ASX ANNOUNCEMENT
Announcement No. 14/06
The Manager
Company Announcements
Australian Stock Exchange
27 September 2006
ALE PROPERTY GROUP (ALE)
ANNUAL REPORT 2006
Please find attached a copy of the ALE Annual Report that will be mailed to ALE’s
stapled security holders on Friday 29 September 2006.
For further information, please contact ALE’s Managing Director, Andrew Wilkinson
on (02) 8231 8588.
- Ends –
Contact:
Brendan Howell
Company Secretary
ALE Property Group
Ph. 02 8231 8588
Website: www.alegroup.com.au
Australian Leisure and Entertainment Property Management Limited ABN 45105 275 278
Australian Leisure and Entertainment Property Trust ARSN 106 063 049
ALE PROPERTY GROUP
ANNUAL REPORT JUNE 2006
A
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6
www.ALEGROUP.cOm.AU
raising
the bar
ALE PROPERTy GROUP OwNs
A PORTfOLiO Of 106 PUbs
LOcATEd ThROUGhOUT ThE
fivE mAiNLANd sTATEs
Of AUsTRALiA.
$300
million+
in under three years ALE’s initial
investor equity of around $91 million
has grown to more than $300 million
in market capitalisation and
distributions paid – growth that has
delivered well above other listed
property trusts
CONTENTS 7 Chairman’s message
13 management team
25 FinanCial reports
IBC investor inFormation anD Corporate DireCtory
/ 14 property portFolio
/ 103 management statement letter
/ 8 FinanCial highlights
/
/ 9 managing DireCtor’s report
/
22 BoarD oF DireCtors
/ 23 Corporate governanCe
/ 104 stapleD seCurity holDer inFormation
/
/
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 confirmed 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 final 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 Press Room, Lower Ground level, Radisson Hotel, Sydney at 10 am on
9 November 2006.
A copy of the notice of meeting will be mailed to stapled security holders and
made available to download from ALE’s website in late September 2006.
Security Holder Enquiries
Please contact the registry if you have any questions about your holding
or payments.
Registered Office
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
Deutsche Bank Place
Corner Hunter and Phillip Streets
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
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ALE sets high standards. In the
past three years we have consistently
outperformed all forecasts.
This year is no exception. Major initiatives have
enabled ALE to raise the bar again and deliver results
above expectations.
Our promise to stapled security holders is to continue
to look for opportunities that deliver outstanding value.
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capital (inflation) indexed bond.
2 commercial mortgage backed securities.
fY07 distribution
acquisition capacity.
During the year ALE completed a major refinancing.
Our new capital structure:
• partly matches ALE’s indexed lease assets with a Cib
• extends ALE’s debt maturities
• extends ALE’s term of fixed interest rates
• reduces and defers ALE’s refinancing risk
• reduces ALE’s credit margins
• increases ALE’s fY06 distributions and expected
• increases certainty of distribution growth for an extended period
• provides undrawn CMbs2 facilities to enhance future
h8yearaverage+
The refinancing also won an indusTry award for innovaTion, being:
/
/ The firsT cib To be included in a cMbs TransacTion
/
/
/
The firsT super-senior securiTy sTrucTure for boTh ausTralian cMbs and cib TransacTions
The firsT spliT MaTuriTy ausTralian cMbs To issue Tranches froM five years Through To 17.5 years
The longesT Tenor of cib issued by any lpT aT 17.5 years
lengthening ALE’s debt maturity and interest
rate hedging to an average eight years
The firsT capiTal (inflaTion) indexed bond (cib) issued by an ausTralian lpT
3
growing the
+portfolio value
h$66
millionh
$66 million increase in the value of the portfolio
including revaluations and two new acquisitions
berwick inn hoTel, Melbourne, vic
acquired aT a 6% discounT To currenT valuaTion
cbX hoTel, caloundra, qld
acquired aT a 16% discounT To currenT valuaTion
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to inflation.
ALE continued to build its portfolio with the
purchase of the historic Berwick Inn Hotel,
Melbourne. Established in 1857, the Berwick
Inn Hotel is leased to Australian Leisure and
Hospitality (ALH) on terms similar to those on
ALE’s other 105 pubs.
Other highlights of ALE’s portfolio include:
• an increase in value to $77.6 million for the year
• acquisition of the completed CbX Hotel, Caloundra
• the continued expansion of operations by major tenant
ALH, thereby creating greater security for ALE
• remaining lease terms of more than 22 years
• increasing returns underpinned by rents indexed
h +
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outlook:
secure and
growing
+We continue to examine a number of potential new
and is based on our
“building blocks of certainty”
The above picTures do noT represenT currenT asseTs of ale
acquisitions, both in the pub sector and in other sectors
of the commercial real estate market, consistent with
our ongoing objective of acquiring quality property with
secure and long term rental income.
distribution growth
(multiple of Cpi)
68% gearing
(hedged for an average eight years)
A- tenant
(ALH 75% owned by Woolworths)
25 year lease term (22 years
remaining + 4x0 year options)
106 pubs/$717.6 million
(trading for an average 56 years)
6
CHAirMAn’s MEssAgE
Distributable profit for the year rose $2.9 million
to $4.6 million, representing a 25% increase
over the previous period. Distributions per
security totalled 6.0 cents for the year ending
30 June 2006. ALE expects to pay distributions
of at least 9.0 cents per stapled security for
the year ending 30 June 2007 on an unchanged
portfolio basis.
dear investor,
on behalf of your board, it is my
pleasure to report to you on the
performance for the year ending
30 June 2006.
Following on from last year’s strong
result, ALE has again achieved significant
growth in capital value and distributable
profit. Distributable profit for the year rose
$2.9 million to $14.6 million, representing
a 25% increase over the previous period.
The net profit of $52.2 million for the first
time included property revaluations (as
required under the new AIFRS accounting
standards).
For the year ended 30 June 2006, ALE
has paid distributions totalling 16 cents per
stapled security. This is 25% higher than
last year and 16% higher than guidance
provided by the Board in December 2005.
ALE expects to pay distributions of at least
19 cents per stapled security for the year
ending 30 June 2007 on an unchanged
portfolio basis.
For the third successive year, ALE is able
to report that the value of the portfolio
has increased – this year by $66.1 million,
or 10.2%.
The valuation increase was driven by
an uplift in the property market and
an improved market understanding of
the nature of ALE’s portfolio and lease
structure. ALE stands alone as a property
trust with a very long lease expiry and a
very high quality rental income stream.
ALE invested significant Board and
management time and security holder
money investigating acquisition
opportunities that matched ALE’s
investment strategy.
In February 2006, ALE purchased the
historic Berwick Inn Hotel, Victoria in
its first acquisition since listing but,
in applying its patient and disciplined
approach, ALE did not proceed with
a number of other opportunities. ALE
believes that the current market’s strength
has encouraged others to take pricing and
risk positions which your Board was not
prepared to entertain.
Capital management has been high on the
agenda this year. On 1 September 2005, at
the absolute low point of the interest rate
cycle, ALE extended its interest rate hedging
to provide further assurance of future
distributions to investors. In May 2006, ALE
completed an award-winning refinancing
of its senior debt facilities. “InSTO”
magazine recognised ALE for its innovative
debt structure, which included the first use
of an AAA rated Capital Indexed Bond by
an Australian listed property trust.
The key benefits of the debt refinancing are:
•
•
•
a reduction in ALE’s cash interest
payments;
a lengthening of ALE’s average debt
maturities and interest rate hedging
terms; and
the incorporation of a partial inflation-
linked interest component, which matches
ALE’s inflation-linked rental income.
When combined with ALE’s growth in
property income, the results of the debt
refinancing are:
•
•
•
an increase in the distribution paid for
June 2006;
a further increase in the expected
distribution for June 2007; and
a lower expected volatility of long-term
distributions.
I express my gratitude to Managing
Director Andrew Wilkinson and his
management team for their continued
excellent performance this year. In
particular, the team’s innovation in capital
management during the year will provide
substantial long-term benefits to stapled
security holders.
The Board continues to review its
corporate governance functions in light of
market best practice. ALE strengthened its
compliance and risk management function
by appointing David Lawler in December
2005 as an independent member of its
Audit, Compliance and Risk Management
Committee. Details of David’s experience
are provided on page 29.
This year’s annual general meeting will
be held at the Radisson Hotel, Sydney at
10 am on 9 november 2006. An agenda
will be sent out to stapled security holders
in advance of the meeting.
Once again, thank you for your continued
support of ALE.
peter warne
Chairman
7
finAnCiAL HigHLigHTs
1 FY04 effectively commenced november 2003.
2 Distributable Profit includes add backs for non-cash accounting items.
3 Total Liabilities as a % of Total Assets.
4 At 30 June.
$8.0m
7.50¢
$576.7m
80%
100%
0.40%
$1.31
$1.41
distributable profit increased to
$4.6 million for fY06
distributable profit2
distribution per stapled security
portfolio value
gearing3
Tax deferred distribution
Management expense ratio
stapled security price4
net assets per stapled security
$4.6
millionh
+distributable profit compared to fy05
distributable profit fy2005
increased property income
increased interest income
reduced Management costs
increased land Tax
acquisition costs1
refinancing benefits
distributable profit fy2006
Major announceMenTs
29 augusT 2006
• June full-year resulTs
• June full-year reporT
6 april 2006
• ale acquires berWick inn hoTel
• MaJor debT refinancing plan
21 february 2006
• deceMber half-year resulTs
• deceMber half-yearly reporT
12 july 2006
• ale Wins insTo aWard for refinancing
15 june 2006
• increase in properTy valuaTions
• final disTribuTion declaraTion
• fy07 disTribuTion guidance
8 May 2006
• refinancing final resulTs
1 net of recoveries.
and neT asseTs
8
fy041
fy05
fy06 change
$11.7m
12.85¢
$651.5m
72%
100%
0.24%
$2.06
$2.17
$14.6m
16.0¢
$2.9m h
3.15¢ h
$717.6m $66.1m h
4% i
68%
100%
0.24%
$2.70
$2.64
$0.64 h
$0.57 h
$m
11.7
1.8 h
0.0 h
0.6 h
(0.0) i
(1.6) i
2.1 h
14.6
15 deceMber 2005
• increase in properTy valuaTions
• inTeriM disTribuTion declaraTion
8 noveMber 2005
• cpi based renTal increases
24 ocTober 2005
• agM 2005 resulTs
1 sepTeMber 2005
• exTension of inTeresT raTe hedging
Managing Director’s report
i am delighted to report to you for the third
successive year a very pleasing result for aLe.
significant increases in distributions and property
values have been achieved, together with a reduction
in risk and ongoing interest costs through an
innovative capital management programme.
Capital management
In FY06 ALE made use of the flexibility
built into its 2003 senior debt arrangements
and refinanced its existing commercial
mortgage backed securities (CMBS) in
favour of a more efficient, longer-term
and asset-matched debt structure.
In a debt refinancing which won the
“InSTO” asset backed security award,
ALE is the first Australian listed property
trust to issue (AAA rated) Capital Indexed
Bonds (CIBs).
The CIBs lower ALE’s cash interest
payments, extend ALE’s debt and interest
rate hedging terms while also matching
ALE’s interest expense to its inflation-
linked rental stream.
As at 30 June 2006 ALE’s gearing was
68.2%, which compares with 88.6%
at IPO and 71.5% at 30 June 2005.
Borrowings currently comprise:
$125 million of 2023, AAA rated Capital
Indexed Bonds (CIBs):
•
fixed interest rate is 3.40% p.a.
(including margin)
•
capital balance and interest increase
with national inflation (CPI), closely
matching the property rental profile.
$225 million of 2011 commercial
mortgage backed securities (CMBS):
•
current hedged interest rate is
6.034% p.a. (including margin).
thE AbovE pICtuRE DoES Not
REpRESENt A CuRRENt ALE ASSEt
Managing Director’s report
(continued)
Management expense $4.0 million
(up by 34%)
•
During the year ALE incurred a net
$1.6 million on costs associated with
an acquisition that did not proceed.
ALE pays land tax in Queensland only.
The small land tax increase this year was
due to the addition of the CBX Hotel,
Caloundra to ALE’s portfolio. All other
regular property outgoings are paid by
ALE’s tenant, Australian Leisure and
Hospitality Group Limited (ALH).
Net profit $52.2 million (AIFRS)
Under the Australian equivalents to
International Financial Reporting Standards
(AIFRS), the calculation of net profit for
ALE includes a number of non-cash and
therefore non-distributable items, including
in particular the revaluation of the property
portfolio during the period.
Offsetting this increase, ALE was able
to reduce management costs in other
areas by $0.6 million.
ALE’s internal management structure
enabled ALE’s management expense
ratio (MER) to be maintained at 0.24%.
This is one of the lowest in the listed
property trust (LPT) sector, which has
an average MER of around 0.6%.
Including these non-cash items, ALE’s net
profit for the year is $52.2 million, with the
major contributing factors being portfolio
revaluations of $50.3 million (up by 7.7%).
DTZ revalued 90 of ALE’s properties
•
during the year. Based upon advice
from DTZ, the directors revalued the
remaining properties in the portfolio
on a pro-rata basis.
•
•
•
Income
Expenses
Land tax $1.2 million (up by 1.1%)
•
Major contributors to distributable
profit include:
Interest income $1.2 million
(up by 0.5%)
•
Property income $47.6 million
(up by 3.5%)
•
Cash interest expense $29.0 million
(down by 7.4%)
•
The distribution for FY06 is 100% tax
deferred. The distribution for FY07 is also
expected to be 100% tax deferred.
ALE holds cash on deposit in order
to provide security for its senior debt
facilities and provide liquidity for its
ongoing operations.
ALE’s efficient cash management
combined with marginally increased
interest rates have led to higher interest
income during the year.
ALE’s total income from its properties
rose 3.5% in the year, driven by inflation
based rental increases averaging
2.96% across the portfolio and the
addition of rental income from ALE’s
new acquisition, the Berwick Inn
Hotel, Victoria.
(up by 24.6%)
For the year ending 30 June 2006 ALE
substantially increased its distributable
profit and has paid total distributions of
$14.5 million, or 16.0 cents per stapled
security. This is 24.5% higher than the
distribution for 2005 and 15.9% higher
than the guidance given halfway through
the year.
+Distributable profit $14.6 million
Reduction in expense due to lower cash
interest rate under the new financing
arrangements (from 10 May to
30 June).
Reduction in expense due to one-off
refinancing items (realisation of
interest rate swap benefits, less
refinancing costs).
Marginal increase in expense due to
100% debt funding of the Berwick Inn
Hotel purchase in February 2006.
10
•
•
•
•
•
Total portfolio value of $717.6 million,
represents revaluation increases
of $50.3 million or 7.7% over the
June 2005 figure, plus an additional
$15.9 million in respect of the purchase
of the Berwick Inn Hotel, Victoria.
The portfolio revaluations show an
improvement in the average portfolio
capitalisation rate to 6.57% (excluding
development properties).
The portfolio continues to be valued on
a single property basis and accordingly
excludes any premium that may be
evident from a portfolio valuation. DTZ’s
view is that a portfolio valuation would
show a premium based on the ability
of the properties to be sold in various
sized parcels to different sectors of the
property investor market.
$150 million of 2011 ALE Notes:
•
listed on the ASX (code LEPHB)
•
fixed interest rate is 7.265%
(including margin).
Accordingly, ALE’s FY07 weighted average
cash borrowing rate has reduced from
6.52% p.a. to 5.72% p.a. ALE’s average
weighted debt term has extended from
3.1 years to eight years.
The refinancing also improved ALE’s
interest cover ratios. The net cash flow
generated by ALE (rental income less
management expenses and land tax)
for FY07 is expected to cover net cash
interest obligations by 1.66 times.
This compares to a cover of 1.48 times
for FY06.
Acquisitions
ALE continues to seek suitable
opportunities to add to its existing
portfolio. During 2006, ALE selectively
reviewed a number of opportunities
that were consistent with the following
acquisition criteria:
•
long-term indexed leases
•
•
•
tenants with sustainable capacity
to pay rent
properties that are strategically
important to the tenant’s core business
other features that provide for the tenant
or third parties to assume significant
property risks and costs.
During the year ALE and its advisers spent
considerable time pursuing acquisition
opportunities which met ALE’s previously
specified investment criteria. In addition
to management time, ALE incurred a
net $1.6 million in due diligence costs
associated with an acquisition that did not
proceed. Whilst disappointing, ALE was
confident that its ultimate risk position and
pricing were at levels that did not sacrifice
security holder value.
ALE is in an excellent position to make
value accretive acquisitions, however,
management and the Board will continue
to be patient and disciplined to ensure
that the quality of its property holdings
are maintained.
100%
80%
60%
40%
20%
0%
D
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8%
7%
6%
5%
In October 2005, ALE acquired the
recently completed CBX Hotel, Caloundra
on Queensland’s Sunshine Coast under
its development agreement with Foster’s
Group Limited (Foster’s) and ALH. Two of
the remaining three properties are under
development by Foster’s and ALH, with
completion times as follows:
narrabeen Hotel, nSW
•
December 2006
•
Burleigh Heads Hotel, QLD
December 2007.
The Parkway Hotel, nSW is currently
the subject of discussion between ALE,
ALH and Foster’s. The outcome of those
discussions will be communicated to the
market on completion.
ALH and Foster’s are assuming the
development risk for each of these
three properties.
100
In February 2006, ALE purchased
the Berwick Inn Hotel, Victoria for
$15.0 million, adding its first property
to the portfolio since listing in
november 2003. As at June 2006, rent
represents 7.2% of the purchase price.
The property is leased to ALH on terms
equivalent to the leases in the remainder
of the portfolio. The Berwick Inn Hotel is a
landmark historic hotel in Victoria and adds
additional value to ALE security holders.
The property was independently valued at
$16.0 million at 30 June 2006.
80
60
pre-refinancing
40
20
post-refinancing*
6
0
0
2
7
0
0
2
8
0
0
2
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
1
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
amounts hedged pre-refinancing
additional amounts hedged as part of refinancing
6
0
0
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7
0
0
2
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7
0
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0
2
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* projection only: will change with changes in cpi from 3% p.a. assumed.
0
1
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11
Existing
New
100
0
100
0
100
0
80
20
60
24
54
24
23
25
10
25
0
25
0
25
0
25
0
25
0
25
0
25
0
25
0
25
0
25
0
25
8
7
6
5
Managing Director’s report
(continued)
Investment performance
ALE’s story remains based on the solid
foundations of:
•
long-term leases – certainty of rental
income
•
•
•
inflation indexation – strong likelihood
of rental growth
interest rate hedging – certainty of
cost containment, and
internal management – maximum
returns to investors.
These features provide:
•
security of distributions, and
•
relative certainty of distribution growth.
In the year under review, ALE’s stapled
security price increased from $2.06 to
$2.70. Combined with the distributions
paid, the total return for stapled security
holders over the year was 39.4%, making
ALE a standout performer when compared
to the LPT sector average of 17%.
Where some other property trusts
pay performance fees to external
managers, ALE’s significant current year
outperformance flows directly to its
stapled security holders.
outlook
The outlook for the year to June 2007 is
positive. Current expectations are for a CPI
increase of between 3.5% and 4% for the
year ending September 2006. The actual
CPI increase will be announced in late
October 2006 and will be reflected in rental
increases commencing november 2006.
This increase in rent is expected to have
a positive impact on the value of the
property portfolio and therefore the net
Assets per stapled security.
Interest savings achieved through the
refinancing will continue to have a positive
impact on future earnings and distributable
cash flow. Management will also continue
to work to identify opportunities where
further interest hedging and savings may
be achieved.
As part of the refinancing (described
above) ALE obtained indicative rating
agency approval for further issuance
of $74 million of senior debt which
would enable ALE to raise funds for an
acquisition if required.
This capacity, combined with one of
the lowest costs of capital in the market,
leaves ALE well positioned to participate
in additional transactions that will provide
value to ALE stapled security holders.
other commercial property sectors.
ALE will continue to pursue value
accretive opportunities.
Given ALE’s current interest rate hedging
and gearing position, inflation indexed
increases in property rentals substantially
flow through to stapled security holders at
a distribution growth rate equivalent to a
multiple of inflation.
In addition ALE reaffirms guidance
given on 15 June 2006 that, on an
unchanged portfolio basis, it expects to
pay distributions of at least 19.0 cents for
the full year ending 30 June 2007. This
guidance is based upon the distribution of
around 4.0 cents per security of capitalised
interest accruing to the balance of the
CIBs. In future years the Board of ALE will
make a decision regarding the distribution
of the CIBs’ capitalised interest having
regard to acquisition opportunities, gearing
levels and other matters.
Once again, I thank ALE’s Board,
management team and investors for
continued support in what has been
a year of significant performance.
In terms of acquisitions, ALE remains
focused on property with long-term
secure leases both in the pub and
Andrew Wilkinson
Managing Director
p.a.
16%
*
12%
8%
4%
0%
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(
s&p/asX 200 Listed property trusts
fy07 Distribution yield
5 year Distribution growth (p.a.)
fy07 Distribution yield
5 year Distribution growth (p.a.)
source: Macquarie, september, 2006.
note: this is not a forecast by aLe property group.
* aLe’s distribution for 2007 is expected to be 100% tax deferred.
this may provide some investors with additional after tax returns.
12
16
12
8
4
0
ManageMent teaM
ANDREW SLADE
bRENDAN hoWELL
DARREN bARkAS
Andrew Wilkinson
BBus, CFTP
Managing Director
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 banking, corporate finance and funds
management.
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
eight 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.
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
Andrew joined ALE in July 2005.
Andrew has 16 years experience in
investment banking and structured finance.
Andrew spent 10 years with Oxley Corporate
Finance, where he was involved with a
range of structured, project and property
finance transactions, the latter involving
major Australian companies and listed
property trusts. For the last six years Andrew
has acted as principal of Slade Financial
Consulting, where he has provided advice
on structured property and asset based
financing 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 howell
BEcon, GDipAppFin (Sec Inst)
Company Secretary and Compliance
Officer
The company secretary is Mr Brendan
Howell. Brendan 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 over 16 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 over seven 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.
Darren barkas
BCom, GDipAppFin (Sec Inst),
GradDipAppCorpGov, CPA, ACIS, F Fin
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 20 years experience in
accounting, taxation, treasury, financial
control and operational management
inclusive of 10 years within property funds
management. Darren previously held a
number of senior financial positions within
the property division of AMP Capital
investors where, over a seven year period,
he was responsible for a wide range of
financial, taxation, unit pricing and registry
functions for a number of listed and unlisted
property funds. At ALE, Darren’s experience
has expanded to include company secretarial
and property portfolio administration and
management functions.
Darren has a Bachelor of Commerce degree
from the University of Wollongong, a
Graduate Diploma in Applied Finance and
Investment from the Financial Services
Institute of Australasia and a Graduate
Diploma in Applied Corporate Governance
from Chartered Secretaries Australia.
Darren is a member of CPA Australia, the
Institute of Chartered Secretaries and
Administrators and Chartered Secretaries
Australia and is a fellow of the Financial
Services Institute of Australasia.
13
property
portfolio
106 properties strategically located
our portfolio continues to go from strength
to strength as we acquire quality
properties well located in the areas in
which people live and work.
