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2013
abacus property group
annual report
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AbAcus ProPerty GrouP
GLossAry
At 30 June 2013, Abacus Property Group comprised Abacus
Trust, Abacus Income Trust, Abacus Storage Property Trust,
Abacus Group Holdings Limited, Abacus Group Projects
Limited and Abacus Storage Operations Limited. The Group
structure is illustrated below.
Abacus Abacus Funds Management Limited,
the responsible entity of the trusts
AGHL Abacus Group Holdings Limited
AGPL Abacus Group Projects Limited
AGHL has been identified as the parent entity of the Group.
The financial reports of the Group for the year ended 30 June
2013 comprise the consolidated financial reports of AGHL
and its controlled entities, AT and its controlled entities,
AGPL and its controlled entities, AIT and its controlled
entities, ASOL and its controlled entities, ASPT and its
controlled entities, Abacus Hospitality Fund and its controlled
entities, Abacus Diversified Income Fund II and its controlled
entities, Abacus Miller Street Holding Trust and its controlled
entity and Abacus Wodonga Land Fund.
AIT
Abacus Income Trust
APG
Abacus Property Group
ASOL
Abacus Storage Operations Limited
ASPT Abacus Storage Property Trust
AT
Abacus Trust
Group Abacus Property Group
AbAcus ProPerty GrouP
Listed Entities:
AGHL/AGPL/ ASOL/AT/AIT/ASPT
Abacus Property Group has significant influence over these
managed funds and the adoption of AASB 10 results in the
consolidation of these funds.
Investment
Portfolio
Office
Storage
Retail
Industrial
Other
Property
Ventures
Funds
Management
Abacus
Hospitatlity
Funds
Abacus
Miller Street
Fund
ADIF II
Abacus
Wodonga Land
Fund
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01
annual report 2013
Chairman & Managing Director’s report
Senior executive team
Sustainability
Who is Abacus
Directors report
Board members
Financial highlights
Recent acquisitions
CONTENTS
02
06
08
12
15
18
20
22
52
54
55
56
58
59
60
141
142
144
149
Directors’ declaration
Independent audit report
Corporate governance report
ASX additional information
Auditor’s independence declaration
Consolidated income statement
Consolidated statement of other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flow
Notes to the financial statements
02
abacus property group
WhO IS ABACuS
Currently Abacus has total assets of
$1.8 billion and a market capitalisation
of over $1 billion and is included in the
S&P/ASX 200 Index.
Abacus Property Group is a diversified
property group that specialises
in private equity style real estate
investments. We seek to invest
our capital in core plus property
opportunities to drive long term total
returns through the property cycle.
We look for Australian assets in gateway
cities that we actively manage through
the asset cycle to increase prospective
total returns. Where appropriate, we
realise mature assets and redeploy
capital into the next generation of
higher growth opportunities.
Abacus has a core plus, asset-centric
business model where it is not the
quantity of assets that is important,
but rather the nature of each asset
we control and the opportunities they
present. Abacus’ disciplined property
selection process maintains a firm
focus on fundamental real estate
value. Our experience has shown that
strict adherence to our fundamental
investment criteria enables Abacus
to acquire assets well and provide
opportunities for outperformance while
minimising downside risk to equity.
1996
2001
2002
2012
Abacus was formed in 1996
as a boutique property
syndicator, providing
property based investment
opportunities for retail
clients of financial planners.
In 2001, Abacus merged
a number of property
syndicates to form the
diversified Abacus Property
Group.
In late 2002, Abacus listed
the Group on the ASX.
Since listing, Abacus has
continued to expand its
business to become one of
Australia’s larger listed real
estate investment trusts.
In 2012, Abacus merged with
its largest unlisted managed
fund, Abacus Storage Fund.
The merger added $330 million
of quality storage assets to the
Group’s portfolio.
03
annual report 2013
Our philOsOphy
Our investment objective is to
provide our investors with reliable and
increasing returns. We look for property
assets that are capable of providing
growth in:
• rental income; and
• asset value
as a result of our diligent active
management.
Abacus is first and foremost a property
investor seeking to extract value
through active management.
The diagram on this page depicts
the investment process that Abacus
undertakes.
Abacus has three integrated property
businesses built on our core expertise
in accessing properties and projects
and actively managing them to realise
their full value.
Our flat corporate structure and
business model supports strong
synergies across our businesses and
contributes to the overall success of the
businesses and the Group.
In total, Abacus has $2.1 billion of
assets under management.
PROPERTy
ACquISITION
Properties that have
realistic prospects
for increased capital
growth through active
managment
ASSET
MANAgEMENT
Significant asset
management
experience is applied
to drive returns
INVESTMENT
REAlISATION
Where appropriate
asset is returned
to market
04
abacus property group
WhO IS ABACuS
CONTINuED
investment pOrtFOliO
prOperty ventures
Funds management
Abacus participates in a range of
projects by combining our capital
and property expertise with the
regional or sector-specific expertise
of our business partners.
Abacus has historically offered a
wide range of high quality investment
solutions designed to meet the
needs of different groups of retail
investors. The Group has now
redirected its focus towards wholesale
third party capital.
Abacus Property Group holds a
diversified investment portfolio of
primarily commercial, storage, industrial
and retail properties. Rental income
from these properties is the largest
contributor to the earnings of the
Group. Abacus’ disciplined property
selection process maintains a firm
focus on fundamental real estate
value. The Group’s property portfolio
is primarily located on the Eastern
seaboard of Australia and New Zealand.
annual report 201305
5
annual report 2013
199 geOrge street
BrisBane Qld
abacus property group
06
FINANCIAl
hIghlIghTS
pleasing grOWth and COrrelatiOn BetWeen
COre FinanCial metriCs
25.4
FY10
28.6
FY11
8.5
FY12
61.1
FY13
64.9
FY10
72.2
FY11
76.8
FY12
83.8
FY13
statutOry prOFit ($ milliOn)
underlying prOFit ($ milliOn)
64.6
FY10
66.8
FY11
79.6
FY12
105.7
FY13
52.8
FY10
61.8
FY11
67.8
FY12
74.1
FY13
CashFlOW FrOm OperatiOns ($ milliOn)
distriButiOns ($ milliOn)
07
annual report 2013
2012
$8.5m
$76.8m
$79.6m
19.9c
16.5c
3.2x
$1.7bn
$1.0bn
$2.34
28.6%
36.8%
$567m
3.0yrs
7.3%
2013
$61.1m
$83.8m
$105.7m
23.7c
16.5c
3.3x
$1.8bn
$1.0bn
$2.32
28.4%
36.6%
$565m
2.1yrs
6.1%
FinanCial highlights
Consolidated statutory net profit1
Underlying profit2
Cashflow from operations
Cashflow from operations per security
Distributions per security3
Interest over ratio4
BalanCe sheet metriCs
Total assets
Net tangible assets5
NTA per security
Gearing6
Covenant gearing7
Total debt drawn
Debt term to maturity
Average cost of debt8
1 Excludes non controlling interests.
2 Calculated in accordance with the AICD/Finsia principles for reporting underlying profit.
3 Includes distributions declared post period end (1 July 2013, 2 July 2012).
4 Calculated as underlying EBITDA divided by interest expense.
5 Excludes external non-controlling interests pf $43.8 million (2012: $51.0 million).
6 Bank debt minus cash divided by total assets minus cash.
7 Total liabilities (net of cash) divided by Total Tangible Assets (net of cash).
8 Weighted average base rate plus margin on drawn amount plus facility line fees.
abacus property group
08
CHAIRMAN & MANAGING
DIRECTOR’S REPORT
09
annual report 2013
dear seCurityhOlders
We are very pleased
tO present tO yOu Our
2013 annual repOrt.
Once again, Abacus Property Group
has delivered a strong result for the
financial year. It was pleasing to see
consistent growth of our underlying
profit and cashflow from operations
which illustrates the strength of our
diversified business. These metrics
remain our key focus as we believe
they best illustrate the health of the
business.
Abacus is a long term investor in
property. We are focused on the
performance of our portfolio over
the investment cycle and will not be
drawn into short term asset acquisitions
if they do not represent fundamental
property value.
The underlying profit for the financial
year to 30 June 2013 was $83.8 million,
a 9.1% increase over the prior year.
Abacus also improved its cashflow
from operations to $105.7 million
from $79.6 million a year before.
These results underwrote Abacus’s
distributions to securityholders of
approximately $74.1 million and
allowed for capital to be re-invested to
further grow returns to securityholders.
We achieved a 19.4% total
securityholder return over the year.
Since 2010, 96% of securityholder
distributions have been paid from
recurring revenue sources. Abacus
has, over this time, focused on driving
revenues from recurring sources to
support and grow our distributions.
Surplus profits provide Abacus with
additional capital to be re-invested into
business activities to drive longer term
returns to securityholders.
The accompanying annual financial
report includes our operating and
financial review (OFR) on pages 22
to 33. The objectives of the OFR are
to provide our securityholders with a
narrative and analysis to supplement
the financial report and assist in
understanding our operations, financial
position, business strategies and
prospects. It contains information you
need to make an informed assessment
of the Group and we encourage you to
read the OFR in its entirety.
Fy13 FinanCial results
The main financial and capital metrics
are presented below:
• Statutory profit increased to
$61.1 million, up from $8.5 million
in the 2012 financial year
• Underlying profit increased to
$83.8 million, up 9.1%
• Cashflow from operations increased
to $105.7 million, up 32.8% to 23.7
cents per security
Abacus’ total assets remained fairly
stable over the year at $1.8 billion,
with net assets of $1.0 billion. The
Group’s net tangible asset backing per
security improved slightly to $2.32 from
$2.30 in December 2012.
The Abacus balance sheet continues
to be strong with gearing remaining
low at 28.4%, well within our target
gearing limit of 35%. Abacus has no
significant debt expiries until late 2014
and an average debt term to maturity
of over two years.
We continue to improve and reweight
the balance sheet with a focus on
disciplined capital management
strategies. We anticipate Abacus’
weighted average interest rate will
remain relatively stable as current
capacity is utilised and anticipate it
should be no greater than 6.5% over
the 2014 financial year.
1 Underlying profit and earnings per security are a non-AIFRS measure that the Group uses to assess performance and distribution levels.
They are calculated in accordance with the AICD/Finsia principles.
2 Cashflow from operations of Abacus excludes cost of inventory sales of $47.9 million.
10
abacus property group
ChAIRMAN & MANAgINg
DIRECTOR’S REPORT
CONTINuED
OvervieW OF Our
Operating divisiOns
investment pOrtFOliO
47 commercial
properties valued
at $888 million
47 storage
facilities valued
at $373 million
94 investment
properties valued
at $1.26 billion
•
Commercial
portfolio
occupancy of
92.8%
Commercial
portfolio rent
growth3 of 3.4%
•
Retail portfolio
continues to
deliver strong
results
Storage
portfolio
occupancy:
83.5%
Storage facility
rental gross rent:
$237 per m2
Our investment portfolio generated
a $63.8 million EBITDA4 result for
the financial year. This result was
below 2012 and was attributable
to the delayed reinvestment of sales
proceeds into new acquisitions.
Our commercial portfolio metrics have
largely remained consistent with the
previous year despite a weakening
economic environment. The slight
decrease in occupancy and WALE
was also largely due to the impact of
sales and acquisitions during the year.
The portfolio offers embedded long
term capital and earnings growth that
we are focused on delivering through
the property cycle.
The portfolio is diversified across
asset classes that are well located,
largely along the eastern seaboard in
major metropolitan areas. While some
geographic areas are challenging, we
nevertheless believe the geographic
diversification provides a level of
security and stability to the portfolio’s
property income and cashflows.
The Group is focused on maintaining
revenue and cashflows to support
securityholder distributions.
The storage portfolio has delivered
a consistent trading performance
across the portfolio providing resilient
underlying cashflows despite the
subdued economic environment
and a competitive storage market.
The Australian market has experienced
increased competition leading to
discounting by market participants.
As a result the portfolio experienced
a slight decrease over the year in
average gross rental to $237 from
$238 per m². Despite this fall in rate,
the portfolio continued to deliver
positive revenue growth of 0.5% pa
from the Australian portfolio and 4.5%
pa from the New Zealand portfolio
largely from an overall improvement
in occupancy.
While focused on improving occupancy
and rental growth from the storage
facilities, Abacus also sees the delivery
of expansion opportunities in the
current portfolio where strong demand
allows for low cost expansion as a core
focus to driving portfolio returns.
3 Like for like properties excluding those assets classified as development
4 Earnings before interest, depreciation, tax and amortisation
11
annual report 2013
prOperty ventures
The property ventures business
invests in projects that focus on
select residential and commercial
development opportunities in core
locations with experienced local joint
venture partners. Abacus has total
assets of $313 million in property
venture projects, reflecting only 17%
of the balance sheet assets but
provides potential for outperformance
as projects and investments complete.
The division generated a strong
EBITDA result, which was 5% above
that delivered in the previous year.
A site at Lewisham, which was part
of the RCL portfolio, was sold in
August 2012 for $48.5 million.
Our residential development projects
at Rosebery (Sydney, NSW) and Bay
Street (Brighton, VIC) made significant
progress during the year. Rosebery
was completed in May 2013. Our Bay
Street project is progressing well and is
currently ahead of schedule. Settlement
is anticipated by the end of the current
calendar year. Abacus also initiated a
number of new projects during the year
including Jack Road in Cheltenham VIC
which comprises a mixed townhouse
development of up to 160 residential
products and Carlton project in
Melbourne VIC, a high density
residential apartment development
of up to 190 units.
Funds management
The funds management business
generated a contribution of
$16.6 million for the year providing
a return of 7.8% on total funds invested
across the platform. This contribution
before fair value adjustments was
slightly below the 2012 financial year
as a consequence of the merger of the
Storage Fund.
sustainaBility
Abacus has always operated its
business activities in a sustainable
manner and with regard for the
natural environment. Abacus has now
enhanced its commitment in this area
by adopting a formal sustainability
protocol. The protocol is on page 15 of
the Annual Report. We have developed
a number of measures that will enable
us to monitor and benchmark the
sustainability performance of our assets.
We intend to report on these measures
in next year’s Annual Report.
Page 17 of this report highlights
one such example at our property
at 51 Allara Street in Canberra. Here
Abacus has completed an upgrade to
the building for a Government tenant
to include energy efficient lighting,
upgraded and efficient air conditioning
systems and a 60 place childcare
centre.
OutlOOk
Abacus has delivered a good result
that illustrates the strength of the
Abacus business, with a strong
underlying profit and cashflow from
operations. We have a clear focus on
activities that will support and generate
cashflow.
We believe the Abacus portfolio is
well placed to cope with the current
challenging conditions and we have
created a strong diversified asset base
with a clear strategy for major assets
and projects. Our income is diversified
by asset class, tenancy and geography.
We are long term property investors
seeking to develop, deliver and acquire
new opportunities to drive long term
securityholder returns.
Finally, we and the other members
of our Board would like to thank
you, our investors and our other
stakeholders for your continued
support. We are pleased with what we
have been able to achieve in light of
that and we are confident that we are
positioning Abacus well in order to
deliver strong long term total returns
to investors in the future. This would
not be possible without the dedication
and hard work of everyone at Abacus.
Therefore, on behalf of the Board,
we would like to thank our executive
team and all our staff.
John Thame
Chairman
Frank Wolf
Managing Director
abacus property group
12
RECENT
ACquISITIONS
01
33 Queen street and
199 geOrge street, BrisBane Qld
These properties were acquired
as one for $34 million in April 2013
and represented an initial yield of
9.4%. 33 Queen Street is an historic
seven level building with frontage to
the Queen Street Mall and immediately
adjoining and connected is 199 George
Street, a recently constructed modern
office and retail tower with frontage to
George Street. 33 Queen Street has an
unrivalled location at the top of Queen
Street Mall, on one of Brisbane’s best
corners. The heritage building has total
NLA of 3,313m2, including 1,290m2 of
retail space leased to Westpac Bank
and 2,023m2 leased to a number of
smaller tenants. Westpac Bank has
occupied the retail area for over
160 years. The building is almost fully
let. 199 George Street is a near new
2,769m2 ten level, A grade commercial
office building that connects to
all floors of the adjoining heritage
building. The property is approximately
90% occupied and has 16 car spaces.
13
annual report 2013
14
abacus property group
RECENT ACquISITIONS
CONTINuED
02
03
BrOWns rOad,
ClaytOn viC
This industrial property in Clayton was
acquired in May 2013 for $19.55 million.
The transaction represents a sale and
lease back for 10 years on triple net
terms and represented an initial yield
of 9.8%. The property comprises
31,873 sqm of improvements on
6.1 hectares of land. The property
represents a strong acquisition with
appropriate risk adjusted returns
providing an attractive yield and
triple net lease. The site’s location is
an established residential area 21km’s
SE from the Melbourne CBD, close
to local railway and transport nodes
and shopping and medical facilities
suggesting a residential rezoning,
with initial indications showing up
to 325 dwellings, may be the highest
and best use for the site at some time
in the future.
BaCChus marsh village shOpping Centre,
BaCChus marsh viC
This sub-regional shopping centre was
acquired for $31.6 million in June 2013.
The property is a well presented and
dominant convenience based shopping
centre located approximately 50km west
of the Melbourne CBD. The total site area
is 4.4 hectares of which 0.84 hectares is
vacant land with development potential.
The acquisition reflects $2,086psm of
gross lettable area representing strong
value metrics for an established centre in
a location illustrating good demographics
and an undersupply of supermarket
facilities. The shopping centre has a total
gross lettable area of 15,147sqm and is
anchored by a Coles supermarket.
The other major retail tenants include
Aldi, Target Country and Reject Shop.
The property provides great enhancement
opportunities to increase the net income
over the medium term via a renewed
leasing and re-positioning strategy,
with the vacant land allowing strong
development potential.
03
02
01
15
annual report 2013
SuSTAINABIlITy
sustainaBility
prOtOCOl
Abacus Property Group (Abacus) is a diversified A-REIT that specialises in investing in core plus property
opportunities across Australia. We seek to take advantage of value-adding opportunities to maximise
securityholder value, through the acquisition, re-development, refurbishment, re-positioning and
re-leasing of assets. Our core plus approach means that our assets are actively managed and often
undergo significant change over their lifecycle.
Abacus believes it is important to understand and respond to the environmental, social and governance
impacts of our business activities. We believe that integrating sustainability issues into our investment
decision-making and business operations is congruent with the responsibility we have to our
stakeholders.
We are committed to implementing sustainability practices in our investments, property management,
development activities and workplaces. We will use these practices to manage risks, create opportunities
and strengthen our operations. We have always applied an ethical approach to our business and we are
committed to:
• Ongoing communication with our stakeholders on environmental, social and governance issues.
• Incorporating environmental issues including climate change in our decision-making processes.
• Managing our buildings efficiently to conserve the use of limited natural resources.
• Supporting and developing our employees to use their skills and expertise to respond to the
sustainability challenges.
• Maintaining a safety-aware culture ensuring proper standards of workplace health and safety for our
staff, contractors and other users of, and visitors to, our properties.
We will work to implement these commitments over time having regard to the nature, context and
strategy of individual property assets and the interests of our stakeholders by:
• Developing and implementing appropriate systems to monitor and benchmark the sustainability
performance of our assets.
• Pursuing cost effective and efficient use of energy and water and waste reduction.
• Adopting sustainable design practices in our asset improvement and development projects where
appropriate.
• Reporting on our sustainability progress and performance.
• Implementing our commitment to sustainability in a practicable manner.
• Influencing our employees and other stakeholders to operate in a manner that supports our
sustainability commitments.
This protocol provides the foundation for Abacus’ commitment to sustainability. All our employees
are responsible for the implementation of this protocol, which will evolve over time in response to our
business needs and the reasonable expectations of our stakeholders.
Signed by:
Frank Wolf
Managing Director
16
abacus property group
SuSTAINABIlITy
CONTINuED
17
annual report 2013
DRET had also made enquiries
regarding childcare requirements
for its employees during its leasing
negotiation. Working with the tenant,
we were able to convert some
commercial internal and external space
into a brand new childcare centre.
The centre caters for 60 children and
provides a useful community service to
the building.
Our work at 51 Allara Street showcases
the ability of Abacus to work with
its tenants and properties to deliver
sustainable requirements where
required with regard to the natural
environment. In undertaking the
refurbishment and upgrade works
Abacus was able to secure a long term
high quality covenant on a 10 year lease
to 2021 and maintain the building’s
standing and desirability into the future.
Case study
51 allara street
CanBerra aCt
51 Allara Street was acquired by
Abacus Property Group in January
2008. The eight level office block
is centrally located in the Canberra
CBD in the major government office
precinct. When the property was
acquired it was leased to a number of
tenants including EY and the Australian
Taxation Office. With the property
facing upcoming lease expiries from EY
the ATO, Abacus looked to the future
and understood that significant private
and government sector tenants require
properties that satisfy their sustainability
requirements. We then undertook a
comprehensive review of the property’s
services. Abacus identified a number of
services in the building that could be
upgraded. These included lighting, lifts,
air conditioning, mechanical ventilation,
hot water systems and sub-metering of
equipment.
A complete modelling of energy usage
led to a plan for refurbishment that
would not only reduce energy usage
but also upgrade building services
which were approximately 20 years
old. Abacus commenced a substantial
refurbishment of the property in 2011
which included an upgrade to the
builders 3.5 star NABERS rating with
the aim of achieving a 4.5 star rating.
While the refurbishment was underway
Abacus negotiated an improved lease
with the Department of Resources,
Energy and Tourism to increase the
area it currently leased to include
all vacated space to approximately
8,000m² or approximately 65% of the
building’s lettable area for 10 years.
Abacus’ commitment to improving
the NABERS rating assisted in positive
leasing negotiations.
The major works on the above systems
includes the following:
• Conversion of lights in office areas
to T5 and low voltage lights in the
common areas plus the use of timers
and motion sensors to automatically
turn off excess lighting when not in
use;
• Upgrade of lifts including new traction
gearless motors which are more
efficient;
• Replacement of chillers with more
efficient chillers, installation of
variable speed drives on high
efficiency motors and upgrading
boiler burners;
• Installation of solar panels to generate
domestic hot water; and
• Sub-metering mains power to allow
for more efficient monitoring.
The works were completed in
November 2012 and the building has
since achieved a NABERS rating of
4.5 stars. These works dramatically
reduce the amount of energy required
across the property and not only save
ongoing costs but also the carbon
impact on the environment. Abacus
was able to access the Federal
Government’s Green Building Fund
program to assist in the cost of the
building upgrade. Additional fine
tuning of the building systems indicate
that the building may achieve a
NABERS rating of 5 stars when the next
assessment is undertaken in late 2013.
abacus property group
18
BOARD
MEMBERS
JOhn thame
Mr Thame is the Chairman and 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.
Frank WOlF
Dr Wolf is the Managing Director
and 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
the retirement and hospitality sectors.
He is also a director of HGL Limited,
a diversified public listed investment
company.
malCOlm irving
Mr Irving is a Non-Executive Director
and has over 40 years’ experience in
company management, including
12 years as Managing Director of CIBC
Australia Limited. He is also a director
of O’Connell Street Associates Pty
Ltd, Macquarie University Hospital and
is Chairman of Macquarie Graduate
School of Management.
19
annual report 2013
William J Bartlett
Mr Bartlett is a Non-Executive Director.
As a partner at Ernst & Young for
23 years, 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 Group Limited, GWA Limited,
Reinsurance Group of America Inc
and RGA Reinsurance Company of
Australia Limited. He is Chairman
of the Cerebral Palsy Foundation
of Australia.
myra salkinder
Mrs Salkinder is a Non-Executive
Director and is a senior executive
of the Kirsh Group. She has been
integrally involved over many years
with the continued expansion of the
Kirsh Group’s property and other
investments, both in South Africa
and internationally. Mrs Salkinder
is a director of various companies
associated with the Kirsh Group
worldwide.
abacus property group
20
SENIOR EXECuTIVE
TEAM
Cate aarOns (nOt piCtured)
head of strategy
rOB BaulderstOne
Chief Financial Officer
CamerOn laird
Joint director property ventures
Cate is responsible for strategy for the
Group and for its managed funds.
Rob is responsible for the Group’s
and its managed funds financial
management, financial reporting and
treasury functions.
Cameron is responsible for the Group’s
joint venture developments and fostering
new property ventures. In addition he is
responsible for the asset management
and development activities across the
Group’s retail portfolio.
phil petersOn
associate director – investments
peter strain
director property
Phil is responsible for all investment
and development activities in addition
to the general day to day management
of the Group’s Storage assets.
Peter is responsible for the asset
management activities of the Group.
neil summerField
head of investor relations
Neil is responsible for investor relations,
communications and marketing
activities to the Group’s listed and
wholesale stakeholders.
21
annual report 2013
gavin leChem
director specialised Capital
JOhn l’estrange
Joint director property ventures
len llOyd
managing director abacus property services
Gavin is responsible for matching the
capital requirements of the Group’s
current and future opportunities with
those of the investment community.
John is responsible for building the
Group’s property ventures business
by overseeing current projects and
fostering new opportunities.
Len overviews management and
administration activities of the Group’s
property portfolio. Len is also involved
in acquisitions, sales and development
activities of the portfolio.
alan thake
associate director – investments
ellis vareJes
Chief Operating Officer and Company secretary
Ellis is responsible for the Group’s
transactional and business functions.
