annual financial report 2010
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ABACUS PROPERTY GROUP
GLOSSARY
At 30 June 2010, 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.
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 PROPERTY GROUP
Level 34 Australia Square
264-278 George Street
Sydney NSW 2000
T +61 2 9253 8600
F +61 2 9253 8616
E enquiries@abacusproperty.com.au
www.abacusproperty.com.au
Abacus Group Holdings Limited
Abacus Trust
Abacus Income Trust
Abacus Group Projects Limited
annual financial report
abacus property group
30 June 2010
CONTENTS
Directors’ Report
Auditor’s Independence Declaration
Consolidated Income Statement
Consolidated Statement of Other Comprehensive Income
Consolidated Distribution Statement
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Corporate Governance Report
ASX Additional Information
02
23
24
26
27
28
30
33
34
105
106
108
111
DIRECTORY
Abacus Group Holdings Limited
ABN: 31 080 604 619
Abacus Group Projects Limited
ABN: 11 104 066 104
Abacus Funds Management Limited
ABN: 66 007 415 590
Registered Office
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 and
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 St
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 2010. 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
directors report
30 June 2010
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 2010 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.
PRINCIPAL ACTIVITIES
The Group operates predominantly in Australia and its
principal activities during the course of the year ended
30 June 2010 included:
•
investment in commercial, retail and industrial
properties;
• property funds management;
• property finance; and
• participation in property joint ventures and
developments.
GROUP STRUCTURE
The Group is comprised of AGHL, AT, AGPL and 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.
02
02
abacus property group
REVIEW OF OPERATIONS
The Group earned a net profit attributable to members
of $25.4 million for the year ended 30 June 2010 (2009:
$102.4 million loss).This profit 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 $64.9 million (2009: $72.0
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 loss in fair value of
investments held at balance
date
Net (gain) / loss in fair value
of derivatives
Net gain in fair value of
investment properties and
derivatives included in equity
accounted profits from
associates and joint ventures
Debt forgiveness of loan as
part of the restructuring of
ADIFII
2010
$’000
2009
$’000
25,436
(102,412)
25,875
113,426
6,247
51,420
(619)
(1,467)
4,900
11,000
Impairment of Intangibles
3,064
-
Underlying profit
64,903
71,967
The improvement in the Group’s statutory performance
reflects an easing in the effects of the global financial
crisis. The net losses on revaluations (properties and
investments) and interest rate swap valuations were
$32.1 million as compared with $164.8 million in the
previous year.
The reduction in the Group’s underlying profit reflects
lower transactional earnings – a consequence of the
global financial crisis.
Basic and diluted earnings / (loss)
per security (cents)
Basic and diluted underlying
earnings per security (cents)
Distributions per security (cents)
(including proposed distribution)
2010
2009
1.53
(11.81)
3.90
8.30
3.15
7.75
The Group’s gearing was reduced further during the
year to 22.2% (2009: 26.6%) following the placement
to institutional securityholders in December 2009. The
impact of both year-end fair value adjustments and the
Group’s performance on its financial condition were as
follows:
Total Assets ($ 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)
2010
2009
1,505.3
22.2
1,102.9
1,054.8
0.58
1,445.8
26.6
989.7
940.5
0.62
(23.3)
(14.6)
1,813.6
1,509.6
1,662.5
867.5
Business activities which contributed to the Group’s
operating performance and financial condition for the
financial year were:
03
Property Finance
Total property finance assets including accrued interest
(and net of provisions) at 30 June 2010 were $87.6 million
(2009: $146.2 million).
Revenue earned from interest and fees (net of
provisions) totalled $12.6 million for the year (2009
$14.4 million).
Joint ventures & Developments
Investments managed within the Joint Ventures &
Developments division comprise direct and indirect
property investments and at 30 June 2010 totalled
$195.0 million (2009 $126.5 million).
The joint venture investments are predominantly with
experienced property investors and developers in
New South Wales and Victoria. 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 $3.7 million to the Group result (2009:
$19.7 million).
directors report
30 June 2010
REVIEW OF OPERATIONS (CONTINUED)
Property
Total property assets at 30 June 2010 were $891
million (2009: $897 million) The property portfolio was
independently revalued during the year ended 30 June
2010, on a staggered basis, which resulted in a net full
year devaluation charge of $18.8 million (2009: $107.5
million).
During the year the Group acquired 343 George Street,
Sydney for $55 million plus acquisition costs and sold
nine properties for $63.7 million which realised a profit of
$2.1 million.
Lower rental income of $71.2 million in the year was
consistent with the reduction of the property portfolio.
Funds Management
Difficult market conditions continued to affect the
distribution of unlisted retail investment products.
Despite these conditions Funds Management
contributed $13.7 million (2009: $13.2 million) to the
Group result.
In the second half of the 2010 financial year the Abacus
Diversified Income Fund II was relaunched with an
offering of 8% minimum income return over the life of
the investment. The Abacus Storage Fund continued
to trade solidly across its portfolio and the self-storage
sector continues to be resilient in the current difficult
environment. The Abacus Hospitality Fund has been
adversely affected by the downturn in demand for
hotel accommodation, particularly from international
tourists and corporate business. During the year the
Fund disposed of three hotels including the Swissotel
in Sydney to reduce debt and improve bank LVR
compliance.
04
04
abacus property group
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
SIGNIFICANT EVENTS AFTER BALANCE DATE
On 26 July 2010 the Group entered into a conditional
agreement with the Kirsh Group to acquire Birkenhead
Point Shopping Centre and Marina, Drummoyne, NSW
(the Centre) for a total consideration of $174 million as
equal tenants in common. Settlement is anticipated to
occur in late 2010 with $45 million of the purchase price
made available by the vendor as interest-free vendor
finance for a period of 3 years.
On 23 August 2010 the Group accepted an offer to
purchase 343 George St for $78 million. Settlement is
anticipated to occur in September 2010.
On 26 August 2010 the Group re-financed its $480m
CLUB facilities with a new 3 year $400 million syndicated
bank debt facility (which replaced Abacus’ existing
$400 million core facility maturing in February 2011)
and a renewed 3 year $80 million working capital bank
debt facility with ANZ (which also had a February 2011
maturity).
During the year ended 30 June 2010, the contributed
equity of the Group increased $123 million to $1,110.5
million compared to $987.5 million at 30 June 2009
due principally to the placement to institutional
securityholders in December 2009.
Total equity increased by 11.4% to $1,102.9 million at 30
June 2010 compared to $989.7 million at 30 June 2009.
At 30 June 2010, existing bank loan facilities totalled
approximately $625.9 million, of which $341.9 million
was drawn.The weighted average maturity of its
secured, non-recourse bank debt is 1.27 years. The
Group manages interest rate exposure on debt facilities
through the use of interest rate swap contracts. At 30
June 2010, 51.2% (2009: 76.3%) of total debt facilities
were covered by interest rate swap arrangements at an
weighted average interest rate (including bank margins
and fees on both drawn and undrawn amounts) of 8%
(2009: 7.31%) and a weighted average term to maturity
of 6 years (2009: 4.69 years).
DISTRIBUTIONS
Group distributions in respect of the year ended 30
June 2010 were $52.8 million (2009: $58.6 million), which
is equivalent to 3.15 cents per stapled security (2009:
7.75 cents). This distribution includes 1.65 cents ($29.5
million) that was paid on 11 August 2010. Further details
on the distributions are set out in note 9 of the financial
statements.
05
directors report
30 June 2010
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group will continue to pursue strategies that
seek to improve profitability and market share of its
activities during the coming year. 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.
DIRECTORS AND SECRETARY
The Directors 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 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
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
Director (Non-executive)
Executive Director
06
06
abacus property group
DIRECTORS AND SECRETARY (CONTINUED)
The qualifications, experience and special responsibilities of the Directors and Company Secretary are as follows:
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 is a Non-Executive Director and has almost 40 years’ experience in the financial services industry. He was
the Managing Director of the Group until September 2006, 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 is a Non-Executive Director and has many years’ experience in company management, including 12 years as
Managing Director of CIBC Australia Limited. He was Chairman of Keycorp Limited (2001 to 2007) and Caltex Australia
Limited and a director of Thales Australia Limited (2000 to 2010) and Telstra Corporation Limited. He is also a director
of O’Connell Street Associates Pty Ltd.
Dennis Bluth
LLM, BA, FAPI
Non-executive Director
Member of Due Diligence Committee
Mr Bluth is a Non-Executive Director and 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.
07
directors report
30 June 2010
DIRECTORS AND SECRETARY (CONTINUED)
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 is a Non-Executive Director. 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 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.
As at the date of this report, the relevant interests of the directors in the stapled securities of Abacus Property Group
were as follows:
APG securities held
276,820
14,187,322
114,032
5,500,000
356,634
128,723
55,925
Directors
John Thame
Frank Wolf
William Bartlett
David Bastian
Dennis Bluth
Malcolm Irving
Len Lloyd
08
08
abacus property group
DIRECTORS AND SECRETARY (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 & RISK
COMMITTEE
DUE DILIGENCE
COMMITTEE
NOMINATION &
REMUNERATION
COMMITTEE
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
18
18
18
18
18
18
18
17
15
14
16
13
16
16
4
4
4
4
4
4
5
5
5
5
5
3
5
5
3
2
4
4
4
4
4
4
4
4
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 is subject to significant environmental regulation in respect of its property activities. Adequate systems are
in place for the management of the Group’s environmental responsibilities and compliance with the various licence
requirements and regulations. No material breaches of requirements or any environmental issues have been identified
during the year.
09
directors report
30 June 2010
AUDITORS INDEPENDENCE DECLARATION
REMUNERATION REPORT (AUDITED)
We have obtained an independence declaration from
our auditor, Ernst & Young, and such declaration is
shown on page 23.
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
$37,000
$37,000
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.
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 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 executives in the parent and the Group
receiving the highest remuneration.
For the purposes of this report, the term ‘executive’
encompasses the Managing Director and other senior
executives of the parent and the Group.
Details of key management personnel (including the
highest paid executives of the Company and the Group).
i) Non-executive Directors
J. Thame
W. Bartlett
D. Bastian
D. Bluth
M. Irving
ii) Executive Directors
F. Wolf
L. Lloyd
iii) Executives
R. de Aboitiz
T. Hardwick
C. Laird
Chairman
Director
Director
Director
Director
Managing Director
Executive Director
Chief Financial Officer
Director Funds Management
Director Joint Ventures
J. L’Estrange
General Manager Property Finance
P. Strain
E Varejes
Director Property
Chief Operating Officer
10
10
abacus property group
REMUNERATION REPORT (AUDITED) (CONTINUED)
Board oversight of remuneration
Remuneration & Nomination Committee
The Remuneration & Nomination Committee of the Board
of Directors is responsible for making recommendations to
the Board on the remuneration arrangements for the non-
executive directors and executives.
The Committee assesses the appropriateness of the
nature and amount of remuneration of non-executive
directors and 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 quality performing Board and executive
team. The Committee engages external consultants who
provide independent advice on the level and composition
of director and executive remuneration. These consultants
report to the Committee and the Board.
The Committee and the Board are mindful of the
Corporations and Markets Advisory Committee
proposals regarding the composition of the Board. The
Board is embarking on a process of consideration of its
composition, particularly in light of the recommendations
on diversity.
Remuneration at a glance
Base salaries
Base salaries paid to executives did not increase in
the year ended 30 June 2010 with the exception of the
Director Property. The increase in Mr Strain’s base salary
reflected changes in his responsibilities.
Retention Bonus
A retention bonus of $500,000 was paid to the Managing
Director. The Remuneration and Nomination Committee
considered it essential in 2008 to ensure his retention
during a difficult economic period that the Group and the
economy were experiencing. This bonus was payable if the
Managing Director continued in that role until the 2009
Annual General Meeting.
Bonuses
Bonuses totalling $1,275,000 are payable to the executives
of the Group for the year ended 30 June 2010. The
details of these bonuses are set out in table 1. The
amount of each bonus was determined by reference to
the performance of the executive against the agreed key
performance indicators, the performance of the Group and
other aspects of the executive’s performance considered
relevant in the context of the review.
Remuneration strategy review
At 30 June 2009 the long-term incentive plans were
cancelled. These plans had been in operation since 2006
and from inception until the time of cancellation the
executives had received no benefits from the operation of
these plans.
During the 2010 financial year the Remuneration
and Nomination Committee worked with its external
consultants, Deloitte Touche Tohmatsu, to complete a
comprehensive review of remuneration arrangements in
order to align them more closely with the Group’s growth
objectives in the 2011 financial year and subsequent
financial years.The result of this review was a number of
changes to be put in place for 2011.These include changes
to the operation of the short-term incentive plan and
introduction of a new long-term incentive plan.
11
directors report
30 June 2010
REMUNERATION REPORT (AUDITED) (CONTINUED)
Non-executive director remuneration
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, which it believes is critical to achieving
the Group’s overall objective of producing superior
performance and growth, is competitive. The Group’s
policy is designed to reward individual performance and
closely align the interests of the executive directors and
other executives to those of securityholders 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 corporate governance best practice,
the separate structure of non-executive director and
executive remuneration is as follows.
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 market competitive.
Structure
The Constitution and the ASX Listing Rules specify that
the aggregate remuneration of non-executive directors
must be determined from time to time by a general
meeting. The last determination was at the annual general
meeting held on 14 November 2007 when securityholders
approved an aggregate remuneration limit of $600,000
per year. It is intended to seek an increase of $200,000
at the forthcoming Annual General Meeting. This
amount represents a limit on non-executive directors’
total fees and does not represent the actual fees paid to
non-executive directors which are set out in Table 1. As
previously noted the Board is embarking on a process that
will lead to changes in the Board’s composition.
The aggregate remuneration limit and the fee structure is
reviewed annually. When undertaking the annual review
process the Board considers advice from its external
consultants which includes a comparison of the fees paid
to non-executive directors of similar groups.
Fees payable, inclusive of superannuation, to non-
executive directors are as follows:
Board/Committee
Board
Board
Audit & Risk Committee
Audit & Risk Committee
Compliance Committee
Credit Committee
Due Diligence Committee
Remuneration & Nomination
Committee
Abacus Storage Funds
Management Limited Board
Role
Fee
Chairman
$183,000
Member
Chairman
Member
Chairman
Member
Member
$69,000
$12,000
$6,000
$6,000
$5,760
$6,000
Member
$6,000
Member
$9,000
12
12
abacus property group
REMUNERATION REPORT (AUDITED) (CONTINUED)
The payment of additional fees for serving on a Board
committee or on the Board of Abacus Storage Funds
Management Limited recognises the additional time
commitment required by directors who serve in those
capacities.
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 2010 and 2009 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.
Structure
In determining the level and make-up of executive
remuneration, the Remuneration & Nomination
Committee engaged external consultants, Deloitte
Touche Tohmatsu, to provide independent advice.
The Board has negotiated a contract of employment
with the Managing Director. Details of this contract are
provided.
Executive 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 (short term and long term incentives) for
each executive is set out in Table 1.
