in good
company
ALE PROPERTY GROUP ANNUAL REPORT JUNE 2005
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Pelican Waters Hotel, Qld
New Brighton Hotel, NSW
During the year the ownership of the
portfolio’s tenant changed hands. With the
tenant now controlled by major retailer
Woolworths Limited (75%) and Bruce
Mathieson Group (25%), our income quality
and value has been enhanced. ALE Property
Group is now in very good company.
investor information
corporate directory
Stock Exchange Listing
The ALE Property Group (ALE) is listed on the Australian Stock Exchange
(ASX). Its stapled securities are listed under ASX code: LEP and its ALE
Notes are listed under ASX code: LEPHB.
Distribution Reinvestment Plan
ALE has not established a distribution reinvestment plan.
Electronic Payment of Distributions
Security holders may nominate a bank, building society or credit union
account for payment of distributions by direct credit. Payments are
electronically credited on the payment dates and confi rmed by mailed
payment advice.
Security holders wishing to take advantage of payment by direct credit
should contact the registry for more details and to obtain an application form.
Publications
The Annual Report is the main source of information for stapled security
holders. In addition, a half-year report for the six months to December is
released to the ASX and posted on the ALE website in February each year.
The half year report is also mailed on request.
Periodically ALE may also send releases to the ASX covering matters of
relevance to investors. These releases are also posted to the ALE website.
Website
The ALE website, www.alegroup.com.au, is a useful source of information
for security holders. It includes details of ALE‘s property portfolio, current
activities and future prospects.
Annual Tax Statement
Accompanying the fi nal stapled security distribution payment, normally
in August each year, will be an annual tax statement which details the tax
deferred components of the year’s distribution.
Distributions
Stapled security distributions are paid twice yearly, normally in February
and August.
Annual General Meeting
The Annual General Meeting of the Company and a meeting of the Trust will
be held at the Barnet Room, Level 6, The Westin, Sydney on 21st October
2005 at 10am.
A copy of the Notice of Meetings will be mailed to stapled security holders
and made available to download from ALE’s website in September 2005.
Security Holder Enquiries
Please contact the registry if you have any questions about your holding
or payments.
Registered Offi ce
Level 8, 15-19 Bent Street
Sydney NSW 2000
Telephone (02) 8231 8588
Company Secretary
Mr Brendan Howell
Level 8, 15-19 Bent Street
Sydney NSW 2000
Telephone (02) 8231 8588
Auditors
PricewaterhouseCoopers
201 Sussex Street
Sydney NSW 2000
Lawyers
Allens Arthur Robinson
2 Chifl ey Square
Sydney NSW 2000
Custodian (of Australian Leisure and
Entertainment Property Trust)
Trust Company of Australia Limited
Level 4, 35 Clarence Street
Sydney NSW 2000
Trustee (of ALE Direct Property Trust)
Permanent Trustee Company Limited
Level 4, 35 Clarence Street
Sydney NSW 2000
Registry
Computershare Investor Services Pty Ltd
Reply Paid GPO Box 7115
Sydney NSW 2000
Level 3, 80 Carrington Street
Sydney NSW 2000
Telephone 1300 302 429
Facsimile: (03) 9473 2500
www.computershare.com.au
Front and back cover: Breakfast Creek Hotel, Qld
contents
quality of income 2 23.5 year lease term 3 compounding value 4 acquisitions 5
prime locations 6 impressive results 8 chairman’s message 9 management team 10
managing director’s report 11 board of directors 18 corporate governance 19
fi nancial reports 21 management statement letter 107 stapled security holder information 108
investor information and corporate directory inside back cover
Designed and produced by Ross Barr & Associates Pty Limited
…in very good
company
ALE Property Group
– Owns freehold
property assets
for ALE Property Group
that equates to…
ALE Notes support
Lease agreements
Foster’s Group
• Former owner
of assets
• Global beverage
company
Supply
agreement
Australian Leisure
& Hospitality Group
(ALH)
• Holds operating
assets
• Operates pubs
25%
Bruce Mathieson
Group
• An experienced
operator of pubs
Joint venture
75%
Woolworths
• A stable and secure retailer
• Number one in market share
• Signifi cant growth aspirations
• An Australian icon
1
quality
of income
the new ownership of
our tenant provides
security of cash fl ow
Sail and Anchor Pub Brewery, WA
Far left: Albany Creek Tavern, Qld
Left: The Young & Jackson Hotel, Vic
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23.5y
our pub portfolio is leased exclusively
to ALH and the remaining term
is unmatched in the listed property
trust sector
ALH also holds four 10 year options to renew that extend
the potential term currently remaining to 63.5 years.
The property portfolio has currently been operating as
pubs for an average of 55 years.
3
the new ownership of
our tenant provides
security of cash fl ow
compounding
value
material revaluation
• A- credit quality tenant*
• CPI indexing rental income
• Strong demand for
pub properties
• Strong demand for
properties with
long term leases
A-
* See Standard & Poor’s press release
(27 January 2005) on ALE’s website
Above: Pymble Hotel, NSW
Right: The Ramsgate Hotel, SA
4
Pelican Waters Hotel, Qld
acquisitions
ALE is seeking to acquire
additional high quality
properties that complement
its existing portfolio
Potential acquisitions:
• Pubs and other commercial properties
• Properties with high quality tenants
• Properties with long term indexed or
fi xed increase rental streams
• Properties which are strategic to the
tenant’s business
• Properties currently under development
by ALH and its development partners
5
prime locations
our properties are situated in prime coastal
or capital city locations – where the majority
of people live, work and socialise
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90%1 of the
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85%1 of the Brisbane
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Breakfast Creek Hotel, Qld
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sydney
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1 Proportion of population
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Source: ABS Census Data 2001;
UrbisJHD
New Brighton Hotel, NSW
7
impressive
results
Net Profi t Change from PDS Forecast ($m)
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FY05
FY041
Change
Net Profi t After Tax
Distributable Profi t2
$5.3m
$3.9m
$1.4m
$11.7m
$8.0m
$3.7m
Distribution per Stapled Security
12.85¢
7.50¢
5.35¢
Portfolio Value
$651.5m $576.7m $74.8m
Stapled Security Price
Net Assets per Stapled Security
$2.06
$2.17
$1.31
$1.41
75¢
76¢
1 FY04 effectively commenced November 2003
2 Distributable Profi t includes add backs for non-cash accounting items
8
It is my pleasure to report to you on the
performance of ALE Property Group (ALE)
for the year ended 30 June 2005.
This year, ALE has experienced substantial
growth in both net profi t and the capital value
of its property portfolio. ALE has achieved net
profi t this year of $5.3 million, an increase
of $1.4 million over last year and $1.8 million
higher than forecast in the PDS/Prospectus
(PDS) at the time of our listing on the Australian
Stock Exchange (November 2003).
This performance has resulted in ALE being able
to pay distributions of $11.7 million to our security
holders or 12.85 cents per security, 11.2% higher
than for the same period last year (annualised)
and 17.9% higher than forecast in the PDS.
In October 2004, the tenant of our existing
105 pub portfolio, Australian Leisure and Hospitality
Group Limited (ALH), was taken over by Bruandwo
Pty Limited, a joint venture company owned
by Woolworths Limited (75%) and the Bruce
Mathieson Group (25%). This has had a materially
positive impact on ALE in a number of ways.
Firstly, ALH now enjoys a credit quality of A-,
according to Standard & Poor’s. Further, we believe
the operating capability of ALH has been enhanced
by the combined industry expertise and resources
of the joint owners, Woolworths and the Bruce
Mathieson Group.
As a consequence, ALE’s long term and infl ation-
indexed lease cash fl ow now comes from a more
creditworthy tenant with increased operational
expertise in its underlying business.
In June 2005, the Board revalued the entire pub
portfolio following an independent valuation
undertaken by DTZ Australia. Improvements in
the ALH lease credit quality as well as increased
market activity in the pub sector resulted in a
material upward revaluation of the portfolio to
$651.5 million, an increase of $74.8 million (13.0%)
over June 2004 and $115.3 million (21.5%) over
the November 2003 purchase price. Following the
revaluation, the Net Assets per stapled security
has risen by 53.9% to $2.17 at 30 June 2005.
The increase in value has caused ALE’s gearing
(debt/total assets) to fall from 88.6% on listing
to 69.5% at 30 June 2005. Interest rates are
100% hedged until 2008 and then partly hedged
until 2013. The Board continues to monitor
capital markets to ensure that ALE’s fi nancing
arrangements provide both effi ciency and certainty
to ALE security holders.
ALE’s management team has continued to perform
well under the leadership of Managing Director,
Andrew Wilkinson, providing robust and effi cient
management in which we have a lot of confi dence.
ALE has recently moved to expand its management
team with the appointment of Andrew Slade in
July 2005 as Investment and Acquisitions Manager
– Securitised Property.
The Board has a sharp focus on both compliance
and risk management. This will continue as the
Group grows and responds to any changes in the
market or the Group operations. ALE has recently
completed a Board review conducted by a specialist
governance adviser. The fi ndings of this review
were that the size and skills of the Board are
appropriate for the current activities of the
Group and that the Board is functioning well.
The adviser suggested how the Board may need to
evolve if the activities of the Group change in the
future. The adviser also suggested various minor
improvements to processes which may enhance
the performance of the Board which the Board is
still considering .
The Board of ALE continues to focus on improving
stapled security holder value and maintaining
a disciplined and patient approach to evaluating
new acquisition opportunities. These are assessed
with specifi c attention paid to the term of lease,
the quality of tenant, and the value of the underlying
property. The Board expects ALE to deliver
continued sound performance in the year ahead
underpinned by its long term infl ation-linked income
stream and fully hedged debt arrangements.
The board has scheduled this year’s annual general
meeting to be held at The Westin, Sydney at 10am
on 21st October 2005. At this meeting the board
will present to stapled security holders an update
of the activities of the group, and provide guidance
on the likely distribution for 2006.
Thank you for your continuing support.
Peter Warne
Chairman
chairman’smessage
9
Andrew Wilkinson
BBus, CFTP
Managing Director
Andrew joined ALE as Chief
Executive Offi cer at the time of its
listing in November 2003 and was
appointed Managing Director of ALE
in November 2004.
Andrew has 25 years experience
in banking and corporate
fi nance and was previously a
corporate fi nance partner with
PricewaterhouseCoopers.
Andrew specialised in providing
fi nancial and strategic advice
on signifi cant property and
infrastructure portfolios and was
one of the founding members
of the NSW Government’s
Infrastructure Council.
Andrew’s career also includes
15 years in fi nance and investment
banking with organisations including
ANZ Capel Court and Schroders
where he was involved in leading
the fi nancing arrangements for
a range of major projects.
Andrew has a Bachelor of Business
degree from the University of
Technology, Sydney and is a
professional member of the Finance
and Treasury Association.
Andrew Slade
BEcon (Actuarial Studies)
Investment and Acquisitions
Manager – Securitised Property
Brendan Howell
BEcon, GDipAppFin (Sec Inst)
Company Secretary and
Compliance Offi cer
Andrew joined ALE in July 2005.
Andrew has 15 years experience in
investment banking and structured
fi nance. Andrew spent 10 years
with Oxley Corporate Finance,
where he was involved with a
range of structured, project and
property fi nance transactions, the
latter involving major Australian
companies and listed property trusts.
For the last fi ve years Andrew has
acted as principal of Slade Financial
Consulting, where he has provided
advice on structured property and
asset-based fi nancing arrangements
for the private sector as well as for
the NSW and SA Governments.
Andrew has a Bachelor of Economics
degree, majoring in Actuarial Studies,
from Macquarie University.
Brendan has 15 years experience
in the funds management industry
and was formerly an associate
member of both the Securities
Institute of Australia and the
Institute of Chartered Accountants
in Australia. Brendan has a property
and accounting background and
has held senior positions with a
leading Australian trustee company
administering listed and unlisted
property trusts. For the past six
and a half years, Brendan has been
directly involved with MIA Services
Pty Limited, a company which
specialises in funds management
compliance, and acts as an
independent consultant and external
compliance committee member
for a number of property, equity
and infrastructure funds managers.
Brendan also acts as an independent
Director for several unlisted public
companies, some of which act as
responsible entities.
Brendan has a Bachelor of
Economics degree from the
University of Sydney and a Graduate
Diploma in Applied Finance and
Investment from the Securities
Institute of Australia.
Darren Barkas
BCom, GDipAppFin (Sec Inst),
CPA, ASIA
Group Financial Controller
and Assistant Company Secretary
Darren joined ALE as Property Trust
Manager in January 2004 and was
appointed Group Financial Controller
and Assistant Company Secretary in
March 2005.
Darren has 19 years of broad
accounting, taxation, fi nancial
control and management experience.
Darren joined ALE from the property
division of AMP Capital Investors.
During his seven years at AMP,
Darren was responsible for a broad
range of accounting, reporting,
treasury, taxation, analysis, registry
and general fi nancial management
functions in roles that covered
a number of AMP’s listed and
unlisted property trusts.
Darren has a Bachelor of Commerce
degree from the University of
Wollongong, a Graduate Diploma
in Applied Finance and Investment
from the Securities Institute of
Australia and is currently undertaking
a Graduate Diploma in Applied
Corporate Governance with
Chartered Secretaries Australia.
Darren is a member of CPA
Australia and the Securities Institute
of Australia and is enrolled in the
Affi liates Program of Chartered
Secretaries Australia.
Andrew Slade
Brendan Howell
Darren Barkas
management
team
10
Pelican Waters Hotel, Qld
I am pleased to report that
ALE has not only performed
well in the past year but also
has a promising outlook.
In summary, the net profi t result exceeded
expectations, property values have increased
materially and the market performance of ALE’s
stapled securities have placed ALE in a position
where it may competitively acquire additional
high quality property assets.
managing director’s
Andrew Wilkinson
report
11
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Increase in
Distribution per
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Growth in
Property Value
Increase in Net Profi t
In the year to June 2005, increased revenue
and continuing effective cost management have
contributed to a signifi cant increase in net profi t
over last year. Contributing factors include:
• Property income – lease payments under ALE’s
long term leases to ALH increased in line with
average state based consumer price index of
2.1%. This was a slightly lower rate of infl ation
than that anticipated at the time of our listing,
resulting in property income being marginally
($0.2 million) below that forecast in the PDS.
•
Interest income – ALE’s cash management
effi ciency more than made up for any small
shortfalls in rental income. $1.2 million of
bank interest income was achieved, a result
signifi cantly higher than the PDS forecast of
$0.4 million. ALE holds cash on deposit in
order to provide security for the Commercial
Mortgage Backed Securities (CBMS)
arrangements, fund liquidity and to support
modest acquisition opportunities.
• Land tax – Queensland land tax (which by
law must be paid by the land owner) is the
only property outgoing routinely paid by ALE.
All other routine outgoings are paid by ALH.
ALE’s land tax expense this year of $1.1 million
was marginally lower than the PDS forecast
of $1.2 million. Although Queensland property
values increased, the savings arising from
delayed development property completions
helped deliver a favourable result.
•
Interest expense – at the time of listing,
ALE was able to lock in an average interest rate
(across its various debt facilities) of 6.524%,
which was well below its PDS forecasts.
Annual interest savings of around $1.0 million
below PDS forecasts were locked in until
November 2008.
• Management expense – this year, management
expenses were lower than the PDS forecast
of $3.0 million. ALE’s internalised management
structure helped deliver a management
expense ratio (MER) of just 0.24% of gross
assets. This compares very favourably to
the wider Listed Property Trust sector which
averages around 0.70% (BDO LPT survey 2004).
While a number of other property trusts pay
performance fees to external managers, ALE’s
signifi cant current year outperformance fl ows
directly to its stapled security holders.
Increase in Distribution
ALE has declared a total distribution to its
security holders of $11.7 million for the full year, or
12.85 cents per stapled security, a 11.2% increase
on the (annualised) distribution for 2004, and 17.9%
more than the PDS forecast of 10.9 cents.
The full year distribution is 100% tax deferred.
Change of Ownership of ALH
As mentioned by our chairman, the tenant of our
existing 105 pub portfolio, ALH, was taken over
by a joint venture of Woolworths and the Bruce
Mathieson Group. This has had a positive impact on
ALE. ALH’s credit quality has improved according to
leading debt rating agency, Standard & Poor’s, and
the operating capability of ALH now benefi ts from
the combined expertise and operating resources
of the joint owners, Woolworths and the Bruce
Mathieson Group.
ALE’s long term, infl ation-indexed lease cash fl ows
come from a very credible tenant with signifi cant
growth aspirations in a market where it clearly
occupies the number one position.
Property Portfolio Valuation
As noted last year, our policy is to have at least
one third of our portfolio independently valued each
year. This year, given the change in the ownership
of ALH and the identity of the new owners, we
decided to have the entire portfolio revalued.
The valuation was performed by DTZ, a recognised
valuer of securitised pub properties in many markets
including the United Kingdom where it has recently
valued around 9,000 pubs for major listed companies
that own the freehold properties.
In mid June 2005, we were delighted to announce
that on the basis of the independent valuation, the
Board had materially increased the carrying value
of our properties to $651.5 million, an increase
of $74.8 million (or 13.0%) over June 2004 and
$115.3 million (or 21.5%) over the November 2003
purchase price. This value refl ects an improvement
in the average capitalisation rate of our freehold
properties to 6.87%.
New Brighton Hotel, NSW
Albany Creek Tavern
Cnr Old Northern and
Albany Creek Roads,
Albany Creek, Qld
Albion Hotel
300 Sandgate Road,
Albion, Qld
Alderley Arms Hotel
2 Samford Road,
Alderley, Qld
Anglers Arms Hotel
50 Queens Street,
Southport, Qld
Balaclava Hotel
423 Mulgrove Road,
Cairns (Earlville), Qld
Breakfast Creek Hotel
2 Kingsford Smith Drive,
Breakfast Creek, Qld
Burleigh Heads Hotel
4 The Esplanade,
Burleigh Heads, Qld
CBX Hotel
12 Bulcock Street,
Caloundra, Qld
Camp Hill Hotel
724 Old Cleveland Road,
Camp Hill, Qld
Chardons Corner Hotel
688 Ipswich Road,
Annerly, Qld
Dalrymple Hotel
310 Bayswater Road,
Garbutt, Qld
Edge Hill Tavern
(formerly the
Newmarket Hotel)
145 – 147 Pease Street,
Manoora, Cairns, Qld
Edinburgh Castle Hotel
421 Gympie Road,
Kedron, Qld
Ferny Grove Tavern
1348 Samford Road,
Ferny Grove, Qld
Four Mile Creek
260 Gympie Road,
Strathpine, Qld
Hamilton Hotel
442 Kingsford Smith Drive,
Hamilton, Qld
Holland Park Hotel
945 Logan Road,
Holland Park, Qld
Imperial Hotel
66 – 72 George Street,
Beenleigh, Qld
Kedron Park Hotel
693 Lutwyche Road,
Kedron Park, Qld
Breakfast Creek Hotel, Qld
13
Blacktown Inn Hotel
80 Blacktown Road,
Blacktown, NSW
Parkway Hotel
5 Frenchs Forest Road,
Frenchs Forest, NSW
Pioneer Tavern
Cnr Maxwell Street and
The Northern Road,
Penrith, NSW
Pymble Hotel
1134 Pacifi c Highway,
Pymble, NSW
Smithfi eld Hotel
671 The Horsley Drive,
Smithfi eld, NSW
Brown Jug Hotel
47 Stanbrook Parade,
Fairfi eld, NSW
Colyton Hotel
12 Great Western Highway,
St Marys, NSW
Crows Nest Hotel
1 – 3 Willoughby Road,
Crows Nest, NSW
Kirribilli Hotel
37 Broughton Street,
Milsons Point, NSW
Melton Hotel
163 Parramatta Road,
Auburn, NSW
Narrabeen Sands
1260 Pittwater Road,
Narrabeen, NSW
New Brighton Hotel
71 The Corso,
Manly, NSW
Sunnybank Hotel
275 McCullough Street,
Sunnybank, Qld
The Vale Hotel and
Aikenvale Motel (Qld)
222 Ross River Road,
(Aikenvale) Townsville, Qld
Wilsonton Hotel
40 Richmond Drive,
Wilsonton, Toowoomba, Qld
Woree Tavern
Bruce Highway,
Woree, Cairns, Qld
Aberfoyle Hub Tavern
The Hub Shopping Centre
Taylors Road,
Aberfoyle Park, SA
Enfi eld Hotel
184 Hampstead Road,
Clearview, SA
Eureka Hotel
10 Park Terrace,
Salisbury, SA
Exeter Hotel
152 Semaphore Road,
Exeter, SA
Breakfast Creek Hotel, Qld
Kirwan Tavern
154 Thurwingowa Drive
Townsville, Qld
Finsbury Hotel
49 Hanson Road,
Woodville North, SA
Petrie Hotel
Dayboro Road,
Petrie, Qld
Gepps Cross Hotel
560 Main North Road,
Blair Athol, SA
Prince of Wales
1154 Sandgate Road,
Nundah, Qld
Hendon Hotel
110 Tapleys Hill Road,
Royal Park, SA
Racehorse Hotel
215 Brisbane Road,
Booval, Qld
Stockade Tavern
2 Gawler Street,
Salisbury, SA
Redland Bay Hotel
The Esplanade,
Redland Bay, Qld
The Ramsgate Hotel
328 Seaview Road,
Henley Beach, SA
Royal Exchange Hotel
10 High Street,
Toowong, Qld
Springwood Tavern
43 Springwood Road,
Springwood, Qld
Stones Corner Tavern
346 Logan Road,
Stones Corner, Qld
14
Ashley Hotel
226 Ballarat Road,
Braybrook, Vic
Deer Park Hotel
760 Ballarat Road,
Deer Park, Vic
Bayswater Hotel
780 Mountain Highway,
Bayswater, Vic
Doncaster Inn Hotel
855 Doncaster Road,
Doncaster, Vic
Blackburn Hotel
111 Whitehorse Road,
Blackburn, Vic
Elsternwick Hotel
259 Brighton Road,
Elwood, Vic
Blue Bell Hotel
Howitt Street,
Wendouree, Vic
Eltham Hotel
746 Main Street,
Eltham, Vic
Burvale Hotel
Cnr Springvale Road
and Burwood Highway,
Nunawading, Vic
Club Hotel
848 Burwood Highway,
Ferntree Gully, Vic
Cramers Hotel
1 Cramer Street,
Preston, Vic
Davey’s Hotel
510 Nepean Highway,
Frankston, Vic
Ferntree Gully Hotel & Motel
1130 – 2 Burwood Highway,
Ferntree Gully, Vic
Gateway Hotel
218 – 230 Princes Highway,
Corio, Vic
Keysborough Hotel
Cnr Corrigan and Cheltenham
Roads, Keysborough, Vic
Mac’s Hotel
322 – 332 High Street,
Melton, Vic
Meadow Inn Hotel
1431 – 1435 Sydney Road,
Fawkner, Vic
The increase in value was driven by:
•
•
•
Increased net rent – property income increased
by 2.1% in the current year. The value of
the upcoming scheduled rent review due in
November 2005 was conservatively excluded
from the valuer’s assessment.
Improved income security – the change of
ownership of ALH resulted in an improvement
of ALH’s credit quality as assessed by Standard
& Poor’s. The valuer also considered the
experience of the new management within the
ALH business. These factors were considered
to provide a much more secure income stream
from a valuation perspective and therefore
justifi ed a strengthening of the capitalisation
rate used.
Increased appetite for quality tenanted
pubs – the pub sector as a whole has
experienced a general strengthening of
capitalisation rates, particular for assets with
strong corporate “triple-net” income streams
such as those in ALE’s portfolio.
In accordance with accounting standards, the
properties were valued by DTZ on an individual
or stand alone property basis. DTZ further advised
that the value of the whole portfolio or groups
of pub properties may transact at a premium to
the individual property values recorded in the
accounts. DTZ were not asked to advise of the
size of that premium.
Development Properties
As at June 2005, ALE has four development
properties yet to be completed. Whilst these
properties have experienced delays in construction,
ALE is not exposed to any property development
risks. During the development period, ALE
continues to earn interest on loans relating to the
development properties under a continuing contract
with the Foster’s Group Limited. The interest is
indexed annually in line with infl ation.
ALE currently expects that, upon completion,
the properties will carry values higher than their
respective purchase prices.
The latest ALH estimate for transfer of each
of the remaining development properties to ALE
is as follows:
• Caloundra Hotel (CBX), Qld
October 2005
• Narrabeen Hotel, NSW
March 2006
• Burleigh Heads Hotel, Qld
December 2007
ALH is presently in discussions with the developer
for the Parkway Hotel in NSW. Once these
discussions are concluded, ALE will advise of any
revised development arrangements that it approves
for this hotel.
Performance
For the year ended 30 June, 2005, ALE was
the second best performing listed property trust
in Australia. Our share price increased from $1.31
to $2.06 over the year, which, combined with a total
distribution of 12.85 cents per security, represents
a 68.4% pre-tax internal rate of return on funds
invested for the 12 month period.
Capital Management
At the date of listing, ALE was able to increase the
effi ciency of its capital structure by leveraging its
rental stream’s long term and high-quality nature.
Since IPO, increases in ALE’s property portfolio
value and stapled security price mean that ALE’s
gearing (debt/total assets) has fallen from 88.6%
at IPO to 69.5% at 30 June 2005. ALE’s capital
structure at 30 June 2005 is as follows:
• $330 million of commercial mortgage backed
securities (CMBS) – in various tranches,
with interest rates fully hedged to between
November 2008 and November 2011; and
• $150 million of ALE Notes – trades on the
ASX (Code LEPHB), paying fi xed interest until
September 2011;
• $187 million in security holder equity – as per
the market valuation of ALE stapled securities
listed on the ASX (code LEP).
The ALE management team, in conjunction
with advisers, is continually investigating capital
management options in order to maximise
effi ciency and therefore value for stapled security
holders. ALE’s current debt arrangements include
built-in prepayment options which allow for fl exibility
in funding arrangements going forward.
Performance – ALE was the second best performing LPT for the year ending 30 June 2005
ALE v ASX Property 300*
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Breakfast Creek Hotel, Qld
ALE S&P Property 300
* rebased to 100 at 11 November 2003
15
ALE has a current policy of maintaining 100%
hedging of interest rates for a minimum average
term to maturity of two and a half years and a
maximum of fi ve years. In conjunction with its
consideration of capital management, ALE and its
advisers continually monitor interest rate markets
in order to evaluate any longer term hedging
opportunities.