Alan is the fund manager for the
Groups other unlisted funds including
the Abacus Hospitality Fund and ADIF
II. He is responsible for investment,
development and capital management
activities in addition to the general day
to day management of the funds.
abacus property group
22
DIRECTORS’
REPORT
30 JuNE 2013
The Directors of Abacus Group Holdings Limited (“AGHL”), Abacus Funds Management Limited (“AFML”) – the Responsible
entity of Abacus Trust (“AT”) and Abacus Income Trust (“AIT”), Abacus Group Projects Limited (“AGPL”), Abacus Storage
Funds Management Limited (“ASFML”) – the Responsible Entity of Abacus Storage Property Trust (“ASPT”) and Abacus
Storage Operations Limited (“ASOL”) present their report for the year ended 30 June 2013.
prinCipal aCtivities
The principal activities of Abacus Property Group were investment in office, retail and industrial properties, investment in
self-storage facilities, participation in property ventures and developments and property funds management. There has
been no significant change in the nature of these activities during the year.
Operating and FinanCial revieW
The operating and financial review is intended to convey the Directors’ perspective of Abacus Property Group and its
operational and financial performance. It sets out information to assist securityholders to understand and interpret the
financial statements prepared in accordance with Australian International Financial Reporting Standards (“AIFRS”) included
in this report. It should be read in conjunction with the financial statements and accompanying notes.
Listed Structure / Entities
The listed Abacus Property Group is a diversified property group that operates predominantly in Australia. It comprises
AGHL, AT, AGPL, AIT, ASPT and ASOL (collectively “Abacus”) and its securities trade on the Australian Securities Exchange
(“ASX”) as ABP. Abacus was listed on the ASX in November 2002 and its market capitalisation was over $1 billion at 30 June
2013.
Shares in AGHL, AGPL and ASOL and units in AT, AIT and ASPT have been stapled together so that none can be dealt
with without the others and are traded together on the ASX as Abacus securities. An Abacus security consists of one share
in AGHL, one unit in AT, one share in AGPL, one unit in AIT, one share in ASOL and one unit in ASPT. A transfer, issue or
reorganisation of a share or unit in any of the component parts requires, while they continue to be stapled, a corresponding
transfer, issue or reorganisation of a share or unit in each of the other component parts.
AGHL, AGPL and ASOL are companies that are incorporated and domiciled in Australia. AT, AIT and ASPT are Australian
registered managed investment schemes. AFML is the Responsible Entity of AT and AIT and ASFML is the Responsible
Entity of ASPT. Both AFML and ASFML are incorporated and domiciled in Australia and are wholly-owned subsidiaries
of AGHL.
Abacus Property Group Consolidation
The application of AASB10 by Abacus results in the consolidation of Abacus Hospitality Fund, Abacus Diversified Income
Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund (the “Group”). This is due to the combination
of Abacus’ role as responsible entity, variable returns arising from its collective equity and loan investments in these funds,
and certain guarantees.
AGHL has been identified as the parent entity of the Group. The financial reports of the Group for the year ended 30 June
2013 comprise the consolidated financial reports of AGHL and its controlled entities, AT and its controlled entities, AGPL
and its controlled entities, AIT and its controlled entities, ASOL and its controlled entities, ASPT and its controlled entities,
Abacus Hospitality Fund and its controlled entities, Abacus Diversified Income Fund II and its controlled entities, Abacus
Miller Street Holding Trust and its controlled entity and Abacus Wodonga Land Fund.
The principal activities of Abacus that contributed to its earnings during the course of the year ended 30 June 2013 included:
• investment in office, retail and industrial properties to derive rental and fee income;
• investment in self-storage facilities to derive storage fee income;
• participation in property ventures and developments to derive interest income and capital profits; and
• property funds management to derive fee income and equity returns.
23
annual report 2013
Operating and FinanCial revieW (COntinued)
These activities are reported through our four core reportable segments of Property, Storage, Property Ventures and Funds
Management, respectively.
Abacus is also a member of the S&P/ASX 200 A-REIT index (ASX:XPJ), a sub-index of the S&P/ASX 200 index that contains
the listed vehicles classified as A-REITs. Abacus is the only dedicated core plus investor in the XPJ index and offers some
differentiation to the market providing a more active management model to the other members of the XPJ index which are
focused on rent collection or funds management.
OuR STRATEgy
Abacus’ objective is to provide securityholders with strong and stable cash backed distributions from a diversified portfolio
of property exposures that provides genuine potential for capital growth. Our strategy is to invest Abacus’ capital into
core plus properties and take advantage of value adding opportunities to drive long term total returns and maximise
securityholder value. Abacus does this through the acquisition, development and active management of property assets.
In particular:
• We take advantage of our specialised knowledge and market position as the only listed core plus investor.
• We drive value through active management of the asset portfolio and through the reinvestment of proceeds from the
sales of mature or low growth core plus assets, assets that have realised their core plus potential and assets that require
a disproportionate investment of management time relative to their value or potential.
• We are committed to simplifying our balance sheet and redeploying realised capital into accretive core plus property
investments that are expected to yield 12-15% per annum equity total returns over time.
• Our core plus presence and track record has facilitated joint ventures with a number of sophisticated global third party
capital providers, and we are actively working within this market to expand our capacity.
Abacus seeks assets in capital cities, typically on the Eastern seaboard of Australia and New Zealand that are mispriced by
the market and which we believe are capable of both cashflow and capital growth. Abacus generally invests in commercial
assets up to $100 million in value. These assets are usually B-Grade assets in good core locations in major trading or CBD
areas, as they generally offer more attractive core plus and enhancement characteristics and therefore better opportunities
to deliver enhanced returns. Our philosophy with self-storage properties is focused on Australia and New Zealand and
includes regional locations.
gROuP RESulTS SuMMARy
The Board monitors a range of financial information and operating performance indicators to measure performance over
time. We use several measures to monitor the financial success of our overall strategy. The key measure is underlying profit.
Revenue ($ million)
Total income ($ million)
Statutory net profit excluding non-controlling interests ($ million)
Underlying profit^ ($ million)
Underlying profit per security^ (c)
Cashflow from operating activities ($ million)
Cashflow from operating activities per security (c)
Distributions per security^ (c)
Interest cover ratio
Weighted securities on issue^ (million)
^ Abacus
2013
281.0
305.9
61.1
83.8
18.76
168.8
37.82
16.50
3.3x
446.4
2012
236.1
250.0
8.5
76.8
19.17
86.3
21.51
16.50
3.2x
400.9
24
abacus property group
Operating and FinanCial revieW (COntinued)
The Group earned a statutory net profit excluding non-controlling interests of $61.1 million for the year ended 30 June 2013
(2012: $8.5 million). This profit has been calculated in accordance with Australian Accounting Standards. It includes certain
significant items that need adjustment to enable securityholders to obtain an understanding of Abacus’ underlying profit
of $83.8 million, a 9% increase on the 2012 underlying profit of $76.8 million.
The underlying profit reflects the statutory profit as adjusted in order to present a figure that reflects the Directors’
assessment of the result for the ongoing business activities of Abacus, in accordance with the AICD/Finsia principles for
reporting underlying profit. The consolidated profits / (losses) which belong to the securityholders of Abacus Hospitality
Fund, Abacus Diversified Income Fund II and Abacus Miller Street Holdings Trust are excluded as these profits cannot
and do not form part of the distributable income of Abacus. The calculation of underlying profit excludes items such as
unrealised fair value gains / (losses) on investment properties, unrealised provision gains / (losses), adjustments arising from
the effect of revaluing assets / liabilities carried at fair value (such as derivatives, financial instruments and investments), the
consolidated profits / (losses) of managed funds which do not form part of the assessable or distributable profits of Abacus
and other adjustments in the determination of underlying profit including transactions that occur infrequently and those that
are outside the scope of Abacus’ core ongoing business activities. Underlying profit is the basis on which distributions are
determined.
The reconciliation between the Group’s statutory profit excluding non-controlling interests and Abacus’ underlying profit is
as follows:
2013
$’000
2012
$’000
Consolidated statutory net profit after tax attributable to members of the Group
61,052
8,470
add back: Consolidated losses relating to the managed funds (these losses are excluded as
the profits/losses of the managed funds cannot and do not form part of the assessable and
distributable income of Abacus)
Net profit attributable to Abacus securityholders
Certain significant items:
Net (gain) / loss in fair value of investment properties held at balance date
Net change in fair value of investments and financial instruments held at balance date
Net loss in fair value of derivatives
Net change in fair value of property, plant and equipment, inventory and investment properties
included in equity accounted investments
Costs relating to the merger and restructuring of managed funds
Consolidation of Abacus Wodonga Land Fund
7,299
16,033
68,351
24,503
(7,484)
(3,752)
3,612
4,100
–
18,943
4,958
1,908
35,205
4,707
5,564
–
Underlying profit attributable to Abacus securityholders
83,770
76,845
Basic earnings per security (cents)
Basic underlying earnings per security^ (cents)
Distribution per security^ (cents – including proposed distribution)
Weighted average securities on issue (million)
^ Abacus
2013
13.68
18.76
16.50
446.4
2012
2.11
19.17
16.50
400.9
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED
25
annual report 2013
Operating and FinanCial revieW (COntinued)
The Australian property market throughout the period has been characterised by a dislocation between pricing and
underlying fundamentals. This is driven by strong demand for product by domestic and international buyers attributable
to large gaps between bond rates and property yields in institutional markets across the developed world. This demand
has largely ignored the weak fundamentals attributable to a slowdown in office activity and uncertain economic conditions.
As a result, Abacus proceeded cautiously with its acquisition strategy during the year as fundamental value was difficult
to find in traditional Sydney or Melbourne CBD markets. This provided a lag between asset realisations of $74 million of
sales of mature, lower growth assets early in the financial year and the purchase of $84 million of property (including equity
accounted properties) in the final months of the year as Abacus was able to re-invest the capital proceeds appropriately
outside of its traditional markets causing a drag on rental income.
The market outlook for the short term remains relatively subdued with a continuation of tough leasing conditions and
high market incentives, which will impact our ability to find attractive core plus opportunities. However, as demonstrated
towards the end of the current year, Abacus remained able to find sound, mispriced core plus properties. The medium term
expectations are anticipating an improvement driven by better economic conditions and white collar employment growth.
The increase in the Group’s statutory net profit excluding non-controlling interests was principally due to a movement of
$53 million in the fair value decrement to interest rate swaps in the prior year. The Group has sought to use these interest
rate swaps to fix the cost of its borrowings, manage interest cover covenants and align these borrowings with the net
revenue earned by the property portfolio.
When considering the underlying profit attributable to Abacus securityholders, the increase in profits by 9% was largely
driven by the completion of transactions including the sale of the Lewisham joint venture residential development project.
The impact of both year-end fair value adjustments and the Group’s performance on its financial position were as follows:
Total assets ($ million)
Gearing^ (%)
Net assets* ($ million)
Net tangible assets*^ ($ million)
NTA per security^ ($)
NTA per security post distribution^ ($)
2013
2,127.8
28.4
1,084.0
1,049.2
2.32
2.23
2012
2,106.8
28.6
1,056.9
1,016.1
2.34
2.25
^ Abacus – gearing calculated as debt minus cash divided by total assets minus cash.
* Excluding external non-controlling interests of $43.8 million (2012: $51.0 million).
The increase in net assets of the Group by 3% reflects the improved performance compared to the previous year. During the
year, the Group’s total assets increased slightly due to property acquisitions towards the end of the year, while the Group’s
total liabilities year on year remained constant.
The Group has $164.3 million of interest bearing loans and borrowings maturing in the coming year, of which $124.4 million
are in the managed funds. The Group is actively engaging with counterparties to either extend or refinance most of the
loans and $27.1 million of vendor finance loans will be repaid in the coming financial year. Despite the increase in current
liabilities and a reduction in investment properties earmarked for sale, net current assets remained positive at $72.3 million.
26
abacus property group
Operating and FinanCial revieW (COntinued)
Capital management
The Abacus balance sheet continues to be strong with gearing remaining low at 28.4%, well within our target gearing limit
of 35%. At 30 June 2013, Abacus had $108 million of available liquidity that provided capacity for use for up to $160 million
of accretive acquisitions. Following the settlement of Bacchus Marsh Village Shopping Centre for $31.6 million in late July,
Abacus’ acquisition capacity reduced to circa $125 million.
Abacus has no significant debt expiring until late 2014. We continue to improve and reweight the balance sheet to larger,
higher quality assets with a focus on disciplined capital management strategies. We anticipate Abacus’ weighted average
interest rate will remain relatively stable as current capacity is utilised and anticipate it should be no greater than 6.5% over
the next year.
CORE SEgMENT RESulTS SuMMARy
Business activities that specifically contributed to the Abacus’ operating performance and financial condition for the financial
year were:
Property
As at 30 June 2013, Abacus’ property segment delivered a result of $64.1 million for the year. This represented an increase
of 15.0% largely attributable to the impact of an increase in the fair value of investment properties offsetting the lost income
from significant asset sales at the beginning of the period. These properties were not replaced until the end of the year.
The 47 assets that make up the commercial portfolio (45 at the commencement of the year) had a total value of $888 million
at year end.
Pursuant to the 2013 portfolio valuation process 23 out of 37 of the commercial properties (excluding equity accounted
properties) or 73% by value were independently valued during the year to 30 June 2013. The remaining properties were
subject to internal review and, where appropriate, their values were adjusted. The valuation process resulted in a net full
year revaluation gain of $6.6 million (2012: $7.2 million charge) or 0.7% of assets. A significant contributor to this increase
was Ashfield Mall, Sydney NSW as a result of a combined improvement in capitalisation rate and rental income following
encouraging repositioning and re-leasing works.
During the year Abacus acquired an interest in the following properties:
Office
180 Queen Street, Brisbane QLD (25% indirect ownership)
Wharf 10, Sydney NSW (25% indirect ownership)
35 Boundary Street, Brisbane QLD (25% indirect ownership)
33 Queen Street, Brisbane QLD (100% direct ownership)
Industrial
Browns Road, Clayton VIC (100% direct ownership)
$7.4m
$8.0m
$10.1m
$34.0m
$19.6m
The acquisition of Bacchus Marsh Village Shopping Centre, Victoria for $31.6 million was announced on 24 June 2013
(although settlement occurred after year end).
Abacus sold five properties during the year, including Lennon’s Plaza in the Brisbane CBD, for $74.0 million which realised
a gain of $2.8 million.
The commercial portfolio is diversified across asset classes which are well located, largely along the eastern seaboard in
major metropolitan areas. While some geographic areas are challenging we nevertheless believe this provides a level of
security and stability to the portfolio’s property income and cash flows.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 27
annual report 2013
Operating and FinanCial revieW (COntinued)
53%
NSW
17%
VIC
14%
QLD
8%
ACT
8%
SA
45%
OFFICE
39%
RETAIL
16%
INDUSTRIAL
& OTHER
COMMERCIAL PORTFOLIO: $888 MILLION
COMMERCIAL PORTFOLIO: $888 MILLION
Commercial portfolio
• $888 million of commercial properties across 47 assets (including equity accounted properties)
• Portfolio capitalisation rate: 8.45%
• Portfolio occupancy: 92.8%
• Like for like rental growth of 4.4%
• Weighted average lease expiry (“WALE”) profile of 4.0 years.
Abacus’ commercial portfolio metrics have largely remained consistent with FY12, that is, the metrics remain robust despite
a weakening economic environment. The portfolio offers embedded long term capital and earnings growth that Abacus is
focused on delivering through the property cycle.
The portfolio has approximately 16% of leases up for renewal over the next year to 30 June 2014. This is consistent with
prior periods where between 10-20% of leases were due for renewal, and this level or near term expiry is consistent with the
length of our WALE and business model. As illustrated in the table below, Abacus has a long and successful track record of
leasing up near term expiries and maintaining occupancy thereby mitigating perceived risk to cashflows and distributions.
KEY LEASING METRICS
Period opening occupancy
Impending years’ vacancy
Total space leased during year
Period close occupancy
FY10
90.3%
14%
FY11
94.6%
21%
FY12
92.8%
13%
FY13
94.3%
19%
55,556m²
44,982m²
82,565m²
42,243m²
94.6%
92.8%
94.3%
92.8%
FY14
92.8%
16%
–
–
Notwithstanding our strong track record, the office leasing environment, as we have mentioned, during the current year
has been challenging, particularly in South East Queensland. This is expected to continue into the coming year. Market
expectation on incentives for new leases has risen to circa 30% in Sydney. These factors combined with poor business
confidence will continue to create challenges to achieving positive rental growth and occupancy.
We believe Abacus’ office portfolio is well suited to these challenging conditions. The portfolio has limited exposure to full
floor or multi-floor tenants, and is configured more for multi-tenanted floors. We have found the potential cost (financial
and time) of relocating to another property in the same location often outweighs the benefit of a cheaper rent. Our tenants
are also strongly connected to the property’s location which is traditionally the reason they initially leased the property
and results in a positive predisposition to remain. Due to the multi-tenanted floor structure we also have the ability to work
proactively with our tenants to contract or expand and adjust their space requirements.
Abacus is focused on maintaining revenue and cashflows to support securityholder distributions but nevertheless being
conscious of the market’s leasing requirements and competitive offerings.
28
abacus property group
Operating and FinanCial revieW (COntinued)
Contribution from Third Party Capital
Abacus has continued to grow its third party capital joint ventures and envisages the platform being an integral component
of Abacus’ future strategy. Abacus typically acquires 25% to 50% of the assets and our capital partners own the balance.
Management of the property remains with Abacus and as a result we are able to leverage our capital to gain greater
exposure to a higher number of core plus assets. This leads to greater earnings from fees and rental income. We will focus
on driving our third party strategy to expand our capital base to add to the $570 million of high quality assets that Abacus
has acquired with its joint venture partners since 2009.
Storage
As at 30 June 2013, Abacus’ storage portfolio delivered a result of $24.4 million for the year. This represents an increase on
the FY12’s result of $12.6 million and can be attributed to the impact of a full year’s contribution from the storage portfolio.
Portfolio assets totalled $373 million across a total portfolio of 47 assets, an overall increase of two assets during the period.
Pursuant to the 2013 valuation process 24 storage assets out of 47 or 54% by value were independently valued during the
year to 30 June 2013. The remaining properties were subject to internal review and, where appropriate, their values were
adjusted. The valuation process resulted in a net full year revaluation gain of $0.9 million (2012: $2.3 million gain) or 0.2%
of assets.
The storage portfolio is well diversified in Australia and New Zealand.
27%
VIC
21%
NZ
19%
QLD
17%
ACT
16%
NSW
STORAGE PORTFOLIO: $373 MILLION
• $373 million of storage assets
• Portfolio capitalisation rate: 9.2%
• Occupancy: 81.8%
• Rental gross rent: $237 per m²
A consistent trading performance across the storage portfolio has continued to deliver resilient underlying cashflows
despite the subdued economic environment and a competitive storage market. The Australian market has experienced
competition leading to increased discounting from other market participants during the year. The portfolio experienced
a slight decrease over the year in gross rental to $237 from $238 per m² as a result. Despite this fall in rate, the portfolio
continued to deliver positive revenue growth via the Australian portfolio at 0.5% pa and the New Zealand market at 4.5% pa
largely from an overall improvement in occupancy.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 29
annual report 2013
Operating and FinanCial revieW (COntinued)
While focused on improving occupancy and rental growth, Abacus also sees the delivery of expansion opportunities in the
current portfolio where strong demand allows for low cost expansion as a core focus to driving portfolio returns. Abacus
currently has a number of store expansions and new store developments that will utilise existing Abacus property holdings
to grow the storage platform. These include:
• Expansion of our store at Riccarton, NZ which will be completed by December 2013. It will provide around 3,000m² of new
fitout over 2 levels.
• Acquisition of the neighbouring property to our Blacktown, NSW facility which settled in June 2013 providing an additional
3,300m² of gross floor area. We will look to integrate this with the existing storage operation to expand and provide a mix
of storage and warehouse space until demand warrants full conversion to storage.
• Castle Hill, NSW: Development approval has been obtained to develop a new facility. This will deliver a new facility of circa
3,500m² on completion once fully developed. We anticipate trading to commence during FY14.
• Wodonga, VIC: A development application has been lodged with council to develop a new facility on our land. This should
deliver circa 3,000m² of net lettable area once fully developed.
• Villawood, NSW: A development application has been lodged with council in one tenancy of an Abacus industrial
property. This should deliver circa 2,000m² as part of stage one, with potential to grow the facility as demand requires.
Property Ventures
The Property Ventures business invests in projects that focus on select residential and commercial development
opportunities in core locations with experienced local joint venture partners. Abacus has total assets of $325 million in
property venture projects, an increase of $69 million from the previous year. Abacus initiated a number of new projects
during the year including:
• Jack Road, Cheltenham VIC. A mixed townhouse development of up to 160 residential products.
• Carlton, Melbourne VIC. A high density residential apartment development of up to 190 units.
The Property Ventures division generated a result of $30.4 million for the year, an increase of 43% to FY12 result of $21.3
million following strong transactional profits in the year. A site at Lewisham, which was part of the RCL portfolio, was sold
in August 2012 for $48.5 million. The sale contributed $6.3 million to the division’s result. Our residential development
projects at Rosebery (Sydney, NSW) and Bay Street (Brighton, VIC) made significant progress during the year. Rosebery was
completed in May 2013 with Abacus generating a total profit of over $5 million. Our Bay Street project is progressing well
and is currently ahead of schedule. It remains on target for settlement by the end of the current calendar year.
Funds Management
The funds management business generated a result of $16.6 million for the year providing a return of 7.8% on total funds
invested across the platform. This result before fair value adjustments was slightly below the FY12 result of $18 million, which
is consistent with a reduction of fee and interest income by virtue of the merger of the Storage Fund in FY12 and a reduction
in assets under management. Abacus continues to manage these unlisted funds to try to optimise the returns with selective
sales of assets where opportunity and market conditions allow.
The progress of the management for each of the funds is set out in the non-core segment results summary is as follows.
30
abacus property group
Operating and FinanCial revieW (COntinued)
NON-CORE SEgMENT RESulTS SuMMARy
As a result of AASB10, the managed funds are consolidated into the Group financial statements and the Group’s statutory
profit includes the financial performance of these funds. These funds are treated as non-core segments as the assets of the
funds are not directly owned by Abacus securityholders and do not contribute directly to Abacus’ underlying profit and
distributable income.
An overview of the financial performance of each of the funds for the year ended 30 June 2013 is as follows:
Abacus Hospitality Fund (AHF)
AHF owns four hotels: Rydges Tradewinds in Cairns, North Queensland with 246 rooms; Rydges Esplanade in Cairns, North
Queensland with 242 rooms; Novotel Twin Waters Resort on the Sunshine Coast, Queensland with 374 rooms and Chateau
on the Park, Christchurch, New Zealand with 192 rooms.
The Queensland market remains difficult. Domestic and overseas visitor numbers are lower than in previous years because
of the strong Australian dollar (although recent weakening should improve overseas visitor numbers). There are however
some signs of improvement in the Cairns market with a pick-up in demand from Japanese tourists which had declined in
previous years after the Japanese tsunami natural disaster. The Novotel Twin Waters Resort on the Sunshine Coast has
experienced a reduction in revenue largely due to a weak corporate conference market. AHF has exchanged contracts
to purchase a 7ha parcel of land adjacent to the hotel for $1.3 million which is currently used for car parking. The land was
previously leased from the Crown.
The Chateau on the Park hotel in Christchurch is presently undergoing a major repair to fix the damage caused by the 2011
earthquake. Repair work has continued for almost a year and is expected to be completed in this calendar year. A number
of rooms have consequently been unavailable resulting in lower hotel occupancy and room revenue compared with the
prior year corresponding period (the previous year benefited from high occupancy through demand from emergency and
construction workers assessing the earthquake damage throughout the Christchurch CBD). The total cost of the repair works
is around NZ$7.0 million. Most of the repair cost is expected to be covered by insurance, but there will be an assessment by
the insurer to determine if any of the works are improvements rather than repairs to damage caused by the earthquake.
The insurer also provided business interruption cover until the end of February 2013.
AHF has a bank facility expiring in June 2014.
Abacus Diversified Income Fund II (ADIF II)
At 30 June 2013 ADIF II owned 21 investment properties diversified by sector and state. The property portfolio was
approximately 95% occupied and had a weighted average lease term of 3.5 years. The portfolio occupancy and average
lease term have remained relatively stable during the year as a result of signing new leases and renewing expiring leases.
During the year ADIF II sold four properties for $18.4 million. Sales proceeds were used to acquire 37 Epping Road,
Macquarie Park, NSW for $17.4 million in March 2013. ADIF II also exercised the property option over 79-85 Melville Street,
Hobart, TAS in May 2013.
ADIF II has two bank facilities. One of the facilities with a drawn balance of $32.2 million expires in September 2013.
The other facility expires in November 2014.
Abacus Miller Street Holdings Trust (AMSHT)
AMSHT owns the commercial property at 50 Miller Street North Sydney. The ten floors of office space are leased by National
Australia Bank (“NAB”) and there are six retail tenancies on the ground floor. In accordance with the lease agreement, NAB
will hand back one floor of 750 m² around November 2013 and continue to lease the remaining nine floors until October
2017. NAB has sublet six of its nine floors to National Broadband Network (“NBN”).
The property is being marketed for sale in accordance with the recommendation from the responsible entity. It has a
weighted average lease expiry of approximately 4 years, a NABERs rating of 5, large contiguous floor space and it is well
located in North Sydney. The bank facility which was to expire in September 2013 has been extended to March 2014 to allow
for an orderly sales process to occur.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 31
annual report 2013
Operating and FinanCial revieW (COntinued)
Abacus Wodonga Land Fund (AWLF)
AWLF owns the estate known as White Box Rise located in Wodonga, Victoria. During the year 84 residential lots and 5
commercial lots were sold for combined gross proceeds of $15.7 million. Construction of new residential stages is ongoing
to maintain inventory for a range of markets including first home buyers, families, investors and retirees. In February 2013
Wodonga council opened its new aquatic centre located at White Box Rise. This will complement the estate’s primary school
and Woolworths shopping centre.
