest. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed- upon notional principal amount. At 30 June 2009, after taking into account the effect of interest rate swaps, approximately 76.3% of the Group’s borrowings are subject to fixed rate agreements (2008: 75.4%). 42 42 43 notes to the financial statements 30 June 2009 abacus property group recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. classification of and valuation of investments The Group has decided to classify investments in listed and unlisted securities as ‘held for trading’ investments and movements in fair value are recognised directly in profit or loss. The fair value of listed securities has been determined by reference to published price quotations in an active market. The fair value of unlisted securities has been determined by reference to the net assets of the entity and available redemption facilities. impairment of property loans and financial assets other than goodwill The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the asset is determined. For property loans and interim funding to related funds this involves value in use calculations, which incorporate a number of key estimates and assumptions around cashflows and fair value of underlying investment properties held by the borrower and expected timing of cashflows from equity raisings of related funds. 3. FinAnciAL riSK MAnAGeMent (continueD) (d) Market risk (continued) Fair value interest rate risk As the Group holds interest rate swaps against its variable rate debt there is a risk that the economic value of a financial instrument will fluctuate because of changes in market interest rates. The level of fixed rate debt is disclosed in note 19 and it is acknowledged that this risk is a by-product of the Group’s attempt to manage its cash flow interest rate risk. (e) other market price risk The Group is exposed to equity securities price risk. The key risk variable is the quoted price of securities which is influenced by a range of factors, most of which are outside the control of the Group. Management of the Group monitors the securities in its investment portfolio based on market indices and published prices. Investments within the portfolio are managed on an individual basis and all buy / sell decisions are approved by the Managing Director and the Chief Financial Officer. 4. SiGniFicAnt AccountinG JuDGMentS, eStiMAteS AnD ASSuMPtionS In applying the Group’s accounting policies management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below: (i) Significant accounting judgments operating lease commitments – Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties and has thus classified the leases as operating leases. control and significant influence Determination of whether the Group has control or significant influence over an investee is based on judgemental assessments of both the rights the Group has in the investee and the risks and rewards it is exposed to. 5. SeGMent inForMAtion The Group predominantly operates in Australia. The Group’s segment reporting format is business segments as the Group’s risks and rates of return can be readily identified with the type of business and services provided. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment revenue, segment expense and segment result do not include transactions between business segments. 4. SiGniFicAnt AccountinG JuDGMentS, eStiMAteS AnD ASSuMPtionS (continueD) (ii) Significant accounting estimates and assumptions impairment of goodwill and intangibles with indefinite useful lives The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the goodwill and intangibles with indefinite useful lives are allocated. No impairment loss was recognised in the current year in respect of goodwill. Fair value of derivatives The fair value of derivatives is determined using closing quoted market prices (where there is an active market) or a suitable pricing model based on discounted cash flow analysis using assumptions supported by observable market rates. Where the derivatives are not quoted in an active market their fair value has been determined using (where available) quoted market inputs and other data relevant to assessing the value of the financial instrument, including financial guarantees granted by the Group, estimates of the probability of exercise. Valuation of investment properties The Group makes judgements in respect of the fair value of investment properties (note 2(o)). The fair value of these properties are reviewed regularly by management with reference to annual external independent property valuations and market conditions existing at reporting date, using generally accepted market practices. The assumptions underlying estimated fair values are those relating to the receipt of contractual rents, expected future market rentals, maintenance requirements, capitalisation rates discount rates that reflect current market uncertaintities and current and recent property investment prices. If there is any material change in these assumptions or regional, national or international economic conditions, the fair value of investment properties may differ and may need to be re-estimated. 44 44 45 notes to the financial statements 30 June 2009 abacus property group 5. SeGMent inForMAtion (continueD) 5. SeGMent inForMAtion (continueD) The Group’s primary business segments based on its management reporting system are Property, Funds Management, Property Finance and Joint Ventures and Developments. The Property division comprises the investment in and ownership of commercial, retail and industrial properties. The Funds Management division develops, originates and manages off balance sheet funds in addition to discharging the Group’s responsible entity obligations. Property Finance provides mortgage lending and related property financing solutions. Joint Ventures & Developments is responsible for the Group’s investments in joint venture activities and in property securities. PROPERTY $’000 FUNDS MANAGEMENT $’000 PROPERTY FINANCE $’000 JOINT VENTURES/ DEVELOPMENTS $’000 YEAR ENDED 30 JUNE 2009 revenue Revenue from external customers Equity accounted investments Net change in fair value of investments derecognised during the year Unallocated revenue total consolidated revenue Direct costs Allocated costs Unallocated expenses Segment result Net change in fair value of investments held at balance date Segment result after fair value adjustments Finance costs / loss on derivatives Loss before tax and minority interest Income tax benefit net loss for the year Assets and Liabilities Segment assets Unallocated assets (a) total assets Segment liabilities Unallocated liabilities (b) total liabilities other segment information: Depreciation and amortisation cash flow information Total - operating Total - investing Total - financing 79,147 645 356 - 80,148 (13,437) (7,020) - 59,691 (107,518) (47,827) 896,822 - 12,614 - 3,693 15,151 15,540 5,336 14,839 3,195 3,316 - 21,350 - (8,106) - 13,244 14,447 - - - 14,447 - (1,560) - 12,887 9,099 4,961 7,222 - 21,282 - (1,562) - 19,720 TOTAL $’000 117,532 8,801 10,894 1,215 138,442 (13,437) (18,248) (1,215) 105,542 - - (5,908) (113,426) 13,244 12,887 13,812 (7,884) 223,371 - 146,162 - 10,432 - 2,123 - 126,524 - 2,123 - (96,284) (104,168) 1,178 (102,990) 1,392,879 52,914 1,445,793 27,292 428,774 456,066 - - - 3,693 12,075 (425) 13,974 29,283 (55,061) (59,989) 9,079 (22,699) - 65,588 (62,645) (40,679) YEAR ENDED 30 JUNE 2008 revenue Revenue from external customers Net change in fair value of investments derecognised during the year Unallocated revenue PROPERTY $’000 FUNDS MANAGEMENT $’000 PROPERTY FINANCE $’000 JOINT VENTURES/ DEVELOPMENTS $’000 TOTAL $’000 81,916 9,428 - 43,859 13,169 11,045 149,989 - - - - (310) - 9,118 1,957 total consolidated revenue 91,344 43,859 13,169 10,735 161,064 Direct costs Allocated costs Unallocated expenses Segment result (14,454) (6,389) - - - (4,970) (1,420) - - - (1,421) - (14,454) (14,200) (1,957) 70,501 38,889 11,749 9,314 130,453 Net change in fair value of investments held at balance date (15,656) - - (6,985) (22,641) Segment result after fair value adjustments 54,845 38,889 11,749 2,329 107,812 Finance costs / loss on derivatives Profit before tax and minority interest Income tax benefit net profit for the year Assets and Liabilities Segment assets Unallocated assets total assets Segment liabilities Unallocated liabilities total liabilities other segment information: Depreciation and amortisation cash flow information Total - operating Total - investing Total - financing (38,420) 69,392 3,034 72,426 1,089,727 243,908 144,657 77,281 1,555,573 44,024 7,890 430 10,937 80,348 1,635,921 63,281 647,641 710,922 3,575 - - - 3,575 24,084 (284,276) 189,076 19,595 (467) - 18,166 (84,600) 131,115 14,864 76,709 (52,111) (421,454) 52,749 372,940 (a) Unallocated assets include goodwill, cash and other assets. (b) Unallocated liabilities include interest-bearing liabilities, tax liabilities and other liabilities. 46 46 47 notes to the financial statements 30 June 2009 abacus property group 6. reVenue 7. eXPenSeS (a) Finance income Interest and fee income on secured loans Provision for doubtful debts Bank interest total finance income (b) Funds Management income Asset management fees Property management fees Consulting and other income Interest on loans to funds management entities Impairment of loan as part of the restructuring of ADIFII Sale of units in Matson Hotel * total funds management income * Sale was to a fund managed by AFML (c) net change in fair value of investments: Net change in fair value of investment properties derecognised during the year# Net change in fair value of other investments derecognised during the year^ CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 22,102 (5,074) 1,215 18,243 5,885 1,039 13,293 10,848 (11,000) - 20,065 19,485 (5,000) 1,957 16,442 7,541 847 12,180 13,924 - 9,367 43,859 1,018 - 31 1,049 - - 715 - - - 715 1,784 9,428 - 9,110 (310) 4,824 total net change in fair value of investments 10,894 9,118 4,824 PARENT 2008 $’000 1,043 - 94 1,137 - - 101 - - - 101 - - - # Includes the sale of the property portfolio of Abacus Storage Solutions Trust and the shares held in Abacus Storage Solutions Limited to Abacus Storage Fund on 31 December 2008. ^ The units held in Abacus Hobart Growth Trust were sold to Abacus Diversified Income Fund II on 30 June 2009. (a) Depreciation and amortisation expense Depreciation of property, plant and equipment - hotels Depreciation of property, plant and equipment - other Amortisation of intangible assets Amortisation - leasehold improvements total depreciation and amortisation expense (b) net change in fair value of investments Net change in fair value of investment properties held at balance date * Net change in fair value of property securities held at balance date total net change in fair value of investments * Refer to notes 2(o) and 15. (c) Finance costs Interest on loans Amortisation of finance costs total finance costs (d) Administrative expenses Wages and salaries Share based payments Other administrative expenses total administrative expenses CONSOLIDATED 2009 $’000 285 493 31 1,185 1,994 2008 $’000 362 309 56 1,377 2,104 2009 $’000 PARENT 2008 $’000 - - - - - - - - - - 107,518 15,656 2,954 (367) 