For the year ending 30 June 2011 the Board has
determined that within the context of providing
market competitive levels of remuneration to Abacus
executives, it is appropriate that:
(a) executives have a significant portion of their total
remuneration at risk as it is tied to the performance
of the business and their own contributions to that
performance; and
(b) executive remunerative be delivered with the
proportion of fixed to potential maximum variable
pay being in the ratio of 60:40 and a weighting
based on seniority to a greater proportion of
variable pay based on long-term performance to
reflect their stewardship role.
These arrangements will apply to those executives who
are invited to participate in the Abacus incentive plan.
Participation will be limited to executives whose roles
have the potential to affect the long-term value of the
Group. Market practice dictates that a significant portion
of the remuneration of these executives should be linked
to long-term incentives.
Both short-term incentives (STIs) and long-term
incentives (LTIs) will be offered to executives. STIs will
comprise cash bonuses. LTIs will be synthetic equity
(comparable to cash-settled options) that will generally
have a vesting period of approximately three years.
13
directors report
30 June 2010
REMUNERATION REPORT (AUDITED) (CONTINUED)
Variable Remuneration – Short Term Incentive (STI)
Fixed Remuneration
Objective
Fixed remuneration is reviewed annually by the
Remuneration & Nomination 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.
Base Salary
Base salary is set by reference to the executive’s position,
performance and experience. In order to attract and retain
executives of the highest quality the Group aims to set
competitive rates of base salary. Base salary levels are
benchmarked periodically against the Group’s competitors
and are reviewed on an annual basis having regard to
performance, external market forces and promotion.
As previously noted the base salary of all but one of the
executives did not change during the year ended 30 June
2010.
The fixed remuneration component of the Group’s
executive directors and the most highly remunerated
executives is detailed in Table 1.
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 - Year ended 30 June 2010
Given the uncertainties during the 2010 financial year
relating to the government’s proposals to change the
legislative regime affecting executive remuneration, the
Board decided to delay introducing a new comprehensive
plan for variable remuneration until the new legislative
regime was finalised. As a consequence variable
remuneration for this year was limited to STIs. Payments
made were delivered as a cash bonus.
Bonus payments are closely linked to the performance
of the executives and senior managers measured against
key performance indicators which are set each year. The
key performance indicators are designed to recognise
and reward both financial and non-financial performance.
The key performance indicators will vary according to the
role of the particular executive and will relate to property,
funds management, property finance, joint venture and
corporate targets.
The bonus awarded is determined by reference to the
performance of the executive against the agreed key
performance indicators, the performance of the Group and
other aspects of the executive’s performance considered
relevant in the context of the review.
The aggregate of annual STI payments available for
executives across the Group was approved by the Board.
Managing Director’s remuneration
In determining the Managing Director’s remuneration the
Board considered market data from the general market
(general listed industry companies of comparable size
and, within that, A- REITs of comparable size) to determine
what an appropriate market competitive level of pay is, his
personal performance, his status in the industry and value
to the Group and also his ability to attract funds to the
Group and entities managed by the Group.
14
14
abacus property group
abacus property group
REMUNERATION REPORT (AUDITED) (CONTINUED)
Variable Remuneration – Short Term Incentive (STI)
(continued)
Structure - Year ending 30 June 2011
After finalisation of the new legislative regime for executive
remuneration, the committee reviewed the performance
conditions that determine awards under the executive
STI plan to ensure that it focuses executives on improving
the underlying financial strength of the business. For the
year ending 30 June 2011, awards under the STI plan
will depend on improvement in underlying net profit at
both Group and business unit level (for executives with
business unit responsibility). Individual key performance
indicators (KPIs) were reviewed to ensure that they strongly
support contribution to underlying profitability in order to
safeguard returns made to our securityholders.
The committee worked with its external consultants
to complete a comprehensive review of remuneration
arrangements during the year in order to align them more
closely with the Group’s growth objectives in the year
ending 30 June 2011 and over the longer term.This review
resulted in the Board adopting the following changes:
•
STI pool – from the year ending 30 June 2011 onwards
the pool available for short-term incentive awards will
be linked directly to achievement of underlying net
profit target for the assessment year.
• KPIs – the performance measures that determine
individual awards under the short-term incentive plan
were reviewed to ensure that they accurately represent
the contributions to be made by executives to the
Group’s financial and operating performance.
Securityholders expect that companies consider the
financial performance of the business when forming
decisions about whether to pay bonus or not, and, if
so, the size of bonuses. The Board has established a
process to manage the assessment and payment of STI
entitlements through KPIs and key effectiveness indicators.
The process is set out as follows on the following page:
15
directors report
30 June 2010
REMUNERATION REPORT (AUDITED) (CONTINUED)
Variable Remuneration – Short Term Incentive (STI) (continued)
Beginning of the year
Set the Plan parameters
• Underlying net profit* target for coming year
• KPIs for each participant
• Maximum STIs payable for each participant
• Determine maximum STI pool size based on sum
of individual theoretical maximums
Year-end
Measure Group financial performance
•
•
•
Is underlying net profit target met or exceeded?
If no, bonuses will generally not be available
If yes, gateway is passed
After year-end
Distribute bonus
• Assess individual performance against KPIs
• STIs paid in cash
*The Board has compared Abacus’ performance against several financial performance measures over annual periods to
determine the strength of the relationship between the measures and securityholder value creation (measured by total
securityholder return) and hence the most appropriate measure to determine entitlements to STIs. Based on this analysis
the Board has adopted underlying net profit as the measure. Underlying net profit reflects the statutory profit 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.
For each relevant year the Board will specify an underlying net profit target that:
• operates as a gateway that must be passed if bonuses are to be generally payable; and
• The Board will retain a discretion based on its view of the circumstances at the time, to adjust the pool size.
If the underlying net profit target has been missed by a small amount, the Board may reduce but not eliminate the pool
if it determines the circumstances warrant such action. If performance has been exceptionally strong the Board may
increase the total pool size to provide additional bonuses reflecting above target performance. Where the financial
gateway has not been achieved and the Board determines that no bonus pool will generally be available, it retains the
discretion to pay bonuses to selected individuals to reward them for their above target performance.
1616
abacus property group
abacus property group
REMUNERATION REPORT (AUDITED) (CONTINUED)
Variable Remuneration – Short Term Incentive (STI)
(continued)
Structure - Year ending 30 June 2011
If an executive is no longer employed at the time
when the Group pays STIs for any relevant year then
that executive will generally not be entitled to be paid
their STI bonus if the relevant executive resigned for
any reason or if their employment was terminated with
cause.
Key Performance Indicators
Where STIs are to be paid it is necessary to determine
how STI entitlements will be quantified for participating
executives.
The KPIs incorporate qualitative indicators of
effectiveness, performance and behaviour. They are
the primary tools the Board will use as a means of
determining performance against expectations in order
to distribute STIs where the financial performance
gateway specified by the Board has been achieved.
The Board is mindful of the competing needs for Abacus
to:
• maintain a robust framework by which performance
expectations are set and measured; and
•
retain its flexibility and entrepreneurialism as an
organisation.
The Board retains the ability to consider each executive’s
total contribution to the Group.
Variable Remuneration – Long Term Incentive (LTI)
At 30 June 2009 the LTI plans were cancelled. These
plans had been in operation since 2006 and at the time
of cancellation the executives had received no benefits
from the operation of these plans.
No LTI awards were made during the year ended 30
June 2010.
The Committee worked with its external consultants
to develop a new LTI plan – from 1 July 2010 onwards,
selected Abacus executives will be invited by the
Board to participate in the new LTI plan which will
reward improved Group performance and returns to
securityholders. Awards under the plan will be linked
directly to the Abacus security price and executives
will not benefit under the plan unless the security price
improves over the relevant vesting period.
Objective
The objective of the LTI plan is to reward executives in
a manner that aligns remuneration with the creation of
securityholder wealth. LTI grants will be made only to
executives who are able to influence the generation of
securityholder wealth and thus have an impact on the
Group’s performance.
LTI Security Appreciation Rights Plan
The plan that operates from 1 July 2010 has been
designed to align the interests of executives with those
of security-holders by providing for a significant portion
of the pay of participating executives to be linked to the
long-term price performance of Abacus securities.
17
directors report
30 June 2010
REMUNERATION REPORT (AUDITED) (CONTINUED)
Variable Remuneration – Long Term Incentive (LTI)
(continued)
Security Appreciation Rights Plan
The security appreciation rights (SARs) plan is an LTI plan
under which:
• Eligibility to participate will be based on the
performance assessment completed in determining
STI awards.
• Key executives may be allocated a number of SARs in
any year as part of their annual remuneration package.
The number of SARs allocated will be determined by
reference to:
- the target LTI portion of each participant’s annual
remuneration package; and
- an adjustment factor (up or down) based on the
annual STI performance assessment for the prior
year and other relevant factors taken into account
by the Board in its discretion.
• Each SAR is equivalent to the positive change in
market value of one Abacus security over the vesting
period.
•
•
SARs vest at the end of a three-year period provided
the executive remains employed by the Group (or
otherwise at the Board’s discretion).
The Board will calculate the difference between the
5-day volume weighted average price (VWAP) of
Abacus securities on the last day of the vesting period
(generally 30 June in the vesting year) less the 5-day
VWAP of Abacus securities as at the day before the
commencement of the vesting period (generally 1 July
of the grant year). If the difference is positive, then the
difference will be multiplied by the number of SARs
allocated to the relevant executive that have vested.
An amount equal to the product will be paid to the
relevant executive.
•
Payment entitlements will be subject to PAYG tax
withholding and will be made as soon as practicable
following the completion of the vesting period.
1818
The Board will retain the discretion to allocate SARs in
excess of the target LTI amount in cases of exceptional
performance.
The plan exposes executives to fluctuations in the security
price throughout the vesting period and directly rewards
them for successfully increasing Abacus’s security price
over that period. If Abacus’s security price does not
increase over the vesting period, executives will not be
entitled to any payment under the plan.
The security price was chosen as the key measure for the
LTI on the basis that it:
•
•
reflects the market’s assessment of the success or
failure of Abacus management over the long-term;
and
incorporates the impact of all aspects of Abacus’s
financial performance.
SAR payouts are cash bonuses the size of which is
determined by reference to the security price.
Each SAR payout will be subject to:
•
income tax at the recipient’s marginal income tax rate
in the year in which the bonus is paid; and
•
PAYG
in the same manner as other cash payments.
Link between remuneration policy and the Group’s
performance
The Group’s performance is regularly compared with its
peers within the S&P/ASX 300 A-REIT. This peer group
reflects the Group’s competitors for capital transactions
and talent. For the year ended 30 June 2010, due to the
continuing uncertainty in the market the Group’s internal
financial and business KPI’s were considered to be a more
appropriate measure for determining remuneration.
abacus property group
REMUNERATION REPORT (AUDITED) (CONTINUED)
The Group’s performance in comparison with the S&P/ASX 300 A-REIT is set out in the following graph:
APG and S&P/ASX 300 A-REIT - Accumulation Index Total Return
160%
120%
80%
40%
0%
-40%
ABP
S&P/ASX 300
Accumulation
2004
2006
end of financial year
2008
2010
The Group’s performance for the past five years is as follows:
Underlying/normalised earnings per
security (cents)
Distributions paid and proposed (cents)
Closing security price
Net tangible assets per security
Weighted average securities on issue
Employment contracts
2006
12.92
11.80
$1.57
$1.22
418.1m
2007
14.43
12.50
$1.98
$1.32
553.2m
2008
13.98
13.50
$1.15
$1.37
650.9m
2009
8.30
7.75
$0.37
$0.62
867.5m
2010
3.90
3.15
$0.41
$0.58
1,662.5m
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 STI payments;
• Dr Wolf may resign from his position and thus terminate this contract by giving 6 months written notice; and
•
the Group may terminate this employment agreement by providing 12 months written notice or providing payment
in lieu of notice (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.
19
directors report
30 June 2010
TABLE 1: REMUNERATION OF KEY MANAGEMENT PERSONNEL
SHORT-TERM BENEFITS
SALARY &
FEES
CASH
BONUS
NON-
MONETARY
BENEFITS
POST
EMPLOYMENT
SUPER-
ANNUATION
LONG-
TERM
BENEFITS
LONG
SERVICE
LEAVE
SECURITY-
BASED
PAYMENT
OPTIONS
TOTAL
% PER-
FORMANCE
RELATED
177,890
79,817
53,762
34,000
108,000
453,469
-
-
-
-
-
-
-
-
-
-
-
-
14,461
7,183
36,238
50,000
-
107,882
-
-
-
-
-
-
-
-
-
-
-
-
192,351
87,000
90,000
84,000
108,000
561,351
-
-
-
-
-
-
1,150,000
1,000,000
4,279
50,000
19,660
-
2,223,939
45%
300,000
150,000
-
50,000
5,513
-
505,513
30%
455,539
125,000
455,539
-
385,539
125,000
-
-
-
14,461
14,461
14,461
-
-
-
-
-
-
595,000
21%
470,000
-
525,000
24%
397,539
75,000
4,279
32,461
7,056
-
516,335
15%
385,539
150,000
4,279
14,461
12,279
442,000
150,000
4,279
28,000
-
-
-
566,558
624,279
26%
24%
3,971,695
1,775,000
17,116
218,305
44,508
-
6,026,624
2010
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
C Laird - Director Joint
Ventures*
J L’Estrange - General
Manager Property
Finance
P Strain - Director
Property
E Varejes - Chief
Operating Officer
Sub-total executive KMP
17,116
Total
*C Laird did not meet the definition of a key management person under AASB 124 for the 2009 financial year but is a key
management person for 2010.
- 6,587,975
1,775,000
4,425,164
326,187
44,508
20
20
abacus property group
TABLE 1: REMUNERATION OF KEY MANAGEMENT PERSONNEL
SHORT-TERM BENEFITS
SALARY &
FEES
CASH
BONUS
NON-
MONETARY
BENEFITS
POST
EMPLOYMENT
SUPER-
ANNUATION
LONG-
TERM
BENEFITS
LONG
SERVICE
LEAVE
SECURITY-
BASED
PAYMENT
OPTIONS#
TOTAL
% PER-
FORMANCE
RELATED
177,904
75,229
-
-
98,000
351,133
-
-
-
-
-
-
-
-
-
-
-
-
13,745
6,953
97,400
91,400
-
209,498
-
-
-
-
-
-
-
-
-
-
-
-
191,649
82,182
97,400
91,400
98,000
560,631
2009
Non-executive directors
J Thame - Chairman
W Bartlett
D Bastian
D Bluth
M Irving
Sub-total non-executive
directors
2,192,135
504,181
-
-
-
7,066
18,417
147,115
100,000
473,718
100,000
456,255
500,000
250,000
1,100,000
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
Sub-total executive KMP
Total
#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.
1,289,742
1,289,742
3,357,015
3,708,148
382,985
592,483
500,000
500,000
44,165
44,165
398,255
396,250
456,255
300,000
130,449
147,115
147,115
147,115
97,115
13,745
50,000
31,745
73,750
13,745
9,363
9,319
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
567,115
617,115
586,478
489,768
617,115
5,573,907
6,134,538
-
-
-
-
-
-
44%
29%
17%
24%
25%
27%
24%
21
directors report
30 June 2010
Signed in accordance with a resolution of the directors.