White Box Rise has approximately 700 residential lots left in accordance with the approved masterplan.
At 30 June 2013, the bank loan was drawn to $6.7 million against a facility limit of $12 million. The loan was re-drawn to
$10.5 million at August 2013, secured on the new residential lots constructed.
FuTuRE PROSPECTS AND RISKS
Abacus remains committed to growing its core segments and will achieve this through the acquisition and ownership of core
plus assets either through joint venture or directly on balance sheet. We will continue to actively manage our portfolio and
where appropriate recycle the mature, lower growth assets realising its improved capital position to help provide liquidity
to fund future acquisitions. We believe that increasing our allocation to core plus assets will improve recurring earnings to
support and grow our distributions and cash flows, optimising securityholder returns in the coming years. At 30 June 2013
Abacus held sufficient acquisition capacity to acquire a further $160 million of properties directly on the balance sheet.
This capacity can be further leveraged to acquire a larger number of assets through joint venture acquisitions. The total
portfolio is anticipated to deliver an increased level of rental income in the coming year as the full year impact of recent
acquisitions is captured. The on-going weakness in the leasing markets and the currently high level of incentives provided to
new tenants is likely to have a negative influence on revenue growth. Growth in revenue through further acquisitions will be
driven by our ability to access markets for core plus opportunities that deliver our required equity returns.
Abacus remains committed to delivering transactional returns to securityholders in addition to returns from recurring
income. The timing and nature of transactional returns are unpredictable and uncertain therefore making it difficult to
forecast.
There are a number of risk factors associated with property-related businesses that may have an impact on the financial
prospects of Abacus. Some of the key risks are outlined below. This outline is not exhaustive, and performance may be
affected adversely by any of these risk and other factors.
• Returns from investment – Returns from investment in real property and other related property exposures depend largely
on the amount of rental income that can be generated from the property, the expenses incurred in operations, including
the management and maintenance of the property, as well as changes in the market value of the property. Factors which
may adversely impact these returns include:
• the overall conditions in the national and local economy, such as changes in gross domestic product, employment
trends, inflation and interest rates;
• local real estate conditions, such as the level of demand for and supply of retail, commercial and industrial space;
• the perception of prospective tenants of the attractiveness, practicality and convenience of the rental space;
• changes in tenancy laws and planning approval requirements;
• external factors including major world events such as war, terrorist attacks or force majeure events;
• unforeseen capital expenditures;
• supply of new property and other investment assets;
• cost of property outgoings and recoverability from tenants; and
• investor demand/liquidity in investment markets.
32
abacus property group
Operating and FinanCial revieW (COntinued)
• Leasing terms and tenant defaults – The future financial performance of Abacus will depend, in part, on its ability
to continue to lease existing retail, office, industrial, storage and hotel space that is vacant or becomes vacant on
economically favourable terms. In addition, the ability to lease new asset space in line with expected terms will impact
on the financial performance of Abacus.
The ability of major tenants to meet their rental and other contractual commitments to Abacus (such as in situations of
insolvency or closure of their businesses) may have an adverse impact on the income from properties, which may result in
an adverse impact on the financial performance of Abacus.
This risk is managed through active asset management including ongoing liaison with tenants, regular maintenance and
refurbishment of properties to attract tenants, timely marketing programs for vacant space and due diligence on the
financial strength of prospective tenants prior to completing leases.
• Funding – The property investment and development sector is highly capital intensive. The ability of Abacus to raise
funds (equity and debt) on acceptable terms will depend on a number of factors including capital market conditions,
general economic and political conditions, Abacus’ performance, and credit availability. Changes in the cost of current and
future borrowings and equity raisings may impact the earnings of Abacus, and impact the availability of funding for new
acquisitions, projects or increase the refinancing risks as debt facilities mature.
Abacus uses debt funding provided by major banks. Any downgrade of Abacus’ bank credit assessment may increase
overall debt funding costs and adversely affect Abacus’ access to debt funding and the terms on which that funding is
offered.
Abacus staggers the debt maturity profile to reduce the concentration of refinancing risks at any point in time and obtains
funding through different banks to reduce credit and counterparty risks.
• Insurance – While Abacus will carry customary property insurance, there are types of losses (such as against floods and
earthquakes) that are generally not insured at full replacement cost or that are insured subject to larger deductibles or
insurance may not be able to be obtained. Additionally, Abacus will face risks associated with the financial strength of its
insurers to meet their indemnity obligations when called upon which could lead to an adverse effect on earnings.
Abacus mitigates this risk through the use of insurance brokers to seek to place cover with well rated insurers and
ensure that this insurance risk is diversified across various insurers. The diversification of the property portfolio across
geographical regions reduces the impact of any potential losses to Abacus.
• Environmental – Abacus may from time to time be exposed to a range of environmental risks including those resulting
from soil and water contamination, construction, cultural heritage and flora and fauna (e.g. native vegetation). In addition,
there is a risk that property owned by or projects undertaken by Abacus from time to time may be contaminated by
materials harmful to human health (such as asbestos or other hazardous materials). Also, returns may be adversely
impacted by changes to sustainability and environmental requirements and potentially costs associated with the carbon
pricing or the introduction of new regulations referable to the property industry.
In these circumstances, Abacus may be required to undertake remedial works on contaminated sites. Additional expenses
may result from changes in environmental regulations across the industry. Abacus as part of the property acquisition due
diligence engages experts to advise on any potential environmental risks and factors these into the acquisition price of the
property. Abacus also constantly monitors for any potential exposure in changes in environmental regulations to manage
any costs and impacts associated with these risks.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 33
annual report 2013
Operating and FinanCial revieW (COntinued)
• Treasury risk – Abacus manages its exposure to financial market risks by way of a formal treasury policy encompassing
among other things interest rate, funding, liquidity and credit risk management. Risk management is undertaken over
multiple timeframes with risk management activity reviewed on a regular basis by our Treasury Management Committee,
a formally documented senior management committee.
The overarching treasury policy parameters for interest rate and funding risk management reflect the objective of
balancing a desired level of certainty for interest expense against retaining an appropriate level of flexibility to respond
to external developments within not only domestic and global financial markets but also the wider domestic and global
economies. The Treasury Policy is reviewed on a regular basis by senior management and the Board. This is enhanced by
utilising the in-depth market knowledge of Abacus’ external independent treasury adviser.
With high levels of uncertainty not only in domestic financial markets but also in the Australasian residential and
commercial property sectors and the wider global economy, Abacus has focused its interest rate risk management activity
over the last financial year on the near-term, albeit within the overall interest rate risk management hedging requirements
of our Treasury Policy. Funding risk management has focused on the timely renegotiation of maturing facilities and where
possible seeks to increase the overall maturity profile.
signiFiCant Changes in the state OF aFFairs
The contributed equity of the Group increased $36.4 million to $1,268.4 million compared to $1,232.0 million as at 30 June
2012 due to securityholder participation in the distribution reinvestment plan.
Total equity increased by $19.9 million to $1,127.8 million at 30 June 2013 compared to $1,107.9 million at 30 June 2012
principally as a result of the performance of the Group.
On 30 June 2013 the Group consolidated Abacus Wodonga Land Fund in application of AASB10 – Consolidated Financial
Statements. This is due to the combination of Abacus’ role as responsible entity and variable returns arising from its
equity and loan investments in the fund. The fair value of the fund’s assets and liabilities were determined at the date of
consolidation and a loss of $18.9 million was recognised by the Group.
distriButiOns
Abacus’ distributions in respect of the year ended 30 June 2013 were $74.1 million (2012: $67.8 million), which is equivalent
to 16.5 cents per stapled security (2012: 16.5 cents). This distribution includes 8.25 cents ($37.4 million) that was paid on
15 August 2013. Further details on the distributions, including distributions by the managed funds are set out in note 9
of the financial statements.
signiFiCant events aFter BalanCe date
Other than as disclosed in this report and to the knowledge of directors, there has been no other matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may affect, the Group’s operations in
future financial years, the results of those operations or the Group’s state of affairs in future financial years.
likely develOpments and eXpeCted results
The Group will continue to pursue strategies that seek to improve total securityholder returns during the coming year as
described in the operating and financial review section of this report.
34
abacus property group
direCtOrs and seCretary
The Directors of AGHL, AFML, ASOL 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
Malcolm Irving
Myra Salkinder
Chairman (Non-executive)
Managing Director
Non-executive Director
Non-executive Director
(retired 14 November 2012)
Non-executive Director
Non-executive Director
The qualifications, experience and special responsibilities of the Directors and Company Secretary are as follows:
John Thame AIBF, FCPA – Chairman (non-executive)
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.
Mr Thame is Chairman of the Due Diligence Committee and a member of the Audit & Risk and Remuneration & Nomination
Committees.
Frank Wolf OAM, 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. He is also a director of HGL Limited, a
diversified publicly listed investment company.
Malcolm Irving AM, FCPA, SF Fin, BCom, Hon DLitt
Mr Irving is a Non-Executive Director and has over 40 years’ experience in company management, including 12 years
as Managing Director of CIBC Australia Limited. He is also a director of O’Connell Street Associates Pty Ltd, Macquarie
University Hospital and is Chairman of Macquarie Graduate School of Management.
Mr Irving is Chairman of the Audit & Risk and Compliance Committees and a member of the Due Diligence Committees.
William J Bartlett FCA, CPA, FCMA, CA(SA)
Mr Bartlett is a Non-Executive Director. As a partner at Ernst & Young for 23 years, 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 Group Limited, GWA Limited, Reinsurance Group of America Inc and RGA
Reinsurance Company of Australia Limited. He is Chairman of the Cerebral Palsy Foundation of Australia.
Mr Bartlett is Chairman of the Remuneration & Nomination Committee and a member of the Due Diligence and Audit & Risk
Committee.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 35
annual report 2013
direCtOrs and seCretary (COntinued)
Myra Salkinder MBA, BA
Mrs Salkinder is a Non-Executive Director and is a senior executive of the Kirsh Group. She has been integrally involved over
many years with the continued expansion of the Kirsh Group’s property and other investments, both in South Africa and
internationally. Mrs Salkinder is a director of various companies associated with the Kirsh Group worldwide.
Mrs Salkinder is a member of the Due Diligence and Remuneration & Nomination Committees.
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 ABP Group were as follows:
DIRECTORS
J Thame
F Wolf
W Bartlett
M Irving
ABP SECURITIES HELD
55,364
2,837,464
22,806
31,471
direCtOrs’ meetings
The number of meetings of directors (including meetings of committees of directors) of AGHL, AFML (the Responsible Entity
of AT and AIT), AGPL, ASFML (the Responsible Entity of ASPT) and ASOL, held during the year and the number of meetings
attended by each director were as follows:
BOARD
AUDIT & RISK
COMMITTEE
REMUNERATION & NOMINATION
COMMITTEE
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
J Thame
F Wolf
W Bartlett
D Bastian
M Irving
M Salkinder
14
14
14
6
14
14
14
14
14
6
14
14
4
4
4
4
4
4
4
4
2
2
1
2
2
2
1
2
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
the 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. The Group is a core plus investor, not a builder of new buildings. The Group endeavours to choose
sustainable options whenever that is a cost-effective outcome.
36
abacus property group
auditOrs independenCe deClaratiOn
We have obtained an independence declaration from our auditor, Ernst & Young, and such declaration is shown on page 52.
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 did not receive or are due to receive amounts for the provision of non-audit services:
rOunding
The amounts contained in this report and in the half-year 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.
remuneratiOn repOrt (audited)
This Remuneration Report outlines Abacus’ remuneration arrangements for directors and executives in accordance with
the requirements of the Corporations Act and Regulations. For the purposes of this report Key Management Personnel are
defined as those persons having authority and responsibility for planning, directing and controlling the major activities of
Abacus, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes
the executives receiving the highest remuneration.
For the purposes of this report, the term executive encompasses the Managing Director and other senior executives of
Abacus.
Details of key management personnel (KMPs)
(i) Non-executive Directors
J. Thame
W. Bartlett
D. Bastian
M. Irving
M. Salkinder
(ii) Executive Director
F. Wolf
(iii) Executives
E. Varejes
C. Aarons
R. Baulderstone
R. de Aboitiz
C. Laird
J. L’Estrange
L. Lloyd
P. Strain
Chairman
Director
Director (retired 14 November 2012)
Director
Director
Managing Director
Chief Operating Officer
Head of Strategy
Chief Financial Officer (appointed 30 November 2012)
Chief Financial Officer (resigned 30 November 2012)
Director Property Ventures
Director Property Ventures
Managing Director – Abacus Property Services
Director Property
REMuNERATION AT A glANCE
Fixed Remuneration
Base salaries paid to executives increased by an average of 5% in the year ended 30 June 2013. The average annual increase
over the last two years was 2.5% (as there was no increase in the previous year).
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED
37
annual report 2013
remuneratiOn repOrt (audited) (COntinued)
Variable Remuneration
Current Variable Remuneration
Current variable remuneration totalling $1,560,000 is payable to the executives of Abacus for the year ended 30 June 2013
as compared with $1,700,000 paid in the previous year. The details are set out in table 1. Current variable remuneration is
generally payable only if the underlying profit target is met. The group target was exceeded in the current year. The amount
of each award was determined by reference to the performance of the executive against key performance indicators (KPIs)
and other aspects of the executive’s performance considered relevant in the context of the assessment.
Deferred Variable Remuneration
In June 2012 the rights issued under the former long term incentive plan were cancelled. The executives had received no
benefits from the operation of the plan.
During the 2013 financial year the Remuneration & Nomination Committee worked with its independent remuneration
consultant, Guerdon Associates, to update the deferred variable remuneration plan in order to align it more closely with
Abacus’ growth objectives. The first issue of security acquisition rights (SARs) was made in May 2013 under the Security
Acquisition Rights Plan (SARs Plan). A total of 701,316 SARs were issued to key management personnel under the SARs Plan.
The rights will (subject to the terms of the Plan, which include claw back provisions) vest in equal tranches over a four year
period.
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 must comprise at least three non-executive directors with a majority of independent members.
The members of the Committee during the year were:
W. Bartlett – Chairman (independent non-executive)
D. Bastian – (independent non-executive) – retired 14 November 2012
M. Irving – (independent non-executive)
J. Thame – Ex-officio member (independent non-executive)
On 10 July 2013 Ms Salkinder replaced Mr Irving as a member of the Committee.
Under its charter the Committee must meet at least two times during a year. The Committee met two times during the year
and the attendance records are set out in the Directors’ Report. The Committee’s charter can be downloaded from the
Corporate Governance section of the Abacus website.
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 attracting motivating and retaining a
quality executive team.
38
abacus property group
remuneratiOn repOrt (audited) (COntinued)
Board oversight of remuneration (continued)
Remuneration policy
The remuneration policy supports the achievement of the group’s overall objective of producing sustainable earnings
growth and continuing growth in security value. Total remuneration levels are positioned at market median, with higher
rewards justified by performance. The policy framework is designed to reward individual performance while closely aligning
the interests of the executives to those of securityholders through the use of variable remuneration. To this end, Abacus
embodies the following principles in its remuneration framework:
• provide sufficient rewards to attract and retain skilled executives who are well qualified and experienced;
• link executive rewards to Abacus’ performance;
• have a reasonable portion of executive remuneration at risk while not encouraging excessive risk taking so as to protect
the defensive nature of the stock; and
• establish performance hurdles for the variable components of executive remuneration that require sustainable non-volatile
earnings performance over time.
Executive remuneration consists of the following key elements:
• fixed remuneration
• variable remuneration
o current variable remuneration
o deferred variable remuneration with a claw back feature.
The fixed remuneration component includes base salary, statutory superannuation and non-monetary benefits (car parking
and the applicable fringe benefits tax). Abacus aims to ensure that the split of fixed and variable remuneration for executives
is appropriate for the type of business it operates, namely, a cyclical, mature business that seeks to provide stable income
earnings with a high level of distribution to securityholders. Volatile outcomes are not valued by the stock market and
therefore remuneration is not highly incentive leveraged. The variable remuneration is designed to reward consistency of
sustainable distributions and steady improvement to the underlying financial strength of the business. The result is a higher
proportion of fixed remuneration for executives compared to other A-REITs and a lower proportion of variable remuneration.
It also recognises that long term value is the outcome of a string of sustained short term outcomes. Volatile earnings and
security distribution outcomes are not acceptable. For this reason, reward is contingent on annual performance, and the
maintenance of that annual performance in succeeding years. The two are not considered independent, and therefore the
reward structure does not allow for separate short term and long term measures. This is a deliberate remuneration strategy
that differs from traditional standards and, in the board’s view, better reflects the group’s positioning in the A-REIT industry.
Security Trading policy
Abacus has a security trading policy in place for directors and employees. The policy can be downloaded from the
Corporate Governance section of the Abacus website. Trading in Abacus securities is only permitted within the six week
periods commencing on the second trading day after the half-year and full-year results are announced and after the annual
general meeting. The Chairman may approve trading windows at other times of the year. Trading is not permitted at any
time if directors and employees are in receipt of confidential information.
Remuneration structure
In accordance with corporate governance best practice, the separate structure of non-executive director and executive
remuneration is as follows.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 39
annual report 2013
remuneratiOn repOrt (audited) (COntinued)
Board oversight of remuneration (continued)
Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level that enables Abacus to attract, motivate and retain directors of
the highest calibre, while incurring a cost that is market competitive.
Structure
Abacus’ constituent documents and the ASX Listing Rules specify that the aggregate remuneration of non-executive
directors must be determined from time to time by securityholders. The last determination was at the annual general
meeting held on 12 November 2010 when securityholders approved an aggregate remuneration limit of $800,000 per year.
This amount is a limit on non-executive directors’ total fees, not the actual fees paid to non-executive directors which are set
out in Table 1. Following the review of the Board’s composition Mr David Bastian retired as a director in November 2012. This
reduced the number of directors to five, the majority of whom are independent. The Board believes that it has a sufficient
complement of experienced directors to manage the group.
The aggregate remuneration limit and the fee structure are reviewed annually and fees were last increased in October 2011.
There was no increase in the year ended 30 June 2013.
Fees payable, inclusive of superannuation, to non-executive directors are as follows:
BOARD/COMMITTEE
Board
Board
Audit & Risk Committee
Audit & Risk Committee
Compliance Committee
Due Diligence Committee
Due Diligence Committee
Remuneration & Nomination Committee
Remuneration & Nomination Committee
Abacus Storage Funds Management Limited Board
ROLE
Chairman
Member
Chairman
Member
Chairman
Chairman
Member
Chairman
Member
Member
FEE
$191,000
$71,000
$20,000
$10,000
$10,000
$15,000
$5,000
$12,000
$8,000
$9,000
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 2013 and 2012 is detailed in Table 1 of this report.
40
abacus property group
remuneratiOn repOrt (audited) (COntinued)
Executive remuneration
Objective
Abacus aims to reward executives with a level and mix of remuneration commensurate with their position and
responsibilities so as to:
• reward executives for group, business unit and individual performance against targets set by reference to appropriate
benchmarks;
• maintain consistent performance over time;
• align the interests of executives with those of securityholders; and
• ensure remuneration is appropriate by market standards.
Abacus’ key gateway financial measure for variable remuneration is underlying profit, which the Board believes is the
appropriate way to ensure that variable remuneration is aligned with the interests of securityholders. Abacus does not issue
market guidance, but the gateway has been determined by the Board as appropriately challenging.
Structure
In determining the level and make-up of executive remuneration, the Remuneration & Nomination Committee
received advice from its external consultants, Guerdon Associates. (Guerdon Associates did not make remuneration
recommendations in relation to any of the KMPs.)
Executive remuneration consists of the following key elements:
• fixed remuneration (base salary, superannuation and non-monetary benefits)
• variable remuneration
o current variable remuneration; and
o deferred variable remuneration with a claw back feature.
The Board has determined that within the context of providing median levels of total remuneration to Abacus executives, it
is appropriate that:
(a) executives have a reasonable and motivating portion of their total remuneration at risk by linking it to the performance of
the business and their own contributions to that performance; and
(b) executive remuneration be delivered with the proportion of fixed to potential maximum variable pay being, with
exceptions for outstanding personal achievement, in the ratio of approximately 60:40 (with the variable component
generally allocated as to half to current variable remuneration and half to deferred variable remuneration).
These arrangements apply only to those executives who are invited to participate in the Abacus deferred variable
remuneration plan. Participation is limited to those executives whose positions have the potential to affect the medium
to long term value of the group. By definition, all KMPs are eligible to participate because of their potential to influence
sustained underlying profit, security value and distributions over the longer term.
Abacus has an investment strategy principally ensuring that at least 70% of its balance sheet exposure is to directly held core
plus property providing a sustainable recurring income stream, with the balance focused on active real estate positions.
Abacus’ investment philosophy is to provide investors with stable returns derived primarily from sound rental income and
improvement of asset values results from diligent asset management of core plus assets with upside potential from active
positions.
Reflecting Abacus’ investment philosophy, the variable remuneration plan design is directed to rewarding activities that
are in the medium to long term interests of securityholders. The variable remuneration strategy is consequently designed
to drive sustainable and growing underlying profit (determined in accordance with the AICD/Finsia principles for reporting
underlying profit) that covers the distribution level implicit in the Abacus security price and incremental growth in capital
value.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 41
annual report 2013
remuneratiOn repOrt (audited) (COntinued)
Executive remuneration (continued)
It follows that a current variable remuneration award for a financial year will generally be shadowed with an equal deferred
variable remuneration award for the next financial year (as the short and medium term goals are essentially the same). The
Board nevertheless retains the discretion whether or not to make deferred remuneration grants and to determine the
amount of the deferred remuneration grants it makes.
The primary purpose of the plan is to ensure that the best performers have an incentive to remain with the group, to
give them an opportunity to extend and sustain their performance and to reduce risk taking associated with short term
performance payments. The vehicle of payment provides exposure to the security price and yield.
The table below sets out the structure of the Abacus executive remuneration arrangements:
REMUNERATION COMPONENT
METHOD
PURPOSE
LINK TO PERFORMANCE
Fixed remuneration
Paid in cash – comprises
base salary, superannuation
contributions and other
benefits.
Set with reference to role,
market, experience and
skill-set.
Current variable component
Paid in cash in September.
To drive achievement of
underlying profit target.
Deferred variable component Awards are made in the form
of security acquisition rights.
Claw back of prior grants is
considered if applicable.
To reward executives for
achieving sustainable
underlying profit growth
over the short to medium
term and to reduce excessive
risk taking associated with
short term performance
assessment models.
No direct link to performance.
Periodic increases are linked to
market movements, changes in
roles and responsibilities, and
to performance in the previous
year.
Underlying profit is a key
financial metric for availability
of a current variable award.
Individual performance is
then tested against KPIs, key
effectiveness indicators and
other internal financial and
performance measures.
Directly linked to the increase
in the Abacus security price
over the vesting period,
and the maintenance of
distributions.
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 with appropriate expertise and experience Abacus aims to set a fair base salary. Base salary levels are
benchmarked periodically against objective benchmarking information and are reviewed on an annual basis having regard
to performance, external market forces and promotion.
Base salaries paid to executives increased by an average of 5% in the year ended 30 June 2013. The average annual increase
over the last two years was 2.5% (there was no increase in the previous year).
The fixed remuneration component of the Managing Director and other key management personnel is detailed in Table 1.
42
abacus property group
remuneratiOn repOrt (audited) (COntinued)
Managing Director’s remuneration
In determining the Managing Director’s remuneration the Board considered independent benchmarking information for the
property industry as well as data from the stock market (general listed industry companies of comparable size and, within
that, A-REITs of comparable size) to determine an appropriate market-competitive level of pay, his personal performance
and his value to the group. The board also evaluated his performance against agreed strategic goals and other performance
metrics. Abacus considers that this approach works well in achieving its performance and remuneration objectives and that
the Managing director has been appropriately rewarded based on his achievement of these goals and metrics.
Variable Remuneration – current variable remuneration
Objective
The objective of the current variable remuneration plan is to link the achievement of Abacus’ operational targets with the
remuneration received by the executives charged with meeting those targets.
Structure
The current variable remuneration plan is designed to link financial rewards with performance consistency, and steady
improvement of the underlying financial strength of the business:
• Current variable remuneration pool – available for current variable remuneration awards – is linked directly to the
achievement of an underlying profit target for the assessment year that meets stakeholder and market expectations.
• KPIs – the performance measures that determine individual current variable remuneration rewards represent the
contributions to be made by executives to Abacus’ financial and operating performance.
Securityholders expect that the Board consider the financial performance of the business when forming decisions about
whether to pay a current variable remuneration award or not, and, if so, how much will be paid. The Board has established
a process to manage the assessment and payment of current variable remuneration entitlements through KPIs and key
effectiveness indicators. The process is set out as follows:
year-end
aFter year-end
Measure Abacus financial
performance
• Is underlying profit
target gateway met or
exceeded?