Petrie
Lawnton
Strathpine
Albany Creek
Nudgee
Ferny Grove
Kedron Park
Kedron
Nundah
Alderley
Albion
Breakfast
Creek
Brisbane
Hamilton
Bulimba
Toowong
Camp Hill
Annerly
Stones Corner
Holland Park
10km
Mt Gravatt
Sunnybank
20km
Springwood
Redland Bay
30km
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Cairns 3
Townsville 3
Mackay 1
Ipswich 1
Toowoomba 1
Beenleigh 1
Sunshine Coast 3
Brisbane 23
Gold Coast 4
bREAkFASt CREEk hotEL, bRISbANE, QLD
NEW bRIghtoN hotEL, MANLy, NSW
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Penrith
St Marys
Blacktown
Pymble
Narrabeen
Frenchs
Forest
Manly
Smithfield
Auburn
Fairfield
30km
20km
10km
Crows
Nest
Milsons
Point
Sydney
14
SEE MOrE AT www.alegroup.com.au
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20km
Salisbury
Exeter
Blair Athol
Woodville
North
Royal Park
10km
Clearview
Henley
Beach
Adelaide
Aberfoyle Park
Perth 3
Adelaide 9
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QuEENS tAvERN, hIghgAtE, WA
SANDoWN pARk hotEL, vIC
Sunbury
Westmeadows
Mill Park
Campbellfield
Melton
Fawkner
Reservoir
Eltham
Essendon
Braybrook
Deer
Park
Preston
Williamstown
Melbourne
Blackburn
10km
Elwood
Lilydale
Doncaster
Mitcham
Nunawading
20km
30km
Bayswater
Glen
Waverly
Ferntree
Gully
Sandringham
Moorabbin
Mulgrave
Rowville
Cheltenham
Noble Park
Keysborough
Doveton
Berwick
Ballarat 1
Geelong 1
Shepparton 1
Melbourne 37
Morwell 1
Traralgon 1
Frankston
Somerville
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SEE MOrE AT www.alegroup.com.au
15
©2006
Image@2006 Digital Globe
NEW bRIghtoN hotEL,
71 The Corso, Manly, NSW
Prime real estate set on a pedestrian mall and
located 50m from the beach. Huge tourist
destination, busy seven days a week.
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NEW South WALES (INCLuDINg SyDNEy CIty AND SubuRbAN LoCAtIoNS) – 12 hotELS bLACktoWN INN hotEL, Blacktown, NSW
bRoWN Jug hotEL, Fairfield, NSW
kIRRIbILLI hotEL, Milsons Point, NSW
NEW bRIghtoN hotEL, Manly, NSW
pyMbLE hotEL, Pymble, NSW
/ CRoWS NESt hotEL, Crows Nest, NSW
/ NARRAbEEN SANDS hotEL, Narrabeen, NSW
/ pIoNEER tAvERN, Penrith, NSW
/ CoLytoN hotEL, St Marys, NSW
/ MELtoN hotEL, Auburn, NSW
/ pARkWAy hotEL, Frenchs Forest, NSW
/ SMIthFIELD hotEL, Smithfield, NSW
/
/
/
/
16
SEE MOrE AT www.alegroup.com.au
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RAMSgAtE hotEL,
328 Seaview road, Henley Beach, SA
Popular local venue located right across the road
from community amphitheatre, beach and pier.
©2006
Image@2006 Digital Globe
South AuStRALIA (INCLuDINg ADELAIDE CIty AND SubuRbAN LoCAtIoNS) – 9 hotELS AbERFoyLE hub tAvERN, Aberfoyle Park, SA
ENFIELD hotEL, Clearview, SA
gEppS CRoSS, Blair Athol, SA
RAMSgAtE hotEL, Henley Beach, SA
/ EuREkA hotEL, Salisbury, SA
/ hENDoN hotEL, Royal Park, SA
/ FINSbuRy hotEL, Woodville north, SA
/ StoCkADE tAvERN, Salisbury, SA
/ ExEtER hotEL, Exeter, SA
/
/
/
SEE MOrE AT www.alegroup.com.au
17
SAIL AND ANChoR pub bREWERy,
64 South Terrace, Fremantle, WA
The premier hotel in the heart of
Fremantle, in close proximity to parks,
sporting fields and the marina.
B
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©2006
Image@2006 Digital Globe
WEStERN AuStRALIA (INCLuDINg pERth CIty AND SubuRbAN LoCAtIoNS) – 3 hotELS QuEENS tAvERN, Highgate, WA
SAIL AND ANChoR pub bREWERy, Fremantle, WA
/ WANNERoo vILLA tAvERN, Wanneroo, WA
/
18
SEE MOrE AT www.alegroup.com.au
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youNg & JACkSoN hotEL,
Melbourne, Vic
Melbourne’s icon hotel, across the road
from Flinders Street station and home to the
famous “Chloe”.
©2006
Image@2006 Digital Globe
/
/ bERWICk INN, Melbourne, Vic
/ MItChAM hotEL, Mitcham, Vic
/ CLub hotEL, Ferntree Gully, Vic
/ buRvALE hotEL, Nunawading, Vic
/ bLACkbuRN hotEL, Blackburn, Vic
/ DoNCAStER INN hotEL, Doncaster, Vic
/ DEER pARk hotEL, Deer Park, Vic
/ ELthAM hotEL, Eltham, Vic
/ kEySboRough hotEL, Keysborough, Vic
vICtoRIA (INCLuDINg MELbouRNE CIty AND SubuRbAN LoCAtIoNS) – 42 hotELS AShLEy hotEL, Braybrook, Vic
bAySWAtER hotEL, Bayswater, Vic
Wendouree, Vic
DAvEy’S hotEL, Frankston, Vic
ELStERNWICk hotEL, Elwood, Vic
gAtEWAy hotEL, Corio, Vic
Fawkner, Vic
oLINDA CREEk hotEL, Lilydale, Vic
pRINCE MARk hotEL, Doveton, Vic
reservoir, Vic
Essendon, Vic
Sandringham, Vic
Campbellfield, Vic
vICtoRIA hotEL, Shepparton, Vic
youNg & JACkSoN hotEL, Melbourne, Vic
/ pIER hotEL/21St CENtuRy, Frankston, Vic
/ RIFLE CLub hotEL, Williamstown, Vic
/ RoyAL ExChANgE hotEL, Traralgon, Vic
/ SANDbELt hotEL, Moorabbin, Vic
/ SoMERvILLE hotEL, Somerville, Vic
/ tuDoR INN hotEL, Cheltenham, Vic
/ vILLAgE gREEN hotEL, Glen Waverly, Vic
/ SANDoWN pARk hotEL, Noble Park, Vic
/ RoyAL hotEL (SuNbuRy), Sunbury, Vic
/ MoRWELL hotEL, Morwell, Vic
/ MAC’S hotEL, Melton, Vic
/ pLough hotEL, Mill Park, Vic
/ RoSE ShAMRoCk AND thIStLE hotEL,
/ StAMFoRD INN hotEL, rowville, Vic
/ thE vALE hotEL (previously the Springvale Hotel), Mulgrave, Vic
/ SANDRINghAM hotEL,
/ SyLvANIA hotEL,
/ FERNtREE guLLy hotEL & MotEL, Ferntree Gully, Vic
/
/ WEStMEADoWS tAvERN, Westmeadows, Vic
/ MEADoW INN hotEL,
/ MouNtAIN vIEW hotEL, Glen Waverly, Vic
/ CRAMERS hotEL, Preston, Vic
/ bLuE bELL hotEL,
/
/
/
/
/
/ RoyAL hotEL ESSENDoN,
/
SEE MOrE AT www.alegroup.com.au
1
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pELICAN WAtERS hotEL,
Pelican Waters Boulevard, Pelican Waters, Qld
redeveloped in 2004, the Pelican Waters Hotel
sits on the waterfront only 5km from Caloundra,
on Queensland’s beautiful Sunshine Coast.
©2006
Image@2006 Digital Globe
QuEENSLAND CoASt – 16 hotELS ANgLERS ARMS hotEL, Southport, Qld
buRLEIgh hEADS hotEL, Burleigh Heads, Qld
EDgE hILL tAvERN, Manoora, Cairns, Qld
MIAMI hotEL, Miami, Qld
pALM bEACh hotEL, Palm Beach, Qld
(Aikenvale), Townsville, Qld
/ Cbx hotEL, Caloundra, Qld
IMpERIAL hotEL, Beenleigh, Qld
/ MouNt pLEASANt hotEL, North Mackay, Qld
/ WILSoNtoN hotEL, WILSoNtoN, Toowoomba, Qld
/ pELICAN WAtERS hotEL, Pelican Waters, Qld
/
/ bALACLAvA hotEL, Cairns (Earlville), Qld
/
/ DALRyMpLE hotEL, Garbutt, Qld
/ kIRWAN tAvERN, Townsville, Qld
/ NooSA REEF hotEL, Noosa Heads, Qld
/
/
/
/ thE vALE hotEL AND AIkENvALE MotEL,
/ WoREE tAvERN, Woree, Cairns, Qld
20
SEE MOrE AT www.alegroup.com.au
bREAkFASt CREEk hotEL,
2 Kingsford Smith Drive, Breakfast Creek, Qld
Set at the mouth of Breakfast Creek on the Brisbane
river, the Breakfast Creek Hotel is arguably the
most famous watering hole in Queensland.
©2006
Image@2006 Digital Globe
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B
/ ALDERLEy ARMS hotEL, Alderley, Qld
QuEENSLAND (INCLuDINg bRISbANE CIty AND SubuRbAN LoCAtIoNS) – 24 hotELS ALbANy CREEk tAvERN, Albany Creek, Qld
ALbIoN hotEL, Albion, Qld
CAMp hILL hotEL, Camp Hill, Qld
FERNy gRovE tAvERN, Ferny Grove, Qld
hoLLAND pARk hotEL, Holland Park, Qld
Mt gRAvAtt hotEL, Mt Gravatt, Qld
pEtRIE hotEL, Petrie, Qld
REDLAND bAy hotEL, redland Bay, Qld
StoNES CoRNER tAvERN, Stones Corner, Qld
/ ChARDoNS CoRNER hotEL, Annerly, Qld
/ FouR MILE CREEk, Strathpine, Qld
/ kEDRoN pARk hotEL, Kedron Park, Qld
/
/ EDINbuRgh CAStLE hotEL, Kedron, Qld
/ hAMILtoN hotEL, Hamilton, Qld
/ bREAkFASt CREEk hotEL, Breakfast Creek, Qld
/ RoyAL ExChANgE hotEL, Toowong, Qld
/ SpRINgWooD tAvERN, Springwood, Qld
/ NuDgEE bEACh hotEL, Nudgee, Qld
SuNNybANk hotEL, Sunnybank, Qld
/ LAWNtoN tAvERN, Lawnton, Qld
/ RACEhoRSE hotEL, Booval, Qld
/ pRINCE oF WALES, Nundah, Qld
/ oxFoRD 152, Bulimba, Qld
/
/
/
/
/
/
/
/
SEE MOrE AT www.alegroup.com.au
21
BoarD of Directors
pEtER WARNE
ANDREW WILkINSoN
JohN hENDERSoN
JAMES MCNALLy
hELEN WRIght
peter h Warne
BA
John henderson
BBldg, MrICS, AAPI
Chairman and Independent Director
Independent Director
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 of BTAL was acquired by
Macquarie Bank Limited in 1999.
Peter is also a board member of two other
listed entities being ASX Limited and
Macquarie Capital Alliance Group.
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.
Andrew Wilkinson
BBus, CFTP
Managing Director
Andrew’s qualifications and experience are
outlined on page 13.
22
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.
James McNally
BBus (Land Economy), DipLaw
Executive Director
James was appointed as an executive
director of the Company in June 2003.
James has over 12 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.
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.
helen Wright
LLB, MAICD
Independent Director
Helen was appointed as a non-executive
director of the Company in September 2003.
Helen was a partner of Freehills, a leading
Australian firm of lawyers, from 1986 to
2003. She practised as a commercial lawyer
specialising in real estate projects including
development and financing and related
taxation and stamp duties. Helen is the
Statutory and Other Offices Remuneration
Tribunal for nSW and serves on the Province
Management Advisory Council of the Little
Company of Mary (Calvary Hospitals).
Until recently Helen was a member of the
Boards of the Sydney Harbour Foreshore
Authority, Australian Technology Park
Precinct Management, and Cooks Cove
Redevelopment Authority and was Deputy
Chair of the Australia Day Council of nSW to
December 2002. Prior boards include Darling
Harbour Authority, UnSW Press Limited and
MLC Homepack Limited.
Helen has a Bachelor of Laws from the
University of nSW, and in 1994 completed
the Advanced Management Program at the
Harvard Graduate School of Business.
corporate governance
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 2006.
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
6
input to and final approval of
management’s development of
corporate strategy and performance
objectives
review and ratification 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 financial
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 first 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 five 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 defined 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 first 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 financial report
commencing on page 30.
To assist the Board in undertaking its
own performance evaluation and that of
directors, last year it 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 has considered going
forward to further enhance current practice.
During the second half of this year, the
Board will review its own performance and
that of its directors and committees, and
will continue to undertake these reviews
on an annual basis. The Board 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 office 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 office
since their last election.
Peter Warne and Helen Wright will be
retiring and standing for re-election as
directors 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 four members, being
three non-executive independent directors
and an independent consultant.
Helen Wright, an independent director, has
been appointed as Chair of the Committee.
The other members of the Committee are
Peter Warne and John Henderson, also
independent directors, and independent
consultant David Lawler.
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 fulfil
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 financial report on page 30.
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 financial report commencing
on page 30.
23
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
financial report on page 30.
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 influenced
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.
Details of directors’ and employees’
holdings in ALE Securities are set out in
the directors’ report in the financial report
on page 29.
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 fulfil
these functions.
corporate governance
(continued)
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 officer 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 officer 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 Limited (next
Financial) which acts as an Investment
Manager. next Financial holds on behalf
of its clients 4,254,837 stapled securities
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 confidentiality of
information are maintained.
24
ALE ProPErty GrouP AnnuAL
FinAnciAL rEPort 30 JunE 2006
Comprising AustrAliAn leisure And entertAinment
property trust And its Controlled entities
ABn 92 648 441 429
raising
ABn 92 648 441 429
ALE ProPErty GrouP AnnuAL
FinAnciAL rEPort 30 JunE 2006
Comprising AustrAliAn leisure And entertAinment
property trust And its Controlled entities
the bar
CONTENTS 26 Directors’ report
38 consoliDateD statements of changes in equity
40 notes to the consoliDateD financial statements
71 inDepenDent auDit report to stapleD security holDers
/ 39 consoliDateD cash flow statements
/
/ 70 Directors’ Declaration
/
/ 36 consoliDateD income statements
/ 37 consoliDateD balance sheets
/
/
IBC investor information anD corporate Directory
25
direCtors’ report
The ALE Property Group (“ALE”) comprises Australian Leisure and Entertainment Property Trust (“Trust”) and its controlled entities
being ALE Direct Property Trust (“Sub-Trust”), ALE Finance Company Pty Limited (“Finance Company”) and Australian Leisure and
Entertainment Property Management Limited (“Company”) as the responsible entity of the Trust.
The registered office and principal place of business of the Company is:
Level 8
15-19 Bent Street
Sydney 2000
The directors of the Company present their report, together with the consolidated financial report of ALE for the year ended
30 June 2006.
Directors
The following persons were directors of the Company during the year and up to the date of this report unless otherwise stated:
Name
Type
Appointed
P H Warne (Chairman)
J P Henderson
H I Wright
A F O Wilkinson (Managing Director)
J T McNally
Non-executive
Non-executive
Non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
Principal activities
During the year the principal activities of ALE consisted of investment in property and property funds management. There has been
no significant change in the nature of these activities during the year.
Significant changes in the state of affairs
In the opinion of the directors, there were no significant changes in the state of affairs of ALE that occurred during the year.
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 ALE’s operations, the
results of those operations or the state of affairs of ALE.
Likely developments and expected results of operations
ALE will continue to maintain its defined strategy of identifying opportunities to increase the profitability of ALE and its value to its
stapled security holders.
In accordance with the leases of its investment properties, ALE will receive increases in rental income in line with increases in the
consumer price index. The directors are not aware of any other future developments likely to significantly affect the operations
and/or results of ALE.
Distributions and dividends
Trust distributions paid or payable to stapled security holders during the year were as follows:
Final Trust distribution for the year ended 30 June 2006 of 9.20 cents (2005: 6.60 cents)
per stapled security to be paid on 31 August 2006
Interim Trust distribution for the year ended 30 June 2006 of 6.80 cents (2005: 6.25 cents)
per stapled security paid on 28 February 2006
2006
$’000
2005
$’000
8,354
5,993
6,174
5,675
Total full year distribution for the year ended 30 June 2006 16.00 cents (2005: 12.85 cents)
14,528
11,668
No provisions for or payments of Company dividends have been made during the year (2005: nil).
26
Review and results of operations
ALE achieved a net profit in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS) of
$52.2 million for the year ended 30 June 2006. With the introduction of AIFRS reporting standards, this amount includes several
items not included in last year’s accounting results. Figures for the year ending 30 June 2005 are shown in accordance with AIFRS.
The directors have produced a table below which separates the cash profit available to be distributed to stapled security holders
and the non-cash items which make up the total net profit. The directors believe this will help stapled security holders gain a more
complete understanding of the results of operations of ALE.
Distributable profit from operations
Property income (including rent and interest)
Interest income from cash deposits
Management expenses
Land tax
Interest expenses (cash – including swaps and refinancing)
Total distributable profit
Other profit items
Fair value adjustments to investment properties
Fair value adjustments to derivatives
Finance costs (non-cash)
Income tax expense/(benefit)
Total other profit items
Total net profit
CONSOLIDATED
30 June 2006
$’000
30 June 2005
$’000
47,586
1,181
(4,006)
(1,151)
(29,032)
14,578
50,256
7,028
(18,227)
(1,428)
37,629
52,207
45,996
1,175
(2,989)
(1,139)
(31,342)
11,701
74,800
–
(6,429)
49
68,420
80,121
Distributable profit per stapled security for the year ended 30 June 2006 is 16.06 cents, an increase of 25% over last year. After all
fair value movements, basic earnings per stapled security for the year ended 30 June 2006 are 57.50 cents per stapled security.
CONSOLIDATED
Note
30 June 2006
Cents
30 June 2005
Cents
Earnings and distribution per stapled security:
Basic and diluted earnings per stapled security
10(a)
57.50
88.24
Distributable earnings per stapled security
(i.e. basic earnings before fair value, income tax and other adjustments)
Distribution per stapled security for the year
10(b)
10(c)
16.06
16.00
12.89
12.85
Summary of financial highlights:
Distributable profit increased by 25% to $14.6 million.
Distributions paid increased by 25% to 16.00 cents per stapled security.
Total property portfolio value increased by 10.2% to $717.6 million.
Net assets per stapled security increased by 22% to $2.64 per stapled security.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 27
direCtors’ report (continued)
Information on directors
mr peter 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 of BTAL was acquired by
Macquarie Bank Limited in 1999.
Peter is also a board member of two other listed entities being
ASX Limited and Macquarie Capital Alliance Group.
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.
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.
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 was a partner of Freehills, a leading Australian firm of
lawyers, from 1986 to 2003. She practised as a commercial
lawyer specialising in real estate projects including development
and financing and related taxation and stamp duties. Helen is the
Statutory and Other Offices Remuneration Tribunal for NSW and
serves on the Province Management Advisory Council of the
Little Company of Mary (Calvary Hospitals). Until recently Helen
was a member of the Boards of the Sydney Harbour Foreshore
Authority, Australian Technology Park Precinct Management,
and Cooks Cove Redevelopment Authority and was Deputy
Chair of the Australia Day Council of NSW to December 2002.
Prior boards include Darling Harbour Authority, UNSW Press
Limited and MLC Homepack Limited.
Helen has a Bachelor of Laws from the University of NSW, and
in 1994 completed the Advanced Management Program at the
Harvard Graduate School of Business.
28
mr andrew 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 banking, corporate
finance and funds management.
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 eight 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.
Andrew has a Bachelor of Business degree from the University
of Technology, Sydney and is a professional member of the
Finance and Treasury Association.
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 12 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.
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.
Company Secretary
The company secretary is Mr Brendan Howell. Brendan
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 over
16 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 over seven 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.
Independent member of Audit, Compliance and Risk
Management Committee (ACRMC)
mr David lawler b.bus, cpa,
independent acrmc member
Experience and expertise
David was appointed to ALE’s ACRMC on 9 December 2005
and has 25 years experience in internal auditing in the banking
and finance industry. He was the Chief Audit Executive for
Citibank in the Philippines, Italy, Switzerland, Mexico, Brazil,
Australia and Hong Kong. He was Group Auditor for the
Commonwealth Bank of Australia.
David is an audit committee member of the Australian Office
of Financial Management, the Defence Materiel Organisation,
Austrade, the Australian Sports Anti-Doping Authority and the
Australian National University.
David has a Bachelor of Business Studies from Manchester
Metropolitan University in the UK. He is a Fellow of CPA
Australia and President of the Institute of Internal Auditors
– Australia.
Directorships of listed entities within the last three years
The following director held directorships of other listed entities within the last three years and from the date appointed up to the
date of this report unless otherwise stated:
Director
Directorships of listed entities
Type
Appointed
P H Warne
P H Warne
P H Warne
SFE Corporation Limited (a)
Australian Stock Exchange Limited
Macquarie Capital Alliance Group
Non-executive
Non-executive
Non-executive
October 2000
July 2006
February 2005
(a) In July 2006, the Australian Stock Exchange Limited (ASX) and SFE Corporation Limited (SFE) merged with the SFE becoming a wholly owned subsidiary of
the ASX. Peter was appointed to the board of the ASX on 25 July 2006.
Special responsibilities of directors
The following are the special responsibilities of each director:
Directors
Special responsibilities
P H Warne
Chairman of the Board.
Member of the Audit, Compliance and Risk Management Committee (ACRMC) (resigned as Chairman on
15 August 2005, continuing as member).
Chairman of the Remuneration Committee.
J P Henderson
Member of the ACRMC.
Member of the Remuneration Committee.
H I Wright
Chair of the ACRMC (appointed Chair 15 August 2005).
Member of the Remuneration Committee.
A F O Wilkinson
Chief Executive Officer and Managing Director of the Company.
Responsible Officer of the Company under the Company’s Australian Financial Services Licence (AFSL).
J T McNally
Responsible Officer of the Company under its AFSL.
Key management personnel interests in stapled securities and options
The following key management personnel and their associates held or currently hold the following stapled securities in ALE:
Name
Role
Number held at the
start of the year
Purchases/(sales)
Number held at
30 June 2006
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
A J Slade
D S Barkas
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Investment and Acquisitions Manager
Group Financial Controller
453,400
40,000
100,000
51,998
–
46,810
196,600
15,000
–
16,002
12,000
1,517
650,000
55,000
100,000
68,000
12,000
48,327
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 29
direCtors’ report (continued)
The following director currently holds options over stapled securities of ALE:
Name
Director
Number held at the
start of the year
Purchases/(sales)
Number held at
30 June 2006
A F O Wilkinson
Executive Director
300,000
–
300,000
Meetings of directors
The numbers of meetings of the Company’s board of directors and of each Board committee held during the year ended 30 June
2006 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
Member of ACRMC
D J Lawler
BOARD MEETINGS
AUDIT, COMPLIANCE
AND RISK MANAGEMENT
COMMITTEE MEETINGS
REMUNERATION
COMMITTEE MEETINGS
Held1
Attended
Held1
Attended
Held1
Attended
15
15
15
15
15
15
15
15
15
15
–
–
5
5
5
–
–
3
5
5
5
–
–
2
2
2
2
–
–
–
2
2
2
–
–
–
1 “Held” reflects the number of meetings which the director or member 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
The information provided under these headings includes remuneration disclosures that are required under Accounting Standard
AASB 124 Related Party Disclosures. These disclosures have been transferred from the financial report and have been audited.