John Thame
Chairman
Sydney, 27 August 2010
Frank Wolf
Managing Director
22
abacus property group
23
consolidated income statement
Year ended 30 June 2010
NOTES
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
REVENUE
Rental income
Finance income
Funds management income
Net change in fair value of investment properties
derecognised
Net change in fair value of investments and financial
instruments derecognised
Share of profit from equity accounted investments
Income from distributions
Total Revenue and Other Income
Property expenses & outgoings
Depreciation, amortisation and impairment expense
Net change in fair value of derivatives
Net change in fair value of investment properties held
at balance date
Net change in fair value of investments held at balance
date
Finance costs
Administrative and other expenses
PROFIT / (LOSS) BEFORE TAX
Income tax benefit / (expense)
PROFIT / (LOSS) AFTER TAX
6a
6b
6c
17b
7a
7b
7c
7d
7e
8a
71,238
78,927
558
484
17,940
18,243
2,338
1,049
20,175
20,065
2,116
1,784
-
-
715
-
5,174
9,110
1,549
4,824
6,463
1,784
8,801
197
9,107
1,512
13,040
30,652
124,890
138,442
17,682
46,831
(11,677)
(11,406)
(324)
(177)
(4,728)
(1,994)
-
-
(6,247)
(51,420)
(826)
(3,447)
(18,775)
(107,518)
-
(2,954)
(7,100)
(5,908)
(883)
(5,851)
(29,722)
(44,864)
(493)
(6,969)
(20,982)
(19,500)
(1,083)
683
25,659
(666)
24,993
(104,168)
1,178
(102,990)
14,073
(1,471)
12,602
28,116
866
28,982
24
24
PROFIT / (LOSS) AFTER TAX
NOTES
CONSOLIDATED
2010
$’000
24,993
2009
$’000
(102,990)
2010
$’000
12,602
PARENT
2009
$’000
28,982
less: net (profit) / loss attributable to non-controlling interests
AT members
AGPL members
AIT members
External
NET PROFIT/(LOSS) ATTRIBUTABLE TO MEMBERS
OF AGHL
(28,424)
105,975
8,596
(5,556)
443
3,161
1,829
578
-
-
-
-
-
-
-
-
52
8,553
12,602
28,982
Net profit / (loss) attributable to members of the Group analysed by amounts attributable to:
AGHL members
AT members
AGPL members
AIT members
NET PROFIT / (LOSS) AFTER TAX ATTRIBUTABLE TO
MEMBERS OF THE GROUP
Basic and diluted earnings / (loss) per stapled security
(cents)
Basic and diluted earnings / (loss) per parent share
(cents)
10
10
52
8,553
12,602
28,982
28,424
(105,975)
(8,596)
(3,161)
5,556
(1,829)
-
-
-
-
-
-
25,436
(102,412)
12,602
28,982
1.53
(11.81)
0.76
3.34
25
consolidated statement of other
comprehensive income
Year ended 30 June 2010
NET PROFIT / (LOSS) AFTER TAX
OTHER COMPREHENSIVE INCOME
Revaluation of assets, net of tax
Foreign exchange translation adjustments, net of tax
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD
Total comprehensive income / (loss) attributable to:
Members of the APG Group
External non-controlling interest
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD
CONSOLIDATED
2010
$’000
24,993
2009
$’000
(102,990)
2010
$’000
12,602
PARENT
2009
$’000
28,982
(706)
53
24,340
1,048
(469)
(102,411)
-
-
12,602
-
-
28,982
24,783
(443)
24,340
(101,833)
(578)
(102,411)
-
-
12,602
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
-
-
28,982
PARENT
2009
$’000
Total comprehensive income / (loss) attributable to members of the Group analysed by amounts attributable to:
AGHL members
AT members
AGPL members
AIT members
TOTAL COMPREHENSIVE INCOME / (LOSS) AFTER TAX
ATTRIBUTABLE TO MEMBERS OF THE GROUP
(916)
28,424
(8,281)
5,556
8,922
(105,975)
(2,951)
(1,829)
12,602
-
-
-
28,982
-
-
-
24,783
(101,833)
12,602
28,982
2626
consolidated statement
of distribution
Year ended 30 June 2010
NOTES
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
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)
25,436
(102,412)
12,602
28,982
8,615
34,051
2.25
1,662,482
149,666
47,254
7.00
867,488
(12,602)
-
-
-
(28,982)
-
-
-
9
9
10
27
consolidated statement of
financial position
30 June 2010
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment held for sale
Inventory
Investment properties held for sale
Property loans
Other financial assets
Other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Inventory
Investment properties
Property loans
Other financial assets
Equity accounted investments
Deferred tax assets
Intangible assets and goodwill
Other
TOTAL NON-CURRENT ASSETS
NOTES
CONSOLIDATED
2010
$’000
2009
$’000
11
12
14
15a
16
13a
13b
14
15b
16
13c
13d
17
8c
18
21,792
8,842
20,901
60,176
91,327
87,011
2,189
1,949
294,187
9,124
22,093
-
5,264
44,289
99,957
6,187
1,391
188,305
9,249
30,891
617,735
325,199
47,057
127,710
13,186
35,173
4,914
1,211,114
32,276
-
708,550
303,342
34,054
127,469
11,329
38,225
2,243
1,257,488
2010
$’000
996
1,342
-
-
-
9,902
2,189
288
14,717
-
-
6,400
34,251
143,519
-
6,394
32,394
14
222,972
PARENT
2009
$’000
275
6,889
-
-
-
10,851
6,082
104
24,201
-
-
6,450
31,483
113,678
-
4,283
32,394
-
188,288
TOTAL ASSETS
1,505,301
1,445,793
237,689
212,489
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
2828
19b
20a
19b
20b
21
8c
13,001
240,706
2,693
13,272
61,829
2,832
395
2,297
-
466
601
-
256,400
77,933
2,692
1,067
4,065
110,435
30,320
284
928
146,032
402,432
1,102,869
1,102,869
6,676
329,555
40,035
355
1,512
378,133
456,066
989,727
989,727
-
1,299
4,125
-
142,978
148,402
151,094
86,595
86,595
-
2,637
3,313
-
134,702
140,652
141,719
70,770
70,770
Equity attributable to members of AGHL:
Contributed equity
Reserves
Retained earnings
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 non-controlling
interest:
Contributed equity
Retained earnings / (accumulated losses)
Total equity attributable to external non-
controlling interest
TOTAL EQUITY
EQUITY
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Total stapled security holders’ interest in equity
Total external non-controlling interest
TOTAL EQUITY
NOTES
2010
$’000
51,963
1,900
13,186
67,049
837,064
(58,057)
779,007
9,459
(85)
(11,740)
(2,366)
212,031
33,349
245,380
CONSOLIDATED
2009
$’000
45,734
2,868
13,020
61,622
745,141
(53,713)
691,428
8,392
(400)
(3,144)
4,848
188,230
29,190
217,420
13,437
362
14,493
(84)
13,799
14,409
2010
$’000
53,009
5,448
28,138
86,595
PARENT
2009
$’000
47,064
5,448
18,258
70,770
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,102,869
989,727
86,595
70,770
23
1,110,517
1,815
(23,262)
1,089,070
13,799
1,102,869
987,497
2,468
(14,647)
975,318
14,409
989,727
53,009
5,448
28,138
86,595
-
86,595
47,064
5,448
18,258
70,770
-
70,770
29
statement of changes in equity
Year ended 30 June 2010
ATTRIBUTABLE TO THE STAPLED SECURITY HOLDER
ASSET
REVALUATION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
EMPLOYEE
EQUITY
BENEFITS
RETAINED
EARNINGS
EXTERNAL
NON-
CONTROLLING
INTEREST
TOTAL
EQUITY
$’000
$’000
1,048
(706)
-
(706)
-
-
-
-
-
$’000
$’000
$’000
$’000
(4,028)
5,448
(14,647)
14,409
989,727
53
-
53
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(653)
25,436
25,436
(443)
24,993
(443)
24,340
-
-
-
-
-
-
-
-
106,265
14,272
4,720
(2,237)
(34,051)
(167)
(34,218)
ISSUED
CAPITAL
$’000
987,497
-
-
-
106,265
14,272
4,720
(2,237)
-
1,110,517
342
(3,975)
5,448
(23,262)
13,799
1,102,869
CONSOLIDATED
At 1 July 2009
Other comprehensive
income/(expense)
Net income for the year
Total comprehensive
income for the period
Equity raisings
Distribution
reinvestment plan
Treasury units
Issue costs
Distribution to security
holders
At 30 June 2010
3030
CONSOLIDATED
At 1 July 2008
Other comprehensive
income / (expense)
Net loss for the year
Total comprehensive
income/expense for
the period
Equity raisings
Distribution
reinvestment plan
Issue costs
Securities 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
At 30 June 2009
ATTRIBUTABLE TO THE STAPLED SECURITY HOLDER
ASSET
REVALUATION
RESERVE
FOREIGN
CURRENCY
TRANSLATION
EMPLOYEE
EQUITY
BENEFITS
$’000
-
$’000
(3,559)
$’000
3,906
ISSUED
CAPITAL
$’000
771,502
EXTERNAL
NON-
CONTROLLING
INTEREST
TOTAL
EQUITY
$’000
18,560
$’000
924,999
RETAINED
EARNINGS
$’000
134,590
-
-
-
1,048
(469)
-
-
1,048
(469)
211,880
8,996
(4,881)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
579
(102,412)
(578)
(102,990)
(102,412)
(578)
(102,411)
-
-
-
-
-
-
-
-
-
8,461
211,880
8,996
(4,881)
8,461
(126)
(126)
5,680
5,680
(286)
(15,586)
(15,872)
(65)
-
-
(65)
(2,002)
(2,002)
(46,474)
-
(46,474)
-
987,497
-
1,048
-
(4,028)
1,542
5,448
-
(14,647)
-
14,409
1,542
989,727
31
statement of changes in
equity (continued)
Year ended 30 June 2010
PARENT
At 1 July 2009
Net income for the year
Total comprehensive income for the period
Equity raisings
Distribution reinvestment plan
Share based payments
At 30 June 2010
PARENT
At 1 July 2008
Net income for the year
Total comprehensive income for the period
Equity raisings
Distribution reinvestment plan
Share based payments
At 30 June 2009
ISSUED CAPITAL
$’000
47,064
-
-
5,240
705
-
53,009
ISSUED CAPITAL
$’000
33,116
-
-
13,533
415
-
47,064
EMPLOYEE
EQUITY
BENEFITS
$’000
5,448
-
-
-
-
-
5,448
EMPLOYEE
EQUITY
BENEFITS
$’000
3,906
-
-
-
-
1,542
5,448
RETAINED
EARNINGS
TOTAL EQUITY
$’000
18,258
12,602
12,602
-
-
(2,722)
28,138
$’000
70,770
12,602
12,602
5,240
705
(2,722)
86,595
RETAINED
EARNINGS
$’000
(10,724)
28,982
28,982
-
-
-
18,258
TOTAL EQUITY
$’000
26,298
28,982
28,982
13,533
415
1,542
70,770
32
consolidated cash flow statement
Year ended 30 June 2010
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
Disposal of controlled entity
Purchase of investment properties
Disposal of investment properties
Purchase of inventories
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 / finance 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
NOTES
CONSOLIDATED
2010
$’000
2009
$’000
134,581
632
1,211
(2,447)
(26,297)
(43,075)
64,605
156,870
1,215
688
(118)
(43,967)
(49,100)
65,588
11
2010
$’000
1,840
56
1,050
-
(493)
(1,976)
477
PARENT
2009
$’000
7,635
31
591
-
(727)
(2,552)
4,978
(76,665)
(179,692)
(54,120)
(49,685)
54,214
83,400
48,318
29,245
(185)
944
-
(37,143)
62,556
(86,995)
(1,345)
(84,619)
110,986
(8,101)
(300,771)
250,958
(20,452)
(150)
-
25,424
(55,983)
54,020
-
10,336
(62,645)
211,463
(5,787)
(309,424)
123,964
(60,895)
-
-
-
-
-
-
(256)
(6,058)
5,945
-
-
357
-
-
-
-
(1,105)
-
-
-
(21,545)
13,948
-
-
554
-
32,620
(40,679)
6,302
14,502
12,606
(37,736)
721
(2,065)
62
9,124
21,792
83
46,777
9,124
-
275
996
-
2,340
275
11
33
notes to the financial statements
30 June 2010
The Corporations Amendment (Corporate Reporting
Reform) Act 2010 was enacted in June 2010 and has
amended the Corporations Act so that a consolidated
reporting group is required to prepare consolidated
financial statements rather than parent entity financial
statements. The Group have applied ASIC Class Order
10/654, issued by the Australian Securities and Investments
Commission, which allows disclosing entities that present
consolidated financial statements to include parent entity
financial statements. In addition, the class order also
provides relief from presenting summarised parent entity
information in the consolidated financial statements.
(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
(i) Changes in accounting policy and disclosures.
The accounting policies adopted are consistent with those
of the previous financial year and the Group has adopted
the new and amended Australian Accounting Standards
and AASB Interpretations as of 1 January 2009.
When the adoption of the Standard or Interpretation is
deemed to have an impact on the financial statements
or performance of the Group, its impact is described on
following page:
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 2010 was authorised for issue in accordance with a
resolution of the directors on 27 August 2010.
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
and associates which are accounted for using the equity
method, and certain investments and financial assets
measured at fair 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.
34
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(c) New accounting standards and interpretations
(continued)
AASB 127 Consolidated and Separate Financial
Statements (revised 2008)
AASB 127 (revised 2008) requires that a change in the
ownership interest of a subsidiary (without a change in
control) is to be accounted for as a transaction with owners
in their capacity as owners. Therefore such transactions will
no longer give rise to goodwill, nor will they give rise to a
gain or loss in the statement of comprehensive income.
Furthermore the revised Standard changes the accounting
for losses incurred by a partially owned subsidiary as well
as the loss of control of a subsidiary. The changes in AASB
3 (revised 2008) and AASB 127 (revised 2008) will affect
future acquisitions, changes in, and loss of control of,
subsidiaries and transactions with non-controlling interests.
AASB 7 Financial Instruments: Disclosures
The amended Standard requires additional disclosures
about fair value measurement and liquidity risk. Fair
value measurements related to all financial instruments
recognised and measured at fair value are to be
disclosed by source of inputs using a three level fair value
hierarchy, by class. In addition, a reconciliation between
the beginning and ending balance for level 3 fair value
measurements is now required, as well as significant
transfers between levels in the fair value hierarchy. The
amendments also clarify the requirements for liquidity
risk disclosures with respect to derivative transactions
and assets used for liquidity management. The fair value
measurement disclosures are presented in note 22 (vi). The
liquidity risk disclosures are not significantly impacted by
the amendments and are presented in note 22 (ii).