• If no, a payment will
generally not be made
(subject to Board
discretion)
• If yes, gateway is passed
Distribute current variable
remuneration
• Assess individual
performance against KPIs
and other measures
• Pay current variable
remuneration
entitlements
Beginning OF
the year
Set the plan parameters
• Underlying profit target
gateway* for coming year
• KPIs for each participant
• Maximum current
variable remuneration
payable for each
participant based on
remuneration ratio
• Determine maximum
current variable
remuneration
• pool size based on
the sum of individual
theoretical maximum
entitlements calculated
in accordance with the
remuneration ratio
* 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 security-holder value creation (measured by total security-holder return) and hence the most appropriate measure
to determine entitlements to variable remuneration. Based on this analysis the Board has adopted underlying profit as the measure. Underlying profit
reflects the statutory profit as adjusted in order to present a figure that reflects the Directors’ assessment of the result for the ongoing business activities of
Abacus, in accordance with the AICD/Finsia principles for reporting underlying profit. The underlying profit is not audited.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED
43
annual report 2013
remuneratiOn repOrt (audited) (COntinued)
Variable Remuneration – current variable remuneration (continued)
Structure (continued)
For each relevant year the Board will specify an underlying profit target that operates as a gateway that must be passed if
current variable remuneration awards are to be generally payable. The Board retains the discretion, based on its view of the
circumstances at the time, to adjust the current variable remuneration pool size.
If the underlying profit target is missed, the Board retains the discretion to make the current variable remuneration pool,
or a reduced pool, generally available 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 current variable remuneration awards
reflective of the above target performance. Where the financial gateway has not been achieved and the Board determines
that no part of the current variable remuneration pool will be generally available, it retains the discretion to pay current
variable remuneration awards to selected individuals to reward them for their personal above target performance. The
application of any of these discretions will be disclosed.
If an executive is no longer employed at the time when Abacus pays current variable remuneration awards for any relevant
year then that executive will generally not be entitled to be paid their current variable remuneration awards if the relevant
executive resigned for any reason or if their employment was terminated with cause.
Key Performance Indicators
When the financial gateway has been passed, and current variable remuneration awards are to be paid, it is necessary to
determine how these entitlements will be quantified for participating executives.
Current variable remuneration payments made to each executive depend on the extent to which KPIs set at the beginning of
the financial year are met. Account is also taken of qualitative indicators of effectiveness, performance and behaviour. They
are the primary tools the Board uses as a means of determining performance against expectations in order to distribute
current variable remuneration awards where the financial performance gateway specified by the Board has been achieved.
PERFORMANCE MEASURES
Financial measure:
• Contribution to Abacus underlying profit
• Contribution to sustainability of distribution
• Contributions to projects expected to grow security value
Non-financial measures:
• Quality of analysis and recommendations
• Reporting and financial requirements
• Tax and compliance requirements
• Transaction and project management
• Key growth activities
• Risk management
• Leadership, staff management, teambuilding and succession
• Other performance measures focuses on achieving business imperatives
PROPORTION OF CURRENT VARIABLE
REMUNERATION AWARD MEASURE APPLIES TO
MANAGING DIRECTOR OTHER EXECUTIVES
60%
20-40%
(dependent on role)
40%
60-80%
These measures were chosen as they represent the key drivers for the short-term success of the business and provide a
framework for long term securityholder value.
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 to reward exceptional achievement.
44
abacus property group
remuneratiOn repOrt (audited) (COntinued)
Key Performance Indicators (continued)
The Board has the discretion to consider each executive’s total contribution to the group in addition to the specific KPIs
selected for the relevant year.
The target levels of performance set by the Board are challenging, and payment of 100% of the current variable
remuneration award opportunity to an executive requires superior performance.
The payment of current variable remuneration awards to executives is subject to a recommendation by the Remuneration
and Nomination Committee to, and approval of, the Board. The Committee considers the performance of the executive
against the KPIs and other applicable measures and approves the amount, if any, of the current variable remuneration to be
paid. For the 2013 financial year current variable remuneration awards of $1,560,000 have been accrued and will be paid in
September 2013.
For the 2012 financial year, 100% of the current variable remuneration awards of $1,700,000 accrued in that year vested and
were paid to executives in the 2013 financial year. There were no forfeitures.
Performance and its link to variable remuneration of the Managing Director
The financial measures driving variable remuneration outcomes are underlying profit and sustainable distributions.
In addition Abacus has a number of non-financial measures that it uses to determine variable remuneration.
The following table sets out performance of the Managing Director against these targets:
PERFORMANCE MEASURE
Financial
Underlying profit
Sustainable distribution
Non-financial
Strategic planning
Reporting and financial requirements
Key growth activities
Risk management
Leadership, team building
FY13 PERFORMANCE
AGAINST TARGETS
Above target
At target
Above target
At target
Above target
At target
Above target
Variable Remuneration – deferred variable remuneration
The KMPs and other selected executives were invited by the Board to participate in the deferred variable remuneration plan
which rewards sustainability of distributions each year over a four year period.
Objective
The objective of the deferred variable remuneration plan is to reward executives for sustaining underlying profit that covers
the distribution level implicit in the Abacus security price.
Deferred Security Acquisition Rights Plan
The deferred variable remuneration plan has been designed to align the interests of executives with those of securityholders
by providing for a significant portion of the remuneration of participating executives to be linked to the delivery of
sustainable underlying profit that covers the distribution level implicit in the Abacus security price.
The deferred security acquisition rights plan (SARs Plan) is a deferred variable remuneration plan under which deferred
variable remuneration awards in the form of security acquisition right (SAR’s) may be awarded in accordance with the
remuneration ratio. Key executives may be allocated a deferred variable remuneration award value in any financial year
generally equal to the last current variable remuneration award paid. Allocations in a financial year are based on the
performance assessment completed in determining current variable remuneration awards for the prior financial year,
adjusted to take into account other factors that the Board considers specifically relevant to the purpose of providing
deferred variable remuneration awards. Adjustments may be needed, for example, to take into account an award of a
current variable remuneration award above the theoretical maximum, the potential of an executive, or their impending
retirement.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 45
annual report 2013
remuneratiOn repOrt (audited) (COntinued)
Deferred Security Acquisition Rights Plan (continued)
The Board has the discretion to award SARs in excess of the cap in the case of exceptional performance.
The deferred variable remuneration grant value allocated to a plan participant for a financial year will be divided by
the 10 day volume weighted average price (VWAP) of Abacus Property Group securities (ABP securities) for the period
commencing on the second trading day after the full year results announcement for the previous financial year was released
to the market (the business day after that 10 day period ends is the allocation date). The quotient will be the number of SARs
to be allocated to the relevant executive for that financial year.
The SARs allocated to an executive for a financial year will vest in four equal annual tranches on the first, second, third and
fourth anniversaries of the allocation date.
To receive the deferred remuneration award the executive must remain employed by Abacus, unless they are considered a
“good leaver” (that is, through death, disability, or genuine retirement, or some other circumstance considered acceptable
or the board in its discretion). All other leavers are considered a “bad leavers” for the purposes of the SARs Plan.
As well the Board will have the discretion, if the amount of distributions per ABP security falls by more than a percentage
determined by the Board for each respective SARs issue, to claw back any unvested tranches. For example, if the Board
determines at the time of a new allocation of SARs that a sustainable annual distribution rate for the whole vesting period for
that allocation of SARs is 16.5 cents per security then the Board may decide that if that rate falls by more than 5% in respect
of any financial year before all of the tranches of SARs in that allocation have vested, the Board may claw back the unvested
SARs that formed part of that allocation. The allocation of SARs for the following year may have a higher distribution rate and
negative variance buffer set, and so on for succeeding years.
If an executive is not a bad leaver but the Board determines that the executive is responsible for misconduct resulting
in material non-compliance with financial reporting requirements or for excessive risk taking, the executive will forfeit all
unvested SARs entitlements.
When a tranche of SARs vests the SARs in that tranche will convert into ABP securities on a one for one basis or
(exceptionally, subject to the discretion of the Board where an executive already has a significant holding of ABP securities) a
cash amount equal to the product derived by multiplying the number of SARs in that tranche by the VWAP of ABP securities
over the first 10 trading days after the date the relevant tranche vests.
To achieve a closer alignment of the interests of securityholders and senior executives, when a tranche of SARs vests, the
holder will also be paid in respect of each SAR vesting an amount (a notional distribution) equivalent to the aggregate of
the distributions per ABP security paid during the period from allocation date of the relevant tranche to the vesting date
for the relevant tranche plus the amount of any distribution per security declared and unpaid as at the vesting date . This
entitlement will be satisfied in ABP securities . In that event the number of additional securities will be calculated by dividing
the amount of the notional distribution by the VWAP of ABP securities over the first 10 trading days after the date the
relevant tranche vests.
Executives will be entitled before any trance of SARs vests, to extend the vesting date for that tranche by 12 months.
This right may be exercised at any time and from time to time in respect of any unvested tranche while the executive’s
employment continues.
1 If the entitlements on a vesting of SARs is satisfied in ABP securities that are cum distribution then the amount of that unpaid distribution will not be
included in the notional distribution.
2 Subject to the Board’s discretion to satisfy this in cash.
46
abacus property group
remuneratiOn repOrt (audited) (COntinued)
Deferred Security Acquisition Rights Plan (continued)
The grant and vesting levels of SARs for key management personnel during the 2013 financial year were as follows:
Allocation of SARs to key management personnel
GRANT DATE
NUMBER
FAIR VALUE
PER RIGHT
FAIR VALUE
RECOGNISED
IN FY13 ON
UNVESTED
RIGHTS
THE FOLLOWING RIGHTS WILL VEST IN THE PERIODS
INDICATED SUBJECT TO PERFORMANCE AND
POTENTIAL CLAW BACK
FY14
FY15
FY16
FY17
15/05/2013
212,420
$2.41
$266,632
53,105
53,105
53,105
53,105
Director
F Wolf
Executives
E Varejes
C Aarons
15/05/2013
15/05/2013
R Baulderstone
15/05/2013
J L'Estrange
C Laird
L Lloyd
P Strain
15/05/2013
15/05/2013
15/05/2013
15/05/2013
84,968
65,360
65,360
74,920
71,652
61,276
65,360
701,316
$2.41
$2.41
$2.41
$2.41
$2.41
$2.41
$2.41
$106,653
$82,040
$82,040
$94,040
$89,938
$76,914
$82,040
21,242
16,340
16,340
18,730
17,913
15,319
16,340
21,242
16,340
16,340
18,730
17,913
15,319
16,340
21,242
16,340
16,340
18,730
17,913
15,319
16,340
21,242
16,340
16,340
18,730
17,913
15,319
16,340
$880,297
175,329
175,329
175,329
175,329
The expense recognised for security based payments (Note 29) includes SARs issued to other executives in the Group.
There was no grant of rights in the previous period.
For the purpose of determining remuneration Abacus subscribes to an independent property salary and remuneration
survey recommended to it by EY and Abacus performs a review of the published remuneration of the members of the S&P
ASX 200 Index and the S&P/ASX 300 A-REIT Index.
Tax advice on the deferred variable remuneration plan was provided by Minter Ellison.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 47
annual report 2013
remuneratiOn repOrt (audited) (COntinued)
Link between remuneration policy and Abacus’ performance
Abacus’ performance is compared with its peers in the S&P/ASX 300 A-REIT index. This peer group reflects Abacus’
competitors for capital transactions and talent. As previously discussed, KMPs and other selected executives are eligible
to receive current variable remuneration and a deferred variable remuneration. Both are risk-related components of total
remuneration as payment entitlements are dependent on performance. The group’s objective is for remuneration policy to
encourage business strategy and implementation that achieves growth in total securityholder returns and favourable peer
comparison.
The variable remuneration strategy is designed to drive sustainable and growing underlying profit that covers the
distribution level implicit in the Abacus security price.
Abacus’ performance in comparison with the S&P/ASX 300 A-REIT index is set out in the following graph:
100
80
60
40
20
0
-20
-40
-60
-80
APG AND S&P/ASX 300 A-REIT ACCUMULATION INDEX TOTAL RETURN
(Since 1 July 2008)
ABP
S&P/ASX 300 Accumulation
Abacus’ performance for the past five years is as follows:
Underlying earnings per security (cents)
Distributions paid and proposed (cents)
Closing security price (30 June)
Net tangible assets per security**
2009
8.30
7.75
$0.37
$0.62
2010
3.90
3.15
$0.41
$0.58
2011*
19.38
16.50
$2.31
$2.51
2012
19.17
16.50
$2.04
$2.34
2013
18.76
16.50
$2.27
$2.32
Weighted average securities on issue
867.5m
1,662.5m
372.3m
400.9m
446.4m
* Abacus securities were consolidated on a 5:1 basis on 29 November 2010.
** Net tangible assets per security includes the impact of the fair value movements.
48
abacus property group
remuneratiOn repOrt (audited) (COntinued)
Employment contracts
Managing Director
The Managing Director, Dr Wolf, is employed under a rolling contract. The current employment contract commenced on
10 October 2002. Under the terms of the contract:
• Dr Wolf receives a base salary that is reviewed annually;
• he is eligible to participate in the deferred variable income plans that are made available and to receive current variable
remuneration payments;
• Dr Wolf may resign from his position and thus terminate this contract by giving 6 months written notice; and
• Abacus 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
The other executives are employed on an ongoing basis under letter agreements until (generally) one month’s notice is
given by either party. Abacus 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.
Deferred variable remuneration allocations vest according to the SARs plan rules.
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED
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51
annual report 2013
Signed in accordance with a resolution of the directors. Abacus Group Holdings Limited (ABN 31 080 604 619)
John Thame
Chairman
Sydney, 28 August 2013
Frank Wolf
Managing Director
52
abacus property group
DIRECTORs’ REPORT 30 JUNE 2013CONTINUED 53
annual report 2013
FINANCIAL
STATEMENTS
30 JuNE 2013
DIRECTORY
Abacus Group Holdings Limited
ABN: 31 080 604 619
Abacus Group Projects Limited
ABN: 11 104 066 104
Abacus Storage Operations Limited
ABN: 37 112 457 075
Abacus Funds Management Limited
ABN: 66 007 415 590
Abacus Storage Funds
Management Limited
ABN: 41 109 324 834
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
Custodian
Perpetual Trustee Company Limited
Level 12 Angel Place
123 Pitt Street
SYDNEY NSW 2000
Directors of Responsible Entities
and Abacus Group Holdings Limited
John Thame, Chairman
Frank Wolf, Managing Director
William Bartlett
Malcolm Irving
Myra Salkinder
Company Secretary
Ellis Varejes
Auditor (Financial and
Compliance Plan)
Ernst & Young
Ernst & Young Centre
680 George Street
SYDNEY NSW 2000
Share Registry
Boardroom Pty Ltd
Level 7, 207 Kent St
SYDNEY NSW 2000
Tel: 1300 737 760
Fax: 1300 653 459
It is recommended that this Annual Financial Report should be read in conjunction with the Annual Financial Report of Abacus
Trust, Abacus Group Projects Limited, Abacus Income Trust, Abacus Storage Property Trust and Abacus Storage Operations
Limited as at 30 June 2013. 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.
abacus property group
54
CONSOLIDATED INCOME
STATEMENT
YEAR ENDED 30 JuNE 2013
NOTES
2013
$’000
2012
$’000
6(a)
6(b)
6(c)
17(b)
7(a)
7(b)
27
7(c)
7(d)
8(a)
REVENUE
Rental income
Storage income
Hotel income
Finance income
Funds management income
Sale of inventory
Total Revenue
Net change in fair value of investment properties derecognised
Net change in fair value of investments and financial instruments derecognised
Net change in fair value of investment properties and property, plant & equipment
held at balance date
Net change in fair value of investments held at balance date
Share of profit / (loss) from equity accounted investments
Other
Total Revenue and Other Income
Property expenses and outgoings
Storage expenses
Hotel expenses
Depreciation, amortisation and impairment expense
Cost of inventory sales
Net change in fair value of derivatives
Loss on consolidation
Finance costs
Impairment charges – related parties
Administrative and other expenses
PROFIT BEFORE TAX
Income tax expense
NET PROFIT AFTER TAX
PROFIT ATTRIBUTABLE TO:
Equity holders of the parent entity (AGHL)
Equity holders of other stapled entities
AT members
AGPL members
AIT members
ASPT members
ASOL members
Stapled security holders
Net profit / (loss) attributable to external non-controlling interests
NET PROFIT
95,010
45,249
55,184
21,721
7,509
56,347
281,020
1,973
6,854
497
5,409
10,164
–
101,506
47,093
52,011
28,997
6,509
–
236,116
9,456
(132)
(2,235)
(1,244)
7,379
686
305,917
250,026
(17,806)
(15,981)
(38,928)
(6,999)
(48,176)
(1,153)
(18,943)
(56,244)
–
(27,368)
74,319
(6,839)
67,480
(18,123)
(16,410)
(40,010)
(7,800)
–
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(3,507)
(26,318)
10,500
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8,026
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450
32,074
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6,751
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25,965
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6,428
67,480
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208
1,964
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10,412
8,470
(444)
8,026
Basic and diluted earnings per stapled security (cents)
10
13.68
2.11
CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME
YEAR ENDED 30 JuNE 2013
NET PROFIT AFTER TAX
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified subsequently to the income statement
Revaluation of assets, net of tax
Items that may be reclassified subsequently to the income statement
Foreign exchange translation adjustments, net of tax
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Total comprehensive income attributable to:
Members of the APG Group
External non-controlling interests
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Total comprehensive income / (loss) attributable to members of the Group analysed
by amounts attributable to:
AGHL members
AT members
AGPL members
AIT members
ASPT members
ASOL members
TOTAL COMPREHENSIVE INCOME AFTER TAX ATTRIBUTABLE TO MEMBERS
OF THE GROUP
55
annual report 2013
2013
$’000
67,480
2012
$’000
8,026
(6,062)
3,957
1,737
3,782
63,155
15,765
62,099
1,056
63,155
9,808
5,957
15,765
3,288
32,074
5,469
6,751
(11,517)
26,034
1,788
6,507
208
1,964
(11,071)
10,412
62,099
9,808
abacus property group
56
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
YEAR ENDED 30 JuNE 2013
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Investment properties held for sale
Inventory
Property loans
Other financial assets
Other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Investment properties
Inventory
Property loans
Other financial assets
Property, plant and equipment
Equity accounted investments
Deferred tax assets
Intangible assets and goodwill
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Derivatives at fair value
Income tax payable
Other financial liabilities
Other
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Interest-bearing loans and borrowings
Derivatives at fair value
Deferred tax liabilities
Other financial liabilities
Other
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
TOTAL EQUITY
NOTES
11
12(a)
16
15(a)
13(a)
13(b)
12(b)
16
15(b)
13(c)
13(d)
14
17
8(c)
18
19(a)
20
30
19(b)
20
8(c)
30
2013
$’000
2012
$’000
44,822
19,560
175,710
72,992
2,452
–
3,636
54,129
11,918
190,821
26,479
19,098
8,053
3,004
319,172
313,502
6,897
6,212
1,221,395
1,181,203
91,942
138,370
28,282
152,100
124,458
100,974
154,758
24,489
154,065
121,833
11,923
33,261
1,808,628
16,320
33,461
1,793,315
2,127,800
2,106,817
63,313
164,318
1,263
876
11,000
6,112
30,426
29,950
-
636
–
4,516
246,882
65,528
–
639,290
55,942
10,312
45,250
2,304
12,725
772,260
79,752
10,183
56,250
2,227
753,098
933,397
999,980
998,925
1,127,820
1,107,892
1,127,820
1,107,892
57
annual report 2013
NOTES
2013
$’000
2012
$’000
162,070
6,816
(43,984)
157,386
6,050
(47,337)
124,902
116,099
804,153
(152,236)
651,917
783,358
(137,593)
645,765
21,018
–
(12,138)
8,880
20,415
(78)
(17,529)
2,808
177,151
(18,894)
170,620
(566)
158,257
170,054
90,589
(1,021)
(4,437)
85,131
13,400
82
41,466
54,948
78,007
52
(34,274)
43,785
87,461
(2,322)
8,790
93,929
12,754
13
15,501
28,268
67,295
5,424
(21,750)
50,969
1,127,820
1,107,892
23
1,268,381
1,231,994
5,877
(190,223)
1,084,035
43,785
3,663
(178,734)
1,056,923
50,969
1,127,820
1,107,892
Equity attributable to members of AGHL:
Contributed equity
Reserves
Accumulated losses
Total equity attributable to members of AGHL:
Equity attributable to unitholders of AT:
Contributed equity
Accumulated losses
Total equity attributable to unitholders of AT:
Equity attributable to members of AGPL:
Contributed equity
Reserves
Accumulated losses
Total equity attributable to members of AGPL:
Equity attributable to unitholders of AIT:
Contributed equity
Accumulated losses
Total equity attributable to unitholders of AIT:
Equity attributable to members of ASPT:
Contributed equity
Reserves
(Accumulated losses)/retained earnings
Total equity attributable to members of ASPT:
Equity attributable to members of ASOL:
Contributed equity
Reserves
Retained earnings
Total equity attributable to members of ASOL:
Equity attributable to external non-controlling interest:
Contributed equity
Reserves
Accumulated losses
Total equity attributable to external non-controlling interest:
TOTAL EQUITY
Contributed equity
Reserves
Accumulated losses
Total stapled security holders' interest in equity
Total external non-controlling interest
TOTAL EQUITY
abacus property group
58
CONSOLIDATED STATEMENT
OF CHANGES IN EQuITY
YEAR ENDED 30 JuNE 2013
ATTRIBuTABLE TO THE STAPLED SECuRITy HOLDER
ISSuED
CAPITAL
$’000
ASSET
REVALuATION
RESERVE
$’000
FOREIGN
CuRRENCy
TRANSLATION
$’000
EMPLOyEE
EquITy
BENEFITS
$’000
RETAINED
EARNINGS
$’000
EXTERNAL
NON-
CONTROLLING
INTEREST
$’000
TOTAL
EquITy
$’000
CONSOLIDATED
At 1 July 2012
Other comprehensive income
Net income for the year
Total comprehensive income for
the year
Distribution reinvestment plan
Security acquisition rights
Distribution to security holders
1,231,994
–
–
–
36,387
–
–
At 30 June 2013
1,268,381
612
(573)
–
(573)
–
–
–
39
(2,397)
1,619
–
1,619
–
–
–
5,448
(178,734)
50,969
1,107,892
–
–
–
–
1,168
–
61,052
(5,371)
6,428
(4,325)
67,480
61,052
–
–
1,057
–
63,155
36,387
–
1,168
–
(72,541)
(8,241)
(80,782)
(778)
6,616
(190,223)
43,785
1,127,820
CONSOLIDATED
At 1 July 2011
Other comprehensive income
Net income for the year
Total comprehensive income for
the year
Equity raisings^
Return of capital^
Distribution reinvestment plan
Issue costs
Acq. of non-controlling interest
Merger of ASOL / ASPT
Distribution to security holders
ISSuED
CAPITAL
$’000
ASSET
REVALuATION
RESERVE
$’000
FOREIGN
CuRRENCy
TRANSLATION
$’000
EMPLOyEE
EquITy
BENEFITS
$’000
RETAINED
EARNINGS
$’000
NON-
CONTROLLING
INTEREST
$’000
TOTAL
EquITy
$’000
1,139,824
–
–
–
56,528
(61,873)
36,189
(2,168)
–
63,494
–
1,021
(409)
–
(4,142)
1,745
–
(409)
1,745
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,448
(148,411)
146,670
1,140,410
–
–
–
–
–
–
–
–
–
–
–
8,470
6,403
(444)
7,739
8,026
8,470
5,959
–
–
–
–
–
–
–
–
–
(1,754)
24,387
(87,881)
15,765
56,528
(61,873)
36,189
(2,168)
(1,754)
–
(63,180)
(12,025)
(75,205)
At 30 June 2012
1,231,994
612
(2,397)
5,448
(178,734)
50,969
1,107,892
^ Capital was returned to securityholders that was applied to the issue of securities as part of the merger between the ABP Group and ASF.
CONSOLIDATED STATEMENT
OF CASH FLOW
YEAR ENDED 30 JuNE 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Income receipts
Interest received
Distributions received
Income tax paid
Finance costs paid
Operating payments
59
annual report 2013
NOTES
2013
$’000
2012
$’000
302,100
258,618
4,051
259
3,657
1,015
(2,286)
(1,353)
(47,892)
(60,735)
(87,399)
(114,952)
NET CASH FLOWS FROM OPERATING ACTIVITIES
11
168,833
86,250
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
Proceeds from sale of property, plant and equipment
Purchase of investment properties
Disposal of investment properties
Consolidation of AWLF
Payment for other investments
(76,436)
(91,909)
25,503
27,208
(7,822)
(1,230)
–
15,512
(111,722)
(24,382)
86,246
96,079
2,042
–
(6,133)
(5,138)
NET CASH FLOWS (USED IN) / FROM INVESTING ACTIVITIES
(88,322)
16,140
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of stapled securities
Return of capital
Payment of issue / finance costs
Repayment of borrowings
Proceeds from borrowings
Distributions paid
NET CASH FLOWS USED IN FINANCING ACTIVITIES
NET DECREASE IN CASH AND CASH EQUIVALENTS
Net foreign exchange differences
Cash and cash equivalents at beginning of year
–
–
62,901
(61,873)
(733)
(6,223)
(121,833)
(242,345)
81,384
174,954
(49,057)
(40,338)
(90,239)
(112,924)
(9,728)
(10,534)
420
15
54,129
64,648
CASH AND CASH EQUIVALENTS AT END OF YEAR
11
44,821
54,129
abacus property group
60
NOTES TO THE FINANCIAL
STATEMENTS
30 JuNE 2013
1. CORPORATE INFORMATION
Abacus Property Group (“APG” or the “Group”) is comprised of Abacus Group Holdings Limited (“AGHL”) (the nominated
parent entity), Abacus Trust (“AT”), Abacus Group Projects Limited (“AGPL”), Abacus Income Trust (“AIT”), Abacus Storage
Property Trust (“ASPT”) and Abacus Storage Operations Limited (“ASOL”). Shares in AGHL, AGPL and ASOL and units in AT,
AIT and ASPT 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 units in ASPT and the shares in ASOL
were stapled to the Group in March 2012.
