ALE ProPErty GrouP
AnnuAl RepoRt 30 June 2008
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www.alegroup.com.au
another round
of solid, low risk results
Front Cover
Crows Nest Hotel, Crows Nest, NSW,
has been an institution on Sydney’s lower
North Shore for nearly 80 years. It caters to a
diverse clientele base and is renowned for it’s
entertainment offering.
Right
Young & Jackson Hotel, Cnr Swanston and
Flinders Street. Melbourne, is one of Australia’s
most famous pubs. It was first opened in
1861 as the Princes Bridge Hotel. In 1875 two
successful Irish diggers became the licensees –
Henry Young and Thomas Jackson.
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Breakfast Creek Hotel, Breakfast Creek QLD
ALE ProPErty GrouP (ALE)
AnnuAL rEPort for thE yEAr EndEd 30 JunE 2008
Comprising AustrAliAn leisure And entertAinment property trust
And its Controlled entities
ABn 92 648 441 429
CONTENTS
Directors’ Report 2 / Auditor’s Independence Declaration 14 / Financial Statements 15 / Consolidated income statements 15 / Consolidated balance sheets 16
/ Consolidated statements of changes in equity 17 / Consolidated cash flow statements 18 / Notes to the consolidated financial statements 19 /
Directors’ declaration 55 / Independent audit report 56 / Corporate directory 92
Ale property group AnnuAl report 30 June 2008 / 1
direCtors’ report /
for the yeAr ended 30 June 2008
The ALE Property Group (ALE) comprises Australian Leisure and Entertainment Property Trust (“Trust”) and its controlled entities
including 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 7
1 O’Connell Street
Sydney NSW 2000
The Directors of the Company present their report, together with the consolidated financial report of ALE, for the year ended
30 June 2008.
1. 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
J T McNally
Independent Non-executive
Independent Non-executive
Independent Non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
2. Principal activities
The principal activities of ALE consist of investment in property and property funds management. There has been no significant
change in the nature of these activities during the year.
3. 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.
4. 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 development likely to significantly affect the operations
and/or results of ALE.
In February 2008, Australian Leisure and Hospitality Limited (ALH), ALE’s tenant, sought declarations in the Supreme Court of
Victoria on the proper interpretation of its lease as it relates to the development of a large amount of vacant land available
(balanced lot) at the Vale Hotel, Mulgrave, Victoria. ALE and ALH are due to enter into mediation on this matter by mid November
2008. In the event that mediation does not resolve the matter, it will be determined by the Supreme Court of Victoria. It is pointed
out, however, that no matter how it is determined, the lease specifies that ALE is entitled to be kept whole in the event of
any development.
2 / Ale property group AnnuAl report 30 June 2008
5. Distributions and dividends
Trust distributions payable to stapled security holders, based on the number of stapled securities on issue at the respective record
dates, for the year were as follows:
Final Trust income distribution for the year ended
30 June 2008 to be paid on 29 August 2008
Final Trust ongoing distribution of fair value adjustments
to investment properties for the year ended 30 June 2008
to be paid on 29 August 2008
Interim Trust income distribution for the year ended 30 June 2008
paid on 28 February 2008
Interim Trust ongoing distribution of fair value adjustments to
investment properties for the year ended 30 June 2008
paid on 28 February 2008
Total distribution for the year ended 30 June 2008
30 June
2008
cents per
security
30 June
2007
cents per
security
30 June
2008
$’000
30 June
2007
$’000
15.44
10.57
13,244
9,595
1.41
6.23
1,216
5,655
9.76
9.50
8,413
8,655
6.99
33.60
6.20
32.50
6,026
28,899
5,648
29,553
No provisions for or payments of Company dividends have been made during the year (2007: nil).
6. Matters subsequent to the end of the financial year
On 9 July 2008, ALE entered into a second CPI Hedge that hedges real base interest rates on $186 million of debt at 3.77% for
15 years. This transaction substantially reduces the interest rate risk from the refinancing of debt that will occur in 2011 and further
reduces the potential volatility in distributions over the long term. On 1 August 2008, ALE extended the second CPI Hedge
entered into on 9 July 2008 by a further $19 million.
On 28 July 2008, ALE disposed of its interest in the Parkway Hotel, Frenchs Forest for $8.45 million. The sale represents a 30%
premium to the carrying value of the investment as at 30 June 2008.
Other than the matters disclosed above, there has not arisen in the interval between the end of the financial year and the date of
this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to
affect significantly the operations of ALE, the results of those operations, or the state of affairs of ALE, in future financial years.
Ale property group AnnuAl report 30 June 2008 / 3
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
7. Review and results of operations
ALE produced an IFRS accounting profit of $6.5 million for the year ended 30 June 2008 (30 June 2007: $97.7 million). ALE produced
a distributable income (before fair value adjustments and income tax) of $10.0 million for the year ended 30 June 2008 (30 June 2007:
$12.8 million). ALE produced a distributable profit (before fair value adjustments and other non-cash items) of $21.6 million for the year
ended 30 June 2008 (30 June 2007: $18.1 million).
The table below separates the cash components of profit that are available for distribution from the non-cash components of ALE’s
profit. The Directors believe this will assist stapled security holders in understanding the results of operations and distributions of ALE.
30 June
2008
$’000
30 June
2007
$’000
Profit before income tax and fair value adjustments for the year
10,041
12,780
Unrealised fair value adjustments to investment properties
Unrealised fair value adjustments to derivatives
Income tax expense
Profit after income tax for the year
Unrealised fair value adjustments to derivatives and investment properties
Gain on disposal of investment properties
Employee share based payments
Finance costs – non-cash
Income tax expense
Adjustments for non-cash items
Profit after income tax adjusted for non-cash items
Fair value adjustments to investment properties distributed
Total available for distribution
Distribution paid or provided for
Available and under/(over) distributed for the year
Earnings and distribution per stapled security
Basic and diluted earnings
Earnings available for distribution
Income distribution
Distribution of fair value adjustments to investment properties
Total distribution
Note
Percentage
increase
14(a)
14(b)
14(c)
-93.0%
25.6%
24.7%
-31.1%
3.4%
(2,098)
716
(2,122)
6,537
1,382
–
221
11,399
2,122
15,124
21,661
7,242
28,903
28,899
4
30 June
2008
cents
7.55
25.00
25.03
8.57
33.60
81,617
4,876
(1,541)
97,732
(86,493)
(449)
3
5,758
1,541
(79,640)
18,092
11,303
29,395
29,553
(158)
30 June
2007
cents
107.48
19.90
20.07
12.43
32.50
Summary of financial highlights for the year
Total distribution per stapled security increased by 3.4% from 32.50 cents to 33.60 cents compared to the June 2007 year.