On 1 September 2005, with 10 year Government
Bonds at their lowest point since listing, ALE
capitalised on the interest rates available in the
long term swap market to extend its interest
rate hedging and therefore lock in lower rates on
the group’s debt after November 2008. In two
transactions, each of $50m, ALE has secured new
hedging at a weighted average interest rate that is
0.59% pa lower than its existing rates in the post
November 2008 period.
Following this hedging extension, ALE has a
weighted average term of hedging of 5.5 years.
ALE’s hedging profi le is shown in the graph below.
Acquisition Strategy
In a recently released independent research report
by Macquarie, ALE has been assessed as having
one of the highest projected distribution growth
profi les when compared to other Australian listed
property trusts. As a consequence, ALE is also
priced at one of the lowest current trading yields
(FY06 distribution divided by current market price).
This outlook by Macquarie not only provides
investors with a positive total return perspective but
also places ALE in a competitive position to consider
value accretive acquisitions. As previously stated,
ALE is adopting a patient and disciplined approach
to the consideration of potential acquisitions and is
working with its advisers to target properties with
the following characteristics:
•
long term leases with indexed rent;
• high credit quality tenants;
• a strategic importance to the tenant’s core
businesses; and
• development risks and ongoing property
outgoings covered by the tenants or
third parties.
During the year ALE considered a number of
acquisitions which came close to meeting our
criteria. Some of these properties are no longer
being considered, whereas others are still under
discussion and evaluation.
Looking Forward
The year ahead is looking positive for ALE.
In accordance with our lease agreements with ALH,
November 2005 will see an anticipated step up in
rent across the portfolio at around 2.5% in line with
the CPI for each state. Given ALE’s current interest
rate management position, increases in triple-net
property rental substantially fl ow through to stapled
security holders as higher distributions, creating
a multiplier effect on distribution growth.
Queensland land tax rates decreased from 1.8%
to 1.5% of unimproved capital value from 1 July
2005. Consistent with the price appreciation of
our properties, the unimproved capital value of our
Queensland freehold properties has most recently
been assessed at approximately $93.7 million.
Subject to any further movements in values, the
annual land tax liability should fully refl ect this latest
assessment in 2008, after a three year phase-in
period. ALE will continue to monitor land value
assessments and object to any where it believes
it is appropriate to do so.
Over and above ALE’s built-in distribution growth
from the existing property portfolio, we see the
opportunity to add further value through various
capital management initiatives and through
exercising our competitive acquisition capabilities.
Finally, I would like to take this opportunity to
thank ALE’s Board and management team for their
support and dedication in delivering a very strong
result for our investors in 2005.
Andrew Wilkinson
Managing Director
Interest Rate Hedging Profi le
Macquarie’s Forecast of Total Return for LPTs (next fi ve years)
ALE has low distribution yield, highest expected growth and total return
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Period ending
n Hedging as at 30 June 2005
n Extension Hedging
(1 September 2005)
ALE
n FY06 Distribution Yield
n Five-year Distribution Growth (pa)
S&P/ASX 200 Listed Property Trusts
n FY06 Distribution Yield
n Five-year Distribution Growth (pa)
Source: Macquarie, 24 July 2005
Note: This is not a forecast by ALE Property Group
* ALE’s distribution for 2006 is expected to be 100% tax-deferred.
This may provide some investors with additional after-tax returns.
Royal Exchange Hotel
64 Princes Highway,
Traralgon, Vic
Royal Hotel (Sunbury)
63 Evans Street,
Sunbury, Vic
Royal Hotel Essendon
871 Mt Alexander Road,
Essendon, Vic
Sandbelt Hotel
Cnr South and Bignell Roads,
Moorabbin, Vic
Sandown Park Hotel
Princes Highway,
Noble Park, Vic
Pymble Hotel, NSW
Mitcham Hotel
566 Maroondah Highway,
Mitcham, Vic
Sandringham Hotel
Cnr Beach and Bay Roads,
Sandringham, Vic
Tudor Inn Hotel
1281 Nepean Highway,
Cheltenham, Vic
Morwell Hotel
311 – 327 Princes Drive,
Morwell, Vic
Somerville Hotel
Cnr Station and Edward Streets,
Somerville, Vic
Mountain View Hotel
186 Springvale Road,
Glen Waverly, Vic
Stamford Inn Hotel
Cnr Stud & Wellington Roads,
Rowville, Vic
Sylvania Hotel
1631 Sydney Road/
Hume Highway,
Campbellfi eld, Vic
The Vale Hotel
(previously the Springvale Hotel)
2277 Dandenong Road/
Princes Highway,
Mulgrave, Vic
Olinda Creek Hotel
161 Main Street,
Lilydale, Vic
Pier Hotel/21st Century
508 Nepean Highway,
Frankston, Vic
Plough Hotel
Childs Road (Stables
Shopping Centre),
Mill Park, Vic
Prince Mark Hotel
Cnr Princes Highway
and Power Road,
Doveton, Vic
Rifl e Club Hotel
121 Victoria Street
Williamstown, Vic
Rose Shamrock and
Thistle Hotel
709 Plenty Road,
Reservoir, Vic
Victoria Hotel
Cnr Wyndham and
Fryer Streets,
Shepparton, Vic
Village Green Hotel
Cnr Springvale and
Ferntree Gully Roads,
Glen Waverly, Vic
Westmeadows Tavern
10 Ardlie Street,
Westmeadows, Vic
The Young & Jackson Hotel
Cnr Swanston and Flinders
Streets, Melbourne, Vic
Queens Tavern
520 Beaufort Street,
Highgate, WA
Sail and Anchor Pub Brewery
64 South Terrace,
Freemantle, WA
Wanneroo Villa Tavern
18 Dundebar Road,
Wanneroo, WA
17
Peter H Warne
BA
Chairman and
Independent Director
Peter was appointed Chairman and
non-executive Director of ALE in
September 2003.
Peter began his career with the
NSW Government Actuary’s Offi ce
and the NSW Superannuation Board
before joining Bankers Trust Australia
Limited (BTAL) in 1981. Peter held
senior positions in the Fixed Income
department, the Capital Markets
division and the Financial Markets
Group of BTAL and acted as a
consultant to assist with integration
issues when the investment banking
business was acquired by Macquarie
Bank Limited in 1999. Peter is
Chairman of Capital Markets CRC
Limited and Next Financial Pty Ltd,
a member of the Advisory Board of
the Australian Offi ce of Financial
Management and a Director of SFE
Corporation Limited, Austraclear
Limited and Macquarie Capital
Alliance Group.
Peter graduated from Macquarie
University with a Bachelor of
Arts, majoring in Actuarial Studies.
He qualifi ed as an associate of, and
received a Certifi cate of Finance
and Investment from, the Institute
of Actuaries, London.
Andrew Wilkinson
BBus, CFTP
Managing Director
James McNally
BBus (Land Economy), DipLaw
Executive Director
Helen Wright
LLB, MAICD
Independent Director
Andrew’s qualifi cations and
experience are outlined on
page 10.
James was appointed as an
executive Director of ALE in
June 2003.
Helen was appointed as a non-
executive Director of ALE in
September 2003.
John Henderson
BBldg, MRICS, AAPI
Independent Director
John was appointed as a non-
executive Director of ALE in
August 2003.
John has been a Director of Marks
Henderson Pty Ltd since 2001 and
is actively involved in the acquisition
of investment property. Previously
an International Director at Jones
Lang LaSalle and Managing Director
of the Sales and Investment
Division, he was responsible for
overseeing the larger property sales
across Australasia, liaising with
institutional and private investors,
and coordinating international
investment activities.
John graduated from the University
of Melbourne and is a member of
the Royal Institution of Chartered
Surveyors, is an associate of the
Australian Property Institute and
is a licensed real estate agent.
James has over 10 years experience
in the funds management industry
having worked in both property
trust administration and compliance
roles for Perpetual Trustees Australia
Limited and MIA Services Pty
Limited, a company that specialises
in compliance services to the funds
management industry.
James provides compliance and
management services to several
Australian fund managers. He is
currently an external member on a
number of compliance committees
for various responsible entities and
acts as a Responsible Offi cer for a
number of companies that hold an
Australian Financial Services Licence,
including ALE.
James’ qualifi cations include a
Bachelor of Business in Land
Economy (Hawkesbury Agricultural
College) and a Diploma of Law (Legal
Practitioners Administrations Board).
He is a registered valuer and licensed
real estate agent.
Helen Wright was a partner of
Freehills, a leading Australian fi rm
of lawyers, from 1986 to 2003.
She practised as a commercial
lawyer specialising in real estate
projects, including development
and fi nancing and related taxation
and stamp duties. Helen is a member
of the Boards of Sydney Harbour
Foreshore Authority, UNSW Press
Limited, Australian Technology Park
Precinct Management, and Cooks
Cove Redevelopment Authority; was
Deputy Chair of the Australia Day
Council of NSW to December 2002;
and serves on the Advisory Board
to The Little Company of Mary
(Calvary hospitals). Prior boards
include Darling Harbour Authority
and MLC Homepack Limited.
Helen has a Bachelor of Laws
from University of NSW, and in
1994 completed the Advanced
Management Program at Harvard
Graduate School of Business.
directors
board of
Peter Warne
Andrew Wilkinson
John Henderson
James McNally
Helen Wright
18
The Board of Directors of Australian Leisure and
Entertainment Property Management Limited (the
“Company”) is accountable to stapled security holders
for the performance of ALE.
Set out below is a summary of the main corporate governance
practices of ALE. These practices have been in effect during the
year ended 30 June 2005.
Roles of the Board and Management
The Board’s responsibilities encompass the following:
1. review and approval of the strategic direction of ALE;
2. oversight of ALE, including its controls and
accountability systems;
3. appointing and, where appropriate, removing the
Managing Director (MD);
4. ratifying the appointment of and, where appropriate,
the removal of the Acquisitions Manager, Group Financial
Controller and the Company Secretary;
5. input to and fi nal approval of management’s development
of corporate strategy and performance objectives;
6. review and ratifi cation of systems of risk management
and internal compliance and control, codes of conduct,
and legal compliance;
7. monitoring of senior management performance and
implementation of strategy, and ensuring appropriate
resources are available;
8. approving and monitoring the progress of major capital
expenditure, capital management, acquisitions and
divestitures;
9. approving and monitoring fi nancial and other reporting; and
10. establishing and maintaining ethical standards.
The Board delegates to the MD responsibility for implementing
strategic direction, and for managing the day-to-day operations
of ALE. The MD consults with the Chairman, in the fi rst place, on
matters which are sensitive, extraordinary or of a strategic nature.
In carrying out its responsibilities, the Board undertakes to serve
the interests of stapled security holders, employees, customers
and the broader community honestly, fairly, diligently and in
accordance with applicable laws.
Board Composition
The full Board determines the Board size and composition,
subject to limits imposed by the Company’s Constitution.
The Board has determined that it is currently appropriate to
have fi ve directors, three of whom, including the Chairman,
are non-executive.
The three non-executive directors, Peter Warne, John Henderson
and Helen Wright, are independent directors as defi ned under
section 601JA of the Corporations Act, and satisfy the principles
of independence as outlined in the ASX Corporate Governance
Council Recommendations.
The Chairman is selected by the full Board annually at the fi rst
meeting following the annual general meeting (AGM), and is an
independent director.
The Board has implemented an annual performance evaluation
process for management, directors, the Board and its
Committees. Part of this process is to also ensure that the Board
and its Committees maintain an appropriate balance of skills,
experience and expertise.
Details of the performance evaluation process for management
are set out in the Directors’ Report in the Concise Financial
Report commencing on page 26.
To assist the Board in undertaking its own performance evaluation
and that of directors, it recently appointed a specialist governance
adviser to review the performance of the Board.
The adviser’s report was favourable and provided a number of
minor suggestions that the Board may consider going forward
to further enhance current practice.
The Board will continue to review its own performance and that
off its directors and Committees on an annual basis, and may
obtain the assistance of external consultants where required to
assist it in this process.
Under the Company’s Constitution, a director may not hold offi ce
for a continuous period in excess of three years or past the third
annual general meeting following the director’s appointment,
whichever is the longer, without submitting for re-election. If no
director would otherwise be required to submit for re-election but
the ASX Listing Rules require that an election of directors be held,
the director to retire at the AGM is the director who has been
longest in offi ce since their last election.
John Henderson will be retiring and standing for re-election
as a director of the Company at its next AGM.
Independent Professional Advice
After prior approval of the Chairman, directors may obtain
independent professional advice at the expense of the Company
on matters arising in the course of their Board duties.
Ethics and Conduct
In accordance with ALE’s Code of Conduct, all directors and
employees are expected to perform their duties professionally
and act with the utmost integrity and objectivity, striving at all
times to enhance the reputation and performance of ALE.
Audit, Compliance and Risk Management Committee
To assist it in carrying out its responsibilities, the Board has
established an Audit, Compliance and Risk Management
Committee. This is a standing committee that is composed
of three non-executive, independent directors.
corporate
governance
19
Under the ASX Corporate Governance Council Recommendations,
from 1 July 2005 the Chair of the Audit, Compliance and Risk
Management Committee may not be the same person that
chairs the Board. As Peter Warne is Chairman of the Board, he
has recently resigned as Chairman of the Audit, Compliance and
Risk Management Committee, and Helen Wright, an Independent
director, has been appointed as Chair of the Committee in
his place. Peter Warne remains on the Committee as an
independent member.
The Audit, Compliance and Risk Management Committee meets
at least four times a year.
As the Board comprises 50% or more independent directors,
an independent compliance committee has not been appointed.
The Board has, however, determined that the Audit, Compliance
and Risk Management Committee fulfi ll this role.
Details of the members of the Audit, Compliance and Risk
Management Committee and their attendance at meetings are
set out in the Directors’ Report in the Concise Financial Report
on page 26.
Given the small number of staff within the Company, the
Company does not have an internal audit function.
Board and Executive Remuneration
Details of Board and Executive remuneration are set out in the
Directors’ report in the Concise Financial Report commencing
on page 26.
Independence and Materiality Thresholds
The Board considers that a director is independent if the director
is a non-executive director and:
1.
is not a substantial shareholder of the Company or an offi cer
of, or otherwise associated directly with, a substantial
shareholder of the Company;
2. within the last three years has not been employed in an
executive capacity by the Company or another group
member; or been a director after ceasing to hold any
such employment;
3. within the last three years has not been a principal of a
material professional adviser or a material consultant to
the Company or another group member, or an employee
materially associated with the service provided;
4. is not a material supplier or customer of the Company or
other group member, or an offi cer of or otherwise associated
directly or indirectly with a material supplier or customer;
5. has no material contractual relationship with the Company
or another group member other than as a director of the
Company;
6. has not served on the board for a period which could, or
could reasonably be perceived to, materially interfere with
the director’s ability to act in the best interests of the
Company; and
7.
is free from any interest and any business or other
relationship which could, or could reasonably be perceived
to, materially interfere with the director’s ability to act in
the best interests of the Company.
Peter Warne is also a director and the Chairman of Next Financial
Pty Limited (Next Financial) which acts as an Investment
Manager. Next Financial holds on behalf of its clients 4,417,420
stapled secturities in the ALE Property Group. Peter Warne is not
involved in any of the decision making processes regarding Next
Financial’s holding in the ALE Property Group. Procedures have
been put into place to ensure Peter Warne’s independence and
confi dentiality of information are maintained.
20
Remuneration Committee
The Board has established a Remuneration Committee composed
of three non-executive independent directors. Peter Warne is
chairman of the committee.
Details of members and meetings held are set out in the
Directors’ Report in the Concise Financial Report on page 26.
Trading in Securities
ALE has a Trading Policy with which all directors and employees
must comply. Directors, employees and their associates may not
utilise information obtained by their position for personal gain
or for gain of another person. Each director and employee must
ensure that any information in their possession that is not publicly
available and which may have a material effect on the price or
value of ALE’s stapled securities, ALE Notes or any derivatives
based on either of these (collectively “ALE Securities”) is not
provided to anyone who may be infl uenced to subscribe for, buy
or sell ALE Securities.
Directors, employees and their associates may buy or sell ALE
Securities only during the four week periods following:
• the release of the half-year results;
• the release of the full-year results; and
• close of the AGM.
The Chairman may, in special circumstances, authorise the sale
by a director or employee of ALE Securities outside the relevant
four week periods outlined above.
All directors and employees are also precluded from buying
or selling ALE Securities at any time if they are aware of price
sensitive information that has not been made public.
In accordance with provisions of the Corporations Act 2001 and
the Listing Rules of the ASX, directors advise the ASX of any
transaction conducted by them in ALE Securities.
Investor Relations
ALE is committed to the provision of timely, full and accurate
disclosure of material information concerning ALE. ALE has
a policy that security holders have equal access to ALE’s
information and has procedures to ensure that all price sensitive
information is disclosed to the ASX in accordance with the
continuous disclosure requirements of the Corporations Act
2001 and the Listing Rules of the ASX.
The Board encourages full participation of security holders
at the AGM. The external auditor will attend the AGM to
answer any questions concerning the audit and content of
the auditor’s report.
ALE Website
All information provided to the ASX is also posted on the ALE
website, www.alegroup.com.au.
The ALE website includes various corporate governance
documents and policies, such as the Board’s Charter, ALE’s Code
of Conduct and the Audit, Compliance and Risk Management
Committee’s Charter.
Distributions
Distributions are paid to security holders every six months.
ASX Corporate Governance Council Principles
ALE has adopted best practice corporate governance principles
consistent with the ASX Corporate Governance Council
Principles of Good Corporate Governance and Best Practice
Recommendations.
ALE has not fully complied with the following recommendation:
• 2.4 – Nomination Committee
Given the number of staff employed by the Company and the
size of the Board, the Board has determined that it does not
require a separate Nomination Committee, and that the Board
will fulfi ll these functions.
Combined
Annual Concise
Financial Report
FOR THE PERIOD 1 JULY 2004 TO 31 JUNE 2005
Consisting of the combined reports of
Australian Leisure and Entertainment Property Management Limited
ABN 45 105 275 278
and
Australian Leisure and Entertainment Property Trust
ARSN 106 063 049
ALE Property Group
Contents
Directors’ report
Discussion and analysis of combined statements
of financial performance, financial position and cashflows
Combined statement of financial performance
Combined statement of financial position
Combined statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent review report to the stapled security holders
22
33
35
36
37
38
51
52
21
directors’ report
The directors’ of Australian Leisure and Entertainment Property Management Limited (the “Company”)
present their report for ALE Property Group (the “Group”) for the year ended 30 June 2005.
The Group is comprised of the Company and Australian Leisure and Entertainment Property Trust
(the “Trust”) for which the Company acted as Responsible Entity for the full year ended 30 June 2005.
Accordingly, this report includes the combined results of the Company and the Trust.
Directors
The following persons were directors of the Company during the whole of the financial year and up to the
date of this report unless otherwise stated:
Name
Non-executive directors
P H Warne (Chairman)
J P Henderson
H I Wright
Executive directors
A F O Wilkinson (Managing Director)
J T McNally
Appointed
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
Principal activities
During the year the principal activity of the Group consisted of investment in property and property funds
management. There has been no significant change in the nature of these activities during the year.
Distributions and dividends
Trust distributions paid or payable to stapled security holders during the financial year were as follows:
2005
$’000
26 June 2003
to 30 June 2004
$’000
Interim Trust distribution for the year ended 30 June 2005 of 6.25 cents
(2004: nil) per stapled security paid on 28 February 2005
5,675
–
Final Trust distribution for the year ended 30 June 2005 of 6.60 cents
(2004: 7.50 cents) per stapled security to be paid 31 August 2005
5,993
11,668
6,810
6,810
No provisions for or payments of Company dividends have been made during the financial year (2004: nil).
22 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Review of operations
A summary of the combined revenue and results for the financial year is set out below:
Income
Property rents and loan interest
Bank interest
Expenses
Borrowing costs excluding (non cash) amortisation
Borrowing costs (non cash) amortisation
Operating expenses
Land tax expense
Income tax (benefit)
Net profit after income tax
Net assets per stapled security
2005
$’000
26 June 2003
to 30 June 2004
$’000
45,996
1,175
47,171
31,523
6,248
2,981
1,139
41,891
(49)
5,329
$2.17
29,479
715
30,194
20,238
3,995
1,565
545
26,343
(51)
3,902
$1.41
As a result of all of the property leases being “triple net” the Group has had minimal direct property outgoings
other than land tax on the Queensland properties.
Significant changes in the state of affairs
In the opinion of the directors, there were no significant changes in the state of affairs of the Group that
occurred during the year.
Matters subsequent to the end of the financial year
On 1 September 2005 the Group entered into two further forward dated interest rate swap transactions in
respect of its $480m debt facilities. The swaps were $50m at 5.5375% pa fixed (excluding credit margin)
from November 2008 to November 2012 and $50m at 5.5475% pa fixed (excluding credit margin) from
November 2008 to November 2013. The directors are not aware of any other matter or circumstance
occurring after balance date which may affect the Group’s operations, the results of those operations or the
state of affairs of the Group.
Likely developments and expected results of operations
The Group will continue to maintain its defined strategy of identifying opportunities to increase the profitability
of the Group and its value to the stapled security holders.
Further information on likely developments in the operations of the Group and the expected results of
operations have not been included in this report because the directors believe that it would be likely to result
in unreasonable prejudice to the Group.
Environmental regulation
Whilst the Group is subject to significant environmental regulation in respect of its property activities,
the directors are satisfied that adequate systems are in place for the management of its environmental
responsibility and compliance with the various licence requirements and regulations. Further, the directors
are not aware of any material breaches of these requirements. On three of the properties ongoing testing
is being undertaken and if further work is required indemnities are held in excess of any expenditure
amounts required.
23
directors’ report
Information on directors
Mr Peter H Warne B.A,
Chairman and Non–Executive Director.
Experience and expertise
Peter was appointed as Chairman and non-executive
director of the Company in September 2003.
Peter began his career with the NSW Government
Actuary’s Office and the NSW Superannuation
Board before joining Bankers Trust Australia Limited
(“BTAL”) in 1981. Peter held senior positions in
the Fixed Income department, the Capital Markets
division and the Financial Markets Group of BTAL
and acted as a consultant to assist with integration
issues when the investment banking business was
acquired by Macquarie Bank Limited in 1999.
Peter graduated from Macquarie University with
a Bachelor of Arts, majoring in Actuarial studies.
He qualified as an associate of, and received a
Certificate of Finance and Investment from, the
Institute of Actuaries, London.
Other current directorships of listed entities
Non-executive director of SFE Corporation Limited
and Macquarie Capital Alliance Group.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Chairman of the board.
– Member of the audit, compliance and risk
management committee (resigned as Chairman
on 15 August 2005, continuing as member).
– Chairman of the remuneration committee.
Mr John Henderson B.Bldg, MRICS, AAPI,
Non-Executive Director.
Experience and expertise
John was appointed as a non-executive director of
the Company in August 2003.
John has been a Director of Marks Henderson Pty Ltd
since 2001 and is actively involved in the acquisition
of investment property. Previously an International
Director at Jones Lang LaSalle and Managing
Director of the Sales and Investment Division, he
was responsible for overseeing the larger property
sales across Australasia, liaising with institutional
and private investors, and coordinating international
investment activities.
John graduated from the University of Melbourne
and is a member of the Royal Institution of Chartered
Surveyors, is an associate of the Australian Property
Institute and is a licensed real estate agent.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Member of the audit, compliance and risk
management committee.
– Member of the remuneration committee.
Ms Helen Wright LL.B, MAICD,
Non-Executive Director.
Experience and expertise
Helen was appointed as a non-executive director of
the Company in September 2003.
Helen Wright was a partner of Freehills, a leading
Australian firm of lawyers, from 1986 to 2003.
She practiced as a commercial lawyer specialising
in real estate projects including development and
financing and related taxation and stamp duties.
Helen is a member of the Boards of the Sydney
Harbour Foreshore Authority, Australian Technology
Park Precinct Management, and Cooks Cove
Redevelopment Authority; was Deputy Chair of the
Australia Day Council of NSW to December 2002;
and serves on the Advisory Council to The Little
Company of Mary (Calvary hospitals). Prior boards
include Darling Harbour Authority, UNSW Press
Limited and MLC Homepack Limited.
Helen has a Bachelor of Laws from University
of NSW, and in 1994 completed the Advanced
Management Program at the Harvard Graduate
School of Business.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Chair of the audit, compliance and risk
management committee.
(appointed Chair 15 August 2005).
– Member of the remuneration committee.
24 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
James’ qualifications include a Bachelor of Business
in Land Economy (Hawkesbury Agricultural College)
and a Diploma of Law (Legal Practitioners Admission
Board). He is a registered valuer and licensed real
estate agent.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Responsible Officer of the Company under the
Company’s Australian Financial Services License.
Mr Brendan R Howell BEcon, GDipAppFin (Sec Inst).
Company secretary
Mr Howell was appointed to the position of company
secretary in September 2003.
Brendan has a Bachelor of Economics from the
University of Sydney and a Graduate Diploma in
Applied Finance and Investment from the Securities
Institute of Australia, and 15 years’ experience in
the funds management industry. He was formerly
an associate member of both the Securities
Institute of Australia and the Institute of Chartered
Accountants in Australia. Brendan has a property
and accounting background and has previously
held senior positions with a leading Australian
trustee company administering listed and unlisted
property trusts. For the past six and half years
Brendan has been directly involved with MIA
Services Pty Limited, a company which specialises
in funds management compliance, and acts as an
independent consultant and external compliance
committee member for a number of property,
equity and infrastructure funds managers.
Brendan also acts as an independent director
for several unlisted public companies, some of
which act as responsible entities.
Mr Andrew F O Wilkinson B. Bus. CFTP,
Managing Director.
Experience and expertise
Andrew was appointed Managing Director of the
Company in November 2004. He joined ALE as
Chief Executive Officer at the time of its listing in
November 2003.
Andrew has over 25 years experience in the banking
and corporate finance.
He was previously a corporate finance partner with
PricewaterhouseCoopers where he specialised in
providing financial and strategic advice on significant
property and infrastructure portfolios. Over his 8
year period with the firm he held a number of senior
positions and was also one of the founding members
of the NSW Government’s Infrastructure Council.
Andrew’s prior career also includes 15 years in
finance and investment banking with organisations
including ANZ Capel Court and Schroders where he
was involved in leading the financing arrangements
for a range of major projects.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Managing Director of the Company.
– Responsible Officer of the Company under the
Company’s Australian Financial Services License.
Mr James McNally B.Bus (Land Economy). Dip. Law,
Executive Director.