AASB 8 Operating Segments
AASB 8 replaced AASB 114 Segment Reporting upon its
effective date. The Group concluded that the operating
segments determined in accordance with AASB 8 are
the same as the business segments previously identified
under AASB 114. AASB 8 disclosures are shown in note 5,
including the related revised comparative information.
AASB 101 Presentation of Financial Statements
The revised Standard separates owner and non-owner
changes in equity. The statement of changes in equity
includes only details of transactions with owners, with
non-owner changes in equity presented in a reconciliation
of each component of equity and included in the new
statement of comprehensive income. The statement of
comprehensive income presents all items of recognised
income and expense, either in one single statement, or in
two linked statements. The Group has elected to present
two linked statements.
The change in accounting policies above were applied
prospectively and had no material impact on earnings per
share.
(ii) Accounting Standards and Interpretations issued but
not yet effective.
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 2010. These are
outlined in the table on the following page.
35
notes to the financial statements
30 June 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
APPLICATION
DATE FOR
GROUP*
1 July 2010
APPLICATION
DATE OF
STANDARD*
1 January
2010
IMPACT ON GROUP
FINANCIAL REPORT
The Group will be
required to review and
revise presentation,
recognition or
measurement where
required for the
Accounting Standards
noted, particularly, AASB
117 - Leases and AASB
107 - Cash Flow.
REFERENCE
SUMMARY
AASB 2009-5
Amendments
to Australian
Accounting
Standards
arising from
the Annual
Improvements
Project
The amendments to some Standards result in
accounting changes for presentation, recognition or
measurement purposes, while some amendments
that relate to terminology and editorial changes are
expected to have no or minimal effect on accounting
except for the following:
The amendment to AASB 117 removes the specific
guidance on classifying land as a lease so that only
the general guidance remains. Assessing land leases
based on the general criteria may result in more land
leases being classified as finance leases and if so, the
type of asset which is to be recorded (intangible vs
property, plant & equipment) needs to be determined.
The amendment to AASB 101 stipulates that the
terms of a liability that could result, at anytime, in
its settlement by the issuance of equity instruments
at the option of the counterparty do not affect its
classification.
The amendment to AASB 107 explicitly states that
only expenditure that results in a recognised asset can
be classified as a cash flow from investing activities.
The amendment to AASB 118 provides additional
guidance to determine whether an entity is acting as
a principal or as an agent. The features indicating an
entity is acting as a principal are whether the entity:
- has primary responsibility for providing
the goods or service;
- has inventory risk
- has discretion in establishing prices
- bears the credit risk
The amendment to AASB 136 clarifies that the largest
unit permitted for allocating goodwill acquired in a
business combination is the operating segment, as
defined in IFRS 8 before aggregation for reporting
purposes.
The main change to AASB139 clarifies that a
prepayment option is considered closely related to the
host contract when the exercise price of a prepayment
option reimburses the lender up to the approximate
present value of lost interest for the remaining term of
the host contract. The other changes clarify the scope
exemption for business combination contracts and
provide clarification in relation to accounting for cash
flow hedges.
36
abacus property group
REFERENCE
SUMMARY
AASB 9
Financial
Instruments
AASB 9 includes requirements for the classification
and measurement of financial assets resulting from
the first part of Phase 1 of the IASB’s project to
replace IAS 39 Financial Instruments: Recognition
and Measurement (AASB 139 Financial Instruments:
Recognition and Measurement).
APPLICATION
DATE OF
STANDARD*
1 January
2013
IMPACT ON GROUP
FINANCIAL REPORT
The Group will review
the classification of its
financial assets in line
with the standard, such
as secured and related
party loans and options.
APPLICATION
DATE FOR
GROUP*
1 July 2013
These requirements improve and simplify the
approach for classification and measurement of
financial assets compared with the requirements of
AASB 139. The main changes from AASB 139 are
described below.
(a) Financial assets are classified based on (1) the
objective of the entity’s business model for
managing the financial assets; (2) the characteristics
of the contractual cash flows. This replaces the
numerous categories of financial assets in AASB
139, each of which had its own classification criteria.
(b) AASB 9 allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are not
held for trading in other comprehensive income.
Dividends in respect of these investments that are
a return on investment can be recognised in profit
or loss and there is no impairment or recycling on
disposal of the instrument.
(c) Financial assets can be deregistered and
measured at fair value through profit or loss
at initial recognition if doing so eliminates or
significantly reduces a measurement or recognition
inconsistency that would arise from measuring
assets or liabilities, or recognising the gains and
losses on them, on different bases.
37
notes to the financial statements
30 June 2010
APPLICATION
DATE OF
STANDARD*
1 January
2013
IMPACT ON GROUP
FINANCIAL REPORT
The Group will review
the classification of its
financial assets in line
with the standard, such
as secured and related
party loans and options.
APPLICATION
DATE FOR
GROUP*
1 July 2013
1 January
2011
1 July 2011
The revision will not have
a significant impact on
the Group’s financial
statements. The Group
will review the definitions
to clarify the disclosure
requirements.
REFERENCE
SUMMARY
AASB 2009-11
Amendments
to Australian
Accounting
Standards
arising from
AASB 9
AASB 124
Related Party
Disclosures
The revised Standards introduces a number of
changes to the accounting for financial assets, the
most significant of which includes:
- two categories for financial assets being amortised
cost or fair value
- removal of the requirement to separate embedded
derivatives in financial assets
- strict requirements to determine which financial
assets can be classified as amortised cost or fair
value, Financial assets can only be classified as
amortised cost if (a) the contractual cash flows from
the instrument represent principal and interest and
(b) the entity’s purpose for holding the instrument is
to collect the contractual cash flows.
- an option for investments in equity instruments
which are not held for trading to recognise fair value
changes through other comprehensive income with
no impairment testing and no recycling through
profit or loss on derecognition.
- reclassifications between amortised cost and
fair value no longer permitted unless the entity’s
business model for holding the asset changes.
- changes to the accounting and additional
disclosures for equity instruments classified as fair
value through other comprehensive income.
The revised AASB 124 simplifies the definition of a
related party, clarifying its intended meaning and
eliminating inconsistencies from the definition,
including:
(a) the definition now identifies a subsidiary and an
associate with the same investor as related parties
of each other;
(b) entities significantly influenced by one person and
entities significantly influenced by a close member
of the family of that person are no longer related
parties of each other; and
(c) the definition now identifies that, whenever a
person or entity has both joint control over a
second entity and joint control or significant
influence over a third party, the second and third
entities are related to each other.
A partial exemption is also provided from the
disclosure requirements for government-related
entities. Entities that are related by virtue of being
controlled by the same government can provide
reduced related party disclosures.
38
abacus property group
REFERENCE
SUMMARY
AASB 2010-3
Limits the scope of the measurement choices of
non-controlling interest at proportionate share of net
assets in the event of liquidation. Other components
of NCI are measured at fair value.
Requires an entity (in a business combination) to
account for the replacement of the acquiree’s share-
based payment transactions (whether obliged or
voluntarily), i.e., split between consideration and post
combination expenses.
Clarifies that contingent consideration from a business
combination that occurred before the effective date of
AASB3 Revised is not restated.
APPLICATION
DATE OF
STANDARD*
1 July 2010
APPLICATION
DATE FOR
GROUP*
1 July 2010
IMPACT ON GROUP
FINANCIAL REPORT
The revision will not have
a significant impact on
the Group’s financial
statements. The Group
will review the revision
to clarify the disclosure
requirements.
AASB 2010-4
Emphasises the interaction between quantitative and
qualitative AASB 7 disclosures and the nature and
extent of risks associated with financial instruments.
1 January
2011
Clarifies that an entity will present an analysis of other
comprehensive income for each component of equity,
either in the statement of changes in equity or in the
notes to the financial statements.
Provides guidance to illustrate how to apply disclosure
principles in AASB 134 for significant events and
transactions.
1 July 2011
The revision will not have
a significant impact on
the Group’s financial
statements. The Group
will review the revision
to clarify the disclosure
requirements.
AASB 2009-12
The amendment makes numerous editorial changes
to a range of Australian Accounting Standards and
Interpretations.
1 January
2011
The amendment to AASB 124 clarifies and simplifies
the definition of a related party.
1 July 2011
The revision will not have
a significant impact on
the Group’s financial
statements. The Group
will review the revision
to clarify the disclosure
requirements.
*designates the beginning of the applicable annual reporting period
AASB 2009-8, AASB 2009-9, AASB 2009-10, AASB 2009-13, AASB 2009-14, AASB 1053, AASB 2010-2 and Interpretation
19 will have no application to the Group.
39
notes to the financial statements
30 June 2010
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.
Non-controlling 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.
40
abacus property group
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:
Rental income
Rental income from investment properties is accounted
for on a straight-line basis over the lease
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. Contingent
Finance Income
Revenue is recognised as interest accrues using the
calculating
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.
Dividends and distributions
Revenue is recognised when the Group’s right to receive
the payment is established.
Net change in fair value of investments and financial
instruments 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.
Financial instruments are derecognised when the right
to receive or pay cash flows from the financial derivative
has expired or when the entity transfers substantially all
the risks and rewards of the financial derivative through
termination. Gains or losses due to derecognition are
recognised in the statement of comprehensive income.
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.
Property development sales
Revenue from property development sales is recognised
when the significant risks, rewards of ownership and
effective control has been transferred to the purchaser
which has been determined to occur upon settlement and
after contractual duties are completed.
No revenue is recognised if there are significant
uncertainties regarding recovery of the consideration due,
the costs incurred or to be incurred cannot be measured
reliably, there is a risk of return or there is continuing
management involvement to the degree usually
associated with ownership.
(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.
41
notes to the financial statements
30 June 2010
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.
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.
A financial asset or financial liability at fair value through
the profit and loss is also a financial asset or financial
liability that upon initial recognition is designated by the
entity as at fair value through the profit and loss. APG uses
this designation where doing so results in more relevant
information. This group of financial assets and liabilities
are managed and their performance evaluated on a fair
value basis, in accordance with APG’s documented risk
management and investment strategy which outlines that
these assets and liabilities are managed on a total rate
of return basis, and information about the instruments
is provided internally on that basis to the entity’s key
management personnel and the Board.
APG enters into loans and receivables with associated
options that provide for a variety of outcomes including
repayment of principal and interest, satisfaction through
obtaining interests in equity or property or combinations
thereof. The fair value of the maximum exposure to credit
risk in relation to these instruments was $35.4 million (2009:
$18 million).
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.
42
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(k) Investments and other financial assets (continued)
Subsidiaries
Investment in subsidiaries are held at lower of cost or
recoverable amount.
(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.
(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.
43
notes to the financial statements
30 June 2010
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.
44
abacus property group
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.
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.
45
notes to the financial statements
30 June 2010
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(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. This
policy for Goodwill is for acquisitions pre 1 July 2009.
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.
Impairment losses recognised for goodwill are not
subsequently reversed.
46
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
the liability. The increase in the provision resulting from the
passage of time is recognised in finance costs.
(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-tax rate that
reflects the time value of money and the risks specific to
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.
(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.
47
notes to the financial statements
30 June 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(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) 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 securities are shown in
equity as a deduction, net of tax, from the proceeds.
(x) 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.
(y) Non-current assets held for sale
Before classification as held for sale the measurement of
the assets is updated. Upon classification as held for sale,
assets are recognised at the lower of carrying amount and
fair value less costs to sell.
Gains and losses from revaluations on initial classification
and subsequent re-measurement are recognised in the
income statement.
(z) Inventories (property development)
Inventories are stated at the lower of cost and net
realisable value. Net realisable value is determined on the
basis of sales in the ordinary course of business. Expenses
of marketing, selling and distribution to customers are
estimated and deducted to establish net realisable value.
The amount of any reversal of write-down of inventories
arising from a change in the circumstances that gave rise
to the original write down, is recognised as a reduction in
the impairment of inventories recognised as an expense.
Cost includes the purchase consideration, development
and holding costs such as borrowing costs, rates and
taxes.
48
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(za) 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.
49
notes to the financial statements
30 June 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(za) Taxation (continued)
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.
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.
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.
(zb) Earnings per stapled security (EPSS)
Basic EPSS is calculated as net profit attributable to
stapled securityholders, 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 securityholders, 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.
50
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.
Primary responsibility for identification and control
financial risks rests with the Treasury Management
Committee under the authority of the Board. The Board
reviews and agrees policies for managing each of the risks
identified below, including the setting of limits for trading
in derivatives, hedging cover of interest rate risks and cash
flow forecast projections.
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.
51
notes to the financial statements
30 June 2010
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 2010, after
taking into account the effect of interest rate swaps,
approximately 51.2% of the Group’s borrowings are subject
to fixed rate agreements (2009: 76.3%).
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 2010, the Group had undrawn committed
facilities of $284 million and cash of $21.8 million which are
adequate to cover short term funding requirements.
Further information regarding the Group’s debt profile is
disclosed in Note 20.
(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 Risk
Market 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.
52
abacus property group
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 20 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.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible
temporary differences and tax losses on revenue account
as management considers that it is probable that future
taxable profits will be available to utilise those temporary
differences and tax losses.
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.
Accounting policy – financial assets and liabilities at fair
value through profit and loss
A financial asset or financial liability at fair value through
profit or loss is also a financial asset or financial liability that
upon initial recognition is designated by the entity as at
fair value through profit or loss. APG uses this designation
where doing so results in more relevant information,
because it is a group of financial assets and liabilities which
is managed and its performance is evaluated on a fair
value basis, in accordance with APG’s documented risk
management and investment strategy, and information
about the instruments is provided internally on that basis
to the entity’s key management personnel and the Board.
Control and significant influence
Determination of whether the Group has control or
significant influence over an investee is based on
53
notes to the financial statements
30 June 2010
4. SIGNIFICANT ACCOUNTING JUDGMENTS,
ESTIMATES AND ASSUMPTIONS (CONTINUED)
the fair value of investment properties may differ and may
need to be re-estimated.
5. SEGMENT INFORMATION
The Group predominantly operates in Australia. Following
are the Group’s operating segments, which are regularly
reviewed by the Chief Operating Decision Maker to
make decisions about resources allocation and to assess
performance:
(a) Property: the segment is responsible for the
investment in and ownership of commercial, retail
and industrial properties. This segment also includes
the equity accounting of material co-investments in
property trusts not engaged in development and
construction projects;
(b) Funds Management: the segment includes
development, origination and fund management
revenues and expenses in addition to discharging the
Group’s responsible entity obligations;
(c) Property Finance: provides mortgage lending and
related property financing solutions; and
(d) Joint Venture and Developments: the segment
is responsible for the Group’s investment in joint
venture development and construction projects, which
includes revenue from debt and equity investments
in joint ventures. This segment also is responsible for
the Group’s investment in property securities.
Segment revenue, segment expenses and segment result
do not include transactions between operating segments.
judgemental assessments of both the rights the Group has
in the investee and the risks and rewards it is exposed to
(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. For goodwill this involves value in use
calculations which incorporate a number of key estimates
and assumptions around cash flows and fair value of
investment properties upon which these determine the
revenue / cash flows. No impairment loss was recognised
in the current year in respect of goodwill, however, an
impairment was recognised for licenses.