5,908 6,985 5,851 7,255 113,426 22,641 8,805 6,888 43,165 1,699 44,864 10,240 1,542 7,718 19,500 40,086 1,471 41,557 12,726 1,038 2,393 16,157 6,969 - 6,969 - - (683) (683) 10,942 6 10,948 - - (1,874) (1,874) 48 48 49 notes to the financial statements 30 June 2009 abacus property group 8. incoMe tAX 8. incoMe tAX (continueD) CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 (a) income tax expense The major components of income tax expense are: income Statement current income tax Current income tax charge Adjustments in respect of current income tax of previous years Deferred income tax Movement in depreciable assets tax depreciation Relating to origination and reversal of temporary differences income tax expense / (benefit) reported in the income statement 2,216 (41) 121 (3,474) (1,178) (652) (314) 99 (2,167) (3,034) 767 (23) (1,592) (503) 15 (1,625) (866) - (1,314) (3,409) (b) numerical reconciliation between aggregate tax expense recognised in the income statement and tax expense calculated per the statutory income tax rate A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: (Loss) / profit before income tax expense Prima facie income tax (benefit) / expense calculated at 30% Less prima facie income tax on loss / (profit) from AT and AIT Prima Facie income tax of entities subject to income tax Distributions from trusts Tax advantaged distributions Rebateable (franked) dividends Entertainment Share based payments Foreign exchange translation adjustments Adjustment of prior year deferred tax applied Other items (net) income tax expense / (benefit) income tax expense/(benefit) reported in the consolidated income statement (104,168) (31,250) 29,999 (1,251) - - - 11 463 (55) (43) (303) (1,178) 69,392 20,818 (22,863) (2,045) (171) (1) (2) 3 311 - (1,160) 31 (3,034) 28,116 8,435 (9,000) (565) - - - - - (55) (23) (223) (866) (9,112) (2,734) - (2,734) (171) (2) - - - - (502) - (3,409) (1,178) (3,034) (866) (3,409) The Group has income tax losses for which no deferred tax asset is recognised on the balance sheet of gross $9.6 million tax effected (2008: nil), which are available indefinitely for offset against future income gains subject to continuing to meet relevant statutory tests. (c) recognised deferred tax assets and liabilities Deferred income tax at 30 June 2009 relates to the following: Deferred tax liabilities Revaluation of investment properties to fair value Revaluation of investments to fair value Other Gross deferred income tax liabilities Set off of deferred tax assets net deferred income tax liabilities Deferred tax assets Revaluation of investment properties to fair value Revaluation of investments to fair value Provisions Losses available for offset against future taxable income Employee provisions Other Gross deferred income tax assets Set off of deferred tax assets net deferred income tax assets CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 45 1,767 661 2,473 (2,118) 355 1,165 2,236 7,984 1,008 386 668 13,447 (2,118) 11,329 7,193 (1,398) 283 6,078 (3,464) 2,614 - - 1,717 1,629 1,216 79 4,641 (3,464) 1,177 - - 198 198 (198) - 1,165 904 1,401 940 - 71 4,481 (198) 4,283 (110) (1,789) 182 (1,717) 1,717 - - - 713 1,746 - - 2,459 1,717 4,176 unrecognised temporary differences At 30 June 2009, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries, associate or joint venture, as the Group has no liability for additional taxation should unremitted earnings be remitted (2008: $nil). tax consolidation AGHL and its 100% owned Australian resident subsidiaries have formed a tax consolidated group. AGHL is the head entity of the tax consolidated group. The head entity and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the tax funding agreement is discussed further below. nature of the tax funding agreement Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement the allocation of tax within the group is based on accounting profit, which is not an acceptable method of allocation under UIG 1052. The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between the amount allocated under the tax funding agreement and the allocation under UIG 1052, the head entity accounts for these as equity transactions. 50 50 51 notes to the financial statements 30 June 2009 abacus property group 8. incoMe tAX (continueD) 10. eArninGS Per StAPLeD Security The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. 9. DiStributionS PAiD AnD ProPoSeD (a) Distributions paid during the year June 2008 quarter: 3.50 cents per stapled security (2007: 3.25 cents) September 2008 quarter: 3.50 cents per stapled security (2007: 3.25 cents) December 2008 quarter: 1.75 cents per stapled security (2007: 3.25 cents) March 2009 quarter: 1.75 cents per stapled security (2008: 3.50 cents) (b) Distributions proposed and not recognised as a liability* June 2009 quarter: 0.75 cents per stapled security (2008: nil) (c) Distributions proposed and recognised as a liability June 2008 quarter: nil (2008: 3.5 cents) CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 22,637 22,677 11,387 13,190 69,891 18,419 20,225 20,466 22,109 81,219 11,322 - - 22,637 - - - - - - - - - - - - - - Distributions were paid from Abacus Trust and Abacus Income Trust (which do not pay tax provided they distribute all their taxable income) hence, there were no franking credits attached. * The final distribution of 0.75 cents per stapled security was declared on 1 July 2009. The distribution was paid on 7 August 2009 for $11.3 million. No provision for the distribution has been recognised in the balance sheet at 30 June 2009 as the distribution had not been declared by the end of the year. Basic earnings / (loss) per stapled security (cents) Diluted earnings / (loss) per stapled security (cents) Reconciliation of earnings used in calculating earnings per stapled security Basic and diluted earnings per stapled security net profit / (loss) Basic and diluted underlying earnings per stapled security net profit / (loss) Weighted average number of stapled securities: Weighted average number of stapled securities for basic earning per share Effect of dilution: Stapled security options Weighted average number of stapled securities adjusted for the effect of dilution 2009 $’000 (11.81) (11.81) 2008 $’000 10.98 10.80 (102,412) 71,460 71,967 90,964 867,488 - 867,488 650,891 10,479 661,370 Options granted to employees (including key management personnel) are considered to be potential stapled securities and have been included in the determination of diluted earnings per stapled security to the extent they are dilutive. These options have not been included in the determination of basic earnings per stapled security. The options were cancelled when the Executive Performance Award Plan was terminated on 30 June 2009. Prior period weighted average number of securities and EPSs have been adjusted in accordance with AASB 133 “Earnings per Share” (“AASB 133”). The weighted average number of securities on issue for the current period, prior to the Equity Raisings, have also been adjusted as required by AASB 133. (c) Franking credit balance The amount of franking credits available for the subsequent financial year are: Franking account balance as at the beginning of the financial year at 30% (2008: 30%) Franking credits that will arise from the receipt of dividends recognised as receivables at reporting date Prior year tax adjustment Franking credits that will arise from the payment of income tax payable as at the end of the financial year 11,252 11,244 11,252 11,244 - (949) - 10,303 8 - 8 (949) - - 11,252 10,303 11,252 - 52 52 53 notes to the financial statements 30 June 2009 abacus property group 11. cASH AnD cASH eQuiVALentS 12. trADe AnD otHer receiVAbLeS (102,990) 72,426 28,982 (5,703) 13. ProPerty LoAnS AnD otHer FinAnciAL ASSetS reconciliation to cash Flow Statement For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June 2009: Cash at bank and in hand (i) CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 9,124 46,777 275 2,340 (i) cash at bank earns interest at floating rates. The carrying amounts of cash and cash equivalents represent fair value. (a) reconciliation of net profit after tax to net cash flows from operations Net profit / (loss) Adjustments for: Depreciation of non-current assets Amortisation of non-current assets Provision for doubtful debts Impairment of loan as part of the restructuring of ADIFII Income distribution Net change in fair value of derivatives Net change in fair value of investments Net (gain)/loss on sale of non-current assets Increase/(decrease) in payables Decrease/(increase) in receivables and other assets net cash from operating activities (b) non-cash financing and investing activities Disposal of subsidiary by providing a mortgage loan facility (note 13) Disclosure of financing facilities Refer to note 19d. 778 2,915 5,074 11,000 - 51,420 113,426 (10,894) (13,668) 8,527 65,588 671 1,433 5,000 - - (3,848) 15,806 (9,118) (10,210) 4,549 76,709 - - - - (30,000) 447 9,062 (5,063) 5,170 (3,620) 4,978 - 12 - - - 7,132 (367) - (1,661) 3,733 3,146 8,245 - - - Disclosure of non-cash financing activities Non-cash financing activities include capital raised pursuant to APG’s distribution reinvestment plan. During the year 18.2 million stapled securities were issued with a cash equivalent of $9 million. Trade debtors Related party receivables Guarantee receivable on settlement of a property Other debtors Gross receivables Less provision for doubtful debts total net trade and other receivables CONSOLIDATED 2009 $’000 9,556 5,597 - 7,124 22,277 (184) 22,093 2008 $’000 6,201 2,043 14,250 4,171 26,665 (511) 26,154 2009 $’000 742 5,504 - 643 6,889 - 6,889 CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 1,096 203 - 719 2,018 - 2,018 PARENT 2008 $’000 - 1,210 18,684 - - - - 19,894 - - - - - (a) current Secured loans - amortised cost(i) Loans to related parties - amortised cost Interim funding to related funds - amortised cost (ii) Interest receivable on secured loans - amortised cost Interest receivable on interim funding to related funds Provision for doubtful debts Investments in securities - listed (fair value) (b) non-current Secured loans - amortised cost(i) Interim funding to related funds - amortised cost (ii) Interest receivable on secured loans - amortised cost Interest receivable on interim funding to related funds Provision for impairment on loan in relation to restructuring of ADIFII Investments in securities - listed (fair value) Investments in securities - unlisted (fair value) Investments in subsidiaries - at cost Investments in joint ventures - at cost 51,221 - 51,634 9,273 845 (13,016) 6,187 106,144 166,789 155,999 5,682 4,122 (11,000) - 17,452 - - 339,044 95,203 - 52,719 16,093 1,263 (8,000) - 157,278 52,969 183,593 7,212 1,652 - 18,831 17,217 - - 281,474 - 10,851 - - - - 6,082 16,933 - 31,267 - 216 - - 13,020 81,288 19,370 145,161 14,651 - 75,712 15,074 105,437 54 54 55 (i) Mortgages are secured by real property assets. The current facilities are scheduled to mature on or before 30 June 2010 and the non-current facilities will mature between 1 July 2010 and 30 June 2018. Weighted average interest rate was 10.05% pa as at 30 June 2009 (2008: 12.4%). (ii) Interim funding is provided to other entities outside the Group managed by the