A Principles used to determine the nature and amount of remuneration (audited)
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 creation of value for the stapled 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 the stapled security 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 the stapled
security 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 the reward framework’s 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.
30
pay for senior executives is reviewed annually to ensure that
executive pay is competitive with the market. Executive pay is
also reviewed on promotion.
There is no guaranteed base pay increase in any executive
contract.
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 (KPIs) 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 KPIs 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 ended 30 June 2006, the KPIs link to STI plans
were based on Company, individual, business and personal
objectives. The KPIs required performance in managing
operating and funding costs, compliance with legislative
requirements, risk management, 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 KPIs 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.
long-term incentives (lti)
A long-term incentive in the form of options over ALE stapled
securities, exercisable between November 2006 and
November 2007 (except if the Company is subject to takeover,
then to February 2007) was provided to the Managing Director,
Mr Wilkinson, in November 2003 at an issue price of $1.036.
stapled security options granted
No options over unissued shares of the Company or of the
unissued units of the Trust were granted during or since the end
of the financial year.
Remuneration report (continued)
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 ALE over a number of periods with greater
emphasis given to the current year. Over the past year ended
30 June 2006 the total return on ALE’s stapled securities
(inclusive of distribution returns) was 39.4% (2005: 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 were
set by the Board in September 2003. The Board may 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 from 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 set in September 2003. The
directors’ fees are 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 shareholders. 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
director’s 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
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
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 31
direCtors’ report (continued)
Remuneration report (continued)
B Details of remuneration (audited)
amount of remuneration
Details of the remuneration of the key management personnel for the current year and for the comparative year are set out below
in tables 1 and 2. The cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed
“Short-term incentives”, above. All other elements of remuneration are not directly related to performance.
Table 1 Remuneration details 1 July 2005 to 30 June 2006
Details of the remuneration of the key management personnel for the year ended 30 June 2006 are set out in the following table:
KEY MANAGEMENT PERSONNEL
SHORT-TERM EMPLOYEE BENEFITS
POST
EMPLOYMENT
BENEFITS
EqUITY
BASED
PAYMENT
Name
Role
Non-executive Director
Non-executive Director
Non-executive Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson Executive Director
Executive Director
J T McNally
Company Secretary
B R Howell
Investment and
A J Slade
Acquisitions Manager
Group Financial Controller
D S Barkas
Salary
and fees
$
110,092
70,000
64,220
261,758
75,000
75,000
138,831
99,803
STI bonus
$
–
–
–
100,000
–
–
Non-
monetary
$
Superannuation
$
Options
$
Total
$
–
–
–
–
–
–
9,908
–
5,780
12,139
–
–
11,539
10,477
–
–
–
7,993
–
–
120,000
70,000
70,000
381,890
75,000
75,000
–
–
190,370
156,880
40,000
20,000
–
26,600
894,704
160,000
26,600
49,843
7,993
1,139,140
Table 2 Remuneration details 1 July 2004 to 30 June 2005
Details of the remuneration of the key management personnel for the year ended 30 June 2005 are set out in the following table:
KEY MANAGEMENT PERSONNEL
SHORT-TERM EMPLOYEE BENEFITS
Name
Role
Non-executive Director
Non-executive Director
Non-executive Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson Executive Director
Executive Director
J T McNally
Company Secretary
B R Howell
Group Financial Controller
D S Barkas
Salary
and fees
$
110,092
70,000
64,220
191,954
81,250
81,250
127,282
STI bonus
$
–
–
–
65,000
–
–
20,000
726,048
85,000
Non-
monetary
$
–
–
–
–
–
–
6,800
6,800
POST
EMPLOYMENT
BENEFITS
EqUITY
BASED
PAYMENT
Superannuation
$
Options
$
Total
$
9,908
–
5,780
15,081
–
–
10,462
41,231
–
–
–
7,993
–
–
–
7,993
120,000
70,000
70,000
280,028
81,250
81,250
164,544
867,072
cash bonuses
For each cash bonus included in the above tables, the percentage of the available bonus that was awarded for the year and the
percentage that was forfeited because a person did not meet the performance criteria is set out below.
Paid
%
133
100
100
Forfeited
%
–
–
–
Name
A F O Wilkinson
A J Slade
D S Barkas
32
Remuneration report (continued)
C Service agreements
On 10 November 2003, the Company entered into a three year
service agreement with the 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 ALE 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.
The employment contracts of Mr Barkas and Mr Slade may be
terminated at one month’s 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 unissued stapled securities of ALE were granted
in November 2003 to Mr 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 ALE 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 and expected
price volatility of the underlying share, the expected dividend
yield and the risk-free interest rate for the term of the option.
stapled securities under option
Unissued stapled securities of ALE under option at the date of
this report are as follows:
Date options
granted
Expiry
date
Issue price
Number
of stapled
securities under option
10-Nov-03
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
To date no stapled securities of ALE have been issued on the
exercise of options.
Insurance of officers and auditor
During the financial year, the Company paid a premium of
$29,844 (2005: $41,766) to insure the directors and officers
of the Company. The auditor of the Company is 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.
Past employment with external auditor
Mr Wilkinson, Managing Director, previously held a position as a
corporate advisory partner without any audit responsibilities of
ALE’s external auditor, PricewaterhouseCoopers. Mr Wilkinson
resigned his partnership prior to accepting the appointment as
Chief Executive Officer of ALE on 24 November 2003.
Non-audit services
The Company may decide to employ the auditor on assignments
additional to its statutory audit duties where the auditor’s
expertise and experience with the Company are important.
The board of directors has considered the position and in
accordance with the advice received from the ACRMC and
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 ACRMC 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 auditor’s 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.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 33
direCtors’ report (continued)
Details of amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the
year are set out below:
Audit services
PricewaterhouseCoopers Australian firm:
Audit and review of the financial reports of ALE and other audit work
required under the Corporations Act 2001
– in relation to current year
– in relation to prior year
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian firm:
General accounting advice (including AIFRS)
Due diligence services – acquisitions not proceeding
Assurance services – internal control review
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Due diligence services – acquisitions not proceeding
Tax consulting services
Total taxation services
2006
$
2005
$
135,400
1,500
136,900
125,750
60,000
185,750
26,173
142,250
9,000
177,423
29,944
31,300
7,000
68,244
314,323
253,994
9,000
223,000
25,135
257,135
15,000
–
24,190
39,190
Includes amounts allocated to the Company of $314,323 for assurance services (2005: $253,994) and $257,135 for taxation
services (2005: $39,190).
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 35.
Environmental regulation
Whilst ALE 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 two of the
properties ongoing testing is being undertaken and if further work is required indemnities are held in excess of any remediation
amounts likely to be required.
Rounding of amounts
ALE is an entity of the kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to the “rounding off” of amounts in the directors’ 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 29th day of August 2006
34
Auditor’s Independence Declaration
As lead auditor for the audit of Australian Leisure and Entertainment Property Trust for the year ended 30 June 2006,
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 Trust during the period.
S J Hadfield
Partner
PricewaterhouseCoopers
Sydney
29 August 2006
Liability is limited by a scheme approved under Professional Standards Legislation.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 35
ConsolidAted inCome stAtements
For tHe yeAr ended 30 June 2006
Revenue
Rent from investment properties
Interest – investment arrangements
Distributions
Interest from cash deposits
Total revenue
Other income
Fair value adjustments to investment properties
Fair value adjustments to derivatives
Other income
Total other income
Total income
Expenses
Finance costs – (cash and non-cash)
Management fees
queensland land tax expense
Other expenses
Total expenses
Profit before income tax
Income tax expense/(benefit)
Profit after income tax
Profit attributable to the stapled
security holders of ALE
Note
2
2
3
4
14
6
5
8
9
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
45,583
2,003
–
1,181
48,767
50,256
7,028
600
57,884
43,766
2,230
–
1,175
47,171
74,800
–
–
74,800
–
–
25,589
4
25,593
–
77
–
77
–
–
20,939
–
20,939
–
–
–
–
106,651
121,971
25,670
20,939
47,259
–
1,151
4,606
53,016
53,635
1,428
52,207
37,771
–
1,139
2,989
41,899
80,072
(49)
12,573
2,276
–
100
14,949
10,721
–
80,121
10,721
13,013
2,185
–
296
15,494
5,445
–
5,445
52,207
80,121
10,721
5,445
Cents
Cents
Cents
Cents
Basic and diluted earnings per stapled security
Distribution per stapled security for the year
10(a)
10(c)
57.50
16.00
88.24
12.85
11.81
16.00
6.00
12.85
The above consolidated income statements should be read in conjunction with the accompanying notes.
RECONCILIATION OF DISTRIBUTIONS TO
STAPLED SECURITY HOLDERS
Profit attributable to the stapled
security holders of ALE
Total distribution (non-cash) adjustments
Available for distribution
Distributions paid or provided for
Available and undistributed
10
10
52,207
(37,629)
14,578
14,528
50
80,121
(68,420)
11,701
11,668
33
10,721
3,807
14,528
14,528
–
5,445
2,960
8,405
11,668
(3,263)
Basic and diluted earnings per stapled security before fair value, income tax and other amounts is disclosed in note 10 of this
financial report.
36
ConsolidAted BAlAnCe sHeets
As At 30 June 2006
Current assets
Cash and cash equivalents
Receivables
Derivative – interest rate swaps
Loans and deposits – investment properties
Current tax asset
Other
Total current assets
Non-current assets
Investment properties
Loans and deposits – investment properties
Investments in controlled entities
Plant and equipment
Deferred tax asset
Other
Total non-current assets
Total assets
Current liabilities
Payables
Derivative – interest rate swaps
Provisions
Other
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Retained profits/(loss)
Reserve
Total equity
Net assets per stapled security
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Note
11
12
7
15
9
13
14
15
17
16
21
13
28,992
1,012
5,250
13,662
7
55
48,978
695,470
8,465
–
101
578
–
19,477
371
–
11,746
–
5,793
37,387
625,000
14,713
–
141
99
13,585
305
24,714
88
–
–
12
25,119
–
–
210,943
–
–
–
704,614
653,538
210,943
753,592
690,925
236,062
18
7
19(a)
19(b)
7,599
229
8,415
4,327
6,963
–
6,026
341
20,570
13,330
2,773
–
8,354
–
11,127
20
22
492,065
1,648
480,783
–
142,539
–
493,713
480,783
142,539
514,283
494,113
153,666
239,309
196,812
82,396
23
24
25
81,787
157,501
21
81,787
115,012
13
239,309
196,812
$2.64
$2.17
81,787
609
–
82,396
$0.91
9
22,956
–
–
–
2,305
25,270
–
–
210,943
–
–
5,423
216,366
241,636
2,770
–
5,994
302
9,066
150,783
–
150,783
159,849
81,787
81,787
–
–
81,787
$0.90
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 37
ConsolidAted stAtements oF CHAnges in eQuity
For tHe yeAr ended 30 June 2006
Note
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Total equity at the beginning of the year
196,812
128,351
81,787
88,010
Adjustment on adoption of AASB 132 and AASB 139
to retained profits
26
4,544
Deferred tax asset recognised on adoption of
AASB 132 and AASB 139
266
–
–
Restated total equity at the beginning of the financial year
201,622
128,351
Profit for the year
Total recognised income and expenses for the year
52,207
52,207
80,121
80,121
4,416
–
86,203
10,721
10,721
–
–
88,010
5,445
5,445
Transactions with equity holders in their capacity
as equity holders:
Employee share options
Distribution paid or payable
25
10
8
(14,528)
8
(11,668)
–
(14,528)
–
(11,668)
(14,520)
(11,660)
(14,528)
(11,668)
Total equity at the end of the year
239,309
196,812
82,396
81,787
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
38
ConsolidAted CAsH FloW stAtements
For tHe yeAr ended 30 June 2006
CONSOLIDATED
PARENT ENTITY
Note
2006
$’000
2005
$’000
2006
$’000
Cash flows from operating activities
Receipts from tenant and others
Payments to suppliers and employees
Interest received – bank deposits and
investment arrangements
Loans to related entities
Interest received – interest rate swap terminations
Interest received – interest rate swaps
CMBS prepayment interest – May 2006
Borrowing costs paid
54,127
(8,539)
3,120
–
2,729
729
(558)
(33,087)
Net cash inflow/(outflow) from operating activities
28
18,521
Cash flows from investing activities
Investment property acquisition
Investment property acquisition costs
Payments for plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
CMBS issued – February 2006
CMBS repaid – May 2006
CMBS issued – May 2006
CIB issued – May 2006
CMBS and CIBs prepaid borrowing costs
Distributions paid
(15,000)
(882)
(28)
(15,910)
15,000
(345,000)
225,000
125,873
(1,801)
(12,168)
48,143
(11,008)
3,505
–
–
527
–
(32,127)
9,040
–
–
(168)
(168)
–
–
–
–
(12,485)
Net cash inflow/(outflow) from financing activities
6,904
(12,485)
Net increase/(decrease) in cash and cash
equivalents held
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
11
Non-cash investing activities
Investment property acquisition and costs
9,515
19,477
28,992
(3,613)
23,090
19,477
4,332
–
–
(28)
4
(2,055)
1,635
740
–
–
296
–
–
–
–
–
–
–
–
–
–
–
296
9
305
–
2005
$’000
30
(805)
16
–
–
713
–
–
(46)
–
–
–
–
–
–
–
–
–
–
(46)
55
9
–
The CBX Hotel, Caloundra, queensland was acquired in September 2005. A loan, deposit and costs were funded in November 2003
in relation to this property. These amounts were applied to the acquisition resulting in no cash flow impact on acquisition.
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 39
notes to tHe ConsolidAted FinAnCiAl stAtements
Note 1 Summary of significant accounting policies
This general purpose financial report for the year ended 30 June 2006 has been prepared in accordance with the Australian
equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian
Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. The financial report includes
separate financial statements for Australian Leisure and Entertainment Property Trust (“the Trust”) as an individual entity and the
consolidated entity, the ALE Property Group (“ALE”), consisting of the Trust and its subsidiaries.
(a) Basis of preparation
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
application of aasb 1 first-time adoption of australian equivalents to international financial reporting standards (aifrs)
This annual financial report is the first ALE annual financial report to be prepared in accordance with AIFRS. AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these consolidated
financial statements.
The financial statements of ALE up until 30 June 2005 had been prepared in accordance with previous Australian Generally
Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing the ALE annual financial
statements for the year ended 30 June 2006, management has amended certain accounting, valuation and consolidation methods
applied in the previous AGAAP financial statements to comply with AIFRS. With the exception of financial instruments, the
comparative figures were restated to reflect these adjustments. ALE has taken the exemption available under AASB 1 to only apply
AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement
from 1 July 2005.
Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRS on ALE’s equity and its net profit are
given in note 38 to the year end financial report.
historical cost convention
These consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of
financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant
and equipment and investment property.
(b) Accounting for ALE
ALE, the stapled entity, was formed by stapling together the units in the Trust and the shares in the Company. For the purposes of
financial reporting, the stapled entity reflects the consolidated entity. The parent entity and deemed acquirer in this arrangement
is the Trust. The basis of this approach is consistent with current practice in relation to the financial reporting obligations of stapled
entities under UIG 1013 Interpretation of Consolidated Financial Reports in relation to Pre-Date-of-Transition Stapled Arrangements.
The consolidated results reflect the performance of the Trust and its subsidiaries including the Company from 1 July 2005 to
30 June 2006.
The stapled securities of ALE are quoted on the Australian Stock Exchange under the code LEP and comprise one unit in the Trust
and one share in the Company. The unit and the share are stapled together under the terms of their respective constitutions and can
not be traded separately. Each entity forming part of ALE is a separate legal entity in its own right under the Corporations Act 2001
and Australian Accounting Standards.
The Company is the Responsible Entity of the Trust.
(c) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries as at balance date and the results for
the period then ended. The Trust and its controlled entities together are referred to in this financial report as ALE or the consolidated
entity. Entities are fully consolidated from the date on which control is transferred to the Trust. They are deconsolidated from the
date that control ceases.
Subsidiaries are all those entities (including special purpose entities) over which ALE has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are considered when assessing whether ALE controls another
entity.
All balances and effects of transactions between the subsidiaries of ALE have been eliminated in full.
(d) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash at bank, deposits at call and short-term
money market securities which are readily convertible to cash.
40
Note 1 Summary of significant accounting policies (continued)
(e) Receivables
Trade debtors are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts.
Trade receivables are due for settlement no more than 30 days from the recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.
A provision for doubtful receivables is established when there is objective evidence that all amounts due may not be collected
according to the original terms of the receivables. The amount of any provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision
is recognised in the income statement.
(f) Investment property
Properties (including land and buildings) held for long-term rental yields and that are not occupied by ALE are classified as
investment properties.
Investment property is initially brought to account at cost which includes the cost of acquisition, stamp duty and other costs directly
related to the acquisition of the properties. The properties are subsequently revalued and carried at fair value. Fair value is based
on active market prices, adjusted for any difference in the nature, location or condition of the specific asset or where this is not
available, an appropriate valuation method which may include discounted cash flow projections and the capitalisation method. The
fair value reflects, among other things, rental income from the current leases and assumptions about future rental income in light of
current market conditions. It also reflects any cash outflows that could be expected in respect of the property.
Subsequent expenditure is capitalised to the properties’ carrying amount only when it is probable that future economic benefits
associated with the item will flow to ALE and the cost of the item can be reliably measured.
Land and buildings (including integral plant and equipment) that comprise investment property are not depreciated.
The carrying value of the investment property is reviewed at each reporting date and is independently revalued at least every three
years. Changes in the fair values of investment properties are recorded in the income statement.
(g) Plant and equipment
Plant and equipment including office fixtures, fittings and operating equipment are stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to its acquisition. Subsequent costs are included in the asset’s
carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to ALE and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period in which they are incurred.
Depreciation
Land is not depreciated. Depreciation on depreciable plant and equipment (office fixtures, fittings and operating equipment) is
calculated using the straight line method or diminishing method to allocate their cost or revalued amounts, net of their residual
values, over their estimated useful lives. The estimated useful life of depreciable plant and equipment is as follows:
Furniture, fittings and equipment
Software
Leasehold improvements
4 – 13 years
3 years
3 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income
statement.
(h) Investments and financial assets
Financial assets classified as loans and deposits are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and arise when money and services are provided to a debtor with no intention of selling the receivable.
Loans and receivables are carried at amortised cost using the effective interest rate method. Under this method, fees, costs,
discounts and premiums directly related to the financial asset are spread over its effective life.
from 1 July 2004 to 30 June 2005
ALE has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 only from 1 July 2005. ALE has applied
previous AGAAP to the comparative information on financial instruments within the scope of AASB 132 and AASB 139.
adjustments on transition date: 1 July 2005
The nature of the main adjustments to make this information comply with AASB 132 and AASB 139 are that, with the exception of
held-to-maturity investments and loans and deposits which are measured at amortised cost, fair value is the measurement basis.
Changes in fair value are either taken to the income statement or an equity reserve. At the date of transition (1 July 2005) changes
to carrying amounts were taken to retained profits/(loss).
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 41
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 1 Summary of significant accounting policies (continued)
(i) Trade and other payables
These amounts represent liabilities for goods and services provided to ALE prior to the end of the period which are unpaid at the
balance sheet date. The amounts are unsecured and are usually paid within 30 days of recognition.
(j) Borrowings
Interest bearing liabilities are initially recognised at cost, being the fair value of the consideration received, net of issue and other
transaction costs associated with the borrowings.
After initial recognition, interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate
method. Under this method, fees, costs, discounts and premiums directly related to the financial liability are spread over the
expected life of the borrowings on an effective interest rate basis.
Prior to 1 July 2005, issue and other transaction costs associated with borrowings were capitalised and amortised on a straight
line basis.
Interest bearing liabilities are classified as current liabilities unless an unconditional right exists to defer settlement of the liability
for at least 12 months after the balance sheet date.
(k) Derivatives
from 1 July 2004 to 30 June 2005
ALE has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1 July 2005. ALE has applied
previous AGAAP in the comparative information on financial instruments within the scope of AASB 132 and AASB 139.
The following sets out how derivatives were accounted for under previous AGAAP.
Interest rate swaps
The net amount receivable or payable under interest rate swap agreements was progressively brought to account over the period
to settlement. The amount recognised was accounted for as an adjustment to interest and finance charges during the period and
included in other debtors or other creditors at each reporting date.
Where an interest rate swap was terminated early and the underlying hedged transaction was:
(a) still expected to occur as designated: the gains or losses arising on the swap upon its early termination continued to be deferred
and were progressively brought to account over the period during which the hedged transactions were recognised.
(b) no longer expected to occur as designated: the gains or losses arising on the swap upon its early termination were recognised
in the income statement at the date of termination.
adjustments on transition date: 1 July 2005
The nature of the main adjustments to make this information comply with AASB 132 and AASB 139 are that derivatives are
measured on a fair value basis. Changes in fair value are either taken to the income statement or an equity reserve (refer below).
At the date of transition (1 July 2005) changes in the carrying amounts of derivatives were taken to retained earnings or reserves.
For further information concerning the adjustments on transition date reference should be made to:
−
−
Derivative financial instruments – note 26.
Reserves and retained profits – note 24.
from 1 July 2005
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. ALE designates certain derivatives as either; (1)
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of the cash flows of
recognised assets and liabilities and highly probable forecast transactions (cash flow hedges).
ALE documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various hedge transactions. ALE also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of
various derivative financial instruments used for hedging purposes are disclosed in note 7.
To date ALE has not designated any of its derivatives as cash flow hedges and accordingly ALE has valued them all at fair value with
movements recorded in the income statement.
(l) Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of past events; it is more likely than not
that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
42
Note 1 Summary of significant accounting policies (continued)
(m) Distributions and dividends
Provision is made for the amount of any distributions or dividends declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the financial year but not distributed at balance date.
(n) Contributed equity
Ordinary units and ordinary shares are classified as contributed equity.
Incremental costs directly attributable to the issue of new units, shares or options are shown in contributed equity as a deduction,
net of tax, from the proceeds.
Distributions to stapled security holders that include a return of capital are shown in equity as a transfer from (reduction of
contributed) equity.
(o) Revenue recognition
Rental income from operating leases is recognised on a straight line basis over the lease term. An asset will be recognised to
represent the portion of an operating lease revenue in a reporting period relating to fixed increases in operating lease revenue in
future periods. These assets will be recognised as a component of investment properties.
Interest and investment income is brought to account on a time proportion basis using the effective interest rate method and if not
received at balance date is reflected in the consolidated balance sheet as a receivable.
(p) Expenses
Expenses including borrowing costs, operating expenses, queensland land tax and other outgoings are brought to account on an
accruals basis.
(q) Employee benefits
(i) wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the
reporting date are recognised as a current liability in respect of employees’ services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised as an
expense when the leave is taken and measured at the rates paid or payable.