Experience and expertise
James was appointed as an executive director of the
Company in June 2003.
James has over ten years experience in the funds
management industry having worked in both property
trust administration and compliance roles for Perpetual
Trustees Australia Limited and MIA Services Pty
Limited, a company that specialises in compliance
services to the funds management industry.
James provides compliance and management
services to several Australian fund managers. He
is currently an external member on a number of
compliance committees for various responsible
entities and acts as a Responsible Officer for
a number of companies that hold an Australian
Financial Services Licence, including the Company.
25
directors’ report
Directors’ and specified executive interests in stapled securities and options
The following directors, specified executive and their associates held or currently hold stapled security
interests in the Group:
Name
Director/specified executive
Balance at
the start
of the year
Purchases / (sales)
Number of
securities held
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
D S Barkas
Director
Director
Director
Director
Specified Executive
453,400
25,000
100,000
31,998
–
179,010
30,000
–
21,000
46,810
632,410
55,000
100,000
52,998
46,810
The following director held or currently holds options over stapled securities of the Group:
Name
Director/specified executive
A F O Wilkinson
Director
Balance at
the start
of the year
300,000
Purchases / (sales)
Number of
options held
–
300,000
Meetings of directors
The numbers of meetings of the Company’s board of directors held during the year ended 30 June 2005 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
Board meetings
Held1
Attended
13
13
13
7
13
13
11
13
7
13
Audit, Compliance and
Risk Management
Committee meetings
Held1
Attended
Remuneration
Committee meeting
Held1
Attended
6
6
6
–
–
6
5
6
–
–
1
1
1
–
–
1
1
1
–
–
1 “Held” reflects the number of meetings which the director was eligible to attend.
Remuneration report
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Equity-based compensation
A Principles used to determine the nature and amount of remuneration
The objectives of the Company’s executive reward framework is to ensure that reward for performance
is transparent, reasonable, competitive and appropriate for the results delivered. The framework aligns
executive reward with achievement of strategic objectives and creating of value for share holders, and
conforms with market best practice for the delivery of reward. The Board ensures that executive reward
satisfies the following key criteria for good reward governance practices:
– competitiveness and reasonableness
– acceptability to share holders
– performance linkage/alignment of executive compensation
– transparency
– capital management
26 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
In consultation with external remuneration consultants, the Company has structured an executive
remuneration framework that is market competitive and complementary to the reward strategy of
the organisation.
Alignment to stapled security holders interests:
– has economic profit as a core component of plan design
– focuses on sustained growth in stapled security holder wealth, consisting of distributions, dividends and
growth in share price and delivering constant return on assets as well as focusing the executive on key
non-financial drivers of value
– attracts and retains high calibre executives
Alignment to program participants’ interests:
– rewards capability and experience
– reflects competitive reward for contribution to growth in stapled security holders wealth
– provides a clear structure for earning rewards
– provides recognition for contribution
The framework provides a mix of fixed and variable pay and a blend of short and long-term incentives.
As executives gain seniority within the Company, the balance of this mix shifts to a higher proportion of
‘at risk’ rewards, depending upon the nature of the executive’s new role.
The overall level of executive reward takes into account the performance of the Group over a number of
periods with greater emphasis given to the current year. Over the past year, the Group’s profit from ordinary
activities after income tax has grown by $1.427m (or 36.6%) from $3.902m to $5.280m and stapled security
holders’ wealth (inclusive of distribution returns) has grown by 68.4%.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on and the
responsibilities of the directors. Non-executive directors’ fees and payments are reviewed annually by the
Board. The Board may also obtain the advice of independent remuneration consultants to ensure that non-
executive directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees
are determined independently to the fees of the non-executive directors, based on comparative roles in
the external market. The Chairman is not present at any discussion relating to the determination of his own
remuneration. Non-executive directors do not receive options over shares.
Directors’ fees
The current base remuneration was last reviewed with effect from September 2003. The directors’ fees are
all inclusive of committee fees.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit which will be
periodically recommended for approval by share holders. The maximum currently stands at $335,000 per
annum, comprised of $260,000 per annum for non-executive directors and $75,000 per annum for the
executive director (inclusive of a responsible officer fee of $5,000 per annum) and excluding the managing
directors’ remuneration. The maximum amount for non-executive directors can only be increased at a general
meeting of the Company.
Retirement allowances for directors
No retirement allowances for directors are offered by the Company in line with recent guidance on
non-executive directors’ remuneration.
27
directors’ report
Remuneration report (continued)
Executive pay
The executive pay and reward framework has three components, the combination of which comprises the
executive’s total remuneration:
– base pay and benefits
– short-term performance incentives
– long-term incentives
– other remuneration such as superannuation
Base pay and benefits
Structured as a total employment cost package which may be delivered as a combination of cash and
prescribed non-cash benefits at the discretion of the executives and the board.
Executives are offered a competitive base pay that comprises the fixed component of their remuneration.
External remuneration consultants provide analysis and advice to ensure base pay is set to reflect the market
for comparable roles. Base pay for senior executives is reviewed annually to ensure that the executives pay is
competitive with the market. An executive’s pay is also reviewed on promotion.
There is no guaranteed base pay increase in any of the executives’ contracts.
Short-term incentives (STI)
The short-term incentive arrangements in place at the Company have been designed to link annual STI bonus
awards to executive performance against agreed key performance indicators (KPI’s) including the financial
performance of the Company during the year in question.
Each executive has a target STI opportunity depending on the accountabilities of the role and the impact on
the performance of the Company.
Each year the remuneration committee considers the appropriate targets and KPI’s to link the STI plan and the
level of payout if targets are met. This includes setting any maximum payout under the STI plan and minimum
levels of performance to trigger payments of STI.
For the year end 30 June 2005, the KPI’s link to STI plans were based on Company, individual, business and
personal objectives. The KPI’s required performance in managing operating and funding costs, compliance
with legislative requirements, increasing security holder value as well as other key strategic non-financial
measures linked to drivers of performance in future economic periods.
The board is responsible for assessing whether the KPI’s have been met. To facilitate this assessment,
the board receives detailed reports on performance from management.
The STI payments may be adjusted up or down in line with over or under achievement against the target
performance levels. This is at the discretion of the board.
The STI target annual payment is reviewed annually.
Shares options granted
No options over unissued shares of the Company were granted during or since the end of the financial year .
B Details of remuneration
Amount of remuneration
Details of the remuneration of each director and the specific executive of the Company, paid or payable by
the Company for the year ended 30 June 2005 are set out in the following tables. The cash bonuses are
dependent on the satisfaction of performance conditions are set out in the section headed “Short-term
incentives”, above. All other elements of remuneration are not directly related to performance.
28 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
Directors of the Company
Name
Non-executive directors
P H Warne (Chairman)
J P Henderson
H I Wright
Executive directors
A F O Wilkinson* (Managing Director)
J T McNally (Director)
Total
Cash Salary
and Fees
110,092
70,000
64,220
191,954
81,250
517,516
Cash Bonus
Superannuation
Total
–
–
–
65,000
–
65,000
9,908
–
5,780
15,081
–
30,769
120,000
70,000
70,000
272,035
81,250
613,285
* Mr Wilkinson was appointed Managing Director on 16 November 2004. Before this appointment he was the Company’s Chief Executive
Officer. Amounts shown above include all of Mr Wilkinson’s remuneration during the reporting period, whether as Managing Director or
Chief Executive Officer. Amounts received in his position as Managing Director amounted to $191,784, made up of cash salary and fees of
$117,895, cash bonus of $65,000 and superannuation of $8,889.
Specified executive of the Company
Name
Cash Salary
Cash Bonus
Non monetary
benefits
Superannuation
Total
D S Barkas*
(Group Financial Controller
& Assistant Company Secretary)
127,282
20,000
6,800
10,462
164,544
* Mr Barkas was appointed Group Financial Controller & Assistant Company Secretary on 16 March 2005. Before this he was the Company’s
Property Trust Manager. Amounts shown above include all of Mr Barkas’ remuneration during the reporting period, whether as Group
Financial Controller and Assistant Company Secretary or Property Trust Manager.
Amounts received in his position as Group Financial Controller and Assistant Company Secretary amounted to $55,377, made up of cash
salary and fees of $25,578, non monetary benefit of $6,800, cash bonus of $20,000 and superannuation of $3,000.
Cash bonuses and options
For each cash bonus included in the above tables, the percentage of the available bonus that was awarded
for the financial year and the percentage that was forfeited because a person did not meet the performance
criteria is set out below.
Name
A F O Wilkinson
D S Barkas
Paid
$
65,000
20,000
Forfeited
%
13.3
0.0
C Service agreement
On 10 November 2003, the Company entered into a three year service agreement with Managing Director,
Mr Wilkinson. The agreement stipulates the minimum base salary, inclusive of superannuation, for each of
the first three years as being $225,000, to be reviewed annually by the board. A short-term incentive (which
if earned, would be paid as a cash bonus each year) and a long-term incentive in the form of options over
stapled securities, exercisable between November 2006 and November 2007 (except if the Company is
subject to takeover, then to February 2007) are also provided.
29
directors’ report
Remuneration report (continued)
C Service agreement (continued)
In the event of the termination of Mr Wilkinson’s employment contract, amounts are payable for unpaid
accrued entitlements, proportion of bonus and option entitlements as at the date of termination. In the event
of redundancy termination amounts are payable for base salary, inclusive of superannuation and bonus and
option entitlements for the balance of the contract.
Mr Barkas’ employment contract may be terminated at one months notice.
There are no other director or executive service agreements.
Letters of appointment have been entered into by each director (excluding the Managing Director) confirming
their remuneration and obligations under the Corporations Law and Company constitution.
A letter of appointment has been entered into with MIA Services Pty Limited for the use of the services of
Brendan Howell as Company Secretary and as a Responsible Officer of the Company on a continuous basis
that may be terminated at any time.
D Equity-based compensation
Options over un-issued stapled securities of the Group were granted during the last financial period to
Andrew Wilkinson as disclosed in an ASX Announcement dated 10 November 2003. Mr Wilkinson has the
right to subscribe for up to 300,000 shares at a fixed price of $1.036 exercisable from 10 November 2006 or
earlier, if Mr Wilkinson’s employment is terminated other than for cause or unsatisfactory performance. The
options will remain exercisable until 10 November 2007, unless the Group is subject to a takeover, in which
case the period of exercise would be reduced to 11 February 2007.
The options value disclosed above as part of specified executive remuneration is the assessed fair value at
grant date of options granted, allocated equally over the period from grant date to vesting date. The fair value
of $24,000 at grant date has been independently determined by using a Black-Scholes option pricing model.
This technique takes into account factors such as the exercise price, the term of the option, the vesting and
performance criteria, the impact of dilution, the non-tradable nature of the option, the share price at grant
date, expected price volatility of the underlying share and the expected dividend yield and the risk-free interest
rate for the term of the option.
Stapled securities under option
Unissued stapled securities of the Group under option at the date of this report are as follows:
Date option granted
10 November 2003
Expiry date
Issue price of
stapled securities
Number under option
10 November 2007*
$1.036
300,000
* Unless ALE Property Company is subject to a takeover, in which case the period of exercise would be shortened to 11 February 2007.
Stapled securities issued on the exercise of options
No stapled securities of the Group have been issued on the exercise of options, to date.
Insurance of officers
During the financial year, the Company paid a premium of $41,766 (2004: $40,746) to insure the directors
and officers of the Company. The auditors of the Company are in no way indemnified out of the assets
of the Company.
Under the constitution of the Company, current or former directors and secretaries are indemnified to
the full extent permitted by law for liabilities incurred by that person in the discharge of their duties.
The constitution provides that the Company will meet the legal costs of that person. This indemnity is
subject to certain limitations.
30 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the Company are important.
Details of amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services
provided during the year are set out below:
The board of directors has considered the position and in accordance with the advice received from the
audit committee is satisfied that the provision of the non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied
that the provision of non-audit services by the auditor, as set out below, did not compromised the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed by the audit committee to ensure that they do not impact the
impartiality and objectivity of the auditor
– none of the services undermine the general principles relating to auditor independence as set out in
Professional Statement F1, including reviewing or auditing the auditors own work, acting in a management
or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing
economic risk and rewards
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 32.
Audit and review of the financial reports of the Group and other audit
work under the Corporations Act 2001
– in relation to current year
– in relation to prior year
Due diligence service
Controls assurance services
Tax compliance services
Tax consulting services
General accounting advice (including AIFRS)
2005
$
2004
$
125,705
60,000
31,300
7,000
15,000
24,190
29,944
293,139
103,000
–
–
14,000
–
34,000
8,750
159,750
Rounding amounts
The Group is of the kind referred to in Class Order 98/0100, issued by the Australian Securities and
Investments Commission, relating to the “rounding off” of amounts in the directors’ report and financial
report. Amounts in the directors’ report and financial report have been rounded off in accordance with the
Class Order to the nearest thousand dollars, unless otherwise indicated.
This report is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 6th day of September 2005
31
Auditors’ independence declaration
As lead auditor for the audit of ALE Property Group for the year ended 30 June 2005,
I declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the
audit.
This declaration is in respect of ALE Property Group, comprising Australian Leisure and
Entertainment Property Management Limited and Australian Leisure and Entertainment
Property Trust and the entities it controlled during the period.
S J Hadfield
Partner
Sydney
6 September 2005
32 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
discussion and analysis of the combined financial statements
The following commentary is to assist stapled security holders in reviewing and interpreting the combined
results of the Group for the year ended 30 June 2005.
The discussion and analysis of the year ended 30 June 2005 results are based upon comparisons of the
30 June 2005 results to those of the period ended 30 June 2004. It is most important to note that the Group
commenced operations during the comparative period of 26 June 2003 to 30 June 2004. During November
2003 the Group acquired its first investments properties, issued the bulk of its stapled securities and issued
all of its existing debt, being $150m of ALE Notes and $330m of Commercial Mortgage Back Securities.
As a result of the comparative period being a commencement period some key differences have been
annualised in order to improve comparability.
Combined statement of financial performance
Net profit after tax was for the year ended 30 June 2005 of $5,329,000 was $1,427,000 (or 36.6%) higher
than the $3,902,000 net profit after tax of the comparative period.
– Total revenue from ordinary activities – was higher by $923,000 (or 2.0%) after annualisation. The key
drivers of the 2.0 % increase were a portfolio rental review which resulted in a 2.1% increase in the property
rental income and loan interest income from November 2004 and stringent cashflow management and
investment procedures which boosted bank interest earnings by an annualised 6.4%.
– Borrowing costs (including non cash amortisation) – were higher by $18,000 (or 0.003%) after
annualisation. The Group had a fully hedged weighted average interest rate established at IPO of 6.524%
and as at 30 June 2005 of 6.527%.
– Land tax expense – was higher by $304,000 or 36.5% after annualisation. In all states other than
Queensland ALH, as tenant, pays the land tax rather than the Group. The key drivers of the increase were
strong increases in Queensland land values and the fact that the comparative period amount of $545,000
only included one day of land tax on three Queensland properties acquired by the Group on 30 June 2004.
– Property valuation expenses – were higher by $134,000 (or 121.8%). Annualisation is not appropriate as the
valuations are only performed annually. The comparative period valuation covered one third of the portfolio
whereas the current valuation covered the entire freehold portfolio.
– Acquisition proposal due diligence costs of $177,000 were incurred in relation to due diligence on potential
investment property acquisitions that did not proceed to completion.
– Other costs of $2,560,000 representing an increase of $313,000 (or 13.9%) after annualisation.
This increase was due to a number of factors including, a progressive staffing of the Group in the
comparative period, Group office relocation in August 2004 and increased operational activity during
the current period.
Combined statement of financial position
Total assets were $690,939,000 as at 30 June 2005 compared to $625,511,000 as at 30 June 2004.
The increase of $65,428,000 (or 10.5%) was driven by a revaluation increment to property investments
of $74,800,000, a decrease in cash of $3,613,000, a decrease in amortisation of prepaid borrowing costs
of $5,769,000 and a net increase in other assets of $10,000.
Total liabilities were $494,127,000 as at 30 June 2005 compared to $497,160,000 as at 30 June 2004.
The decrease of $3,033,000 (or 0.6%) was driven by a reduction in payables of $2,678,000, a decrease in
provisions of $819,000, and increase in ALE Notes premium of $479,000 and a decrease in other liabilities
of $15,000.
Net assets were $196,812,000 as at 30 June 2005 compared to $128,351,000 as at 30 June 2004.
The increase of $68,461,000 (or 53.3%) is as a result of the movements in total assets and total liabilities.
33
discussion and analysis of the combined financial statements
Combined statement of financial position (continued)
Equity was $196,812,000 as at 30 June 2005 compared to $128,351,000 as at 30 June 2004. The increase of
$68,461,000 (or 53.3%) was driven by an increase in asset revaluation reserve of $74,800,000, an increase in
accumulated losses of $116,000 and a decrease in contributed equity of $6,223,000. The Group’s distribution
to stapled security holders of available operating cashflows (which exceeded accounting income due to non
cash expenses) resulted in the decrease to contributed equity.
The net assets per stapled security as at 30 June 2005 were $2.17 compared to $1.41 as at 30 June 2004.
Combined statement of cash flows
Net cash inflow from operating activities included the rent earned on the portfolio, the interest earned on cash
balances held by the Group and the payment of interest expenses on the Group’s borrowings.
Net cash outflow from investing activities was an outflow of $168,000 relating to the fit-out of the Group’s
office premises, website design and construction and other fixed assets.
Net cash outflow from financing activities was an outflow of $12,485,000 which was the total of the June
2004 distribution of $6,810,000 and the December 2004 distribution of $5,675,000.
The net decrease in cash held during the year of $3,613,000 was due to a net decrease in payables of
$2,678,000, a net decrease in provisions of $819,000 and other net decreases of $116,000.
34 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
combined statement of financial performance
FOR THE YEAR ENDED 30 JUNE 2005
Revenue and expenses from ordinary activities
Property rental income and loan interest
Interest income
Total revenue from ordinary activities
Borrowing costs excluding amortisation
Borrowing costs (non-cash) amortisation
Land tax expense
Property valuation expenses
Acquisition proposal due diligence
Salaries, fees and related costs
Insurance for directors and officers
Insurance other
Legal fees
Corporate advisory services
Occupancy costs
Annual reports
Registry fees
Accounting fees
Tax reviews and advice
Interest rate risk advice
Other expenses
Total expenses from ordinary activities
Profit from ordinary activities before income tax expenses
Income tax (benefit)
Net profit after income tax attributable to
stapled security holders of the Group
Net increment in asset valuations
Total revenues, expenses and valuation adjustments
attributable to stapled security holders of the Group
recognised directly in equity
Total changes in equity attributable to stapled security
holders of the Group other than those resulting from
transactions with stapled security holders as owners
Distributions paid and payable
Basic and diluted earnings per stapled security
Distributions per stapled security held for the full financial year
Note
2
2(a)
3
4
5
6
2005
$’000
26 June 2003
to 30 June 2004
$’000
45,996
1,175
47,171
31,523
6,248
1,139
244
177
991
42
70
143
92
92
52
62
65
68
49
834
41,891
5,280
29,479
715
30,194
20,238
3,995
545
110
–
555
41
35
73
35
26
55
37
26
34
86
452
26,343
3,851
(49)
(51)
5,329
74,800
3,902
40,459
74,800
40,459
80,129
11,668
Cents
5.87
12.85
44,361
6,810
Cents
4.30
7.50
The above combined statement of financial performance should be read in conjunction with the accompanying notes.
35
combined statement of financial position
AS AT 30 JUNE 2005
Current Assets
Cash assets
Receivables
Prepayments and other assets
Development property loans
Total Current Assets
Non-Current Assets
Property investments
Development property – loans, deposits and costs
Prepayments and other assets
Plant & equipment
Deferred tax asset
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Other
Total Current Liabilities
Non-Current Liabilities
Interest bearing liabilities – CMBS
Interest bearing liabilities – ALE Notes
ALE Notes premium
Deferred tax liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Asset revaluation reserve
Accumulated losses
Total Equity
Net assets per stapled security
Note
2005
$’000
2004
$’000
7
8
10
9
10
8
11
11
12
19,477
385
5,793
11,746
37,401
625,000
14,713
13,585
141
99
653,538
690,939
7,016
6,026
302
13,344
330,000
150,000
783
–
480,783
494,127
196,812
81,787
115,259
(234)
196,812
$
2.17
23,090
325
6,018
11,746
41,179
550,200
14,713
19,344
16
59
584,332
625,511
9,694
6,845
309
16,848
330,000
150,000
304
8
480,312
497,160
128,351
88,010
40,459
(118)
128,351
$
1.41
The above combined statement of financial position should be read in conjunction with the accompanying notes.
36 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
combined statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2005
Note
2005
$’000
26 June 2003
to 30 June 2004
$’000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees
(inclusive of goods and services tax)
Recoveries of payments to suppliers – Foster’s Group Limited
Interest received from Foster’s Group Limited and bank term deposits
Borrowing costs
Net cash inflow from operating activities
Cash flows from investing activities
Acquisitions of property investments
Loans to Foster’s Group Limited
Deposits on development property investments
Pre-acquisition costs on property investments
Plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of stapled securities
Proceeds from interest bearing liabilities
Distributions paid
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash held
Cash at beginning of the financial period
Cash at the end of the financial period
7
Non-cash financing activities
The above combined statement of cash flows should be read in conjunction with the accompanying notes.
48,143
30,215
(11,008)
–
3,505
(31,600)
9,040
–
–
–
–
(450)
(168)
–
–
(12,485)
(12,485)
(3,613)
23,090
19,477
–
(1,344)
447
2,560
(14,568)
17,310
(509,741)
(23,409)
(2,600)
(168)
(20)
(536,220)
62,000
480,000
–
542,000
23,090
–
23,090
28,800
37
notes to the combined financial statements
Note 1 – Basis of preparation of concise financial report
The combined concise financial report has been prepared in accordance with the requirements of Accounting
Standard AASB1039 “Concise Financial Reports”, applicable Urgent Issues Group Consensus Views and the
Corporations Act 2001.
The financial statements and specific disclosures included in the combined concise financial report have been
derived from the aggregated full financial report for the financial period. The combined concise financial report
cannot be expected to provide as full an understanding of the combined financial performance, combined
financial position and financing and investing activities of ALE Property Group as the full financial report.
Note 2 – Revenue
Operating activities
Rental income
Interest received on loans to the Foster’s Group Limited
(a) Interest income from:
Bank term deposit interest
Note 3 – Borrowing costs excluding amortisation
CMBS interest expense inclusive of all swaps
ALE Notes interest expense
Rating and liquidity fees
Note 4 – Borrowing costs (non-cash) amortisation
Prepaid borrowing costs
Amortisation of ALE Notes premium
The prepaid borrowing costs had no cashflow impact on the Group as
they were funded by the issue of Group stapled securities (Note 8 (a)
contains further information). The ALE Notes premium is accrued and
will have no cashflow impact on the Group until payment on expiry of
the ALE Notes (Note 16 (b) contains further information).
Non-cash borrowing costs represent available operating cash amounts
that may be used to fund distributions to stapled security holders.
Note 5 – Distributions
Distributions recognised during the financial year:
Interim Trust distribution for the financial year ended 30 Jun 05 of
6.25 cents per stapled security (2004: nil) paid 28 Feb 05
Final Trust distribution for the financial year ended 30 Jun 05 of
6.60 cents per stapled security (2004: 7.50 cents) to be paid 31 Aug 05
2005
$’000
26 June 2003
to 30 June 2004
$’000
43,766
2,230
45,996
1,175
47,171
20,429
10,898
196
31,523
5,769
479
6,248
27,468
2,011
29,479
715
30,194
13,089
7,077
72
20,238
3,691
304
3,995
5,675
5,993
11,668
–
6,810
6,810
No dividends were paid or are payable by the Company for the full year ended 30 June 2005 (2004: nil).
38 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Note 6 – Earnings per stapled security
Basic earnings per stapled security
Diluted earnings per stapled security
Weighted average number of stapled securities are used as the
denominator in calculating basic earnings per stapled security
Weighted average number of stapled securities and potential
stapled securities used as the denominator in calculating diluted
earnings per stapled security
Note 7 – Cash assets
Cash at bank
Deposits
Cash reserve
In order to have the CMBS rated, the cash reserve, which is
equal to approximately three months debt service of the CMBS
has been set aside by the Group for the term of the CMBS and is
therefore restricted.
As at 30 June 2005, the cash assets of the Group had a weighted
average interest rate of 5.59% (2004: 5.40%).
Note 8 – Prepayments and other assets
Current
Corporate advisory services prepaid to 30 June 2005
Prepaid expenses
Other assets
Capitalised borrowing costs
Non-Current
Rental deposits
Capitalised borrowing costs
Total
Cents
5.87
5.87
Cents
4.30
4.30
No. of securities
No. of securities
90,800,100
90,800,100
90,800,100
90,800,100
2005
$’000
2004
$’000
202
13,775
5,500
19,477
3,643
13,947
5,500
23,090
(a)
(b)
(b)
–
40
–
5,753
5,793
–
13,585
13,585
19,378
174
30
45
5,769
6,018
6
19,338
19,344
25,362
(a) On 10 November 2003 $300,000 was paid to Macquarie Bank
Limited for advisory services to 30 June 2005.
The Group has expensed the fee as at 30 June 2005.
(b) Reconciliation of capitalised borrowing costs:
Opening unamortised lead manager’s incentive fee
Amount expensed during the period
Closing balance
25,109
(5,769)
19,340
28,800
(3,691)
25,109
39
notes to the combined financial statements
Note 8 – Prepayments and other assets (continued)
Under the lead manager’s incentive offer as originally agreed between the Foster’s Group Limited and the
lead manager, Macquarie Equity Capital Markets Limited, the lead manager was entitled to be issued with
48,000 stapled securities for each one tenth of a basis point by which the Group’s weighted average interest
rate on borrowings was less than 7.335% up to a maximum of 28.8 million stapled securities at 6.735%.
The 6.735% target was surpassed with the weighted average interest rate on borrowings for the Group being
6.524% fixed for five years to 10 November 2008.
The fee of $28.8 million was capitalised as a borrowing cost and will continue to be expensed over the
remaining term of the five year period to which it relates.