responsible entity AFML to enable acquisition of properties ahead of receipt of funds from investors. The loans are unsecured and the rates of interest equal the rate of the respective fund’s distribution. These loans rank equally with other unsecured liabilities and unitholders in the event of winding up. notes to the financial statements 30 June 2009 abacus property group 14. non-current ASSetS – ProPerty, PLAnt AnD eQuiPMent 15. inVeStMent ProPertieS Land and buildings At 1 July, net of accumulated depreciation Additions Disposals Revaluations Effect of movements in foreign exchange Depreciation charge for the year At 30 June, net of accumulated depreciation Fair value Accumulated depreciation net carrying amount at end of period Plant and equipment At 1 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 total net carrying amount of Property, Plant & equipment Property Hotel properties - Pubs (1) Budget lodge / hostel accommodation Other CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 30,302 60 - 1,048 179 (331) 31,258 31,258 - 31,258 1,537 150 (193) (476) 1,018 1,591 (573) 1,018 32,276 28,678 21,021 (18,947) - - (450) 30,302 30,483 (181) 30,302 1,876 1,530 (1,707) (161) 1,537 1,628 (91) 1,537 31,840 CONSOLIDATED VALUE 2009 $’000 2008 $’000 6,965 21,694 3,617 32,276 6,905 20,979 3,956 31,840 (1.) Value of licenses are accounted for separately as intangibles (see note 17) Property, plant and equipment pledged as security for liabilities The Group has nil freehold land and buildings subject to a first charge from the Group’s bank loans (2008: $23.6m) as disclosed in note 19. current Commercial Industrial Other total current non - current Retail Commercial Industrial Storage Other Total non-current Total investment properties CONSOLIDATED 2009 $’000 26,391 13,640 4,258 44,289 2008 $’000 3,849 - - 3,849 CONSOLIDATED 2009 $’000 2008 $’000 266,843 283,450 131,233 3,807 23,217 708,550 752,839 279,090 350,444 163,085 94,559 41,413 928,591 932,440 2009 $’000 PARENT 2008 $’000 - - - - 2009 $’000 - - - - 5,550 5,550 5,550 - - - - PARENT 2008 $’000 - - - - 6,927 6,927 6,927 reconciliation A reconciliation of the carrying amount of investment properties at the beginning and end of the year is as follows: Carrying amount at beginning of the financial period Additions and capital expenditure Acquisition through business combinations Fair value adjustments for properties held at balance date Disposals Effect of movements in foreign exchange carrying amount at end of the financial year CONSOLIDATED 2009 $’000 932,440 49,462 - (107,517) (121,764) 218 752,839 2008 $’000 673,210 293,432 54,846 (15,806) (73,242) - 932,440 Investment properties are carried at the directors’ determination of fair value and are based on independent valuations. 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, latest independent update or directors’ valuation. 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 each investment property is conducted annually either in December or June of each year. The key underlying assumptions, on a portfolio basis, contained within the independent and director valuations above are as follows: 56 56 57 notes to the financial statements 30 June 2009 abacus property group 15. inVeStMent ProPertieS (continueD) • A weighted average capitalisation rate for the portfolio 8.53% (2008: 7.75%) which for each category is as follows; - Retail - 7.97% (2008: 7.32%) - Commercial – 8.62% (2008: 7.62%) - Industrial – 9.02% (2008: 7.64%) - Other – 7.98% (2008: 6.51%) • The current occupancy rate for the portfolio is 90% which is not expected to materially change during the period relevant to the valuations (based on a conservative 50% tenant retention rate): • A weighted average rent review for the 12 months to 30 June 2010 of 3.6% (excludes market reviews and assumes CPI reviews of 3%). The independent and director valuations are based on common valuation methodologies including capitalisation and discounted cash flow approaches, which have regard to recent market sales evidence. Accordingly, the directors’ valuations at 30 June 2009 have regards to market sales evidence in adopting a market valuation for each property including the key assumptions outlined. Some of the investment properties are used as security for secured bank debt. The current investment properties represent five industrial and commercial properties which are either subject to a sales contract or an active sales campaign. All properties are expected to be sold by 30 June 2010. 16. non-current ASSetS - inVeStMentS AccounteD For uSinG tHe eQuity MetHoD Investment in associates Investment in joint ventures (a) Details of Associates and Joint Ventures (i) Associates Stanright Limited (1) Abacus Storage Fund (2) Abacus Miller Street Trust (3) Abacus Wodonga Land Fund (2) (ii) Joint Ventures Abacus Rosebury Property Trust Willoughby Development Trust The Tulip Unit Trust Pakenham Valley Unit Trust The Main Street Pakenham Trust The Bay Street Brighton Unit Trust The Abacus Colemans Road Trust Fordtrans Pty Ltd Abacus Aspley Village Trust The Mount Druitt Unit Trust Jigsaw Trust Hampton Residential Retirement Trust Note 16a (i) 16a (ii) 2009 $’000 22,039 103,782 125,821 CONSOLIDATED 2008 $’000 7,638 96,455 104,093 2009 2008 % 40 15 30 15 % 40 - 30 - ownership interest 2008 % 50 50 50 50 50 50 50 50 33 50 - - 2009 % 50 50 50 50 50 50 50 50 33 50 50 50 CONSOLIDATED 2009 $’000 5,108 14,584 1,622 725 22,039 CONSOLIDATED 2008 $’000 1,577 - 6,061 - 7,638 2009 $’000 200 200 1,903 5,360 - 3,173 1,483 59,041 19,332 934 7,263 4,893 103,782 carrying value 2008 $’000 200 770 1,902 6,684 2,145 3,170 2,850 56,799 21,033 902 96,455 - - (1) A subsidiary of Abacus Group Holdings Limited, the London Trust, has a 40% interest in Stanright Limited, a UK company which holds a 50% interest in Grant Thornton House in the UK. (2) The subsidiaries of Abacus Group Holdings Limited act as the Responsible Entities of these Funds. (3) Abacus Trust has a 30% interest in the Abacus Miller Street Holdings Trust which owns 50 Miller Street in North Sydney. (4) Abacus Funds Management Limited acts as the Responsible Entity of Abacus Hospitality Fund and Abacus Diversified Income Fund II. Accordingly these funds are considered to be associates of the Group. (5) The joint venture entities acquire and develop commercial and residential properties intended for resale. (6) There were no impairment losses or contingent liabilities relating to the investment in the associates and joint ventures. 58 58 59 notes to the financial statements 30 June 2009 abacus property group 16. non-current ASSetS - inVeStMentS AccounteD For uSinG tHe eQuity MetHoD (continueD) 17. intAnGibLe ASSetS AnD GooDWiLL (b) Share of associates and joint ventures’ net profits Abacus Aspley Village Trust Abacus Miller Street Trust (3) Abacus Rosebury Property Trust Abacus Storage Fund (2) Abacus Wodonga Land Fund Fordtrans Pty Ltd Hampton Residential Retirement Trust Jigsaw Trust Other Pakenham Valley Unit Trust Stanright Limited (1) The Abacus Colemans Road Trust The Bay Street Brighton Unit Trust The Main Street Pakenham Trust The Mount Druitt Unit Trust The Tulip Unit Trust (c) extract from associates and joint ventures’ balance sheets Current assets Non-current assets Current liabilities Non-current liabilities net assets Share of net assets 2009 $’000 645 (4,062) - 435 (765) 4,707 (109) 155 (22) 4,168 3,455 45 134 (126) 32 109 8,801 CONSOLIDATED 2008 $’000 - - - - - 7,165 - - 572 1,869 - 3,434 - (92) - - 12,948 2009 $’000 42,065 829,662 871,727 (124,490) (394,064) (518,554) 353,173 125,821 CONSOLIDATED 2008 $’000 7,548 303,002 310,550 (14,304) (100,012) (114,316) 196,234 104,093 Goodwill Balance at 1 July Acquisition through business combinations Disposal balance at 30 June Management rights, licences and entitlements At 1 July, net of accumulated amortisation Acquisition Disposal of management rights and licences Amortisation charge for the year At 30 June, net of accumulated amortisation total goodwill and intangibles CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 35,090 67 (2,696) 32,461 6,049 - (285) - 5,764 38,225 32,394 2,696 - 35,090 8,583 285 (2,764) (55) 6,049 41,139 32,394 - - 32,394 - - - - - 32,394 PARENT 2008 $’000 32,394 - - 32,394 - - - - - 32,394 Description of the Group’s intangible assets and goodwill Goodwill After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication of impairment. Management rights, licences and entitlements Management rights, licences and entitlements represent intangible assets acquired through the acquisition of certain hotel assets. Licences and entitlements essentially relate to gaming and liquor licence rights attaching to the hotel assets. These intangible assets have been determined to have indefinite useful lives and the cost model is utilised for their measurement. These licences and entitlements have been granted for an indefinite period by the relevant government department. This supports the Group’s assertion that these assets have an indefinite useful life. As these management rights, licences and entitlements are an integral part of owning a hotel asset, they are subjected to impairment testing on an annual basis or whenever there is an indication of impairment as part of the annual property valuation and review process of the hotels as a going concern. impairment tests for goodwill and intangibles with indefinite useful lives (i) Description of the cash generating units and the other relevant information Goodwill acquired through business combinations and management rights, licences and entitlements have been allocated to two individual cash generating units, each of which is a reportable segment, for impairment testing as follows: • Funds Management - property / asset management business • Property - or specifically the hotel assets 60 60 61 notes to the financial statements 30 June 2009 abacus property group 17. intAnGibLe ASSetS AnD GooDWiLL (continueD) Funds Management The recoverable amount of the Funds Management unit has been determined based on a value in use calculation using cash flow projections as at 30 June covering a five-year period. A post tax discount rate of 10.59% (2008: 9.14%) and a terminal growth rate of 3% (2008: 3%) has been applied to the cash flow projections. The increase in goodwill relates to the acquisition of the Abacus Jigsaw Trust during the year. Property The recoverable amount of the indefinite life intangible assets have been determined based on the independent and directors’ valuations of the hotels on a going concern basis. Common valuation methodologies including capitalisation and discounted cash flow approaches are used, with assumptions reference to recent market sales evidence. Accordingly, the directors’ valuations at 30 June 2009 have regards to market sales evidence in adopting a market valuation for each property including the key assumptions outlined. (i) Carrying amounts of goodwill, management rights, licences and entitlements allocated to each of the cash generating units The carrying amounts of goodwill, management rights, licences and entitlements are allocated to Funds Management and Property as follows: Goodwill Management rights, licences and entitlements FUNDS MANAGEMENT PROPERTY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 TOTAL 2008 $’000 PARENT 2008 $’000 2009 $’000 32,461 32,394 - 2,696 32,461 35,090 32,394 32,394 - - 5,764 6,049 5,764 6,049 - - (iii) Key assumptions used in valuation calculations Funds Management Goodwill The calculation of value in use is most sensitive to the following assumptions: a. Fee income b. Discount rates c. Property values of the funds/properties under management Fee income – fee income is based on actual income in the year preceding the start of the budget period and actual funds under management. Discount rates – discount rates reflect management’s estimate of the time value of money and the risks specific to each unit that are not reflected in the cash flows. Property values – property values are based on the fair value of properties which are valued annually by independent valuers. 