(ii) share based payments after 7 november 2002 and vested after 1 January 2005
The fair value of options granted are recognised as an employee benefit expense with a corresponding increase in equity. The fair
value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the
options.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account 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 and expected price volatility of the underlying share, the expected dividend yield and the risk-
free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales
growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to
become exercisable. At each balance date, the entity revises its estimate of the number of options that are expected to become
exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to
contributed equity.
(iii) bonus plans
Liabilities and expenses for bonuses are recognised where contractually obliged or where there is a past practice that has created a
constructive obligation.
(iv) long service leave
ALE will begin to recognise liabilities for long service leave when employees reach a qualifying period of continuous service. The
liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of
service. Expected future payments are discounted using market yields at the reporting date on national government bonds with the
terms to maturity and currency that match, as closely as possible, the estimated future cash flow.
(v) retirement benefit obligations
ALE pays fixed contributions to employees’ funds and ALE’s legal or constructive obligations are limited to these contributions. The
contributions are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 43
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 1 Summary of significant accounting policies (continued)
(r) Income tax
(i) trusts
Under current legislation, Trusts are not liable for income tax, provided that their taxable income and taxable realised gains are fully
distributed to security holders each financial year.
(ii) companies
The income tax expense or revenue for the reporting period is the tax payable on the current reporting period’s taxable income
based on the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences between the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused
tax losses.
Deferred tax balances are calculated using the balance sheet method. Under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No
deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Similarly, no
deferred tax asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable
that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to the offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
(s) Earnings per stapled security
(i) basic earnings per stapled security
Basic earnings per stapled security is calculated by dividing the profit attributable to the equity holders of ALE by the weighted
average number of stapled securities outstanding during the reporting period.
(ii) Diluted earnings per stapled security
Diluted earnings per stapled security adjusts the figures used in the determination of basic earnings per stapled security to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential stapled securities and the
weighted average number of stapled securities assumed to have been issued for no consideration in relation to dilutive potential
stapled securities.
(t) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
(u) New accounting standards and UIG interpretation
Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2006 reporting
periods. ALE’s assessment of the impact of these new standards and interpretations is set out below.
(i) uig 4 Determining whether an asset contains a lease
UIG 4 is applicable to annual periods beginning on or after 1 January 2006. ALE has not elected to adopt UIG 4 early. It will apply
UIG 4 in its 2007 financial statements and the UIG 4 transition provisions. ALE will therefore apply UIG 4 on the basis of facts and
circumstances that existed as of 1 July 2006. Implementation of UIG 4 is not expected to change the accounting for any of ALE’s
current arrangements.
(ii) aasb 7 financial instruments: Disclosures and aasb 2005-10 amendments to australian accounting standards
[aasb 132, aasb 101, aasb 114, aasb 117, aasb 133, aasb 139, aasb 1, aasb 4, aasb 1023 and aasb 1038]
AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning on or after 1 January 2007. ALE has not adopted
the standards early. Application of the standards will not affect any of the amounts recognised in the financial statements, but will
impact the type of information disclosed in relation to ALE’s financial instruments.
44
Note 1 Summary of significant accounting policies (continued)
(v) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different to those of other business segments. A geographical segment is engaged in providing products or services
within a particular economic environment and is subject to risks and returns that are different from those of segments operating in
other economic environments.
(w) Functional and presentation currency
Items included in the financial statements of each of the ALE entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in
Australian dollars, which is ALE’s functional and presentation currency.
(x) Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. Fair
value estimates of investment properties and derivatives are particularly reliant on estimates and judgements.
(y) Rounding of amounts
The financial report of ALE has been prepared in accordance with Class Order 98/100 issued by the Australian Securities and
Investments Commission, relating to the “rounding off” of amounts in the financial report to the nearest thousand dollars, unless
otherwise stated. Amounts in the financial report have been rounded off in accordance with that Class Order.
(z) Financial risk management
ALE’s activities expose it to a variety of financial risks; market risk (including fair value interest rate risk), credit risk, liquidity risk and
cash flow risk. ALE’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of ALE. ALE uses derivative financial instruments such as interest rate swaps
to hedge certain risk exposures (note 20 provides further information).
(i) credit risk
The major credit risk is the risk that the tenant will fail to perform its contractual obligations including honouring the terms of the
lease agreements either in whole or in part. Credit risk has been minimised primarily by ensuring, on a continuous basis, that the
tenant has appropriate financial standing and by the various security arrangements that are in place.
A secondary credit risk exists in respect of the loans to Foster’s Group Limited made by ALE under the conditional sale contracts
of properties under development. Credit risk has been minimised primarily by ensuring, on a continuous basis, that Foster’s Group
Limited has appropriate financial standing and by the various security arrangements that are in place.
The credit risk on financial assets of ALE which have been recognised in the consolidated balance sheet is generally the carrying
amount net of any provision for doubtful debts.
(ii) liquidity and cash flow risk
Liquidity risk is the risk that ALE will experience difficulty in either realising or otherwise raising sufficient funds to satisfy
commitments. Cash flow risk is the risk that the future cash flows will fluctuate. The risk management guidelines adopted are
designed to minimise liquidity and cash flow risk through actively managing significant exposures to large creditors and ensuring
counterparties have appropriate financial standing.
(iii) market risk
Market risk is the risk that the value of ALE’s investment properties will fluctuate as a result of changes in valuations. To the extent
controllable, this risk is managed by ensuring that all activities are transacted in accordance with mandates, overall investment
strategy and within approved limits. Market risk analysis is conducted regularly on a total portfolio basis.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 45
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Note 2
Rent from investment properties and
interest from investment arrangements
Rent from investment properties
Interest – investment arrangements
As at 30 June 2006 the weighted average investment
property rental yield was 6.57% (2005: 7.06%) and the
weighted average investment arrangements loan interest as a
percentage of investment property loans, deposits and costs
equated to a yield of 8.65% (2005: 8.48%).
All of ALE’s investment property lease rentals are reviewed to
state based CPI annually. None of the lease rentals are subject
to fixed increases.
Note 3 Distributions
Distributions
Trust distribution from the Sub-Trust to the Trust. As this is a
transaction within the consolidated group it is eliminated on
consolidation.
Note 4
Operating bank and term deposit interest
Interest income
As 30 June 2006 the weighted average interest rate earned on
cash was 5.83% (2005: 5.59%)
Note 5 Finance costs – (cash and non-cash)
Cash excluding refinancing costs
Commercial Mortgage Backed Securities (CMBS) interest expense
Capital Indexed Bonds (CIBs) interest paid or payable
ALE Notes interest expense
Swaps interest (benefit)
Other expenses
(a)
Non-cash excluding refinancing costs
CIBs interest capitalised
Amortised costs – Pre May 2006 CMBS
Amortised costs – May 2006 CMBS and CIBs
Amortised costs – ALE Notes
Amortisation of ALE Notes premium
Cash and non-cash refinancing costs
Pre May 2006 CMBS prepayment break cost
Write off unamortised balance of prepaid costs
– refinanced pre May 2006 CMBS
Finance costs (cash and non-cash)
(b)
(c)
(d)
46
45,583
2,003
47,586
43,766
2,230
45,996
–
–
–
–
–
–
–
–
–
–
25,589
25,589
20,939
20,939
1,181
1,181
1,175
1,175
4
4
–
–
20,371
454
10,898
–
165
31,888
527
2,789
21
1,227
409
4,973
558
9,840
10,398
47,259
20,953
10,898
(528)
201
31,524
–
3,461
–
2,308
478
6,247
–
–
–
–
–
10,898
–
39
10,937
–
–
–
1,227
409
1,636
–
–
–
–
–
10,898
(713)
42
10,227
–
–
–
2,308
478
2,786
–
–
–
37,771
12,573
13,013
Note 5 Finance costs – (cash and non-cash) (continued)
(a) swaps interest (benefit)
Under AIFRS the swap interest for the 2006 year is included in fair value adjustments to derivatives (note 6).
(b) cash excluding refinancing costs
Finance costs expensed during the period that have either been paid or are payable in cash at balance date.
(c) non-cash excluding refinancing costs
Amortisation of prepaid borrowing costs (paid upfront) and the capitalised components of the ALE Notes premium and CIBs interest
(payable on maturities in September 2011 and November 2023 respectively).
(d) cash and non-cash refinancing costs
As a result of refinancing $345 million of CMBS with new CMBS and CIBs during May 2006 $558,000 of prepayment interest
(cash) was incurred on the refinanced fixed rate CMBS and $9,840,000 of unamortised prepaid borrowing costs (non cash) relating
to the $345 million of refinanced CMBS was expensed.
In reconciling profits/(loss) after tax to amounts available for distribution to stapled security holders the $4,973,000 of non-cash
expenses at note 5(c) and the $9,840,000 of non-cash expenses included at note 5(d) were both added back thereby recognising
that their non-cash nature increases cash profits available for distribution. Note 10 contains further information.
Note
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Note 6 Fair value adjustments to derivatives
Interest rate swaps fair value adjustments net gain/(loss)
Swaps interest net (receivable)/payable at balance date
Swap interest benefit received/receivable
Interest expenses and benefits under interest rate swap
contracts are recognised within the movement of interest rate
derivative fair values.
Note 7 Derivative assets/(liabilities)
Asset
Liability
Net asset/(liability)
ALE is exposed to changes in interest rates and uses interest
rate swaps to hedge these risks. From 1 July 2005 these
interest rate swaps are carried on the consolidated balance
sheet at fair value. Changes in fair value are recognised in
the consolidated income statement. ALE has not restated its
comparative figures for this change (note 1(a) provides further
information).
Note 8 Other expenses
Legal fees
Insurance
Occupancy costs
Property condition and compliance audits
Trustee and custodian fees
Auditors’ remuneration
Property valuation fees
Salaries, fees and related costs
Prepaid (at IPO) advisory costs
Acquisition proposal due diligence
Other
(a)
3,648
(26)
3,406
7,028
5,250
(229)
5,021
58
85
105
106
116
144
216
1,233
–
2,189
354
4,606
–
–
–
–
0
0
–
143
111
92
52
112
182
243
906
174
177
797
(2,171)
–
2,248
77
88
0
88
–
–
–
–
99
–
–
–
–
–
1
2,989
100
–
–
–
–
0
0
–
–
–
–
–
96
–
–
–
174
–
26
296
(a) Costs incurred by the Company, as responsible entity for the Trust, in relation to property acquisitions that did not proceed to completion. The amount
disclosed is before recoveries from third parties.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 47
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Note 9
Income tax
Current tax (benefit)
Deferred tax expense
Deferred income tax expense included in income
tax expense comprises:
Decrease/(increase) in deferred tax asset (note 21)
(Decrease)/increase in deferred tax liabilities (note 22)
Reconciliation of income tax expense to prima
facie tax payable
Profit before the income tax expense
Less: Profit attributable to the entities not subject to tax
Profit/(loss) before income tax expense subject to tax
Tax at the Australian tax rate 30% (2005: 30%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Expenditure held on balance sheet
Share based payments
Entertainment
Under provision in prior years
Income tax expense
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the year and not
recognised in net profit or loss but directly debited or credited
to equity:
Fair value adjustments to derivatives
(7)
1,435
1,428
(213)
1,648
1,435
–
(49)
(49)
(49)
–
(49)
–
–
–
–
–
–
–
–
–
–
53,635
(48,908)
80,072
(80,244)
10,721
(10,721)
5,445
(5,445)
4,727
1,418
(9)
2
1
16
(172)
(52)
–
1
2
1,428
(49)
(266)
(266)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 10 Distributions
Reconciliation of profits/loss after tax to amounts
available for distribution:
Profit after income tax
Plus/(Less)
Fair value adjustments to investment properties
Fair value adjustments to derivatives
Employee share option expense
Interest rate derivatives net receipts
Non-cash excluding refinancing costs
Non-cash refinancing costs
Income tax expense/(benefit)
Prepaid IPO costs
Total distribution (non-cash) adjustments
Available for distribution
Distributions paid or provided for
Available and undistributed
(a)
52,207
80,121
10,721
(50,256)
(7,028)
8
3,406
4,973
9,840
1,428
–
(74,800)
–
8
–
6,247
–
(49)
174
(37,629)
(68,420)
14,578
14,528
50
11,701
11,668
33
–
(77)
–
2,248
1,636
–
–
–
3,807
14,528
14,528
–
5
5
(b)
(c)
5,445
–
–
–
–
2,786
–
–
174
2,960
8,405
11,668
(3,263)
48
Note 10 Distributions (continued)
CONSOLIDATED
PARENT ENTITY
2006
Stapled
securities
on Issue
2005
Stapled
securities
on Issue
2006
Stapled
securities
on Issue
2005
Stapled
securities
on Issue
Divide note 10 (a), (b) and (c) (above) by stapled securities
on issue to calculate cents per stapled security
90,800,100
90,800,100
90,800,100
90,800,100
(a) Basic and diluted earnings per stapled security
57.50
88.24
11.81
(b) Basic and diluted earnings per stapled security before
fair value adjustments, non-cash amortisation of
borrowing costs and prepaid advisory fees
(c) Distribution per stapled security
16.06
16.00
12.89
12.85
16.00
16.00
Cents
Cents
Cents
Cents
6.00
9.26
12.85
Note
$’000
$’000
$’000
$’000
Note 11 Cash assets and cash equivalents
Cash at bank and in hand
Deposits at call
Cash reserve
The cash reserve of $5.5 million is required to be held as
a cash reserve as part of the terms of the CMBS issue
in order to provide liquidity against CMBS obligations
to scheduled CMBS maturity on 20 May 2011 and final
maturity on 20 May 2015.
During the year ended 30 June 2006 all cash assets were
placed on deposit with either the ANZ Banking Group
Limited, Commonwealth Bank of Australia Limited or
Macquarie Bank Limited. As at 30 June 2006 the weighted
average interest rate on all cash assets was 5.83%
(2005: 5.59%).
Note 12 Receivables
Accounts receivable
Interest receivable
Loan to related party – the Company
Loan to related party – the Sub-Trust
Accounts receivable comprise expenditure incurred by ALE
that are recoverable from its tenant, Australian Leisure and
Hospitality Group Pty Limited, or from Foster’s Group Limited
and other parties.
4,783
18,709
5,500
28,992
202
13,775
5,500
19,477
5
300
–
305
9
–
–
9
880
132
–
–
1,012
303
68
–
–
371
–
–
699
24,015
24,714
100
–
350
22,506
22,956
Note 13 Other
Current
Prepaid capitalised borrowing costs
Other prepaid expenses
Non-current
Prepaid capitalised borrowing costs
Total
(a)
(a)
–
55
55
–
–
55
5,754
39
5,793
13,585
13,585
19,378
–
12
12
–
–
12
2,301
4
2,305
5,423
5,423
7,728
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 49
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
–
–
–
25,109
( 5,769)
19,340
–
–
–
10,032
( 2,308)
7,724
Note 13 Other (continued)
(a) Reconciliation of capitalised borrowing costs:
Opening unamortised lead manager’s incentive fee
Amount expensed during the year
The prepaid borrowing costs of $28.8 million incurred in
November 2003 were, until 1 July 2005, being expensed
in a straight line over the remaining term of the five year
period to which it related.
From 1 July 2005 ALE has adopted AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139
Financial Instruments: Recognition and Measurement.
This has resulted in all capitalised borrowing costs being
disclosed as a reduction in borrowings (note 20). The fee
of $28.8 million has, since 1 July 2005, been expensed
from inception not on a straight line basis, but on an
amortised costs basis that applies an effective yield
equivalent to the interest rate required to discount all cash
flows on the fixed rate CMBS, ALE Notes and capitalised
borrowing costs back to the face value of the fixed rate
borrowings at inception.
The amortised cost on an effective yield basis results in
prepaid capitalised borrowing costs being expensed at a
lower rate in the earlier years and at a higher rate in the
later years of the term when compared to the straight
line basis. The amortisation adjustment required as at
30 June 2005 has been applied directly to retained profits/
(loss) (for further information refer to note 26).
Note 14
Investment properties
Reconciliation
A reconciliation of the carrying amounts of investment
properties at the beginning and end of the year is set out below:
Carrying amount at beginning of the year
Acquisitions
Net gain from fair value adjustments
Carrying amount at the end of the year
625,000
20,214
50,256
550,200
–
74,800
695,470
625,000
–
–
–
–
–
–
–
–
50
Note 14
Investment properties (continued)
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
Queensland
Albany Creek Tavern, Albany Creek
Albion Hotel, Albion
Alderley Arms Hotel, Alderley
Anglers Arms Hotel, Southport
Balaclava Hotel, Cairns
Breakfast Creek Hotel, Breakfast Creek
Caloundra Hotel, Caloundra
Camp Hill Hotel, Camp Hill
Chardons Corner Hotel, Annerly
Dalrymple Hotel, Townsville
Edge Hill Tavern
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 Gravatt Hotel, Mount Gravatt
Mount Pleasant Tavern, Mackay
Noosa Reef Hotel, Noosa Heads
Nudgee Beach Hotel
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
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
Oct-05
Nov-03
Nov-03
Nov-03
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
Jun-04
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
Nov-03
Cost
including
additions
$’000
5,470
5,659
8,205
8,771
5,847
3,112
8,865
5,848
2,830
4,150
58,757
8,394
4,433
3,301
4,433
3,301
10,656
4,332
2,264
1,415
3,207
2,358
3,112
5,847
3,672
6,602
3,773
2,452
2,264
4,433
4,433
4,055
3,207
1,792
6,874
3,018
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
Valuation
type and date
Fair value
30 June 2006
$’000
Fair value
30 June 2005
$’000
Fair value
gains (losses)
30 June 2006
$’000
B
B
B
B
B
A
A
A
A
A
B
A
B
B
A
A
C
A
A
C
A
B
A
B
A
B
B
A
C
A
B
B
C
A
A
B
B
B
C
B
B
B
B
B
A
B
C
C
C
7,100
7,300
10,600
11,400
7,300
3,900
11,200
7,600
3,450
5,500
6,600
6,900
9,900
10,600
6,850
3,700
10,500
6,800
3,250
5,100
500
400
700
800
450
200
700
800
200
400
75,350
70,200
5,150
10,500
5,800
4,300
5,700
4,100
12,000
5,500
2,900
1,800
4,050
3,100
3,900
7,100
4,900
7,700
5,100
3,200
2,900
5,750
5,400
5,400
4,000
2,300
9,700
3,900
6,300
8,800
5,200
2,150
4,300
2,600
6,500
7,200
11,400
7,500
10,200
7,300
5,500
1,250
9,600
5,200
4,100
5,300
3,800
11,700
–
2,750
1,500
3,700
3,000
3,600
6,600
4,600
7,400
4,600
2,900
2,700
5,300
5,100
4,800
3,700
2,200
8,300
3,500
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
900
600
200
400
300
300
1,168
150
300
350
100
300
500
300
300
500
300
200
450
300
600
300
100
1,400
400
700
800
400
250
400
700
600
500
1,100
1,000
600
600
200
150
Total Queensland properties
171,526
217,200
194,150
18,719
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 51
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 14
Investment properties (continued)
Property
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
Berwick Inn, Berwick
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, 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
Date
acquired
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Feb-06
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
Cost
including
additions
$’000
3,301
2,452
3,301
1,886
1,603
2,169
1,604
3,773
4,433
24,522
3,961
9,903
15,883
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
5,565
2,264
12,544
2,735
6,130
Valuation
type and date
Fair value
30 June 2006
$’000
Fair value
30 June 2005
$’000
Fair value
gains (losses)
30 June 2006
$’000
B
A
B
B
B
B
A
A
B
B
B
A
B
C
B
A
A
A
B
A
B
B
A
C
B
B
B
B
A
A
B
A
B
A
B
B
B
B
B
B
B
B
A
A
A
B
B
C
B
B
B
4,200
3,350
4,200
2,500
2,100
2,900
2,150
5,000
5,900
4,000
3,150
4,100
2,350
1,950
2,850
2,100
4,850
5,500
200
200
100
150
150
50
50
150
400
32,300
30,850
1,450
5,400
13,400
16,000
12,600
2,900
13,800
6,900
12,200
3,600
9,800
16,200
4,500
6,800
7,400
4,650
12,800
9,100
10,700
11,400
2,300
10,500
5,300
10,600
11,200
13,500
4,100
3,700
5,900
3,300
4,100
15,400
8,400
6,700
4,000
17,000
7,300
7,500
7,700
3,450
16,200
3,800
7,700
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
400
800
117
900
200
1,400
400
1,300
200
600
1,100
300
500
500
350
800
600
700
800
200
700
400
1,100
700
900
300
300
400
400
100
1,000
600
500
200
1,100
500
500
600
250
1,100
100
600
Total Victorian properties
266,097
359,800
319,400
24,517
52
Note 14
Investment properties (continued)
Property
Western Australia
queens Tavern, Highgate
Sail & Anchor Hotel, Fremantle
Wanneroo Villa Tavern, Wanneroo
Total Western Australian properties
Date
acquired
Nov-03
Nov-03
Nov-03
Cost
including
additions
$’000
4,810
3,112
1,132
9,054
Valuation
type and date
Fair value
30 June 2006
$’000
Fair value
30 June 2005
$’000
Fair value
gains (losses)
30 June 2006
$’000
A
C
C
5,860
3,610
1,350
5,635
3,465
1,300
10,820
10,400
225
145
50
420
Total investment properties
529,956
695,470
625,000
50,256
Valuation type and date
A
B
C Directors’ valuations conducted May 2006 with a valuation date of 30 June 2006.
Independent valuations conducted during April 2006 with a valuation date of 30 June 2006.
Independent valuations conducted during May 2006 with a valuation date of 30 June 2006.
Investment properties
All investment properties are freehold and 100% owned by ALE and are comprised of land, buildings and fixed improvements.
The plant, equipment and liquor and gaming licences are owned by the tenant.
Leasing arrangements
The investment properties are leased to a single tenant under long-term “triple net” operating leases with rentals payable monthly
in advance. ALE has incurred no lease incentive costs to date.
Valuation of investment properties
The basis of valuation of investment properties is fair value being the amounts for which the properties could be exchanged
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 ALE’s policy of independently valuing at least one-third of its property portfolio annually, 90 properties were
independently valued during April and May 2006 on an as at 30 June 2006 basis. The independent valuations are identified as “A”
(conducted April 2006) or “B” (conducted May 2006) in the investment property table under the column labelled “Valuation type
and date” (above). All of these valuations were completed by Peter Spiller (AAPI) of DTZ Australia (NSW) Pty Ltd.
Directors’ valuations
90 of ALE’s portfolio of 103 completed properties (an additional three property acquisitions remain subject to completion, refer to
note 15) were independently valued during April and May 2006. The remaining 13 completed properties were subject to directors’
valuations as at 31 May 2006. The directors’ valuations were determined by taking each property’s net rent as at 31 May 2006
and capitalising it at a rate equal to the latest independently determined capitalisation rate for that property adjusted by the
average change in capitalisation rate evident in the April and May 2006 independent valuations on a state by state basis. The latest
independent valuation for the directors’ valuation properties was 30 June 2005 for all except Caloundra, queensland which was
completed by Peter Spiller (AAPI) of DTZ Australia (NSW) Pty Ltd on 30 September 2005.
Conditional acquisition of development properties
During November 2003 ALE entered into conditional sale contracts with subsidiaries of Foster’s Group Limited to acquire seven
properties that were subject to development plans. The conditional sale contracts are conditional upon satisfactory completion of
the developments. At 30 June 2006, three of the properties are yet to be acquired (note 15 contains further information).