Investment property acquisitions and revaluations (excluding development properties) increased portfolio value by 6.65% from
$769.1 million to $820.27 million compared to June 2007.
Net assets per stapled security decreased by 8.9% from $3.37 to $3.08 compared to June 2007 due to adjustments to property
asset values, a buyback of stapled securities and a range of other minor items.
4 / Ale property group AnnuAl report 30 June 2008
8. Information on Directors
Mr Peter Warne BA, 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 four other listed entities,
being ASX Limited, Macquarie Group Limited, WHK Group Limited and TEYS Limited. 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 BBldg, 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 LLB, 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 also the Local Government Remuneration Tribunal. 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. Prior boards include Australia Day Council of NSW, 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.
Mr Andrew Wilkinson BBus, 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.
Mr James McNally BBus (Land Economy), DipLaw, Executive Director
Experience and expertise
James was appointed as an executive Director of the Company in June 2003.
James has over 15 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.
Ale property group AnnuAl report 30 June 2008 / 5
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
Brendan Howell BE, GDipAppFin (Sec Inst), Company Secretary and Compliance Officer
Experience and expertise
The Company Secretary is Mr Brendan Howell. Brendan was appointed to the position of company secretary in April 2007, having
previously held the position from September 2003 to September 2006.
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 18 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
administrating listed and unlisted property trusts. For over nine 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 fund managers. Brendan also acts as an
independent director for several unlisted public companies, some of which act as responsible entities.
Independent member of the Audit, Compliance and Risk Management Committee (ACRMC).
Mr David Lawler BBus, 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,
the Australian Trade Commission, the Australian Sports Anti-Doping Authority, AusAID (the Australian Agency for International
Development) and National ICT Australia.
David is a director of Australian Settlements Limited and chairman of its audit and risk committee.
David has a Bachelor of Business Studies from Manchester Metropolitan University in the UK. He is a Fellow of CPA Australia
and a past 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
Resigned
P H Warne
P H Warne
P H Warne
P H Warne
ASX Limited (a)
WHK Group Limited
Macquarie Group Limited
TEYS Limited
Non-executive
Non-executive
Non-executive
Non-executive
July 2006
May 2007
July 2007
October 2007
(a) In July 2006, the Australian Stock Exchange and SFE Corporation Limited (SFE) merged, with the SFE becoming a wholly owned subsidiary of the
Australian Securities Exchange (ASX). SFE was delisted in July 2006. Peter was appointed to the board of the ASX on 25 July 2006.
6 / Ale property group AnnuAl report 30 June 2008
Special responsibilities of Directors
The following are the special responsibilities of each Director:
Director
Special responsibilities
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
Chairman of the Board.
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
and Chair of the Remuneration Committee.
Member of the ACRMC.
Member of the Remuneration Committee.
Chair of the ACRMC.
Member of the Remuneration Committee.
Chief Executive Officer and Managing Director of the Company.
Responsible Officer of the Company under the Company’s Australian Financial Services Licence (AFSL).
Responsible Officer of the Company under the Company’s Australian Financial Services Licence (AFSL).
Directors’ and key management personnel interests in stapled securities and performance rights
The following Directors, key management personnel and their associates held or currently hold the following stapled security
interests in ALE:
Name
Role
Number held at the
start of the year
Purchases
/(sales)
Number held at
30 June 2008
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
A J Slade
M J Clarke
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Investment and Acquisitions Manager
Finance Manager
700,000
109,000
100,000
377,650
12,000
1,500
40,000
80,000
–
–
–
–
The following key management personnel currently hold performance rights over stapled securities in ALE:
740,000
189,000
100,000
377,650
12,000
1,500
Name
Role
Number held at the
start of the year
Conversion/sales
/purchases
Number held at
30 June 2008
A F O Wilkinson
A J Slade
Executive Director
Investment and Acquisitions Manager
–
–
90,516
15,552
90,516
15,552
Ale property group AnnuAl report 30 June 2008 / 7
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
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 2008 and the number of meetings attended by each Director at the time the Director held office during the year were:
Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
Board meetings
Held1
Attended
ACRMC meetings
Held1
Attended
Remuneration
Committee meetings
Held1
Attended
9
9
9
9
9
9
8
9
9
9
8
8
8
n/a
n/a
8
8
8
n/a
n/a
2
2
2
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
8
8
n/a
1. “Held” reflects the number of meetings which the Director or member was eligible to attend.
9. Remuneration report (audited)
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
9.1
9.2 Details of remuneration
9.3 Service agreements
9.4 Equity based compensation
2
2
2
n/a
n/a
n/a
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.
9.1 Principles used to determine the nature and amount of remuneration
The objectives of ALE’s executive reward framework are 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 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 stapled security holders
• performance linkage/alignment of executive compensation with outcomes for security holders
• transparency
• capital management.
In consultation with external remuneration consultants, ALE 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 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 employee 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 three years ended 30 June 2008, the total return on ALE’s stapled securities (inclusive of
distribution returns) was 21.8% (2007: n/a).
8 / Ale property group AnnuAl report 30 June 2008
9.1 Principles used to determine the nature and amount of remuneration (continued)
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 last reviewed in 2007, the first review since 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 or performance rights over stapled securities.
Directors’ fees
The current base remuneration was last reviewed with effect from July 2007. 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 stapled security holders. The maximum currently stands at $475,000 per annum, comprised of $385,000 per annum
for Non-executive Directors and $90,000 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.
Executive pay
The executive pay and reward framework has three components, the combination of which comprises the executive’s total
remuneration:
• base pay and benefits
• short term performance incentives
• long term incentives.