The financial report of the Group for the year ended 30 June 2013 was authorised for issue in accordance with a resolution
of the directors on 28 August 2013.
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 financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated under the option available to the Group under ASIC Class Order 98/100. The Group is an entity to
which the class order applies.
(b) Statement of Compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS),
as issued by the AASB and IASB respectively.
(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 except as follows:
The Group has adopted the following new and amended Australian Accounting Standards and AASB interpretations as of
1 July 2012. Adoption of these standards and interpretations did not have any material effect on the financial position or
performance of the Group.
– AASB 2011-9 Presentation of Other Comprehensive Income – This standard requires entities to group items presented in
other comprehensive income on the basis of whether they might be reclassified subsequently to profit or loss and those
that will not.
– AASB 2010-8 Deferred Tax: Recovery of Underlying Assets – The amendment addresses the determination of deferred
tax on investment property measured at fair value and introduces a rebuttable presumption that deferred tax is measured
on the basis that the carrying amount will be recoverable through sale rather than use. This amendment will have no
impact on the Group as the majority of investment properties are held within the Group’s Trusts and where the investment
property is held within a company, the Group already had a policy to assess recoverability and record deferred tax where
appropriate based on the assessment of recoverability of the carrying value per property.
61
annual report 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Group early adopted the following standards during the year ended 30 June 2012:
– AASB 10 Consolidated Financial Statements – establishes a new control model that applies to all entities. It replaces parts
of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial
statements and UIG-112 Consolidation – Special Purpose Entities.
The new control model broadens the situations when an entity is considered to be controlled by another entity and
includes new guidance for applying the model to specific situations, including when acting as a manager may give control,
the impact of potential voting rights and when holding less than a majority voting rights may give control.
Adoption resulted in the consolidation of Abacus Hospitality Fund, Abacus Diversified Income Fund II and Abacus Miller
Street Holding Trust. This is due to the combination of APG’s role as responsible entity, variable returns arising from its
collective equity and loan investments in these funds and certain guarantees.
– AASB 11 Joint Arrangements - replaces AASB 131 Interests in Joint Ventures and UIG-113 Jointly controlled Entities –
Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to define joint control, and
therefore the determination of whether joint control exists may change. In addition it removes the option to account
for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is
dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the parties
a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and
obligations. Joint ventures that give the parties a right to the net assets is accounted for using the equity method.
Adoption had no impact in the Group’s method of accounting for its joint arrangements.
– AASB 12 Disclosure of Interests in Other Entities – includes all disclosures relating to an entity’s interests in subsidiaries,
joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements
made by management to determine whether control exists, and to require summarised information about certain joint
arrangements, associates and structured entities and subsidiaries with non controlling interests.
Adoption resulted in the Group disclosing the summarised financial information of material investments in joint
arrangements. Prior to adoption of AASB12, the Group’s share of summarised financial information was disclosed.
62
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) New accounting standards and interpretations (continued)
(i) Accounting standards and Interpretations issues 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 2013. These are outlined in the
following table.
APPLICATION
DATE FOR
GROuP*
1 July 2015
APPLICATION
DATE OF
STANDARD*
1 January
2015
IMPACT ON GROuP FINANCIAL REPORT
The Group will review the classification of
its existing financial assets and liabilities
in line with the standard, such as secured
and related party loans, options and
derivatives.
The tests above with respect to any
potential reclassification of financial assets
with variable cash flows will depend on the
facts applicable at transition date.
REFERENCE SuMMARy
AASB 9
AASB 9 includes requirements for the
classification and measurement of financial
assets. It was further amended by AASB 2010-7
to reflect amendments to the accounting for
financial liabilities.
These requirements improve and simplify the
approach for classification and measurement of
financial assets compared with the requirements
of AASB 139. The main changes are described
below.
(a) Financial assets that are debt instruments
will be 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.
(b) 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 designated 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.
(d) Where the fair value option is used for
financial liabilities the change in fair value is
to be accounted for as follows:
– The change attributable to changes
in credit risk are presented in other
comprehensive income (OCI)
– The remaining change is presented in profit
or loss.
Consequential amendments were also made
to other standards as a result of AASB 9,
introduced by AASB 2009-11 and superseded
by AASB 2010-7 and 2010-10.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 63
annual report 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) New accounting standards and interpretations (continued)
APPLICATION
DATE OF
STANDARD*
1 January
2013
IMPACT ON GROuP FINANCIAL REPORT
The Group will review the assets and
liabilities requiring measurement at fair
value. The standard is unlikely to have a
material financial impact on the Group
however the Group may be required to
increase its level of disclosure.
APPLICATION
DATE FOR
GROuP*
1 July 2013
1 January
2013
This revision will have no impact on how
the Group measures its employee benefits.
1 July 2013
1 July 2013
The Group will review any amendments to
the standards when adopted by the AASB.
1 July 2013
REFERENCE SuMMARy
AASB 13 AASB 13 establishes a single source of guidance
for determining the fair value of assets and
liabilities. AASB 13 does not change when an
entity is required to use fair value, but rather,
provides guidance on how to determine fair
value when fair value is required or permitted.
Application of this definition may result in
different fair values being determined for the
relevant assets.
AASB 13 also expands the disclosure
requirements for all assets or liabilities carried
at fair value. This includes information about the
assumptions made and the qualitative impact of
those assumptions on the fair value determined.
Consequential amendments were also made to
other standards via AASB 2011-8.
AASB 119 The main change introduced by this standard
is to revise the accounting for defined benefit
plans. The amendment removes the options for
accounting for the liability, and requires that the
liabilities arising from such plans is recognised
in full with actuarial gains and losses being
recognised in other comprehensive income.
It also revised the method of calculating the
return on plan assets.
The revised standard changes the definition of
short-term employee benefits. The distinction
between short-term and other long-term
employee benefits is now based on whether
the benefits are expected to be settled wholly
within 12 months after the reporting date.
Consequential amendments were also made to
other standards via AASB 2011-10.
AASB
2012-5
AASB 2012-5 makes amendments resulting from
the 2009-2011 Annual Improvements Cycle. The
standard addresses a range of improvements,
including the following:
– Repeat application of AASB 1 is permitted
– Clarification of the comparative information
requirements when an entity provides a third
balance sheet (AASB 101 Presentation of
Financial Statements).
64
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) New accounting standards and interpretations (continued)
REFERENCE
SuMMARy
APPLICATION
DATE OF
STANDARD*
IMPACT ON GROuP FINANCIAL REPORT
APPLICATION
DATE FOR
GROuP*
AASB 2011-4 This amendment deletes from AASB124
1 July 2013 The amendment will have no impact on the
1 July 2013
disclosures for the Group.
1 July 2013
The Group is required to report under the
Tier 1 requirement as a for-profit entity in the
private sector that has public accountability.
There will be no impact to the reporting
requirements of the Group.
1 July 2013
individual key management personnel
disclosure requirements for disclosing entities
that are not companies. It also removes the
individual KMP disclosure requirements for all
disclosing entities in relation to equity holdings,
loans and other related party transactions.
AASB 1053
Application
of Tiers of
Australian
Accounting
Standards
This Standard establishes a differential financial
reporting framework consisting of two Tiers of
reporting requirements for preparing general
purpose financial statements:
(a) Tier 1: Australian Accounting Standards
(b) Tier 2: Australian Accounting Standards –
Reduced Disclosure Requirements
Tier 2 comprises the recognition, measurement
and presentation requirements of Tier 1 and
substantially reduced disclosures corresponding
to those requirements.
The following entities apply Tier 1 requirements
in preparing general purpose financial
statements:
(a) For-profit entities in the private sector that
have public accountability (as defined in this
Standard)
(b) The Australian Government and State,
Territory and Local Governments
The following entities apply either Tier 2 or Tier
1 requirements in preparing general purpose
financial statements:
(a) For-profit private sector entities that do not
have public accountability
(b) All not-for-profit private sector entities
(c) Public sector entities other than the
Australian Government and State, Territory
and Local Governments.
*designates the beginning of the applicable annual reporting period
AASB 2012-2, AASB 2012-4, AASB 2012-9, AASB 2012-10, AASB 2012-2 and Interpretation 20 will have no application to the Group.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 65
annual report 2013
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, AIT and its subsidiaries, ASPT and its subsidiaries and ASOL and its subsidiaries
collectively referred to as the Group.
Subsidiaries are all those entities over which the Group has power over the investee such that the Group is able to direct the
relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use
its power over the investee to affect the amount of the investor’s returns.
The adoption of AASB 10 in the year ended 30 June 2012 led to the consolidation of Abacus Hospitality Fund, Abacus
Diversified Income Fund II and Abacus Miller Street Holding Trust. In the year ended 30 June 2013 the Group also
consolidated Abacus Wodonga Land Fund. This is due to the combination of the Group’s role as responsible entity and its
exposure to variable returns arising from its collective equity and loan investments in these funds and certain guarantees.
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 are allocated their share of net profit after tax in the consolidated income statement and are
presented within equity in the consolidated statement of financial position, separately from the equity of the owners of the
parent.
Non-controlling interests represent those equity interests in Abacus Hospitality Fund, Abacus Miller Street Holding Trust,
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 statement of financial position.
(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 on translation of foreign operations 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.
66
abacus property group
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Foreign currency translation (continued)
At reporting date the assets and liabilities of foreign operations 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.
(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 and Storage income
Rental income from investment properties is accounted for on a straight-line basis over the lease term. Contingent rental
income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an integral
part of the total rental income.
Hotel Income
Revenue from rooms is recognised and accrued on the provision of rooms or on the date of which rooms are to be provided
in accordance with the terms and conditions of the bookings. Advance deposits from customers received are not recognised
as revenue until such time when the rooms have been provided or when the customers forfeit the deposits due to failure of
attendance.
Finance Income
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating 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.
Income from the sale of joint venture profit share rights is recognised when the Group enters into arrangements with other
parties which result in the Group receiving consideration for the sale of its right to receive a profit share from the joint
venture
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
Changes in market value of investments are 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.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 67
annual report 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 Statement of Cash Flow, 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.
(j) Derivative financial instruments and hedging
The Group utilises derivative financial instruments, both foreign exchange and interest rate swaps to manage the risk
associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are recognised at fair
value.
The Group has set defined policies and implemented hedging policies to manage interest and exchange rate risks.
Derivative instruments are transacted in line with these policies to achieve the economic outcomes in line with the Group’s
treasury and hedging policy. They are not transacted for speculative purposes.
The Group does not employ hedge accounting and as such derivatives are recorded at fair value with gains or losses arising
from the movement in fair values recorded in the income statement.
(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 2013 the Group’s investments in listed and
unlisted securities have been classified as 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.
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 the Australian
Securities Exchange quoted market bid prices at the close of business on the balance sheet date.
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.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Investments and other financial assets (continued)
Financial assets at fair value through profit or loss
A financial asset or financial liability at fair value is designated by the entity at fair value through the profit and loss upon
initial recognition. 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 $28.2 million (2012: $27.9 million).
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised
in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
Subsidiaries
Investment in subsidiaries are held at lower of cost or recoverable amount.
(l) Investment in associates
The Group’s investments in its associates are 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 lower of cost and recoverable amount in the parent’s financial
statements.
(m) Interest in joint arrangements
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 lower of cost or recoverable amount in the investing entities.
The Group’s interest in joint operations that give the parties a right to the underlying assets and obligations themselves
is accounted for by recognising the share of those assets and obligations.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 69
annual report 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Property, plant and equipment
Hotel property, plant and equipment
Property (including land and buildings), plant and equipment represent owner-occupied properties and are initially
measured at cost including transaction costs and acquisition costs. Subsequent to initial recognition, properties are
measured at fair value less accumulated depreciation and any impairment in value after the date of revaluation.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Buildings – 50 years
Plant and equipment – 3 to 20 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.
Other
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
Impairment
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows,
the recoverable amount is determined for the cash-generating unit to which the asset belongs.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-
generating units are written down to their recoverable amount.
The recoverable amount of property (including land and buildings), plant and equipment is the greater of fair value less
costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
assets.
Impairment losses are recognised in the income statement.
Independent valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially
from the asset’s fair value at the balance sheet date.
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.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Property, plant and equipment (continued)
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 and property specific conditions at the balance sheet date.
Gains or losses arising from changes in the fair values of investment properties are recognised in the income statement
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 the income statement in the year of retirement
or disposal.
Investment properties under construction are carried at fair value after allowing for the remaining expected costs of
completion plus an appropriate risk adjusted development margin.
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.
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.
Investment properties are independently valued on a staggered basis every two years unless the underlying financing
requires a more frequent independent valuation cycle. 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. Leasing costs are treated as separate assets and 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.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 71
annual report 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
(q) Goodwill and Intangibles
Goodwill
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the
acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial
recognition, goodwill is measured at cost less any accumulated impairment losses and is not amortised. Goodwill is
reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated
to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the
synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or
groups of units. Each unit or group of units to which the goodwill is so allocated:
• Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
• Is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined
in accordance with AASB 8 Operating Segments.
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.
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.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Goodwill and Intangibles (continued)
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.
(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 the liability. The increase in the
provision resulting from the passage of time is recognised in finance costs.
Employee leave benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to
be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date.
They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick
leave are recognised when the leave is taken and are measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised and measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of
service. Expected future payments are discounted using market yields at the reporting date on national government bonds
with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 73
annual report 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) Distributions and dividends
Trusts generally distribute their distributable assessable income to their unitholders. Such distributions are determined by
reference to the taxable income of the respective trusts. Distributable income may include capital gains arising from the
disposal of investments and tax-deferred income. Unrealised gains and losses on investments that are recognised as income
are usually retained and are generally not assessable or distributable until realised. Capital losses are not distributed to
security holders but are retained to be offset against any future realised capital gains.
A liability for dividend or distribution is recognised in the Balance Sheet if the dividend or distribution has been declared,
determined or publicly recommended prior to balance date.
(v) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of transaction
costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Fees paid in the establishment of loan facilities that are yield related are included as part of the
carrying amount of loans and borrowings.
Borrowings are classified as non-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. 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 with the exception of investment properties which
are valued in accordance with 2(o).
Gains and losses from revaluations on initial classification and subsequent re-measurement are recognised in the income
statement.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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. Where the net realisable value of inventory is less than cost, an impairment expense is
recognised in the consolidated income statement. Reversals of previously recognised impairment charges are recognised
in the consolidated income statement such that the inventory is always carried at the lower of cost and net realisable value.
Cost includes the purchase consideration, development costs and holding costs such as borrowing costs, rates and taxes.
Hotel
Inventories are valued at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary
to make the sale.
(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.
Trust income tax
under current Australian income tax legislation AT, AIT, ASPT, AHT, ADIFII and AMSHT are not 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, ASOL and its Australian resident wholly-owned subsidiaries
and AHL and its Australian resident wholly-owned subsidiaries have formed separate tax consolidation groups. AGHL, ASOL
and AHL have entered into tax funding agreements with their 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 tax entity and the controlled entities in each tax consolidated group continue to account for their own current
and deferred tax amounts.
In addition to its own current and deferred tax amounts, the head tax entity 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 agreements 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:
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 75
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(za) Taxation (continued)
Company income tax (continued)
• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
• when the deductible temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be
utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be
utilised.
unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it
has become probable that future taxable profit will allow the deferred tax asset to be recovered.
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.
New Zealand
The trusts that operate in New Zealand (“NZ”) are treated as a company for NZ income tax purposes and are taxed at the
corporate tax rate of 28% (2012: 28%). NZ income tax paid the Trusts can be claimed as foreign tax credits to offset against
foreign income and distributable to security holders. NZ tax losses are carried forward provided the continuity test of
ownership is satisfied. Interest expense from the Trusts are fully deductible subject to thin capitalisation considerations.
Property revaluation gains or losses are to be excluded from taxable income, with no deferred tax implications as capital
gains are not taxed in NZ.
Income derived by companies which are incorporated in Australia and registered in NZ as overseas companies is exempt
from tax in Australia where the income has been taxed in NZ. This income is regarded as non-assessable non-exempt
income. As such, income tax is calculated on the companies’ NZ taxable income and taxed at the NZ corporate rate of 28%
(2012: 28%).
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(za) Taxation (continued)
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 security holders, adjusted to exclude costs of servicing equity
(other than distributions) divided by the weighted average number of stapled securities on issue during the period under
review.
Diluted EPSS is calculated as net profit attributable to stapled security holders, adjusted for:
• costs of servicing equity (other than distributions);
• the after tax effect of dividends and interest associated with dilutive potential stapled securities that have been recognised
as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
stapled securities;
divided by the weighted average number of stapled securities and dilutive potential stapled securities, adjusted for any
bonus element.
(zc) Security based payment plans
Executives of the Group receive remuneration in the form of security based payments, whereby Executives render services
as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is recognised, together with a corresponding increase in other capital reserves in
equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised
for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period
has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income
statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning
and end of that period and is recognised in employee benefits expense (note 29).
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is
conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market
or non-vesting conditions are satisfied, provided that all other performance and / or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms
not been modified, if the original terms of the award are met. An additional expense is recognised for any modification
that increases the total fair value of the security based payment transaction, or is otherwise beneficial to the employee as
measured at the date of modification.
When an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the
control of either the entity or the employee are not met.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 77
annual report 2013
3. FINANCIAL RISK MANAGEMENT
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 of 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 and
options, secured property loans and interest bearing loans and derivatives with banks.
The Group manages its exposure to risk by:
– 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 satisfied 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 Ventures business which provides loans to third parties, those
using the funds for property development and / or investment. 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;
– background of the owner (borrower) including previous investment track record;
– 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.
78
abacus property group
3. FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through 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 2013, the Group had undrawn committed facilities of $262.7 million and cash of $44.8 million which are
adequate to cover short term funding requirements.
Further information regarding the Group’s debt profile is disclosed in Note 20.
(c) Refinancing Risk
Refinancing risk is the risk that unfavorable interest rate and credit market conditions result in an unacceptable increase
in the Group’s credit margins and interest cost. Refinancing risk arises when the Group is required to obtain debt to fund
existing and new debt positions.
The Group is exposed to refinancing risks arising from the availability of finance as well as the interest rates and credit
margins at which financing is available. The Group manages this risk by spreading maturities of borrowings and interest
rate swaps, diversification of lenders and reviewing potential transactions to understand the impact on the Group’s credit
worthiness.
(d) Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Foreign currency risk
The Group is exposed to currency risk on its investment in foreign operations, equity investments, investment in associates
and property loans denominated in a currency other than the functional currency of Group entities. The currencies in which
these transactions are conducted are primarily are denominated in NZD.
As a result the Group’s balance sheet can be affected by movements in the A$/NZ$ exchange rates.
Interest rate risk
APG’s exposure to the risk of changes in market interest rates relates primarily to APG’s long-term bank debt obligations
which are based on floating interest rates. APG’s policy is to maintain a mix of floating exposure and fixed interest rate
hedging with fixed rate cover highest in years 1 to 5.
Similar policies are employed for the funds consolidated by the Group (AHF, ADIF II and AMSHT).
The Group hedges to minimise interest rate risk by entering variable to fixed interest rate swaps which also helps deliver
interest covenant compliance and positive carry (net rental income in excess of interest expense) on the property portfolio.
Interest rate swaps have the economic effect of converting borrowings from variable rates to fixed rates. Under the interest
rate swaps, the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest
amounts calculated by reference to the agreed notional principal amounts. At 30 June 2013, after taking into account the
effect of interest rate swaps, approximately 83.0% of the Group’s drawn debt is subject to fixed rate hedges (2012: 97.0%).
Hedge cover as a percentage of available facilities at 30 June 2013 is 59.5% (2012: 69.7%).
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 79
annual report 2013
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 swapped and fixed rate debt is disclosed
in note 22.
(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
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 is designated by the entity as being at fair value through profit or loss upon initial
recognition. 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.
80
abacus property group
4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED)
(i) Significant accounting judgments (continued)
Control and significant influence
In determining whether the Group has control over an entity, the Group assess its exposure or rights to variable returns
from its involvement with the entity and whether it has the ability to affect those returns through its power over the investee.
The Group may have significant influence over an entity when it has the power to participate in the financial and operating
policies decisions of the entity but is not in control or joint control of those policies.
(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. The assumptions used in the estimations of the recoverable amount and the carrying amount of
goodwill and intangibles with indefinite useful lives are discussed in note 18.
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 and property, plant and equipment held at fair value
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 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 and discount rates that reflect current market conditions and current or recent property investment
prices. If there is any material change in these assumptions or regional, national or international economic conditions, the
fair value of investment properties may differ and may need to be re-estimated.
Net realisable value of inventory
Inventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of completion and selling expenses. The estimates take into
consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that
such events confirm conditions existing at the end of the period. The key assumptions that require the use of management
judgment are reviewed half-yearly. If the net realisable value is less than the carrying value of inventory, an impairment loss is
recognised in the income statement.
Fair value of financial assets
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 $23.6 million (2012:
$27.9 million).
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 81
annual report 2013
5. SEGMENT INFORMATION
The Group predominately operates in Australia. Following are the Group’s operating segments, which are regularly reviewed
by the Chief Operating Decision Maker (“CODM”) 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 entities not engaged in
development and construction projects;
(b) Funds Management: the segment includes development, origination, co-investment and fund management revenues
and expenses in addition to discharging the Group’s responsible entity obligations;
(c) Property Ventures: provides secured lending and related property financing solutions and is also responsible for the
Group’s investment in joint venture and associates’ development and construction projects, which includes revenue from
debt and equity investments in joint ventures and associates. This segment also is responsible for the Group’s investment
in property securities; and
(d) Storage: the segment is responsible for the investment in and ownership of self-storage facilities.
Segment result includes transactions between operating segments which are then eliminated.
AASB 10 - in application of the standard the Group has consolidated the Abacus Hospitality Fund, Abacus Diversified
Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund. The performances of these entities
which are operated as externally managed investment schemes are considered to be non-core segments and are reviewed
separately to that of the performance of the Group’s business segments.
82
abacus property group
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88
abacus property group
6. REVENUE
(a) Finance income
Interest and fee income on secured loans
Sale of joint venture profit share rights
Bank interest
Total finance income
(b) Funds management income
Asset / property management fees
Interest on loans
Total funds management income
(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
Net change in fair value of other investments held at balance date
Total change in fair value of investments held at balance date
2013
$’000
2012
$’000
20,367
–
1,354
15,635
11,000
2,362
21,721
28,997
3,977
3,532
7,509
(73)
4,130
1,352
5,409
3,002
3,507
6,509
(280)
503
(1,467)
(1,244)
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 89
annual report 2013
2013
$’000
2012
$’000
4,559
(24)
–
2,464
6,999
35,800
12,376
48,176
4,728
688
12
2,372
7,800
–
–
–
51,631
4,613
–
66,229
4,756
2,058
56,244
73,043
13,976
776
11,363
753
12,616
14,202
27,368
26,318
7. ExPENSES
(a) Depreciation, amortisation and impairment expense
Depreciation and amortisation of property, plant and equipment and software
Net loss on property, plant and equipment remeasured at fair value
Impairment of intangible assets
Amortisation – leasing costs
Total depreciation, amortisation and impairment expense
(b) Cost of inventory sales
Acquisition and holdings costs
Additional development costs*
Total cost of inventory sales
* co-owner contribution to the Lewisham residential development
(c) Finance costs
Interest on loans
Amortisation of finance costs
Finance costs incurred in the merger with Abacus Storage Fund
Total finance costs
(d) Administrative and other expenses
Wages and salaries
Contributions to defined contribution plans
Other expenses
Total administrative and other expenses
90
abacus property group
8. INCOME TAx
(a) Income tax expense
The major components of income tax expense are:
Income Statement
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous years
Deferred income tax
Movement in depreciable assets tax depreciation
Relating to origination and reversal of temporary differences
Income tax expense reported in the income statement
(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 the
accounting profit before income tax multiplied by the
Group's applicable income tax rate is as follows:
2013
$’000
2012
$’000
5,861
2,076
–
(1,098)
6,839
1,831
(123)
201
565
2,474
Profit before income tax expense
74,319
10,500
Prima facie income tax expense calculated at 30% (Au)
Prima facie income tax expense calculated at 28% (NZ)
Less prima facie income tax expense on profit from Trusts
Prima Facie income tax of entities subject to income tax
Adjustment of prior year tax applied
Derecognition of deferred tax assets
Entertainment
Foreign exchange translation adjustments
Franked dividends
Other items (net)
Income tax expense
22,153
143
(18,124)
4,171
2,076
1,000
19
34
(175)
(286)
2,743
380
(1,541)
1,582
(123)
857
21
(51)
–
188
6,839
2,474
Income tax expense reported in the consolidated income statement
6,839
2,474
The Group has capital tax losses for which no deferred tax asset is recognised on the balance sheet of gross $7.21 million (2012: $6.82 million),
which are available indefinitely for offset against future gains subject to continuing to meet relevant statutory tests.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 91
annual report 2013
2013
$’000
2012
$’000
9,356
1,092
–
1,048
1,185
7,317
2,123
229
1,048
871
12,681
11,588
(2,369)
(1,405)
10,312
10,183
2,408
8,343
1,060
(1,000)
2,958
523
5,355
5,387
1,028
–
5,791
164
14,292
17,725
(2,369)
(1,405)
11,923
16,320
8. INCOME TAx (CONTINUED)
(c) Recognised deferred tax assets and liabilities
Deferred income tax at 30 June 2013 relates to the following:
Deferred tax liabilities
Revaluation of investment properties at fair value
Revaluation of financial instruments at fair value
Revaluation of property, plant and equipment
Reset of tax cost bases
Other
Gross deferred income tax liabilities
Set off of deferred tax assets
Net deferred income tax liabilities
Deferred tax assets
Revaluation of financial instruments at fair value
Provisions – other
Provisions – employee entitlements
Derecognition of deferred tax asset
Losses available for offset against future taxable income
Other
Gross deferred income tax assets
Set off of deferred tax assets
Net deferred income tax assets
Unrecognised temporary differences
At 30 June 2013, the Group has unrecognised deferred tax assets on capital account in relation to the fair value of investments
($1.1 million gross) (2012: $1.2 million) and fair value of investment properties ($3.6 million gross) (2012: $3.8 million).