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,
54
abacus property group
5. SEGMENT INFORMATION (CONTINUED)
YEAR ENDED 30 JUNE 2010
$’000
$’000
$’000
$’000
$’000
PROPERTY
FUNDS
MANAGEMENT
PROPERTY
FINANCE
JOINT
VENTURES/
DEVELOPMENTS
TOTAL
Revenue
Revenue from external customers
Equity accounted investments
Net change in fair value of investments
derecognised
72,567
6,818
5,670
20,897
(729)
12,607
-
4,433
374
110,504
6,463
-
-
1,620
7,290
85,055
(16,405)
(9,273)
Unallocated revenue
Total consolidated revenue
Direct costs
Allocated costs
Unallocated expenses
Segment result before fair value adjustments
Net change in fair value of investments held at
balance date
Segment result after fair value adjustments
Finance costs including net change in fair value
of derivatives
Profit before tax and non-controlling interest
Income tax expense
Net profit for the year
add non-controlling interest loss
Net profit for the period attributable to members of the Group
(18,778)
40,599
59,377
20,168
-
(6,458)
12,607
-
(1,845)
6,427
-
(2,773)
13,710
10,762
3,654
633
124,890
(16,405)
(20,349)
(633)
87,503
-
-
(7,097)
(25,875)
13,710
10,762
(3,443)
61,628
Assets and Liabilities
Segment assets
Unallocated assets (a)
Total assets
Segment liabilities
Unallocated liabilities (b)
Total liabilities
Other segment information:
Depreciation and amortisation
891,193
-
253,259
-
87,595
-
195,025
-
8,463
-
10,472
-
1,849
-
1,849
-
3,630
-
-
-
3,630
(35,969)
25,659
(666)
24,993
443
25,436
1,427,072
78,229
1,505,301
22,633
379,799
402,432
(a)Unallocated assets include goodwill, cash and other assets.
(b)Unallocated liabilities include interest-bearing liabilities, tax liabilities and other liabilities.
55
notes to the financial statements
30 June 2010
5. SEGMENT INFORMATION (CONTINUED)
YEAR ENDED 30 JUNE 2009
$’000
$’000
$’000
$’000
$’000
PROPERTY
FUNDS
MANAGEMENT
PROPERTY
FINANCE
JOINT
VENTURES/
DEVELOPMENTS
TOTAL
356
79,147
645
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 before fair value adjustments
Net change in fair value of investments held at
balance date
Segment result after fair value adjustments
Finance costs including net change in fair
value of derivatives
Loss before tax and non-controlling interest
Income tax benefit
Net loss for the year
less non-controlling interest
Net loss for the period attributable to members of the Group
-
80,148
(13,437)
(7,020)
-
59,691
(107,518)
(47,827)
14,839
3,195
3,316
-
21,350
-
(8,106)
-
13,244
14,447
-
9,099
4,961
117,532
8,801
-
7,222
10,894
-
14,447
-
(1,560)
-
12,887
-
21,282
-
(1,562)
-
19,720
1,215
138,442
(13,437)
(18,248)
(1,215)
105,542
-
-
(5,908)
(113,426)
13,244
12,887
13,812
(7,884)
(96,284)
(104,168)
1,178
(102,990)
578
(102,412)
1,392,879
52,914
1,445,793
27,292
428,774
456,066
896,822
223,371
146,162
126,524
12,614
10,432
2,123
2,123
3,693
-
-
-
3,693
Assets and Liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Other segment information:
Depreciation and amortisation
56
abacus property group
6. REVENUE
(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 (1)
Impairment of loan as part of the restructuring of ADIFII
Total funds management income
CONSOLIDATED
2010
$’000
2009
$’000
17,592
(285)
633
17,940
5,204
890
1,665
17,316
(4,900)
20,175
22,102
(5,074)
1,215
18,243
5,885
1,039
13,293
10,848
(11,000)
20,065
2010
$’000
2,282
-
56
2,338
-
-
-
-
-
-
PARENT
2009
$’000
1,018
-
31
1,049
-
-
715
-
-
715
(c) Net change in fair value of investments and financial instruments derecognised
Net change in fair value of financial instruments derecognised
Net change in fair value of other investments derecognised
Total net change in fair value of investments and financial
instruments derecognised
3,589
1,585
5,174
(1) No interest was charged on the loan owed by ADIFII in 2009.
-
9,110
-
1,549
-
4,824
9,110
1,549
4,824
57
notes to the financial statements
30 June 2010
7. EXPENSES
(a) Depreciation, amortisation and impairment expense
Depreciation of property, plant and equipment
Amortisation of software
Impairment of intangible assets
Amortisation - leasing costs
Total depreciation, amortisation and impairment expense
(b) Net change in fair value of derivatives
Interest rate swaps
Financial instruments (ADIFII guarantee)
Total net change in fair value of derivatives
(c) Net change in fair value of investments held at balance date
Net change in fair value of property securities held at balance date
Net change in fair value of options held at balance date
Total change in fair value of investments held at balance date
4,100
3,000
7,100
5,908
-
5,908
2010
$’000
PARENT
2009
$’000
CONSOLIDATED
2010
$’000
589
32
3,064
1,043
4,728
2009
$’000
778
31
-
1,185
1,994
5,247
1,000
6,247
48,420
3,000
51,420
(174)
1,000
826
-
-
-
-
883
-
883
493
-
493
-
-
-
-
447
3,000
3,447
5,851
-
5,851
6,969
-
6,969
-
-
(683)
(683)
28,008
1,714
29,722
43,165
1,699
44,864
12,423
-
8,559
20,982
10,240
1,542
7,718
19,500
-
-
1,083
1,083
(d) Finance costs
Interest on loans
Amortisation of finance costs
Total finance costs
(e) Administrative expenses
Wages and salaries
Share based payments
Other administrative expenses
Total administrative expenses
58
abacus property group
8. INCOME TAX
(a) Income tax expense
The major components of income tax expense are:
Income Statement
Current income tax
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
Current income tax charge
Adjustments in respect of current income tax of previous years
(5,781)
2,409
2,216
(41)
(243)
(2,077)
767
(23)
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
578
3,460
666
121
25
15
(3,474)
(1,178)
3,766
1,471
(1,625)
(866)
(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:
Profit / (loss) before income tax expense
Prima facie income tax expense / (benefit) calculated at 30%
Less prima facie income tax/(benefit) on (profit)/loss from AT and AIT
Prima Facie income tax of entities subject to income tax
Entertainment
Share based payments
Foreign exchange translation adjustments
Impairment of management rights
Adjustment of prior year tax applied
Derecognition of deferred tax assets
Other items (net)
Income tax expense / (benefit)
Income tax expense/(benefit) reported in the consolidated income
statement
12,602
3,781
(3,720)
61
-
-
271
-
(2,077)
3,164
52
25,659
7,698
(15,501)
(7,803)
(11)
-
(104,168)
(31,250)
29,999
(1,251)
(11)
463
(55)
-
(43)
-
(281)
271
919
2,409
3,605
1,276
666
666
(1,178)
1,471
(1,178)
1,471
28,116
8,435
(9,000)
(565)
-
-
(55)
-
(23)
-
(223)
(866)
(866)
The Group has income tax losses for which no deferred tax asset is recognised on the balance sheet of gross $3.59
million (2009: Nil), which are available indefinitely for offset against future income gains subject to continuing to meet
relevant statutory tests.
59
notes to the financial statements
30 June 2010
8. INCOME TAX (CONTINUED)
(c) Recognised deferred tax assets and liabilities
Deferred income tax at 30 June 2010 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
Revaluation of financial instruments 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
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
-
-
2,557
2,557
(2,273)
284
-
-
3,922
3,921
6,761
589
266
15,459
(2,273)
13,186
45
1,767
661
2,473
(2,118)
355
1,165
1,278
958
7,984
1,008
386
668
13,447
(2,118)
11,329
-
-
735
735
(735)
-
-
-
37
2,301
4,763
-
28
7,129
(735)
6,394
-
-
198
198
(198)
-
1,165
807
97
1,401
940
-
71
4,481
(198)
4,283
Unrecognised temporary differences
At 30 June 2010, the Group has unrecognised deferred tax assets on capital account in relation to the fair value of
investments in listed and unlisted securities ($10.2 million gross), fair value of investment properties ($3.9 million gross)
and fair value of investment in options ($3.0 million gross) (2009: $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 on the following
page.
60
abacus property group
8. INCOME TAX (CONTINUED)
Nature of the tax funding agreement
Members of the tax consolidated group have entered into a tax funding agreement. 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.
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
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
(a) Distributions paid during the year
June 2009 quarter: 0.75 cents per stapled security (2008: 3.50 cents)
September 2009 quarter: Nil (2008: 3.50 cents)
December 2009 half: 1.50 cents per stapled security (2008: 1.75 cents)
March 2010 quarter: Nil (2009: 1.75 cents)
11,209
-
22,842
-
34,051
22,637
22,677
11,387
13,190
69,891
(b) Distributions proposed and not recognised as a liability*
June 2010 half: 1.65 cents per stapled security (2009: 0.75 cents)
29,924
11,209
-
-
-
-
-
-
-
-
-
-
-
-
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 1.65 cents per stapled security was declared on 1 July 2010. The distribution was paid on 11 August 2010 for $29.9 million. No
provision for the distribution has been recognised in the balance sheet at 30 June 2010 as the distribution had not been declared by the end of the year.
(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% (2009: 30%)
Prior year tax adjustment
10,303
-
10,303
11,252
10,303
11,252
(949)
10,303
-
10,303
(949)
10,303
61
notes to the financial statements
30 June 2010
10. EARNINGS PER STAPLED SECURITY
Basic and 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)
Weighted average number of stapled securities:
Weighted average number of stapled securities for basic and
diluted earning per share
CONSOLIDATED
2010
$’000
1.53
2009
$’000
(11.81)
2010
$’000
0.76
PARENT
2009
$’000
3.34
25,436
(102,412)
12,602
28,982
’000
’000
’000
’000
1,662,482
867,488
1,662,482
867,488
62
abacus property group
11. CASH AND CASH EQUIVALENTS
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
Reconciliation to Cash Flow Statement
For the purposes of the Cash Flow Statement, cash and cash
equivalents comprise the following at 30 June 2010:
Cash at bank and in hand (i)
(i)cash at bank earns interest at floating rates. The carrying amounts of cash and cash equivalents represent fair value.
21,792
9,124
996
275
24,993
(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
Impairment of licences
Provision for doubtful debts
Forgiveness of loan as part of the restructuring of ADIFII
Income distribution
Net change in fair value of derivatives
Net change in fair value of investment properties held at
balance date
Net change in fair value of investments held at balance date
Net change in fair value of investment properties derecognised
Net change in fair value of financial instruments derecognised
Increase/(decrease) in payables
Decrease/(increase) in receivables and other assets
589
1,074
3,064
285
4,900
-
6,247
18,775
7,100
(2,116)
(5,174)
14,216
(9,348)
(102,990)
12,602
28,982
778
2,915
-
5,074
11,000
-
51,420
-
-
-
-
-
(11,990)
826
-
-
-
-
-
(30,000)
3,447
107,518
-
2,954
5,908
(1,784)
(9,110)
(13,668)
8,527
883
-
(1,549)
226
(521)
5,851
-
(4,824)
2,188
(3,620)
Net cash from operating activities
64,605
65,588
477
4,978
(b) Non-cash financing and investing activities
Disposal of subsidiary by providing a mortgage loan facility
-
8,245
-
-
Disclosure of financing facilities
Refer to note 20d.
Disclosure of non-cash financing activities
Non-cash financing activities include capital raised pursuant to APG’s distribution reinvestment plan. During the year 37.7
million stapled securities were issued with a cash equivalent of $14.3 million.
63
notes to the financial statements
30 June 2010
12. TRADE AND OTHER RECEIVABLES
Trade debtors
Related party receivables
Other debtors
Gross receivables
Less provision for doubtful debts
Total net receivables
13. PROPERTY LOANS AND OTHER FINANCIAL ASSETS
(a) Current property loans
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 (iv)
(b) Current other financial assets
Investments in securities - listed (fair value)
CONSOLIDATED
2010
$’000
2,458
309
7,075
9,842
(1,000)
8,842
2009
$’000
9,556
5,597
7,124
22,277
(184)
22,093
CONSOLIDATED
2010
$’000
2009
$’000
60,633
-
22,753
3,925
900
(1,200)
87,011
51,221
-
51,634
9,273
845
(13,016)
99,957
2010
$’000
692
472
178
1,342
-
1,342
2010
$’000
-
9,902
-
-
-
-
9,902
PARENT
2009
$’000
742
5,504
643
6,889
-
6,889
PARENT
2009
$’000
-
10,851
-
-
-
-
10,851
2,189
2,189
6,187
6,187
2,189
2,189
6,082
6,082
64
abacus property group
13. PROPERTY LOANS AND OTHER FINANCIAL ASSETS (CONTINUED)
(c) Non-current property loans
Secured loans - amortised cost (i)
Interim funding to related funds - amortised cost (ii) (iii)
Interest receivable on secured loans - amortised cost
Interest receivable on interim funding to related funds
Provision for doubtful debts
Provision for impairment on loan in relation to restructuring
of ADIFII (iv)
(d) Non-current other financial assets
Investments in securities - unlisted (fair value)
Investments in subsidiaries - at cost
Investments in joint ventures - at cost
Other financial assets (fair value) (v)
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
147,402
157,631
15,015
6,151
(1,000)
148,539
155,999
5,682
4,122
-
-
33,617
-
634
-
PARENT
2009
$’000
-
31,267
-
216
-
-
(11,000)
-
-
325,199
303,342
34,251
31,483
11,666
-
-
35,391
47,057
15,804
-
-
18,250
34,054
12,291
117,056
14,172
-
143,519
13,020
81,288
19,370
-
113,678
(i) Mortgages are secured by real property assets. The current facilities are scheduled to mature and are expected to be realised on or before 30 June
2011 and the non-current facilities will mature between 1 July 2011 and 18 December 2018. Weighted average interest rate was 9.93% pa as at 30 June
2010 (2009: 10.05%).
(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.
(iii) The loan to Abacus Storage Fund has the same capital growth entitlements as investor equity up until it is repaid. Recoverability of the loan of $92.3m
to ADIFII and the loan of $66.4m to the Abacus Hospitality Fund is predicated on the recovery of property valuations to original cost during the next six
years.
(iv) The movement in the provision reflects the writing off of loans that had been fully provided for in previous periods.
(v) APG enters into loans and receivables with associated options that provide for a variety of outcomes including repayment of principal and interest,
satisfaction through obtaining interests in equity or property or combinations thereof. At the end of the year, the fair value of the maximum exposure to
credit risk in relation to these instruments was $35.4 million (2009: $18 million).