17. intAnGibLe ASSetS AnD GooDWiLL (continueD) (iii) Key assumptions used in valuation calculations (continued) Hotel intangible Assets The calculation of the hotel valuations is most sensitive to the following assumptions: a. Hotel income b. Discount rates and capitalisation rates with reference to market sales evidence c. Other value adding or potential attributes of the hotel asset Hotel income – hotel income is based on actual income in the year preceding the start of the budget period, adjusted based on industry norms for valuation purposes. Discount rates and capitalisation rates – these rates reflect management’s estimate of the time value of money and the risks specific to each unit that are not reflected in the cash flows, with reference to recent market sales evidence. Other value adding or potential attributes – unique features of individual hotel assets that will add or have the potential to add value to the property in determining the total fair value of the hotel. (iv) Sensitivity to changes in assumptions Significant and prolonged property value falls and market influences which could increase discount rates could cause goodwill to be impaired in the future. 62 62 63 notes to the financial statements 30 June 2009 abacus property group 18. trADe AnD otHer PAyAbLeS 19. intereSt beArinG LoAnS AnD borroWinGS (a) current Trade creditors Other creditors Rental guarantee Goods and services tax Accrued expenses Distributions on stapled securities Related party payables - Subsidiaries and other group entities - Other related parties (b) non-current Capital guarantee Rental guarantee 626 3,279 2,314 1,893 5,160 13,272 - - - 13,272 3,000 6,677 9,677 CONSOLIDATED 2009 $’000 2008 $’000 2,891 15,775 14,250 1,461 10,709 45,086 22,658 2009 $’000 205 52 - (27) 236 466 - PARENT 2008 $’000 79 238 - (8) 159 468 - - 229 67,973 133,559 - 134,025 78,429 - 78,897 - - - 3,000 - 3,000 - - - Since the last annual reporting date, the following guarantees in respect of the Abacus Diversified Income Fund II (“ADIFII”) have commenced: a) Cash Distribution Yield Guarantee whereby the Group has agreed to underwrite the cash distribution yield of 8.5% from 1 July 2008 to 30 June 2011. This will be achieved by Abacus Finance Pty Ltd deferring the interest on the Working Capital Facility or by the Group deferring any of the fees payable to it under the constitution of ADIFII (or a combination of these things) or in any other way the Group considers appropriate. Any interest or fee deferral or other funding support may be recovered if the actual cash distribution exceeds the cash required to meet the underwritten distribution over the Guarantee Period, or after the Guarantee Period or at the expiry of the Working Capital Facility. b) Capital Return Guarantee whereby the Group will offer to acquire units in ADIFII at $1.00 per unit. This guarantee will apply to all ADIFII units on issue as at 1 July 2013. If at that time the net asset value per unit (as determined by the Group) is less than $1.00 per unit, the Group will make an offer to acquire each ADIFII unit for $1.00, payable at the Group’s discretion in cash or by way of the issue of stapled securities in the Group to an equivalent value based on the 10 day volume weighted average price of the Group’s stapled securities over the period ending on 30 June 2013. This offer will be made by 30 September 2013. At the end of the year the fair value of the guarantee was $3 million. (a) current Bank loans - A$ * Loan from related parties Less: Unamortised borrowing costs (b) non-current Bank loans - A$ Bank loans - NZ$ Loan from related parties Loan from Abacus Trust Less: Unamortised borrowing costs (c) Maturity profile of current and non-current interest bearing loans Due within one year Due between one and five years Due after five years CONSOLIDATED 2009 $’000 2008 $’000 62,000 510 (681) 61,829 330,219 - - - (664) 329,555 62,510 324,234 5,985 392,729 52,923 10,937 (156) 63,704 505,313 20,462 57,260 - (2,161) 580,874 63,860 562,573 20,462 646,895 2009 $’000 601 - - 601 2,637 - - - - 2,637 601 2,637 - 3,238 PARENT 2008 $’000 - 3,937 - 3,937 4,697 - 4,854 52,195 - 61,746 3,937 61,746 - 65,683 The Group maintains a range of interest-bearing loans and borrowings. The sources of funding are spread over a number of counterparties and the terms of the instruments are negotiated to achieve a balance between capital availability and cost of debt. Bank loans – A$ are provided by several banks at interest rates that include both fixed and floating arrangements. The loans are denominated in Australian dollars and the term to maturity varies from May 2010 to November 2017. The effective fixed interest rate of borrowings which are covered by fixed rate swaps was 8.06% at year end (2008 7.41%), while interest on floating rate borrowings are paid quarterly based on existing swap and yield rates quoted on the rate reset date. The bank loans are secured by a charge over the investment properties and certain property, plant and equipment as detailed in note 14 and note 15. Approximately 76.3% (2008: 75.4%) of available bank debt facilities were subject to fixed rate arrangements with a weighted average term to maturity of 4.69 years (2008: 5.07 years). APG’s effective interest rate as at 30 June 2009 was 7.31% (2008: 7.69%). *Under the Group’s Working Capital Facility the contractual maturity date of this facility is May 2010. The Group has received from its Bank an offer to extend the facility’s maturity out to February 2011 (the same date as the core facility). 64 64 65 notes to the financial statements 30 June 2009 abacus property group 19. intereSt beArinG LoAnS AnD borroWinGS (continueD) (d) Financing facilities available At reporting date, the following financing facilities had been negotiated and were available: Total facilities - bank loans Facilities used at reporting date - bank loans Facilities unused at reporting date - bank loans These facilities comprise fixed and floating rate secured facilities. CONSOLIDATED 2009 $’000 2008 $’000 612,442 (392,219) 220,223 741,064 (578,698) 162,366 2009 $’000 5,335 (3,238) 2,097 PARENT 2008 $’000 4,697 (4,697) - The Group has entered into a club facility which is a secured, limited recourse debt agreement with ANZ (as lead arranger), CBA and St George Bank. Under the agreement certain properties owned by AT, AIT, AGPL and AGHL form a common security pool, which is collateral for this loan facility. 20. FinAnciAL inStruMentS (i) credit risk credit risk exposures The Group’s maximum exposure to credit risk at the reporting date was: Receivables Secured property loans Interim funding to related funds Cash and cash equivalents Derivatives CARRYING AMOUNT CONSOLIDATED 2009 $’000 22,093 219,949 201,600 9,124 - 452,766 2008 $’000 26,154 163,477 239,227 46,777 11,272 486,907 2009 $’000 6,889 - 42,334 275 - 49,498 PARENT 2008 $’000 2,018 1,210 18,684 2,340 134 24,386 20. FinAnciAL inStruMentS (continueD) (i) credit risk (continued) Secured property loans and receivables The following table illustrates grouping of the Group’s investment in secured loans. As noted in disclosure note 3, the Group mitigates the exposure to this risk by evaluation of the credit submission before acceptance, ensuring security is obtained and consistent and timely monitoring of the financial instrument to identify any potential adverse changes in the credit quality: 30-JUN-09 Consolidated less: provisioning total consolidated Parent less: provisioning total Parent TOTAL $’000 467,658 (24,016) 443,642 49,223 - 49,223 ORIGINAL TERM (1) EXTENDED TERM PAST DUE TERM (2) IMPAIRED (3) $’000 $’000 $’000 $’000 422,905 (12,200) 410,705 49,223 - 49,223 - - - - - 28,806 (441) 28,365 - - - 15,947 (11,375) 4,572 - - - (1.) Terms are extended typically in recognition of traditional project delays (e.g. weather, development approvals). (2.) For loans with past due terms all are less than two years old. (3.) In considering the impairment of loans, the Group will undertake a market analysis of the secured property development which is used to service the loan and identify if a deficiency of security exists and the extent of that deficiency, if any. If there is an indicator of impairment, fair value calculations of expected future cashflows are determined and if there are any differences to the carrying value of the loan, an impairment is recognised. 30-Jun-08 Consolidated less: provisioning total consolidated Parent less: provisioning total Parent TOTAL $’000 436,369 (8,511) 427,858 21,912 - 21,912 ORIGINAL TERM $’000 333,815 - 333,815 21,912 - 21,912 EXTENDED TERM $’000 PAST DUE TERM (1) $’000 1,936 - 1,936 - - - 92,021 - 92,021 - - - IMPAIRED $’000 8,597 (8,511) 86 - - - As at 30 June 2009, the Group had the following concentrations of credit risk: (1.) For loans with past due terms $84.3 million are less than two years old, $6.3 million are two to three years and $1.5 million are three years old.  Secured property loans: 69% of secured property loans is represented by 5 borrowers (2008: 63% of secured property loans was represented by 4 borrowers); and  Interim Funding to Related Funds: represented by the Abacus Diversified Income Fund II $82.7 million, and the Abacus Hospitality Fund $70.6 million (2008: Abacus Diversified Income Fund II $105.6 million, Abacus Hospitality Fund $97.6 million). 