Tax consolidation
AGHL and its 100% owned Australian resident subsidiaries, ASOL and its 100% owned Australian resident subsidiaries and
AHL and its 100% owned Australian resident subsidiaries have formed separate tax consolidated groups. AGHL, ASOL
and AHL are the head entity of their respective tax consolidated groups. The head entity and the controlled entities in the
tax consolidated group continue to account for their own current and deferred tax amounts. The current and deferred tax
amounts are measured in a manner that is consistent with the broad principles in AASB 112 Income Taxes. The nature of the
tax funding agreement is discussed further below.
Nature of the tax funding agreement
Members of the respective tax consolidated groups have entered into tax funding agreements. The tax funding agreements
require 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 agreements 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.
92
abacus property group
9. DISTRIBUTIONS PAID AND PROPOSED
Abacus Property Group*
(a) Distributions paid during the year
June 2012 half: 8.25 cents per stapled security (2011: 8.25 cents)
December 2012 half: 8.25 cents per stapled security (2011: 8.25 cents)
(b) Distributions proposed and not recognised as a liability^
June 2013 half: 8.25 cents per stapled security (2012: 8.25 cents)
2013
$’000
2012
$’000
35,886
36,702
31,217
31,963
72,588
63,180
37,376
35,886
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.
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
^ The final distribution of 8.25 cents per stapled security was declared on 1 July 2013. The distribution being paid on or about 15 August 2013 will be
approximately $37.4 million. No provision for the distribution has been recognised in the balance sheet at 30 June 2013 as the distribution had not been
declared by the end of the year.
Abacus Hospitality Fund
(a) Distributions paid during the year
June 2012 quarter: 1.125 cents per security (2011: 1.125 cents)
September 2012 quarter: 1.125 cents per security (2011: 1.125 cents)
December 2012 quarter: 1.125 cents per security (2011: 1.125 cents)
March 2013 quarter: 0.500 cents per security (2012: 1.125 cents)
(b) Distributions proposed and recognised as a liability
June 2013 quarter: 0.500 cents per stapled security (2012: 1.125 cents)
Abacus Miller Street Holding Trust
(a) Distributions paid during the year
June 2012 quarter: 1.125 cents per unit (2011: Nil cents)
September 2012 quarter: 1.125 cents per unit (2011: 1.125 cents)
December 2012 quarter: 1.125 cents per unit (2011: 1.125 cents)
March 2013 quarter: 1.125 cents per unit (2012: 1.125 cents)
(b) Distributions proposed and recognised as a liability
June 2013 quarter: 1.125 cents per unit (2012: 1.125 cents)
2013
$’000
552
556
552
248
2012
$’000
551
551
551
551
1,908
2,204
248
551
2013
$’000
214
214
214
214
856
2012
$’000
–
214
214
214
642
214
214
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 93
annual report 2013
2013
$’000
2012
$’000
80
590
469
233
562
268
1,139
1,063
80
597
474
80
597
474
79
596
473
80
590
374
80
590
434
80
590
469
3,450
3,287
80
597
474
80
590
469
1,151
1,139
2013
$’000
2012
$’000
12,089
1,106
13,195
10,396
1,693
12,089
9. DISTRIBUTIONS PAID AND PROPOSED (CONTINUED)
Abacus Diversified Income Fund II
(a) Distributions paid during the year
Final distribution for financial year 30 June 2012: rate as per unit class
Class A units 0.75 cents per unit (2011: 2.125 cents)
Class B units 2.331 cents per unit (2011: 2.250 cents)
Class C units 1.748 cents per unit (2011: 1.668 cents)
September 2012: rate as per unit class
Class A units 0.75 cents per unit (2011: 0.75 cents)
Class B units 2.3585 cents per unit (2011: 2.331 cents)
Class C units 1.7689 cents per unit (2011: 1.748 cents)
December 2012: rate as per unit class
Class A units 0.75 cents per unit (2011: 0.75 cents)
Class B units 2.3585 cents per unit (2011: 2.331 cents)
Class C units 1.7689 cents per unit (2011: 1.748 cents)
March 2013: rate as per unit class
Class A units 0.75 cents per unit (2012: 0.75 cents)
Class B units 2.3585 cents per unit (2012: 2.331 cents)
Class C units 1.7689 cents per unit (2012: 1.748 cents)
(b) Distributions proposed and recognised as a liability
Final distribution payable for the June 2013 quarter: rate as per unit class
Class A units 0.75 cents per unit (2012: 0.75 cents)
Class B units 2.3585 cents per unit (2012: 2.331 cents)
Class C units 1.7689 cents per unit (2012: 1.748 cents)
Abacus Property Group*
(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% (2012: 30%)
Franking credits that will arise from the payment of income payable at the end of the financial year
Franking account balance at the end of the financial year 30% (2012 30%)
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
94
abacus property group
10. EARNINGS PER STAPLED SECURITY
Basic and diluted earnings per stapled security (cents)
Reconciliation of earnings used in calculating earnings per stapled security
Basic and diluted earnings per stapled security
2013
$’000
13.68
2012
$’000
2.11
Net profit
61,052
8,470
Weighted average number of stapled securities:
Weighted average number of stapled securities for basic earning per security
446,427
400,921
11. CASH AND CASH EQUIVALENTS
Reconciliation to Cash Flow Statement
For the purposes of the Cash Flow Statement, cash and
cash equivalents comprise the following at 30 June 2013:
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.
(a) Reconciliation of net profit after tax to net cash flows from operations
Net profit
Adjustments for:
Depreciation and amortisation of non-current assets
Provision for doubtful debts
Diminution of inventory
Restructuring charge – related parties
Loss on consolidation
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 investments and financial instruments derecognised
Increase/(decrease) in payables
Increase/(decrease) in unearned revenue
(Increase)/decrease in inventories
(Increase)/decrease in receivables and other assets
Net cash from operating activities
(b) Disclosure of financing facilities
Refer to note 20d.
2013
$’000
2012
$’000
44,822
54,129
67,480
8,026
6,999
1,060
–
–
18,943
1,153
(497)
(5,409)
(1,973)
(6,854)
17,768
14,750
48,176
7,234
7,800
348
1,500
3,507
–
54,315
2,235
1,244
(9,456)
(132)
(2,518)
–
–
19,381
168,830
86,250
(c) Disclosure of non-cash financing activities
Non-cash financing activities include capital raised pursuant to APG’s distribution reinvestment plan. During the year
18.6 million stapled securities were issued with a cash equivalent of $36.6 million.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 95
annual report 2013
2013
$’000
2012
$’000
645
20,913
21,558
(1,998)
19,560
935
13,549
14,484
(2,566)
11,918
6,897
6,897
6,212
6,212
2013
$’000
2012
$’000
2,047
405
17,713
1,385
2,452
19,098
–
–
–
168
7,885
8,053
116,404
21,966
137,938
16,820
138,370
154,758
4,642
23,640
4,489
20,000
28,282
24,489
12. TRADE AND OTHER RECEIVABLES
(a) Current
Trade debtors
Other debtors
Gross receivables
Less provision for doubtful debts
Net current receivables
(b) Non-current
Other debtors
Non-current receivables
13. PROPERTY LOANS AND OTHER FINANCIAL ASSETS
(a) Current property loans
Secured loans – amortised cost(i)
Interest receivable on secured loans – amortised cost
(b) Current other financial assets
Investments in securities – listed – fair value
Other financial assets – fair value(ii)
(c) Non-current property loans
Secured loans – amortised cost(i)
Interest receivable on secured loans – amortised cost
(d) Non-current other financial assets
Investments in securities – unlisted – fair value
Other financial assets – fair value(ii)
(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 2014
and the non-current facilities will mature between 1 July 2014 and 24 December 2018. For 30 June 2012, an amount of $33.1 million relates to a loan to
Abacus Wodonga Land Fund, a related party, which consolidated into the Group on 30 June 2013.
(ii) Abacus 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 period, the maximum exposure to credit risk in
relation to these instruments was $23.6 million (2012: $27.9 million).
96
abacus property group
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
Gross value
Accumulated depreciation
Net carrying amount at end of year
Plant and equipment
At 1 July, net of accumulated depreciation
Additions
Disposals
Effect of movements in foreign exchange
Depreciation charge for the year
At 30 June, net of accumulated depreciation
Gross value
Accumulated depreciation
Net carrying amount at end of year
Total
Property, plant and equipment
Hotel properties(1)
Storage properties
Office Equipment / furniture and fittings
Total property, plant and equipment
2013
$’000
2012
$’000
138,412
144,999
5,976
205
–
(13,663)
(7,260)
2,068
(1,547)
7,452
444
(1,025)
137,649
138,412
151,436
150,653
(13,787)
(12,241)
137,649
138,412
15,653
1,792
(39)
35
(2,990)
18,239
1,371
(298)
47
(3,706)
14,451
15,653
38,769
(24,318)
14,451
36,689
(21,036)
15,653
152,100
154,065
2013
$’000
2012
$’000
149,820
152,155
1,778
502
1,823
87
152,100
154,065
(1) Includes a pub property but excludes the value of licence that is accounted for separately as an intangible.
The property, plant and equipment are carried at the directors’ determination of fair value. 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.
The independent and directors’ 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 2013 have regard to market sales evidence in adopting a market valuation for each property including the key
assumptions outlined.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 97
annual report 2013
14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The key underlying assumptions, on a portfolio basis, contained within the independent and directors’ valuations above for
the Hotel properties are as follows:
• A weighted average capitalisation rate for the hotel properties is 9.39% (2012: 9.33%)
• The current weighted average occupancy rate for the hotel properties is 72% (2012: 72%)
The independent and directors’ 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 2013 have regards to market sales evidence in adopting a market valuation for each property including the key
assumptions outlined.
15. INVENTORY
(a) Current
Hotel supplies
Projects1
– purchase consideration
– development costs
– finance costs2
– other costs3
(b) Non-current
Projects1
– purchase consideration
– development costs
– finance costs2
– other costs3
– diminution
Total inventories
1. Inventories are held at the lower of cost and net realisable value.
2. Finance costs were capitalised at interest rates within the range of 8.1% to 12.7% during the financial year (2012: 9.3% to 9.8%)
3. Other costs are described in note 2(z).
2013
$’000
2012
$’000
501
479
10,833
53,148
7,354
1,156
26,000
–
–
–
72,992
26,479
57,245
26,749
6,792
2,656
(1,500)
81,246
12,163
6,579
2,486
(1,500)
91,942
100,974
164,934
127,453
98
abacus property group
16. INVESTMENT PROPERTIES
Investment properties held for sale
Retail
Commercial
Industrial
Other
Total investment properties held for sale
Investment properties
Retail
Commercial
Industrial
Storage
Other
Total investment properties
2013
$’000
2012
$’000
69,710
93,000
13,000
–
23,801
144,550
9,220
13,250
175,710
190,821
2013
$’000
2012
$’000
266,249
362,279
198,083
371,558
23,226
296,507
310,395
198,740
357,761
17,800
1,221,395
1,181,203
Total investment properties including held for sale
1,397,105
1,372,024
The current investment properties represent 12 properties which are either subject to a sales contract or an active
sales campaign and are expected to be sold by 30 June 2014.
Reconciliation
A reconciliation of the carrying amount of investment properties excluding properties held for sale at the beginning
and end of the year is as follows:
Carrying amount at beginning of the financial year
Straight lining rental assets
Additions and capital expenditure
Fair value adjustments for properties held at balance date
Disposals
Effect of movements in foreign exchange
Properties transferred to held for sale
Transfers
Carrying amount at end of the financial year
2013
$’000
2012
$’000
1,181,203
1,338,130
–
113,133
3,914
(15,404)
5,115
(167)
35,152
(2,263)
(61,636)
368
(92,950)
(158,621)
26,384
30,240
1,221,395
1,181,203
Investment properties are carried at the Directors’ determination of fair value. 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.
Investment properties are independently valued on a staggered basis every two years unless the underlying financing
requires a more frequent independent valuation cycle. The key underlying assumptions, on a portfolio basis, contained
within the independent and director valuations above are as follows:
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 99
annual report 2013
16. INVESTMENT PROPERTIES (CONTINUED)
Abacus Property Group*
• A weighted average capitalisation rate for each category is as follows:
• Group – 8.67% (2012: 8.69%)
• Retail – 7.89% (2012: 8.18%)
• Commercial – 8.51% (2012: 8.38%)
• Industrial – 9.81% (2012: 9.78%)
• Storage – 9.20% (2012: 9.18%)
• Other – 7.49% (2012: 8.75%)
• The current occupancy rate for the principal portfolio excluding development and self-storage assets is 92.8% (2012:
94.3%). The current occupancy rate for self-storage assets is 81.8% (2012: 82.8%).
• A weighted average rent review for the 12 months to 30 June 2013 of 4.0% (2012: 3.7%).
During the year ended 30 June 2013, 56% (2012: 62%) of the number of investment properties in the portfolio was subject to
external valuations, the remaining 44% (2012: 38%) was subject to internal valuation.
Abacus Diversified Income Fund II
• A weighted average capitalisation rate for each category is as follows:
• Commercial – 10.41% (2012: 9.34%)
• Industrial – 8.85% (2012: 8.86%)
• The current occupancy rate for the portfolio is 95% (2012: 97%).
• The weighted average lease expiry term is 3.48 years (30 June 2012: 4.08 years).
During the year ended 30 June 2013, 100% of the number of properties in the portfolio was subject to external valuations.
Abacus Miller Street Holding Trust
• A capitalisation rate of 8.75% (2012: 8.75%).
• The current occupancy rate of the property is 100% (2012: 98%).
• A weighted average rent review for the 12 months to 30 June 2013 of 4.0% (2012: 4.0%).
The property was externally valued as at 30 June 2013.
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 2013 have regard 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.
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
100
abacus property group
17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Investment in joint ventures
(a) Details of Joint Ventures
309 George St JV Trust
Abacus Aspley Village Trust
PRINCIPAL ACTIVITy
Property investment
Property investment
Abacus Rosebery Property Trust
Property development
Abwill 350 George St Trust
Property development
Australian Aggregation Head Trust
Property investment
Birkenhead Point Marina Pty Ltd(1)
Marina operator
Fordtrans Pty Ltd (Virginia Park)
Property investment
Hampton Residential Retirement Trust
Property development
Jack Road Investments Unit Trust
Property development
Jigsaw Trust
Pakenham Valley unit Trust
Childcare operator
Land subdivision
queensberry Street Carlton unit Trust
Property development
The Abacus Colemans Road Trust
Property development
The Mount Druitt unit Trust
Property investment
The Tulip unit Trust
Property development
NOTE
17
2013
$’000
124,458
124,458
2012
$’000
121,833
121,833
OWNERSHIP INTEREST
CARRyING VALuE
30 JUNE
2013
%
30 JUNE
2012
%
25
33
50
50
25
50
50
50
50
50
50
50
50
50
50
25
33
50
50
25
50
50
50
–
50
50
–
50
50
50
30 JUNE
2013
%
10,245
7,476
1,697
6,371
27,925
80
61,399
4,255
4,350
–
21
–
–
639
–
30 JUNE
2012
%
11,478
10,459
1,284
6,842
14,241
583
60,412
4,519
–
9,784
21
–
1,672
538
–
124,458
121,833
(1) Operates the marina adjacent to the Birkenhead Point Shopping Centre in Drummoyne NSW.
There were no impairment losses or contingent liabilities relating to the investment in the associates and joint ventures.
(b) Extract from associates and joint ventures’ profit & loss statements
Revenue
Expenses
Net profit
Share of net profit
2013
$’000
154,408
(127,862)
2012
$’000
73,781
(56,880)
26,546
16,901
10,164
7,379
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 101
annual report 2013
2013
$’000
41,413
572,535
613,948
(18,098)
2012
$’000
48,492
524,846
573,338
(18,485)
(239,813)
(239,282)
(257,911)
(257,767)
356,037
315,571
124,458
121,833
17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
(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
Material investments in joint ventures follows.
Fordtrans Pty Ltd (Virginia Park) (“VP”)
The Group has a 50% interest in the ownership and voting rights of Fordtrans Pty Ltd. VP’s principal place of business is in
Bentleigh East, Victoria.
VP owns a sizeable Business Park providing a mixture of industrial and office buildings as well as supporting facilities
including gymnasium, swim centre, child care centre, children’s play centre, cafe, yoga centre and martial arts centre.
The site has recently been enhanced following the purchase of a neighbouring site by the Group that offers expansion
potential and residential opportunity.
The Group jointly controls the venture with the other partner under the terms of unitholders Agreement and requires
unanimous consent for all major decisions over the relevant activities.
The Group’s share of income (including distributions) for the year ended 30 June 2013 was $4.79 million (2012: $4.54 million).
Summarised Financial Information
Summarised financial information in respect of VP is as follows:
Cash & cash equivalents
Other current assets
Total current assets
Total non-current assets
Total assets
Other current liabilities
Total current liabilities
Non-current financial liabilities
Total non-current liabilities
Total liabilities
Net assets
2013
$’000
843
15,745
2012
$’000
1,134
11,233
16,588
12,367
176,783
176,286
193,371
188,653
6,188
6,188
3,377
3,377
64,732
64,389
64,732
64,389
70,920
67,766
122,451
120,887
102
abacus property group
17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED)
Fordtrans Pty Ltd (Virginia Park) (“VP”) (continued)
Summarised Statement of Comprehensive Income
Revenue
Interest income
Interest expense
Profit before tax
Income tax expense
Total comprehensive income
18. INTANGIBLE ASSETS AND GOODWILL
Goodwill
Balance at 1 July
Balance at 30 June
Licences and entitlements
At 1 July, net of accumulated amortisation
Disposal
Impairment
At 30 June, net of accumulated amortisation
Total goodwill and intangibles
2013
$’000
16,578
3,416
(4,558)
8,929
–
2012
$’000
15,559
2,416
(4,026)
8,853
–
8,929
8,853
2013
$’000
2012
$’000
32,461
32,461
32,461
32,461
1,000
(200)
–
800
2,712
(1,700)
(12)
1,000
33,261
33,461
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.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED
103
annual report 2013
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 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 2013 covering a five-year period.
A pre tax discount rate of 9.49% (2012: 9.49%) and a terminal growth rate of 3% (2012: 3%) have been applied to the cash flow
projections.
Property
The recoverable amount of the indefinite life intangible assets has 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 2013 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
(iii) Key assumptions used in valuation calculations
FuNDS MANAGEMENT
PROPERTy
TOTAL
2013
$’000
2012
$’000
32,394
32,394
–
–
2013
$’000
67
800
2012
$’000
2013
$’000
2012
$’000
67
32,461
32,461
1,000
800
1,000
Funds Management Goodwill
The calculation of value in use is most sensitive to the following assumptions:
a. Fee income
b. Discount rates
c. Property values of the funds/properties under management
Fee income – fee income is based on actual income in the year preceding the start of the budget period and actual funds
under management.
Discount rates – discount rates reflect management’s estimate of the time value of money and the risks specific to each unit
that are not reflected in the cash flows.
Property values – property values are based on the fair value of properties which are valued on a staggered two year basis
by independent valuers.
104
abacus property group
18. INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
(iii) Key assumptions used in valuation calculations (continued)
Hotel Intangible Assets
The calculation of the hotel valuations is most sensitive to the following assumptions:
a. Hotel income
b. Discount rates and capitalisation rates with reference to market sales evidence
c. Other value adding or potential attributes of the hotel asset
Hotel income – hotel income is based on actual income in the year preceding the start of the budget period, adjusted based
on industry norms for valuation purposes.
Discount rates and capitalisation rates – these rates reflect 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 hotel valuation at June 2013 was 11.5% (2012: 12.5%).
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 2013 has significant head room thus
reasonable changes in the assumptions such as a 1% change in the discount rate or a 10% fall in revenue assumptions would
not cause any 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.
19. TRADE AND OTHER PAYABLES
(a) Current
Trade creditors
Other creditors
unearned revenue
Rental guarantee
Goods and services tax
Accrued expenses
(b) Non-current
unearned revenue
Rental guarantee
2013
$’000
2012
$’000
503
24,325
25,889
2,785
1,146
8,665
962
13,028
–
900
6,907
8,629
63,313
30,426
–
–
–
10,125
2,600
12,725
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 105
annual report 2013
2013
$’000
2012
$’000
8,600
31,367
29,950
–
39,967
29,950
36,740
21,538
58,278
32,189
(106)
32,083
34,000
(10)
33,990
–
–
–
–
–
–
–
–
–
20. INTEREST BEARING LOANS AND BORROWINGS
Abacus Property Group*
Current
Bank loans – A$
Other loans – A$
Abacus Hospitality Fund
Current
Bank loans – A$
Bank loans – A$ value of NZ$ denominated loan
Abacus Diversified Income Fund II
Current
Bank loans – A$
Less: Unamortised borrowing costs
Abacus Miller Street Holding Trust
Current
Bank loans – A$
Less: Unamortised borrowing costs
(a) Total current
164,318
29,950
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
106
abacus property group
20. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Abacus Property Group*
Non-current
Bank loans – A$
Other loans – A$
Bank loans – A$ value of NZ$ denominated loan
Less: Unamortised borrowing costs
Abacus Hospitality Fund
Non-current
Bank loans – A$
Bank loans – A$ value of NZ$ denominated loan
Loans from other parties
Less: Unamortised borrowing costs
Abacus Diversified Income Fund II
Non-current
Bank loans – A$
Less: Unamortised borrowing costs
Abacus Miller Street Holding Trust
Non-current
Bank loans – A$
Less: Unamortised borrowing costs
Abacus Wodonga Land Fund
Non-current
Bank loans – A$
(b) Total non-current
2013
$’000
2012
$’000
500,548
484,484
–
55,374
(2,719)
29,354
53,038
(6,546)
553,203
560,330
–
–
27,350
(235)
49,240
20,020
25,267
(469)
27,115
94,058
52,349
(34)
84,319
(427)
52,315
83,892
–
–
–
34,000
(20)
33,980
6,657
6,657
–
–
639,290
772,260
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED
107
annual report 2013
2013
$’000
2012
$’000
164,434
642,278
–
29,950
779,722
–
806,712
809,672
20. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
(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
Abacus Property Group*
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 are $A and $NZ denominated and are provided by several banks at interest rates which are set periodically on a
floating basis. The term to maturity for the loans varies from May 2014 to April 2016. The bank loans are secured by charges
over the investment properties, certain inventory and certain property, plant and equipment.
Approximately 83% (2012: 97%) of bank debt drawn was subject to fixed rate hedges. The bank debt drawn at 30 June 2013
has a weighted average term to maturity of 2.1 years (2012: 3 years). Hedge cover as a percentage of available facilities at
30 June 2013 is 59.5% (2012: 69.7%).
APG’s weighted average interest rate as at 30 June 2013 was 6.05% (2012: 7.27%). Line fees on undrawn facilities contributed
to 0.47% of the weighted average interest rate at 30 June 2013 (2012: 0.40%). APG’s weighted average interest rate excluding
the undrawn facilities line fees as at 30 June 2013 was 5.58% (2012: 6.87%).
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
Abacus Hospitality Fund
AHF’s $A and $NZ bank facility matures in June 2014. The facility is secured by a charge over AHF’s hotel assets and at
30 June 2013 approximately 73.7% (2012: 62.0%) of drawn bank debt facilities were subject to current fixed rate hedges.
The bank debt drawn at 30 June 2013 has a weighted average term to maturity of 1.0 year (2012: 2.0 years).
AHF’s weighted average interest rate as at 30 June 2013 was 8.0% (2012: 8.1%). Line fees on undrawn facilities contributed to
0.41% of the weighted average interest rate at 30 June 2013 (2012: 0.18%). AHF’s weighted average interest rate excluding the
undrawn facilities line fees as at 30 June 2013 was 7.59% (2012: 7.92%).
Abacus Diversified Income Fund II
ADIF II has financed its Australian investment property portfolio via two $A facilities provided by two major Australian banks
which mature in September 2013 and November 2014 respectively.
The facilities are secured by charges over ADIF II’s investment properties and at 30 June 2013 approximately 92.9% (2012:
93.1%) of drawn bank debt facilities were subject to fixed rate hedges. The bank debt drawn at 30 June 2013 has a weighted
average term to maturity of 0.9 years (2012: 1.9 years).
ADIF II’s weighted average interest rate as at 30 June 2013 was 8.86% (2012: 8.85%). Line fees on undrawn facilities
contributed to 0.29% of the weighted average interest rate at 30 June 2013 (2012: 0.20%). ADIF II’s weighted average interest
rate excluding the undrawn facilities line fees as at 30 June 2013 was 8.57% (2012: 8.65%).