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 ALE have been designed to link annual STI bonus awards to executive
performance against agreed key performance indicators (KPIs) including the financial performance of ALE 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 ALE.
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 2008, the KPI links to STI plans were based on ALE, business and personal objectives. The KPIs required
performance in seeking value accretive acquisitions, managing operating and funding costs, compliance with legislative requirements,
risk and capital management and 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.
Ale property group AnnuAl report 30 June 2008 / 9
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
9.1 Principles used to determine the nature and amount of remuneration (continued)
Long term incentives (LTI)
Performance rights over unissued stapled securities were granted in June 2008 to Mr Wilkinson and Mr Slade. Mr Wilkinson has the
right to receive up to 90,516 stapled securities at a nil cost exercisable from 1 June 2009 or earlier, if employment is terminated after
a change of control in the Company. Mr Slade has the right to receive up to 15,552 stapled securities at a nil cost exercisable
progressively from 30 June 2008 or earlier, if employment is terminated after a change of control in the Company.
The performance rights provide the opportunity to receive fully paid stapled securities for nil cost. The receipt of stapled securities is
contingent on achieving specific performance hurdles over a specified performance period. The performance hurdles are as follows:
• a Total Shareholder Return (TSR) performance hurdle where ALE’s TSR is ranked against a comparative group consisting
of companies classified as Real Estate Investment Trusts in the S&P/ASX 300 Index;
• a TSR performance hurdle based on ALE’s absolute TSR; and
• a service period retention hurdle, whereby the employee must be employed by ALE at the vesting date for the performance
rights to vest.
Stapled security options granted
No options over unissued stapled securities of ALE were granted during or since the end of the year.
Stapled security performance rights granted
The following performance rights (PR) over unissued stapled securities were granted during the year:
Executive
Number of
PR issued
Grant date
Performance
period
start date
Fair value
of PR at
grant date ($)
Expiry date
Number of PR
vested during
2008
A F O Wilkinson
90,516
12 Dec 2007
6 Nov 2006
3.11
1 Jun 2009
A J Slade
15,552
30 Jun 2008
1 Jul 2007
2.57
30 Jun 2010
–
–
9.2 Details of remuneration
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 were dependent on the satisfaction of performance conditions as set out in the section
headed “Short term incentives”, above. All other elements of remuneration were not directly related to performance.
Table 1 Remuneration details 1 July 2007 to 30 June 2008
Details of the remuneration of the key management personnel for the year ended 30 June 2008 are set out in the following table:
Key management personnel
Short term employee benefits
Post employment
benefits
Equity based
payment
Name
Role
Salary and fees
$
STI bonus
$
Non-monetary Superannuation
$
$
Non-executive Director
P H Warne
J P Henderson Non-executive Director
H I Wright
Non-executive Director
A F O Wilkinson Executive Director
Executive Director
J T McNally
Company Secretary
B R Howell
Investment and
A J Slade
Acquisitions Manager
Finance Manager
M J Clarke
137,615
85,000
77,982
297,741
90,000
90,000
155,575
79,536
1,013,449
–
–
–
120,000
–
–
75,000
25,000
220,000
–
–
–
–
–
–
–
–
–
12,385
–
7,018
13,092
–
–
13,092
22,965
68,552
1. The equity based payments expense for Mr Wilkinson’s performance rights covers the period November 2006 to June 2008.
Performance
rights1
$
–
–
–
181,076
–
–
Total
$
150,000
85,000
85,000
611,909
90,000
90,000
40,000
–
221,076
283,667
127,501
1,523,077
10 / Ale property group AnnuAl report 30 June 2008
9.2 Details of remuneration (continued)
Table 2 Remuneration details 1 July 2006 to 30 June 2007
Details of the remuneration of the key management personnel for the year ended 30 June 2007 are set out in the following table:
Key management personnel
Name
Role
Short term employee benefits
Post employment
benefits
Equity based
payment
Salary and fees
$
STI bonus
$
Non-monetary Superannuation
$
$
P H Warne
Non-executive Director
J P Henderson Non-executive Director
Non-executive Director
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
Finance Manager
Group Financial Controller
and Company Secretary
M J Clarke
D S Barkas1
1. Mr Barkas resigned effective 20 April 2007.
110,092
70,000
64,220
257,314
75,000
57,500
142,793
44,278
–
–
–
75,000
–
–
40,000
15,000
–
–
–
–
–
–
–
–
97,101
918,298
–
130,000
18,900
18,900
9,908
–
5,780
12,686
–
–
12,686
3,992
8,963
54,015
Options
$
–
–
–
2,891
–
–
Total
$
120,000
70,000
70,000
347,891
75,000
57,500
–
–
195,479
63,270
–
2,891
124,964
1,124,104
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 are set out below.
Name
A F O Wilkinson
A J Slade
M J Clarke
Paid
Forfeited
2008
%
160
150
100
2007
%
100
100
100
2008
%
–
–
–
2007
%
–
–
–
9.3 Service agreements
On 30 June 2008, the Company entered into a service agreement with the Managing Director, Mr Wilkinson, relating to the period
starting November 2006 and ending on 1 June 2009. The agreement stipulates the minimum base salary, inclusive of
superannuation, for each of the first three years as being $300,000 for Mr Wilkinson, 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
performance rights over stapled securities, vesting from May 2009 (or earlier if there is a termination after a change of control)
are also provided.
In the event of the termination of Mr Wilkinson’s employment contract and depending on the reason for the termination, amounts
may be payable for unpaid accrued entitlements and a proportion of bonus 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 performance right
entitlements for the balance of the contract.
At the annual general meeting of the Company to be held on 12 November 2008, the terms of Mr Wilkinson’s new contract will
be put to a shareholder vote.
The employment contracts of Mr Slade and Mr Clarke 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 Compliance Officer of ALE on a continuous basis that may be terminated at any time.
.
Ale property group AnnuAl report 30 June 2008 / 11
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
9.4 Equity based compensation
The performance rights value disclosed above as part of specified executive remuneration is the assessed fair value at grant date
of performance rights granted, allocated equally over the period from grant date to vesting date. The fair value 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 performance right, the security price at grant date and expected price volatility of the underlying security, the expected
distribution yield and the risk-free interest rate for the term of the performance right.