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 15 Loans and deposits – investment properties
Deposits and acquisition costs on all of the properties are classified as non-current assets due to them forming a part of the
acquisition of investment properties (a non-current asset) under the conditional sale contracts.
Total loans and deposits – investment properties
Total investment properties (note 14)
Total investment properties and loans and deposits – investment properties
As at 30 June 2006:
Property
Current
Narrabeen Sands Hotel, Narrabeen
Parkway Hotel, Frenchs Forest, NSW
Non-current
Burleigh Heads Hotel, Burleigh Heads
Narrabeen Sands Hotel, Narrabeen
Parkway Hotel, Frenchs Forest, NSW
As at 30 June 2005:
Property
Current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen
Non-current
Caloundra Hotel, Caloundra, QLD
Narrabeen Sands Hotel, Narrabeen
Burleigh Heads Hotel, Burleigh Heads
Parkway Hotel, Frenchs Forest, NSW
Expected
acquisition
quarter ending
Deposits
(10% of
purchase price)
$’000
Loans
(90% of
purchase price)
$’000
Dec 2006
Dec 2006
Dec 2007
Dec 2006
Dec 2006
–
–
–
658
879
638
2,175
2,175
7,914
5,748
13,662
5,914
–
–
5,914
19,576
Expected
acquisition
quarter ending
Deposits
(10% of
purchase price)
$’000
Loans
(90% of
purchase price)
$’000
–
–
–
426
879
657
638
2,600
2,600
3,832
7,914
11,746
–
–
5,915
5,748
11,663
23,409
Costs
$’000
–
–
–
114
152
110
376
376
Costs
$’000
–
–
–
74
152
114
110
450
450
Total
acquisition
costs
$’000
7,914
5,748
13,662
6,686
1,031
748
8,465
22,127
695,470
717,597
Total
acquisition
costs
$’000
3,832
7,914
11,746
500
1,031
6,686
6,496
14,713
26,459
625,000
651,459
Total loans and deposits – investment properties
Total investment properties (note 14)
Total investment properties and loans and deposits – investment properties
ALE paid deposits and made loans to subsidiaries of Foster’s Group Limited during November 2003 equal to the purchase prices
in the conditional sale contracts for each of the properties. ALE receives monthly interest on the loans equal to the rent otherwise
payable on the properties. As at 30 June 2006 the annual interest payable was $1,914,000 (2005: $2,244,000). This equates to a
weighted average interest rate of 9.78% (2005: 9.59%) on the loan amount of $20,723,000 (2005: $23,409,000) and a weighted
average interest rate of 8.80% (2005: 8.63%) on the purchase price of $22,898,000 (2005: $26,009,000).
Under the conditional sale contracts ALE will acquire legal title to each of these properties on completion of the relevant
development at the purchase price agreed at the November 2003 exchange of contracts. Independent valuations will be undertaken
on each of the developments when complete and, if necessary, the purchase price will be adjusted down to reflect the value. If
the completion valuation results in an increase in value there will be no adjustment to the purchase price. ALE and members of
Foster’s Group Limited had rights to rescind the conditional sale contracts in the event that the developments were not completed
by November 2005. Formal agreements were completed between the parties during July 2006 expanding the extension of the
applicable sunset dates to enable the completion of the developments over extended timetables.
54
Note 15 Loans and deposits – investment properties (continued)
Current and non-current asset classifications
The Narrabeen Hotel (subject to development completion) and the Parkway Hotel (subject to discussion between ALE, ALH and
Foster’s Group Limited) are expected to be acquired by ALE and the loans repaid by 31 December 2006. As a result the loans are
classified as current assets.
The loan to the Foster’s Group Limited on the remaining property, Burleigh Heads Hotel, is classified as a non-current asset due to
expected development completion and acquisition by ALE after 30 June 2007.
Note 16 Plant and equipment
Furniture, fittings
and equipment
$’000
Software
$’000
Office fitout
$’000
Total
$’000
At 30 June 2004
At cost
Accumulated depreciation
Net book value
Year ended 30 June 2005
Opening net book value
Additions
Depreciation charge
Closing net book value
At 30 June 2005
Cost
Accumulated depreciation
Net book value
Year ended 30 June 2006
Opening net book value
Additions
Depreciation charge
Closing net book value
As at 30 June 2006
Cost
Accumulated depreciation
Net book value
Investment in controlled entities
Note 17
Unlisted units in controlled trust
– Sub-Trust
The Trust owns 100% of the issued units of the Sub-Trust
(note 35 contains further information).
Note 18 Payables
Trade creditors
Interest accrued on CMBS
Interest accrued on CIBs
Interest accrued on ALE Notes
Other accruals
2
–
2
2
57
(12)
47
59
(12)
47
47
–
(13)
34
59
(25)
34
18
(4)
14
14
25
(7)
32
43
(11)
32
32
29
(25)
36
72
(36)
36
–
–
–
–
86
(24)
62
86
(24)
62
62
–
(31)
31
85
(54)
31
20
(4)
16
16
168
(43)
141
188
(47)
141
141
29
(69)
101
216
(115)
101
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
–
–
–
–
210,943
210,943
210,943
210,943
254
1,355
492
2,747
2,751
7,599
44
3,046
–
2,747
1,126
6,963
–
–
–
2,747
26
2,773
–
–
–
2,747
23
2,770
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 55
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
8,354
46
15
8,415
3,905
391
31
–
4,327
5,994
22
10
6,026
–
–
39
302
341
330,000
15,000
(345,000)
225,000
330,000
–
–
–
225,000
330,000
(17,280)
17,280
–
(1,128)
3
(1,125)
125,873
527
126,400
(768)
19
(749)
–
–
–
–
–
–
–
–
–
–
–
–
8,354
–
–
8,354
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,994
–
–
5,994
–
–
–
302
302
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,000
150,000
150,000
150,000
(11,520)
3,037
(8,483)
1,022
–
–
–
783
(11,520)
3,037
(8,483)
1,022
–
–
–
783
492,065
480,783
142,539
150,783
225,000
125,873
527
150,000
1,022
(1,125)
(749)
(8,483)
330,000
–
–
150,000
783
–
–
–
–
–
–
150,000
1,022
–
–
(8,483)
492,065
480,783
142,539
–
–
–
150,000
783
–
–
–
150,783
Note 19 Provisions and other liabilities
(a) Provisions
Provision for distribution
Provision for annual leave
Provision for superannuation
(b) Current liabilities – other
Unearned rental income for the month of July 2006
received in June 2006
GST on unearned rental income for the month of
July 2006 received in June 2006
Unearned interest income for July 2006
Other
Note 20 Borrowings
CMBS – opening balance
CMBS – issued February 2006 (Berwick acquisition)
CMBS pre May 2006 – prepaid
CMBS May 2006 – issued
Closing CMBS
CMBS pre May 2006 – borrowing costs
CMBS pre May 2006 – amortised borrowing costs
CMBS pre May 2006 – unamortised costs
CMBS May 2006 – prepaid borrowing costs
CMBS May 2006 – amortised borrowing costs
CMBS May 2006 – unamortised costs
CIBs – issued May 2006
Capitalised interest
Closing CIBs
Prepaid CIBs borrowing costs
Amortised CIBs borrowing costs
CIBs – unamortised costs
ALE Notes on issue
ALE Notes – prepaid borrowing costs
ALE Notes – amortised borrowing costs
ALE Notes – unamortised costs
ALE Notes premium
Comprising (from above):
CMBS on issue
CIBs on issue
CIBs capitalised interest
ALE Notes on issue
ALE Notes premium
CMBS May 2006 – unamortised costs
CIBs – unamortised costs
ALE Notes – unamortised costs
56
Note 20 Borrowings (continued)
From 1 July 2005 ALE adopted AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement. This has resulted in all capitalised borrowing costs being disclosed as a reduction in borrowings;
previously these costs were disclosed as prepaid capitalised borrowing costs.
CMBS borrowings of $330 million at 30 June 2005 were increased to $345 million during February 2006 in order to fund the
acquisition of the Berwick Inn, Victoria (purchase price $15.0 million). The $345 million of CMBS borrowings were refinanced during
May 2006 with $225 million of new CMBS and $125.9 million of CIBs.
A 3.40% p.a. (including credit margin) fixed rate of interest applies to the CIBs and is payable quarterly with the outstanding balance
of the CIBs escalating periodically in line with the relevant consumer price index. The amount of the escalation is referred to as
capitalised interest and is not payable until maturity of the CIBs.
The CMBS and CIBs borrowings are secured by, among other things, first ranking real property mortgages over all but four of the
investment properties. The CMBS and CIBs have scheduled maturity dates of 20 May 2011 and 20 November 2023 respectively.
The ALE Notes were issued on 7 November 2003 with an expected maturity date of 30 September 2011. A 2.5% redemption
premium of $3.75 million is payable on the expected maturity date.
ALE’s $225 million of CMBS variable interest rate exposure of is fully hedged (100% fixed) up until November 2009. This has been
achieved by the use of variable rate borrowings swapped to fixed rates by using interest rate swaps.
At 30 June 2006, the notional principal amounts and periods of expiry of the interest rate derivative contracts are as follows:
Expiry periods
Less than 1 year
1-3 years
3-4 years
4-5 years
6-7 years
$50 million on 20-Nov-08
$50 million on 20-May-09
($50 million) on 20-May-09
$50 million on 20-Nov-09
($20 million) on 20-Nov-09
$50 million on 20-May-10
$30 million on 20-Nov-10
$15 million on 20-Nov-12
$50 million on 20-Nov-12
7-8 years
$50 million on 20-Nov-13
Total expiries
($50 million) forward rate commences 20-Nov-08
$100 million forward rate commences 20-Nov-08
Expiries excluding derivatives yet to commence
(a)
(b)
(b)
(a)
(b)
Consolidated
2006
$’000
–
50,000
80,000
30,000
65,000
50,000
275,000
(50,000)
225,000
ALE’s weighted average interest rate on all borrowings and interest rate swaps as at 30 June 2006 was 6.034% (2005: 6.524%).
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 57
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 20 Borrowings (continued)
Assets pledged as securities
The ALE Notes are unsecured. The carrying amounts of assets pledged as security for CMBS and CIBs borrowings are:
Current assets
Cash reserve
Non-current assets
Total investment properties
Less: Properties not subject to mortgages
Imperial Hotel, Beenleigh, qLD
Petrie Hotel, Petrie, qLD
Woree Tavern, Cairns, qLD
Wanneroo Villa Tavern, Wanneroo, WA
Properties subject to first mortgages
Total assets
CONSOLIDATED
2006
$’000
2005
$’000
5,500
5,500
695,470
625,000
(3,200)
(2,150)
(1,250)
(1,350)
(2,900)
(1,900)
(1,100)
(1,300)
687,520
617,800
693,020
623,300
In the unlikely event of a default by ALE’s tenant, Australian Leisure and Hospitality Group Limited (ALH), if the assets pledged
as security are insufficient to fully repay CMBS and CIBs borrowings, the CMBS and CIBs holders are also entitled to recover the
amount unpaid from the business assets of ALH.
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Note 21 Deferred tax asset
The balance comprises temporary
differences attributable to:
amounts recognised in profit or loss
Derivative – interest rate swaps
Employee benefits
Acquisition proposal due diligence
CIBs amortisation
Other accruals
Other provisions
Net deferred tax assets
Movements:
Opening balance at 1 July 2005
Change on adoption of AASB 132 and AASB 139
Credited/(charged) to the income statement (note 9)
Credited/(charged) to equity
Closing balance at 30 June 2006
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
71
19
381
28
79
–
578
99
266
213
–
578
196
382
578
–
10
–
–
77
12
99
50
–
49
–
99
99
–
99
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
58
Note 22 Deferred tax liability
The balance comprises temporary
differences attributable to:
amounts recognised in profit or loss
Derivative – interest rate swaps
Interest income earned but not received
CIBs interest amortisation
CIBs and CMBS amortisation of costs
Prepaid expense
Net deferred tax liability
Movements:
Opening balance at 1 July 2005
Change on adoption of AASB 132 and AASB 139
Charged/(credited) to income statement (note 9)
Charged/(credited) to equity
Acquisition of subsidiary
Closing balance at 30 June 2006
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax liabilities to be recovered within 12 months
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
1,575
15
47
10
1
1,648
–
–
1,648
–
–
1,648
16
1,632
1,648
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note 23 Contributed equity
Balance at the beginning of the year
Transfer (to) distribution to stapled security holders
81,787
–
81,787
88,010
(6,223)
81,787
81,787
–
81,787
88,010
(6,223)
81,787
The Trust issued 9,080,010 of no income voting units (NIVUS) to the Company fully paid at $1.00 each in November 2003. The
NIVUS are not stapled to shares in the Company, have an issue and withdrawal price of $1.00, carry no rights to income from the
Trust and entitle the holder to no more than $1.00 per NIVUS upon the winding up of the Trust. The Company has a voting power of
9.09% in the Trust as a result of the issue of NIVUS.
Movements in the number of fully paid stapled securities during the period were as follows:
Stapled securities on issue:
Balance at the beginning of the year
Issue of securities
Number of
securities
Number of
securities
Number of
securities
Number of
securities
90,800,100
–
90,800,100
–
90,800,100
–
90,800,100
–
Balance at the end of the year
90,800,100
90,800,100
90,800,100
90,800,100
Stapled securities
Fully paid ALE stapled securities were issued at $1.00 per stapled security. Each stapled security comprises one share in the
Company and one unit in the Trust. They cannot be traded or dealt with separately. Stapled securities entitle the holder to
participate in dividends/distributions and the proceeds on any winding up of ALE in proportion to the number of and amounts paid
on the securities held. On a show of hands every holder of stapled securities present at a meeting in person or by proxy, is entitled
to one vote. On a poll each ordinary shareholder is entitled to one vote for each fully paid share and each unitholder is entitled to one
vote for each fully paid unit.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 59
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note
26
Note 24 Retained profits/(loss)
Balance at the beginning of the year
Adjustment on adoption of AASB 132 and AASB 139
Deferred tax asset recognised on adoption
of AASB 132 and AASB 139
Profit attributable to stapled security holders of ALE
Transfer from contributed equity
Total available for appropriation
Distributions provided for or paid during the year
CONSOLIDATED
PARENT ENTITY
2006
$’000
Number of
securities
2005
$’000
Number of
securities
2006
$’000
Number of
securities
2005
$’000
Number of
securities
115,012
4,544
266
52,207
–
172,029
(14,528)
40,336
–
–
80,121
6,223
126,680
(11,668)
–
4,416
–
10,721
–
15,137
(14,528)
–
–
–
5,445
6,223
11,668
(11,668)
–
Balance at the end of the year
157,501
115,012
609
Note
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Retained earnings balance at the end of the year is
comprised of the following amounts:
Fair value adjustments – investment properties (non-cash)
Fair value adjustments to derivatives (non-cash)
Transfer from contributed equity
Amortised costs – pre May 2006 CMBS (non-cash)
Amortised costs – ALE Notes (non cash)
Amortised costs – May 2006 CMBS (non-cash)
Accrued ALE Notes premium (non-cash)
CIBs capitalised interest (non-cash)
Income tax (expense)/benefit (non-cash)
Other
(a)
(a)
(b)
(b)
(c)
(a) Unrealised fair value gains have not been distributed.
(b) Borrowing costs that were funded in November 2003 by the issue of
ALE stapled securities.
(c) ALE Notes premium payable in on ALE Notes termination
(scheduled September 2011).
Note 25 Reserve
Balance at the beginning of the year
Employee share option expense
165,515
5,021
6,223
(17,280)
(3,037)
(19)
(1,022)
(527)
(1,428)
4,055
115,259
–
6,223
(3,461)
(2,308)
–
(783)
–
49
33
157,501
115,012
–
88
6,223
–
(3,037)
–
(1,022)
–
–
(1,643)
609
13
8
21
5
8
13
–
–
–
–
–
6,223
–
(2,308)
–
(783)
–
–
(3,132)
–
–
–
–
Options over unissued stapled securities of ALE were granted during a previous 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 employment is terminated other than for cause or
unsatisfactory performance. The options will remain exercisable until 10 November 2007, unless ALE is subject to a takeover, in
which case the period of exercise would be reduced to 11 February 2007. When exercised each option is converted to one ordinary
unit and one ordinary share.
The options value disclosed above as part of key management 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 and expected price volatility of the underlying share, the expected dividend yield and the risk-
free interest rate for the term of the option.
60
Note 26 Adjustment on adoption of AASB 132 and AASB 139 to retained profits
Reconciliation of the AIFRS adjustment, being an increase of $4,544,000 to opening retained profits on 1 July 2005, as disclosed in
the consolidated statements of changes in equity.
Expenses/(benefits)
Derivatives interest rate swaps – net asset
CMBS pre May 2006 – amortised borrowing costs
ALE Notes – amortised borrowing costs
ALE Notes premium
CONSOLIDATED
AIFRS income/
(expenses) to
30 June 2005
$’000
AGAAP income/
(expenses) to
30 June 2005
$’000
Increase to
retained profits
1 July 2005
$’000
1,373
(4,651)
(1,810)
(612)
(5,700)
–
(5,665)
(3,796)
(783)
(10,244)
1,373
1,014
1,986
171
4,544
Note 27 AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement
ALE has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentation
and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005 and has not restated any comparative period
figures for the resulting adjustments. The adjustments have instead been taken directly to retained earnings as at 1 July 2005.
(a) Interest rate derivatives
Potential variability in future distributions arise predominantly from financial assets and liabilities bearing variable interest rates. For
example, if financial liabilities exceed financial assets and interest rates rise, to the extent that interest rate derivatives (swaps) are
not available to fully hedge the exposure, distribution levels would be expected to decline from the levels that they would otherwise
have been.
ALE also has long-term leased property assets and fixed interest rate liabillities that are currently intended to be held until maturity.
The market value of these assets and liabilities are also expected to change as long-term interest rates fluctuate. For example, as
long-term interest rates rise the market value of both property assets and fixed interest rate liabilities may fall (all other market variables
remaining unchanged). These movements in property assets and fixed interest rate liabillities impact upon the net equity value of ALE.
The contracts are settled on a net basis and the net amount receivable or payable at the reporting date is included in derivatives
– interest rate swaps. The contracts require settlement of net interest receivable or payable every 90 days. The settlement dates
coincide with the dates on which interest is payable on the underlying CMBS and CIBs debt.
(b) Interest rate risk
ALE’s exposure to the interest rate risk and the effective weighted interest rate by maturity periods is set out in the following table.
For interest rates applicable to each class of asset or liability refer to individual notes to the financial statements.
Exposure arises predominantly from liabilities bearing variable interest rates as the consolidated entity intends to hold fixed assets
and liabilities to maturity.
FIXED INTEREST MATURING IN
Floating
interest rate
$’000
Note
1 year
or less
$’000
1 to 5
years
$’000
More than
5 years
$’000
Non-interest
bearing
$’000
Total
$’000
2006
financial assets
Cash and cash equivalents
Receivables
Loans to Foster’s Group Limited
Weighted average interest rate
financial liabilities
Payables
Borrowings – ALE Notes
Borrowings – CMBS
Borrowings – CIBs
Derivatives – interest rate swaps
Weighted average interest rate
11
12
15
18
20
20
20
20
4,783
–
–
4,783
5.65%
–
–
225,000
–
(225,000)
–
–
24,209
–
13,662
37,871
7.06%
–
–
–
–
–
–
–
–
–
5,914
5,914
11.53%
–
–
–
–
110,000
–
–
–
–
–
–
150,000
–
126,400
115,000
110,000
391,400
–
1,012
–
1,012
–
7,599
–
–
–
–
7,599
28,992
1,012
19,576
49,580
7.31%
7,599
150,000
225,000
126,400
–
508,999
6.04%
4.64%
–
4.87%
Net financial assets/(liabilities)
4,783
37,871
(104,086)
(391,400)
(6,587)
(459,419)
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 61
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 27 AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement (continued)
(b) Interest rate risk (continued)
FIXED INTEREST MATURING IN
Floating
interest rate
$’000
Note
1 year
or less
$’000
1 to 5
years
$’000
More than
5 years
$’000
Non-interest
bearing
$’000
Total
$’000
2005
financial assets
Cash
Receivables
Loans to Foster’s Group Limited
11
12
15
202
–
–
202
Weighted average interest rate
5.15%
financial liabilities
Payables
Borrowings – ALE Notes
Borrowings – CMBS
Derivatives – interest rate swaps
18
20
20
20
–
–
230,000
(230,000)
Weighted average interest rate
–
–
19,275
–
11,746
31,021
7.11%
–
–
11,663
11,663
9.59%
–
–
–
–
–
–
–
100,000
200,000
–
150,000
–
30,000
300,000
180,000
–
–
–
–
–
–
–
371
–
371
–
7,016
–
–
–
7,016
19,477
371
23,409
43,257
7.71%
7,016
150,000
330,000
–
487,016
6.19%
6.79%
–
6.43%
Net financial assets/(liabilities)
202
31,021
(288,337)
(180,000)
(6,645)
(443,759)
(c) Credit risk
The major credit risk is the risk that the tenant will fail to perform its contractual obligations including honouring the terms of the
lease agreements either in whole or in part. Credit risk has been minimised primarily by ensuring, on a continuous basis, that the
tenant has appropriate financial standing and by the various security arrangements that are in place.
A secondary credit risk exists in respect of the loans to Foster’s Group Limited made by ALE under the conditional sale contracts
of properties under development. Credit risk has been minimised primarily by ensuring, on a continuous basis, that Foster’s Group
Limited has appropriate financial standing and by the various security arrangements that are in place.
The credit risk on financial assets of ALE which have been recognised in the consolidated balance sheet is generally the carrying
amount net of any provision for doubtful debts.
(d) Liquidity and cash flow risk
Liquidity risk is the risk that ALE will experience difficulty in either realising or otherwise raising sufficient funds to satisfy
commitments. Cash flow risk is the risk that the future cash flows will fluctuate from the expected. The risk management guidelines
adopted are designed to minimise liquidity and cash flow risk by monitoring and planning for significant exposures to large creditors
and ensuring counterparties have appropriate financial standing.
In order to have the CMBS and CIBs rated, ALE has put in place a liquidity facility equal to approximately six months debt service of
the CMBS and CIBs.
(e) Market risk
Market risk is the risk that the value of ALE’s investment properties will fluctuate as a result of changes in market prices. To
the extent controllable, this risk is managed by ensuring that all activities are transacted in accordance with mandates, overall
investment strategy and within approved limits. Market risk analysis is conducted regularly on a total portfolio basis.
62
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Note 28 Reconciliation of profit after income tax to
net cash inflows from operating activities
Profit/(loss) for the year
Fair value adjustment to investment property
Fair value adjustment to derivative financial instruments
Fair value adjustment to derivative financial instruments
– swap interest
Finance costs amortisation – May 2006 refinance write off
Finance costs amortisation
Income tax expense/(benefit)
Employee share options
Depreciation
(Increase) in receivables
(Increase) in loan to related party
(Increase)/decrease in other assets
Increase/(decrease) in payables
Increase in provisions
Increase/(decrease) in other liabilities
52,207
(50,256)
(7,028)
3,406
9,840
4,973
1,428
8
68
(719)
–
(16)
611
29
3,970
Net cash inflow/(outflow) from operating activities
18,521
80,121
10,721
5,445
(74,800)
–
–
–
5,769
(49)
8
48
(61)
–
210
(2,685)
–
479
9,040
–
(77)
2,248
–
1,227
–
–
–
(100)
(13,833)
–
3
–
107
296
–
–
–
–
2,307
–
–
(88)
–
(8,890)
185
1,163
–
(168)
(46)
Note 29 Key management personnel disclosures
(a) Directors
The following persons were directors of ALE Property Group comprising Australian Leisure and Entertainment Property Trust and its
controlled entities during the financial year:
Name
Type
Appointed
P H Warne (Chairman)
J P Henderson
H I Wright
A F O Wilkinson (Managing Director)
J T McNally
Non-executive
Non-executive
Non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of ALE, directly or
indirectly, during the year.