108
abacus property group
20. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Abacus Wodonga Land Fund
AWLF 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.
The loan is secured by a charge over the Fund’s development property and AGHL has provided a guarantee.
The bank loan is provided by an Australian bank at interest rates that include both fixed and floating arrangements. The loan is
denominated in Australian dollars and the term to maturity date is 30 April 2015. The weighted average interest rate of the bank
borrowing which is covered by fixed rate hedges was 12.66% at 30 June 2013 (2012: 10.95%).
Abacus Miller Street Holding Trust
The Miller Street investment property is financed by a major Australian bank via a secured charge. The bank loan is a $34.0 million
facility which expires in March 2014. AMSHT has hedged 97.1% of its drawn debt (2012: 97.1%) and at reporting date AMSHT’s
weighted average interest rate was 8.09%. (2012: 8.38%). Line Fees on undrawn facilities contributed to 0.03% of the weighted
average interest rate as at 30 June 2013 (2012: 0.02%). AMSHT’s weighted average interest rate excluding the undrawn facilities line
fees as at 30 June 2013 was 8.06% (2012: 8.36%).
(d) Financing facilities available
At reporting date, the following financing facilities had been negotiated and were available:
Abacus Property Group
Total facilities – bank loans
Facilities used at reporting date – bank loans
Facilities unused at reporting date – bank loans
Abacus Hospitality Fund
Total facilities – bank loans
Facilities used at reporting date – bank loans
Facilities unused at reporting date – bank loans
Abacus Diversified Income Fund
Total facilities – bank loans
Facilities used at reporting date – bank loans
Facilities unused at reporting date – bank loans
Abacus Miller Street Holding Trust
Total facilities – bank loans
Facilities used at reporting date – bank loans
Facilities unused at reporting date – bank loans
Abacus Wodonga Land Fund
Total facilities – bank loans
Facilities used at reporting date – bank loans
Facilities unused at reporting date – bank loans
2013
$’000
2012
$’000
786,500
789,950
(564,522)
(567,472)
221,978
222,478
80,724
(58,278)
22,446
78,646
(69,260)
9,386
96,500
104,577
(84,538)
(84,319)
11,962
20,258
35,000
(34,000)
35,000
(34,000)
1,000
1,000
12,000
(6,657)
5,343
–
–
–
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 109
annual report 2013
20. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
(e) Assets pledged as security
The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are:
Current
First mortgage
Inventory
Investment properties held for sale
Total current assets pledged as security
Non-current
First mortgage
Freehold land and buildings
Property, plant and equipment
Inventory
Investment properties
Total non-current assets pledged as security
2013
$’000
2012
$’000
72,489
175,710
248,199
–
190,821
190,821
6,216
5,609
145,620
148,456
58,422
54,663
1,194,931
1,173,163
1,405,189
1,381,891
Total assets pledged as security
1,653,388
1,572,712
(f) Defaults and breaches
During the current and prior years, there were no defaults or breaches on any of the loans.
110
abacus property group
21. PARENT ENTITY FINANCIAL INFORMATION
Results of the parent entity
Profit / (loss) for the year*
Total comprehensive income / (expense) for the year
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Issued capital
Retained earnings
Employee options reserve
Total equity
2013
$’000
2012
$’000
4,978
4,978
(72,912)
(72,912)
9,951
21,808
183,904
155,723
118
11,884
52,638
35,539
131,266
120,184
165,611
(40,960)
6,615
160,673
(45,937)
5,448
131,266
120,184
* Includes diminution of subsidiary of $98 million in 2012 which is eliminated in the consolidation of the Group’s results.
Parent entity contingencies
The parent entity has entered into the following agreement in the year ended 30 June 2011 which is current as at
30 June 2013:
• Provide a corporate guarantee to a bank to increase the amount of drawn funds available and to guarantee the payment
of interest on a tranche. The maximum liability is approximately $5.1 million (2012: $6.8 million). No property security has
been provided by the parent.
Parent entity capital commitments
There are no capital commitments of the parent entity as at 30 June 2013 (2012: Nil).
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 111
annual report 2013
CARRyING AMOuNT
2013
$’000
2012
$’000
26,457
18,130
140,822
173,856
28,281
44,822
32,542
54,129
240,382
278,657
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
Other financial assets
Cash and cash equivalents
As at 30 June 2013, the Group had the following concentrations of credit risk:
• Secured property loans: a loan which represents 43% of the portfolio covers two large projects at Riverlands and Camelia;
• Other financial assets (fair value) is represented by 2 issuers (2012: 2 issuers)
Secured property loans
The following table illustrates grouping of the Group’s investment in secured loans. As noted in disclosure note 3, the Group
mitigates the exposure to this risk by evaluation of the credit submission before acceptance, ensuring security is obtained
and consistent and timely monitoring of the financial instrument to identify any potential adverse changes in the credit
quality.
30 JUNE 2013
Loans
less: provisioning
Total
30 JUNE 2012
Loans
less: provisioning
Total
TOTAL
$’000
ORIGINAL
TERM
$’000
RENEWED/
EXTENDED
TERM(1)
$’000
140,822
56,321
84,501
–
–
–
140,822
56,321
84,501
PAST DuE
TERM(2)
$’000
IMPAIRED(3)
$’000
–
–
–
–
–
–
TOTAL
$’000
ORIGINAL
TERM
$’000
RENEWED/
EXTENDED
TERM(1)
$’000
173,856
150,121
23,735
–
–
–
173,856
150,121
23,735
PAST DuE
TERM(2)
$’000
IMPAIRED(3)
$’000
–
–
–
–
–
–
112
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(i) Credit Risk (continued)
Secured property loans (continued)
1) Loans are generally renewed / extended on comparable terms.
2) For loans with past due terms all are less than two years old and are expected to be recovered.
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.
Other financial assets of $28.3 million (2012: $32.5 million) include options totalling $23.6 million (2012: $27.9 million) which are
both on original or renewed terms.
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 2012
movement during the year
Balance at 30 June 2013
2013
$’000
–
–
–
2012
$’000
–
–
–
(ii) Liquidity Risk
The table below shows an analysis of the contractual maturities of key liabilities which forms part of the Group’s assessment of
liquidity risk.
Abacus Property Group*
30 JUNE 2013
Liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
Trade and other payables
51,787
51,787
Interest bearing loans and borrowings incl derivatives#
628,862
715,475
51,787
79,834
–
–
624,742
10,899
Total liabilities
680,649
767,262
131,621
624,742
10,899
30 JUNE 2012
Liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
Trade and other payables
32,735
32,735
Interest bearing loans and borrowings incl derivatives#
643,566
724,007
20,010
82,846
12,725
635,311
Total liabilities
676,301
756,742
102,856
648,036
–
5,850
5,850
# Carrying amount includes fair value of derivative liabilities. Contractual cash flows includes contracted debt and net swap payments using prevailing
forward rates.
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 113
annual report 2013
22. FINANCIAL INSTRUMENTS (CONTINUED)
(ii) Liquidity Risk (continued)
Abacus Hospitality Fund
30 JUNE 2013
Liabilities
Trade and other payables
Interest bearing loans and borrowings incl derivatives#
Total liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
8,645
96,645
8,645
105,957
8,645
64,796
105,290
114,602
73,441
–
19,960
19,960
–
21,201
21,201
30 JUNE 2012
Liabilities
Trade and other payables
Interest bearing loans and borrowings incl derivatives#
Total liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
6,895
85,969
6,895
96,700
6,895
8,117
–
88,584
92,864
103,595
15,012
88,584
–
–
–
# Carrying amount includes fair value of derivative liabilities. Contractual cash flows includes contracted debt and net swap payments using prevailing
forward rates.
Abacus Diversified Income Fund II
30 JUNE 2013
Liabilities
Trade and other payables
Interest bearing loans and borrowings incl derivatives#
Total liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
1,919
90,750
1,919
96,241
1,919
37,321
–
58,920
92,669
98,160
39,240
58,920
–
–
–
30 JUNE 2012
Liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
Trade and other payables
2,724
2,724
Interest bearing loans and borrowings incl derivatives#
92,233
100,615
2,724
7,380
–
93,235
Total liabilities
94,957
103,339
10,104
93,235
# Carrying amount includes fair value of derivative liabilities. Contractual cash flows includes contracted debt and net swap payments using prevailing
forward rates.
–
–
–
114
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(ii) Liquidity Risk (continued)
Abacus Miller Street Holding Trust
30 JUNE 2013
Liabilities
Trade and other payables
Interest bearing loans and borrowings incl derivatives#
Total liabilities
30 JUNE 2012
Liabilities
Trade and other payables
Interest bearing loans and borrowings incl derivatives#
Total liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
715
35,086
35,801
715
36,244
36,959
715
36,244
36,959
–
–
–
–
–
–
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
828
35,843
36,671
828
38,073
38,901
828
2,749
–
35,324
3,577
35,324
–
–
–
# Carrying amount includes fair value of derivative liabilities. Contractual cash flows includes contracted debt and net swap payments using prevailing
forward rates.
Abacus Wodonga Land Fund
30 JUNE 2013
Liabilities
Trade and other payables
Interest bearing loans and borrowings#
Total liabilities
CARRyING
AMOuNT
$’000
CONTRACTuAL
CASH FLOWS
$’000
1 yEAR OR
LESS
$’000
OVER 1 yEAR
TO 5 yEARS
$’000
OVER
5 yEARS
$’000
140
9,614
9,754
140
11,754
11,894
140
1,226
–
10,466
1,366
10,466
–
23
23
# Carrying amount includes fair value of derivative liabilities. Contractual cash flows includes contracted debt and net swap payments using prevailing
forward rates.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 115
annual report 2013
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iii) Currency Risk
The following table shows the Group’s investments denominated in a foreign currency.
AuD
NZD
GBP
Assets
Cash at bank
Investment in securities
Total assets
Liabilities
2013
$’000
2012
$’000
2013
£’000
2012
£’000
2013
$’000
3,982
4,270
2012
$’000
8,028
4,026
8,252
12,054
4,727
10,253
4,727
10,253
–
–
–
2,593
2,593
–
2,629
2,629
Interest bearing loans and borrowings
76,911
73,058
91,302
93,303
Total liabilities
76,911
73,058
91,302
93,303
–
–
–
–
The Abacus Property Group and Abacus Hospitality Fund borrow 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 the foreign currency risk on their New Zealand denominated asset values.
The following sensitivity is based on the foreign risk exposures in existence at the balance sheet date.
At 30 June 2013, had the Australian Dollar moved, as illustrated in the table below, with all other variables held consistent,
post tax profit and equity would have been affected as follows:
JUDGEMENTS OF REASONABLY POSSIBLE MOVEMENTS:
AUD/GBP + 10%
AUD/GBP - 10%
AUD/NZD + 10%
AUD/NZD - 10%
POST TAX PROFIT
HIGHER/(LOWER)
EquITy
HIGHER/(LOWER)
2013
$’000
(388)
474
(5,381)
6,577
2012
$’000
(366)
447
(5,537)
6,767
2013
$’000
2012
$’000
–
–
–
–
–
–
–
–
116
abacus property group
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:
Abacus Property Group^
30 JUNE 2013
Financial Assets
Cash and cash equivalents
Receivables
Secured loans
Total financial assets
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
29,686
–
–
29,686
–
–
2,452
–
6,897
138,370
2,452
145,267
Weighted average interest rate*
1.30%
7.00%
11.07%
Financial liabilities
Interest bearing liabilities – bank
Interest bearing liabilities – other
Derivatives
Payables
561,802
–
–
–
–
27,075
–
–
Total financial liabilities
561,802
27,075
–
–
–
–
–
Notional principal swap balance
maturities*
–
–
288,066
180,000
–
468,066
Weighted average interest rate on
drawn bank debt*
6.05%
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
TOTAL
$’000
29,686
20,736
140,822
–
13,839
–
13,839
191,244
–
4,292
35,691
51,787
561,802
31,367
35,691
51,787
91,770
680,647
TOTAL
$’000
43,114
14,170
173,857
–
14,170
30
14,200
231,141
–
4,292
53,286
32,735
560,926
29,354
53,286
32,735
90,313
676,301
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Weighted average interest rate*
3.30%
13.11%
10.70%
30 JUNE 2012
Financial Assets
Cash and cash equivalents
Receivables
Secured loans
Total financial assets
Financial liabilities
Interest bearing liabilities – bank
Interest bearing liabilities – other
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*
43,114
–
–
–
–
19,068
–
–
154,759
43,114
19,068
154,759
560,926
–
–
–
560,926
–
–
–
–
–
–
25,062
–
–
25,062
–
98,703
306,999
225,000
–
630,702
Weighted average interest rate on
drawn bank debt*
7.27%
* rate calculated at 30 June excluding forward starts.
^ Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 117
annual report 2013
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
–
–
–
–
–
–
–
–
–
–
–
27,350
–
–
27,350
42,942
–
–
–
–
–
–
–
–
10,972
10,972
2.00%
58,043
–
–
58,043
–
8.03%
TOTAL
$’000
10,972
4,025
14,997
58,043
27,350
11,251
8,645
–
4,025
4,025
–
11,251
8,645
19,896
105,289
–
42,942
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
9,990
–
9,990
2.19%
68,790
–
–
–
–
–
–
–
–
–
–
5,635
–
–
–
19,632
–
–
TOTAL
$’000
9,990
3,238
13,228
–
3,238
3,238
–
–
16,709
6,895
68,790
25,267
16,709
6,895
23,604
117,661
–
42,942
–
–
–
–
–
–
–
–
–
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iv) Interest rate risk (continued)
Abacus Hospitality Fund
30 JUNE 2013
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
Weighted average interest rate*
Financial liabilities
Interest bearing liabilities – bank
Related party loans
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*#
Weighted average interest rate on
drawn bank debt*
30 JUNE 2012
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
Weighted average interest rate*
Financial liabilities
Interest bearing liabilities – bank
Related party loans
Derivatives
Payables
Total financial liabilities
68,790
5,635
19,632
Notional principal swap balance
maturities*
–
–
42,942
Weighted average interest rate on
drawn bank debt*
8.10%
* rate calculated at 30 June excluding forward starts.
# The Fund has an additional $83.4 million interest rate swap position which in notional terms exceeds the amount of debt borrowed, as a result of repaying
bank debt from hotel sales, including Diplomat in October 2012 and Swissotel in June 2010. This means that after June 2014 more than 100% of the Fund’s
debt will be hedged.
118
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iv) Interest rate risk (continued)
Abacus Diversified Income Fund II
30 JUNE 2013
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
Financial liabilities
Interest bearing liabilities – bank
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*
Weighted average interest rate*
1.30%
30 JUNE 2012
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
Weighted average interest rate*
2.30%
Financial liabilities
Interest bearing liabilities – bank
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*
Weighted average interest rate on
drawn bank debt*
* rate calculated at 30 June.
83,932
–
–
83,932
–
8.85%
468
–
468
84,505
–
–
84,505
226
–
226
Weighted average interest rate on
drawn bank debt*
8.86%
–
25,000
53,500
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
$’000
468
1,218
1,686
–
1,218
1,218
–
6,210
1,919
8,129
84,505
6,210
1,919
92,634
–
78,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78,500
–
–
–
–
–
–
–
–
TOTAL
$’000
226
1,058
1,284
–
1,058
1,058
–
7,914
2,724
83,932
7,914
2,724
10,638
94,570
–
78,500
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 119
annual report 2013
TOTAL
$’000
1,653
50
1,703
–
50
50
–
1,096
715
1,811
34,000
1,096
715
35,811
–
33,000
TOTAL
$’000
799
9
808
–
9
9
–
1,843
828
2,671
34,000
1,843
828
36,671
–
33,000
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iv) Interest rate risk (continued)
Abacus Miller Street Holding Trust
30 JUNE 2013
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
Weighted average interest rate*
Financial liabilities
Interest bearing liabilities – bank
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*
Weighted average interest rate on
drawn bank debt*
8.09%
30 JUNE 2012
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
799
–
799
Weighted average interest rate*
2.30%
Financial liabilities
Interest bearing liabilities – bank
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*
Weighted average interest rate on
drawn bank debt*
* rate calculated at 30 June.
34,000
–
–
34,000
–
8.38%
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
1,653
–
1,653
1.30%
34,000
–
–
34,000
–
–
–
–
–
–
–
–
33,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33,000
–
–
–
–
–
–
–
–
120
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(iv) Interest rate risk (continued)
Abacus Wodonga Land Fund
30 JUNE 2013
Financial Assets
Cash and cash equivalents
Receivables
Total financial assets
Weighted average interest rate*
Financial liabilities
Interest bearing liabilities – bank
Derivatives
Payables
Total financial liabilities
Notional principal swap balance
maturities*
Weighted average interest rate on
drawn bank debt*
FLOATING
INTEREST RATE
$’000
FIXED INTEREST
LESS THAN
1 yEAR
$’000
FIXED INTEREST
1 TO 5 yEARS
$’000
FIXED INTEREST
OVER 5 yEARS
$’000
NON INTEREST
BEARING
$’000
TOTAL
$’000
2,042
427
2,469
–
427
427
–
2,957
174
3,131
6,657
2,957
174
9,788
–
–
–
–
–
–
–
10,000
–
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,042
–
2,042
2.74%
6,657
–
–
6,657
–
12.66%
Summarised interest rate sensitivity analysis
The table below illustrates the potential impact a change in $A interest rates by +/- 1% would have had on the Group’s profit and
equity on a pre-tax basis:
30 JUNE 2013
Financial assets
Financial liabilities
30 JUNE 2012
Financial assets
Financial liabilities
AuD
-1%
+1%
CARRyING
AMOuNT
FLOATING
$’000
44,822
176,036
PROFIT
$’000
(448)
(26,330)
54,129
123,113
(541)
(29,555)
EquITy
$’000
–
–
–
–
PROFIT
$’000
448
26,619
541
25,101
EquITy
$’000
–
–
–
–
The analysis for the interest rate sensitivity of financial liabilities includes derivatives.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 121
annual report 2013
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 $0.49 million (2012: $0.51 million).
(vi) Fair values
The fair value of the Group’s financial assets and liabilities are approximately equal to that of their carrying values.
In accordance with AASB 7 Financial Instruments: Disclosures the Group’s financial instruments are classified into the following fair
value measurement hierarchy:
(a) Level 1 Quoted prices (unadjusted) in active market for identical assets or liabilities;
(b) 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.
122
abacus property group
22. FINANCIAL INSTRUMENTS (CONTINUED)
(vi) Fair values (continued)
The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2013.
30 JUNE 2013
Current
Derivative liabilities
Total current
Non-current
Investment in securities – unlisted
Investment in options
Derivative liabilities
Total non-current
30 JUNE 2012
Current
Investment in securities – listed
Investment in options
Total current
Non-current
Investment in securities – unlisted
Investment in options
Derivative liabilities
Total non-current
There were no transfers between Levels 1, 2 and 3 during the year.
LEVEL 1
2013
$’000
–
–
371
–
–
371
LEVEL 2
2013
$’000
(1,263)
(1,263)
–
–
(55,942)
(55,942)
LEVEL 1
2013
$’000
LEVEL 2
2013
$’000
–
–
–
–
–
(79,752)
168
–
168
–
–
–
–
LEVEL 3
2013
$’000
–
–
4,270
23,640
–
27,910
LEVEL 3
2013
$’000
–
7,885
7,885
LEVEL 4
2013
$’000
(1,263)
(1,263)
4,641
23,640
(55,942)
(27,661)
LEVEL 4
2013
$’000
168
7,885
8,053
4,490
20,000
–
4,490
20,000
(79,752)
(79,752)
24,490
(55,262)
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 123
annual report 2013
22. FINANCIAL INSTRUMENTS (CONTINUED)
(vi) Fair values (continued)
The following table is a reconciliation of the movements in unlisted securities and options classified as Level 3 for the year
ended 30 June 2013.
opening balance as at 30 June 2012
fair value movement through the income statement
transfers to investment properties
redemptions / conversions
closing balance as at 30 June 2013
opening balance as at 30 June 2011
fair value movement through the income statement
redemptions / conversions
closing balance as at 30 June 2012
uNLISTED
SECuRITIES
$000
OPTIONS
$’000
TOTAL
$’000
4,490
27,885
32,375
170
–
(19)
3,640
(7,885)
–
3,810
(7,885)
(19)
4,641
23,640
28,281
uNLISTED
SECuRITIES
$000
OPTIONS
$’000
4,795
27,382
(50)
(255)
503
–
TOTAL
$’000
32,177
453
(255)
4,490
27,885
32,375
Determination of fair value
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 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
The potential effect of using reasonable possible alternative assumptions based on a change in the property valuations
by 5%, a change in the property capitalisation rate by 0.5% and a change in the unit price of securities of 10% would have
the effect of reducing the fair value by up to $0.4 million (2012: $0.4 million) or increase the fair value by $12.1 million (2012:
$8.2 million).
124
abacus property group
23. CONTRIBUTED EQUITY
(a) Issued stapled securities
Stapled securities
Issue costs
Total contributed equity
(b) Movement in stapled securities on issue
At 30 June 2012
– distribution reinvestment plan
– less transaction costs
Securities on issue at 30 June 2013
2013
$’000
2012
$’000
1,308,406
1,271,794
(40,025)
(39,800)
1,268,381
1,231,994
STAPLED SECuRITIES
NuMBER
‘000
VALuE
$’000
434,983
1,231,994
18,057
–
36,612
(225)
453,040
1,268,381
24. CAPITAL MANAGEMENT
Abacus Property Group*
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 underlying profits).
The following strategies are available to the Group to manage its capital: issuing new stapled securities, activating its
distribution reinvestment plan, electing to have the distribution 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 and joint ventures, or (where practical) recalibrating the timing
of transactions and capital expenditure so as to avoid a concentration of net cash outflows.
The Group manages the cash flow effect of interest rate risk by entering into interest rate swap agreements that are used to
convert floating interest rate borrowings to fixed interest rates. Such interest rate swaps are entered into with the objective
of hedging the risk of interest rate fluctuations in respect of underlying borrowings. Under the interest rate swaps, the Group
agrees with other parties to exchange, at specified intervals (mainly monthly), the difference between fixed contract rates
and floating rate interest amounts calculated by reference to the agreed notional principal amounts.
Interest rate swap contracts have been recorded on the Statement of Financial Position at their fair value in accordance with
AASB 139 Financial Instruments: Recognition and Measurement. The AIFRS documentation, designation and effectiveness
requirements cannot be met in all circumstances, as a result derivatives do not qualify for hedge accounting and are
recorded at fair value through the Statement of Income.
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 125
annual report 2013
24. CAPITAL MANAGEMENT (CONTINUED)
A summary of the Group’s key banking covenants and its compliance is set out below:
METRICS
Nature of facilities
Group ICR
Total gearing
Debt covenants
COVENANT REQUIREMENT /
MEASuRE
KEy DETAILS
Secured, non recourse1
The Group has no unsecured facilities
≥ 2.02
≤ 50%2
Compliant
Group EBITDA (ex fair value P&L and impairment to goodwill and
intangibles) / total interest expense
Total liabilities (net of cash) / total tangible assets (net of cash)
Key covenants include Bank LVR, Property ICR and Look Through
Gearing
1. There are no market capitalisation covenants.
2. Condition of the current $400m Syndicated facility, $100m Working Capital facility and the $70m Bilateral facility.
Consolidated Funds
The Capital Management approach and strategies employed by the Group are also deployed for the funds ABP manages
and which are consolidated in these accounts – AHF, ADIF II, AMSHT and AWLF (or the Consolidated Funds).
Points unique to the capital management of these respective funds are:
• The Consolidated Funds via their responsible entities comply with capital and distribution requirements of their
constitutions and/or deeds, the capital requirements of relevant regulatory authorities and continue to operate as going
concerns; and
• There is currently no DRP for any of the Funds.
A summary of compliance of banking covenants – by fund – is set out below:
METRICS
Nature of facilities
AHF
ADIF II
AMSHT
AWLF
Secured, non
recourse
Secured, non
recourse
Secured, non
recourse
Secured, non
recourse
Debt covenants
Compliant
Compliant
Compliant
Compliant
126
abacus property group
25. INTEREST IN SUBSIDIARIES
(a) Interest in subsidiaries with material non-controlling interest (“NCI”)
The Group has the following subsidiaries with material non-controlling interest:
NAME OF ENTITy
30 June 2013
Abacus Hospitality Fund*
Abacus Miller Street Holding Trust
Abacus Wodonga Land Fund^
30 June 2012
Abacus Hospitality Fund
Abacus Storage Fund**
Abacus Miller Street Holding Trust
PRINCIPAL
PLACE OF
BuSINESS
Australia
Australia
Australia
Australia
Australia
Australia
(PROFIT)/LOSS
ALLOCATED TO
NCI
$’000
ACCuMuLATED
NCI
$’000
% HELD By
NCI
90
70
85
90
80
70
(5,278)
445
–
30,041
4,329
–
(4,833)
34,370
3,874
(3,098)
358
1,134
32,039
–
5,375
37,414
The country of incorporation is the same as the principal place of business, unless stated otherwise.
* The Abacus working capital facility ranks pari passu for downside but not on upside at fund wind up.
^ Abacus Wodonga Land Fund consolidated into the Group on 30 June 2013, therefore, there is no profit and loss.
** The Abacus Storage Fund merged with the Abacus Property Group in March 2012. Therefore, the only profit and loss had material non-controlling interest
for the period 1 July 2011 to 6 March 2012 with the statement of financial position being Nil.
Significant Restrictions
There are no significant restrictions.