10. Stapled securities under performance rights or options
There are no unissued stapled securities under the performance rights plan or options at the date of this report.
11. Stapled securities issued on the exercise of performance rights or options
No stapled securities have been issued during the financial year.
12. Insurance of officers
During the financial year, the Company paid a premium of $24,615 (2007: $28,325) to insure the Directors and officers of the
Company. The auditors of the Company are in no way indemnified out of the assets of the Company.
Under the constitution of the Company, current or former Directors and secretaries are indemnified to the full extent permitted by
law for liabilities incurred by these persons in the discharge of their duties. The constitution provides that the Company will meet
the legal costs of these persons. This indemnity is subject to certain limitations.
13. Environmental regulation
Whilst ALE 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. At
three properties ongoing testing and monitoring is being undertaken and minor remediation work is required; however, ALE is
indemnified by third parties against any remediation amounts likely to be required.
14. 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 on the
following page, 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.
12 / Ale property group AnnuAl report 30 June 2008
14. Non-audit services (continued)
Details of amounts paid or payable to the auditors (KPMG and PricewaterhouseCoopers) for audit and non-audit services provided
during the year are set out below:
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the Group
and other audit work required under the Corporations Act 2001
• in relation to current year
Total remuneration for audit services
PricewaterhouseCoopers Australian firm:
Audit and review of the financial reports of the 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)
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Tax consulting services
Total taxation services
30 June
2008
$
30 June
2007
$
125,241
125,241
–
–
–
25,171
25,171
149,437
28,357
177,794
–
–
25,171
18,893
18,893
196,687
21,700
72,900
94,600
5,300
38,685
43,985
15. 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 14.
16. 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.
Peter H Warne
Director
Sydney
Dated this 19th day of August 2008
Ale property group AnnuAl report 30 June 2008 / 13
Auditor’s independenCe deClArAtion
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the Directors of Australian Leisure and Entertainment Property Management Limited,
the Responsible Entity for Australian Leisure and Entertainment Property Trust
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2008 there have been:
(i) no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Steve Gatt
Partner
Sydney
19 August 2008
14 / Ale property group AnnuAl report 30 June 2008
ConsolidAted inCome stAtements /
for the yeAr ended 30 June 2008
Note
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Revenue
Rent from investment properties
Interest from investment arrangements
Distributions
Interest from cash deposits
Total revenue
Other income
Gain on disposal of investment properties
Fair value adjustments to investment properties
Fair value adjustments to derivatives
Total other income
Total revenue and other 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
Profit after income tax
6
6
7
8
14
18
10
9
12
13
Profit attributable to the stapled security holders of ALE
50,169
2,013
–
1,055
53,237
–
(2,098)
716
(1,382)
51,855
38,476
–
1,588
3,132
43,196
8,659
2,122
6,537
6,537
47,972
1,963
–
1,430
51,365
449
81,617
4,876
86,942
138,307
34,895
–
1,309
2,830
39,034
99,273
1,541
97,732
97,732
–
–
35,520
115
35,635
–
–
(859)
(859)
34,776
12,912
2,875
–
126
15,913
18,863
–
18,863
18,863
–
–
31,700
35
31,735
–
–
(600)
(600)
31,135
12,723
2,335
–
105
15,163
15,972
–
15,972
15,972
Cents
Cents
Cents
Cents
Basic and diluted earnings per stapled security
Distribution per stapled security for the year
14(a)
14(e)
7.55
33.60
107.48
32.50
21.77
33.60
17.59
32.50
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
Adjustments for non-cash items
14
Profit after income tax adjusted for non-cash items
Fair value adjustments to investment properties
identified for distribution
Total available for distribution
14
Distribution paid or provided for
Available and undistributed for the year
14
6,537
15,124
21,661
7,242
28,903
28,899
4
97,732
(79,640)
18,092
11,303
29,395
29,553
(158)
18,863
2,794
21,657
7,242
28,899
28,899
–
15,972
2,378
18,350
11,303
29,653
29,553
100
Basic and diluted earnings per stapled security before fair value, income tax and other amounts is disclosed in Note 14.
Ale property group AnnuAl report 30 June 2008 / 15
ConsolidAted BAlAnCe sheets /
As At 30 June 2008
Current assets
Cash and cash equivalents
Receivables
Derivatives
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
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Derivatives
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
Reserve
Total equity
Note
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
15
16
11
19
17
18
19
21
20
25
22
24
11
23
23
24
26
27
28
29
8,527
1,906
19,064
19,576
1
563
49,637
820,270
2,551
–
111
1,164
824,096
873,733
7,870
8,450
8,309
14,497
201
39,327
564,593
5,890
570,483
609,810
263,923
60,384
203,318
221
263,923
24,765
398
11,514
19,576
–
1,180
57,433
769,110
2,551
–
51
1,001
772,713
830,146
6,026
–
1,475
15,283
31
22,815
497,805
3,605
501,410
524,225
305,921
80,241
225,680
–
305,921
2,100
19,883
458
–
–
12
22,453
–
–
180,656
–
–
180,656
203,109
2,784
–
1,829
14,460
–
19,073
146,252
–
146,252
165,325
37,784
60,792
(23,008)
–
37,784
1,184
18,167
170
–
–
12
19,533
–
–
210,943
–
–
210,943
230,476
2,973
–
682
15,251
–
18,906
144,317
–
144,317
163,223
67,253
80,225
(12,972)
–
67,253
Net assets per stapled security
$3.08
$3.37
$0.44
$0.74
The above consolidated balance sheets should be read in conjunction with the accompanying Notes.