65
notes to the financial statements
30 June 2010
14. PROPERTY, PLANT AND EQUIPMENT
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
Cost or fair value less costs to sell
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
Current property, plant and equipment (fair value less costs to sell)
Non-current property, plant and equipment (cost or fair value)
Total net carrying amount of property, plant and equipment
Property
Hotel properties - Pubs(1)
Budget lodge / hostel accommodation
Office equipment / furniture and fittings
(1) Value of licences are accounted for separately as intangibles (see note 18)
66
CONSOLIDATED
2010
$’000
2009
$’000
31,258
-
(979)
(706)
(53)
(310)
29,210
29,210
-
29,210
1,018
182
-
(260)
940
1,773
(833)
940
30,150
20,901
9,249
30,150
7,374
20,901
1,875
30,150
30,302
60
-
1,048
179
(331)
31,258
31,258
-
31,258
1,538
149
(193)
(476)
1,018
1,591
(573)
1,018
32,276
-
32,276
32,276
6,965
21,694
3,617
32,276
abacus property group
14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The Parent does not hold any property, plant and equipment.
The current property, plant and equipment represents six (6) properties which are either subject to a sales contract or an
active sales campaign. All properties are expected to be sold by 30 June 2011.
Property, plant and equipment pledged as security for liabilities
Some of the freehold land and buildings are used as security for secured bank debt.
15. INVENTORIES
(a) current
Hotel supplies
Projects
- purchase consideration
- other costs
(b) non-current
Projects
- purchase consideration
- development costs
- other costs
Total inventories
The Parent does not hold any inventory.
Inventories are held at the lower of cost and net realisable value.
Other costs as described in note 2(z).
CONSOLIDATED
2010
$’000
2009
$’000
107
105
58,600
1,469
60,176
5,159
-
5,264
20,941
4,445
5,505
30,891
91,067
-
-
-
-
5,264
67
notes to the financial statements
30 June 2010
16. INVESTMENT PROPERTIES
Investment properties held for sale
Retail
Commercial
Industrial
Other
Total investment properties held for sale
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
52,785
-
38,040
502
91,327
-
26,391
13,640
4,258
44,289
-
-
-
-
-
-
-
-
-
-
The investment properties held for sale represent nine (9) properties which are either subject to a sales contract or an
active sales campaign. All properties are expected to be sold by 30 June 2011.
Investment properties
Retail
Commercial
Industrial
Storage
Other
Total investment properties
Total investment properties including held for sale
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
218,204
262,220
82,031
3,500
51,780
617,735
709,062
266,843
283,450
131,233
3,807
23,217
708,550
752,839
-
-
-
-
6,400
6,400
6,400
PARENT
2009
$’000
-
-
-
-
6,450
6,450
6,450
At 30 June 2010, 60% of the property portfolio was subject to external valuation, the remaining 40% was subject to
internal valuation.
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
Fair value adjustments for properties held at balance date
Transfers to inventory
Disposals
Effect of movements in foreign exchange
Properties transferred to held for sale
Carrying amount at end of the financial year
CONSOLIDATED
2010
$’000
708,550
37,488
(18,775)
(1,850)
(60,595)
(45)
(47,038)
617,735
2009
$’000
932,440
49,462
(107,517)
-
(121,764)
218
(44,289)
708,550
2010
$’000
6,450
236
(286)
-
-
-
-
6,400
PARENT
2009
$’000
8,280
1,124
(2,954)
-
-
-
-
6,450
68
abacus property group
16. INVESTMENT PROPERTIES (CONTINUED)
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:
• A weighted average capitalisation rate for each category is as follows;
- Retail – 8.03% (2009: 7.97%)
- Commercial – 8.48% (2009: 8.62%)
- Industrial – 9.31% (2009: 9.02%)
- Other – 7.92% (2009: 7.98%)
•
The current occupancy rate for the portfolio is 93.2% (2009: 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 2011 of 3.9% (2010: 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 2010 have regards to market sales evidence in adopting a market valuation for each property
including the key assumptions outlined.
The majority of the investment properties are used as security for secured bank debt.
69
notes to the financial statements
30 June 2010
17. 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
NOTES
17(i)
17(ii)
CONSOLIDATED
2010
$’000
23,715
103,995
127,710
2009
$’000
23,687
103,782
127,469
Stanright Limited (1)
Abacus Storage Fund (2)
Abacus Miller Street Trust (3)
Abacus Wodonga Fund(2)
PRINCIPAL ACTIVITY
Property investment
Storage facility investment
Property investment
Property development
OWNERSHIP INTEREST
CARRYING VALUE
2010
%
40
16
30
15
2009
%
40
15
30
15
2010
$’000
3,275
16,494
2,326
1,620
23,715
2009
$’000
5,108
14,584
1,622
2,373
23,687
(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. The reporting date for Stanright Limited is 31 March.
(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.
70
abacus property group
17. NON-CURRENT ASSETS - INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
(ii) Joint Ventures (4)
PRINCIPAL ACTIVITY
Property investment
Property development
Property investment
Abacus Aspley Village Trust
Abacus Rosebery Property Trust
Fordtrans Pty Ltd (Virginia Park)
Hampton Residential Retirement Trust Property development
Jigsaw Trust
Pakenham Valley Unit Trust
The Abacus Colemans Road Trust
The Bay Street Brighton Unit Trust (5)
The Main Street Pakenham Trust (5)
The Mount Druitt Unit Trust
The Tulip Unit Trust
Willoughby Development Trust
Childcare operator
Property development
Property development
Property development
Property development
Property investment
Property development
Property development
OWNERSHIP INTEREST
CARRYING VALUE
2010
%
33
50
50
50
50
50
50
-
-
50
50
50
2009
%
33
50
50
50
50
50
50
50
50
50
50
50
2010
$’000
19,068
200
62,409
4,116
9,013
4,806
1,986
-
-
402
1,795
200
103,995
2009
$’000
19,332
200
59,041
4,893
7,263
5,360
1,483
3,173
-
934
1,903
200
103,782
(4) The joint venture entities acquire and develop (generally to the subdivision stage) commercial and residential properties intended for resale.
(5) The remaining interest in these joint ventures were acquired during the year. The properties are now included in non-current inventories (note 15).
(6) There were no impairment losses or contingent liabilities relating to the investment in the associates and joint ventures other than the debt forgiveness
on the working capital facility owed by ADIFII.
71
notes to the financial statements
30 June 2010
17. NON-CURRENT ASSETS - INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
(b) Share of associates and joint ventures’ net profits
Revenue
Expenses
Net profit / (loss)
Share of net profit
(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
2010
$’000
98,977
(76,411)
22,566
6,463
2010
$’000
129,247
760,615
889,862
(217,782)
(299,572)
(517,354)
372,508
127,710
CONSOLIDATED
2009
$’000
88,621
(91,954)
(3,333)
8,801
2009
$’000
42,065
829,662
871,727
(124,490)
(394,064)
(518,554)
353,173
127,469
72
abacus property group
18. INTANGIBLE ASSETS AND GOODWILL
Goodwill
Balance at 1 July
Acquisition through business combinations
Disposal
Balance at 30 June
Licences and entitlements
At 1 July, net of accumulated amortisation
Acquisition
Disposal of licences
Impairment
At 30 June, net of accumulated amortisation
Total goodwill and intangibles
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
32,461
-
-
32,461
35,090
67
(2,696)
32,461
32,394
-
-
32,394
5,764
12
-
(3,064)
2,712
35,173
6,049
-
(285)
-
5,764
38,225
-
-
-
-
-
32,394
PARENT
2009
$’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.
Licences and entitlements
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 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 losses recognised
An impairment loss of $3.1 million was recognised during the year in relation to the licences of two hotels under the
property segment, namely the Mariners Lodge Hotel at Batemans Bay NSW and the Forest Lodge Hotel at Glebe
NSW. The impairment loss has been recognised in the consolidated income statement in the line item “depreciation,
amortisation and impairment expense”. The loss was a result of write down as the carrying amount exceeded the value
in use as determined by the external valuation performed as at 30 June 2010.
73
notes to the financial statements
30 June 2010
18. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
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
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 2010 covering a five-year period.
A post tax discount rate of 9.6% (2009: 10.59%) and a terminal growth rate of 3% (2009: 3%) has been applied to the cash
flow projections.
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 2010 have regards to market sales evidence in adopting a market valuation for each
property including the key assumptions outlined.
(ii) 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
2010
$’000
32,394
2009
$’000
32,394
PROPERTY
2010
$’000
67
2009
$’000
67
2010
$’000
32,461
TOTAL
2009
$’000
32,461
PARENT
2009
$’000
32,394
2010
$’000
32,394
-
-
2,712
5,764
2,712
5,764
-
-
(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.
74
abacus property group
18. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
(iii) Key assumptions used in valuation calculations (continued)
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.
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 the independent valuers’ and 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. The weighted average capitalisation rate used for the two hotel valuations at June 2010 was
11.65% (2009: 9.42%).
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, however, the goodwill valuation as at 30 June 2010 has significant head room thus
changes in the assumptions such as discount rate and revenue assumptions would not cause any significant impairment.
Intangibles have been impaired on the basis that they now represent recoverable amount. A decrease in hotel income
or increase in discount rate have already been taken into consideration in the sensitivity of market factors as part of the
external valuation.
75
notes to the financial statements
30 June 2010
19. TRADE AND OTHER PAYABLES
(a) Current
Trade creditors
Other creditors
Rental guarantee
Goods and services tax
Accrued expenses
(b) Non-current
Rental guarantee
20. INTEREST BEARING LOANS AND BORROWINGS
(a) Current
Bank loans - A$
Other loans - A$
Loan from related parties
Less: Unamortised borrowing costs
(b) Non-current
Bank loans - A$
Loan from related parties
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
76
CONSOLIDATED
2010
$’000
2009
$’000
1,612
3,405
1,313
1,181
5,490
13,001
626
3,279
2,314
1,893
5,160
13,272
4,065
4,065
6,676
6,676
CONSOLIDATED
2010
$’000
2009
$’000
232,157
9,916
141
(1,508)
240,706
62,000
-
510
(681)
61,829
109,734
1,299
(598)
110,435
330,219
-
(664)
329,555
242,214
105,048
5,985
353,247
62,510
324,234
5,985
392,729
2010
$’000
207
125
-
(30)
93
395
-
-
2010
$’000
2,297
-
-
-
2,297
-
1,299
-
1,299
2,297
1,299
-
3,596
PARENT
2009
$’000
205
52
-
(27)
236
466
-
-
PARENT
2009
$’000
601
-
-
-
601
2,637
-
-
2,637
601
2,637
-
3,238
abacus property group
20. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
The Group maintains a range of interest-bearing loans and borrowings. The sources of funding are spread over a number
of counterparties and the terms of the instruments are negotiated to achieve a balance between capital availability and
cost of debt.
Bank loans – A$ 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 February 2011 to November 2016. The
effective fixed interest rate of borrowings which are covered by fixed rate swaps (including bank margins and fees on
both drawn and undrawn amounts) was 8.79% at year end (2009 8.06%), 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, certain inventory and certain property, plant
and equipment as detailed in note 14 to note 16. Approximately 51.2% (2009: 76.3%) of available bank debt facilities
were subject to fixed rate arrangements with a weighted average term to maturity of 6.00 years (2009: 4.69 years). APG’s
weighted average interest rate as at 30 June 2010 was 8.00% (2009: 7.31%).
77
notes to the financial statements
30 June 2010
20. 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
2010
$’000
625,892
(341,891)
284,001
2009
$’000
612,442
(392,219)
220,223
2010
$’000
4,200
(2,297)
1,903
PARENT
2009
$’000
5,335
(3,238)
2,097
The Group’s debt facilities are secured first mortgage facilities – they are collateralised by the Group’s real estate assets.
Full utilisation of available facilities would require additional real estate assets to collateralise draw downs. Facility readily
available at reporting date based upon (a) existing secured property assets and (b) a targeted Group Gearing ratio (Total
Debt – Cash / Total Assets – Cash) of between 30% to 35% is $132.7 million. Cash on hand at reporting date is $21.8
million.
During the year, the Group has extended the contractual maturity date of the Working Capital Facility, which is part of
the Club Facility, from May 2010 to February 2011 (the same date as the Core facility) and the contractual maturity date of
the Abacus Independent Retail Property Trust Facility from December 2010 to June 2015. The Club Facility 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.
Also as part of the extension of the Working Capital Facility, the Group has transferred out $70m of the Working Capital
Facility to establish a new three year facility maturing in December 2012. This facility is secured against amounts which
are not part of the club collateral pool which enables the Group to access additional liquidity including for future
acquisition opportunities.
Please also refer to Note 24 Capital Management for more information on key banking covenants of the refinanced and
renewed facilities.
21. DERIVATIVES
Interest rate swaps
Financial instruments (ADIFII guarantee)*
*refer to Note 28 for details of the guarantees provided to ADIFII
CONSOLIDATED
2010
$’000
26,320
4,000
30,320
2009
$’000
37,035
3,000
40,035
2010
$’000
125
4,000
4,125
PARENT
2009
$’000
313
3,000
3,313
7878
abacus property group
22. 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
Other financial assets (fair value)
Cash and cash equivalents
CARRYING AMOUNT
CONSOLIDATED
2010
$’000
8,842
225,775
186,435
35,392
21,792
478,236
2009
$’000
22,093
219,949
201,600
18,250
9,124
471,016
2010
$’000
1,341
-
44,153
-
996
46,490
PARENT
2009
$’000
6,889
-
42,334
-
275
49,498
As at 30 June 2010, the Group had the following concentrations of credit risk:
•
•
Secured property loans: 76% of secured property loans is represented by 5 borrowers (2009: 69% of secured
property loans was represented by 5 borrowers);
Interim Funding to Related Funds: represented by the Abacus Diversified Income Fund II (working capital facility and
secured note facility) $96.9 million, and the Abacus Hospitality Fund $66.6 million (2009: Abacus Diversified Income
Fund II $82.7 million, Abacus Hospitality Fund $70.6 million); and
• Other financial assets (fair value) is represented by 2 issuers (2009: 1 issuer).
79
notes to the financial statements
30 June 2010
22. FINANCIAL INSTRUMENTS (CONTINUED)
(i) Credit Risk (continued)
Secured property loans and interim funding
The following table illustrates grouping of the Group’s investment in secured loans and interim funding. 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 JUNE 2010
Consolidated
less: provisioning
Total Consolidated
Parent
less: provisioning
Total Parent
TOTAL
$’000
414,410
(2,200)
412,210
44,153
-
44,153
ORIGINAL
TERM (1)
$’000
398,398
(1,000)
397,398
44,153
-
44,153
EXTENDED
TERM
$’000
2,718
-
2,718
-
-
-
PAST DUE
TERM (2)
$’000
10,141
-
10,141
-
-
-
IMPAIRED (3)
$’000
3,153
(1,200)
1,953
-
-
-
(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 JUNE 2009
Consolidated
less: provisioning
Total Consolidated
Parent
less: provisioning
Total Parent
TOTAL
$’000
467,658
(24,016)
443,642
49,223
-
49,223
ORIGINAL
TERM
$’000
422,905
(12,200)
410,705
49,223
-
49,223
EXTENDED
TERM
$’000
-
-
-
-
-
-
PAST DUE
TERM (1)
$’000
28,806
(441)
28,365
-
-
-
IMPAIRED
$’000
15,947
(11,375)
4,572
-
-
-
(1) For loans with past due terms all are less than two years old and are expected to be recovered.