Note 9 – Investment properties
Reconciliation
A reconciliation of the carrying amounts of investment properties at the beginning and end of the current
financial year is set out below:
Carrying amount at the beginning of the year
Additions
Revaluation increment
Carrying amount at the end of the year
Cost
Including
Additions
$’000
5,470
5,659
8,205
8,771
5,847
3,112
8,865
5,847
2,830
4,150
Date
Acquired
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Independent
Valuation
and Carrying
Amount
2005
$’000
6,600
6,900
9,900
10,600
6,850
3,700
10,500
6,800
3,250
5,100
Property
New South Wales
Blacktown Hotel, Blacktown
Brown Jug Hotel, Fairfield Heights
Colyton Hotel, Colyton
Crows Nest Hotel, Crows Nest
Kirribilli Hotel, Kirribilli
Melton Hotel, Auburn
New Brighton Hotel, Manly
Pioneer Hotel, Penrith
Pymble Hotel, Pymble
Smithfield Tavern, Smithfield
Total
New South Wales Properties
2005
$’000
550,200
–
74,800
625,000
2004
$’000
–
509,741
40,459
550,200
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
800
700
1,000
1,000
450
300
800
400
150
600
330
541
695
829
553
288
835
553
270
350
Carrying
Amount
2004
$’000
5,800
6,200
8,900
9,600
6,400
3,400
9,700
6,400
3,100
4,500
58,756
70,200
64,000
6,200
5,244
Queensland
Nov 03
Albany Creek Tavern, Albany Creek
Nov 03
Albion Hotel, Albion
Nov 03
Alderley Arms Hotel, Alderley
Nov 03
Anglers Arms Hotel, Southport
Nov 03
Balaclava Hotel, Cairns
Banyo Tavern, Nudgee
Nov 03
Breakfast Creek Hotel, Breakfast Creek Nov 03
Nov 03
Camp Hill Hotel, Camp Hill
Nov 03
Chardons Corner Hotel, Annerly
8,394
4,433
3,301
4,433
3,301
3,018
10,657
2,264
1,415
9,600
5,200
4,100
5,300
3,800
3,500
11,700
2,750
1,500
9,000
4,800
3,500
4,600
3,500
3,200
11,500
2,400
1,500
600
400
600
700
300
300
200
350
–
606
367
199
167
199
182
843
136
85
40 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Note 9 – Investment properties (continued)
Independent
Valuation
and Carrying
Amount
2005
$’000
Cost
Including
Additions
$’000
3,207
3,112
5,847
3,672
6,602
3,773
2,452
2,264
4,433
4,433
4,055
1,792
3,207
2,358
6,874
4,999
6,885
4,237
1,698
3,395
1,792
5,187
5,753
9,148
5,376
8,205
5,659
4,527
1,037
3,700
3,600
6,600
4,600
7,400
4,600
2,900
2,700
5,300
5,100
4,800
2,200
3,700
3,000
8,300
5,600
8,000
4,800
1,900
3,900
1,900
5,900
6,700
10,300
6,500
9,600
6,700
5,300
1,100
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
200
300
400
300
300
700
200
300
500
400
500
300
400
500
900
(100)
600
300
100
200
(200)
400
700
300
700
900
600
400
–
293
188
353
628
498
127
248
136
367
267
245
108
93
142
526
701
515
263
102
305
308
313
247
852
424
495
441
373
63
Carrying
Amount
2004
$’000
3,500
3,300
6,200
4,300
7,100
3,900
2,700
2,400
4,800
4,700
4,300
1,900
3,300
2,500
7,400
5,700
7,400
4,500
1,800
3,700
2,100
5,500
6,000
10,000
5,800
8,700
6,100
4,900
1,100
167,195
194,150
179,600
14,550
12,405
3,301
2,452
3,301
1,886
1,603
2,169
1,603
3,773
4,433
4,000
3,150
4,100
2,350
1,950
2,850
2,100
4,850
5,500
3,800
2,900
3,900
2,200
1,800
2,600
1,800
4,400
5,200
200
250
200
150
150
250
300
450
300
499
448
599
314
197
431
197
627
767
24,521
30,850
28,600
2,250
4,079
Date
Acquired
Nov 03
Nov 03
Nov 03
Jun 04
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Jun 04
Nov 03
Nov 03
Jun 04
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Property
Queensland (continued)
Dalrymple Hotel, Townsville
Edinburgh Castle Hotel, Kedron
Ferny Grove Tavern, Ferny Grove
Four Mile Creek, Strathpine
Hamilton Hotel, Hamilton
Holland Park Hotel, Holland Park
Imperial Hotel, Beenleigh
Kedron Park Hotel, Kedron Park
Kirwan Tavern, Townsville
Lawnton Tavern, Lawnton
Miami Hotel, Miami
Mount Pleasant Tavern, Mackay
Mt Gravatt Hotel, Mount Gravatt
Newmarket Hotel, Cairns
Noosa Reef Hotel, Noosa Heads
Oxford 152, Bulimba
Palm Beach Hotel, Palm Beach
Pelican Waters, Caloundra
Petrie Hotel, Petrie
Prince of Wales Hotel, Nundah
Racehorse Hotel, Booval
Redland Bay Hotel, Redland Bay
Royal Exchange Hotel, Toowong
Springwood Hotel, Springwood
Stones Corner Hotel, Stones Corner
Sunnybank Hotel, Sunnybank
Vale Hotel Motel, Townsville
Wilsonton Hotel, Toowoomba
Woree Tavern, Cairns
Total
Queensland Properties
South Australia
Aberfoyle Hub, Aberfoyle Park
Enfield, Clearview
Eureka, Salisbury
Exeter, Exeter
Finsbury, Woodville North
Gepps Cross, Blair Athol
Hendon, Royal Park
Ramsgate, Henley Beach
Stockade Tavern, Salisbury
Total
South Australian Properties
41
notes to the combined financial statements
Note 9 – Investment properties (continued)
Cost
Including
Additions
$’000
3,961
9,903
9,431
1,981
9,714
5,093
8,300
2,546
6,979
12,166
3,301
4,716
4,716
3,112
9,620
6,885
8,111
8,583
1,509
7,168
3,961
8,017
8,488
9,809
2,735
2,641
4,338
2,169
3,112
10,846
6,319
4,527
2,641
12,732
5,376
5,470
5,564
2,264
12,544
2,735
6,131
Date
Acquired
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Independent
Valuation
and Carrying
Amount
2005
$’000
5,000
12,600
11,700
2,700
12,400
6,500
10,900
3,400
9,200
15,100
4,200
6,300
6,900
4,300
12,000
8,500
10,000
10,600
2,100
9,800
4,900
9,500
10,500
12,600
3,800
3,400
5,500
2,900
4,000
14,400
7,800
6,200
3,800
15,900
6,800
7,000
7,100
3,200
15,100
3,700
7,100
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
700
2,000
1,600
600
2,100
1,000
2,000
600
1,800
2,100
700
1,300
1,800
1,000
1,800
1,100
1,300
900
500
2,100
500
900
1,500
2,100
900
600
900
600
600
2,800
900
1,400
1,000
2,200
1,000
1,200
1,200
800
1,600
700
600
339
697
669
119
586
407
600
254
421
834
199
284
384
188
580
515
589
1,117
91
532
439
583
512
691
165
159
262
131
288
754
581
273
159
968
424
330
336
136
956
265
369
Carrying
Amount
2004
$’000
4,300
10,600
10,100
2,100
10,300
5,500
8,900
2,800
7,400
13,000
3,500
5,000
5,100
3,300
10,200
7,400
8,700
9,700
1,600
7,700
4,400
8,600
9,000
10,500
2,900
2,800
4,600
2,300
3,400
11,600
6,900
4,800
2,800
13,700
5,800
5,800
5,900
2,400
13,500
3,000
6,500
250,214
319,400
268,400
51,000
18,186
Property
Victoria
Ashley, Braybrook
Bayswater, Bayswater
Blackburn, Blackburn
Blue Bell, Wendouree
Burvale, Nunawading
Club Hotel, Ferntree Gully
Cramers, Preston
Daveys, Frankston
Deer Park, Deer Park
Doncaster Hotel/Motel, Doncaster
Elsternwick, Elwood
Eltham, Eltham
Ferntree Gully Hotel, Ferntree Gully
Gateway, Corio
Keysborough, Keysborough
Mac’s Melton, Melton
Meadow Inn, Fawkner
Mitcham, Mitcham
Morwell, Morwell
Mountain View, Glen Waverly
Olinda Creek, Lilydale
Pier, Frankston
Plough, Mill Park
Prince Mark, Doveton
Rifle Club, Williamstown
Rose Shamrock & Thistle, Reservoir
Royal Essendon, Essendon
Royal Exchange, Traralgon
Royal Sunbury, Sunbury
Sandbelt Club, Moorabbin
Sandown Park, Noble Park
Sandringham, Sandringham
Somerville, Somerville
Stamford, Rowville
Sylvania, Campbellfield
Tudor Inn, Cheltenham
Vale, Mulgrave
Victoria, Shepparton
Village Green, Mulgrave
Westmeadows, Westmeadows
Young & Jackson, Melbourne
Total
Victorian Properties
42 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Note 9 – Investment properties (continued)
Cost
Including
Additions
$’000
Date
Acquired
Independent
Valuation
and Carrying
Amount
2005
$’000
Nov 03
Nov 03
Nov 03
4,810
3,113
1,132
5,635
3,465
1,300
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
535
165
100
290
188
67
Carrying
Amount
2004
$’000
5,100
3,300
1,200
9,055
10,400
9,600
800
545
509,741
625,000
550,200
74,800
40,459
Property
Western Australia
Queens Tavern, Highgate
Sail & Anchor Hotel, Freemantle
Wanneroo Villa Tavern, Wanneroo
Total
Western Australian Properties
Total
Investment Properties
Valuation of investment properties
The basis of valuation of investment properties is fair value being the amounts for which the properties
could be exchanged , on a stand alone property by property basis, between willing parties in an arm’s length
transaction, based on current prices in an active market for similar properties in the same location and
condition and subject to similar leases.
Independent valuations
In accordance with the Group’s policy of independently valuing at least one-third of its property portfolio
annually, all of the Group’s investment properties were independently valued as at 30 June 2005. The
revaluations were completed by Peter Spiller (AAPI) of DTZ Australia (NSW) Pty Ltd.
Investment properties
All investment properties are freehold and 100% owned by the Group and are comprised of land, buildings
and fixed improvements. The plant, equipment and liquor and gaming licenses are owned by the tenant.
Leasing arrangements
The investment properties are leased to a single tenant under long-term operating leases with rentals payable
monthly in advance.
Conditional acquisition of development properties
During November 2003 the Group entered into conditional sale contracts with subsidiaries of Foster’s Group
Limited to acquire seven properties that were subject to development at the time. The conditional sale
contracts are conditional upon satisfactory completion of the developments. At 30 June 2005, four of the
properties are yet to be acquired. (Refer Note 10 for further information).
43
notes to the combined financial statements
Note 10 – Development properties – loans, deposits and costs
As at 30 June 2005:
Property
Deposits at 10%
of Purchase Price
$’000
Loans to Foster’s
Group Limited
$’000
Acquisition
Costs
$’000
Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Non-Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Burleigh Heads Hotel, Burleigh Heads, QLD
Parkway Hotel, Frenchs Forest, NSW
Total
As at 30 June 2004:
Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Non-Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Burleigh Heads Hotel, Burleigh Heads, QLD
Parkway Hotel, Frenchs Forest, NSW
Total
Note 11 – Interest bearing liabilities
–
–
–
426
879
657
638
2,600
2,600
–
–
–
426
879
657
638
2,600
2,600
Commercial mortgage backed securities (CMBS)
ALE Notes on issue
3,832
7,914
11,746
–
–
5,915
5,748
11,663
23,409
3,832
7,914
11,746
–
–
5,915
5,748
11,663
23,409
–
–
–
74
152
114
110
450
450
–
–
–
74
152
114
110
450
450
Total Cost
$’000
3,832
7,914
11,746
500
1,031
6,686
6,496
14,713
26,459
3,832
7,914
11,746
500
1,031
6,686
6,496
14,713
26,459
2005
$’000
330,000
150,000
480,000
2004
$’000
330,000
150,000
480,000
The CMBS borrowings are secured by, among other things, first ranking real property mortgages over all of
the investment properties and have scheduled maturity dates of 10 November 2008 and final maturity dates
of 10 November 2010. The ALE Notes are unsecured and have a maturity date of 30 September 2011.
The Group’s variable interest rate exposure is fully hedged (100% fixed) up until 10 November 2008 on
current borrowings. This has been achieved by the use of variable rate borrowings swapped to fixed rates by
using interest rate swaps.
44 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Note 11 – Interest bearing liabilities (continued)
The Group’s weighted average interest rate as at year end was:–
CMBS – $230 million variable rate
CMBS – $100 million fixed rate
CMBS – $330 million weighted average of variable and fixed
ALE Notes – $150 million fixed
Total weighted average interest rate of CMBS and ALE Notes
Net impact of swaps – net $230 million (refer Note 22(d))
Total Group weighted average interest rate
Note 12 – Asset Revaluation Reserve
Note
(i) Nature and purpose of reserve
The assets revaluation reserve is used to record increments and
decrements in the fair vale value of investment properties.
(ii) Movements in reserve
Balance at the beginning of the financial year
Movements in valuations of investment properties
9
Balance at the end of the financial year
Note 13 – Segment information
2005
%
6.400
6.660
6.479
7.265
6.724
(0.824)
6.527
2005
$’000
2004
%
6.210
6.660
6.346
7.265
6.633
(0.227)
6.524
2004
$’000
40,459
74,800
115,259
–
40,459
40,459
Business segment
The Group operates solely in the property investment and property funds management industry.
Geographical segment
The Group owns property solely within Australia.
Note 14 – Events occurring after reporting date
The directors are not aware of any significant events since the reporting date.
45
notes to the combined financial statements
Note 15 – Impacts of adopting Australian equivalents to IFRS
The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards
(IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued
Australian equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB
interpretations originated by the International Financial Reporting Interpretations Committee or the former
Standing Interpretations Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS.
The adoption of AIFRS will be first reflected in the Group’s financial statements for the half-year ending
31 December 2005 and the year ending 30 June 2006.
To comply with the AIFRS for the first time the Group will be required to restate its comparative financial
statements to reflect the application of AIFRS to that comparative period. Most adjustments required on
transition to AIFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.
The Group has initiated a project to manage the transition to AIFRS, under the management of the Group
Financial Controller. All of the AIFRS have been analysed and the required accounting policy changes have
been identified. In some cases, choices of accounting policies are available, including elective exemptions
under Accounting Standard AASB1 First-time Adoption of Australian Equivalents to International Financial
Reporting Standards. These choices have been analysed to determine the most appropriate accounting policy
for the Group.
The known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been
prepared using AIFRS are set out below. The expected material financial effects of adopting AIFRS are shown
for each line item in the statement of financial performance and the statement of financial position with
descriptions of the differences. No material impacts are expected in relation to the statement of cash flows.
Although the adjustments disclosed in this note are based upon management’s best knowledge of
expected standards and interpretations and current facts and circumstances, the adjustments may change.
For example, amended or additional standards or interpretations may be issued by the AASB and IASB.
Therefore, until the Group prepares its first full AIFRS financial statements the possibility cannot be excluded
that the accompanying disclosures may have to be adjusted.
46 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Note 15 – Impacts of adopting Australian equivalents to IFRS (continued)
Impact on the combined statement of financial performance
Existing AGAAP
2005
$’000
Effect of Change
2005
$’000
Note
AIFRS
2005
$’000
(a)
(b)
Revenue and expenses from ordinary activities
Property rental income & loan interest
Revaluation of investment properties
Interest income
Total revenue from ordinary activities
Borrowing costs excluding amortisation
Borrowing costs (non-cash) amortisation
Land tax expense
Property valuation expenses
Acquisition proposal due diligence
Salaries, fees and related costs
Insurance for directors and officers
Insurance other
Legal fees
Corporate advisory services
Occupancy costs
Annual reports
Registry fees
Accounting fees
Tax reviews and advice
Interest rate risk advice
Other expenses
Total expenses from ordinary activities
Profit from ordinary activities before income
tax expenses
Income tax benefit
Net profit after income tax attributable to Stapled
security holders of the Group
45,996
–
1,175
47,171
31,523
6,248
1,139
244
177
991
42
70
143
92
92
52
62
65
68
49
834
41,891
–
74,800
–
74,800
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
–
–
8
45,996
74,800
1,175
121,971
31,523
6,248
1,139
244
177
999
42
70
143
92
92
52
62
65
68
49
834
41,899
5,280
74,792
80,072
(49)
–
(49)
5,329
74,792
80,121
Net increment in asset valuations
74,800
(74,800)
Total revenues, expenses and valuation adjustments
attributable to stapled security holders of the Group
recognised directly in equity
Total changes in equity attributable to stapled security
holders of the Group other than those resulting from
transactions with stapled security holders as owners
Distributions paid and payable
–
–
74,800
(74,800)
80,129
11,668
(8)
–
80,121
11,668
Cents
Cents
Cents
Basic and diluted earnings per stapled security
Distributions per stapled security held for the full financial year
5.87
12.85
–
–
88.24
12.85
47
notes to the combined financial statements
Note 15 – Impacts of adopting Australian equivalents to IFRS (continued)
Impact on the combined statement of financial position
Existing AGAAP
2005
$’000
Effect of Change
2005
$’000
Note
Current Assets
Cash assets
Receivables
Prepayments and other assets
Loans
Total Current Assets
Non-Current Assets
Deferred tax asset
Property investments
Development property – loans, deposits and costs
Prepayment
Plant & equipment
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Other
Total Current Liabilities
Non-Current Liabilities
Interest bearing liabilities – CMBS
Interest bearing liabilities – ALE Notes
ALE Notes premium
Deferred tax liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Asset revaluation reserve
Share based payments reserve
Accumulated (losses) / retained profits
Total Equity
Net assets per stapled security
19,477
385
5,793
11,746
37,401
99
625,000
14,713
13,585
141
653,538
690,939
7,016
6,026
302
13,344
330,000
150,000
783
–
480,783
494,127
196,812
81,787
115,259
–
(234)
196,812
$
2.17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(115,259)
13
115,246
–
–
(a)
(b)
AIFRS
2005
$’000
19,477
385
5,793
11,746
37,401
99
625,000
14,713
13,585
141
653,538
690,939
7,016
6,026
302
13,344
330,000
150,000
783
–
480,783
494,127
196,812
81,787
–
13
115,012
196,812
$
2.17
48 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Note 15 – Impacts of adopting Australian equivalents to IFRS (continued)
(a) Investment properties
Under the new AASB140 Investment Property, if investment properties are measured at fair value, net of
applicable tax, gains or losses arising from changes in fair value are recognised in the net profit or loss for the
period in which they arise.
This will result in a change to the current accounting policy which requires that fair value increments be
recognised in the asset revaluation reserve in the statement of financial position, except to the extent that
they reverse a decrement previously recognised as an expense in the profit and loss account, and fair value
decrements be recognised in the profit and loss account, except to the extent that they reverse an increment
previously recognised in the asset revaluation reserve.
If the policy required by AASB 140 had been applied during the year ended 30 June 2005 retained earnings
at 30 June 2005 would have been $115,259,000 higher, revaluation of investment properties for the year
ended 30 June 2005 would have been $74,800,000 higher and the asset revaluations reserve at 30 June
2005 would have been $115,259,000 lower.
(b) Equity based compensation benefits
Under AASB 2 Share-based Payment, the Group is required to recognise an expense for those options issued
to employees after 7 November 2002 that vest after 1 January 2005. The options are measured at their grant
date based on their fair value and the aggregate amount is allocated evenly over the vesting period.
This will result in a change to the current accounting policy, under which no expense is recognised for options
granted over un-issued shares to the Managing Director for nil monetary consideration.
The fair value of the options issued to Andrew Wilkinson on 10 November 2003 was $24,000 at grant date.
The vesting period is three years ending 10 November 2006.
If the policy required by AASB 2 had been applied during the year ended 30 June 2005 then,
– the salaries, fees and related costs would have been $8,000 higher, with a corresponding increase in the
net movement in the share based payment reserve; and
– the accumulated losses would have been $13,000 higher with a corresponding increase in the share based
payment reserve.
(c) Financial instruments
The Group will be taking advantage of the exemption available under AASB 1 to apply AASB 132 Financial
Instruments : Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and
Measurement only from 1 July 2005. This allows the Group to apply previous Australian generally accepted
accounting principles (Australian GAAP) to the comparative information of financial instruments within the
scope of AASB 132 and AASB 139 for the 31 December 2005 and 30 June 2006 financial reports.
Changes applicable from 1 July 2005:
Fair value of interest rate swaps
In accordance with AASB 139, interest rate swaps as derivatives are initially recognised at fair value on the
date the swap agreements are entered into and are subsequently remeasured to their fair value. Changes
in fair value are either taken to the statement of financial performance or an equity reserve, depending on
whether the criteria for hedge accounting are satisfied at the transition date (1 July 2005). The Group does
not intend on achieving hedge accounting, changes in the fair value of the swaps will be recognised in the
statement of financial performance.
Capitalised borrowing establishment costs (lead manager’s incentive fee)
Under AASB 139, capitalised borrowing establishment costs will be reclassified to interest bearing liabilities
thereby reducing the value of the related liability. Amortisation of the capitalised borrowing costs, which
will accrete the interest bearing liabilities to the principal payable at maturity, will change from a straight-line
basis to an effective yield basis. This will result in lower amortisation charges through the statement
of performance at the start of the debt facility term and higher amortisation charges at the end the debt
facility term.
49
notes to the combined financial statements
Note 15 – Impact of adopting Australian equivalents to IFRS (continued)
Loans and receivables and financial liabilities
Their classifications will remain unchanged. Consistent with AASB 139, measurement of these instruments
will initially be at fair value with subsequent measurement at amortised cost, using the effective interest
rate method.
Consequently, the amortisation of the redemption premium on the ALE Notes will change from a straight line
basis to an effective yield basis to accrete the ALE Notes to the principal payable at maturity.
Disclosure and presentation of equity
Currently “Units on Issue” are treated as equity. According to AASB 132, “Units on Issue” are treated as
a financial liability if the constitution requires the scheme to buy back units at the option of the unit holder.
This occurs at the termination date of the Trust and Sub-Trust and is set at the eightieth anniversary of the
commencement date less 1 day.
In order to resolve this, the wording in the trust constitutions was changed on 28 June 2005 to ensure the
“Units on Issue” satisfy the criteria for them to continue to be classified as equity. Management is of the
view that going forward the debt and equity classification applicable to the “Units on Issue” and the Group’s
stapled securities will remain unchanged under AIFRS.
Note 16 – Full financial report
Further financial information can be obtained from the full annual financial report. The full annual financial
report and auditors report will be sent to security holders on request, free of charge. Please call 1300 302 429
(freecall) and for International +61 3 9415 4141, and a copy will be forwarded to you. Alternatively, you can
access the full annual financial report and the annual concise financial report via the internet on our website:
www.alegroup.com.au.
50 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
directors’ declaration
The directors declare that in their opinion, the Concise Financial Report for the Group for the period ended
30 June 2005 as set out on pages 33 to 50 complies with accounting standard AASB 1039: Concise
Financial Reports.
The financial statements and specific disclosures included in this concise financial report have been derived
from the full financial report for the year ended 30 June 2005.
The concise financial report cannot be expected to provide as full an understanding of the financial
performance, financial position and financing and investing activities of the combined entity as the full
financial report, which as indicated in Note 16, is available on request.
The directors have been given the declarations by the Managing Director and Group Financial Controller and
Assistant Company Secretary, as Chief Executive Officer and Chief Financial Officer equivalents, as required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 6th day of September 2005
51
Independent audit report to the stapled securityholders of ALE Property Group
Matters relating to the electronic presentation of the audited financial report
This audit report relates to the concise financial report of ALE Property Group for the financial year
ended 30 June 2005 included on ALE Property Group’s web site. The directors of Australian Leisure
and Entertainment Property Management Limited are responsible for the integrity of the ALE Property
Group’s web site. We have not been engaged to report on the integrity of this web site. The audit report
refers only to the financial report identified below. It does not provide an opinion on any other information
which may have been hyperlinked to/from the financial report. If users of this report are concerned
with the inherent risks arising from electronic data communications they are advised to refer to the hard
copy of the audited financial report to confirm the information included in the audited financial report
presented on this web site.
Audit opinion
In our opinion, the concise financial report of ALE Property Group (the Group) for the year ended
30 June 2005 complies with Australian Accounting Standard AASB 1039: Concise Financial Reports.
This opinion must be read in conjunction with the rest of our audit report.
Scope
The financial report and directors’ responsibility
The concise financial report comprises the statement of financial position, statement of financial
performance, statement of cash flows, discussion and analysis and notes to the financial statements
and the directors’ declaration for the Group, comprising Australian Leisure and Entertainment Property
Management Limited and Australian Leisure and Entertainment Property Trust and the entities it
controlled, for the year ended 30 June 2005.
The directors of Australian Leisure and Entertainment Property Management Limited (the Responsible
Entity) are responsible for the preparation and presentation of the financial report in accordance with
Australian Accounting Standard AASB 1039: Concise Financial Reports.
Audit approach
We conducted an independent audit of the concise financial report in order to express an opinion to the
stapled securityholders of the Group. Our audit was conducted in accordance with Australian Auditing
Standards, in order to provide reasonable assurance as to whether the concise financial report is free of
material misstatement. The nature of an audit is influenced by factors such as the use of professional
judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive
rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements
have been detected. For further explanation of an audit, visit our website http://www.pwc.com/au/
financialstatementaudit.
We also performed an independent audit of the full financial report of the Group for the financial year
ended 30 June 2005. Our audit report on the full financial report was signed on 16 August 2005 and was
not subject to any qualification.
In conducting our audit of the concise financial report, we performed procedures to assess whether in all
material respects the concise financial report is presented fairly in accordance with Australian Accounting
Standard AASB 1039: Concise Financial Reports.
We formed our audit opinion on the basis of these procedures, which included:
– testing that the information included in the concise financial report is consistent with the information in
the full financial report, and
– examining, on a test basis, information to provide evidence supporting the amounts, discussion and
analysis, and other disclosures in the concise financial report which were not directly derived from the
full financial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the concise financial report.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional
ethical pronouncements and the Corporations Act 2001.
PricewaterhouseCoopers
Sydney
6 September 2005
S J Hadfield
Partner
52 ALE PROPERTY GROUP ANNUAL CONCISE REPORT 30 JUNE 2005
Annual Concise
Financial Report
FOR THE PERIOD 1 JULY 2004 TO 31 JUNE 2005
Australian Leisure and Entertainment
Property Management Limited
ABN 45 105 275 278
Contents
Directors’ report
Discussion and analysis of statement of financial performance,
statement of financial position and statement of cash flows
Statement of financial performance
Statement of financial position
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent review report to the shareholders
54
66
67
68
69
70
75
76
53
directors’ report
The directors of Australian Leisure and Entertainment Property Management Limited (the “Company”)
present their report for the year ended 30 June 2005.