66 66 67 notes to the financial statements 30 June 2009 abacus property group 20. FinAnciAL inStruMentS (continueD) (i) credit risk (continued) Investment in secured property loans are interest bearing on average 2.5 year terms. A provision for impairment loss is typically recognised when there is objective evidence that the loan has not been repaid by the due date and management has determined that the full amount of the loan may not be recoverable. An impairment loss of $5.1 million for secured property loans and an $11.0 million impairment of the ADIFII loan as part of the restructuring (2008: $5.5 million) has been recognised by the Group in the current year. The movement in the allowance for impairment in respect of secured property loans and receivables during the year was as follows: Balance at 1 July 2008 Impairment loss recognised (secured property loans) Impairment loss recognised (ADIFII) Impairment loss utilised / written back balance at 30 June 2009 CONSOLIDATED 2009 $’000 8,511 5,099 11,000 (594) 24,016 2008 $’000 3,011 5,500 - - 8,511 2009 $’000 PARENT 2008 $’000 - - - - - - - - - - 20. FinAnciAL inStruMentS (continueD) (ii) Liquidity risk (continued) CONSOLIDATED 30-JUN-08 Liabilities Trade and other payables Interest bearing loans and borrowings total liabilities PARENT 30-JUN-08 Liabilities Trade and other payables Interest bearing loans and borrowings total liabilities CARRYING AMOUNT CONTRACTUAL CASH FLOWS 1 YEAR OR LESS $’000 $’000 $’000 67,973 646,895 714,868 67,973 937,214 1,005,187 67,973 72,442 140,415 CARRYING AMOUNT CONTRACTUAL CASH FLOWS 1 YEAR OR LESS $’000 $’000 $’000 OVER 1 YEAR TO 5 YEARS $’000 - 857,254 857,254 OVER 1 YEAR TO 5 YEARS $’000 78,897 65,683 144,580 78,897 86,828 165,725 78,897 4,252 83,149 - 82,576 82,576 OVER 5 YEARS $’000 - 7,518 7,518 OVER 5 YEARS $’000 - - - (ii) Liquidity risk The table below shows an analysis of the contractual maturities of key liabilities which forms part of the Group’s assessment of liquidity risk. (iii) currency risk The Group considers its exposure to foreign currency risk as insignificant. CONSOLIDATED 30-JUN-09 Liabilities Trade and other payables Interest bearing loans and borrowings incl derivatives# total liabilities PARENT 30-JUN-09 Liabilities Trade and other payables Interest bearing loans and borrowings incl derivatives^ CARRYING AMOUNT $’000 CONTRACTUAL CASH FLOWS $’000 1 YEAR OR LESS $’000 OVER 1 YEAR TO 5 YEARS $’000 OVER 5 YEARS $’000 22,948 22,948 13,272 9,676 - 429,764 587,366 175,126 402,240 10,510 452,712 610,314 188,398 411,916 10,510 CARRYING AMOUNT CONTRACTUAL CASH FLOWS 1 YEAR OR LESS OVER 1 YEAR TO 5 YEARS $’000 $’000 $’000 $’000 OVER 5 YEARS $’000 137,025 137,025 134,025 3,551 5,697 1,694 3,000 4,004 - - - total liabilities 140,576 142,722 135,719 7,004 # Includes derivative of a principal value of $294.4 million. ^ Includes derivative of a principal value of $2.86 million. 68 68 69 notes to the financial statements 30 June 2009 abacus property group 20. FinAnciAL inStruMentS (continueD) (iv) interest rate risk The Group’s exposure to interest rate risk and the effective weighted average interest rates for each class of financial asset and financial liability are: CONSOLIDATED 30-JUN-09 Financial Assets Cash and cash equivalents Receivables Secured and related party loans total financial assets Weighted average interest rate Financial liabilities Interest bearing liabilities - bank Related party loans Derivatives Payables total financial liabilities Weighted average interest rate PARENT 30-JUN-09 Financial Assets Cash and cash equivalents Receivables Secured and related party loans total financial assets Weighted average interest rate Financial liabilities Interest bearing liabilities - bank Derivatives Payables total financial liabilities Weighted average interest rate FLOATING INTEREST RATE $’000 FIXED INTEREST MATURING IN 1 YEAR OR LESS $’000 FIXED INTEREST MATURING IN 1 TO 5 YEARS $’000 FIXED INTEREST MATURING IN OVER 5 YEARS $’000 NON INTEREST BEARING TOTAL $’000 $’000 9,124 - - 9,124 2.93% 110,430 - - - 110,430 4.71% - - 78,026 78,026 10.75% 49,104 - - - 49,104 8.15% - - 199,344 199,344 10.84% 232,686 - - - 232,686 8.11% - - 131,476 131,476 8.44% - 22,093 12,703 34,796 9,124 22,093 421,549 452,766 - - - - - - 510 37,035 22,948 60,493 392,220 510 37,035 22,948 452,713 FLOATING INTEREST RATE FIXED INTEREST MATURING IN 1 YEAR OR LESS FIXED INTEREST MATURING IN 1 TO 5 YEARS FIXED INTEREST MATURING IN OVER 5 YEARS NON INTEREST BEARING TOTAL $’000 $’000 $’000 $’000 $’000 $’000 275 - 27,643 27,918 3.21% 673 - - 673 4.99% - - - - 476 - - 476 8.15% - - 10,851 10,851 15.00% 2,089 - - 2,089 8.15% - - - - - - - - - 6,889 3,840 10,729 275 6,889 42,334 49,498 - 313 137,025 137,338 3,238 313 137,025 140,576 20. FinAnciAL inStruMentS (continueD) (iv) interest rate risk (continued) CONSOLIDATED 30-JUN-08 Financial Assets Cash and cash equivalents Receivables Secured and related party loans Derivatives total financial assets weighted average interest rate Financial liabilities Interest bearing liabilities - bank Related party loans Payables total financial liabilities Weighted average interest rate PARENT 30-JUN-08 Financial Assets Cash and cash equivalents Receivables Secured and related party loans Derivatives total financial assets Weighted average interest rate Financial liabilities Interest bearing liabilities - bank Related party loans Payables total financial liabilities Weighted average interest rate FLOATING INTEREST RATE $’000 FIXED INTEREST MATURING IN 1 YEAR OR LESS $’000 FIXED INTEREST MATURING IN 1 TO 5 YEARS $’000 FIXED INTEREST MATURING IN OVER 5 YEARS $’000 NON INTEREST BEARING TOTAL $’000 $’000 46,777 - - - 46,777 7.34% 141,533 42,250 - 183,783 8.93% - - 145,876 - 145,876 12.88% 5,000 10,937 - 15,937 7.60% - - 211,833 - 211,833 9.00% 409,386 15,010 - 424,396 7.57% - - 33,593 - 33,593 7.90% 20,462 - - 20,462 8.17% - 26,154 11,402 11,272 48,828 46,777 26,154 402,704 11,272 486,907 - - 67,973 67,973 576,381 68,197 67,973 712,551 FLOATING INTEREST RATE $’000 FIXED INTEREST MATURING IN 1 YEAR OR LESS $’000 FIXED INTEREST MATURING IN 1 TO 5 YEARS $’000 FIXED INTEREST MATURING IN OVER 5 YEARS $’000 NON INTEREST BEARING TOTAL $’000 $’000 2,340 - - - 2,340 7.34% - - - - - - 16,053 - 16,053 6.89% - 3,937 - 3,937 10.00% - - - - - 4,697 57,049 - 61,746 13.49% - - - - - - - - - - 2,018 3,841 134 5,993 2,340 2,018 19,894 134 24,386 - - 78,897 78,897 4,697 60,986 78,897 144,580 70 70 71 notes to the financial statements 30 June 2009 abacus property group 20. FinAnciAL inStruMentS (continueD) (iv) interest rate risk (continued) Summarised interest rate sensitivity analysis The table below illustrates the potential impact a change in interest rate by +/- 1% would have had on the Group’s profit and equity: CONSOLIDATED 30-Jun-09 Financial assets Financial liabilities PARENT 30-Jun-09 Financial assets Financial liabilities CONSOLIDATED 30-JUN-08 Financial assets Financial liabilities PARENT 30-JUN-08 Financial assets CARRYING AMOUNT FLOATING $’000 9,124 147,465 CARRYING AMOUNT PROFIT $’000 (91) 1,475 FLOATING PROFIT $’000 27,918 986 $’000 (279) 10 CARRYING AMOUNT FLOATING $’000 46,777 183,783 CARRYING AMOUNT PROFIT $’000 (468) 1,838 AUD -1% EQUITY $’000 - - AUD -1% EQUITY $’000 - - AUD -1% EQUITY $’000 - - AUD -1% PROFIT $’000 91 (1,475) PROFIT $’000 279 (10) PROFIT $’000 468 (1,838) +1% EQUITY $’000 - - +1% EQUITY $’000 - - +1% EQUITY $’000 - - +1% FLOATING PROFIT EQUITY PROFIT EQUITY $’000 2,340 $’000 (23) $’000 - $’000 23 $’000 - The analysis for the interest rate sensitivity of financial liabilities includes derivatives. 20. FinAnciAL inStruMentS (continueD) (iv) interest rate risk (continued) CONSOLIDATED 30-JUN-08 Financial assets Financial liabilities PARENT 30-JUN-08 Financial assets CARRYING AMOUNT FLOATING $’000 619 20,462 CARRYING AMOUNT PROFIT $’000 (6) 205 NZD -1% EQUITY $’000 - - NZD -1% PROFIT $’000 6 (205) +1% EQUITY $’000 - - +1% FLOATING PROFIT EQUITY PROFIT EQUITY $’000 619 $’000 (6) $’000 - $’000 6 $’000 - (v) Price risk The Group is exposed to equity securities risk. Equity securities price risk arises from investments in listed and unlisted securities. The key risk variable is the quoted price of the securities, which is influenced by a range of factors, most of which are outside the control of the Group. As a result, the Group does not use financial instruments to manage the price risk exposure on property securities but instead regularly monitors levels of exposure and conducts sensitivity analysis for fluctuations in the quoted securities prices. A fluctuation of 15% in the price of the equity securities would impact the net profit after income tax expense of the Group, with all other variables held constant, by an increase/(decrease) of $3.7 million (2008: $2.6 million). 72 72 73 notes to the financial statements 30 June 2009 abacus property group 20. FinAnciAL inStruMentS (continueD) 21. contributeD eQuity (vi) Fair values As at 30 June 2009, the carrying amounts and fair values of financial assets and financial liabilities are: CONSOLIDATED Financial assets Cash and cash equivalents Loans and Receivables (current) Loans and Receivables (non-current) Derivatives Investment in securities - listed Investment in securities - unlisted total financial assets Financial Liabilities Trade and other payables Interest bearing loans and borrowings Derivatives total financial liabilities net financial assets / (liabilities) PARENT Financial assets Cash and cash equivalents Loans and Receivables (current) Loans and Receivables (non-current) Derivatives Investment in securities - listed total financial assets Financial Liabilities Trade and other payables Interest bearing loans and borrowings Derivatives total financial liabilities net financial assets / (liabilities) CARRYING AMOUNT 2009 $’000 9,124 122,050 321,592 - 6,187 17,452 476,405 22,948 391,384 37,035 451,367 25,038 CARRYING AMOUNT 2009 $’000 275 10,851 31,483 - 6,082 48,691 137,025 3,238 313 140,576 (91,885) FAIR CARRYING VALUE AMOUNT 2009 $’000 2008 $’000 FAIR VALUE 2008 $’000 46,777 182,433 245,426 11,272 18,831 17,217 521,956 46,777 182,433 245,426 11,272 18,831 17,217 521,956 67,973 646,895 - 714,868 (192,912) 67,973 646,895 - 714,868 (192,912) 9,124 122,050 321,592 - 6,187 17,452 476,405 22,948 391,384 37,035 451,367 25,038 (a) issued stapled securities Stapled securities - securities financed by APG under the ESLP total contributed equity (b) Movement in stapled securities on issue At 1 July 2008 - treasury units - equity raising - distribution reinvestment plan - less transaction costs Securities on issue at 30 June 2009 22. cAPitAL MAnAGeMent CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 1,009,577 (22,080) 987,497 793,999 (22,497) 771,502 47,064 - 47,064 CONSOLIDATED PARENT 2008 $’000 33,116 - 33,116 PARENT STAPLED SECURITIES STAPLED SECURITIES NUMBER ‘000 VALUE $’000 NUMBER ‘000 VALUE $’000 645,604 - 845,858 18,160 - 1,509,622 771,502 417 211,463 8,996 (4,881) 987,497 645,604 - 845,858 18,160 - 1,509,622 33,116 25 13,509 414 - 47,064 FAIR CARRYING VALUE AMOUNT 2009 $’000 2008 $’000 10,851 31,483 - 6,082 48,691 2,340 21,912 - 134 14,651 39,037 FAIR VALUE 2008 $’000 2,340 21,912 - 134 14,651 39,037 137,025 3,238 313 140,576 (91,885) 78,897 65,683 - 144,580 (105,543) 78,897 65,683 - 144,580 (105,543) The Group seeks to manage its capital requirements through a mix of debt and equity funding. It also ensures that Group entities comply with capital and distribution requirements of their constitutions and/or trust deeds, the capital requirements of relevant regulatory authorities and continue to operate as going concerns. The Group also protects its equity in assets by taking out insurance. The Group assesses the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its broader strategic plan. In addition to tracking actual against budgeted performance, the Group continuously reviews its capital structure to ensure sufficient funds and financing facilities, on a cost effective basis are available to implement the Group’s strategy that adequate financing facilities are maintained and distributions to members are made within the stated distribution guidance (i.e. paid out of normalised profits). The Group actively manages its capital via the following strategies: issuing new stapled securities, activating its distribution reinvestment plan (presently active at 2.5% discount to VWAP but not underwritten), electing to have the dividend reinvestment plan underwritten, adjusting the amount of distributions paid to members, activating a security buyback program, divesting assets, active management of the Group’s fixed rate swaps, directly purchasing assets in managed funds or (where practical) recalibrating the timing of transactions and capital expenditure so as to avoid a concentration of net cash outflows. 