Name
A J Slade
D S Barkas
B R Howell
Type
Appointed
Investment and Acquisitions Manager
Group Financial Controller
Company Secretary and Compliance Officer
18 July 2005
29 January 2004
26 September 2003
(c) Compensation for key management personnel
The following table sets out the compensation for key management personnel in aggregate. Refer to the remuneration report in the
directors’ report for details of the remuneration policy and compensation details by individual.
Short-term employee benefits
Post employment benefits
Share based payments
CONSOLIDATED
2006
$’000
2005
$’000
1,081,304
49,843
7,993
1,139,140
817,848
41,231
7,993
867,072
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 63
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 29 Key management personnel disclosures (continued)
ALE has taken advantage of the relief provided by Corporations Regulation CR2M.6.04 and has transferred the detailed remuneration
disclosures to the directors’ report. The relevant information can be found in the remuneration report on pages 30 to 33.
The table sets out the equity holdings for key management personnel in aggregate.
Name
Role
Number held at the
start of the year
Purchases/(sales)
Number held at
30 June 2006
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
D S Barkas
A J Slade
Non-executive Director
Non-executivec Director
Non-executive Director
Executive Director
Group Financial Controller
Investment and Acquisitions Manager
453,400
40,000
100,000
51,998
46,810
–
196,600
15,000
–
16,002
1,517
12,000
650,000
55,000
100,000
68,000
48,327
12,000
The following director currently holds options over the stapled securities of ALE:
Name
Role
Number held at the
start of the year
Purchases / (sales)
Number held at
30 June 2006
A F O Wilkinson
Executive Director
300,000
–
300,000
Note 30 Remuneration of Auditors
Audit services
PricewaterhouseCoopers Australian firm:
Audit and review of the financial reports of ALE
and other audit work under the Corporations Act 2001
– in relation to current year
– in relation to prior year
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian firm:
General accounting advice (including AIFRS)
Due diligence services
Controls assurance services
Total remuneration for other assurance services
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
135,400
1,500
125,705
60,000
136,900
185,705
26,173
142,250
9,000
177,423
29,944
31,300
7,000
68,244
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total remuneration for assurance services
314,323
253,949
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Due diligence services
Tax consulting services
Total taxation services
Note 31 Related party transactions
(a) Parent entity, subsidiaries and associates
Details are set out in note 35.
9,000
223,000
25,135
257,135
15,000
–
24,190
39,190
(b) Key management personnel
Key management personnel and their compensation is set out in note 29.
(c) Transactions with related parties
For the year ended 30 June 2006 the Company had charged the Trust $2,276,000 in management fees (2005: $2,185,000) and the
Finance Company had charged the Sub-Trust $20,642,000 in interest (2005: $20,949,000).
64
Note 31 Related party transactions (continued)
(c) Transactions with related parties (continued)
Peter Warne is a director of Next Financial Limited (“Next”), which is a private investment manager which operates accounts on
behalf of investors. All of Next’s investment securities are held by Fortis Clearing Sydney Pty Ltd (“Fortis”) as custodian for clients.
Fortis held 4,254,837 stapled securities of ALE as at 30 June 2006 (2005: 4,400,314). Mr Warne does not make any investment
decisions as part of his role at Next which relate to securities in ALE.
ALE has entered into two associate motor vehicle leases with the spouse of Darren Barkas. The leases commenced on 15 March
2005; as at 30 June 2006 payments under the leases totalled to $5,000 (2005: $2,000).
(d) Terms and conditions
All related party transactions are conducted on normal commercial terms and conditions.
Outstanding balances are unsecured and are repayable in cash and callable on demand.
Note 32 Commitments
(a) Capital commitments
Other than amounts required under the conditional sale contracts to acquire properties under development (these amounts are fully
represented in investment property deposits and loans in note 15), the directors are not aware of any capital commitments as at the
date of this report.
(b) Lease commitments
ALE has entered into a non-cancellable operating lease for its office premises at Level 8, 15-19 Bent Street, Sydney. The minimum
net lease commitments under this lease are:
CONSOLIDATED
PARENT ENTITY
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Note 33 Earnings per stapled security
74
4
–
78
71
74
4
149
–
–
–
–
Cents
Cents
Cents
Basic and diluted earnings per ALE stapled security
57.50
88.24
11.81
–
–
–
–
Cents
6.00
Weighted average number of stapled securities used as the
denominator in calculating earnings per stapled security
90,800,100
90,800,100
90,800,100
90,800,100
Number of
Number of
Number of
Number of
stapled securities stapled securities stapled securities stapled securities
Weighted average number of stapled securities and potential
stapled securities used as the denominator in calculating
diluted earnings per stapled security
Note 34 Contingent liabilities and contingent assets
90,800,100
90,800,100
90,800,100
90,800,100
Put and call option
For all of the investment properties, at the end of the initial lease term of 25 years (2028 for most of the portfolio), and at the end
of each further term (four 10 year terms), there is a call option for the landlord (or its nominee) and a put option for the tenant to
require the landlord (or its nominee) to buy plant, equipment, goodwill, inventory, all then current consents, licences, permits,
certificates, authorities or other approvals, together with any liquor licence, held by the tenant in relation to the premises. The
gaming licence is to be included or excluded at the tenant’s option. These assets are to be purchased at current value as determined
by the valuation methodology set out in the lease. The landlord must pay the purchase price on expiry of the lease.
Bank guarantee
The Company has entered into a bank guarantee of $23,834 in respect of its office tenancy at Level 8, 15-19 Bent Street, Sydney.
This guarantee may give rise to a liability if the Company does not meet its obligations under the terms of the lease.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 65
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Investments in controlled entities
Note 35
The Trust owns 100% of the issued equity of the Sub-Trust. The Sub-Trust owns 100% of the issued equity of the Finance
Company. The Trust owns none of the issued equity of the Company, but is deemed to be its “acquirer” under AIFRS.
Note 36 Segment information
Business segment
ALE operates solely in the property investment and property funds management industry and has no business segmentation.
Geographical segment
ALE owns property solely within Australia.
Note 37 Events occurring after reporting date
The directors are not aware of any matter or circumstance occurring after balance date which may materially affect ALE’s
operations, the results of those operations or the state of affairs of ALE.
Note 38 Explanation of transition to Australian equivalents to IFRS
There was no difference between profit and equity under previous Australian Generally Accepted Accounting Principles (AGAAP)
for the Trust (parent entity).
(1) Reconciliation of ALE (consolidated) profit under previous AGAAP to profit under Australian equivalents to IFRS
(AIFRS) for the year ended 30 June 2005
Note
(a)
(b)
Consolidated
30 June 2005
previous AGAAP
$’000
Consolidated
30 June 2005
effect of transition
to AIFRS
$’000
Consolidated
30 June 2005
AIFRS
$’000
45,996
–
1,175
47,171
31,524
6,247
1,139
244
177
991
42
70
143
92
92
52
62
65
68
49
834
41,891
5,280
(49)
–
74,800
–
74,800
45,996
74,800
1,175
121,971
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
–
–
8
74,792
–
31,524
6,247
1,139
244
177
999
42
70
143
92
92
52
62
65
68
49
834
41,899
80,072
(49)
5,329
74,792
80,121
Revenue
Property rental income and loan interest
Revaluation of investment properties
Interest income
Total revenue
Expenses
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
Profit before tax
Income tax (benefit)
Profit after tax
66
Note 38 Explanation of transition to Australian equivalents to IFRS (continued)
(2) Reconciliation of ALE (consolidated) equity reported under previous AGAAP to equity under AIFRS as at the end of
the last reporting period under previous AGAAP: 30 June 2005
Consolidated
30 June 2005
previous AGAAP
$’000
Consolidated
30 June 2005
effect of transition
to AIFRS
$’000
Notes
Consolidated
30 June 2005
AIFRS
$’000
Current assets
Cash and cash equivalents
Receivables
Prepayments and other assets
Investment properties – loans and deposits
Total current assets
Non-current assets
Property investments
Development properties – loans, deposits and costs
Prepayments and other assets
Plant and 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
Share based payments reserve
Retained profits
Total equity
Net assets per stapled security
19,477
371
5,793
11,746
37,387
625,000
14,713
13,585
141
99
653,538
690,925
7,002
6,026
302
13,330
330,000
150,000
783
–
480,783
494,113
196,812
81,787
115,259
–
(234)
196,812
$2.17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(115,259)
13
115,246
–
–
19,477
371
5,793
11,746
37,387
625,000
14,713
13,585
141
99
653,538
690,925
7,002
6,026
302
13,330
330,000
150,000
783
–
480,783
494,113
196,812
81,787
–
13
115,012
196,812
$2.17
(a)
(b)
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 67
notes to tHe ConsolidAted FinAnCiAl stAtements (continued)
Note 38 Explanation of transition to Australian equivalents to IFRS (continued)
(3) Reconciliation of ALE (consolidated) equity reported under previous AGAAP to equity under AIFRS under previous
AGAAP: 30 June 2004 as at the date of transition 1 July 2004
1 July 2004
previous
AGAAP
$’000
1 July 2004 effect
of transition
to AIFRS
$’000
1 July 2004
AIFRS
$’000
Note
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(40,459)
5
40,454
–
–
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
–
5
40,336
128,351
$1.41
(a)
(b)
Current assets
Cash
Receivables
Prepayments and other assets
Development property loans
Total current assets
Non-current assets
Property investments
Development properties – loans, deposits and costs
Prepayments and other assets
Plant and 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
Share based payments reserve
Retained profits
Total equity
Net assets per stapled security
68
Note 38 Explanation of transition to Australian equivalents to IFRS (continued)
(4) Reconciliation of cash flow statement for the year ended 30 June 2005
The adoption of AIFRSs has not resulted in any material adjustments to the cash flow statement.
(5) Notes to the reconciliations
(a) investment property
Under previous AGAAP, ALE recognised valuation increments and decrements on investment property in the asset revaluation
reserve. Under AASB 140 Investment Property, all movements in investment property are recognised directly in the consolidated
income statement.
As a result, the net increase in the fair value of the investment properties of $74,800,000 for the 12 months ended 30 June 2005
has been recognised directly in the consolidated income statement.
At the date of transition on 1 July 2004 the effect of AASB 140 Investment Property on the combined balance sheet was to reduce
the asset revaluation reserve by $40,459,000 (i.e. to zero) and increase opening retained earnings by $40,459,000. The effect at
31 December 2004 and 30 June 2005 was $40,459,000 and $115,259,000 respectively with the asset revaluation being reduced to
zero in both cases.
There was no effect on total equity.
(b) equity based compensation benefits
Under previous AGAAP, ALE recognised no expense for options granted over unissued stapled securities to the managing director
for nil monetary consideration. Under AASB 2 Share-based Payment, ALE 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.
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.
As a result, expenses for the half year ended 31 December 2004 of $4,029 and for the full year ended 30 June 2005 of $7,992 have
been recognised directly in the combined income statement.
At the date of transition on 1 July 2004 the effect of AASB 2 Share-based Payment on the combined balance sheet was to reduce
the retained profits by $5,124 and increase the opening share based payments reserve by $5,124. The effect at 31 December 2004
and 30 June 2005 was $9,153 and $13,117 respectively.
ALE PROPERTY GROUP ANNUAL REPORT 30 JUNE 2006 69
direCtors’ deClArAtion
In the directors’ opinion:
(a) the financial statements and notes set out on pages 36 to 69 are in accordance with the Corporations Act 2001, including:
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(i)
(ii) giving a true and fair view of the Company’s financial position as at 30 June 2006 and of its performance as represented by
the results of its operations, changes in equity and its cash flows, for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
(c) The actual remuneration disclosures set out on pages 30 to 33 of the directors’ report comply with Accounting Standards AASB
124 Related Party Disclosures and the Corporations Regulations 2001.
The directors have been given the declarations by the Managing Director and the Group Financial Controller 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 29th day of August 2006
70
Independent audit report to the stapled security holders of ALE Property Group
Matters relating to the electronic presentation of the audited financial report
This audit report relates to the financial report and remuneration disclosures of ALE Property Group for the financial year
ended 30 June 2006 included on ALE Property Group’s web site. The directors of Australian Leisure and Entertainment
Property Management Limited (the Responsible Entity) 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 and remuneration disclosures identified below. It does not provide an opinion on any other information
which may have been hyperlinked to/from the financial report or the remuneration disclosures. 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 and remuneration disclosures to confirm the information included in the audited financial
report and remuneration disclosures presented on this web site.
Audit opinion
In our opinion:
1. the financial report of ALE Property Group:
−
gives a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of
Australian Leisure and Entertainment Property Group as at 30 June 2006, and of their performance for the year
ended on that date, and
−
is presented in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial
reporting requirements in Australia, and the Corporations Regulations 2001; and
2. the remuneration report contained in pages 30 to 33 of the directors’ report comply with Accounting Standard
AASB 124 Related Party Disclosures (AASB 124) and the Corporations Regulations 2001.
This opinion must be read in conjunction with the rest of our audit report.
Scope
The financial report, remunerations disclosures and directors’ responsibility
The financial report comprises the balance sheets, income statements, cash flow statements, statements of changes
in equity, accompanying notes to the financial statements, and the directors’ declaration for both Australian Leisure
and Entertainment Property Trust (the Trust) and ALE Property Group (the Group), for the year ended 30 June 2006.
The consolidated entity comprises both Australian Leisure and Entertainment Property Trust and the entities that it
controlled that year, including Australian Leisure and Entertainment Property Management limited and its controlled
entities.
The company has disclosed information about the remuneration of directors and executives (remuneration disclosures)
as required by AASB 124, under the heading “remuneration report” on pages 30 to 33 of the directors’ report, as
permitted by the Corporations Regulations 2001.
The directors of the Australian Leisure and Entertainment Property Management Limited (the Responsible Entity) are
responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations
Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are
designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the
financial report. The directors are also responsible for the remuneration disclosures contained in the directors’ report.
Audit approach
We conducted an independent audit in order to express an opinion to the stapled security holders of the Group. Our
audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to
whether the financial report is free of material misstatement and the remuneration disclosures comply with AASB 124
and the Corporations Regulations 2001. 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.
ALE PROPERTY GROUP AnnUAL REPORT 30 JUnE 2006 71
Independent audit report to the stapled security holders of ALE Property Group (continued)
We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance
with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in
Australia, a view which is consistent with our understanding of the Group’s financial position, and of their performance
as represented by the results of their operations, changes in equity and cash flows. We also performed procedures to
assess whether the remuneration disclosures comply with AASB 124 and the Corporations Regulations 2001.
We formed our audit opinion on the basis of these procedures, which included:
−
−
examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial
report and remuneration disclosures, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant
accounting estimates made by the directors.
Our procedures include reading the other information in the Annual Report to determine whether it contains any
material inconsistencies with the financial report.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the
nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001.
PricewaterhouseCoopers
S J Hadfield
Partner
Sydney
29 August 2006
72
AustrALiAn LEisurE And
EntErtAinmEnt ProPErty
mAnAGEmEnt LimitEd AnnuAL
FinAnciAL rEPort 30 JunE 2006
AustrAliAn leisure And entertAinment
property mAnAgement limited
ABn 45 105 275 278
raising
ABn 92 648 441 429
ALE ProPErty GrouP AnnuAL
FinAnciAL rEPort 30 JunE 2006
Comprising AustrAliAn leisure And entertAinment
property trust And its Controlled entities
the bar
CONTENTS 74 Directors’ report
86 notes to the financial statements
shareholDers
/ 104 stapleD security holDer information
/ 83 income statement
/ 84 Balance sheet
/
100 Directors’ Declaration
/ 85 statement of cash flows
/ 101 inDepenDent auDit report to the
/
/
IBC investor information anD corporate Directory
73
direCtors’ report
The directors of Australian Leisure and Entertainment Property Management Limited (“Company”) present their report for the year
ended 30 June 2006.
The registered office and principal place of business of the Company is:
Level 8
15-19 Bent Street
Sydney 2000
Directors
The following persons were directors of the Company during the whole of the year and up to the date of this report unless
otherwise stated:
Name
Type
Appointed
P H Warne (Chairman)
J P Henderson
H I Wright
A F O Wilkinson (Managing Director)
J T McNally
Non-executive
Non-executive
Non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
Principal activities
During the year the principal activities of the Company consisted of property funds management and acting as responsible entity
for the Australian Leisure and Entertainment Property Trust (“Trust”). There has been no significant change in the nature of these
activities during the year.
Dividends
No provisions for or payments of Company dividends have been made during the year (2005: nil).
Review of operations
A summary of the revenue and results for the year is set out below:
Revenue
Management fees
Interest income
Total revenue
Other income
Total income
Expenses
Salaries, fees and related costs
Acquisition proposal due diligence
Other expenses
Total expenses
Loss before income tax
Income tax (benefit)
(Loss) attributable to the shareholders of the Company
Basic and diluted earnings per share
Dividend per share for the year
Net assets per share
74
2006
$
2005
$
2,276,395
45,143
2,185,120
20,382
2,321,538
2,205,502
600,000
–
2,921,538
2,205,502
1,214,597
2,188,800
740,963
979,197
177,343
1,189,359
4,144,360
2,345,899
(1,222,822)
(140,397)
(370,462)
(39,368)
(852,360)
(101,029)
Cents
Cents
(0.94)
–
$
0.09
(0.11)
–
$
0.10
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
year.
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 ALE and
its value to its shareholders.
The directors are not aware of any future developments likely
to significantly affect the operations and/or results of 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 two of the properties ongoing testing is being
undertaken and if further work is required indemnities are held
in excess of any expenditure amounts required.
Information on directors
mr peter warne B.a,
chairman and non-executive Director.
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.
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 was a partner of Freehills, a leading Australian firm of
lawyers, from 1986 to 2003. She practised as a commercial
lawyer specialising in real estate projects including development
and financing and related taxation and stamp duties. Helen is the
Statutory and Other Offices remuneration Tribunal for NSW and
serves on the Province Management Advisory Council of the
Little Company of Mary (Calvary Hospitals). until recently Helen
was a member of the Boards of the Sydney Harbour Foreshore
Authority, Australian Technology Park Precinct Management,
and Cooks Cove redevelopment Authority and was Deputy
Chair of the Australia Day Council of NSW to December 2002.
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.
Experience and expertise
Peter was appointed as Chairman and non-executive director of
the Company in September 2003.
mr andrew wilkinson B. Bus, cftp,
managing Director.
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 of BTAL was acquired by Macquarie Bank
Limited in 1999.
Peter is also a board member of two other listed entities being
ASX Limited and Macquarie Capital Alliance group.
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.
mr John henderson B.Bldg, mrics, aapi,
non-executive 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 banking, corporate
finance and funds management.
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 eight 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.
Experience and expertise
John was appointed as a non-executive director of the Company
in August 2003.
Andrew has a Bachelor of Business degree from the university
of Technology, Sydney and is a professional member of the
Finance and Treasury Association.
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 75
direCtors’ report (continued)
Information on directors (continued)
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 12 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.
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.
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 over seven 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.
Independent member of Audit, Compliance and Risk
Management Committee (ACRMC)
mr David lawler B.Bus, cpa,
independent audit committee member
Experience and expertise
David has 25 years experience in internal auditing in the banking
and finance industry. He was the Chief Audit Executive for
Citibank in the Philippines, Italy, Switzerland, Mexico, Brazil,
Australia and Hong Kong. He was group Auditor for the
Commonwealth Bank of Australia.
Company secretary
The company secretary is Mr Brendan Howell. Brendan was
appointed to the position of company secretary in September
2003.
David is an audit committee member of the Australian Office
of Financial Management, the Defence Materiel Organisation,
Austrade, the Australian Sports Anti-Doping Authority and the
Australian National university.
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 over
16 years experience in the funds management industry. He was
David has a Bachelor of Business Studies from Manchester
Metropolitan university in the uK. He is a Fellow of CPA Australia
and President of the Institute of Internal Auditors – Australia.
Directorships of listed companies within the last three years
The following director held directorships of other listed entities within the last three years and from the date appointed up to the
date of this report unless otherwise stated:
Director
Directorships of listed entities
Type
Appointed
P H Warne
P H Warne
P H Warne
SFE Corporation Limited (a)
Australian Stock Exchange Limited
Macquarie Capital Alliance group
Non-executive
Non-executive
Non-executive
October 2000
July 2006
February 2005
(a) In July 2006, the Australian Stock Exchange Limited (ASX) and SFE Corporation Limited (SFE) merged with the SFE becoming a wholly owned subsidiary of
the ASX. Peter was appointed to the board of the ASX on 25 July 2005.
Special responsibilities of directors
The following are the special responsibilities of each director:
Director
Special responsibilities
P H Warne
Chairman of the Board.
Member of the Audit, Compliance and risk Management Committee (ACrMC) (resigned as Chairman on
15 August 2005, continuing as a member).
Chairman of the remuneration Committee.
J P Henderson
Member of the ACrMC.
Member of the remuneration Committee.
H I Wright
Chair of the ACrMC (appointed Chair 15 August 2005).
Member of the remuneration Committee.
A F O Wilkinson
Chief Executive Officer and Managing Director of the Company.
responsible Officer of the Company under the Company’s Australian Financial Services Licence (AFSL)
J T McNally
responsible Officer of the Company under the Company’s AFSL.
76
Directors’ and key management personnel interests in stapled securities and options
The following directors, key management personnel and their associates held or currently hold the following stapled security
interests in the Company:
Name
role
Number held at the
start of the year
Purchases/(sales)
Number held at
30 June 2006
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
A J Slade
D S Barkas
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Investment and Acquisitions Manager
group Financial Controller
453,400
40,000
100,000
51,998
–
46,810
196,600
15,000
–
16,002
12,000
1,517
650,000
55,000
100,000
68,000
12,000
48,327
The following director currently holds options over shares of the Company:
Name
Director
Number held at the
start of the period
Purchases/(sales)
Number held at
30 June 2006
A F O Wilkinson
Director
300,000
–
300,000
Meetings of directors
The numbers of meetings of the Company’s board of directors held and of each Board committee during the year ended
30 June 2006 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
Member of ACrMC
D J Lawler
BOArD MEETINgS
AuDIT, COMPLIANCE
AND rISK MANAgEMENT
COMMITTEE MEETINgS
rEMuNErATION
COMMITTEE MEETINgS
Held1
Attended
Held1
Attended
Held1
Attended
15
15
15
15
15
15
15
15
15
15
–
–
5
5
5
–
–
3
5
5
5
–
–
2
2
2
2
–
–
–
2
2
2
–
–
–
1 “Held” reflects the number of meetings which the director or member 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
The information provided under these headings includes remuneration disclosures that are required under Accounting Standard
AASB 124 related Party Disclosures. These disclosures have been transferred from the financial report and have been audited.
A Principles used to determine the nature and amount of remuneration (audited)
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 creation of value for shareholders, 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 shareholders
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.