Directors
The following persons were directors of the Company during the whole of the financial year and up until the
date of this report unless otherwise stated:
Name
Non-executive directors
P H Warne (Chairman)
J P Henderson
H I Wright
Executive directors
A F O Wilkinson (Managing Director)
J T McNally
Appointed
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
Principal Activities
During the period the principal activity of the Company consisted of property funds management and acting
as responsible entity for the Australian Leisure and Entertainment Property Trust (the “Trust”).
Dividends
No provisions for or payments of Company dividends have been made during the financial year (2004: nil).
Review of Operations
A summary of the revenue and results for the financial year is set out below:
Income
Management fee income
Bank interest
Expenses
Operating expenses
Income tax (benefit) / expense
Net (loss) after income tax
Net assets per share
2005
$
26 June 2003
to 30 June 2004
$
2,185,120
996,548
20,382
2,997
2,205,502
999,545
2,337,906
1,196,088
2,337,906
1,196,088
(39,368)
(93,036)
0.10
(58,568)
(137,975)
0.10
54
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Significant changes in the state of affairs
In the opinion of the directors, there were no significant changes in the state of affairs of the Company that
occurred during the period, other than those changes otherwise identified in this financial report.
Matters Subsequent to the end of the financial year
The directors are not aware of any matter or circumstance occurring after balance date which may affect the
Company’s operations, the results of those operations or the state of affairs of the Company.
Likely Developments and expected results of operations
The Company will continue to maintain its defined strategy of identifying opportunities to increase the
profitability of the ALE Property Group (the “Group”) and its value to its shareholders.
Further information on likely developments in the operations of the Company and the expected results of
operations have not been included in this report because the directors believe that it would be likely to result
in unreasonable prejudice to the Company.
Environmental Regulation
Whilst the Company is not subject to significant environmental regulation in respect of its property activities,
the directors are satisfied that adequate systems are in place for the management of its environmental
responsibility and compliance with the various licence requirements and regulations. Further, the directors
are not aware of any material breaches of these requirements. On three of the properties ongoing testing
is being undertaken and if further work is required indemnities are held in excess of any expenditure
amounts required.
55
directors’ report
Information on directors
Mr Peter H Warne B.A,
Chairman and Non–Executive Director.
Experience and expertise
Peter was appointed as Chairman and non-executive
director of the Company in September 2003.
Peter began his career with the NSW Government
Actuary’s Office and the NSW Superannuation
Board before joining Bankers Trust Australia Limited
(“BTAL”) in 1981. Peter held senior positions in
the Fixed Income department, the Capital Markets
division and the Financial Markets Group of BTAL
and acted as a consultant to assist with integration
issues when the investment banking business was
acquired by Macquarie Bank Limited in 1999.
Peter graduated from Macquarie University with
a Bachelor of Arts, majoring in Actuarial studies.
He qualified as an associate of, and received a
Certificate of Finance and Investment from, the
Institute of Actuaries, London.
Other current directorships of listed entities
Non-executive director of SFE Corporation Limited
and Macquarie Capital Alliance Group.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Chairman of the board.
– Member of the audit, compliance and risk
management committee (resigned as Chairman on
15 August 2005, continuing as member).
– Chairman of the remuneration committee.
Mr John Henderson (B.Bldg, MRICS, AAPI),
Non-Executive Director.
Experience and expertise
John was appointed as a non-executive director of
the Company in August 2003.
John has been a Director of Marks Henderson Pty Ltd
since 2001 and is actively involved in the acquisition
of investment property. Previously an International
Director at Jones Lang LaSalle and Managing
Director of the Sales and Investment Division, he
was responsible for overseeing the larger property
sales across Australasia, liaising with institutional
and private investors, and coordinating international
investment activities.
John graduated from the University of Melbourne
and is a member of the Royal Institution of Chartered
Surveyors, is an associate of the Australian Property
Institute and is a licensed real estate agent.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Member of the audit, compliance and risk
management committee.
– Member of the remuneration committee.
Ms Helen Wright LL.B, MAICD,
Non-Executive Director.
Experience and expertise
Helen was appointed as a non-executive director of
the Company in September 2003.
Helen Wright was a partner of Freehills, a leading
Australian firm of lawyers, from 1986 to 2003.
She practiced as a commercial lawyer specialising
in real estate projects including development and
financing and related taxation and stamp duties.
Helen is a member of the Boards of the Sydney
Harbour Foreshore Authority, Australian Technology
Park Precinct Management, and Cooks Cove
Redevelopment Authority; was Deputy Chair of the
Australia Day Council of NSW to December 2002;
and serves on the Advisory Council to The Little
Company of Mary (Calvary hospitals). Prior boards
include Darling Harbour Authority, UNSW Press
Limited and MLC Homepack Limited.
Helen has a Bachelor of Laws from University
of NSW, and in 1994 completed the Advanced
Management Program at the Harvard Graduate
School of Business.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Chair of the audit, compliance and risk
management committee.
(appointed Chair 15 August 2005).
– Member of the remuneration committee.
56
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
James’ qualifications include a Bachelor of Business
in Land Economy (Hawkesbury Agricultural College)
and a Diploma of Law (Legal Practitioners Admission
Board). He is a registered valuer and licensed real
estate agent.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Responsible Officer of the Company under the
Company’s Australian Financial Services License.
Mr Brendan R Howell BEcon, GDipAppFin (Sec Inst).
Company secretary
Mr Howell was appointed to the position of company
secretary in September 2003.
Brendan has a Bachelor of Economics from the
University of Sydney and a Graduate Diploma in
Applied Finance and Investment from the Securities
Institute of Australia, and 15 years’ experience in
the funds management industry. He was formerly
an associate member of both the Securities
Institute of Australia and the Institute of Chartered
Accountants in Australia. Brendan has a property
and accounting background and has previously
held senior positions with a leading Australian
trustee company administering listed and unlisted
property trusts. For the past six and half years
Brendan has been directly involved with MIA
Services Pty Limited, a company which specialises
in funds management compliance, and acts as an
independent consultant and external compliance
committee member for a number of property,
equity and infrastructure funds managers.
Brendan also acts as an independent director
for several unlisted public companies, some of
which act as responsible entities.
Mr Andrew F O Wilkinson (B. Bus. CFTP),
Managing Director.
Experience and expertise
Andrew was appointed Managing Director of the
Company in November 2004. He joined ALE as
Chief Executive Officer at the time of its listing in
November 2003.
Andrew has over 25 years experience in the banking
and corporate finance.
He was previously a corporate finance partner with
PricewaterhouseCoopers where he specialised in
providing financial and strategic advice on significant
property and infrastructure portfolios. Over his 8
year period with the firm he held a number of senior
positions and was also one of the founding members
of the NSW Government’s Infrastructure Council.
Andrew’s prior career also includes 15 years in
finance and investment banking with organisations
including ANZ Capel Court and Schroders where he
was involved in leading the financing arrangements
for a range of major projects.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Managing Director of the Company.
– Responsible Officer of the Company under the
Company’s Australian Financial Services License.
Mr James McNally (B.Bus (Land Economy). Dip. Law),
Executive Director.
Experience and expertise
James was appointed as an executive director of
the Company in June 2003.
James has over ten years experience in the funds
management industry having worked in both
property trust administration and compliance roles
for Perpetual Trustees Australia Limited and MIA
Services Pty Limited, a company that specialises
in compliance services to the funds management
industry.
James provides compliance and management
services to several Australian fund managers. He
is currently an external member on a number of
compliance committees for various responsible
entities and acts as a Responsible Officer for
a number of companies that hold an Australian
Financial Services Licence, including the Company.
57
directors’ report
Directors’ and specified executive interests in shares and options
The following directors, specified executive and their associates held or currently hold share interests in the
Company:
Name
Director/specified executive
Purchases / (sales)
Balance at
the start
of the year
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
D S Barkas
Director
Director
Director
Director
Specified Executive
453,400
25,000
100,000
31,998
–
179,010
30,000
–
21,000
46,810
Number of
shares held
632,410
55,000
100,000
52,998
46,810
The following director held or currently holds options over shares of the Company:
Name
Director/specified executive
A F O Wilkinson
Director
Balance at
the start
of the year
300,000
Purchases / (sales)
Number of
options held
–
300,000
Meetings of directors
The numbers of meetings of the Company’s board of directors held during the year ended 30 June 2005 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
Board meetings
Held1
Attended
13
13
13
7
13
13
11
13
7
13
Audit, Compliance and
Risk Management
Committee meetings
Held1
Attended
Remuneration
Committee meeting
Held1
Attended
6
6
6
–
–
6
5
6
–
–
1
1
1
–
–
1
1
1
–
–
1 “Held” reflects the number of meetings which the director was eligible to attend.
58
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Equity-based compensation
A Principles used to determine the nature and amount of remuneration
The objectives of the Company’s executive reward framework is to ensure that reward for performance is
transparent, reasonable, competitive and appropriate for the results delivered. The framework aligns executive
reward with achievement of strategic objectives and creating of value for security holders, and conforms
with market best practice for the delivery of reward. The Board ensures that executive reward satisfies the
following key criteria for good reward governance practices:
– competitiveness and reasonableness
– acceptability to share holders
– performance linkage/alignment of executive compensation
– transparency
– capital management
In consultation with external remuneration consultants, the Company has structured an executive
remuneration framework that is market competitive and complementary to the reward strategy of
the organisation.
Alignment to stapled security holders interests:
– has economic profit as a core component of plan design
– focuses on sustained growth in stapled security holder wealth, consisting of distributions, dividends and
growth in share price and delivering constant return on assets as well as focusing the executive on key
non-financial drivers of value
– attracts and retains high calibre executives
Alignment to program participants’ interests:
– rewards capability and experience
– reflects competitive reward for contribution to growth in stapled security holders wealth
– provides a clear structure for earning rewards
– provides recognition for contribution
The framework provides a mix of fixed and variable pay and a blend of short and long-term incentives.
As executives gain seniority within the Company, the balance of this mix shifts to a higher proportion of
‘at risk’ rewards, depending upon the nature of the executive’s new role.
The overall level of executive reward takes into account the performance of the Group over a number of
periods with greater emphasis given to the current year. Over the past year, the Group’s profit from ordinary
activities after income tax has grown by $1.427m (or 36.6%) from $3.902m to $5.280m and stapled security
holders’ wealth (inclusive of distribution returns) has grown by 68.4%.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on and the
responsibilities of the directors. Non-executive directors’ fees and payments are reviewed annually by
the Board. The Board may also obtain the advice of independent remuneration consultants to ensure that
non-executive directors’ fees and payments are appropriate and in line with the market. The Chairman’s
fees are determined independently to the fees of the non-executive directors, based on comparative roles
in the external market. The Chairman is not present at any discussion relating to the determination of his
own remuneration. Non-executive directors do not receive options over securities.
59
directors’ report
Remuneration report (continued)
Directors’ fees
The current base remuneration was last reviewed with effect from September 2003. The directors’ fees are
all inclusive of committee fees.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit which will be
periodically recommended for approval by share holders. The maximum currently stands at $335,000 per
annum, comprised of $260,000 per annum for non-executive directors and $75,000 per annum for the
executive director (inclusive of a responsible officer fee of $5,000 per annum) and excluding the managing
directors’ remuneration. The maximum amount for non-executive directors can only be increased at a general
meeting of the Company.
Retirement allowances for directors
No retirement allowances for directors are offered by the Company in line with recent guidance on
non-executive directors’ remuneration.
Executive pay
The executive pay and reward framework has three components, the combination of which comprises the
executive’s total remuneration:
– base pay and benefits
– short-term performance incentives
– long-term incentives
– other remuneration such as superannuation
Base pay and benefits
Structured as a total employment cost package which may be delivered as a combination of cash and
prescribed non-cash benefits at the discretion of the executives and the board.
Executives are offered a competitive base pay that comprises the fixed component of their remuneration.
External remuneration consultants provide analysis and advice to ensure base pay is set to reflect the market
for comparable roles. Base pay for senior executives is reviewed annually to ensure that the executives pay is
competitive with the market. An executive’s pay is also reviewed on promotion.
There is no guaranteed base pay increase in any of the executives’ contracts.
Short-term incentives (STI)
The short-term incentive arrangements in place at the Company have been designed to link annual STI bonus
awards to executive performance against agreed key performance indicators (KPI’s) including the financial
performance of the Company during the year in question.
Each executive has a target STI opportunity depending on the accountabilities of the role and the impact on
the performance of the Company.
Each year the remuneration committee considers the appropriate targets and KPI’s to link the STI plan and the
level of payout if targets are met. This includes setting any maximum payout under the STI plan and minimum
levels of performance to trigger payments of STI.
For the year end 30 June 2005, the KPI’s link to STI plans were based on Company, individual, business and
personal objectives. The KPI’s required performance in managing operating and funding costs, compliance
with legislative requirements, increasing security holder value as well as other key strategic non-financial
measures linked to drivers of performance in future economic periods.
The board is responsible for assessing whether the KPI’s have been met. To facilitate this assessment,
the board receives detailed reports on performance from management.
The STI payments may be adjusted up or down in line with over or under achievement against the target
performance levels. This is at the discretion of the board.
The STI target annual payment is reviewed annually.
60
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
Security options granted
No options over unissued stapled securities were granted during or since the end of the financial year.
B Details of remuneration
Amount of remuneration
Details of the remuneration of each director and the specific executive of the Company, paid or payable by
the Company for the year ended 30 June 2005 are set out in the following tables. The cash bonuses are
dependent on the satisfaction of performance conditions are set out in the section headed “Short-term
incentives”, above. All other elements of remuneration are not directly related to performance.
Directors of the Company
Name
Non-executive directors
P H Warne (Chairman)
J P Henderson
H I Wright
Executive directors
A F O Wilkinson* (Managing Director)
J T McNally (Director)
Total
Cash Salary
and Fees
110,092
70,000
64,220
191,954
81,250
517,516
Cash Bonus
Superannuation
Total
–
–
–
65,000
–
65,000
9,908
–
5,780
15,081
–
30,769
120,000
70,000
70,000
272,035
81,250
613,285
* Mr Wilkinson was appointed Managing Director on 16 November 2004. Before this appointment he was the Company’s Chief Executive
Officer. Amounts shown above include all of Mr Wilkinson’s remuneration during the reporting period, whether as Managing Director or
Chief Executive Officer. Amounts received in his position as Managing Director amounted to $191,784, made up of cash salary and fees
of $117,895, cash bonus of $65,000 and superannuation of $8,889.
Specified executive of the Company
Name
Cash Salary
Cash Bonus
Non monetary
benefits
Superannuation
Total
D S Barkas*
(Group Financial Controller
& Assistant Company Secretary)
127,282
20,000
6,800
10,462
164,544
* Mr Darren Barkas was appointed Group Financial Controller & Assistant Company Secretary on 16 March 2005. Before this he was the
Company’s Property Trust Manager. Amounts shown above include all of Mr Barkas’ remuneration during the reporting period, whether as
Company Financial Controller and Assistant Company Secretary or Property Trust Manager.
Amounts received in his position as Group Financial Controller and Assistant Company Secretary amounted to $55,377, made up of cash
salary and fees of $25,578, non monetary benefit of $6,800, cash bonus of $20,000 and superannuation of $3,000.
Cash bonuses and options
For each cash bonus included in the above tables, the percentage of the available bonus that was awarded
for the financial year and the percentage that was forfeited because a person did not meet the performance
criteria is set out below.
Name
A F O Wilkinson
D S Barkas
Paid
$
65,000
20,000
Forfeited
%
13.3
0.0
61
directors’ report
Remuneration report (continued)
C Service agreement
On 1 November 2003, the Company entered into a three year service agreement with Managing Director,
Mr Wilkinson. The agreement stipulates the minimum base salary, inclusive of superannuation, for each
of the first three years as being $225,000, to be reviewed annually by the board. A short-term incentive
(which if earned, would be paid as a cash bonus each year) and a long-term incentive in the form of options
over shares, exercisable between November 2006 and November 2007 (except if the Company is subject
to takeover, then to February 2007) are also provided.
In the event of the termination of Mr Wilkinson’s employment contract, amounts are payable for unpaid
accrued entitlements, proportion of bonus and option entitlements as at the date of termination. In the event
of redundancy termination amounts are payable for base salary, inclusive of superannuation and bonus and
option entitlements for the balance of the contract.
Mr Barkas’ employment contract may be terminated at one months notice.
There are no other director or executive service agreements.
Letters of appointment have been entered into by each director (excluding the Managing Director) confirming
their remuneration and obligations under the Corporations Law and Company constitution.
A letter of appointment has been entered into with MIA Services Pty Limited for the use of the services of
Brendan Howell as Company Secretary and as a Responsible Officer of the Company on a continuous basis
that may be terminated at any time.
D Shared-based compensation
Options over un-issued stapled securities were granted during the last financial period to Andrew Wilkinson
as disclosed in an ASX Announcement dated 10 November 2003. Mr Wilkinson has the right to subscribe
for up to 300,000 securities at a fixed price of $1.036 exercisable from 10 November 2006 or earlier,
if Mr Wilkinson’s employment is terminated other than for cause or unsatisfactory performance. The options
will remain exercisable until 10 November 2007, unless the ALE Property Company is subject to a takeover,
in which case the period of exercise would be reduced to 11 February 2007.
The options value disclosed above as part of specified executive remuneration is the assessed fair value at
grant date of options granted, allocated equally over the period from grant date to vesting date. The fair value
of $24,000 at grant date has been independently determined by using a Black-Scholes option pricing model.
This technique takes into account factors such as the exercise price, the term of the option, the vesting and
performance criteria, the impact of dilution, the non-tradable nature of the option, the share price at grant
date, expected price volatility of the underlying share and the expected dividend yield and the risk-free interest
rate for the term of the option.
Stapled securities under option
Unissued stapled securities under option at the date of this report are as follows:
Date option granted
10 November 2003
Expiry date
Issue price of
stapled securities
Number under option
10 November 2007*
$1.036
300,000
* Unless ALE Property Company is subject to a takeover, in which case the period of exercise would be reduced to 11 February 2007
Stapled securities issued on the exercise of options
No stapled securities have been issued on the exercise of options, to date.
62
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
D Shared-based compensation (continued)
Insurance of officers
During the financial year, the Company paid a premium of $41,766 (2004: $40,746) to insure the directors
and officers of the Company. The auditors of the Company are in no way indemnified out of the assets of
the Company.
Under the constitution of the Company, current or former directors and secretaries are indemnified to
the full extent permitted by law for liabilities incurred by that person in the discharge of their duties.
The constitution provides that the Company will meet the legal costs of that person. This indemnity is
subject to certain limitations.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the Company are important.
Details of amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services
provided during the year are set out below:
The board of directors has considered the position and in accordance with the advice received from the audit
committee is satisfied that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed by the audit committee to ensure that they do not impact the
impartiality and objectivity of the auditor
– none of the services undermine the general principles relating to auditor independence as set out in
Professional Statement F1, including reviewing or auditing the auditors own work, acting in a management
or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing
economic risk and rewards.
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 65.
During the period the auditor of the Group earned the following remuneration:
Audit and review of the financial reports of the Group and other audit
work under the Corporations Act 2001*
– in relation to current year
– in relation to prior year
Due diligence service
Controls assurance services
Tax compliance services
Tax consulting services
General accounting advice (including AIFRS)
* Includes amounts allocated to the Company of $74,300 (2004: $41,200).
2005
$
2004
$
125,705
60,000
31,300
7,000
15,000
24,190
29,944
293,139
103,000
–
–
14,000
–
34,000
8,750
159,750
63
directors’ report
Rounding amounts
The Company is of the kind referred to in Class Order 98/0100, issued by the Australian Securities and
Investments Commission, relating to the “rounding off” of amounts in the directors’ report and financial
report. Amounts in the directors’ report and financial report have been rounded off in accordance with the
Class Order to the nearest thousand dollars, unless otherwise indicated.
This report is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 6th day of September 2005
64
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Auditors’ independence declaration
As lead auditor for the audit of Australian Leisure and Entertainment Property
Management Limited for the year ended 30 June 2005, I declare that to the best of my
knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the
audit.
This declaration is in respect of Australian Leisure and Entertainment Property
Management Limited during the period.
S J Hadfield
Partner
Sydney
6 September 2005
65
discussion and analysis of the financial statements
The following commentary is to assist shareholders in reviewing and interpreting the results of the Company
for the year ended 30 June 2005.
Statement of financial performance
Net loss after tax was $93,036. The material aspects of the actual result were:
– Management fee income from the Trust was $2,185,120.
– Management costs – total for the period was $2,337,906 and included salaries and directors expenses,
audit, advisory and legal fees and a range of other expenses incurred in managing the affairs of the Group.
– Taxation benefit of $39,368 arising from the loss in the Company.
– The reimbursements in the current period did not fully recover the management costs due to minor
timing differences.
Statement of financial position
As at 30 June 2005 total assets were $9,692,625, total liabilities were $843,626 and net assets were
$8,848,999. The reduction in net assets of $93,036 from the 30 June 2004 total of $8,942,035 is a result
of the net loss after tax of $93,036.
At 30 June 2005 the Company held $156,682 of cash at bank to provide for the Company’s day to day
liquidity requirements.
The net asset per share issued at 30 June 2005 was $0.10 and as at 30 June 2004 was $0.10.
Statement of cash flows
Net cash inflow from operating activities includes the payment of the Company’s expenses incurred in
managing the affairs of the Group and the reimbursement for these expenses from the Trust during the year.
Net cash inflow from operating activities was $217,245.
Net cash outflow from investing activities was an outflow of $168,033 relating to the fit-out of the Company’s
office premises, website design and construction and other fixed assets.
There were no cash flows from financing activities during the year.
The net increase in cash held of $49,212 results from the net cash inflow from operating activities of
$217,245 and the net cash outflow from investing activities of $168,033.
66
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
statement of financial performance
FOR THE YEAR ENDED 30 JUNE 2005
Note
2
3
Revenue and expenses from ordinary activities
Management fees
Interest income
Total revenue from ordinary activities
Salaries, fees and related costs
Acquisition proposal due diligence
Legal fees
Insurance for directors and officers
Auditor’s remuneration for audit services – relating to current year
Auditor’s remuneration for audit services – relating to prior year
Insurance other
Annual reports
Registry fees
Information systems
Occupancy costs
Accounting fees
Tax reviews and advice
Corporate advisory services
Interest rate risk advice
ASX and ASIC fees
Travel and accommodation
Depreciation – plant & equipment
Marketing expenses
Communications expenses
Dues and subscriptions
Other expenses
2005
$
26 June 2003
to 30 June 2004
$
2,185,120
20,382
2,205,502
971,204
177,343
143,012
41,766
125,750
60,000
69,791
51,967
62,131
35,721
91,622
64,762
68,277
91,783
48,820
39,805
27,068
22,248
20,744
11,726
10,243
102,123
996,548
2,997
999,545
540,398
–
73,069
40,746
103,000
–
34,873
55,000
36,775
26,455
25,570
26,343
34,000
34,855
86,075
3,217
10,078
3,514
10,904
1,896
2,125
47,195
Total expenses from ordinary activities
2,337,906
1,196,088
(Loss) from ordinary activities before income tax benefit
(132,404)
(196,543)
Income tax (benefit)
Net (loss) after income tax attributable to shareholders
of the Company
Total revenues, expenses and valuation adjustments
attributable to shareholders of the Company recognised
directly in equity
Total changes in equity attributable to shareholders of the
Company other than those resulting from transactions with
shareholders as owners
(39,368)
(58,568)
(93,036)
(137,975)
–
–
(93,036)
(137,975)
Cents
Cents
Basic and diluted (loss) per share
Dividends per share held for the full financial year
4
(0.10)
–
(0.15)
–
The above statement of financial performance should be read in conjunction with the accompanying notes.
67
statement of financial position
AS AT 30 JUNE 2005
Current Assets
Cash assets
Receivables
Loan to related party
Prepayments
Total Current Assets
Non-Current Assets
Deferred tax asset
Receivables
Plant and equipment
Investment in related party
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Loan from related party
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Accumulated losses
Total Equity
Net assets per share
The above statement of financial position should be read in conjunction with the accompanying notes.
2005
$
2004
$
156,682
186,087
–
31,275
374,044
97,936
–
140,635
9,080,010
107,470
220,378
646,548
22,315
996,711
58,568
5,958
16,545
9,080,010
9,318,581
9,161,081
9,692,625
10,157,792
460,500
33,279
349,847
843,626
843,626
468,154
34,931
712,672
1,215,757
1,215,757
8,848,999
8,942,035
9,080,010
(231,011)
9,080,010
(137,975)
8,848,999
8,942,035
0.10
0.10
68
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2005
Cash flows from operating activities
Expense recoveries
Management fees and expense recoveries from related parties
Cash payments in the course of operations
Interest received
Net cash inflow from operating activities
Cash flows from investing activities
Payments for investments
Payments for property, plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Net cash inflow from financing activities
Net increase in cash held
Cash at beginning of the financial period
Cash at the end of the financial period
Non-cash investing activities
Non-cash financing activities
The above statement of cash flows should be read in conjunction with the accompanying notes.
2005
$
26 June 2003
to 30 June 2004
$
269,166
8,890,000
(8,961,779)
19,858
–
1,062,672
(937,183)
2,040
217,245
127,529
–
(168,033)
(6,200,010)
(20,059)
(168,033)
(6,220,069)
–
–
6,200,010
6,200,010
49,212
107,470
156,682
107,470
–
107,470
–
–
2,880,000
2,880,000
69
notes to the financial statements
Note 1 – Summary of significant accounting policies
The concise financial report has been prepared in accordance with the requirements of Accounting Standard
AASB1039 “Concise Financial Reports”, applicable Urgent Issues Group Consensus Views and the
Corporations Act 2001.
The financial statements and specific disclosures included in the concise financial report have been derived
from the full financial report for the financial period. The concise financial report cannot be expected to
provide as full an understanding of the financial performance, financial position and financing and investing
activities of the Company as the full financial report.
Note 2 – Management fees
Management fees
Fees charged to the Trust by the Company for management and
responsible entity services.