74 74 75 notes to the financial statements 30 June 2009 abacus property group 22. cAPitAL MAnAGeMent (continueD) A summary of the Group’s key banking covenants are set out below: COVENANT MEASURE KEY DETAILS NATURE OF FACILITIES Secured, non recourse 1 The Group has no unsecured facilities ICR LVR 2 GROUP ICR 3,4 TOTAL GEARING 3,4 GEARING RATIO ON A LOOK THROUGH BASIS 4 1.5 Net rental income / Interest expense (including fixed rate swaps) 55% to 67.5% Drawn Loan / Bank accepted valuations 2.0 45% 60% Group EBITDA (excluding fair value P&L) / Total Interest Expense (including fixed rate swaps) (Total Liabilities + Guarantees) / Total Tangible Assets Total gearing plus gearing from proportional consolidation of equity accounted investments 1 - There are no market cap covenants 2 - LVR stepped down from 70.0% to 67.5% under the terms of the Working Capital Facility 3 - Condition of the $550m CLUB facility 4 - Condition of the $150m Working Capital Facility component of the $550m CLUB facility 23. DiSPoSAL oF SubSiDiAry On 29 December 2008,the Group disposed of 100% of the voting shares of Abacus Storage Solutions Pty Ltd (ASSPL) for a total consideration of $26.6 million. ASSL was a company based in Australia that operated self- storage facilities in Townsville and Brisbane as well as a single self-storage facility in Hamilton, New Zealand. Total cash inflow on disposal of subsidiary is as follows: Net cash transferred on disposal Cash consideration received Net consolidated cash inflow 2009 $’000 (1,186) 26,610 25,424 76 76 77 notes to the financial statements 30 June 2009 abacus property group 24. reLAteD PArty DiScoSureS (a) Subsidiaries The consolidated financial statements include the financial statements of the following entities: EQUITY INTEREST CARRYING VALUE ENTITY Abacus Group Holdings Limited and its subsidiaries Abacus AAVT Pty Ltd Abacus Airways NZ Trust Abacus Bankstown Property Trust Abacus Finance Pty Limited Abacus Funds Management Limited Abacus Hobart Growth Trust Abacus HP Trust Abacus Jigsaw Investment Pty Ltd Abacus London Trust Abacus Mortgage Fund Abacus Mount Druitt Trust Abacus Musswellbrook Pty Ltd Abacus Nominee Services Pty Limited Abacus Nominees (No 5) Pty Limited Abacus Nominees (No 7) Pty Limited Abacus Nominees (No 9) Pty Limited Abacus Note Facilities Pty Ltd Abacus Pitt Street Property Trust Abacus Property Income Fund Abacus Property Services Pty Ltd Abacus Property Pty Ltd Abacus SP Note Facility Pty Ltd Abacus Storage Funds Management Limited Abacus Unitel Pty Ltd Abacus Unitel Trust Amiga Pty Limited Childcare Trust 2 Abacus Group Projects Limited and its subsidiaries Abacus Allara Street Trust Abacus Jigsaw Holdings Pty Limited Abacus Northshore Trust 1 Abacus Northshore Trust 2 Abacus Repository Trust Abacus Sanctuary Holdings Pty Limited Abacus Ventures Trust Abacus Villages Trust Abacus Villages Limited 2009 % 2008 % 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 50 50 50 50 50 51 - - 100 100 100 100 100 79 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 50 50 51 50 50 - - - - - - - - 2009 $’000 - 4,750 - - 8,448 - - 90 - 17,500 908 - - - - - - 21,321 37,725 10 - - 929 - 11,867 - - 500 - - - - - 9,162 - - 2008 $’000 - 4,750 - - 5,868 3,173 - - - - - - - - - - - 21,321 37,725 10 - - 929 - - - - 500 - - - - - 9,162 50 50 24. reLAteD PArty DiScoSureS (continueD) (a) Subsidiaries (continued) ENTITY Abacus trust and its subsidiaries: Abacus 1769 Hume Highway Trust Abacus Alderley Trust Abacus Alexandria Trust Abacus Ashfield Mall Property Trust Abacus Campbell Property Trust Abacus Epping Park Property Trust Abacus Greenacre Trust Abacus Hurstville Trust Abacus Industrial Property Trust Abacus Lisarow Trust Abacus Liverpool Plaza Trust Abacus Macquarie Street Trust Abacus Moorabbin Trust Abacus Moore Street Trust Abacus Mortgage Fund Abacus National Boulevard Trust Abacus North Sydney Car park Trust Abacus Port Macquarie Trust Abacus Premier Parking Trust Abacus Shopping Centre Trust Abacus Smeaton Grange Trust Abacus SP Fund Abacus St Johns Road Trust Abacus Varsity Lakes Trust Abacus Virginia Trust Abacus Westpac House Trust Abacus income trust and its subsidiaries: Abacus Campbellfield Trust Abacus Chermside Trust Abacus Eagle Farm Trust Abacus Independent Retail Property Trust Abacus Lennons Plaza Trust Abacus Mertz Apartments Abacus Retail Property Trust Abacus Stafford Trust Abacus Tamworth Retail Trust Abacus Wollongong Property Trust (b) ultimate parent AGHL has been designated as the parent entity of the Group. (c) Key Management Personnel Details of key management personnel are disclosed in Note 25. EQUITY INTEREST 2008 % 2009 % CARRYING VALUE 2008 $’000 2009 $’000 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 75 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 75 100 100 100 100 100 75 14,803 19,587 1,600 57,908 15,044 29,547 13,396 14,314 8,902 8,204 34,249 3,154 31,295 1,319 - 16,091 1,463 10,077 7,010 - 5,803 - 4,316 15,021 58,365 44,419 8,816 - 5,082 25,964 32,679 6,859 - 5,097 11,951 6,160 18,537 20,980 - 57,908 15,044 29,547 13,898 18,712 8,902 10,314 34,249 5,456 38,727 2,450 17,250 21,259 - 16,009 8,873 - 10,004 - 6,341 24,055 16,115 56,832 8,816 4,794 5,082 - 32,679 6,859 - 5,097 11,951 5,995 78 78 79 notes to the financial statements 30 June 2009 abacus property group 24. reLAteD PArty DiScoSureS (continueD) (d) transactions with related parties 25. Key MAnAGeMent PerSonneL (a) compensation for Key Management Personnel transactions with related parties other than associates and joint ventures revenues Distributions received / receivable from controlled entities Asset management fees received / receivable Property management fees received / receivable Other transactions Current tax payable assumed from wholly-owned tax consolidation parties Capital tax losses assumed from wholly-owned tax consolidation parties Loan advanced from controlled entities Loan repayments to controlled entities Loan received from entities within the Group Loan repayments from entities within the Group transactions with associates and joint ventures revenues Management fees received / receivables from joint ventures Distributions received / receivable from associates Distributions received / receivable from joint ventures Interest revenue from associates Interest revenue from joint ventures other transactions Loan advanced to associates Loan advanced from associates Loan repayments from associates Loan repayments to associates Loan advanced to joint ventures Loan repayments from joint ventures Loan advanced from joint ventures Loan repayments to joint ventures Interest expense on loan from joint ventures Purchase of unlisted securities Sale of units in subsidiary Terms and conditions of transactions CONSOLIDATED 2009 $’000 - 5,218 1,044 - - - - - - 641 - 7,322 17 1,559 (498) 562 - (9,956) (14,299) 9,260 - (47,104) - (19,336) 8,245 2008 $’000 - 7,325 816 - - - - - - 216 366 6,984 461 263 (1,173) - - - (13,131) 44,468 42,250 (534) 679 - - 2009 $’000 PARENT 2008 $’000 30,000 - - (7,203) 6,639 122,699 (66,400) 68,574 (120,769) - - - - 949 - - - (13,949) 372 - (4,854) - - - - - - (6,040) 6,991 151,090 (140,017) 118,612 (120,912) - - - - 263 - - - - (2,938) 7,725 - (534) 679 - - Sales and fees to and purchases and fees charged from related parties are made in arm’s length transactions both at normal market prices and on normal commercial terms. Outstanding balances at year-end are unsecured and settlement occurs in cash. No provision for doubtful debts has been recognised or bad debts incurred with respect to amounts payable or receivable from related parties during the year. An impairment of $11 million was recognised by the Group during the year as part of the restructuring of ADIFII. Guarantees provided to Joint Venture project related parties are disclosed in Note 26. (e) Director-related entity transactions A director, Mr Dennis Bluth, is a partner in the legal firm HWL Ebsworth and during the year a total amount of $0.2 million (2008: $0.2 million) was paid to the firm for legal services relating to corporate issues, lease documentation and sales contracts. 80 80 Short-term employee benefits Post-employment benefits Security-based payments (b) option holdings of Key Management Personnel (consolidated) Executive Performance Award Plan (“EPAP”) CONSOLIDATED 2009 2008 2009 PARENT 2008 $ 4,208,148 592,483 1,289,742 6,090,373 $ 5,038,242 553,858 836,540 6,428,640 $ - - - - $ - - - - 30 JUNE 2009 Directors F Wolf L Lloyd executives R de Aboitiz T Hardwick J L’Estrange P Strain E Varejes total 30 JUNE 2008 Directors F Wolf L Lloyd executives R de Aboitiz T Hardwick J L’Estrange P Strain E Varejes total BALANCE AT BEGINNING OF YEAR 1-JUL-08 3,747,130 1,168,915 721,154 1,168,915 1,168,915 1,019,661 1,168,915 10,163,605 BALANCE AT BEGINNING OF YEAR 1-JUL-07 GRANTED AS REMUNE- RATION OPTIONS EXERCISED CANCELLATION ON TERMINATION OF THE PLAN BALANCE AT END OF YEAR 30-JUN-09 VESTED AND EXERCISABLE AT THE END OF THE YEAR - - - - - - - - - - - - - - - - (3,747,130) (1,168,915) (721,154) (1,168,915) (1,168,915) (1,019,661) (1,168,915) 10,163,605 - - - - - - - - - - - - - - - - GRANTED AS REMUNE- RATION OPTIONS EXERCISED NET CHANGE OTHER BALANCE AT END OF YEAR 30-JUN-08 VESTED AND EXERCISABLE AT THE END OF THE YEAR 1,343,284 447,761 2,403,846 721,154 - 447,761 447,761 298,507 447,761 3,432,835 721,154 721,154 721,154 721,154 721,154 6,730,770 - - - - - - - - - - 3,747,130 1,168,915 721,154 - 1,168,915 - 1,168,915 - 1,019,661 - - 1,168,915 - 10,163,605 - - - - - - - - 81 notes to the financial statements 30 June 2009 abacus property group 25. Key MAnAGeMent PerSonneL (continueD) (b) option holdings of Key Management Personnel (consolidated) (continued) executive Security Loan Plan (“eSLP”) 25. Key MAnAGeMent PerSonneL (continueD) (c) Security holdings of Key Management Personnel Securities held in Abacus Property Group (number) 30 JUNE 2009 Directors F Wolf L Lloyd executives R de Aboitiz J L’Estrange P Strain E Varejes total 30 JUNE 2008 Directors F Wolf L Lloyd executives R de Aboitiz J L’Estrange P Strain E Varejes total BALANCE AT BEGINNING OF YEAR 1-JUL-08 2,881,728 785,925 654,938 1,309,875 654,938 1,309,875 7,597,279 BALANCE AT BEGINNING OF YEAR 1-JUL-07 2,881,728 785,925 654,938 1,309,875 654,938 1,309,875 7,597,279 GRANTED AS REMUNE- RATION OPTIONS EXERCISED CANCELLATION ON TERMINATION OF THE PLAN BALANCE AT END OF YEAR 30-JUN-09 VESTED AND EXERCISABLE AT THE END OF THE YEAR - - - - - - - - - - - - - - (2,881,728) (785,925) (654,938) (1,309,875) (654,938) (1,309,875) (7,597,279) - - - - - - - - - - - - - - GRANTED AS REMUNE- RATION OPTIONS EXERCISED NET CHANGE OTHER BALANCE AT END OF YEAR 30-JUN-08 VESTED AND EXERCISABLE AT THE END OF THE YEAR - - - - - - - - - - - - - - - - - - - - - 2,881,728 785,925 2,881,728 785,925 654,938 1,309,875 654,938 