16 / Ale property group AnnuAl report 30 June 2008
ConsolidAted stAtements of ChAnges in eQuity /
for the yeAr ended 30 June 2008
Consolidated
Parent Entity
Total equity at the beginning of the year
Profit for the year
Total recognised income and expenses for the year
305,921
6,537
6,537
239,309
97,732
97,732
67,253
18,863
18,863
Note
2008
$’000
2007
$’000
2008
$’000
Transactions with equity holders in their
capacity as equity holders:
Employee share based payments
Stapled securities issued
DRP implementation costs
Stapled securities purchased and cancelled
Distribution paid or payable
Total equity at the end of the year
27
14
221
–
(34)
(19,823)
(28,899)
(48,535)
263,923
3
311
–
(1,881)
(29,553)
(31,120)
305,921
–
–
(34)
(19,399)
(28,899)
(48,332)
37,784
2007
$’000
82,396
15,972
15,972
–
281
–
(1,843)
(29,553)
(31,115)
67,253
The above consolidated statements of changes in equity should be read in conjunction with the accompanying Notes.
Ale property group AnnuAl report 30 June 2008 / 17
ConsolidAted CAsh floW stAtements /
for the yeAr ended 30 June 2008
Cash flows from operating activities
Distributions received
Receipts from tenant and others
(inclusive of goods and services tax)
Payments to suppliers and employees
(inclusive of goods and services tax)
Interest received – bank deposits and
investment arrangements
Interest received – interest rate swaps
Borrowing costs paid
Net cash inflow from operating activities
Cash flows from investing activities
Investment property acquisitions
Proceeds from disposal of properties
Payments for plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from NAB borrowings
Proceeds from CMBS issue
Proceeds from short term loan
Prepaid borrowing costs
Proceeds from issue of stapled securities
Borrowings from/(repayments to) other group entities
Stapled securities purchased under buyback program
DRP implementation costs
Distributions paid
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Note
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
–
–
35,520
31,700
50,605
45,375
–
–
(3,084)
(8,210)
(3,199)
(2,240)
30
2,419
8,508
(35,727)
22,721
(53,258)
–
(113)
(53,371)
36,000
20,000
8,450
(492)
–
–
(19,823)
(34)
(29,689)
14,412
(16,238)
3,386
1,057
(30,194)
11,414
–
8,598
(12)
8,586
–
–
–
–
311
–
(1,881)
–
(22,657)
(24,227)
(4,227)
115
–
(10,977)
21,459
28
–
(10,945)
18,543
–
–
–
–
–
–
–
–
–
28,579
(19,433)
–
(29,689)
(20,543)
916
1,184
2,100
–
–
–
–
–
–
–
–
281
6,555
(1,843)
–
(22,657)
(17,664)
879
305
1,184
Cash and cash equivalents at the beginning of the year
24,765
28,992
Cash and cash equivalents at the end of the year
15
8,527
24,765
The above consolidated cash flow statements should be read in conjunction with the accompanying Notes.
18 / Ale property group AnnuAl report 30 June 2008
notes to the ConsolidAted finAnCiAl stAtements /
Note 1 Reporting Entity
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
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 2007 to 30 June 2008.
The stapled securities of ALE are quoted
on the Australian Securities 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.
Note 2 Basis of preparation
This general purpose financial report has
been prepared in accordance with
Australian Accounting Standards, other
authoritative pronouncements of the
Australian Accounting Standards Board,
Urgent Issues Group Interpretations and
the Corporations Act 2001.
(a) Compliance Statement
The financial report is a general purpose
financial report which has been prepared
in accordance with Australian Accounting
Standards (AASs) (including Australian
Interpretations) adopted by the Australian
Accounting Standards Board (AASB)
and the Corporations Act 2001. The
consolidated financial report of the
Group also complies with the IFRS and
interpretations adopted by the
International Accounting Standards Board.
(b) Basis of measurement
The financial report is prepared on the
historical cost basis except for the
following:
• derivative financial instruments are
measured at fair value
• financial instruments at fair value
through profit or loss are measured
at fair value
• investment property is measured at
fair value
• liabilities for cash settled share based
payment arrangements are measured
at fair value.
The methods used to measure fair values
are discussed further in Note 4.
(c) Functional and presentation
currency
These consolidated financial statements
are in Australian dollars, which is ALE’s
functional currency.
ALE is of a kind referred to in ASIC Class
Order 98/100 dated 10 July 1998
(updated by CO 05/641 effective 28 July
2005 and CO 06/51 effective 31 January
2006) and in accordance with that Class
Order, all financial information presented
in Australian dollars has been rounded to
the nearest thousand unless otherwise
stated.
(d) Use of estimates and judgements
The preparation of financial statements
requires management to make
judgements, estimates and assumptions
that affect the application of accounting
policies and the reported amounts of
assets, liabilities, income and expenses.
Actual results may differ from these
estimates. Estimates and underlying
assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates
are recognised in the period in which the
estimate is revised and in any future
periods affected.
In particular, information about significant
areas of estimation uncertainty and
critical judgements in applying
accounting policies that have the most
significant effect on the amount
recognised in the financial statements
are described in the following Notes:
• Note 4(a) – investment properties
• Note 4(c) and Note 41 – valuation of
financial instruments
• Note 31 – measurement of share based
payments
Note 3 Summary of significant
accounting policies
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 years
presented unless otherwise stated. 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) 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.
(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.
Ale property group AnnuAl report 30 June 2008 / 19
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 3 Summary of significant
accounting policies (continued)
(c) Receivables
Trade debtors are recognised initially at
fair value and subsequently measured at
amortised cost, less provision for
doubtful debts. Trade receivables are
generally due for settlement within
30 days.
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) 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. Maintenance
capital expenditure is the responsibility
of the tenant under the triple net leases
in place over 102 of the 105 properties.
The Group undertakes annual condition
and compliance reviews by a qualified
independent consultant to ensure
properties are properly maintained.
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.
(e) 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 reliably measured.
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
the carrying amount. These are included
in the income statement.
(f) 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.
20 / Ale property group AnnuAl report 30 June 2008
Note 3 Summary of significant
accounting policies (continued)
(g) 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.
(h) 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.
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.
(i) Derivatives
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 11.
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.
(j) 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.
(k) Distributions and dividends
Provisions are 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 the balance date.
(l) 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.
(m) 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.
(n) Expenses
Expenses including operating expenses,
Queensland land tax and other outgoings
(if any) are brought to account on an
accruals basis. Borrowing costs are
recognised using the effective interest
rate method.
(o) 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.