2005
$
26 June 2003
to 30 June 2004
$
2,185,120
996,548
Note 3 – Acquisition proposal due diligence
Acquisition proposal due diligence
177,343
–
Costs incurred by the Company, as responsible entity for the Trust,
in relation to potential property acquisitions that did not proceeded to completion.
Note 4 – Earnings per share
Weighted average number of shares used as the denominator
Cents
Cents
(0.10)
(0.10)
(0.15)
(0.15)
No. of shares
No. of shares
90,800,100
90,800,100
90,800,100
90,800,100
Basic (loss) per share
Diluted (loss) per share
Weighted average number of shares used as the denominator in
calculating basic earnings per share
Weighted average number of shares and potential shares used
as the denominator in calculating diluted earnings per share
Note 5 – Segment information
Business Segment
The Company operates solely in the property funds management industry.
Geographical Segment
The Company operates solely within Australia.
Note 6 – Events occurring after reporting date
The directors are not aware of any significant events since the reporting date.
70
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Note 7 – Impacts of adopting Australian equivalents to IFRS
The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards
(IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued
Australian equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB
interpretations originated by the International Financial Reporting Interpretations Committee or the former
Standing Interpretations Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS.
The adoption of AIFRS will be first reflected in the Group’s financial statements for the half-year ending
31 December 2005 and the year ending 30 June 2006.
To comply with the AIFRS for the first time the Company will be required to restate its comparative financial
statements to reflect the application of AIFRS to that comparative period. Most adjustments required on
transition to AIFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.
The Company has initiated a project to manage the transition to AIFRS, under the management of the Group
Financial Controller. All of the AIFRS have been analysed and the required accounting policy changes have
been identified.
In some cases, choices of accounting policies are available, including elective exemptions under Accounting
Standard AASB1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards.
These choices have been analysed to determine the most appropriate accounting policy for the Company.
The known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been
prepared using AIFRS are set out below. The expected material financial effects of adopting AIFRS are shown
for each line item in the statement of financial performance and the statement of financial position with
descriptions of the differences. No material impacts are expected in relation to the statement of cash flows.
Although the adjustments disclosed in this note are based upon management’s best knowledge of
expected standards and interpretations and current facts and circumstances, the adjustments may change.
For example, amended or additional standards or interpretations may be issued by the AASB and IASB.
Therefore, until the company prepares its first full AIFRS financial statements the possibility cannot be
excluded that the accompanying disclosures may have to be adjusted.
71
notes to the financial statements
Note 7 – Impacts of adopting Australian equivalents to IFRS (continued)
Impact on the statement of financial performance
Revenue and expenses from ordinary activities
Management fees
Interest income
Total revenue from ordinary activities
Salaries, fees and related costs
Acquisition proposal due diligence
Legal fees
Auditor’s remuneration for audit services
– relating to current year
Auditor’s remuneration for audit services
– relating to prior year
Insurance for directors and officers
Insurance other
Annual reports
Registry fees
Information systems
Occupancy costs
Accounting fees
Tax reviews and advice
Corporate advisory services
Interest rate risk advice
ASX and ASIC fees
Travel and accommodation
Depreciation – plant & equipment
Marketing expenses
Communications expenses
Dues and subscriptions
Other expenses
Existing AGAAP
2005
$
Effect of Change
2005
$
Note
AIFRS
2005
$
2,185,120
20,382
2,205,502
–
–
–
2,185,120
20,382
2,205,502
(a)
971,204
177,343
143,012
125,750
60,000
41,766
69,791
51,967
62,131
35,721
91,622
64,762
68,277
91,783
48,820
39,805
27,068
22,248
20,744
11,726
10,243
102,123
7,993
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
979,197
177,343
143,012
125,750
60,000
41,766
69,791
51,967
62,131
35,721
91,622
64,762
68,277
91,783
48,820
39,805
27,068
22,248
20,744
11,726
10,243
102,123
Total expenses from ordinary activities
2,337,906
7,993
2,345,899
(Loss) from ordinary activities before income
tax expenses
Income tax (benefit) / expense
Net (loss) after income tax attributable to
shareholders of the Company
Total revenues, expenses and valuation adjustments
attributable to share holders of the Company recognised
directly in equity
Total changes in equity attributable to share holders
of the Company other than those resulting from
transactions with share holders as owners
(132,404)
(7,993)
(140,397)
(39,368)
–
(39,368)
(93,036)
(7,993)
(101,029)
–
–
–
(93,036)
(7,993)
(101,029)
72
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Note 7 – Impacts of adopting Australian equivalents to IFRS (continued)
Impact on the combined statement of financial position
Existing AGAAP
2005
$
Effect of Change
2005
$
Note
AIFRS
2005
$
Current Assets
Cash assets
Receivables
Prepayments and other assets
Total Current Assets
Non-Current Assets
Deferred tax asset
Plant and equipment
Investment in related party
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Loan from related party
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Share base payment reserve
Accumulated losses
Total Equity
156,682
186,087
31,275
374,044
97,936
140,635
9,080,010
9,318,581
9,692,625
460,500
33,279
349,847
843,626
843,626
8,848,999
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
156,682
186,087
31,275
374,044
97,936
140,635
9,080,010
9,318,581
9,692,625
460,500
33,279
349,847
843,626
843,626
8,848,999
(a)
(a)
9,080,010
–
(231,011)
8,848,999
–
13,117
(13,117)
9,080,010
13,117
(244,128)
–
8,848,999
73
notes to the financial statements
Note 7 – Impacts of adopting Australian equivalents to IFRS (continued)
(a) Equity based compensation benefits
Under AASB 2 Share-based Payment, the Company is required to recognise an expense for those options
issued to employees after 7 November 2002 that vest after 1 January 2005. The options are measured at
their grant date based on their fair value and the aggregate amount is allocated evenly over the vesting period.
This will result in a change to the current accounting policy, under which no expense is recognised for options
granted over un-issued securities to the managing director for nil monetary consideration.
The fair value of the options issued to Andrew Wilkinson on 10 November 2003 was $24,000 at grant date.
The vesting period is three years ending 10 November 2006.
If the policy required by AASB 2 had been applied during the year ended 30 June 2005 then,
– the salaries, fees and related costs would have been $7,993 higher, with a corresponding increase in the net
movement in the share based payment reserve; and
– the accumulated losses would have been $13,117 higher with a corresponding increase in the share based
payment reserve.
b) Financial instruments
The Company will be taking advantage of the exemption available under AASB 1 to apply AASB 132
Financial Instruments : Disclosure and Presentation and AASB 139 Financial Instruments: Recognition
and Measurement only from 1 July 2005. This allows the Company to apply previous Australian generally
accepted accounting principles (Australian GAAP) to the comparative information of financial instruments
within the scope of AASB 132 and AASB 139 for the 31 December 2005 and 30 June 2006 financial reports.
Changes applicable from 1 July 2005:
Loans and receivables and financial liabilities
Their classifications will remain unchanged. Consistent with AASB 139, measurement of these instruments
will initially be at fair value with subsequent measurement at amortised cost, using the effective interest
rate method.
Note 8 – Full financial report
Further financial information can be obtained from the full annual financial report. The full annual financial
report and auditors report will be sent to security holders on request, free of charge. Please call 1300 302 429
(freecall) and for International +61 3 9415 4141, and a copy will be forwarded to you. Alternatively, you can
access the full annual financial report and the annual concise financial report via the internet on our website:
www.alegroup.com.au
74
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
directors’ declaration
The directors declare that in their opinion, the Concise Financial Report for the Company for the year
ended 30 June 2005 as set out on pages 66 to 74 complies with accounting standard AASB 1039:
Concise Financial Reports.
The financial statements and specific disclosures included in this concise financial report have been derived
from the full financial report for the year ended 30 June 2005.
The concise financial report cannot be expected to provide as full an understanding of the financial
performance, financial position and financing and investing activities of the combined entity as the full
financial report, which as indicated in Note 8, is available on request.
The directors have been given the declarations by the Managing Director and Group Financial Controller and
Assistant Company Secretary, as Chief Executive Officer and Chief Financial Officer equivalents, as required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 6th day of September 2005
75
Independent audit report to the members of Australian Leisure and Entertainment Property
Management Limited
Matters relating to the electronic presentation of the audited financial report
This audit report relates to the concise financial report of Australian Leisure and Entertainment Property
Management Limited for the financial year ended 30 June 2005 included on ALE Property Group’s
web site. The directors of Australian Leisure and Entertainment Property Management Limited are
responsible for the integrity of the ALE Property Group’s web site. We have not been engaged to report
on the integrity of this web site. The audit report refers only to the financial report identified below.
It does not provide an opinion on any other information which may have been hyperlinked to/from the
financial report. If users of this report are concerned with the inherent risks arising from electronic data
communications they are advised to refer to the hard copy of the audited financial report to confirm the
information included in the audited financial report presented on this web site.
Audit opinion
In our opinion, the concise financial report of Australian Leisure and Entertainment Property Management
Limited (the Company) for the year ended 30 June 2005 complies with Australian Accounting Standard
AASB 1039: Concise Financial Reports.
This opinion must be read in conjunction with the rest of our audit report.
Scope
The financial report and directors’ responsibility
The concise financial report comprises the statement of financial position, statement of financial
performance, statement of cash flows, discussion and analysis and notes to the financial statements and
the directors’ declaration for the Company for the year ended 30 June 2005.
The directors of the Company are responsible for the preparation and presentation of the financial report
in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports.
Audit approach
We conducted an independent audit of the concise financial report in order to express an opinion
to the members of the Company. Our audit was conducted in accordance with Australian Auditing
Standards, in order to provide reasonable assurance as to whether the concise financial report is free of
material misstatement. The nature of an audit is influenced by factors such as the use of professional
judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive
rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements
have been detected. For further explanation of an audit, visit our website http://www.pwc.com/au/
financialstatementaudit.
We also performed an independent audit of the full financial report of the Company for the financial year
ended 30 June 2005. Our audit report on the full financial report was signed on 16 August 2005 and was
not subject to any qualification.
In conducting our audit of the concise financial report, we performed procedures to assess whether in all
material respects the concise financial report is presented fairly in accordance with Australian Accounting
Standard AASB 1039: Concise Financial Reports.
We formed our audit opinion on the basis of these procedures, which included:
– testing that the information included in the concise financial report is consistent with the information in
the full financial report, and
– examining, on a test basis, information to provide evidence supporting the amounts, discussion and
analysis, and other disclosures in the concise financial report which were not directly derived from the
full financial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the concise financial report.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional
ethical pronouncements and the Corporations Act 2001.
PricewaterhouseCoopers
Sydney
6 September 2005
S J Hadfield
Partner
76
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY MANAGEMENT LIMITED ANNUAL CONCISE REPORT 30 JUNE 2005
Annual Concise
Financial Report
FOR THE PERIOD 1 JULY 2004 TO 31 JUNE 2005
Australian Leisure and Entertainment
Property Trust
ARSN 106 063 049
Contents
Directors’ report
Discussion and analysis of consolidated statements of financial
performance, financial position and cash flows
Consolidated statement of financial performance
Consolidated statement of financial position
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent review report to the unitholders
78
89
91
92
93
94
105
106
77
directors’ report
The directors of Australian Leisure and Entertainment Property Management Limited (the “Company”) as
Responsible Entity for Australian Leisure and Entertainment Property Trust (the “Trust”) present their report
for the Trust and its controlled entities (the “Consolidated Entity”) for the year ended 30 June 2005.
This report includes the consolidated results of the Trust and its wholly owned sub trust Australian Leisure
and Entertainment Direct Property Trust (the “Sub Trust”), and the Sub Trust’s wholly owned special
financing vehicle ALE Finance Company Pty Limited (the “Finance Company”).
The Company and the Trust together form the ALE Property Group (the “Group”).
Directors
The following persons were directors of the Company during the whole of the year and up until the date of
this report unless otherwise stated:
Name
Non-executive directors
P H Warne (Chairman)
J P Henderson
H I Wright
Executive directors
A F O Wilkinson (Managing Director)
J T McNally
Appointed
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
Principal activities
During the year the principal activity of the Consolidated Entity consisted of investment in property. There has
been no significant change in these activities during the year.
Distributions
Trust distributions paid or payable to unitholders during the financial year were as follows:
2005
$’000
26 June 2003
to 30 June 2004
$’000
Interim Trust distribution for the year ended 30 June 2005 of 6.25 cents
(2004: nil) per stapled security paid on 28 February 2005
5,675
–
Final Trust distribution for the year ended 30 June 2005 of 6.60 cents
(2004: 7.50 cents) per stapled security to be paid 31 August 2005
5,993
11,668
6,810
6,810
78
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Review of Operations
A summary of the consolidated revenue and results of the Consolidated Entity is set out below:
Income
Property rents and loan interest
Bank interest
Expenses
Borrowing costs
Land tax expense
Other expenses
Income tax (benefit) / expense
Net Income
Net assets per ordinary unit
2005
$’000
19 August 2003
to 30 June 2004
$’000
45,996
1,155
47,151
37,771
1,139
2,828
41,738
(10)
5,423
$2.07
29,479
712
30,191
24,233
545
1,365
26,143
8
4,040
$1.28
As a result of all of the property leases being “triple net” the Consolidated Entity has had minimal direct
property outgoings other than land tax on the Queensland properties.
Significant changes in the state of affairs
In the opinion of the directors, there were no significant changes in the state of affairs of the Consolidated
Entity that occurred during the financial year, other than those changes otherwise identified in this financial
report.
Matters subsequent to the end of the financial year
On 1 September 2005 the Consolidated Entity entered into two further forward dated interest rate swap
transactions in respect of its $480m debt facilities. The swaps were $50m at 5.5375% pa fixed (excluding
credit margin) from November 2008 to November 2012 and $50m at 5.5475% pa fixed (excluding credit
margin) from November 2008 to November 2013. The directors are not aware of any other matter or
circumstance occurring after balance date which may affect the Consolidated Entity’s operations, the results
of those operations or the state of affairs of the Consolidated Entity.
Likely developments and expected results of operations
The Consolidated Entity will continue to maintain its defined strategy of identifying opportunities to increase
the profitability of the Consolidated Entity and its value to its unitholders .
Further information on likely developments in the operations of the Consolidated Entity and the expected
results of operations have not been included in this report because the directors believe that it would be likely
to result in unreasonable prejudice to the Consolidated Entity.
Environmental regulation
Whilst the Consolidated Entity is subject to significant environmental regulation in respect of its property
activities, the directors of the Company are satisfied that adequate systems are in place for the management
of its environmental responsibility and compliance with the various licence requirements and regulations.
Further, the directors are not aware of any material breaches of these requirements. On three of the
properties ongoing testing is being undertaken and if further work is required indemnities are held in excess
of any expenditure amounts required.
79
directors’ report
Information on directors
Mr Peter H Warne B.A,
Chairman and Non–Executive Director.
Experience and expertise
Peter was appointed as Chairman and non-executive
director of the Company in September 2003.
Peter began his career with the NSW Government
Actuary’s Office and the NSW Superannuation
Board before joining Bankers Trust Australia Limited
(“BTAL”) in 1981. Peter held senior positions in
the Fixed Income department, the Capital Markets
division and the Financial Markets Group of BTAL
and acted as a consultant to assist with integration
issues when the investment banking business was
acquired by Macquarie Bank Limited in 1999.
Peter graduated from Macquarie University with
a Bachelor of Arts, majoring in Actuarial studies.
He qualified as an associate of, and received a
Certificate of Finance and Investment from, the
Institute of Actuaries, London.
Other current directorships of listed entities
Non-executive director of SFE Corporation Limited
and Macquarie Capital Alliance Group.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Chairman of the board.
– Member of the audit, compliance and risk
management committee (resigned as Chairman on
15 August 2005, continuing as member).
– Chairman of the remuneration committee.
Mr John Henderson (B.Bldg, MRICS, AAPI),
Non-Executive Director.
Experience and expertise
John was appointed as a non-executive director of
the Company in August 2003.
John has been a Director of Marks Henderson
Pty Ltd since 2001 and is actively involved in the
acquisition of investment property. Previously an
International Director at Jones Lang LaSalle and
Managing Director of the Sales and Investment
Division, he was responsible for overseeing the
larger property sales across Australasia, liaising with
institutional and private investors, and coordinating
international investment activities.
John graduated from the University of Melbourne
and is a member of the Royal Institution of Chartered
Surveyors, is an associate of the Australian Property
Institute and is a licensed real estate agent.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Member of the audit, compliance and risk
management committee.
– Member of the remuneration committee.
Ms Helen Wright LL.B, MAICD,
Non-Executive Director.
Experience and expertise
Helen was appointed as a non-executive director of
the Company in September 2003.
Helen Wright was a partner of Freehills, a leading
Australian firm of lawyers, from 1986 to 2003.
She practiced as a commercial lawyer specialising
in real estate projects including development and
financing and related taxation and stamp duties.
Helen is a member of the Boards of the Sydney
Harbour Foreshore Authority, Australian Technology
Park Precinct Management, and Cooks Cove
Redevelopment Authority; was Deputy Chair of the
Australia Day Council of NSW to December 2002;
and serves on the Advisory Council to The Little
Company of Mary (Calvary hospitals). Prior boards
include Darling Harbour Authority, UNSW Press
Limited and MLC Homepack Limited.
Helen has a Bachelor of Laws from University
of NSW, and in 1994 completed the Advanced
Management Program at the Harvard Graduate
School of Business.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last three
years
None.
Special responsibilities
– Chair of the audit, compliance and risk
management committee.
(appointed Chair 15 August 2005).
– Member of the remuneration committee.
80
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
James’ qualifications include a Bachelor of Business
in Land Economy (Hawkesbury Agricultural College)
and a Diploma of Law (Legal Practitioners Admission
Board). He is a registered valuer and licensed real
estate agent.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last three
years
None.
Special responsibilities
– Member of the audit, compliance and risk
management committee.
– Responsible Officer of the Company under the
Company’s Australian Financial Services License.
Mr Brendan R Howell BEcon, GDipAppFin (Sec Inst).
Company secretary
Mr Howell was appointed to the position of company
secretary in September 2003.
Brendan has a Bachelor of Economics from the
University of Sydney and a Graduate Diploma in
Applied Finance and Investment from the Securities
Institute of Australia, and 15 years’ experience in the
funds management industry. He was formerly an
associate member of both the Securities Institute of
Australia and the Institute of Chartered Accountants
in Australia. Brendan has a property and accounting
background and has previously held senior
positions with a leading Australian trustee company
administering listed and unlisted property trusts. For
the past six and half years Brendan has been directly
involved with MIA Services Pty Limited, a company
which specialises in funds management compliance,
and acts as an independent consultant and external
compliance committee member for a number of
property, equity and infrastructure funds managers.
Brendan also acts as an independent director for
several unlisted public companies, some of which
act as responsible entities.
Mr Andrew F O Wilkinson (B. Bus. CFTP),
Managing Director.
Experience and expertise
Andrew was appointed Managing Director of the
Company in November 2004. He joined ALE as
Chief Executive Officer at the time of its listing in
November 2003.
Andrew has over 25 years experience in the banking
and corporate finance.
He was previously a corporate finance partner with
PricewaterhouseCoopers where he specialised in
providing financial and strategic advice on significant
property and infrastructure portfolios. Over his 8
year period with the firm he held a number of senior
positions and was also one of the founding members
of the NSW Government’s Infrastructure Council.
Andrew’s prior career also includes 15 years in
finance and investment banking with organisations
including ANZ Capel Court and Schroders where he
was involved in leading the financing arrangements
for a range of major projects.
Other current directorships of listed entities
None.
Former directorships of listed entities in the last
three years
None.
Special responsibilities
– Responsible Officer of the Company under the
Company’s Australian Financial Services License.
Mr James McNally (B.Bus (Land Economy) Dip. Law),
Executive Director.
Experience and expertise
James was appointed as an executive director of the
Company in June 2003.
James has over ten years experience in the funds
management industry having worked in both
property trust administration and compliance roles
for Perpetual Trustees Australia Limited and MIA
Services Pty Limited, a company that specialises
in compliance services to the funds management
industry.
James provides compliance and management
services to several Australian fund managers. He
is currently an external member on a number of
compliance committees for various responsible
entities and acts as a Responsible Officer for
a number of companies that hold an Australian
Financial Services Licence, including the Company.
81
directors’ report
Directors’ and specified executive interests in units and options
The following directors, specified executive and their associates held or currently hold unit interests in the Trust:
Name
Director/specified executive
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
D S Barkas
Director
Director
Director
Director
Specified Executive
Balance at
the start
of the year
453,400
25,000
100,000
31,998
–
Purchases / (sales)
179,010
30,000
–
21,000
46,810
Number of
units held
632,410
55,000
100,000
52,998
46,810
The following director held or currently holds options over units of the Trust:
Name
A F O Wilkinson
Director
Director
Balance at
the start
of the period
300,000
Purchases / (sales)
Number of
options held
–
300,000
Meetings of directors
The numbers of meetings of the Company’s board of directors held during the year ended 30 June 2005 and
the number of meetings attended by each director at the time the director held office during the year were:
Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
Board meetings
Held1
Attended
13
13
13
7
13
13
11
13
7
13
Audit, Compliance and
Risk Management
Committee meetings
Held1
Attended
Remuneration
Committee meeting
Held1
Attended
6
6
6
–
–
6
5
6
–
–
1
1
1
–
–
1
1
1
–
–
1 “Held” reflects the number of meetings which the director was eligible to attend.
Remuneration report
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Equity-based compensation
A Principles used to determine the nature and amount of remuneration
The objectives of the Company’s executive reward framework is to ensure that reward for performance is
transparent, reasonable, competitive and appropriate for the results delivered. The framework aligns executive
reward with achievement of strategic objectives and creating of value for share holders, and conforms
with market best practice for the delivery of reward. The Board ensures that executive reward satisfies the
following key criteria for good reward governance practices:
– competitiveness and reasonableness
– acceptability to share holders
– performance linkage/alignment of executive compensation
– transparency
– capital management
82
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
In consultation with external remuneration consultants, the Company has structured an executive
remuneration framework that is market competitive and complementary to the reward strategy of the
organisation.
Alignment to stapled security holders interests:
– has economic profit as a core component of plan design
– focuses on sustained growth in stapled security holder wealth, consisting of distributions, dividends and
growth in share price and delivering constant return on assets as well as focusing the executive on key non-
financial drivers of value
– attracts and retains high calibre executives
Alignment to program participants’ interests:
– rewards capability and experience
– reflects competitive reward for contribution to growth in stapled security holders wealth
– provides a clear structure for earning rewards
– provides recognition for contribution
The framework provides a mix of fixed and variable pay and a blend of short and long-term incentives.
As executives gain seniority within the Company, the balance of this mix shifts to a higher proportion of
‘at risk’ rewards, depending upon the nature of the executive’s new role.
The overall level of executive reward takes into account the performance of the Group over a number of
periods with greater emphasis given to the current year. Over the past year, the Group’s profit from ordinary
activities after income tax has grown by $1.427m (or 36.6%) from $3.902m to $5.280m and stapled security
holders’ wealth (inclusive of distribution returns) has grown by 68.4%.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on and the
responsibilities of the directors. Non-executive directors’ fees and payments are reviewed annually by
the Board. The Board may also obtain the advice of independent remuneration consultants to ensure that
non-executive directors’ fees and payments are appropriate and in line with the market. The Chairman’s
fees are determined independently to the fees of the non-executive directors, based on comparative roles
in the external market. The Chairman is not present at any discussion relating to the determination of his
own remuneration. Non-executive directors do not receive options over shares.
Directors’ fees
The current base remuneration was last reviewed with effect from September 2003. The directors fees are all
inclusive of committee fees.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit which will be
periodically recommended for approval by share holders. The maximum currently stands at $335,000 per
annum, comprised of $260,000 per annum for non-executive directors and $75,000 per annum for the
executive director (inclusive of a responsible officer fee of $5,000 per annum) and excluding the managing
directors’ remuneration. The maximum amount for non-executive directors can only be increased at a general
meeting of the Company.
Retirement allowances for directors
No retirement allowances for directors are offered by the Company in line with recent guidance on non-
executive directors’ remuneration.
83
directors’ report
Remuneration report (continued)
Executive pay
The executive pay and reward framework has three components, the combination of which comprises the
executive’s total remuneration:
– base pay and benefits
– short-term performance incentives
– long-term incentives
– other remuneration such as superannuation
Base pay and benefits
Structured as a total employment cost package which may be delivered as a combination of cash and
prescribed non-cash benefits at the discretion of the executives and the board.
Executives are offered a competitive base pay that comprises the fixed component of their remuneration.
External remuneration consultants provide analysis and advice to ensure base pay is set to reflect the market
for comparable roles. Base pay for senior executives is reviewed annually to ensure that the executives pay is
competitive with the market. An executive’s pay is also reviewed on promotion.
There is no guaranteed base pay increase in any of the executives’ contracts.
Short-term incentives (STI)
The short-term incentive arrangements in place at the Company have been designed to link annual STI bonus
awards to executive performance against agreed key performance indicators (KPI’s) including the financial
performance of the Company during the year in question.
Each executive has a target STI opportunity depending on the accountabilities of the role and the impact on
the performance of the Company.
Each year the remuneration committee considers the appropriate targets and KPI’s to link the STI plan and the
level of payout if targets are met. This includes setting any maximum payout under the STI plan and minimum
levels of performance to trigger payments of STI.
For the year end 30 June 2005, the KPI’s link to STI plans were based on Company, individual, business and
personal objectives. The KPI’s required performance in managing operating and funding costs, compliance
with legislative requirements, increasing security holder value as well as other key strategic non-financial
measures linked to drivers of performance in future economic periods.
The board is responsible for assessing whether the KPI’s have been met. To facilitate this assessment, the
board receives detailed reports on performance from management.
The STI payments may be adjusted up or down in line with over or under achievement against the target
performance levels. This is at the discretion of the board.
The STI target annual payment is reviewed annually.
Shares options granted
No options over unissued shares of the Company were granted during or since the end of the financial year .
B Details of remuneration
Amount of remuneration
Details of the remuneration of each director and the specific executive of the Company, paid or payable by
the Company for the year ended 30 June 2005 are set out in the following tables. The cash bonuses are
dependent on the satisfaction of performance conditions are set out in the section headed “Short-term
incentives”, above. All other elements of remuneration are not directly related to performance.