1,309,875 7,597,279 654,938 1,309,875 654,938 1,309,875 7,597,279 30 JUNE 09 Directors J Thame F Wolf W Bartlett D Bastian D Bluth M Irving L Lloyd executives R de Aboitiz T Hardwick J L’Estrange P Strain E Varejes total 30 JUNE 08 Directors J Thame F Wolf W Bartlett D Bastian D Bluth M Irving L Lloyd executives R de Aboitiz T Hardwick J L’Estrange P Strain E Varejes total BALANCE 1 JULY 08 DISPOSED VIA ESLP NET PURCHASES BALANCE 30 JUNE 09 55,378 9,718,341 8,000 4,503,497 20,000 35,387 795,925 - (2,881,725) - - - - (785,925) 145,378 7,236,610 8,000 496,503 266,953 45,264 45,925 200,756 14,073,226 16,000 5,000,000 286,953 80,651 55,925 695,535 1,710,526 1,309,875 654,938 1,309,875 20,817,277 (654,938) (1,700,000) (1,309,875) (654,938) (1,309,875) (9,297,276) 342,640 89,474 - 100,000 309,875 9,086,622 383,237 100,000 - 100,000 309,875 20,606,623 BALANCE 1 JULY 07 ACQUIRED VIA ESLP NET PURCHASES BALANCE 30 JUNE 08 50,000 9,710,274 - 4,486,352 - 30,014 785,925 654,938 1,750,000 1,309,875 654,938 1,309,875 20,742,191 - - - - - - - - - - - - - 5,378 8,067 8,000 17,145 20,000 5,373 10,000 55,378 9,718,341 8,000 4,503,497 20,000 35,387 795,925 40,597 (39,474) - - - 75,086 695,535 1,710,526 1,309,875 654,938 1,309,875 20,817,277 All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length. (d) Loans to Key Management Personnel There were no loans to individuals that exceeded $100,000 at any time in 2009 or in the prior year. 82 82 83 notes to the financial statements 30 June 2009 abacus property group 25. Key MAnAGeMent PerSonneL (continueD) (e) other transactions and balances with Key Management Personnel and their related parties During the financial year, transactions occur between the Group and Key Management Personnel which are within normal employee, customer or supplier relationship on terms and conditions no more favourable to than those with which it is reasonable to expect the entity would have adopted if dealing with Key Management Personnel or director-related entity at arm’s length in similar circumstances including, for example, performance of contracts of employment, the reimbursement of expenses and the payment of distributions on their stapled securities in the Group and on their investment in various Trusts managed by Abacus Funds Management Limited as Responsible Entity. An executive, Tom Hardwick, has a 20% interest in the issued capital of Redstone (NSW) Pty Ltd which owns CCG1 Pty Limited, the operator of the childcare centres. During the year the Group lent $0.47 million to CCG1 Pty Limited and the balance at 30 June 2009 was $19.08 million. Interest of $2.44 million has been charged on the loan for the year. Amounts recognised at the reporting date in relation to other transactions with Key Management Personnel: Assets Current assets Trade and other receivables Non-current assets Mortgage loans total Assets revenue 2009 $’000 2008 $’000 1,040 2,127 19,081 20,121 3,405 17,722 19,849 1,183 executive Security Loan Plan (eSLP) Executives were offered limited recourse loans to acquire Group securities on market. The Executive entered into a salary sacrifice arrangement under which base remuneration approximately equal to a notional interest amount on the loan was foregone by the Executive. The interest rate for a financial year was equivalent to the Group distribution rate for that year. The securities acquired under the Plan were purchased on market and were fully vested. The loans will be repaid with the proceeds of securities that were acquired under the ESLP. This plan is accounted for and valued as an option plan, with the contractual life of each option equivalent to the estimated loan life. A repayment of the loan is treated as an increase to Contributed Equity. The ESLP is no longer in operation. 26. Security bASeD PAyMent PLAnS (a) recognised security payment expenses The expense recognised for employee services received during the year is as follows: CONSOLIDATED 2009 $’000 2008 $’000 PARENT 2008 $’000 2009 $’000 1,542 1,038 - - Expense arising from equity- settled payment transactions The security-based payment plans that were cancelled effective 30 June 2009 are described below. (b) types of security-based payment plans executive Performance Award Plan (ePAP) Security options were granted to executives employed on or before the first day of the relevant financial year. Under the EPAP, the exercise price of the options was set by reference to the market price of the securities near the time of each annual grant and performance is measured by comparing the Group’s Total Securityholder Return (TSR) (security price appreciation plus distributions reinvested) with a group of peer companies. The performance measurement period was three years. The cancellation of the EPAP has resulted in the bringing forward of any remaining share based payment expenses to the current year. The EPAP is no longer in operation. 84 84 85 notes to the financial statements 30 June 2009 abacus property group 26. Security bASeD PAyMent PLAnS (continueD) (c) Summary of options granted The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, security options issued during the period: 2009 No. 2009 WAEP 2008 No. 2008 WAEP 23,180,139 1.87 14,598,406 1.79 - - 8,870,195 2.01 (584,458) 1.81 (288,462) 2.01 - - - - - - - - (22,595,681) 1.87 Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Expired during the year Cancellation of the plans outstanding at the end of the year exercisable at the end of the year (d) option pricing model: ePAP The fair value of the equity-settled share options granted under the EPAP is estimated as at the date of grant using a Binomial Model taking into account the terms and conditions upon which the options were granted. A Monte Carlo simulation is applied to fair value the TSR element. In accordance with the rules of the EPAP, the model simulates the Group’s TSR and compares it against the peer group over the three-year period of each grant. The model takes into account the historic distributions, security price volatilities and covariances of the Group and each comparator company to produce a predicted distribution of relative share performance. This is applied to the grant to give an expected value of the TSR element. The following table lists the inputs to the models used for the year ended 30 June 2008 when the last grant of options was made: Distribution yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Option Exercise Price ($) Weighted average share price at measurement date ($) EPAP 2008 7.00 22.00 5.93 10.00 2.01 1.95 - - - 23,180,139 1.87 Model used Monte Carlo / Binomial - 10,479,003 1.91 The effects of early exercise have been incorporated into the calculations by using an expected life for the option that is shorter than the contractual life based on historical exercise behaviour, which is not necessarily indicative of exercise patterns that may occur in the future. 27. coMMitMentS AnD continGencieS operating lease commitments – Group as lessee The Group has entered into a commercial lease on its offices. The lease has a term of three years with an option to renew for another three years. Future minimum rentals payable under non-cancelable operating lease as at 30 June are as follows: Within one year After one year but not more than five years More than five years CONSOLIDATED 2008 $’000 640 2009 $’000 741 PARENT 2008 $’000 - 2009 $’000 - 1,491 2,458 - - 2,232 3,098 - - - - - - operating lease commitments – Group as lessor Future minimum rentals receivable under non-cancelable operating leases as at 30 June are as follows: Within one year After one year but not more than five years More than five years CONSOLIDATED 2008 $’000 2009 $’000 2009 $’000 PARENT 2008 $’000 66,748 57,446 334 1,538 131,601 165,937 558 6,999 146,512 196,510 20 6,991 344,861 419,893 912 15,528 These amounts do not include percentage rentals which may become receivable under certain leases on the basis of retail sales in excess of stipulated minimums and, in addition, do not include recovery of outgoings. 86 86 87 notes to the financial statements 30 June 2009 abacus property group 27. coMMitMentS AnD continGencieS (continueD) capital and other commitments At 30 June 2009 the Group had numerous commitments and contingent liabilities which principally related to property acquisition settlements, loan facility guarantees for the Group’s interest in the jointly controlled projects and funds management vehicles, commitments relating to property refurbishing costs, unused mortgage loan facilities to third parties, and certain property put option arrangements. Commitments contracted for and other contingent liabilities at reporting date but not recognised as liabilities are as follows: Within one year - gross settlement of property acquisitions - property refurbishment costs - net equity contributions to joint ventures - unused portion of loan facilities to outside parties After one year but not more than five years - net equity contributions to joint ventures - property refurbishment costs - other Longer than five years CONSOLIDATED 2009 $’000 2008 $’000 2009 $’000 PARENT 2008 $’000 49,500 1,820 - 5,544 56,864 - - 1,535 - 58,399 25,500 11,119 9,000 4,500 50,119 - - 453 - 50,572 - - - - - - - - - - - - 9,000 - 9,000 - - - - 9,000 (1) Gross settlement of property acquisition commitments excludes bank debt or other external funding available to settle the transactions. In accordance with Group policy, the fair value of all guarantees are estimated each period and form part of the Group’s reported AIFRS results. There has been no other material change to any contingent liabilities or contingent assets. 28. AuDitor’S reMunerAtion the auditor of the Group is ernst & young. Amounts received or due and receivable by Ernst & Young Australia for: - an audit of the financial report of the entity and any other entity in the consolidated entity - taxation related services - other assurance and compliance services CONSOLIDATED 2009 $ 2008 $ 2009 $ PARENT 2008 $ 456,000 - 34,500 490,500 429,847 - 44,455 474,302 135,000 - - 135,000 259,056 23,351 26,667 309,074 29. eVentS AFter tHe bALAnce SHeet DAte Other than as disclosed in this report and to the knowledge of directors, there has been no other matter or circumstance that has arisen since the end of the financial year that has 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. 88 88 89 directors’ declaration 30 June 2009 DirectorS’ DecLArAtion In accordance with a resolution of the Directors of Abacus Group Holdings Limited, we state that: In the opinion of the directors: (a) the financial statements, notes and the additional disclosures included in the directors’ report designated as audited, of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2009 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 Company will be able to pay its debts as and when they become due and payable. 