8080
abacus property group
22. 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 $1.0 million for interim
funding to related funds and a $4.9 million debt forgiveness of the ADIFII loan as part of the restructuring (2009: $5.1 million
for secured property loans and $11.0 million impairment for ADIFII) 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 2009
Impairment loss recognised (secured property loans)
Impairment loss recognised (interim funding)
Impairment loss recognised (ADIFII)
Impairment loss utilised / written back
Balance at 30 June 2010
CONSOLIDATED
PARENT
2010
$’000
24,016
-
1,000
4,900
(27,716)
2,200
2009
$’000
8,511
5,099
-
11,000
(594)
24,016
2010
$’000
-
-
-
-
-
-
2009
$’000
-
-
-
-
-
-
81
notes to the financial statements
30 June 2010
22. FINANCIAL INSTRUMENTS (CONTINUED)
(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.
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
1 YEAR
OR LESS
OVER 1 YEAR
TO 5 YEARS
$’000
$’000
$’000
$’000
OVER
5 YEARS
$’000
17,066
17,066
13,001
4,065
-
383,567
427,734
262,258
140,400
25,076
400,633
444,800
275,259
144,465
25,076
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
1 YEAR
OR LESS
OVER 1 YEAR
TO 5 YEARS
OVER
5 YEARS
$’000
$’000
$’000
$’000
$’000
395
7,721
8,116
395
9,153
9,548
395
5,153
5,548
-
4,000
4,000
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
1 YEAR
OR LESS
OVER 1 YEAR
TO 5 YEARS
$’000
$’000
$’000
$’000
-
-
-
OVER
5 YEARS
$’000
19,948
19,948
13,272
6,676
-
429,764
587,366
175,126
402,240
10,510
449,712
607,314
188,398
408,916
10,510
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
1 YEAR
OR LESS
OVER 1 YEAR
TO 5 YEARS
$’000
$’000
$’000
$’000
466
3,551
4,017
466
5,697
6,163
466
1,694
2,160
-
4,004
4,004
OVER
5 YEARS
$’000
-
-
-
CONSOLIDATED
30 JUNE 2010
Liabilities
Trade and other payables
Interest bearing loans and borrowings
incl derivatives#
Total liabilities
PARENT
30 JUNE 2010
Liabilities
Trade and other payables
Interest bearing loans and borrowings
incl derivatives^
Total liabilities
CONSOLIDATED
30 JUNE 2009
Liabilities
Trade and other payables
Interest bearing loans and borrowings
incl derivatives
Total liabilities
PARENT
30 JUNE 2009
Liabilities
Trade and other payables
Interest bearing loans and borrowings
incl derivatives
Total liabilities
# Includes derivative of a principal value of $30.3 million.
^ Includes derivative of a principal value of $4.1 million.
8282
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iii) Currency Risk
There is no significant currency risk related to investments in $NZD and $SGD. The following table shows the currency
risk associated to the Group’s investment in options denominated in £GBP.
CONSOLIDATED
Assets
Other financial assets
Investment in securities
Total assets
AUD
GBP
2010
$’000
15,391
10,491
25,882
2009
$’000
18,250
13,995
32,245
2010
$’000
8,721
5,944
14,665
2009
$’000
8,891
6,818
15,709
The following sensitivity is based on the foreign risk exposures in existence at the balance sheet date.
At 30 June 2010, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant,
post tax profit and equity would have been affected as follows:
JUDGEMENTS OF REASONABLY
POSSIBLE MOVEMENTS:
CONSOLIDATED
AUD/GBP + 10%
AUD/GBP - 10%
POST TAX PROFIT
HIGHER/(LOWER)
EQUITY HIGHER/(LOWER)
2010
$’000
(2,353)
2,876
2009
$’000
(2,931)
3,583
2010
$’000
-
-
2009
$’000
-
-
83
notes to the financial statements
30 June 2010
22. 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
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
30 JUNE 2010
$’000
$’000
$’000
$’000
$’000
$’000
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
Interest bearing liabilities - other
Related party loans
Derivatives
Payables
Total financial liabilities
Weighted average interest rate*
PARENT
30 JUNE 2010
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*
* Rate calculated at 30 June.
8484
21,792
-
-
21,792
4.35%
166,991
9,916
-
-
-
176,907
7.25%
-
-
38,858
38,858
12.98%
174,900
-
-
-
-
174,900
8.79%
-
-
108,273
108,273
12.65%
-
-
264,127
264,127
8.36%
-
8,842
3,153
11,995
21,792
8,842
414,411
445,045
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,440
30,320
17,066
48,826
341,891
9,916
1,440
30,320
17,066
400,633
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
996
-
17,332
18,328
4.14%
1,122
-
-
1,122
7.22%
-
-
9,902
9,902
15.00%
1,175
-
-
1,175
8.79%
-
-
-
-
-
-
-
-
-
-
13,079
13,079
15.00%
-
-
-
-
-
1,341
3,840
5,181
-
4,125
395
4,520
996
1,341
44,153
46,490
2,297
4,125
395
6,817
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iv) Interest rate risk (continued)
CONSOLIDATED
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
30 JUNE 2009
$’000
$’000
$’000
$’000
$’000
$’000
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
Interest bearing liabilities - other
Related party loans
Derivatives
Payables
Total financial liabilities
Weighted average interest rate*
PARENT
30 JUNE 2009
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*
* Rate calculated at 30 June.
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%
-
-
131,476
131,476
8.44%
-
22,093
12,703
34,796
9,124
22,093
421,549
452,766
232,686
-
-
-
232,686
8.11%
-
-
-
-
-
-
510
37,035
22,948
392,220
510
37,035
22,948
60,493
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
3,466
3,779
3,238
313
3,466
7,017
85
notes to the financial statements
30 June 2010
22. 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 on a pre-tax basis:
CONSOLIDATED
30 JUNE 2010
Financial assets
Financial liabilities
PARENT
30 JUNE 2010
Financial assets
Financial liabilities
CONSOLIDATED
30 JUNE 2009
Financial assets
Financial liabilities
PARENT
30 JUNE 2009
Financial assets
Financial liabilities
CARRYING
AMOUNT
FLOATING
$’000
21,792
203,227
CARRYING
AMOUNT
FLOATING
$’000
18,328
1,122
CARRYING
AMOUNT
FLOATING
$’000
9,124
147,465
CARRYING
AMOUNT
FLOATING
$’000
27,918
986
AUD
-1%
+1%
PROFIT
$’000
(218)
(12,972)
EQUITY
$’000
-
-
PROFIT
$’000
218
10,385
EQUITY
$’000
-
-
AUD
-1%
+1%
PROFIT
EQUITY
PROFIT
EQUITY
$’000
(183)
(111)
$’000
-
-
$’000
183
87
$’000
-
-
AUD
-1%
+1%
PROFIT
$’000
(91)
(10,011)
EQUITY
$’000
-
-
PROFIT
$’000
91
(8,510)
EQUITY
$’000
-
-
AUD
-1%
+1%
PROFIT
EQUITY
PROFIT
EQUITY
$’000
(279)
(101)
$’000
-
-
$’000
279
86
$’000
-
-
The analysis for the interest rate sensitivity of financial liabilities includes derivatives.
86
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(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 $1.82 million (2009: $3.7 million).
(vi) Fair values
The fair value of the Group’s financial assets and liabilities are approximately equal to that of their carrying values.
As at 30 June 2010, the Group has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires
the classification of fair value measurements into the following hierarchy:
(a)
(b)
Level 1
Quoted prices (unadjusted) in active market for identical assets or liabilities;
Level 2
Inputs other than quoted prices included in level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
(c)
Level 3
Inputs for the asset or liability that are not based on observable market data.
87
notes to the financial statements
30 June 2010
22. FINANCIAL INSTRUMENTS (CONTINUED)
(vi) Fair values (continued)
The following table presents the Group’s assets and liabilities measured and recognised as at fair value at 30 June 2010.
Comparative information has not been provided as permitted by the transitional provisions of the new amendments.
CONSOLIDATED
Current
Investment in securities - listed
Total current
Non-current
Investment in securities - unlisted
Investment in options
Derivative liabilities
Total non-current
PARENT
Current
Investment in securities - listed
Total current
Non-current
Investment in securities - unlisted
Derivative assets and liabilities
Total non-current
There were no transfers between Levels 1, 2 and 3 during the year.
LEVEL 1
LEVEL 2
LEVEL 3
2010
$’000
2,189
2,189
2010
$’000
-
-
2010
$’000
-
-
-
-
-
-
-
-
(26,320)
(26,320)
11,666
35,392
(4,000)
43,058
TOTAL
2010
$’000
2,189
2,189
11,666
35,392
(30,320)
16,738
2,189
2,189
-
-
-
-
-
-
125
125
-
-
2,189
2,189
12,291
(4,000)
8,291
12,291
(3,875)
8,416
88
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(vi) Fair values (continued)
The following table is a reconciliation of the movements in unlisted securities, options and derivatives classified as level
3 for the year ended 30 June 2010. Comparative information has not been provided as permitted by the transitional
provisions of the new rules.
CONSOLIDATED
opening balance as at 30 June 2009
fair value movement through the income statement
purchases
redemptions
closing balance as at 30 June 2010
PARENT
opening balance as at 30 June 2009
fair value movement through the income statement
purchases
redemptions
closing balance as at 30 June 2010
Determination of fair value
UNLISTED
SECURITIES
$’000
15,813
(4,083)
11
(75)
11,666
OPTIONS
$’000
18,391
(3,000)
20,000
-
35,391
ADIFII
DERIVATIVE
$’000
(3,000)
(1,000)
-
-
(4,000)
UNLISTED
SECURITIES
ADIFII
DERIVATIVE
$’000
13,020
(731)
77
(75)
12,291
$’000
(3,000)
(1,000)
-
-
(4,000)
TOTAL
$’000
31,204
(8,083)
20,011
(75)
43,057
TOTAL
$’000
10,020
(1,731)
77
(75)
8,291
The fair value of listed securities is determined by reference to the quoted bid price of the entity at balance date. The fair
value of unlisted securities is determined by reference to the net assets of the underlying entities.
The fair value of derivative financial instruments is determined in accordance with generally accepted pricing models by
discounting the expected future cash flows at prevailing market interest rates. In determining the fair value of the ADIFII
derivative the growth in net operating income, property valuations and the expected rate of conversion from “A Class”
to “B Class” units has also been taken into account.
The fair value of interest rate swaps is determined using a generally accepted pricing model on a discounted cash flow
analysis using assumptions supported by observable market rates.
The fair value of the options is determined using generally accepted pricing models including Black-Scholes and
adjusted for specific features of the options including share price, underlying net assets and property valuations and
prevailing exchange rates.
Sensitivity of Level 3
Sensitivities to reasonably possible changes in non-market observable valuation assumptions would not have a material
impact on the Group’s reported results.
89
notes to the financial statements
30 June 2010
23. CONTRIBUTED EQUITY
(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 2009
- treasury units
- equity raising
- distribution reinvestment plan
- less transaction costs
Securities on issue at 30 June 2010
CONSOLIDATED
2010
$’000
2009
$’000
1,110,517
-
1,110,517
1,009,577
(22,080)
987,497
CONSOLIDATED
2010
$’000
53,009
-
53,009
PARENT
2009
$’000
47,064
-
47,064
PARENT
STAPLED SECURITIES
STAPLED SECURITIES
NUMBER
‘000
VALUE
$’000
NUMBER
‘000
VALUE
$’000
1,509,622
-
266,192
37,738
-
1,813,552
987,497
4,720
106,265
14,272
(2,237)
1,110,517
1,509,622
-
266,192
37,738
-
1,813,552
47,064
-
5,240
705
-
53,009
90
abacus property group
24. CAPITAL MANAGEMENT
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 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.
On 26 August 2010 the Group re-financed its $480m CLUB facilities with a new 3 year $400 million syndicated bank debt
facility (which replaced Abacus’ existing $400 million core facility maturing in February 2011) and a renewed 3 year $80
million working capital bank debt facility with ANZ (which also had a February 2011 maturity).
A summary of the Group’s key banking covenants both at year end and post year end are set out below:
COVENANT / RATIO
Nature of facilities
ICR
Group ICR
Total Gearing
COVENANT
REQUIREMENT–
AS AT 30 JUNE 2010
Secured, non
recourse 1
COVENANT
REQUIREMENT– POST
REFINANCING
Secured, non
recourse 1
KEY DETAILS
The Group has no unsecured facilities
Net rental income / Interest expense
(including fixed rate swaps)
Group EBITDA (ex fair value P&L) / Total
Interest Expense (including fixed rate swaps)
1.5
2.0
50%
Total Liabilities (net of cash) / Total Tangible
Assets (net of cash)
1.5
2.0
45%
LVR
50% to 65% 2
50% to 65% 2
Drawn Loan / Bank accepted valuations
Gearing ratio on a
look through basis
60%
60%
Total Gearing plus gearing from proportional
consolidation of equity accounted investments
(1) There are no market cap covenants.
(2) The 65% LVR for the new Working Capital Facility is maintained but will step down to 62.5% from 1 July 2011 and to 60.0% from 1 July 2012.
(3) The weighted average maturity of the Group’s bank facilities increased from 1.3 years to 3.1 years with the refinancing of the CLUB facilities. Total
.......bank facilities remains unchanged at $625.9 million.
91
notes to the financial statements
30 June 2010
25. 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
2010
%
2009
%
Abacus AAVT Pty Ltd
Abacus Airways NZ Trust
Abacus Bankstown Property Trust
Abacus CIH Pty Ltd
Abacus Dry Dock Lodge
Abacus Finance Pty Limited
Abacus Forrest Lodge Trust
Abacus Funds Management Limited
Abacus HP Operating Co Pty Ltd
Abacus HP Trust
Abacus Jigsaw Investments Pty Ltd
Abacus London Trust
Abacus Mariners Lodge 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 SP Note Facility Pty Ltd
Abacus Storage Funds Management Limited
Abacus Unitel Pty Ltd
Abacus Unitel Trust
Abacus 343 George St Trust
Abacus (343 George St) Trust
Abacus (343 George St Sydney) Pty Ltd
Amiga Pty Limited
Childcare Trust 2
Main Street Pakenham Unit Trust
Bay Street Brighton Unit Trust
Clarendon Property Investments Pty Ltd
Corporate Helpers Pty Ltd
92
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
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
-
-
-
-
2010
$’000
-
4,750
-
-
-
-
-
2009
$’000
-
4,750
-
-
-
-
-
8,448
8,448
-
-
90
-
-
-
-
90
-
-
17,500
908
17,500
908
-
-
-
-
-
-
21,320
37,725
10
-
929
-
11,867
30,000
30,000
-
-
-
-
5,767
-
-
-
-
-
-
-
-
41,796
37,725
10
-
929
-
11,867
-
-
-
-
-
-
-
-
-
abacus property group
25. RELATED PARTY DISCOSURES (CONTINUED)
(a) Subsidiaries (continued)
ENTITY
Abacus Group Projects Limited and its subsidiaries
EQUITY INTEREST
CARRYING VALUE
2010
%
2009
%
2010
$’000
2009
$’000
Abacus Property Pty Ltd
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 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 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
100
50
50
50
50
50
50
51
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
500
-
-
-
-
-
-
500
-
-
-
-
-
2,414
9,163
13,803
17,731
462
50,464
17,799
22,401
12,683
12,493
10,024
8,204
33,116
2,946
31,176
1,469
-
2,229
-
3,785
-
5,916
28,192
-
14,107
58,365
52,327
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
93
notes to the financial statements
30 June 2010
25. RELATED PARTY DISCOSURES (CONTINUED)
(a) Subsidiaries (continued)
ENTITY
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 26.