84
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
Directors of the Company
Name
Non-executive directors
P H Warne (Chairman)
J P Henderson
H I Wright
Executive directors
A F O Wilkinson* (Managing Director)
J T McNally (Director)
Total
Cash Salary
and Fees
110,092
70,000
64,220
191,954
81,250
517,516
Cash Bonus
Superannuation
Total
–
–
–
65,000
–
65,000
9,908
–
5,780
15,081
–
30,769
120,000
70,000
70,000
272,035
81,250
613,285
* Mr Wilkinson was appointed Managing Director on 16 November 2004. Before this appointment he was the Company’s Chief Executive
Officer. Amounts shown above include all of Mr Wilkinson’s remuneration during the reporting period, whether as Managing Director or
Chief Executive Officer. Amounts received in his position as Managing Director amounted to $191,784, made up of cash salary and fees of
$117,895, cash bonus of $65,000 and superannuation of $8,889.
Specified executive of the Company
Name
Cash Salary
Cash Bonus
Non monetary
benefits
Superannuation
Total
D S Barkas*
(Group Financial Controller
& Assistant Company Secretary)
127,282
20,000
6,800
10,462
164,544
* Mr Darren Barkas was appointed Group Financial Controller & Assistant Company Secretary on 16 March 2005. Before this he was the
Company’s Property Trust Manager. Amounts shown above include all of Mr Barkas’ remuneration during the reporting period, whether as
Company Financial Controller and Assistant Company Secretary or Property Trust Manager.
Amounts received in his position as Group Financial Controller and Assistant Company Secretary amounted to $55,377, made up of cash
salary and fees of $25,578, non monetary benefit of $6,800, cash bonus of $20,000 and superannuation of $3,000.
Cash bonuses and options
For each cash bonus included in the above tables, the percentage of the available bonus that was awarded
for the financial year and the percentage that was forfeited because a person did not meet the performance
criteria is set out below.
Name
A F O Wilkinson
D S Barkas
Paid
$
65,000
20,000
Forfeited
%
13.3
0.0
C Service agreement
On 10 November 2003, the Company entered into a three year service agreement with Managing Director,
Mr Wilkinson. The agreement stipulates the minimum base salary, inclusive of superannuation, for each of
the first three years as being $225,000, to be reviewed annually by the board. A short-term incentive (which
if earned, would be paid as a cash bonus each year) and a long-term incentive in the form of options over
stapled securities, exercisable between November 2006 and November 2007 (except if the Company is
subject to takeover, then to February 2007) are also provided.
85
directors’ report
Remuneration report (continued)
C Service agreement (continued)
In the event of the termination of Mr Wilkinson’s employment contract, amounts are payable for unpaid
accrued entitlements, proportion of bonus and option entitlements as at the date of termination. In the event
of redundancy termination amounts are payable for base salary, inclusive of superannuation and bonus and
option entitlements for the balance of the contract.
Mr Barkas’ employment contract may be terminated at one months notice.
There are no other director or executive service agreements.
Letters of appointment have been entered into by each director (excluding the Managing Director) confirming
their remuneration and obligations under the Corporations Law and Company constitution.
A letter of appointment has been entered into with MIA Services Pty Limited for the use of the services of
Brendan Howell as Company Secretary and as a Responsible Officer of the Company on a continuous basis
that may be terminated at any time.
D Equity-based compensation
Options over un-issued shares of ALE Property Company were granted during the last financial period to
Andrew Wilkinson as disclosed in an ASX Announcement dated 10 November 2003. Mr Wilkinson has the right
to subscribe for up to 300,000 stapled securities at a fixed price of $1.036 exercisable from 10 November 2006
or earlier, if Mr Wilkinson’s employment is terminated other than for cause or unsatisfactory performance.
The options will remain exercisable until 10 November 2007, unless the ALE Property Company is subject to a
takeover, in which case the period of exercise would be reduced to 11 February 2007.
The options value disclosed above as part of specified executive remuneration is the assessed fair value at
grant date of options granted, allocated equally over the period from grant date to vesting date. The fair value
of $24,000 at grant date has been independently determined by using a Black-Scholes option pricing model.
This technique takes into account factors such as the exercise price, the term of the option, the vesting and
performance criteria, the impact of dilution, the non-tradable nature of the option, the share price at grant
date, expected price volatility of the underlying share and the expected dividend yield and the risk-free interest
rate for the term of the option.
Units under option
Unissued units of the Trust under option at the date of this report are as follows:
Date option granted
10 November 2003
Expiry date
Issue price of
stapled securities
Number under option
10 November 2007*
$1.036
300,000
* Unless ALE Property Group is subject to a takeover, in which case the period of exercise would be shortened to 11 February 2007.
Units issued on the exercise of options
No units of the Trust have been issued on the exercise of options, to date.
Insurance of officers
During the financial year, the Company paid a premium of $41,766 (2004: $40,746) to insure the directors and
officers of the Company. The auditors of the Trust are in no way indemnified out of the assets of the Trust.
Under the constitution of the Company, current or former directors and secretaries are indemnified to
the full extent permitted by law for liabilities incurred by that person in the discharge of their duties.
The constitution provides that the Company will meet the legal costs of that person. This indemnity is
subject to certain limitations.
86
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Remuneration report (continued)
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the Company are important.
Details of amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services
provided during the year are set out below:
The board of directors has considered the position and in accordance with the advice received from the
audit committee is satisfied that the provision of the non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied
that the provision of non-audit services by the auditor, as set out below, did not compromised the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services have been reviewed by the audit committee to ensure that they do not impact the
impartiality and objectivity of the auditor
– none of the services undermine the general principles relating to auditor independence as set out in
Professional Statement F1, including reviewing or auditing the auditors own work, acting in a management
or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing
economic risk and rewards
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 88.
Audit and review of the financial reports of the Group and other audit
work under the Corporations Act 2001*
– in relation to current year
– in relation to prior year
Due diligence service
Controls assurance services
Tax compliance services
Tax consulting services
General accounting advice (including AIFRS)
* Includes amounts allocated to the Trust of $74,282 (2004: $41,200).
2005
$
2004
$
125,705
60,000
31,300
7,000
15,000
24,190
29,944
293,139
103,000
–
–
14,000
–
34,000
8,750
159,750
Rounding of amounts
The Trust is a registered scheme of a kind referred to in Class Order 98/0100, issued by the Australian
Securities and Investments Commission, relating to the “rounding off” of amounts in the directors’ report and
financial report. Amounts in the directors’ report and financial report have been rounded off in accordance
with the Class Order to the nearest thousand dollars, unless otherwise indicated.
This report is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 6th day of September 2005
87
Auditors’ Independence Declaration
As lead auditor for the audit of Australian Leisure and Entertainment Property Trust for
the year ended 30 June 2005, I declare that to the best of my knowledge and belief,
there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the review; and
(b) no contraventions of any applicable code of professional conduct in relation to the
review.
This declaration is in respect of Australian Leisure and Entertainment Property Trust and
the entities it controlled during the period.
S J Hadfield
Partner
Sydney
6 September 2005
88
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
discussion and analysis of the combined financial statements
The following commentary is to assist unitholders in reviewing and interpreting the results of the Trust and
Consolidated Entity for the year ended 30 June 2005.
The discussion and analysis of the year ended 30 June 2005 results are based upon comparisons of the
30 June 2005 results to those of the period ended 30 June 2004. It is most important to note that the Group
commenced operations during the comparative period of 26 June 2003 to 30 June 2004. During November
2003 the Group acquired its first investments properties, issued the bulk of its stapled securities and issued
all of its existing debt, being $150m of ALE Notes and $330m of Commercial Mortgage Back Securities.
As a result of the comparative period being a commencement period some key differences have been
annualised in order to improve comparability.
Consolidated statement of financial performance
Net profit after tax was for the year ended 30 June 2005 of $5,423,000 was $1,383,000 (or 34.2%) higher
than the $4,040,000 net profit after tax of the comparative period.
– Total revenue from ordinary activities – was higher by $908,000 (or 2.0%) higher after annualisation. The
key drivers of the 2.0 % increase were a portfolio rental review which resulted in a 2.1% increase in the
property rental income and loan interest from November 2004 and stringent cashflow management and
investment procedures which boosted bank interest earnings by an annualised 5.0%.
– Borrowing costs (including non cash amortisation) – were higher by $18,000 (or 0.00%) after annualisation.
The Trust had a fully hedged weighted average interest rate established at IPO of 6.524% and as at 30 June
2005 of 6.527%.
– Land tax expense – was higher by $304,000 (or 36.5%) after annualisation. In all states other than
Queensland ALH, as tenant, pays the land tax rather than the Trust. The key drivers of the increase were
strong increases in Queensland land values and the fact that the comparative period amount of $545,000
only included one day of land tax on three Queensland properties acquired by the Trust on 30 June 2004.
– Property valuation expenses – were higher by $133,000 (or 120.9%). Annualisation is not appropriate as the
valuations are only performed annually. The comparative period valuation covered one third of the portfolio
whereas the current valuation covered the entire of the portfolio.
– Other costs of $2,585,000 versus a comparative total of $1,255,000 represent an increase of $663,000 (or
34.5%) after annualisation. The annualised increase of 34.5% is mainly due to increased management fees
charged by the Company as a result of a progressive staffing of the Group during the comparative period,
due diligence activities and increased operational activity during the current period.
Consolidated statement of financial position
Total assets were $690,677,000 as at 30 June 2005 compared to $625,171,000 as at 30 June 2004.
The increase of $65,506,000 (or 10.5%) was driven by a revaluation increment to property investments of
$74,800,000, a decrease in cash of $3,662,000, a decrease in amortisation of prepaid borrowing costs of
$5,769,000 and a net increase in other assets of $59,000.
Total liabilities were $493,633,000 as at 30 June 2005 compared to $496,682,000 as at 30 June 2004.
The decrease of $3,049,000 (or 0.6%) was driven by a reduction in payables of $2,697,000, a decrease in
provisions of $817,000, and increase in ALE Notes premium of $479,000 and a decrease in other liabilities
of $14,000.
Net assets were $197,044,000 as at 30 June 2005 compared to $128,489,000 as at 30 June 2004.
The increase of $68,555,000 (or 53.3%) is as a result of the movements in total assets and total liabilities.
Equity was $197,044,000 as at 30 June 2005 compared to $128,489,000 as at 30 June 2004. The increase
of $68,555,000 (or 53.3%) was driven by an increase in revaluation reserve of $74,800,000, an increase in
accumulated losses of $18,000 and a decrease in contributed equity of $6,223,000. The Trust’s distribution
to unitholders of available operating cashflows (which exceeded accounting income due to non cash
expenses) resulted in the decrease to contributed equity.
The net asset per stapled security as at 30 June 2005 were $2.07 compared to $1.32 as at 30 June 2004.
89
discussion and analysis of the combined financial statements
Consolidated statement of cash flows
Net cash inflow from operating activities includes the rent earned on the portfolio, the interest earned on
cash balances held by the Trust and the payment of interest expenses on the Trust’s borrowings.
There were no cash flows from investing activities during the year.
Net cash outflow from financing activities was an outflow of $12,485,000 which was the total of the
June 2004 distribution of $6,810,000 and the December 2004 distribution of $5,675,000.
The net decrease in cash held during the year of $3,662,000 was due to a net decrease in payables of
$2,697,000, a net decrease in provisions of $817,000 and other net decreases of $148,000.
90
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
consolidated statement of financial performance
FOR THE YEAR ENDED 30 JUNE 2005
Revenue and expenses from ordinary activities
Property rental income and loan interest
Distribution income
Interest income
Total revenue from ordinary activities
Borrowing costs excluding amortisation
Borrowing costs (non-cash) amortisation
Management fees
Land tax expense
Property valuation expenses
Other expenses
Total expenses from ordinary activities
Profit from ordinary activities before income tax expenses
Income tax (benefit) / expense
Net profit after income tax expenses attributable to
unitholders of the Trust
Net increase in asset revaluation reserve
Total revenues, expenses and valuation adjustments
attributable to unitholders of the Trust recognised
directly in unitholders’ funds
Total changes in equity attributable to unitholders of the
Trust other than those resulting from transactions with
unitholders as owners
Distributions paid and payable
Basic and diluted earnings per ordinary unit
Distribution per ordinary unit held for the full financial year
Note
2
2 (a)
3
4
5
6
2005
$’000
19 August 2003
to 30 June 2004
$’000
45,996
–
1,155
47,151
31,523
6,248
2,185
1,139
243
400
41,738
5,413
(10)
5,423
74,800
29,479
–
712
30,191
20,238
3,995
997
545
110
258
26,143
4,048
8
4,040
40,459
74,800
40,459
80,223
44,499
11,668
6,810
Cents
5.97
12.85
Cents
4.45
7.50
The above consolidated statement of financial performance should be read in conjunction with the accompanying notes.
91
consolidated statement of financial position
AS AT 30 JUNE 2005
Current Assets
Cash assets
Receivables
Loan to related party
Prepayments and other assets
Loans
Total current assets
Non-Current Assets
Property investments
Development property, loans deposits and costs
Prepayments and other assets
Deferred tax asset
Total non-current assets
Total assets
Current Liabilities
Payables
Loan from related party
Provisions
Other
Total current liabilities
Non-current Liabilities
Interest bearing liabilities – CMBS
Interest bearing liabilities – ALE Notes
ALE Notes premium
Deferred tax liability
Total non-current liabilities
Total liabilities
Net Assets
Unitholders’ funds
Contributed equity
Asset revaluation reserve
Accumulated losses / retained profits
Total Unitholders’ funds
Net assets per ordinary unit
Net assets per no income voting unit (NIVUS)
Note
2005
$’000
2004
$’000
7
8
10
9
10
8
11
11
12
19,321
199
350
5,762
11,746
37,378
625,000
14,713
13,585
1
653,299
690,677
6,554
–
5,993
303
22,983
174
66
5,951
11,746
40,920
550,200
14,713
19,338
–
584,251
625,171
9,251
–
6,810
309
12,850
16,370
330,000
150,000
783
–
480,783
493,633
197,044
81,787
115,259
(2)
197,044
$2.07
$1.00
330,000
150,000
304
8
480,312
496,682
128,489
88,010
40,459
20
128,489
$1.32
$1.00
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
92
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
consolidated statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2005
Note
2005
$’000
19 August 2003
to 30 June 2004
$’000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Expense recoveries from related parties
Payments to suppliers and employees
(inclusive of goods and services tax)
Foster’s Group Limited – recovery of payments to suppliers
Interest received
Borrowing costs
Net cash inflow / (outflow) from operating activities
Cash flows from investing activities
Acquisition of property investments
Deposits paid on property investments
Pre-acquisition costs on property investments
Investment in related parties
Loan to Foster’s Group Limited
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of units
Proceeds from interest bearing liabilities
Distributions paid
Net cash (outflow) / inflow from financing activities
Net (decrease) / increase in cash held
Cash at beginning of the financial period
Cash at the end of the financial period
7
Non-cash financing activities
48,443
315
(11,820)
–
3,485
(31,600)
8,823
–
–
–
–
–
–
–
–
(12,485)
(12,485)
(3,662)
22,983
19,321
–
30,215
–
(1,469)
447
2,558
(14,568)
17,183
(509,741)
(2,600)
(450)
–
(23,409)
(536,200)
62,000
480,000
–
542,000
22,983
–
22,983
28,800
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
93
notes to the financial statements
Note 1 – Basis of preparation of concise financial report
The consolidated concise financial report has been prepared in accordance with the requirements of
Accounting Standard AASB1039 “Concise Financial Reports”, applicable Urgent Issues Group Consensus
Views and the Corporations Act 2001.
The financial statements and specific disclosures included in the consolidated concise financial report
have been derived from the consolidated full financial report for the financial period. The consolidated
concise financial report cannot be expected to provide as full an understanding of the consolidated financial
performance, consolidated financial position and financing and investing activities of the Consolidated Entity
as the full financial report.
Note 2 – Revenue
Operating activities
Rental income
Interest received on loans to Foster’s Group Limited
(a) Interest income from:
Bank term deposit interest
Note 3 – Borrowing costs excluding amortisation
CMBS interest expense inclusive of all swaps
ALE Notes interest expense
Other borrowing costs
Note 4 – Borrowing costs (non-cash) amortisation
Prepaid borrowing costs
Amortisation of ALE Notes premium
The prepaid borrowing costs had no cashflow impact on the
Consolidated Entity as they were funded by the issue of Trust
units (Note 8 (a) contains further information). The ALE Notes
premium is accrued and will have no cashflow impact on the
Consolidated Entity until payment on expiry of the ALE Notes.
Note 5 – Distributions
Distributions recognised during the financial year:
Interim Trust distribution for the financial year ended 30 Jun 05
of 6.25 cents per stapled security (2004: nil) paid 28 Feb 05
Final Trust distribution for the financial year ended 30 Jun 05 of 6.60
cents per stapled security (2004: 7.50 cents) to be paid 31 Aug 05
2005
$’000
19 August 2003
to 30 June 2004
$’000
43,766
2,230
45,996
1,155
47,151
20,429
10,898
196
31,523
5,769
479
6,248
27,468
2,011
29,479
712
30,191
13,089
7,077
72
20,238
3,691
304
3,995
5,675
5,993
11,668
–
6,810
6,810
94
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Note 6 – Earnings per unit
Weighted average number of units used as the denominator
Basic earnings per unit
Diluted earnings per unit
2005
Cents
5.97
5.97
2004
Cents
4.45
4.45
No. of Units
No. of Units
Weighted average number of ordinary units used as the denominator
in calculating basic earnings per units
90,800,100
90,800,100
Weighted average number of ordinary units and potential ordinary units
used as the denominator in calculating diluted earnings per unit
90,800,100
90,800,100
Note 7 – Cash Assets
Cash at bank
Deposits
Cash reserve *
69
13,752
5,500
19,321
3,559
13,924
5,500
22,983
* In order to have the CMBS rated, the cash reserve, which is equal to approximately three months service of the CMBS has been set aside
by the Consolidated Entities for the term of the CMBS and is therefore restricted.
As at 30 June 2005, the cash assets of the Consolidated Entity had a weighted average interest rate of 5.60%
(2004: 5.40%).
Note 8 – Prepayments and other assets
Current
Corporate advisory services
Prepaid other expenses
Capitalised borrowing costs
Non-Current
Capitalised borrowing costs
Total
(a)
(b)
(b)
–
8
5,754
5,762
13,585
19,347
174
8
5,769
5,951
19,338
25,289
(a) On 10 November 2003 $300,000 was paid to Macquarie Bank
Limited for advisory services to 30 June 2005.
(b) Reconciliation of capitalised borrowing costs:
Lead manager’s incentive fee paid
Amount expensed during the period
Closing balance
25,109
(5,769)
19,340
28,800
(3,691)
25,109
Under the lead manager’s incentive offer as originally agreed between Foster’s Group Limited and the lead
manager, Macquarie Equity Capital Markets Limited, the lead manager was entitled to be issued with 48,000
stapled securities for each one tenth of a basis point by which the Group’s weighted average interest rate on
borrowings was less than 7.335% up to a maximum of 28.8 million stapled securities at 6.735%.
The 6.735% target was surpassed with the weighted average interest rate on borrowings for the Group being
6.524% fixed for five years to 10 November 2008.
The fee of $28.8 million was capitalised as a borrowing cost and will continue to be expensed over the
remaining time of the five year period to which it relates.
95
notes to the financial statements
Note 9 – Investment properties
Reconciliation
A reconciliation of the carrying amounts of investment properties at the beginning and end of the current
financial year is set out below:
Carrying amount at the beginning of the year
Additions
Revaluation increment
Carrying amount at the end of the year
Cost
Including
Additions
$’000
5,470
5,659
8,205
8,771
5,847
3,112
8,865
5,847
2,830
4,150
Date
Acquired
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Independent
Valuation
and Carrying
Amount
2005
$’000
6,600
6,900
9,900
10,600
6,850
3,700
10,500
6,800
3,250
5,100
Property
New South Wales
Blacktown Hotel, Blacktown
Brown Jug Hotel, Fairfield Heights
Colyton Hotel, Colyton
Crows Nest Hotel, Crows Nest
Kirribilli Hotel, Kirribilli
Melton Hotel, Auburn
New Brighton Hotel, Manly
Pioneer Hotel, Penrith
Pymble Hotel, Pymble
Smithfield Tavern, Smithfield
Total
New South Wales Properties
2005
$’000
550,200
–
74,800
625,000
2004
$’000
–
509,741
40,459
550,200
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
800
700
1,000
1,000
450
300
800
400
150
600
330
541
695
829
553
288
835
553
270
350
Carrying
Amount
2004
$’000
5,800
6,200
8,900
9,600
6,400
3,400
9,700
6,400
3,100
4,500
58,756
70,200
64,000
6,200
5,244
Queensland
Nov 03
Albany Creek Tavern, Albany Creek
Nov 03
Albion Hotel, Albion
Nov 03
Alderley Arms Hotel, Alderley
Nov 03
Anglers Arms Hotel, Southport
Nov 03
Balaclava Hotel, Cairns
Banyo Tavern, Nudgee
Nov 03
Breakfast Creek Hotel, Breakfast Creek Nov 03
Nov 03
Camp Hill Hotel, Camp Hill
Nov 03
Chardons Corner Hotel, Annerly
Nov 03
Dalrymple Hotel, Townsville
Nov 03
Edinburgh Castle Hotel, Kedron
Nov 03
Ferny Grove Tavern, Ferny Grove
Jun 04
Four Mile Creek, Strathpine
Nov 03
Hamilton Hotel, Hamilton
Nov 03
Holland Park Hotel, Holland Park
Nov 03
Imperial Hotel, Beenleigh
Nov 03
Kedron Park Hotel, Kedron Park
Nov 03
Kirwan Tavern, Townsville
Nov 03
Lawnton Tavern, Lawnton
8,394
4,433
3,301
4,433
3,301
3,018
10,657
2,264
1,415
3,207
3,112
5,847
3,672
6,602
3,773
2,452
2,264
4,433
4,433
9,600
5,200
4,100
5,300
3,800
3,500
11,700
2,750
1,500
3,700
3,600
6,600
4,600
7,400
4,600
2,900
2,700
5,300
5,100
9,000
4,800
3,500
4,600
3,500
3,200
11,500
2,400
1,500
3,500
3,300
6,200
4,300
7,100
3,900
2,700
2,400
4,800
4,700
600
400
600
700
300
300
200
350
–
200
300
400
300
300
700
200
300
500
400
606
367
199
167
199
182
843
136
85
293
188
353
628
498
127
248
136
367
267
96
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Note 9 – Investment properties (continued)
Independent
Valuation
and Carrying
Amount
2005
$’000
Cost
Including
Additions
$’000
4,055
1,792
3,207
2,358
6,874
4,999
6,885
4,237
1,698
3,395
1,792
5,187
5,753
9,148
5,376
8,205
5,659
4,527
1,037
4,800
2,200
3,700
3,000
8,300
5,600
8,000
4,800
1,900
3,900
1,900
5,900
6,700
10,300
6,500
9,600
6,700
5,300
1,100
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
500
300
400
500
900
(100)
600
300
100
200
(200)
400
700
300
700
900
600
400
–
245
108
93
142
526
701
515
263
102
305
308
313
247
852
424
495
441
373
63
Carrying
Amount
2004
$’000
4,300
1,900
3,300
2,500
7,400
5,700
7,400
4,500
1,800
3,700
2,100
5,500
6,000
10,000
5,800
8,700
6,100
4,900
1,100
167,195
194,150
179,600
14,550
12,405
3,301
2,452
3,301
1,886
1,603
2,169
1,603
3,773
4,433
4,000
3,150
4,100
2,350
1,950
2,850
2,100
4,850
5,500
3,800
2,900
3,900
2,200
1,800
2,600
1,800
4,400
5,200
200
250
200
150
150
250
300
450
300
499
448
599
314
197
431
197
627
767
24,521
30,850
28,600
2,250
4,079
3,961
9,903
9,431
1,981
9,714
5,093
8,300
2,546
6,979
12,166
5,000
12,600
11,700
2,700
12,400
6,500
10,900
3,400
9,200
15,100
4,300
10,600
10,100
2,100
10,300
5,500
8,900
2,800
7,400
13,000
700
2,000
1,600
600
2,100
1,000
2,000
600
1,800
2,100
339
697
669
119
586
407
600
254
421
834
Date
Acquired
Nov 03
Nov 03
Nov 03
Nov 03
Jun 04
Nov 03
Nov 03
Jun 04
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Property
Queensland (continued)
Miami Hotel, Miami
Mount Pleasant Tavern, Mackay
Mt Gravatt Hotel, Mount Gravatt
Newmarket Hotel, Cairns
Noosa Reef Hotel, Noosa Heads
Oxford 152, Bulimba
Palm Beach Hotel, Palm Beach
Pelican Waters, Caloundra
Petrie Hotel, Petrie
Prince of Wales Hotel, Nundah
Racehorse Hotel, Booval
Redland Bay Hotel, Redland Bay
Royal Exchange Hotel, Toowong
Springwood Hotel, Springwood
Stones Corner Hotel, Stones Corner
Sunnybank Hotel, Sunnybank
Vale Hotel Motel, Townsville
Wilsonton Hotel, Toowoomba
Woree Tavern, Cairns
Total
Queensland Properties
South Australia
Aberfoyle Hub, Aberfoyle Park
Enfield, Clearview
Eureka, Salisbury
Exeter, Exeter
Finsbury, Woodville North
Gepps Cross, Blair Athol
Hendon, Royal Park
Ramsgate, Henley Beach
Stockade Tavern, Salisbury
Total
South Australian Properties
Victoria
Ashley, Braybrook
Bayswater, Bayswater
Blackburn, Blackburn
Blue Bell, Wendouree
Burvale, Nunawading
Club Hotel, Ferntree Gully
Cramers, Preston
Daveys, Frankston
Deer Park, Deer Park
Doncaster Hotel/Motel, Doncaster
97
notes to the financial statements
Note 9 – Investment properties (continued)
Cost
Including
Additions
$’000
3,301
4,716
4,716
3,112
9,620
6,885
8,111
8,583
1,509
7,168
3,961
8,017
8,488
9,809
2,735
2,641
4,338
2,169
3,112
10,846
6,319
4,527
2,641
12,732
5,376
5,470
5,564
2,264
12,544
2,735
6,131
Date
Acquired
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Nov 03
Independent
Valuation
and Carrying
Amount
2005
$’000
4,200
6,300
6,900
4,300
12,000
8,500
10,000
10,600
2,100
9,800
4,900
9,500
10,500
12,600
3,800
3,400
5,500
2,900
4,000
14,400
7,800
6,200
3,800
15,900
6,800
7,000
7,100
3,200
15,100
3,700
7,100
Asset
Revaluation
Reserve
Increase/
(Decrease)
2005
$’000
Asset
Revaluation
Reserve
Increase/
(Decrease)
2004
$’000
700
1,300
1,800
1,000
1,800
1,100
1,300
900
500
2,100
500
900
1,500
2,100
900
600
900
600
600
2,800
900
1,400
1,000
2,200
1,000
1,200
1,200
800
1,600
700
600
199
284
384
188
580
515
589
1,117
91
532
439
583
512
691
165
159
262
131
288
754
581
273
159
968
424
330
336
136
956
265
369
Carrying
Amount
2004
$’000
3,500
5,000
5,100
3,300
10,200
7,400
8,700
9,700
1,600
7,700
4,400
8,600
9,000
10,500
2,900
2,800
4,600
2,300
3,400
11,600
6,900
4,800
2,800
13,700
5,800
5,800
5,900
2,400
13,500
3,000
6,500
250,214
319,400
268,400
51,000
18,186
Nov 03
Nov 03
Nov 03
4,810
3,113
1,132
5,635
3,465
1,300
5,100
3,300
1,200
535
165
100
290
188
67
9,055
10,400
9,600
800
545
509,741
625,000
550,200
74,800
40,459
Property
Victoria (continued)
Elsternwick, Elwood
Eltham, Eltham
Ferntree Gully Hotel, Ferntree Gully
Gateway, Corio
Keysborough, Keysborough
Mac’s Melton, Melton
Meadow Inn, Fawkner
Mitcham, Mitcham
Morwell, Morwell
Mountain View, Glen Waverly
Olinda Creek, Lilydale
Pier, Frankston
Plough, Mill Park
Prince Mark, Doveton
Rifle Club, Williamstown
Rose Shamrock & Thistle, Reservoir
Royal Essendon, Essendon
Royal Exchange, Traralgon
Royal Sunbury, Sunbury
Sandbelt Club, Moorabbin
Sandown Park, Noble Park
Sandringham, Sandringham
Somerville, Somerville
Stamford, Rowville
Sylvania, Campbellfield
Tudor Inn, Cheltenham
Vale, Mulgrave
Victoria, Shepparton
Village Green, Mulgrave
Westmeadows, Westmeadows
Young & Jackson, Melbourne
Total
Victorian Properties
Western Australia
Queens Tavern, Highgate
Sail & Anchor Hotel, Freemantle
Wanneroo Villa Tavern, Wanneroo
Total
Western Australian Properties
Total
Investment Properties
98
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Note 9 – Investment properties (continued)
Valuation of investment properties
The basis of valuation of investment properties is fair value being the amounts for which the properties
could be exchanged, on a stand alone property by property basis, between willing parties in an arm’s length
transaction, based on current prices in an active market for similar properties in the same location and
condition and subject to similar leases.