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 77
direCtors’ report (continued)
Remuneration report (continued)
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 the reward framework’s 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 ALE over a number of periods with greater emphasis
given to the current year. Over the year ended 30 June 2006 the total return on ALE’s stapled securities (inclusive of distribution
returns) was 39.4% (2005: 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 were set by the Board prior to listing in 2003. The Board may 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 from 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 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 shareholders. 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 Director’s 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
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 executive pay is competitive with the market. Executive pay is also reviewed on promotion.
There is no guaranteed base pay increase in any executive contract.
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 (KPIs) 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 KPIs 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.
78
Remuneration report (continued)
For the year ended 30 June 2006, the KPIs link to STI plans were based on Company, individual, business and personal objectives.
The KPIs 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 KPIs 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.
long-term incentives (lti)
A long-term incentive in the form of options over ALE stapled securities, exercisable between November 2006 and November 2007
(except if the Company is subject to takeover, then to February 2007) was provided to the Managing Director, Mr Wilkinson, in
November 2003 at an issue price of $1.036.
stapled security options granted
No options over unissued shares of the Company were granted during or since the end of the year.
B Details of remuneration (audited)
amount of remuneration
Details of the remuneration of the key management personnel for the current year and for the comparative year are set out below
in tables 1 and 2. The cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed
“Short-term incentives”, above. All other elements of remuneration are not directly related to performance.
Table 1 Remuneration details 1 July 2005 to 30 June 2006
Details of the remuneration of the key management personnel for the year ended 30 June 2006 are set out in the following table:
KEy MANAgEMENT PErSONNEL
SHOrT-TErM EMPLOyEE BENEFITS
POST
EMPLOyMENT
BENEFITS
EquITy
BASED
PAyMENT
Name
role
Non-executive Director
Non-executive Director
Non-executive Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson Executive Director
Executive Director
J T McNally
Company Secretary
B r Howell
Investment and
A J Slade
Acquisitions Manager
group Financial Controller
D S Barkas
Salary
and fees
$
110,092
70,000
64,220
261,758
75,000
75,000
138,831
99,803
STI bonus
$
–
–
–
100,000
–
–
Non-
monetary
$
Superannuation
$
Options
$
Total
$
–
–
–
–
–
–
9,908
–
5,780
12,139
–
–
11,539
10,477
–
–
–
7,993
–
–
–
120,000
70,000
70,000
381,890
75,000
75,000
190,370
156,880
40,000
20,000
–
26,600
894,704
160,000
26,600
49,843
7,993
1,139,140
Table 2 Remuneration details 1 July 2004 to 30 June 2005
Details of the remuneration of the key management personnel for the year ended 30 June 2005 are set out in the following table:
KEy MANAgEMENT PErSONNEL
SHOrT-TErM EMPLOyEE BENEFITS
Name
role
Non-executive Director
Non-executive Director
Non-executive Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson Executive Director
Executive Director
J T McNally
Company Secretary
B r Howell
group Financial Controller
D S Barkas
Salary
and fees
$
110,092
70,000
64,220
191,954
81,250
81,250
127,282
STI bonus
$
–
–
–
65,000
–
–
20,000
726,048
85,000
Non-
monetary
$
–
–
–
–
–
–
6,800
6,800
POST
EMPLOyMENT
BENEFITS
EquITy
BASED
PAyMENT
Superannuation
$
Options
$
Total
$
9,908
–
5,780
15,081
–
–
10,462
41,231
–
–
–
7,993
–
–
120,000
70,000
70,000
280,028
81,250
81,250
164,544
7,993
867,072
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 79
direCtors’ report (continued)
Remuneration report (continued)
cash bonuses
For each cash bonus included in the above tables, the percentage of the available bonus that was awarded for the 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
A J Slade
D S Barkas
Paid
%
133
100
100
Forfeited
%
–
–
–
C Service agreements
On 10 November 2003, the Company entered into a three year service agreement with the 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.
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.
The employment contracts of Mr Barkas and Mr Slade may be terminated at one month’s 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 unissued stapled securities were granted in November 2003 to Mr 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 ALE 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 and expected price volatility of the underlying share, 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 options
granted
10-Nov-03
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 have been issued on the exercise of options, to date.
Insurance of officers
During the financial year, the Company paid a premium of $29,844 (2005: $41,766) to insure the directors and officers of the
Company. The auditor of the Company is 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.
80
Past employment with external auditor
Mr Wilkinson, Managing Director, previously held a position as a corporate advisory partner without any audit responsibilities of
ALE’s external auditor, PricewaterhouseCoopers. Mr Wilkinson resigned his partnership prior to accepting the appointment as Chief
Executive Officer of ALE on 24 November 2003.
Non-audit services
The Company may decide to employ the auditor on assignments additional to its statutory audit duties where the auditor’s expertise
and experience with the Company are important.
The board of directors has considered the position and in accordance with the advice received from the ACrMC 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 ACrMC 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 auditor’s 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.
Details of amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the
year are set out below:
Audit services
PricewaterhouseCoopers Australian firm:
Audit and review of the financial reports of the ALE Property group and other audit work
required under the Corporations Act 2001
– in relation to current year
– in relation to prior year
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian firm:
general accounting advice (including AIFrS)
Due diligence – acquisitions not proceeding
Assurance services – internal control review
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Due diligence services
Tax consulting services
Total taxation services
2006
$
2005
$
135,400
1,500
125,750
60,000
136,900
185,750
26,173
142,250
9,000
177,423
29,944
31,300
7,000
68,244
314,323
253,994
9,000
223,000
25,135
257,135
15,000
–
24,190
39,190
Includes amounts allocated to the Company of $314,323 for assurance services (2005: $253,994) and $257,135 for taxation
services (2005: $39,190).
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 82.
This report is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 29th day of August 2006
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 81
Auditor’s Independence Declaration
As lead auditor for the audit of Australian Leisure and Entertainment Property Management Limited for the year ended 30 June
2006, 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
PricewaterhouseCoopers
Sydney
29 August 2006
Liability is limited by a scheme approved under Professional Standards Legislation.
82
inCome stAtement
For tHe yeAr ended 30 June 2006
Revenue
Management fees
Interest income
Total revenue
Other income
Total income
Salaries, fees and related costs
Insurance
Accounting services
Taxation services
Corporate advisory services
Auditors’ remuneration
registry fees
Legal fees
Occupancy costs
Depreciation expense – plant and equipment
Travel and accommodation
Acquisition proposal due diligence
Other expenses
Total expenses
(Loss) before income tax
Income tax (benefit)
(Loss) after income tax
(Loss) attributable to the shareholders of the Company
Basic and diluted earnings/(loss) per share
Dividends paid and payable per share
The above income statement should be read in conjunction with the accompanying notes.
Note
2006
$
2005
$
2
3
4
3
2,276,395
45,143
2,185,120
20,382
2,321,538
2,205,502
600,000
–
2,921,538
2,205,502
1,214,597
85,285
69,028
30,535
(28,521)
136,900
66,513
57,973
104,116
37,387
32,160
2,188,800
149,587
979,197
111,557
64,762
68,277
140,603
185,750
62,131
143,013
91,622
22,248
27,068
177,343
272,328
4,144,360
2,345,899
(1,222,822)
(140,397)
5
(370,462)
(39,368)
(852,360)
(101,029)
(852,360)
(101,029)
Cents
Cents
(0.94)
–
(0.11)
–
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 83
BALANCE SHEET
AS AT 30 JUNE 2006
Current assets
Cash and cash equivalents
Receivables
Prepayments and other assets
Total current assets
Non-current assets
Plant and equipment
Investment in related party
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Loan from related party
Current tax liability
Total current liabilities
Non-current liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Retained profits/(loss)
Reserves
Total equity
Net assets per share
Note
2006
$
2005
$
7
8
6
9
10
11
12
13
5
14
483,114
851,028
38,279
1,372,421
156,682
186,087
31,275
374,044
102,354
9,080,010
472,153
140,636
9,080,010
97,936
9,654,517
9,318,582
11,026,938
9,692,626
2,258,234
61,174
699,144
1,918
3,020,470
460,501
33,279
349,847
–
843,627
1,837
1,837
–
–
3,022,307
843,627
8,004,631
8,848,999
15
16
17
9,080,010
(1,096,488)
21,109
9,080,010
(244,128)
13,117
8,004,631
8,848,999
0.09
0.10
The above balance sheet should be read in conjunction with the accompanying notes.
Total equity at the beginning of the year
Profit/(Loss) for the year
Total recognised income and expenses for the year
Transactions with equity holders in their capacity as equity holders:
Employee share options
Total transactions with equity holders in their capacity as equity holders
Total equity at the end of the year
Total recognised income and expense for the year is attributable to members of the Company.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
2006
$
2005
$
8,848,999
(852,360)
8,942,035
(101,029)
(852,360)
(101,029)
7,992
7,992
7,993
7,993
8,004,631
8,848,999
84
stAtement oF CAsH FloWs
For tHe yeAr ended 30 June 2006
Cash flows from operating activities
Other revenue (management fee and expense recovery)
Payments to suppliers and employees
Interest received – bank deposits and investment arrangements
Note
2006
$
2005
$
10,172,856
(9,856,116)
38,397
9,159,166
(8,961,779)
19,858
Net cash inflow from operating activities
21
355,137
217,245
Cash flows from investing activities
Payments for plant and equipment
Net cash (outflow) from investing activities
Net increase in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
(28,705)
(168,033)
(28,705)
(168,033)
326,432
156,682
49,212
107,470
Cash and cash equivalents at the end of the year
7
483,114
156,682
The above statement of cash flows should be read in conjunction with the accompanying notes.
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 85
notes to tHe FinAnCiAl stAtements
Note 1 Summary of significant accounting policies
This general purpose financial report for the year ended 30 June 2006 has been prepared in accordance with the Australian
equivalents to International Financial reporting Standards (AIFrS), other authoritative pronouncements of the Australian Accounting
Standards Board, urgent Issues group Interpretations and the Corporations Act 2001.
(a) Basis of preparation
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
application of aasB 1 first-time adoption of australian equivalents to international financial reporting standards (aifrs)
This annual financial report is the first Company annual financial report to be prepared in accordance with AIFrS. AASB 1 First-time
Adoption of Australian Equivalents to International Financial reporting Standards has been applied in preparing the financial statements.
The financial statements of the Company up until 30 June 2005 had been prepared in accordance with previous Australian generally
Accepted Accounting Principles (AgAAP). AgAAP differs in certain respects from AIFrS. When preparing the Company annual
financial statement for the year ended 30 June 2006, management has amended certain accounting, valuation and consolidation
methods applied in the previous AgAAP financial statements to comply with AIFrS. The comparative figures were restated
to reflect these adjustments. The Company has taken the exemption available under AASB 1 to apply AASB 132 Financial
Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: recognition and Measurement from 1 July 2005.
reconciliations and descriptions of the effect of transition from previous AgAAP to AIFrS on the Company’s equity and its net
profit are given in note 27 to the year end financial report.
historical cost convention
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets
and liabilities (including derivative instruments) at fair value through profit or loss and certain classes of property, plant and equipment.
(b) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash at bank, deposits at call and short-term
money market securities which are readily convertible to cash.
(c) Receivables
Trade debtors are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts.
Trade receivables are due for settlement no more than 30 days from the recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.
A provision for doubtful receivables is established when there is objective evidence that all amounts due may not be collected
according to the original terms of the receivables. The amount of any provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision
is recognised in the income statement.
(d) Plant and equipment
Plant and equipment including office fixtures, fittings and operating equipment are stated at historical cost less depreciation.
Historical cost includes expenditure that is directly attributable to its acquisition. Subsequent costs are included in the asset’s
carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation
Depreciation on depreciable plant and equipment (office fixtures, fittings and operating equipment) is calculated using the straight
line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives. The estimated
useful life of depreciable plant and equipment is as follows:
Furniture, fittings and equipment
Software
Leasehold improvements
4 – 13 years
3 years
3 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.
(e) Investments and financial assets
Financial assets classified as loans and deposits are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and arise when money and services are provided to a debtor with no intention of selling the receivable.
Loans and deposits are carried at amortised cost using the effective interest rate method. under this method, fees, costs, discounts
and premiums directly related to the financial asset are spread over its effective life.
(f) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid
at the balance sheet date. The amounts are unsecured and are usually paid within 30 days of recognition.
86
Note 1 Summary of significant accounting policies (continued)
(g) Provisions
Provisions are recognised when there is a present legal or constructive obligation as a result of past events; it is more likely than not
that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
(h) Dividends
Provision is made for the amount of any dividends declared, being appropriately authorised and no longer at the discretion of the
entity, on or before the end of the financial year but not distributed at the balance date.
(i) Earnings per stapled security
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company by the weighted
average number of shares outstanding during the reporting period.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential shares and the weighted average number of
shares assumed to have been issued for no consideration in relation to dilutive potential shares.
(j) Contributed equity
Ordinary shares are classified as contributed equity.
Incremental costs directly attributable to the issue of new units, shares or options are shown in contributed equity as a deduction,
net of tax, from the proceeds.
(k) Revenue
Management fee income is brought to account on an accruals basis, and if not received at balance date is reflected in the balance
sheet as a receivable.
(l) Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
(m) Expenses
Expenses including operating expenses and other outgoings are brought to account on an accruals basis and, if not paid at balance
date, are reflected in the balance sheet as payables.
(n) Employee benefits
(i) wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the
reporting date are recognised as a current liability in respect of employees’ services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised as an
expense when the leave is taken and measured at the rates paid or payable.
(ii) share based payments after 7 november 2002 and vested after 1 January 2005
The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value
is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account 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 and expected price volatility of the underlying share, the expected dividend yield and the risk-
free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales
growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to
become exercisable. At each balance date, the entity revises its estimate of the number of options that are expected to become
exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.
upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to
contributed equity.
(iii) Bonus plans
Liabilities and expenses for bonuses are recognised where contractually obliged or where there is a past practice that has created a
constructive obligation.
(iv) long service leave
The Company will begin to recognise liabilities for long service leave when employees reach a qualifying period of continuous
service. The liability for long service leave is recognised in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected
unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the reporting date on national government
bonds with the terms to maturity and currency that match, as closely as possible, the estimated future cash flow.
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 87
notes to tHe FinAnCiAl stAtements (continued)
Note 1 Summary of significant accounting policies (continued)
(n) Employee benefits (continued)
(v) retirement benefit obligations
The Company pays fixed contributions to employees’ funds and the Company’s legal or constructive obligations are limited to these
contributions. The contributions are recognised as an expense as they become payable. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in the future payments is available.
(o) Income tax
The income tax expense or revenue for the reporting period is the tax payable on the current reporting period’s taxable income
based on the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences between the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused
tax losses.
Deferred tax balances are calculated using the balance sheet method. under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No
deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Similarly, no
deferred tax asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable
that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to the offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
(p) Goods and services tax (GST)
revenues, expenses and assets are recognised net of the amount of associated gST, unless the gST incurred is not recoverable
from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
receivables and payables are stated inclusive of the amount of gST receivable or payable. The net amount of gST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The gST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
(q) New accounting standards and UIG interpretation
Certain new accounting standards and uIg interpretations have been published that are not mandatory for 30 June 2006 reporting
periods. The Company’s assessment of the impact of these new standards and interpretations is set out below.
(i) uiG 4 Determining whether an asset contains a lease
uIg 4 is applicable to annual periods beginning on or after 1 January 2006. The Company has not elected to adopt uIg 4 early. It
will apply uIg 4 in its 2007 financial statements and the uIg 4 transition provisions. The Company will therefore apply uIg 4 on the
basis of facts and circumstances that existed as of 1 July 2006. Implementation of uIg 4 is not expected to change the accounting
for any of the Company’s current arrangements.
(ii) aasB 7 financial instruments: Disclosures and aasB 2005-10 amendments to australian accounting standards [aasB
132, aasB 101, aasB 114, aasB 117, aasB 133, aasB 139, aasB 1, aasB 4, aasB 1023 and aasB 1038]
AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning on or after 1 January 2007. The Company has not
adopted the standards early. Application of the standards will not affect any of the amounts recognised in the financial statements,
but will impact the type of information disclosed in relation to the Company’s financial instruments.
(r) Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
(s) Financial risk management
The Company’s activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk and
price risk), credit risk, liquidity risk and cash flow interest rate risk. The Company’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company.
88
Note 1 Summary of significant accounting policies (continued)
(s) Financial risk management (continued)
(i) credit risk
The major credit risk is the risk that the Trust will fail to perform its obligations including honouring the terms of management
fee and expense recovery arrangements either in whole or in part. Credit risk has been minimised primarily by ensuring, on a
continuous basis, that the Trust has appropriate financial standing.
The credit risk on financial assets of ALE which have been recognised in the balance sheet is generally the carrying amount net of
any provision for doubtful debts.
(ii) liquidity and cash flow risk
Liquidity risk is the risk that the Company will experience difficulty in either realising or otherwise raising sufficient funds to satisfy
commitments. Cash flow risk is the risk that the future cash flows will fluctuate. The risk management guidelines adopted are
designed to minimise liquidity and cash flow risk through actively managing significant exposures to large creditors and ensuring
counterparties have appropriate financial standing.
Note 2 Management fees
Management fees
Fees charged to the Trust by the Company for management and responsible entity services.
Expense recovery and management fee receipts (inclusive of gST) of $10,172,856 (2005:
$9,159,166) disclosed in the statement of cash flows is comprised predominantly of recoveries of
Trust expenditure paid by the Company and then recovered from the Trust. No margins or fees are
charged by the Company on recoverable costs, as a result expense recoveries are not disclosed in
the income statement as revenue but are netted off against the relevant expenses incurred.
2006
$
2005
$
2,276,395
2,185,120
Note 3 Transaction costs and other income
Acquisition proposal due diligence
Amounts (recovered) following non-completion (disclosed as other income)
Net costs incurred
2,188,800
(600,000)
1,588,800
177,343
–
177,343
Costs incurred and recovery received by the Company, as responsible entity for the Trust,
in relation to potential property acquisitions that did not proceed to completion.
Note 4 Auditors’ remuneration
Audit services
PricewaterhouseCoopers Australian firm:
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
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian firm:
general accounting advice (including AIFrS)
Due diligence services
Controls assurance services
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Due diligence services
Tax consulting services
Total taxation services
135,400
1,500
136,900
125,750
60,000
185,750
26,173
142,250
9,000
177,423
29,944
31,300
7,000
68,244
314,323
253,994
9,000
223,000
25,135
257,135
15,000
–
24,190
39,190
Includes amounts allocated to the Company of $314,323 for a assurance services (2005: $253,994) and $257,135 for taxation
services (2005: $39,190).
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 89
notes to tHe FinAnCiAl stAtements (continued)
Income tax expense/(benefit)
Note 5
Current tax expense /(benefit)
Deferred tax (benefit)
(Increase) in deferred tax asset
Increase in deferred tax liabilities
Reconciliation of income tax expense to prima facie tax payable
(Loss) before the income tax expense
Tax at the Australian tax rate 30%
Tax effect of amounts which are deductible (taxable) in calculating taxable income:
Expenditure held on balance sheet
Share based payments
Entertainment
under provision in prior years
Income tax (benefit)
Note 6 Plant and equipment
2006
$
2005
$
1,918
(372,380)
(8,940)
(30,428)
(370,462)
(39,368)
(374,217)
1,837
(30,428)
–
(372,380)
(30,428)
(1,222,822)
(366,847)
(140,397)
(42,119)
(9,203)
2,398
735
2,455
(3,615)
–
–
642
2,109
2,751
(370,462)
(39,368)
Furniture, fittings
and equipment
$’000
Software
$’000
Office fitout
$’000
Total
$’000
2,214
(149)
2,065
2,065
57,499
(12,287)
47,277
17,845
(3,365)
14,480
14,480
25,918
(7,541)
32,857
–
–
–
20,059
(3,514)
16,545
–
84,616
(24,114)
16,545
168,033
(43,942)
60,502
140,636
59,713
(12,436)
43,763
(10,906)
84,616
(24,114)
188,092
(47,456)
47,277
32,857
60,502
140,636
47,277
–
(12,392)
32,857
28,705
(24,995)
60,502
–
(29,599)
140,636
28,705
(66,986)
34,885
36,567
30,903
102,354
59,713
(24,828)
72,468
(35,901)
84,616
(53,713)
216,796
(114,442)
34,885
36,567
30,903
102,354
At 30 June 2004
At cost
Accumulated depreciation
Net book value
Year ended 30 June 2005
Opening net book value
Additions
Depreciation charge
Closing carrying value
At 30 June 2005
Cost
Accumulated depreciation
Net book value
Year ended 30 June 2006
Opening net book value
Additions
Depreciation charge
Closing net book amount
As at 30 June 2006
Cost
Accumulated depreciation
Net book value
90
Note 7 Cash and cash equivalents
Cash at bank
Deposits at call
Note
2006
$
2005
$
(a)
459,196
23,918
132,764
23,918
483,114
156,682
(a) The deposit represents an office occupancy security deposit.
As at 30 June 2006 the weighted average interest rate earned on cash was 5.64% (2005: 4.82%).
Note 8 Receivables
Accounts receivable
Interest receivable
Note 9
Investment in related party
Trust No Income Voting units (NIVuS)
The Company was issued $9,080,010 of NIVuS in the Trust for cash consideration of
$6,200,010 and non-cash consideration of $2,880,000 in November 2003. The NIVuS
have only been issued to the Company and are held by the Company in order to satisfy
the net tangible asset condition in its Australian Financial Services Licence. The NIVuS are
not stapled to shares in the Company, have an issue and withdrawal price of $1.00, carry
no rights to income from the Trust and entitle the holder to no more than $1.00 per NIVuS
upon the winding up of the Trust. The Company has a voting power of 9.09% in the Trust
as a result of the issue of NIVuS.
Note 10 Deferred tax asset
The balance comprises temporary
differences attributable to:
Amounts recognised in profit or loss
Employee benefits
Acquisition proposal due diligence
Other accruals
Other provisions
Net deferred tax assets
Movements:
Opening balance at 1 July 2005
Credited/(charged) to the income statement (note 5)
Closing balance at 30 June 2006
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Note 11 Payables
Trade creditors
Creditor accruals
Note 12 Provisions
Provision for annual leave
Provision for superannuation
847,213
3,815
851,028
184,631
1,456
186,087
9,080,010
9,080,010
18,611
381,312
72,230
–
472,153
97,936
374,217
472,153
186,169
285,984
472,153
9,984
–
75,884
12,068
97,936
67,508
30,428
97,936
97,936
–
97,936
264,370
1,993,864
64,403
396,098
2,258,234
460,501
45,902
15,272
61,174
23,144
10,135
33,279
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 91
notes to tHe FinAnCiAl stAtements (continued)
Note 13 Loan from related party
Loan from the Trust
The loan is non-interest bearing, of no fixed term and is repayable on demand.