(b) Summarised financial information about subsidiary with material NCI
Summarised statement of financial position
ABACuS HOSPITALITy FuND
Current assets
Current liabilities
Net current assets
Non-current assets
Non-current liabilities
Net non-current assets
Net deficiency
2013
$’000
15,758
(67,790)
2012
$’000
27,326
(7,461)
(52,032)
19,865
148,682
152,190
(117,798)
(184,925)
30,884
(32,735)
(21,148)
(12,870)
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 127
annual report 2013
2013
$’000
62,214
(35,682)
2012
$’000
63,365
(828)
26,532
62,537
–
–
(20,348)
(54,859)
(20,348)
(54,859)
6,184
7,678
2013
$’000
10,978
(173)
10,805
21,084
(48,053)
(26,969)
(16,164)
2013
$’000
53,841
628
(891)
(263)
(5,372)
(5,635)
2013
$’000
3,743
(637)
–
(637)
–
(637)
2012
$’000
–
–
–
–
–
–
–
2012
$’000
51,064
(9,802)
8
(9,794)
4,789
(5,005)
2012
$’000
5,627
(515)
–
(515)
–
(515)
25. INTEREST IN SUBSIDIARIES (CONTINUED)
(b) Summarised financial information about subsidiary with material NCI (continued)
ABACuS MILLER STREET HOLDING TRuST
Current assets
Current liabilities
Net current assets
Non-current assets
Non-current liabilities
Net non-current assets
Net assets
ABACuS WODONGA LAND FuND
Current assets
Current liabilities
Net current assets
Non-current assets
Non-current liabilities
Net non-current assets
Net deficiency
Summarised statement of comprehensive income
ABACuS HOSPITALITy FuND
Revenue
Profit / (loss) before income tax
Income tax expense
Profit / (loss) after tax
Other comprehensive income
Total comprehensive income / (expense)
ABACuS MILLER STREET HOLDING TRuST
Revenue
Loss before income tax
Income tax expense
Loss after tax
Other comprehensive income
Total comprehensive income / (expense)
128
abacus property group
26. RELATED PARTY DISCLOSURES
(a) Subsidiaries
The consolidated financial statements include the financial statements of the following entities:
ENTITy
Abacus Group Holdings Limited and its subsidiaries
Abacus (343 George St Sydney) Pty Ltd
Abacus AAVT Pty Ltd
Abacus Airways NZ Trust
Abacus Castle Hill Trust
Abacus CIH Pty Ltd
Abacus Finance Pty Limited
Abacus Forest Lodge Trust
Abacus Funds Management Limited
Abacus Griffith Avenue Trust
Abacus HP Operating Co Pty Ltd
Abacus HP Trust
Abacus Investment Pty Ltd
Abacus Wasjig Investments Pty Ltd
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 Wodonga Land Commercial Trust
Amiga Pty Limited
Bay Street Brighton unit Trust
Childcare Trust 2
Clarendon Property Investments Pty Ltd
Corporate Helpers Pty Ltd
Main Street Pakenham unit Trust
Abacus Group Projects Limited and its subsidiaries
Abacus Property Pty Ltd
Abacus Allara Street Trust
Abacus Wasjig Holdings Pty Limited
Abacus Repository Trust
Abacus Ventures Trust
EquITy INTEREST
2013
%
2012
%
–
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
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
100
100
100
100
–
100
100
100
100
100
100
100
50
50
50
51
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 129
annual report 2013
EquITy INTEREST
2013
%
2012
%
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
25
25
100
100
25
100
100
100
100
100
100
100
100
100
100
100
–
100
75
100
–
100
–
–
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
25
25
100
100
25
100
100
100
100
100
100
100
100
100
–
100
100
100
75
100
100
100
100
100
100
26. RELATED PARTY DISCLOSURES (CONTINUED)
(a) Subsidiaries (continued)
ENTITy
Abacus Trust and its subsidiaries:
Abacus 1769 Hume Highway Trust
Abacus Alderley Trust
Abacus Alexandria Trust
Abacus Ashfield Mall Property Trust
Abacus Birkenhead Point Trust
Abacus Browns Road Trust
Abacus Campbell Property Trust
Abacus Epping Park Property Trust
Abacus Greenacre Trust
Abacus Australian Aggregation Holding 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 Northshore Trust 1*
Abacus Northshore Trust 2*
Abacus North Sydney Car park Trust
Abacus Premier Parking Trust
Abacus Sanctuary Holdings Pty Limited*
Abacus Shopping Centre Trust
Abacus Smeaton Grange Trust
Abacus SP Fund
Abacus Varsity Lakes Trust
Abacus Virginia Trust
Abacus Westpac House Trust
Abacus 14 Martin Place Trust
Abacus 171 Clarence Street Trust
Abacus 309 George Street Trust
Abacus 33 queen Street Trust
Abacus Income Trust and its subsidiaries:
Abacus Campbellfield Trust
Abacus Chermside Trust
Abacus Eagle Farm Trust
Abacus Independent Retail Property Trust
Abacus Lennons Plaza Trust
Abacus Mertz Apartments
Abacus Retail Property Trust
Abacus Stafford Trust
Abacus Tamworth Retail Trust
Abacus Wollongong Property Trust
* These entities are wholly owned by Abacus
130
abacus property group
26. RELATED PARTY DISCLOSURES (CONTINUED)
(a) Subsidiaries (continued)
ENTITy
Abacus Storage Operations Limited and its subsidiaries:
Balmain Storage Pty Limited
Abacus Storage (Bulleen and Greensborough) Pty Limited
Abacus Storage NZ Operations Pty Limited
Abacus Storage Solutions Pty Limited
Abacus Storage Solutions NZ Pty Limited
Abacus uSI C Trust
Abacus u Stow It A1 Trust
Abacus u Stow It B1 Trust
Abacus u Stow It A2 Trust
Abacus u Stow It B2 Trust
u Stow It Holdings Limited
u Stow It Pty Limited
Abacus Storage Property Trust and its subsidiary:
Abacus Storage NZ Property Trust
Abacus Diversified Income Fund II
Abacus Hospitality Fund
Abacus Miller Street Holding Trust
Abacus Wodonga Land Fund
EquITy INTEREST
2013
%
2012
%
100
100
100
100
100
100
100
100
100
100
100
100
100
–
10
30
15
100
100
100
100
100
100
100
100
100
100
100
100
100
–
10
30
15
Subsidiaries controlled by the Group with material non-controlling interest
Abacus Hospitality Fund: The Group is deemed under AASB10 Consolidated Financial Statements to have control of AHF
based upon the aggregate impact of (a) the Group’s role as responsible entity of AHF and (b) the size and variable nature of
returns arising from the Group’s loans to AHF (as the loans provided by the Group to AHF rank pari passu for downside but
not on upside at fund wind up).
Abacus Diversified Income Fund II: The Group is deemed under AASB10 Consolidated Financial Statements to have control
of ADIFII based upon the aggregate impact of (a) the Group’s role as responsible entity of ADIFII (b) the size and variable
nature of returns arising from the Group’s loans to ADIFII (as the Abacus Working Capital Facility provided by the Group to
ADIFII ranks pari passu on downside, but not the upside, at wind up) and (c) the capital and income guarantees made by the
Group to unitholders of ADIFII under the ADIFII offer documents.
Abacus Miller Street Holding Trust: The Group is deemed under AASB10 Consolidated Financial Statements to have control
of AMSHT a) the Group’s role as responsible entity of AMSHT and (b) the Group’s 30% direct interest in the fund and the
relative dispersion of the remaining interests not held by the Group.
Abacus Wodonga Land Fund: The Group is deemed under AASB10 Consolidated Financial Statements to have control of
AWLF a) the Group’s role as responsible entity of AWLF (waiving of fees) and (b) the Group’s 15% direct interest in the fund
and the relative dispersion of the remaining interests not held by the Group.
(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 28.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 131
annual report 2013
26. RELATED PARTY DISCLOSURES (CONTINUED)
(d) Transactions with related parties
Transactions with related parties other than associates and joint ventures
Revenues
Property management fees received / receivable
169
153
2013
$’000
2012
$’000
Transactions with associates and joint ventures
Revenues
Management fees received / receivable from joint ventures
Management fees received / receivable from associates
Distributions received / receivable from joint ventures
Interest revenue from associates
Interest revenue from joint ventures
Other transactions
Loan advanced to associates
Loan repayments from associates
Loan advanced to joint ventures
Loan repayments from joint ventures
Loan advanced from joint ventures
Impairment charge
Purchase of property from associates
2,163
279
6,466
–
1,352
–
–
(3,461)
–
2,083
–
6,345
1,394
557
5,818
3,507
1,122
(8,186)
4,527
(134)
2,860
1,929
(3,507)
–
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.
132
abacus property group
26. RELATED PARTY DISCLOSURES (CONTINUED)
(d) Transactions with related parties (continued)
Entity with significant influence
Calculator Australia Pty Ltd (“Kirsh”) is a significant securityholder in the Group with a holding of approximately 47% of the
ordinary securities of the Group (2012: 41%).
During the year, Abacus Property Services Pty Ltd was engaged to manage the following properties:
PROPERTy
RELATIONSHIP WITH KIRSH
CHARGE PER ANNuM
Birkenhead Point Shopping Centre
Tenants in common
14 Martin Place
4 Martin Place
Tenants in common
100% owned by Kirsh
Birkenhead Point Marina Pty Ltd
Joint Venture
3% of gross rental
3% of gross rental
3% of gross rental
3% of gross rental
During the year, Abacus Funds Management Limited charged an asset management fee to the following entities:
PROPERTy
RELATIONSHIP WITH KIRSH
CHARGE PER ANNuM
Birkenhead Point Shopping Centre
Tenants in common
0.2% of gross assets
Mrs Myra Salkinder is a non-executive director of the Group and is a senior executive of Kirsh.
AMT $
548,955
286,991
169,499
55,414
AMT $
396,075
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 133
annual report 2013
27. CONSOLIDATION OF ABACUS WODONGA LAND FUND
On 30 June 2013, the Group consolidated Abacus Wodonga Land Fund in application of AASB 10 Consolidated Financial
Statements. This is due to the combination of APG’s role as responsible entity and variable returns arising from its equity and
loan investments in this fund. A loss on consolidation was incurred of $18.9 million.
The fair value of the net assets of Abacus Wodonga Land Fund at the date of consolidation are set out below:
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Inventory
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Related party loans
Derivatives at fair value
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
$’000
2,042
428
7,763
10,233
19,037
13
19,050
29,283
174
174
6,657
19,495
2,957
29,109
29,283
–
134
abacus property group
28. 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 2013
Directors
J Thame
F Wolf
W Bartlett
D Bastian
M Irving
Executives
C Aarons
R de Aboitiz
R Baulderstone
P Strain
E Varejes
Total
30 JUNE 2012
Directors
J Thame
F Wolf
W Bartlett
D Bastian
M Irving
Executives
R de Aboitiz
L Lloyd
P Strain
E Varejes
Total
2013
$’000
2012
$’000
6,319,507
5,879,867
262,650
148,886
880,297
337,730
94,306
–
7,611,340
6,311,903
BALANCE
1 JULY 2012
APPOINTED/
(RETIRED)
PURCHASES/
(SALES)
BALANCE
30 JUNE 13
55,364
2,837,464
22,806
–
–
–
545,000
(545,000)
–
–
–
–
55,364
2,837,464
22,806
–
29,063
–
2,408
31,471
–
33,425
–
57,577
75,414
26,889
(33,425)
5,378
–
–
–
–
–
(19,190)
–
26,889
–
5,378
38,387
75,414
3,656,113
(546,158)
(16,782)
3,093,173
BALANCE
1 JULY 2011
APPOINTED/
(RETIRED)
PURCHASES/
(SALES)
BALANCE
30 JUNE 12
55,364
2,837,464
22,806
900,000
26,718
3,939
11,185
32,590
61,975
3,952,041
–
–
–
–
–
–
–
–
–
–
–
–
–
55,364
2,837,464
22,806
(355,000)
545,000
2,345
29,063
29,486
(11,185)
24,987
13,439
33,425
–
57,577
75,414
(295,928)
3,656,113
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.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 135
annual report 2013
28. KEY MANAGEMENT PERSONNEL (CONTINUED)
(c) Loans to Key Management Personnel
There were no loans to individuals that exceeded $100,000 at any time in 2013 or in the prior year.
(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.
29. SECURITY BASED PAYMENTS
(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
The security-based payment are described below.
2013
$’000
1,168
2012
$’000
–
(b) Type of security-based payment plan
Security Acquisition Rights (SARs)
The deferred variable incentive plan has been designed to align the interests of executives with those of securityholders by
providing for a significant portion of the remuneration of participating executives to be linked to the delivery of sustainable
underlying profit that covers the distribution level implicit in the Group’s security price.
Key executives have been allocated SARs in the current financial year generally equal to the last current variable incentive
paid. Allocations were based on the performance assessment completed in determining current variable incentive awards
for the prior financial year, adjusted to take into account other factors that the Board considers specifically relevant to the
purpose of providing deferred variable incentives.
The SARs granted during the year vest as follows:
VESTING DATE
AMOuNT VESTED*
September 2013
One quarter of the initial issue
September 2014
One quarter of the initial issue
September 2015
One quarter of the initial issue
September 2016
One quarter of the initial issue
POTENTIAL
NuMBER TO VEST
232,313
232,313
232,313
232,313
* The Board is able to claw back unvested SARs if the distribution level fails by more than 10% below the sustainable annual distribution rate.
For valuation purposes the SARs are equivalent to European call options (in that they may be “exercised” only at their
maturity (i.e. vesting date)). The fair value of the SARs granted is estimated at the date of the grant using a trinomial tree
model (using 500 steps) cross checked by a modified Black-Scholes model. The trinomial tree model and the Black-Scholes
model generally produce the same values for an option over a non-dividend paying share, or where the option is entitled
to the same distributions as are paid on the underlying security, as is assumed in this case, and if the time to exercise is the
same, (i.e. at the end of the term).
When SARs vest they will convert into ABP securities on a one for one basis or at the Board’s discretion a cash equivalent
amount will be paid.
136
abacus property group
29. SECURITY BASED PAYMENTS (CONTINUED)
(c) Summary of SARs granted
The following table illustrates movements in SARs during the year:
Opening balance
Granted during the year
Cancelled during the year
Outstanding at the end of the year
Exercisable at the end of the year
2013
NO.
2012
NO.
–
2,976,923
929,252
12,785,714
–
(15,762,637)
929,252
–
–
–
2012
n/a
n/a
n/a
n/a
The weighted average remaining life of the instrument at 30 June 2013 was 1.8 years (2012 N/A).
The weighted average fair value of the SARs granted during the year was $2.41 (2012 N/A).
The following table lists the inputs to the model used for the SARs plan for the year ended 30 June 2013:
Expected volatility (%)
Risk-free interest rate (%)
Life of instrument (years)
Model used
2013
20-25
2.55-2.67
0.3-3.3
Trinomial
The expected life of the SARs is based on historical data and current expectations and is not necessarily indicative of
exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period
similar to the life of the SARs is indicative of future trends, which may not necessarily be the actual outcome.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 137
annual report 2013
30. OTHER FINANCIAL LIABILITIES
Abacus Property Group*
The Group has provided the following guarantees to the ADIFII unitholders:
uNIT TyPE
Class A $1.00
Class B $1.00
Class C $0.75
CASH DISTRIBuTION yIELD GuARANTEE
CAPITAL RETuRN GuARANTEE
$1.00 per unit on 30 September 2013.
9% pa plus indexation (indexed in line with
inflation in each year after 1 July 2011).
$1.00 per unit at Fund termination
(no later than 30 June 2017).
9% pa plus indexation (indexed in line with
inflation in each year after 1 July 2011).
$0.75 per unit at Fund termination
(no later than 30 June 2017).
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) or 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) 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 loan provided to ADIFII in satisfaction of the Group’s obligations in respect of the underwritten Capital Return in
respect of the Class B and Class C units.
As a result of the consolidation of ADIFII under AASB10 the underwritten capital guarantee results in ADIFII’s units on issue
being classified as a liability and at the end of the period the value was $56.3 million (2012: $56.3 million).
The offer document for ADIFII was closed in December 2011 and no further equity will be raised. The actual guarantee
exposure (if any) will be determined at the maturity date of the first capital guarantee in September 2013 ($11 million or 20%
of the total guarantee exposure) and the balance of the guarantee exposure will be determined at Fund termination no later
than 30 June 2017.
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
138
abacus property group
31. COMMITMENTS AND CONTINGENCIES
Abacus Property Group*
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-cancellable operating lease as at 30 June 2013 are as follows:
Within one year
After one year but not more than five years
More than five years
2013
$’000
930
2,813
471
4,214
2012
$’000
374
–
–
374
Operating lease commitments – Group as lessor
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2013 are as follows:
Within one year
After one year but not more than five years
More than five years
2013
$’000
91,579
210,783
74,248
2012
$’000
88,768
245,854
108,106
376,610
442,728
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.
Capital and Other commitments
At 30 June 2013 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 and unused mortgage loan facilities to third
parties.
Commitments planned and/or contracted at reporting date but not recognised as liabilities are as follows:
Within one year
– gross settlement of property acquisitions
– property refurbishment costs
– property development costs
– unused portion of loan facilities to outside parties
2013
$’000
2012
$’000
44,294
2,630
9,352
3,807
7,375
12,605
13,417
4,996
60,083
38,393
* Excludes Abacus Hospitality Fund, Abacus Diversified Income Fund II, Abacus Miller Street Holding Trust and Abacus Wodonga Land Fund.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 139
annual report 2013
31. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Capital and Other commitments (continued)
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.
Contingent liabilities:
Within one year
– corporate guarantee
2013
$’000
2012
$’000
5,060
5,060
6,750
6,750
Abacus Diversified Income Fund II
Operating lease commitments – as lessor
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2013 are as follows:
Within one year
After one year but not more than five years
More than five years
2013
$’000
13,025
32,579
8,744
2012
$’000
14,168
40,714
16,143
54,348
71,025
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.
Capital and Other commitments
Within one year
– property refurbishment costs
Abacus Miller Street Holding Trust
2013
$’000
2,161
2,161
Operating lease commitments – as lessor
Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2013 are as follows:
Within one year
After one year but not more than five years
More than five years
2013
$’000
4,702
17,768
171
2012
$’000
1,745
1,745
2012
$’000
5,047
18,211
3,818
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.
22,641
27,076
140
abacus property group
31. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Abacus Wodonga Land Fund
Capital and Other commitments
Within one year
– property development costs
32. AUDITOR’S REMUNERATION
2013
$’000
2012
$’000
1,130
1,130
–
–
2013
$’000
2012
$’000
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
977,390
958,000
– transactional advisory services
– other assurance services
–
262,300
40,800
–
1,018,190
1,220,300
33. EVENTS AFTER BALANCE SHEET DATE
Other than as disclosed in this report, there has been no other matter or circumstance that has arisen since the end of the
financial year that has significantly affected, or may affect, the Group’s operations in future financial years, the results of
those operations or the Group’s state of affairs in future financial years.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED
DIRECTOR’S
DECLARATION
141
annual report 2013
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 2013 and of their
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including Australian Accounting Interpretations) and the
Corporations Regulations 2001;
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 2013.
On behalf of the Board
John Thame
Chairman
Sydney, 28 August 2013
Frank Wolf
Managing Director
142
abacus property group
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2013CONTINUED 143
annual report 2013
abacus property group
144
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 About Abacus tab on the Abacus website at
www.abacusproperty.com.au.
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.
The Board Charter and Constitution are available on the Abacus website.
Recommendation 1.2
Induction procedures are in place for all staff (including senior executives) that include a briefing on relevant aspects of
Abacus’ financial position, strategies, operations and risk management policies as well as the respective rights, duties and
responsibilities of the Board and senior executives.
Each year the Board, with the assistance of the Managing Director, and the Remuneration and Nomination 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 Remuneration and Nomination Committee meetings when his own remuneration and performance is being
considered.
An annual review has taken place in the reporting period in accordance with the process outlined above.
Principle 2: Structure the board to add value
Recommendation 2.1
The board comprises one executive director and four non-executive directors. The majority of the Board (Messrs Thame,
Irving and Bartlett) are independent members. The board has determined that an independent director is one who:
• is not a substantial security holder or an officer of, or is not otherwise associated directly with, a substantial security holder
of the Group;
• has not within the previous three years been employed in any executive capacity;
• 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;
145
annual report 2013
• 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
• does not have a material contractual relationship with the Group other than as a director.
No independent non-executive director has a relationship significant enough to compromise their independence on the
Board. Non-executive directors confer regularly without management present.
Any change in the independence of a non-executive director would be disclosed and explained to the market in a timely
manner.
Given the nature of the Group’s business and current stage of development, the Board considers its current composition
provides the necessary skills and experience to ensure a proper understanding of, and competence to deal with, the current
and emerging issues of the business to optimise the financial performance of the Group and returns to securityholders.
Details of the skills, experience and expertise of each director are set out on page 34.
Directors’ independent advice
Directors may seek independent professional advice with the Chairman’s consent, which will not be unreasonably withheld
or delayed, on any matter connected with the performance of their duties, and which advice will be at the Group’s expense.
Recommendation 2.2
The Chairman of the Board (Mr John Thame) is an independent, non-executive director.
Recommendation 2.3
The roles of Chairman and Chief Executive Officer/Managing Director are not exercised by the same individual.
The division of responsibility between the Chairman and Managing Director has been agreed by the Board and is set out
in the Board Charter.
Recommendation 2.4
The Board has established a Remuneration and Nomination 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 35.
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 Remuneration and Nomination Committee Charter and the Selection and Appointment of Non-Executive Directors
Policy are available on the Abacus website.
The Board is committed to workplace diversity, with a particular focus on supporting the representation of women at
a senior level of the Group and on the Board. The Diversity Policy is available on the Abacus website.
Over 48% of Abacus’ employees are women. Abacus has female representation at both the Board (20%) and senior
management (14%) level. In 2011, the Board set female representation at Board level as a priority and this was met in
April 2011 with the appointment of a female director. In the current period, Abacus has recruited from a diverse pool of
candidates for all positions filled during the year and has a number of employees with flexible employment arrangements
to take account of domestic responsibilities.
146
abacus property group
CORPORATE
GOVERNANCE
REPORT
30 JuNE 2013
CONTINuED
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 Abacus website.
Recommendation 3.2
The Diversity Policy is available on the Abacus website.
The Board is committed to workplace diversity, with a particular focus on supporting the representation of women at
a senior level of the Group and on the Board.
Over 48% of Abacus’ employees are women. In 2011, the Board set female representation at Board level and senior
management as a priority. Abacus currently has female representation at both the Board (20%) and senior management
(14%) level. Abacus has recruited from a diverse pool of candidates for all positions filled during the year and has a number
of employees with flexible employment arrangements to take account of domestic responsibilities.
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 one non-independent non-
executive director 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 35. 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 Abacus 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 Securityholder Communications Policy is available on the Abacus website.
147
annual report 2013
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 Abacus website also includes webcasts of the results briefings.
The Group keeps a summary record for internal use of the issues discussed at group and one-on-one briefings with investors
and analysts, including a record of those present where appropriate.
The Continuous Disclosure and Securityholder Communications Policy is available on the Abacus website.
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.
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.
Independent consultants are engaged on an ad hoc basis who review business processes and undertake 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.
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.
148
abacus property group
CORPORATE
GOVERNANCE
REPORT
30 JuNE 2013
CONTINuED
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1
The Board has established a Remuneration and Nomination Committee.
The Remuneration and Nomination 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 Abacus website. The Chairman of the Remuneration and Nomination
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 and Nomination Committee may seek input from individuals on remuneration policies but no individual
employee is directly involved in deciding their own remuneration.
The members of the committee and their attendance at meetings are provided on page 35.
Non-executive directors are paid fees for their service and do not participate in other benefits (with the exception of Group
travel insurance cover) which may be offered other than those which are statutory requirements.
ASX ADDITIONAL
INFORMATION
149
annual report 2013
Abacus Property Group is made up of the Abacus Trust, Abacus Income Trust, Abacus Storage Property Trust, Abacus
Group Holdings Limited, Abacus Group Projects Limited and Abacus Storage Operations Limited. The responsible entity
of the Abacus Trust and Abacus Income Trust is Abacus Funds Management Limited. The responsible entity of the Abacus
Storage Property Trust is Abacus Storage Funds Management Limited. Unless specified otherwise, the following information
is current as at 27 August 2013.
Number of holders of ordinary fully paid stapled securities
9,293
Voting rights attached to ordinary fully paid stapled securities
one vote per stapled security
Number of holders holding less than a marketable parcel of ordinary fully
paid stapled securities
Secretary, Abacus Funds Management Limited
Secretary, Abacus Storage Funds Management Limited
Secretary, Abacus Group Holdings Limited
Secretary, Abacus Group Projects Limited
Secretary, Abacus Storage Operations Limited
Registered office
Abacus Funds Management Limited
Abacus Storage Funds Management Limited
Abacus Group Holdings Limited
Abacus Group Projects Limited
Abacus Storage Operations 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
685
Ellis Varejes
Level 34, Australia Square
264-278 George Street
Sydney NSW 2000
+61 2 9253 8600
Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
+61 2 9290 9600
none
none
NUMBER OF SECURITIES
213,046,573
150
abacus property group
ASX ADDITIONAL
INFORMATION
30 JuNE 2013
CONTINuED
SECURITIES REGISTER
NuMBER OF SECuRITIES
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-over
Totals
TOP 20 LARGEST SECURITYHOLDINGS
HOLDER NAME
CITICORP NOMINEES PTy LIMITED
CALCULATOR AUSTRALIA PTY LIMITED
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