Independent valuations
In accordance with the Consolidated Entity’s policy of independently valuing at least one-third of its property
portfolio annually, all of the Consolidated Entity’s investment properties were independently valued as at
30 June 2005. The revaluations were completed by Peter Spiller (AAPI) of DTZ Australia (NSW) Pty Ltd.
Investment properties
All investment properties are freehold and 100% owned by the Consolidated Entity and are comprised of
land, buildings and fixed improvements. The plant, equipment and liquor and gaming licenses are owned by
the tenant.
Leasing arrangements
The investment properties are leased to a single tenant under long-term operating leases with rentals payable
monthly in advance.
Conditional acquisition of development properties
During November 2003 the Consolidated Entity entered into conditional sale contracts with subsidiaries of
Foster’s Consolidated Entity Limited to acquire seven properties that were under development at the time.
The conditional sale contracts are conditional upon satisfactory completion of the developments. At 30 June
2005, four of the properties are yet to be acquired. (Refer Note 10 for further information).
Note 10 – Development properties – loans, deposits and costs
As at 30 June 2005:
Property
Deposits at 10%
of Purchase Price
$’000
Loans to Foster’s
Group Limited
$’000
Acquisition
Costs
$’000
Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Non-Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Burleigh Heads Hotel, Burleigh Heads, QLD
Parkway Hotel, Frenchs Forest, NSW
Total
–
–
–
426
879
657
638
2,600
2,600
3,832
7,914
11,746
–
–
5,915
5,748
11,663
23,409
–
–
–
74
152
114
110
450
450
Total Cost
$’000
3,832
7,914
11,746
500
1,031
6,686
6,496
14,713
26,459
99
notes to the financial statements
Note 10 – Development properties – loans, deposits and costs (continued)
As at 30 June 2004:
Property
Deposits at 10%
of Purchase Price
$’000
Loans to Foster’s
Group Limited
$’000
Acquisition
Costs
$’000
Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Non-Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Burleigh Heads Hotel, Burleigh Heads, QLD
Parkway Hotel, Frenchs Forest, NSW
Total
Note 11 – Interest bearing liabilities
–
–
–
426
879
657
638
2,600
2,600
Commercial mortgage backed securities (CMBS)
ALE Notes on issue
3,832
7,914
11,746
–
–
5,915
5,748
11,663
23,409
–
–
–
74
152
114
110
450
450
Total Cost
$’000
3,832
7,914
11,746
500
1,031
6,686
6,496
14,713
26,459
2005
$’000
330,000
150,000
480,000
2004
$’000
330,000
150,000
480,000
The CMBS borrowings are secured by, among other things, first ranking real property mortgages over of the
investment properties and have scheduled maturity dates of 10 November 2008 and final maturity dates of
10 November 2010. A fixed interest rate of 6.66% applies to $100 million of the CMBS borrowings.
The ALE Notes are unsecured with a maturity date of 30 September 2011 and a fixed interest rate of 7.265%.
The Consolidated Entity’s variable interest rate exposure is fully hedged (100% fixed) up until 10 November
2008 on current borrowings. This has been achieved by the use of variable rate borrowings swapped to fixed
rates by using interest rate swaps.
The Consolidated Entities weighted average interest rate as at year end was:
CMBS – $230 million variable rate
CMBS – $100 million fixed rate
CMBS – $330 million weighted average of variable and fixed
ALE Notes – $150 million fixed
Total weighted average interest rate of CMBS and ALE Notes
Net impact of swaps – net $230 million (refer Note 22(d))
Total Group weighted average interest rate
2005
%
6.400
6.660
6.479
7.265
6.724
(0.824)
6.527
2004
%
6.210
6.660
6.346
7.265
6.633
(0.227)
6.524
100
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Note 12 – Asset Revaluation Reserve
Note
2005
$’000
2004
$’000
(i) Nature and purpose of reserve
The assets revaluation reserve is used to record increments and
decrements in the fair vale value of investment properties.
(ii) Movements in reserve
Balance at the beginning of the financial year
Movements in valuations of investment properties
9
Balance at the end of the financial year
Note 13 – Segment information
40,459
74,800
115,259
–
40,459
40,459
Business segment
The Consolidated Entity operates solely in the property investment and property funds management industry.
Geographical segment
The Consolidated Entity owns property solely within Australia.
Note 14 – Events occurring after reporting date
The directors are not aware of any significant events since the reporting date.
Note 15 – Impact of adopting Australian equivalents to International Financial Reporting Standards
(“IFRS”)
The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards
(IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued
Australian equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB
interpretations originated by the International Financial Reporting Interpretations Committee or the former
Standing Interpretations Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS.
The adoption of AIFRS will be first reflected in the Group’s financial statements for the half-year ending
31 December 2005 and the year ending 30 June 2006.
To comply with the AIFRS for the first time the Trust will be required to restate its comparative financial
statements to reflect the application of AIFRS to that comparative period. Most adjustments required on
transition to AIFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.
The Group has initiated a project to manage the transition to AIFRS, under the management of the Group
Financial Controller. All of the AIFRS have been analysed and the required accounting policy changes have
been identified. In some cases, choices of accounting policies are available, including elective exemptions
under Accounting Standard AASB1 First-time Adoption of Australian Equivalents to International Financial
Reporting Standards. These choices have been analysed to determine the most appropriate accounting policy
for the Group.
The known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been
prepared using AIFRS are set out below. The expected material financial effects of adopting AIFRS are shown
for each line item in the statement of financial performance and the statement of financial position with
descriptions of the differences. No material impacts are expected in relation to the statement of cash flows.
Although the adjustments disclosed in this note are based upon management’s best knowledge of
expected standards and interpretations and current facts and circumstances, the adjustments may change.
For example, amended or additional standards or interpretations may be issued by the AASB and IASB.
Therefore, until the Group prepares its first full AIFRS financial statements the possibility cannot be excluded
that the accompanying disclosures may have to be adjusted.
101
notes to the financial statements
Note 15 – Impact of adopting Australian equivalents to International Financial Reporting Standards
(“IFRS”) (continued)
As a result of the Trust taking advantage of the exemption available under AASB 1 to apply AASB 132
Financial Instruments : Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and
Measurement only from 1 July 2005, it is managements view that AIFRS would have no impact on the
statements of financial performance or statement of financial position of the parent entity as at 30 June 2005.
The following impacts relate to the consolidated entity only.
Impact on the consolidated statement of financial performance
Existing AGAAP
2005
$’000
Effect of Change
2005
$’000
Note
AIFRS
2005
$’000
Revenue and expenses from ordinary activities
Property rental income & loan interest
Revaluation of investment properties
Interest income
(a)
Total revenue from ordinary activities
Borrowing costs excluding amortisation
Borrowing costs (non-cash) amortisation
Management fess
Land tax expense
Property valuation expenses
Other expenses
Total expenses from ordinary activities
Profit from ordinary activities before income
tax expenses
Income tax (benefit)
Net profit after income tax attributable to
Stapled security holders of the Group
43,766
–
3,385
47,151
31,523
6,248
2,185
1,139
243
400
41,738
5,413
(10)
–
74,800
–
74,800
–
–
–
–
–
–
–
43,766
74,800
3,385
121,951
31,523
6,248
2,185
1,139
243
400
41,738
74,800
80,213
–
(10)
5,423
74,800
80,223
Net increment in asset valuations
(a)
74,800
(74,800)
–
Total revenues, expenses and valuation adjustments
attributable to stapled security holders of the Group
recognised directly in equity
Total changes in equity attributable to stapled security
holders of the Group other than those resulting from
transactions with stapled security holders as owners
Distributions paid and payable
74,800
(74,800)
74,800
80,223
11,688
–
–
80,223
11,688
Cents
Cents
Cents
Basic and diluted earnings per ordinary unit
Distributions per stapled security held for the full financial year
5.97
12.85
–
–
88.35
12.85
102
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Note 15 – Impacts of adopting Australian equivalents to IFRS (continued)
Impact on the consolidated statement of financial position
Existing AGAAP
2005
$’000
Effect of Change
2005
$’000
Note
Current Assets
Cash assets
Receivables
Loan to related party
Prepayments and other assets
Loans
Total Current Assets
Non-Current Assets
Property investments
Development property – loans, deposits and costs
Prepayments
Deferred tax asset
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Other
Total Current Liabilities
Non-Current Liabilities
Interest bearing liabilities – CMBS
Interest bearing liabilities – ALE Notes
ALE Notes premium
Deferred tax liability
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Asset revaluation reserve
Accumulated (losses) / retained profits
Total Equity
Net assets per ordinary unit
Net assets per no income voting unit (NIVUS)
19,321
199
350
5,762
11,746
37,378
625,000
14,713
13,585
1
653,299
690,677
6,554
5,993
303
12,850
330,000
150,000
783
–
480,783
493,633
197,044
81,787
115,259
(2)
197,044
$
2.07
1.00
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(115,259)
115,259
–
$
–
–
(a)
(a)
AIFRS
2005
$’000
19,321
199
350
5,762
11,746
37,378
625,000
14,713
13,585
1
653,299
690,677
6,554
5,993
303
12,850
330,000
150,000
783
–
480,783
493,633
197,044
81,787
–
115,247
197,044
$
2.07
1.00
(a) Investment properties
Under the new AASB140 Investment Property, if investment properties are measured at fair value, net of
applicable tax, gains or losses arising from changes in fair value are recognised in the net profit or loss for the
period in which they arise.
103
notes to the financial statements
Note 15 – Impacts of adopting Australian equivalents to IFRS (continued)
(a) Investment properties (continued)
This will result in a change to the current accounting policy which requires that fair value increments be
recognised in the asset revaluation reserve in the statement of financial position, except to the extent that
they reverse a decrement previously recognised as an expense in the profit and loss account, and fair value
decrements be recognised in the profit and loss account, except to the extent that they reverse an increment
previously recognised in the asset revaluation reserve.
If the policy required by AASB 140 had been applied during the year ended 30 June 2005 retained earnings
at 30 June 2005 would have been $115,259,000 higher, revaluation of investment properties for the year
ended 30 June 2005 would have been $74,800,000 higher and the asset revaluations reserve at 30 June
2005 would have been $115,529,000 lower.
(b) Financial instruments
The Trust will be taking advantage of the exemption available under AASB 1 to apply AASB 132 Financial
Instruments : Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and
Measurement only from 1 July 2005. This allows the Trust to apply previous Australian generally accepted
accounting principles (Australian GAAP) to the comparative information of financial instruments within the
scope of AASB 132 and AASB 139 for the 31 December 2005 and 30 June 2006 financial reports.
Changes applicable from 1 July 2005:
Fair value of interest rate swaps
In accordance with AASB 139, interest rate swaps as derivatives are initially recognised at fair value on the
date the swap agreements are entered into and are subsequently remeasured to their fair value. Changes
in fair value are either taken to the statement of financial performance or an equity reserve, depending on
whether the criteria for hedging accounting are satisfied at the transition date (1 July 2005). The Consolidated
Entity does not intend on achieving hedge accounting, changes in the fair value of the swaps will be
recognised in the statement of financial performance.
Capitalised borrowing establishment costs (lead manager’s incentive fee)
Under AASB 139, capitalised borrowing establishment costs will be reclassified to interest bearing liabilities
thereby reducing the value of the related liability. Amortisation of the capitalised borrowing costs, which will
accrete the interest bearing liabilities to the principal payable at maturity, will change from a straight-line basis
to an effective yield basis. This will result in lower amortisation charges through the statement of performance
at the start of the debt facility term and higher amortisation charges at the end the debt facility term.
Loans and receivables and financial liabilities
Their classifications will remain unchanged. Consistent with AASB 139, measurement of these instruments will
initially be at fair value with subsequent measurement at amortised cost, using the effective interest rate method.
Consequently, the amortisation of the redemption premium on the ALE Notes will change from a straight line
basis to an effective yield basis to accrete the ALE Notes to the principal payable at maturity.
Disclosure and presentation of equity
Currently “Units on Issue” are treated as equity. According to AASB 132, “Units on Issue” are treated as
a financial liability if the constitution requires the scheme to buy back units at the option of the unit holder.
This occurs at the termination date of the Trust and Sub-Trust and is set at the 80th anniversary of the
commencement date less 1 day.
In order to resolve this, the wording in the trust constitutions was changed on 28 June 2005 to ensure the
“Units on Issue” satisfy the criteria for them to continue to be classified as equity. Management is of the
view that going forward the debt and equity classification applicable to the “Units on Issue” and the Group’s
stapled securities will remain unchanged under AIFRS.
Note 16 – Full financial report
Further financial information can be obtained from the full annual financial report. The full annual financial
report and auditors report will be sent to security holders on request, free of charge. Please call 1300 302 429
(freecall) and for International +61 3 9415 4141, and a copy will be forwarded to you. Alternatively, you can
access the full annual financial report and the annual concise financial report via the internet on our website:
www.alegroup.com.au
104
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
directors’ declaration
The directors declare that in their opinion, the Concise Financial Report for the Trust for the year ended
30 June 2005 as set out on pages 89 to 104 complies with accounting standard AASB 1039: Concise
Financial Reports.
The financial statements and specific disclosures included in this concise financial report have been derived
from the full financial report for the year ended 30 June 2005.
The concise financial report cannot be expected to provide as full an understanding of the financial
performance, financial position and financing and investing activities of the combined entity as the full
financial report, which as indicated in Note 16, is available on request.
The directors have been given the declarations by the Managing Director and Group Financial Controller and
Assistant Company Secretary, as Chief Executive Officer and Chief Financial Officer equivalents, as required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 6th day of September 2005
105
Independent audit report to the unitholders of Australian Leisure and Entertainment
Property Trust
Matters relating to the electronic presentation of the audited financial report
This audit report relates to the concise financial report of Australian Leisure and Entertainment Property
Trust for the financial year ended 30 June 2005 included on ALE Property Group’s web site. The directors
of Australian Leisure and Entertainment Property Management Limited are responsible for the integrity
of the ALE Property Group’s web site. We have not been engaged to report on the integrity of this web
site. The audit report refers only to the financial report identified below. It does not provide an opinion
on any other information which may have been hyperlinked to/from the financial report. If users of
this report are concerned with the inherent risks arising from electronic data communications they are
advised to refer to the hard copy of the audited financial report to confirm the information included in the
audited financial report presented on this web site.
Audit opinion
In our opinion, the concise financial report of Australian Leisure and Entertainment Property Trust (the
Trust) for the year ended 30 June 2005 complies with Australian Accounting Standard AASB 1039:
Concise Financial Reports.
This opinion must be read in conjunction with the rest of our audit report.
Scope
The financial report and directors’ responsibility
The concise financial report comprises the consolidated statement of financial position, consolidated
statement of financial performance, consolidated statement of cash flows, discussion and analysis and
notes to the financial statements and the directors’ declaration for Australian Leisure and Entertainment
Property Trust (the Trust) for the year ended 30 June 2005.
The directors of Australian Leisure and Entertainment Property Management Limited (the Responsible
Entity) are responsible for the preparation and presentation of the financial report in accordance with
Australian Accounting Standard AASB 1039: Concise Financial Reports.
Audit approach
We conducted an independent audit of the concise financial report in order to express an opinion to the
unitholders of the Trust. Our audit was conducted in accordance with Australian Auditing Standards,
in order to provide reasonable assurance as to whether the concise financial report is free of material
misstatement. The nature of an audit is influenced by factors such as the use of professional judgement,
selective testing, the inherent limitations of internal control, and the availability of persuasive rather
than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements
have been detected. For further explanation of an audit, visit our website http://www.pwc.com/au/
financialstatementaudit.
We also performed an independent audit of the full financial report of the Trust for the financial year
ended 30 June 2005. Our audit report on the full financial report was signed on 16 August 2005 and was
not subject to any qualification.
In conducting our audit of the concise financial report, we performed procedures to assess whether in all
material respects the concise financial report is presented fairly in accordance with Australian Accounting
Standard AASB 1039: Concise Financial Reports.
We formed our audit opinion on the basis of these procedures, which included:
– testing that the information included in the concise financial report is consistent with the information in
the full financial report, and
– examining, on a test basis, information to provide evidence supporting the amounts, discussion and
analysis, and other disclosures in the concise financial report which were not directly derived from the
full financial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the concise financial report.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional
ethical pronouncements and the Corporations Act 2001.
PricewaterhouseCoopers
Sydney
6 September 2005
S J Hadfield
Partner
106
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Level 8, O’Connell House
15-19 Bent Street
Sydney NSW 2000
Australia
Telephone: + 61 02 8231 8588
Facsimile: + 61 02 8231 8500
Web:
www.alegroup.com.au
15 August, 2005
The Directors
Australian Leisure and Entertainment Property
Management Limited
Level 8
15-19 Bent Street
Sydney NSW 2000
Subject:
Management Statement Letter to Directors on ALE Property Group’s –
Financial Reports for the year ended 30 June 2005.
Dear Directors,
We confi rm to the best of our knowledge and belief that the Financial Reports for the year ended
30 June 2005 of:
– ALE Property Group
– Australian Leisure and Entertainment Property Management Limited
– Australian Leisure and Entertainment Property Trust and its controlled entities
– ALE Finance Company Pty Limited
present a true and fair view, in all material respects, of the fi nancial condition and operational results of
their respective entities and are in accordance with relevant accounting standards and requirements of the
Corporations Act 2001.
The above statement is founded on a system of risk management and internal compliance and control which
implements the policies adopted by the Board.
We confi rm that all risk management and internal compliance and control systems are operating effi ciently
and effectively in all material respects.
Yours sincerely
Andrew Wilkinson
Andrew Wilkinson
Andrew Wilkinson
Andrew Wilkinson
Managing Director
Darren Barkas
Darren Barkas
Darren Barkas
Darren Barkas
Group Financial Controller
& Assistant Company Secretary
Brendan Howell
Brendan Howell
Brendan Howell
Brendan Howell
Company Secretary
Australian Leisure and Entertainment Property Management Limited ABN 45 105 275 278
Australian Leisure and Entertainment Property Trust ASBN 106 063 049
107
stapled security holder information
Voting rights
The voting rights are one vote per stapled security.
Distribution of stapled security holders as at 23 August 2005
Number of Stapled Securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – over
Total
Number of Stapled
Security Holders
74
758
564
1,134
59
2,589
Stapled
Securities Held
55,523
2,522,610
4,925,103
33,548,559
49,748,305
90,800,100
% of
Stapled Securities
0.06%
2.78%
5.42%
36.95%
54.79%
100.00%
There were five stapled security holders holding parcels of stapled securities with a value of less than $500.
Top 20 largest stapled security holders as at 23 August 2005
Rank Stapled Security Holder
Number of Stapled
Security Holders
% of
Stapled Securities
11.99%
8.16%
5.54%
4.86%
3.56%
2.22%
2.05%
1.93%
1.26%
0.87%
0.76%
0.72%
0.67%
0.55%
0.55%
0.51%
0.42%
0.38%
0.29%
0.28%
47.57%
Number of
Stapled Securities
9,595,726
6,418,559
16,014,285
J P Morgan Nominees Australia Limited
ANZ Nominees Limited
Fortis Clearing Nominees P/L
Lady Jean Falconer Griffin
RBC Global Services Australia Nominees Pty Limited
RBC Global Services Australia Nominees Pty Limited
1 National Nominees Limited
2
3
4
5 Westpac Custodian Nominees Limited
6 Mr Kenneth Charles Ferris + Mrs Dorothy May Ferris
7
8
9
10 Cogent Nominees Pty Limited
11 Citicorp Nominees Pty Limited
12 Pineross Pty Ltd
13 Argo Investments Limited
14 Bond Street Custodians Limited
15 Caergwrle Investments Pty Ltd
16 Mrs Shemara Wikramanayake
17 Bond Street Custodians Limited
18 Mr Michael John Steven Arthur
19 Bow Lane Nominees Pty Ltd
20 Australian Executor Trustees Limited
Total
10,884,704
7,412,593
5,034,692
4,417,420
3,236,434
2,015,367
1,859,120
1,750,967
1,146,124
789,786
688,430
650,000
610,000
500,000
500,000
460,500
385,000
341,064
264,503
253,255
43,199,959
Substantial stapled security holders (notices received as at 23 August 2005)
Stapled Security Holder
UBS Nominees Pty Limited
Deutsche Bank Group
Total
108
AUSTRALIAN LEISURE AND ENTERTAINMENT PROPERTY TRUST ANNUAL CONCISE REPORT 30 JUNE 2005
Pelican Waters Hotel, Qld
New Brighton Hotel, NSW
During the year the ownership of the
portfolio’s tenant changed hands. With the
tenant now controlled by major retailer
Woolworths Limited (75%) and Bruce
Mathieson Group (25%), our income quality
and value has been enhanced. ALE Property
Group is now in very good company.
investor information
corporate directory
Stock Exchange Listing
The ALE Property Group (ALE) is listed on the Australian Stock Exchange
(ASX). Its stapled securities are listed under ASX code: LEP and its ALE
Notes are listed under ASX code: LEPHB.
Distribution Reinvestment Plan
ALE has not established a distribution reinvestment plan.
Electronic Payment of Distributions
Security holders may nominate a bank, building society or credit union
account for payment of distributions by direct credit. Payments are
electronically credited on the payment dates and confi rmed by mailed
payment advice.
Security holders wishing to take advantage of payment by direct credit
should contact the registry for more details and to obtain an application form.
Publications
The Annual Report is the main source of information for stapled security
holders. In addition, a half-year report for the six months to December is
released to the ASX and posted on the ALE website in February each year.
The half year report is also mailed on request.
Periodically ALE may also send releases to the ASX covering matters of
relevance to investors. These releases are also posted to the ALE website.
Website
The ALE website, www.alegroup.com.au, is a useful source of information
for security holders. It includes details of ALE‘s property portfolio, current
activities and future prospects.
Annual Tax Statement
Accompanying the fi nal stapled security distribution payment, normally
in August each year, will be an annual tax statement which details the tax
deferred components of the year’s distribution.
Distributions
Stapled security distributions are paid twice yearly, normally in February
and August.
Annual General Meeting
The Annual General Meeting of the Company and a meeting of the Trust will
be held at the Barnet Room, Level 6, The Westin, Sydney on 21st October
2005 at 10am.
A copy of the Notice of Meetings will be mailed to stapled security holders
and made available to download from ALE’s website in September 2005.
Security Holder Enquiries
Please contact the registry if you have any questions about your holding
or payments.
Registered Offi ce
Level 8, 15-19 Bent Street
Sydney NSW 2000
Telephone (02) 8231 8588
Company Secretary
Mr Brendan Howell
Level 8, 15-19 Bent Street
Sydney NSW 2000
Telephone (02) 8231 8588
Auditors
PricewaterhouseCoopers
201 Sussex Street
Sydney NSW 2000
Lawyers
Allens Arthur Robinson
2 Chifl ey Square
Sydney NSW 2000
Custodian (of Australian Leisure and
Entertainment Property Trust)
Trust Company of Australia Limited
Level 4, 35 Clarence Street
Sydney NSW 2000
Trustee (of ALE Direct Property Trust)
Permanent Trustee Company Limited
Level 4, 35 Clarence Street
Sydney NSW 2000
Registry
Computershare Investor Services Pty Ltd
Reply Paid GPO Box 7115
Sydney NSW 2000
Level 3, 80 Carrington Street
Sydney NSW 2000
Telephone 1300 302 429
Facsimile: (03) 9473 2500
www.computershare.com.au
Front and back cover: Breakfast Creek Hotel, Qld
contents
quality of income 2 23.5 year lease term 3 compounding value 4 acquisitions 5
prime locations 6 impressive results 8 chairman’s message 9 management team 10
managing director’s report 11 board of directors 18 corporate governance 19
fi nancial reports 21 management statement letter 107 stapled security holder information 108
investor information and corporate directory inside back cover
Designed and produced by Ross Barr & Associates Pty Limited
in good
company
ALE PROPERTY GROUP ANNUAL REPORT JUNE 2005
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