EQUITY INTEREST
CARRYING VALUE
2010
%
100
100
100
75
100
100
100
100
100
100
2009
%
100
100
100
75
100
100
100
100
100
100
2010
$’000
7,615
-
5,082
24,747
32,679
5,746
-
5,097
10,190
5,348
2009
$’000
8,816
-
5,082
25,964
32,679
6,859
-
5,097
11,951
6,160
94
abacus property group
25. RELATED PARTY DISCOSURES (CONTINUED)
(d) Transactions with related parties
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
Interest revenue from related funds
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
Management fees received / receivables from associates
Distributions received / receivable from associates
Distributions received / receivable from joint ventures
Interest revenue from associates
Interest revenue from joint ventures
CONSOLIDATED
2010
$’000
2009
$’000
2010
$’000
PARENT
2009
$’000
-
2,954
890
11,192
-
12,000
30,000
5,218
1,044
5,164
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
240
641
2,176
-
4,186
6,583
2,311
-
-
7,322
3,338
1,559
(9,965)
(7,203)
13,762
6,639
86,558
122,699
(78,357)
(66,400)
-
-
-
-
-
-
-
68,574
(120,769)
-
-
-
-
-
315
949
95
notes to the financial statements
30 June 2010
25. RELATED PARTY DISCOSURES (CONTINUED)
(d) Transactions with related parties (continued)
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
(7,653)
-
2,534
(369)
(5,757)
6,704
1,299
-
-
-
-
(498)
562
-
(9,956)
(14,299)
9,260
-
(47,104)
-
(19,336)
8,245
-
-
-
-
-
-
-
(5,757)
(13,949)
6,704
1,299
-
-
-
-
372
-
(4,854)
-
-
-
Terms and conditions of transactions
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 $15.9 million was recognised by the Group as part of
the restructuring of ADIFII.
Guarantees provided to Joint Venture project related parties are disclosed in Note 28.
(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 $0.1 million
(2009: $0.2 million) was paid to the firm for legal services relating to corporate issues, lease documentation and sales
contracts.
96
abacus property group
26. KEY MANAGEMENT PERSONNEL
(a) Compensation for Key Management Personnel
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Security-based payments
(b) Security holdings of Key Management Personnel
Securities held in Abacus Property Group (number)
30 JUNE 10
Directors
J Thame
F Wolf
W Bartlett
D Bastian
D Bluth
M Irving
L Lloyd
Executives
R de Aboitiz
T Hardwick
P Strain
E Varejes
Total
CONSOLIDATED
PARENT
2010
$
6,217,280
326,187
44,508
-
6,587,975
2009
$
4,208,148
592,483
44,165
1,289,742
6,134,538
2010
$
-
-
-
-
2009
$
-
-
-
-
BALANCE
1 JULY 09
PURCHASES
/(SALES)
BALANCE
30 JUNE 10
200,756
14,073,226
16,000
5,000,000
286,953
80,651
55,925
76,064
114,096
98,032
500,000
55,349
42,899
-
276,820
14,187,322
114,032
5,500,000
342,302
123,550
55,925
383,237
100,000
100,000
309,875
20,606,623
52,696
(100,000)
50,701
-
889,837
435,933
-
150,701
309,875
21,496,460
97
notes to the financial statements
30 June 2010
26. KEY MANAGEMENT PERSONNEL (CONTINUED)
(b) Security holdings of Key Management Personnel (continued)
Securities held in Abacus Property Group (number) (continued)
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
BALANCE
1 JULY 08
DISPOSED
VIA ESLP
PURCHASES /
(SALES)
BALANCE
30 JUNE 09
55,378
9,718,338
8,000
4,503,497
20,000
35,387
790,925
-
(2,881,725)
-
-
-
-
(785,925)
654,938
1,750,000
1,309,875
654,938
1,309,875
20,811,151
(654,938)
(1,700,000)
(1,309,875)
(654,938)
(1,309,875)
(9,297,276)
145,378
7,236,613
8,000
496,503
266,953
45,264
50,925
383,237
50,000
-
100,000
309,875
9,092,748
200,756
14,073,226
16,000
5,000,000
286,953
80,651
55,925
383,237
100,000
-
100,000
309,875
20,606,623
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.
(c) Loans to Key Management Personnel
There were no loans to individuals that exceeded $100,000 at any time in 2010 or in the prior year.
98
abacus property group
26. KEY MANAGEMENT PERSONNEL (CONTINUED)
(d) 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 childcare centres. During the year the Group lent $0.97 million to CCG1 Pty Limited and the
balance at 30 June 2010 was $23.16 million. Interest of $2.48 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
2010
$’000
2009
$’000
147
1,040
23,158
23,305
2,480
19,081
20,121
3,405
99
notes to the financial statements
30 June 2010
27. SECURITY BASED PAYMENT PLANS
(a) Recognised security payment expenses
The expense recognised for employee services received during the year is as follows:
Expense arising from equity-settled payment transactions
CONSOLIDATED
2009
2010
$’000
$’000
-
1,542
2010
$’000
-
PARENT
2009
$’000
-
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 on 30 June 2009 resulted in the bringing forward of any remaining share based payment
expenses to that year.
The EPAP is no longer in operation and ceased on 30 June 2009.
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 were to be repaid with the proceeds of securities that were acquired under the ESLP.
This plan was accounted for and valued as an option plan, with the contractual life of each option equivalent to the
estimated loan life. The repayment of the loans was treated as an increase to Contributed Equity.
The ESLP is no longer in operation and ceased on 30 June 2009.
100
abacus property group
27. SECURITY BASED PAYMENT PLANS (CONTINUED)
(c) Summary of options
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in,
security options:
Outstanding at the beginning of the year
Forfeited during the year
Cancellation of the plans
Outstanding at the end of the year
Exercisable at the end of the year
28. COMMITMENTS AND CONTINGENCIES
2010
No.
-
-
-
-
-
2010
WAEP
-
-
-
-
-
2009
No.
23,180,139
(584,458)
(22,595,681)
-
-
2009
WAEP
1.87
1.81
1.87
-
-
The Group has provided the following guarantees to the Abacus Diversified Income Fund II (“ADIFII” or the “Fund”):
UNIT TYPE
Existing Units $1.00 (Class A)
Converted Units $1.00 (Class B)
New Units $0.75 (Class C)
CASH DISTRIBUTION YIELD GUARANTEE
8.5% pa until 30 June 2011 and based on
the actual distributable cash of the Fund
thereafter.
8.5% pa until 30 June 2011 and 8.0% pa plus
indexation thereafter (indexed in line with
inflation in each year after 1 July 2011) over
the Fund term (30 June 2016)
Initially 8.0% pa based on an issue price of
$0.75 per Unit, indexed in line with inflation
each year from 1 July 2010, over the Fund
term (30 June 2016)
CAPITAL RETURN GUARANTEE
$1.00 per unit at 30 September 2013
if the net assets per Unit are less
than $1.00 at 30 June 2013.
$1.00 per Unit at Fund termination
(effective on 30 June 2016).
$0.75 per Unit at Fund termination
(effective on 30 June 2016).
The Underwritten Distributions will be achieved by deferring the interest on the Working Capital Facility or by deferring
any of the fees payable to the Group 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 at the expiration of the Fund
term or on a winding up of the Fund.
The Underwritten Capital Return will apply to all ADIFII units on issue as at 1 July 2013 (Class A) on or after 1 July 2016
(Class B and C). At the time the Group will make an offer to acquire each Class A unit for $1.00, or ensure that each
holder of Class B units receives back their $1.00 initial capital and each holder of Class C units receives back their $0.75
initial capital. The Underwritten Capital returns can be satisfied at the Group’s discretion (Class A) or unitholder discretion
with respect to Class B and C units through either a payment in cash or by the Group issuing stapled securities in APG
to an equivalent value based on the 10 day volume weighted average price of APG’s stapled securities over the period
ending on 30 June 2013 or prior to issuing stapled securities as applicable.
After 30 June 2016 the Group will, if required, set off all or part of the principal of the second secured Working Capital
Facility provided to ADIFII in satisfaction of the Group’s obligations in respect of the Underwritten Capital Return.
28. COMMITMENTS AND CONTINGENCIES (CONTINUED)
101
notes to the financial statements
30 June 2010
The fair value of these guarantees at 30 June 2010 has been determined, a liability has been recognised and the
movement has been taken up as a charge in the Income Statement.
APG has a series of Funds for which it acts as responsible entity and Manager. Typically, APG provides working capital
loans to these Funds to finance seed capital and seeks to make them self-funding through a combination of bank debt
and equity. From time to time, APG provides additional funding to these Funds, via these working capital loans, which
are used by the Funds for working capital purposes or asset purchases. Certain of these funds are presently in the
process of refinancing current banking facilities and there may be consequential working capital loans provided to the
Funds for which APG would obtain security.
Certain of the working capital loans have a right of redraw for amounts previously repaid, which at 30 June 2010, totalled
$24.1 million (2009: $22.6 million).
There has been no other material change to any contingent liabilities or contingent assets.
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
PARENT
2010
$’000
744
747
-
1,491
2009
$’000
741
1,491
-
2,232
2010
$’000
-
-
-
-
2009
$’000
-
-
-
-
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
PARENT
2010
$’000
54,282
99,945
118,317
272,544
2009
$’000
66,748
131,601
146,512
344,861
2010
$’000
259
289
-
548
2009
$’000
334
558
20
912
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.
102
abacus property group
28. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Capital and Other commitments
At 30 June 2010 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(1)
- property refurbishment costs
- unused portion of loan facilities to outside parties
After one year but not more than five years
- other
CONSOLIDATED
2010
$’000
42,000
2,050
2,523
46,573
2009
$’000
49,500
1,820
5,544
56,864
22,500
69,073
1,535
58,399
2010
$’000
PARENT
2009
$’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.
103
notes to the financial statements
30 June 2010
29. 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
- other assurance and compliance services
CONSOLIDATED
2010
$
2009
$
2010
$
PARENT
2009
$
550,000
37,000
587,000
456,000
34,500
490,500
62,500
-
62,500
135,000
-
135,000
30. EVENTS AFTER THE BALANCE SHEET DATE
On 26 July 2010 the Group entered into a conditional agreement with the Kirsh Group to acquire Birkenhead Point
Shopping Centre and Marina, Drummoyne, NSW (the Centre) for a total consideration of $174 million as equal tenants
in common. Settlement is anticipated to occur in late 2010 with $45 million of the purchase price made available by the
vendor as interest-free vendor finance for a period of 3 years.
On 23 August 2010 the Group accepted an offer to purchase 343 George St for $78 million. Settlement is anticipated to
occur in September 2010.
Other than as disclosed above or in note 24 (Group re-financing) 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.
104
abacus property group
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 2010 and
of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(b); and
(c) 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 2010.
On behalf of the Board
John Thame
Chairman
Sydney, 27 August 2010
Frank Wolf
Managing Director
105
directors’ declaration
30 June 2010
106
106
107
corporate governance report
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, Bastian 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.
Given the nature of the Group’s business and current
stage of development, the Board considers its
current composition provides the necessary skills
and experience to ensure a proper understanding
of, and competence to deal with, the current and
emerging issues of the business to optimise the
financial performance of the Group and returns to
securityholders. Details of the skills, experience and
expertise of each director are set out on pages 7 and 8.
Directors’ independent advice
Directors may seek independent professional advice
on any matter connected with the performance of their
duties. In such cases, the Group will reimburse the
reasonable costs of such advice.
108
corporate governance report
abacus property group
PRINCIPLE 2: STRUCTURE THE BOARD TO
ADD VALUE (CONTINUED)
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.
The Managing Director may not go on to become
Chairman.
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 9 of the annual report.
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.
An annual review has taken place in the reporting period
in accordance with the policy.
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 and Risk Committee.
The Audit and Risk 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 9. Other directors
that are not members of the committee, the external
auditor and other senior executives attend meetings by
invitation.
The Audit and Risk 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 and Risk
Committee Charter.
The Audit and Risk 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.
109
corporate governance report
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.
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 9.
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.
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 and Risk
Committee for review.
The Audit and Risk 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 and Risk Committee and the Board to assess any
necessary changes.
110
110
ASX additional information
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 2010..
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
Perpetual Limited
one vote per stapled security
12,732
646
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
620,300,523
127,834,350
111
ASX additional information
SECURITIES REGISTER
NUMBER OF SECURITIES
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 – over
TOP 20 LARGEST SECURITYHOLDINGS
SECURITYHOLDERS
1 Calculator Australia Pty 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 Limited
6 J P Morgan Nominees Australia Limited
7 RBC Dexia Investor Services Australia Nominees Pty Limited
8 Cogent Nominees Pty Limited
9 Citicorp Nominees Pty Limited
10 RBC Dexia Investor Services Australia Nominees Pty Limited
11 Citicorp Nominees Pty Limited
12 Australian Executor Trustees Limited
13 Anz Nominees Limited
14 Avanteos Investments Limited
15 RBC Dexia Investor Services Australia Nominees Pty Limited
16 Kalambay Limited
17 Suncorp Custodian Services Pty Limited
18 Bond Street Custodians Limited
19 Investec Bank (Australia) Limited
20 Equity Trustees Limited
NUMBER OF SECURITYHOLDERS
557
1,421
1,756
8,192
806
NUMBER OF
SECURITY
% OF ISSUED
SECURITIES
620,300,523
143,720,104
109,883,306
91,796,743
78,307,069
52,390,874
41,642,429
27,903,000
23,773,848
17,227,319
16,294,158
15,148,533
13,417,092
12,611,452
11,482,247
11,347,509
9,181,769
8,496,573
7,420,035
7,219,663
33.494
7.760
5.933
4.957
4.228
2.829
2.249
1.507
1.284
0.930
0.880
0.818
0.724
0.681
0.620
0.613
0.496
0.459
0.401
0.390
112
112
ABACUS PROPERTY GROUP
GLOSSARY
At 30 June 2010, 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.
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 PROPERTY GROUP
Level 34 Australia Square
264-278 George Street
Sydney NSW 2000
T +61 2 9253 8600
F +61 2 9253 8616
E enquiries@abacusproperty.com.au
www.abacusproperty.com.au
Abacus Group Holdings Limited
Abacus Trust
Abacus Income Trust
Abacus Group Projects Limited
annual financial report 2010
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