Ale property group AnnuAl report 30 June 2008 / 21
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 3 Summary of significant
accounting policies (continued)
(ii) Share based payments
The grant date fair value of performance
rights granted to employees is
recognised as an employee expense,
with a corresponding increase in equity,
over the period that the employees
become unconditionally entitled to the
performance rights. The amount
recognised as an expense is adjusted to
reflect the actual number of performance
rights that vest, except for those that fail
to vest due to performance hurdles not
being met.
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 performance right,
the vesting and performance criteria,
the impact of dilution, the non-tradable
nature of the performance right, the
share price at grant date and expected
price volatility of the underlying security,
the expected dividend yield and the
risk-free interest rate for the term of the
performance right.
The fair value of the performance rights
granted excludes the impact of any
non-market vesting conditions.
Non-market vesting conditions are
included in assumptions about the
number of performance rights that are
expected to become exercisable. At
each balance date, the entity revises its
estimate of the number of performance
rights that are expected to become
exercisable. The employee benefit
expense recognised each period takes
into account the most recent estimate.
Upon the exercise of performance rights,
the balance of the share based payments
reserve relating to those performance
rights 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 (five years). 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.
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.
(p) 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
effect 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 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.
22 / Ale property group AnnuAl report 30 June 2008
(t) New accounting standards
and UIG interpretation
The following standards, amendments to
standards and interpretations have been
identified as those which may impact the
entity in the period of initial application.
They are available for early adoption at
30 June 2008, but have not been applied
in preparing this financial report:
• AASB 8 Operating Segments
introduces the “management
approach” to segment reporting.
AASB 8, which becomes mandatory
for the ALE’s 30 June 2010 financial
statements, will require the disclosure
of segment information based on the
internal reports regularly reviewed by
ALE’s Chief Operating Decision Maker
in order to assess each segment’s
performance and to allocate resources
to them. Currently ALE presents
segment information in respect of its
business and geographical segments
(see Note 39). Under the management
approach, there will be no change to
the disclosure;
• Revised AASB 101 Presentation of
Financial Statements introduces as a
financial statement (formerly
“primary” statement) the “statement
of comprehensive income”. The
revised standard does not change the
recognition, measurement or disclosure
of transactions and events that are
required by other AASBs. The revised
AASB 101 will become mandatory
for ALE’s 30 June 2010 financial
statements. ALE has not yet
determined the potential effect of the
revised standard on ALE’s disclosures;
• AASB 2008-1 Amendments to
Australian Accounting Standard –
Share Based Payment: Vesting
Conditions and Cancellations changes
the measurement of share based
payments that contain non-vesting
conditions. AASB 2008-1 becomes
mandatory for ALE’s 30 June 2010
financial statements. ALE has not
yet determined the potential effect of
the amending standard on the ALE’s
financial report;
• Revised AASB 127 Consolidated and
Separate Financial Statements changes
the accounting for investments in
subsidiaries. Key changes include: the
remeasurement to fair value of any
previous/retained investment when
control is obtained/lost, with any
resulting gain or loss being recognised
in profit or loss; and the treatment of
increases in ownership interest after
control is obtained as transactions with
equity holders in their capacity as
equity holders. The revised standard
will become mandatory for ALE’s
30 June 2010 financial statements.
ALE has not yet determined the
potential effect of the revised standard
on ALE’s financial report; and
• Revised AASB 123 Borrowing Costs
removes the option to expense
borrowing costs and requires that an
entity capitalise borrowing costs
directly attributable to the acquisition,
construction or production of a
qualifying asset as part of the cost of
that asset. The revised AASB 123 will
become mandatory for ALE’s 30 June
2010 financial statements and will
constitute a change in accounting policy
for ALE. In accordance with the
transitional provisions ALE will apply
the revised AASB 123 to qualifying
assets for which capitalisation of
borrowing costs commences on or
after the effective date. ALE has not
yet determined the potential effect of
the revised standard on future earnings.
(u) 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.
Note 3 Summary of significant
accounting policies (continued)
(q) Earnings per stapled security
(i) Basic earnings per stapled security
Basic earnings per stapled security are
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.
(r) 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.
(s) Financial risk management
ALE’s activities expose it to a variety of
financial risks: market 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 and CPI Hedges to hedge certain
risk exposures (Notes 5 and 41 provide
further information).
Ale property group AnnuAl report 30 June 2008 / 23
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 4 Determination of fair values
A number of ALE’s accounting policies
and disclosures require the determination
of fair value, for both financial and
non-financial assets and liabilities. Fair
values have been determined for
measurement and/or disclosure purposes
based on the following methods. Where
applicable, further information about the
assumptions made in determining fair
values is disclosed in the Notes specific
to that asset or liability.
(a) Investment property
Investment property is property which
is held either to earn rental income or
for capital appreciation or for both.
Investment property is measured at fair
value with any change therein recognised
in profit or loss. ALE has a valuation
process for determining the fair value
at each reporting date. An independent
valuer, having an appropriate professional
qualification and recent experience in the
location and category of property being
valued, values individual properties
every three years on a rotation basis or
on a more regular basis if considered
appropriate and as determined by
management in accordance with Board
approved valuation policy. These external
independent valuations are taken into
consideration when determining the fair
value of the investment properties. The
fair values are based on market values,
being the estimated amount for which
a property could be exchanged on the
date of valuation between a willing buyer
and a willing seller in an arm’s length
transaction after proper marketing
wherein the parties had each acted
knowledgeably, prudently and without
compulsion.
The valuations of each independent
property are prepared by considering
the aggregate of the net annual passing
rental receivable from the individual
properties and where relevant,
associated costs. A capitalisation rate,
which reflects the specific risks inherent
in the net cash flows, is then applied to
the net annual passing rentals to arrive at
the property valuation. The independent
valuer may have regard to other valuation
methods in cross checking the primary
capitalisation of income method. A table
showing the range of capitalisation rates
applied to individual properties for each
state in which the property is held is
included below.