Note 14 Deferred tax liability
The balance comprises temporary
differences attributable to:
amounts recognised in profit or loss
Interest income earned but not received
Prepaid expense
Net deferred tax liability
Movements:
Opening balance at 1 July 2005
Charged to income statement (note 5)
Closing balance at 30 June 2006
Deferred tax liabilities to be recovered within 12 months
Deferred tax liabilities to be recovered after more than 12 months
Note 15 Contributed equity
(a) Share capital
Issued share capital 90,800,100 fully paid at $0.10 each
(b) Movements in ordinary share capital
There was no movement during the year
Balance at the end of the period
Movements in the number of fully paid shares
Shares on issue
Opening balance
Issue of shares
Closing balance
2006
$
2005
$
699,144
349,847
1,145
692
1,837
–
1,837
1,837
1,837
–
1,837
–
–
–
–
–
–
–
–
–
2006
$
2005
$
9,080,010
9,080,010
–
–
9,080,010
9,080,010
No. of shares
No. of shares
90,800,100
–
90,800,100
–
90,800,100
90,800,100
Shares
Fully paid stapled security interests in the Company and the Trust were issued at $1.00 per stapled security. Each stapled security
comprises one $0.10 share in the Company and one $0.90 unit in the Trust. They cannot be traded or dealt with separately.
Stapled securities entitle the holder to participate in dividends/distributions and the proceeds on any winding up of the Company in
proportion to the number of and amounts paid on the securities held. On a show of hands every holder of stapled securities present
at a meeting in person or by proxy, is entitled to one vote. On a Company poll each ordinary shareholder is entitled to one vote for
each fully paid share, and on a Trust poll each unitholder is entitled to one vote for each fully paid unit.
92
Note 16 Retained profits/(loss)
Balance at the beginning of the year
Net (loss) attributable to ordinary shareholders
Balance at the end of the year
Note 17 Reserves
Balance at the beginning of the year
Employee share option expense
Balance at the end of the year
Note 18 Segment information
2006
$
2005
$
(244,128)
(852,360)
(143,099)
(101,029)
(1,096,488)
(244,128)
13,117
7,992
21,109
5,124
7,993
13,117
Business segment
The Company operates solely in the property funds management industry and has no business segmentation.
Geographical segment
The Company operates solely within Australia.
Note 19 Events occurring after reporting date
The directors are not aware of any matter or circumstance occurring after balance date which may materially affect the Company’s
operations, the results of those operations or the state of affairs of the Company.
Note 20 Contingent liabilities
The directors are not aware of any material contingent liabilities as at the date of this report.
Note 21
Reconciliation of profit after income tax to net cash
inflows from operating activities
(Loss) for the year
Depreciation
Income tax (benefit)
Non-cash employee benefits expense – share based payments
(Increase)/decrease in receivables
(Increase) in other assets
Decrease in loan to related party
Increase/(decrease) in loan from related party
Increase/(decrease) in provisions
Increase/(decrease) in payables
2006
$
2005
$
(852,360)
66,986
(370,462)
7,992
(664,941)
(7,004)
–
349,297
27,895
1,797,733
(101,029)
43,943
(39,368)
7,993
34,291
(3,002)
646,548
(362,825)
(1,652)
(7,654)
Net cash inflows from operating activities
355,137
217,245
Note 22
AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement
The Company has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and
Presentation and AASB 139 Financial Instruments: recognition and Measurement from 1 July 2005 and has not restated any
comparative period figures for the resulting adjustments. The adjustments have instead been taken directly to retained earnings as
at 1 July 2005.
(a) Interest rate risk
The Company’s exposure to the interest rate risk and the effective weighted interest rate by maturity periods is set out in the
following table. For interest rates applicable to each class of asset or liability refer to individual notes to the financial statements.
Exposure arises predominantly from assets bearing variable interest rates as the Company intends to hold fixed assets and liabilities
to maturity.
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 93
notes to tHe FinAnCiAl stAtements (continued)
Note 22 AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement (continued)
(a) Interest rate risk (continued)
FIXED INTErEST MATurINg IN
Floating
interest rate
$
Note
1 year
or less
$
1 to 5
years
$
More than
5 years
$
Non-interest
bearing
$
Total
$’000
2006
financial assets
Cash
receivables
Weighted average interest rate
financial liabilities
Payables
Loan from related party
Weighted average interest rate
7
8
11
13
458,896
–
458,896
5.65%
23,918
–
23,918
5.60%
–
–
–
–
–
–
–
–
Net financial assets/(liabilities)
458,896
23,918
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300
851,028
483,114
851,028
851,328
1,334,142
–
2.04%
2,258,234
699,144
2,258,234
699,144
2,957,378
2,957,378
–
–
(2,106,050)
(1,623,236)
FIXED INTErEST MATurINg IN
Floating
interest rate
$
Note
1 year
or less
$
1 to 5
years
$
More than
5 years
$
Non-interest
bearing
$
Total
$’000
2005
financial assets
Cash
receivables
Weighted average interest rate
financial liabilities
Payables
Loan from related party
Weighted average interest rate
7
8
11
13
132,464
–
132,464
4.75%
23,918
–
23,918
5.25%
–
–
–
–
–
–
–
–
Net financial assets/(liabilities)
132,464
23,918
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300
186,087
156,682
186,087
186,387
342,769
–
2.20%
460,501
349,847
460,501
349,847
810,348
810,348
–
–
(623,961)
(467,579)
(b) Credit risk
Credit risk is the risk that the Trust will fail to perform its contractual obligations to the Company, including honouring the terms
of its constitution, either in whole or in part. Credit risk has been minimised primarily by ensuring that the Trust has appropriate
financial standing.
The credit risk on financial assets of the Company which have been recognised in the balance sheet is generally the carrying
amount net of any provision for doubtful debts.
(c) Liquidity and cash flow risk
Liquidity risk is the risk that the Company will experience difficulty in either realising or otherwise raising sufficient funds to satisfy
commitments. Cash flow risk is the risk that the future cash flows will fluctuate. The risk management guidelines adopted are
designed to minimise liquidity and cash flow risk through actively managing significant exposures to large creditors and ensuring
counterparties have appropriate financial standing.
(d) Net fair value of assets and liabilities
The net fair value of assets and liabilities included in the balance sheet approximates their carrying values.
94
Note 23 Commitments
(a) Capital commitments
The directors are not aware of any capital commitments as at the date of this report.
(b) Lease commitments
The Company has entered into a non-cancellable operating lease for its office premises at Level 8, 15-19 Bent Street, Sydney. The
minimum net lease commitments under this lease are:
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Note 24 Related party transactions
(a) Parent entity, subsidiaries, joint ventures and associates
The Company has no parent entity, subsidiaries, joint ventures or associates.
(b) Key management personnel
Key management personnel and their compensation are set out in note 25.
2006
$
2005
$
73,361
3,867
–
77,228
70,843
71,188
3,825
145,856
(c) Transactions with related parties
For the year ended 30 June 2006 the Company had charged the Trust $2,276,000 in management fees (2005: $2,185,000).
Peter Warne is a director and chairman of ALE and of Next Financial Pty Limited (“Next”), which is a private investment manager
which operates accounts on behalf of investors. All such securities are held by Fortis Clearing Sydney Pty Ltd (“Fortis”) as
custodian for clients. Fortis held 4,254,837 stapled securities of ALE as at 30 June 2006 (2005: 4,400,314). Mr Warne does not
make any investment decisions as part of his role at Next which relate to securities in ALE.
ALE has entered into two associate motor vehicle leases with the spouse of Darren Barkas. The leases commenced on 15 March
2005. For the year ended 30 June 2006 payments under the leases totalled to $5,000 (2005: $2,000).
(d) Terms and conditions
All related party transactions are conducted on normal commercial terms and conditions.
Outstanding balances are unsecured and are repayable in cash and callable on demand.
Note 25 Key management personnel
(a) Directors
The following persons were directors of the Company during the financial year:
Name
Type
Appointed
P H Warne (Chairman)
J P Henderson
H I Wright
A F O Wilkinson (Managing Director)
J T McNally
Non-executive
Non-executive
Non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Company,
directly or indirectly, during the year.
Name
Title
Appointed
Andrew Slade
Darren Barkas
Brendan Howell
Investment and Acquisitions Manager
group Financial Controller
Company Secretary and Compliance Officer
18 July 2005
29 January 2004
26 September 2003
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 95
notes to tHe FinAnCiAl stAtements (continued)
Note 25 Key management personnel (continued)
(c) Compensation for key management personnel
The following table sets out the compensation for key management personnel in aggregate. refer to the remuneration report in the
directors’ report for details of the remuneration policy and compensation details by individual.
Short-term employee benefits
Post employment benefits
Share based payments
2006
$
2005
$
1,081,304
49,843
7,993
1,139,140
817,848
41,231
7,993
867,072
The Company has taken advantage of the relief provided by the Corporations regulations Cr2M.6.04 and has transferred the
detailed remuneration disclosures to the directors’ report. The relevant information can be found in the remuneration report on
pages 77 to 80.
(d) Equity holdings of key management personnel
The table sets out the share holdings for key management personnel in the Company:
Name
role
Number held at the
start of the year
Purchases/(sales)
Number held at
30 June 2006
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
D S Barkas
A J Slade
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
group Financial Controller
Investment and Acquisitions Manager
453,400
40,000
100,000
51,998
46,810
–
196,600
15,000
–
16,002
1,517
12,000
650,000
55,000
100,000
68,000
48,327
12,000
The following director currently holds options over shares in the Company:
Name
role
Number held at the
start of the year
Purchases/(sales)
Number held at
30 June 2006
A F O Wilkinson
Director
300,000
–
300,000
Note 26 Earnings per share
(a) Basic earnings per share
attributable to equity holders of the company
Basic and diluted earnings per equity holders of the Company
attributable to security holders of the stapled entity
Basic and diluted earnings per stapled security
Basic and diluted earnings per stapled security before financing costs attributable
to the Company security holders divided by the average number of securities
Basic and diluted earnings per stapled security using realised operating income
2006
$
2005
$
(0.94)
(0.11)
(0.94)
(0.94)
(0.11)
(0.11)
Number
Number
(b) Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator in calculating earnings per share
90,800,100
90,800,100
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
90,800,100
90,800,100
96
Note 27 Explanation of transition to Australian equivalents to IFRS
(1) Reconciliation of ALE profit under previous Australian Generally Accepted Accounting Principles (AGAAP) to profit
under Australian equivalents to IFRS (AIFRS)
as at the end of the last reporting period under previous aGaap: 30 June 2005
Revenue
Management fees
Interest income
Total revenue
Expenses
Salaries, fees and related costs
Corporate advisory services
Auditors’ remuneration
registry fees
Legal fees
Occupancy costs
Accounting fees
Depreciation expense – plant and equipment
Travel and accommodation
Acquisition proposal due diligence
Other expenses
Total expenses
(Loss) before income tax
Income tax (benefit)
(Loss) after income tax
Note
Previous
AgAAP
$
Effect of
transition
to AIFrS
$
AIFrS
$
(a)
2,185,120
20,382
2,205,502
886,204
140,603
182,625
62,131
143,013
91,622
75,707
22,248
27,068
177,343
529,342
–
–
–
2,185,120
20,382
2,205,502
7,993
–
–
–
–
–
–
–
–
–
–
894,197
140,603
182,625
62,131
143,013
91,622
75,707
22,248
27,068
177,343
529,342
2,337,906
7,993
2,345,899
(132,404)
(7,993)
(140,397)
(39,368)
(93,036)
–
(39,368)
(7,993)
(101,029)
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 97
notes to tHe FinAnCiAl stAtements (continued)
Note 27 Explanation of transition to Australian equivalents to IFRS (continued)
(2) Reconciliation of equity reported under AGAAP to equity under AIFRS
(a) as at the end of the last reporting period under previous aGaap: 30 June 2005
Note
Previous
AgAAP
$
156,682
186,087
31,275
374,044
140,636
9,080,010
97,936
9,318,582
9,692,626
460,501
33,279
349,847
843,627
843,627
8,848,999
Effect of
transition
to AIFrS
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
AIFrS
$
156,682
186,087
31,275
374,044
140,636
9,080,010
97,936
9,318,582
9,692,626
460,501
33,279
349,847
843,627
843,627
8,848,999
(a)
9,080,010
(231,011)
–
8,848,999
–
(13,117)
13,117
9,080,010
(244,128)
13,117
–
8,848,999
Current assets
Cash and cash equivalents
receivables
Prepayments and other assets
Total current assets
Non-current assets
Plant and equipment
Investment in related party
Deferred tax asset
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
Share based payments reserve
Total equity
98
Note 27 Explanation of transition to Australian equivalents to IFRS (continued)
(2) Reconciliation of equity reported under AGAAP to equity under AIFRS (continued)
(b) at the date of transition to aifrs: 1 July 2004
Current assets
Cash
receivables
Loan to related party
Prepayments and other assets
Total current assets
Non-current assets
receivables
Plant and equipment
Investment in related party
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Other
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share based payments reserve
Accumulated losses
Total equity
Net assets per stapled security
Note
(a)
1 July 2004
previous
AgAAP
$
107,470
220,378
646,548
22,315
996,711
5,958
16,545
9,080,010
58,568
9,161,081
10,157,792
468,154
34,931
712,672
1,215,757
1,215,757
8,942,035
9,080,010
–
(137,975)
8,942,035
$0.10
1 July 2004
effect of
transition
to AIFrS
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 July 2004
AIFrS
$
107,470
220,378
646,548
22,315
996,711
5,958
16,545
9,080,010
58,568
9,161,081
10,157,792
468,154
34,931
712,672
1,215,757
1,215,757
8,942,035
–
5,124
(5,124)
–
–
9,080,010
5,124
(143,099)
8,942,035
$0.10
(3) Reconciliation of cash flow statement for the year ended 30 June 2005
The adoption of AIFrS has not resulted in any material adjustments to the cash flow statement.
(4) Note to the reconciliations
(a) equity based compensation benefits
under previous AgAAP, the Company recognised no expense for options granted over unissued stapled securities to the managing
director for nil monetary consideration. 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.
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.
As a result, expenses for the half year ended 31 December 2005 of $4,029 and for the full year ended 30 June 2005 of $7,993 have
been recognised in the income statement.
At the date of transition on 1 July 2004 the effect of AASB 2 Share-based Payment on the balance sheet was to reduce the retained
profits by $5,124 and increase the opening share based payments reserve by $5,124.
AuSTrALIAN LEISurE AND ENTErTAINMENT PrOPErTy MANAgEMENT LIMITED ANNuAL rEPOrT 30 JuNE 2006 99
direCtors’ deClArAtion
In the directors’ opinion:
(a) the financial statements and notes set out on pages 83 to 99 are in accordance with the Corporations Act 2001, including:
complying with Accounting Standards, the Corporations regulations 2001 and other mandatory professional reporting
requirements; and
(i)
(ii) giving a true and fair view of the Company’s financial position as at 30 June 2006 and of its performance as represented by
the results of its operations, changes in equity and its cash flows, for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
(c) The actual remuneration disclosures set out on pages 77 to 80 of the directors’ report comply with Accounting Standards AASB
124 related Party Disclosures and the Corporations regulations 2001.
This declaration is made in accordance with a resolution of the directors.
P Warne
Director
Sydney
Dated this 29th day of August 2006
100
Independent audit report to the stapled security holders 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 financial report and remuneration disclosures of Australian leisure and entertainment
Property management limited (the Company) for the financial year ended 30 June 2006 included on Ale Property
group’s web site. the Company’s directors 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
and remuneration disclosures identified below. it does not provide an opinion on any other information which may have
been hyperlinked to/from the financial report or the remuneration disclosures. 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 and remuneration disclosures to confirm the information included in the audited financial report and
remuneration disclosures presented on this web site.
Audit opinion
in our opinion:
1. the financial report of Australian leisure and entertainment Property management limited:
−
gives a true and fair view, as required by the Corporations Act 2001 in Australia, of the financial position of Australian
leisure and entertainment Property management limited as at 30 June 2006, and of their performance for the year
ended on that date, and
−
is presented in accordance with the Corporations Act 2001, Accounting standards and other mandatory financial
reporting requirements in Australia, and the Corporations regulations 2001; and
2. the remuneration report contained in pages 77 to 80 of the directors’ report comply with Accounting standard
AAsB 124 related Party disclosures (AAsB 124) and the Corporations regulations 2001..
this opinion must be read in conjunction with the rest of our audit report.
Scope
The financial report, remunerations disclosures and directors’ responsibility
the financial report comprises the balance sheets, income statements, cash flow statements, statements of changes
in equity, accompanying notes to the financial statements, and the directors’ declaration for Australian leisure and
entertainment Property management limited (the company), for the year ended 30 June 2006.
the company has disclosed information about the remuneration of directors and executives (remuneration disclosures)
as required by AAsB 124, under the heading “remuneration report” on pages 77 to 80 of the directors’ report, as
permitted by the Corporations regulations 2001.
the directors of the Company are responsible for the preparation and true and fair presentation of the financial report
in accordance with the Corporations Act 2001. this includes responsibility for the maintenance of adequate accounting
records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and
accounting estimates inherent in the financial report. the directors are also responsible for the remuneration disclosures
contained in the directors’ report.
Audit approach
We conducted an independent audit 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 financial report is free of material misstatement and the remuneration disclosures comply with AAsB 124 and
the Corporations regulations 2001. 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 performed procedures to assess whether in all material respects the financial report presents fairly, in accordance
with the Corporations Act 2001, Accounting standards and other mandatory financial reporting requirements in
Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s financial
position, and of their performance as represented by the results of their operations, changes in equity and cash flows.
AustrAliAn leisure And entertAinment ProPerty mAnAgement limited AnnuAl rePort 30 June 2006 101
Independent audit report to the stapled security holders of Australian Leisure and Entertainment Property
Management Limited (continued)
We also performed procedures to assess whether the remuneration disclosures comply with AAsB 124 and the
Corporations regulations 2001.
We formed our audit opinion on the basis of these procedures, which included:
−
−
examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial
report and remuneration disclosures, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant
accounting estimates made by the directors.
our procedures include reading the other information in the Annual report to determine whether it contains any
material inconsistencies with the financial report.
While we considered the effectiveness of management’s internal controls over financial reporting when determining the
nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.
our audit did not involve an analysis of the prudence of business decisions made by directors or management.
Independence
in conducting our audit, we followed applicable independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001.
PricewaterhouseCoopers
S J Hadfield
Partner
sydney
29 August 2006
102
Level 8, O’Connell House
15-19 Bent Street
Sydney NSW 2000
Australia
Telephone: + 61 02 8231 8588
Facsimile: + 61 02 8231 8500
www.alegroup.com.au
Web:
28 August, 2006
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 2006.
Dear Directors,
We confirm to the best of our knowledge and belief that the Financial Reports for the year ended 30 June 2006 of:
−
−
−
ALE Property Group, being Australian Leisure and Entertainment Property Trust and its controlled entities;
Australian Leisure and Entertainment Property Management Limited; and
ALE Finance Company Pty Limited
present a true and fair view, in all material respects, of the financial 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 confirm that all risk management and internal compliance and control systems are operating efficiently and effectively in all
material respects.
Yours sincerely
Andrew Wilkinson
Managing Director
Darren Barkas
Group Financial Controller
Brendan Howell
Company Secretary
103
STApLed SeCuriTy HOLder iNFOrmATiON
The equity holder information set out below was applicable as at 31 August 2006.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Number of securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
CLASS oF EquiTY SECuRiTY
Number
of stapled
security holders
Number of
option holders
Number of
No income
Voting unit
(NiVuS) holders
91
754
554
1,080
11
2,490
–
–
–
–
1
1
–
–
–
–
1
1
The stapled securities are listed on the ASX and each stapled security is comprised of one share in Australian Leisure and Entertainment Property
Management Limited (“Company”) and one unit in Australian Leisure and Entertainment Property Trust (“Trust”). The options are stapled security
options. The NiVuS have been issued by the Trust to the Company.
300,000 options have been issued, all under an employee incentive plan. The options and the NiVuS are unquoted equity securities, i.e. not listed
on the ASX.
There were four holders of less than a marketable parcel of stapled securities.
B. Equity security holders
The names of the 20 largest holders of stapled securities are listed below:
Rank
Name
Number of
stapled securities
% of
issued capital
J P Morgan Nominees Australia Limited
Mr Kenneth Charles Ferris and Mrs Dorothy Mayferris
1 National Nominees Limited
2 ANZ Nominees Limited
3
4 Westpac Custodian Nominees Limited
5 Fortis Clearing Nominees P/L
6
7 Lady Jean Falconer Griffin
8 T W Hedley Pty Ltd
9 Citicorp Nominees Pty Limited
10 T W Hedley Pty Ltd
11
RBC Dexia investor Services Australia Nominees Pty Limited
12 RBC Dexia investor Services Australia Nominees Pty Limited
13 T W Hedley Pty Ltd
14 ARGo investments Limited
15 uBS Wealth Management Australia Nominees Pty Ltd
16 Caergwrle investments Pty Ltd
17 Mrs Shemara Wikramanayake
18 Bond Street Custodians Limited
19 Pineross Pty Ltd
20 Mr Kenneth Charles Ferris and Mrs Dorothy May Ferris
Total
C. Substantial holders
Substantial holders of ALE (as per notices received as at 31 August 2006) are set out below:
Stapled security holder
uBS Nominees Pty Limited
Deutsche Bank Group
Australia and New Zealand Banking Group Limited
iNG Australia Holdings Limited and related companies
11,132,237
6,392,378
6,092,194
4,706,485
4,210,050
2,217,867
1,859,120
1,652,928
1,580,074
1,561,606
1,085,586
810,000
763,297
610,000
556,500
500,000
460,500
385,000
325,000
273,491
47,174,313
12.26
7.04
6.71
5.18
4.64
2.44
2.05
1.82
1.74
1.72
1.20
0.89
0.84
0.67
0.61
0.55
0.51
0.42
0.36
0.30
51.95
Number held
Percentage of
voting rights
9,595,726
9,482,014
7,165,395
7,269,917
10.57%
10.44%
7.89%
8.01%
ANZ and each of the ANZ subsidiaries is taken under s 608(3)(a) of the Corporations Act 2001 to have the same relevant interest in
ALE Property Group as iNG Australia Limited (iNGA), by reason of ANZ having voting power above 20% in iNGA.
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a) Stapled securities
on a show of hands every stapled security holder present at a meeting in person or by proxy shall have one vote and upon a poll each stapled
security will have one vote.
(b) NIVUS
Each NiVuS entitles the the Company to one vote at a meeting of the Trust. 9,080,000 NiVuS have been issued by the Trust to the Company and
90,800,100 units have been issued by the Trust to stapled security holders. The NiVuS therefore represent 9.09% of the voting rights of the Trust.
(c) Options
No voting rights.
104
ALE PROPERTy GROUP OwNs
A PORTfOLiO Of 106 PUbs
LOcATEd ThROUGhOUT ThE
fivE mAiNLANd sTATEs
Of AUsTRALiA.
$300
million+
in under three years ALE’s initial
investor equity of around $91 million
has grown to more than $300 million
in market capitalisation and
distributions paid – growth that has
delivered well above other listed
property trusts
CONTENTS 7 Chairman’s message
13 management team
25 FinanCial reports
IBC investor inFormation anD Corporate DireCtory
/ 14 property portFolio
/ 103 management statement letter
/ 8 FinanCial highlights
/
/ 9 managing DireCtor’s report
/
22 BoarD oF DireCtors
/ 23 Corporate governanCe
/ 104 stapleD seCurity holDer inFormation
/
/
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 confirmed 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 final 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 Press Room, Lower Ground level, Radisson Hotel, Sydney at 10 am on
9 November 2006.
A copy of the notice of meeting will be mailed to stapled security holders and
made available to download from ALE’s website in late September 2006.
Security Holder Enquiries
Please contact the registry if you have any questions about your holding
or payments.
Registered Office
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
Deutsche Bank Place
Corner Hunter and Phillip Streets
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
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