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 year ended 30 June 2009. On behalf of the Board John Thame Chairman Sydney, 27 August 2009 Frank Wolf Managing Director 90 90 91 corporate governance report abacus property group corPorAte GoVernAnce rePort 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 recommendation 1.1 The Board has adopted a charter that sets out the functions and responsibilities reserved by the Board, those delegated to the Managing Director and those specific to the Chairman. The conduct of the Board is also governed by the Constitution. The roles of Chairman and Managing Director are not exercised by the same individual. The primary responsibilities of the Board and the Managing Director are set out in the Board Charter. Senior executives reporting to the Managing Director have their roles and responsibilities defined in position descriptions and are given a letter of appointment on commencement. PrinciPLe 2: Structure tHe boArD to ADD VALue recommendation 2.1 The board is comprised of two executive directors and five non-executive directors. The majority of the Board (Messrs Thame, Bluth, Irving and Bartlett) are independent members. The board has determined that an independent director is one who: • • is not a substantial security holder or an officer of, or is not otherwise associated directly with, a substantial security holder of the Group; is not employed, or has not previously been employed in an executive capacity by the company or another group member, unless there has been a period of at least three years between ceasing such employment and serving on the board; • has not within the last three years been a principal of a material professional adviser or a material consultant to the Group; or an employee materially associated with the service provided; • is not a material supplier or customer of the Group, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; or The Board Charter and Constitution are available on the Abacus website. • does not have a material contractual relationship with the Group other than as a director. recommendation 1.2 Each year the Board, with the assistance of the Managing Director, and the Nomination and Remuneration Committee, undertakes a formal process of reviewing the performance of senior executives. The measures generally relate to the performance of Abacus and the performance of the executive individually. The Managing Director is not present at the Board or Nomination and Remuneration Committee meetings when his own remuneration and performance is being considered. An annual review has taken place in the reporting period in accordance with the process outlined above. No non-executive director has a relationship significant enough to compromise their independence on the Board. 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 page 14. 92 93 corporate governance report 30 June 2009 corporate governance report Directors’ independent advice Directors may seek independent professional advice with the Chairman’s consent, which will not be unreasonably withheld or delayed, on any matter connected with the performance of their duties, and which advice will be at the Group’s expense. recommendation 2.2 The Chairman of the Board (Mr John Thame) is an independent, non-executive director. recommendation 2.3 The roles of Chairman and Chief Executive Officer/ Managing Director are not exercised by the same individual. The division of responsibility between the Chairman and Managing Director has been agreed by the Board and is set out in the Board Charter. recommendation 2.4 The Board has established a Nomination and Remuneration committee. The Committee’s charter sets its role, responsibilities and membership requirements. The members of the committee and their attendance at meetings are provided on page 16. The Chairman of the committee is independent. The Selection and Appointment of Non-Executive Directors policy sets out the procedures followed when considering the appointment of new directors. The Nomination and Remuneration Committee Charter and the Selection and Appointment of Non-Executive Directors Policy are available on the website. recommendation 2.5 The Board has a documented Performance Evaluation Policy which outlines the process for evaluating the performance of the board, its committees and individual directors. PrinciPLe 3: ProMote etHicAL AnD reSPonSibLe DeciSion-MAKinG recommendation 3.1 The Group’s Code of Conduct promotes ethical practices and responsible decision making by directors and employees. The Code deals with confidentiality of information, protection of company assets, disclosure of potential conflicts of interest and compliance with laws and regulations. The Code of Conduct is available on the website. recommendation 3.2 The Group Trading Policy restricts trading in Group securities by directors and employees. The policy sets out the periods in which trading in Group securities is permitted. The Trading Policy is available on the website. PrinciPLe 4: SAFeGuArD inteGrity in FinAnciAL rePortinG recommendation 4.1, 4.2 and 4.3 The board has established an Audit Committee. The Audit Committee comprises three independent non-executive directors and the chairman of the Committee is not the chairman of the Board. The members of the committee and their attendance at meetings are provided on page 16. Other directors that are not members of the committee, the external auditor and other senior executives attend meetings by invitation. The Audit Committee has a formal charter which sets out its specific roles and responsibilities, and composition requirements. The procedures for the selection and appointment of the external auditor are set out in the Audit Committee Charter. An annual review has taken place in the reporting period in accordance with the policy. The Audit Committee Charter is available on the website. PrinciPLe 5: MAKe tiMeLy AnD bALAnceD DiScLoSure recommendation 5.1 The Group has a policy and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements. The Managing Director is responsible for ensuring that the Group complies with its disclosure obligations. The Continuous Disclosure and Shareholder Communications Policy is available on the website. PrinciPLe 6: reSPect tHe riGHtS oF SecurityHoLDerS recommendation 6.1 The Group aims to keep securityholders informed of significant developments and activities of the Group. The Group’s website is updated regularly and includes annual and half-yearly reports, distribution history and all other announcements lodged with the ASX. The Continuous Disclosure and Shareholder Communications Policy is available on the website. In addition, the Group publishes a newsletter from time to time which updates investors and their advisers on the current activities of the Group. external auditor The external auditor attends the annual general meetings of the Group and is available to answer securityholder questions. PrinciPLe 7: recoGniSe AnD MAnAGe riSK recommendation 7.1 and 7.2 The Business Risk Management Policy dealing with oversight and management of material business risks is set out in the corporate governance information section on the Abacus website at www.abacusproperty.com.au. The Group’s Risk Management Framework was developed in consultation with an external consultant. Under the compliance plan the responsible managers report regularly on the risks they manage and any emerging risks. An Internal Auditor (independent of the external auditor) has been appointed who reviews business processes and undertakes formal assessments throughout the year. These assessments are provided to the Audit Committee for review. The Audit Committee has responsibility for reviewing the Group’s risk management framework. The risk management framework is formally reviewed annually. This review is initially carried out by the Compliance and Risk Manager and then reviewed by the Audit Committee and the Board to assess any necessary changes. recommendation 7.3 The Managing Director and Chief Financial Officer confirm in writing to the Board that the financial statements present a true and fair view and that this statement is based on a sound system of risk management and internal compliance. The statement also confirms that the statement is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. 94 94 95 corporate governance report 30 June 2009 ASX additional information corporate governance report PrinciPLe 8: encourAGe enHAnceD PerForMAnce recommendation 8.1 The board has established a Nomination and Remuneration Committee. The Nomination and Remuneration Committee is responsible for assessing the processes for evaluating the performance of the Board and key executives. A copy of the committee charter is available on the website. The Chairman of the Nomination and Remuneration Committee is independent. The Group’s remuneration policies including security- based payment plans and the remuneration of key management personnel are discussed in the Remuneration Report. The remuneration committee may seek input from individuals on remuneration policies but no individual is directly involved in deciding their own remuneration. The members of the committee and their attendance at meetings are provided on page 16. 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. 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 24 August 2009. Number of holders of ordinary fully paid stapled securities Voting rights attached to ordinary fully paid stapled securities Number of holders holding less than a marketable parcel of ordinary fully paid stapled securities 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 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 Securityholders Calculator Australia Pty Limited one vote per stapled security 12,314 391 Ellis Varejes Level 34, Australia Square 264-278 George Street Sydney NSW 2000 (02) 9253 8600 Registries Limited Level 7, 207 Kent Street Sydney NSW 2000 (02) 9290 9600 None None number of Securities 413,824,287 96 96 97 ASX additional information 30 June 2009 notes SecuritieS reGiSter NUMBER OF SECURITIES 1-1000 1,001-5000 5,001-10000 10,001-100000 100,001 – over toP 20 LArGeSt SecurityHoLDinGS SECURITYHOLDERS 1. Calculator Australia Limited 2. J P Morgan Nominees Australia Limited 3. HSBC Custody Nominees (Australia) Limited 4. National Nominees Limited 5. RBC Dexia Investor Services Australia Nominees Pty Ltd 6. Investec Bank (Australia) Limited 7. Australian Executor Trustees Limited 8. Citicorp Nominees Pty Limited 9. RBC Dexia Investor Services Australia Nominees Pty Ltd 10. RBC Dexia Investor Services Australia Nominees Pty Ltd 11. ANZ Nominees Limited 12. Cogent Nominees Pty Limited 13. Kalambay Limited 14. ANZ Nominees Limited 15. Avanteos Investments Limited 16. Tricom Nominees Pty Ltd 17. Suncorp Custodian Services Pty Limited 18. Citicorp Nominees Pty Limited 19. Queensland Investment Corporation 20. RBC Dexia Investor Services Australia Nominees Pty Ltd NUMBER OF SECURITYHOLDERS 305 1,272 1,891 8,050 796 NUMBER OF SECURITIES % OF ISSUED SECURITIES 413,824,287 27.17 139,764,303 70,885,914 70,199,989 47,358,785 40,390,035 32,916,193 23,849,685 22,839,971 22,245,312 15,734,287 15,671,661 11,347,509 11,224,790 11,149,009 10,869,125 8,645,292 8,393,490 8,316,916 6,420,492 9.18 4.66 4.61 3.11 2.65 2.16 1.57 1.50 1.46 1.03 1.03 0.75 0.74 0.73 0.71 0.57 0.55 0.55 0.42 98 98 99 AbAcuS ProPerty GrouP Level 34 Australia Square 264-278 George Street Sydney NSW 2000 T 612 9253 8600 F 612 9253 8616 E enquiries@abacusproperty.com.au www.abacusproperty.com.au notes 100 100 www.abacusproperty.com.au 

Continue reading text version or see original annual report in PDF format above