New South Wales
Victoria
Queensland
South Australia
Western Australia
Valuations reflect where appropriate,
the type of tenants actually in occupation
or responsible for meeting lease
commitments or likely to be in
occupation after letting of vacant
accommodation and the market’s general
perception of their credit-worthiness;
the allocation of maintenance and
insurance responsibilities between lessor
and lessee, and the remaining economic
life of the property. It has been assumed
that whenever rent reviews or lease
renewals are pending with anticipated
reversionary increases, all notices, and
where appropriate, counter-notices have
been served validly and within the
appropriate time.
(b) Trade and other receivables
The fair value of trade and other
receivables, excluding construction
work-in-progress, is estimated as the
present value of future cash flows,
discounted at the market rate of interest
at the reporting date.
(c) Derivatives
The fair value of interest rate swaps is
based on mark-to-market valuation
provided by swap counter parties. Those
mark-to-market quotes are tested for
reasonableness by discounting estimated
future cash flows based on the terms
and maturity of each contract and using
the appropriate market interest rates
(including credit margins where
appropriate) for a similar instrument at
the measurement date.
The fair value of CPI hedges are calculated
based on the present value of future
principal and interest cash flows,
discounted at the appropriate market rate
of interest (including credit margins where
appropriate) as at the reporting date.
2008
Yields
2007
Yields
5.50% – 6.30%
5.75% – 7.00%
5.25% – 7.10%
6.50% – 7.25%
6.10% – 6.40%
5.50% – 6.25%
5.42% – 6.75%
5.28% – 7.00%
6.48% – 7.25%
6.25% – 7.33%
Note 5 Financial Risk Management
Overview
ALE has exposure to the following risks
from their use of financial instruments:
• credit risk
• liquidity risk
• market risk.
This Note presents information about
ALE’s exposure to each of the above
risks, their objectives, policies and
processes for measuring and managing
risk, and the management of capital.
Further quantitative disclosures are
included throughout this financial report.
The Board of Directors has overall
responsibility for the establishment
and oversight of the risk management
framework. The Board has established
the Audit Compliance and Risk
Management Committee, which is
responsible for developing and
monitoring risk management policies.
The committee reports regularly to the
Board of Directors on its activities.
Risk management policies are
established to identify and analyse the
risks faced by ALE, to set appropriate
risk limits and controls, and to monitor
risks and adherence to limits. Risk
management policies and systems are
reviewed regularly to reflect changes in
market conditions and ALE’s activities.
ALE, through their training and
management standards and procedures,
aims to develop a disciplined and
constructive control environment in
which all employees understand their
roles and obligations.
The Audit Compliance and Risk
Management Committee oversees how
management monitors compliance with
the ALE’s risk management policies and
procedures and reviews the adequacy of
the risk management framework.
24 / Ale property group AnnuAl report 30 June 2008
Note 5 Financial Risk Management
(continued)
Credit risk
Credit risk is the risk of financial loss
to ALE if a tenant or counterparty to a
financial instrument fails to meet its
contractual obligations, and arises
principally from the ALE’s receivables
from the tenant and investment
securities. For the Trust it arises from
receivables due from subsidiaries.
Trade and other receivables
ALE’s exposure to credit risk is
influenced mainly by the individual
characteristic of each tenant. ALE has
one tenant (Australian Leisure and
Hospitality Group Limited) and therefore
there is significant concentration of credit
risk with that tenant. Credit risk has been
minimised primarily by ensuring, on a
continuous basis, that the tenant has
appropriate financial standing.
Liquidity risk
Liquidity risk is the risk that ALE will not
be able to meet its financial obligations as
they fall due. ALE’s approach to managing
liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity
to meet its liabilities when due, under
both normal and stressed conditions,
without incurring unacceptable losses
or risking damage to ALE’s reputation.
ALE has liquidity risk management
policies, which assists it in monitoring
cash flow requirements and optimising
its cash return on investments. Typically
ALE ensures that it has sufficient cash on
demand to meet expected operational
expenses and commitments for the
purchase/sale of assets for a period of
90 days (or longer if deemed necessary),
including the servicing of financial
obligations.
Market risk
Market risk is the risk that changes in
market prices, such as the consumer
price index and interest rates, will affect
ALE’s income or the value of its holdings
of leases and financial instruments. The
objective of market risk management is
to manage and control market risk
exposures within acceptable parameters,
while optimising the return.
ALE enters into derivatives and financial
liabilities in order to manage market risks.
All such transactions are carried out
within the guidelines set by the Audit,
Compliance and Risk Management
Committee.
Interest rate risk and consumer price
index risk
ALE adopts a policy of ensuring that all
exposure to changes in interest rates on
borrowings is hedged. This is achieved by
entering into interest rate swaps to fix the
interest rate and CPI hedges to match
liability movements with movement in
property values.
Capital management
ALE regards share capital and some of its
financial liabilities as capital and monitors
and manages these to address risks and
add value where appropriate.
The Board’s policy is to maintain a strong
capital base so as to maintain investor,
creditor and market confidence and to
sustain future development of the
business. The Board of Directors
monitors the return on capital, which the
Group defines as distributable income
divided by total shareholders’ equity,
excluding minority interests. The Board
of Directors also monitors the level of
distributions to security holders.
The Board seeks to maintain a balance
between the higher returns that may be
achieved with higher levels of borrowings
and the advantages and security afforded
by a sound capital position. While ALE
does not have a specific return on capital
target it seeks to ensure that capital is
being most efficiently used at all times.
In seeking to manage its capital
efficiently, ALE from time to time
undertakes on-market buybacks of both
ALE stapled securities and ALE Notes.
ALE has also previously made ongoing
capital distribution payments to stapled
security holders on a fully transparent
basis. Additionally, the available total
returns on all new acquisitions are tested
against the anticipated weighted cost of
capital at the time of the acquisition.
ALE assesses the adequacy of its capital
requirements, cost of capital and gearing
as part of its broader strategic plan.
Gearing ratios are monitored and
increased or decreased progressively
based on acquisition opportunities
available, the availability of financing and
a range of prudent financial metrics both
at the time and on a projected basis
going forward. The outcome of ALE’s
strategic planning process plays an
important role in determining acquisition
and financing priorities over time.
The total gearing ratios at 30 June 2008
and 30 June 2007 were 69.8% and
63.1% respectively.
ALE implemented a stapled security
buyback plan on 2 May 2007 which
concluded on 2 May 2008.
ALE implemented a buyback plan for
ALE Notes on 24 June 2008 which
will conclude on 30 September 2011
or earlier if regulatory approvals require
or until all ALE Notes have been
bought back.
Ale property group AnnuAl report 30 June 2008 / 25
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 6 Rent from investment properties
and interest from investment arrangements
Rent from investment properties
Interest from investment arrangements
The weighted average investment arrangements loan interest as
a percentage of investment property loans, deposits and costs
equated to a yield of 9.15% (2007: 8.99%).
All of ALE’s investment property lease rentals and interest from
investment arrangements are reviewed to state based CPI
annually and are not subject to fixed increases.
Note 7 Distributions received
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 8 Interest income
Operating bank and term deposit interest
As at 30 June 2008 the weighted average interest rate earned
on cash was 6.69% (2007: 6.12%).
Note 9 Finance costs (cash and non-cash)
Finance costs – cash
Commercial Mortgage Backed Securities (CMBS) interest
Capital Indexed Bonds (CIB) interest
National Australia Bank (NAB) Facility
ALE Notes interest
Other finance expenses
Finance costs – non-cash
CIB interest capitalised
CPI Hedge interest capitalised
Amortised costs – CMBS/CIB issued May 06
Amortised costs – NAB Facility
Amortised costs – CPI hedge
Amortised costs – ALE Notes
Amortised costs – ALE Notes premium
Other finance expenses
Finance costs (cash and non-cash)
Note
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(h)
(i)
(j)
(k)
(l)
(e)
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
50,169
2,013
52,182
47,972
1,963
49,935
–
–
–
–
–
–
–
–
–
–
35,520
35,520
31,700
31,700
1,055
1,055
1,430
1,430
115
115
35
35
9,684
4,506
1,691
10,928
268
27,077
3,363
5,666
215
99
2
1,459
476
119
11,399
38,476
13,593
4,436
–
10,898
210
29,137
3,825
–
155
–
–
1,337
441
–
5,758
34,895
–
–
–
10,928
49
10,977
–
–
–
–
–
1,459
476
–
1,935
12,912
–
–
–
10,898
47
10,945
–
–
–
–
–
1,337
441
–
1,778
12,723
26 / Ale property group AnnuAl report 30 June 2008
Note 9 Finance costs (cash and non-cash) (continued)
(a) Variable rate interest expense on $225 million CMBS issued during May 2006 and $20 million CMBS issued during August
2007, with a scheduled maturity of May 2011. Variable interest rate on the CMBS borrowings were swapped to a fixed interest
rate expense until 7 December 2007 by interest rate swaps. From 7 December 2007 these borrowings are hedged by a CPI
Hedge to a fixed interest rate of 3.61% applied to a balance escalating at CPI until November 2023. CPI Hedge capitalised
interest is calculated with reference to prevailing inflation rates. Interest that is capitalised is added on to the notional balance
on the CPI side of the hedge to calculate interest payable in future periods. The capitalised interest is payable by ALE on
maturity of the CPI Hedge which is scheduled for November 2023. The hedge counterparty has a right to break the CPI Hedge
thereby requiring that the capitalised amount be paid in December 2012 or December 2017. During the year ending 30 June
2008 $5.708 million of net swap interest from the CPI Hedge was received/receivable.
(b) Fixed rate interest expense of 3.40% (including credit margin) on indexing CIB balance issued during May 2006 with a
scheduled maturity of November 2023.
(c) Variable rate interest expense on working capital facility drawn to $36 million in November 2007 with a scheduled maturity of
November 2011. The variable interest rate is swapped to a fixed rate with an interest rate swap.
(d) Fixed rate interest expense of 7.265% on ALE Notes issued during November 2003 with a scheduled maturity of September
2011. Expense is recognised on an effective rate basis.
(e) Other borrowing costs such as agency rating fees and liquidity fees.
(f) CIB capitalised interest is calculated with reference to prevailing inflation rates. Interest that is capitalised is added to the
balance of the CIB to calculate interest payable in future periods. The capitalised interest is payable by ALE on maturity of the
CIB which is scheduled for November 2023.
(g) CPI Hedge interest is calculated with reference to prevailing inflation rates. Interest that is capitalised is added to the notional
balance of the CPI Hedge to calculate interest payable in future periods. The capitalised interest is payable by ALE on maturity
of the CPI Hedge which is scheduled for November 2023. (see (a) above for further details).
(h) Establishment costs of CMBS and CIB issued during May 2006 are amortising over the period of May 2006 to May 2011
on an effective rate basis.
(i) Establishment costs of NAB Facility established in November 2007 are amortising over the period of November 2007
to May 2011 on an effective rate basis.
(j) Establishment costs of CPI Hedge established during December 2007 are amortising over the period of December 2007
to September 2023 on an effective rate basis.
(k) Establishment costs of ALE Notes issued during November 2003 are amortising over the period of November 2003
to September 2011 on an effective rate basis.
(l) Premium of $3.75 million payable on maturity of ALE Notes is accruing over the period of November 2003 to September 2011
on an effective rate basis.
In reconciling profit after tax to amounts available for distribution to stapled security holders, the non-cash finance costs have
been added back thereby recognising that their non-cash nature increases the amounts available for distribution. (Note 14
contains further information).
Note 10 Current year fair value adjustments to derivatives
Interest rate swaps fair value adjustments net gain/loss
CPI Hedge fair value adjustment net gain
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
604
112
716
4,876
–
4,876
(859)
–
(859)
(600)
–
(600)
Ale property group AnnuAl report 30 June 2008 / 27
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 11 Derivative assets/(liabilities)
Asset
Liability
Net asset
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
19,064
(8,309)
10,755
11,514
(1,475)
10,039
458
(1,829)
(1,371)
170
(682)
(512)
(a) Instruments used by ALE
ALE is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in
interest rates in accordance with ALE’s financial risk management policies (refer Note 41).
Interest rate swap contracts
In the period to 7 December 2007 ALE had in place swap contracts to cover 100% of interest payments on the $245 million
CMBS and on $25 million of the $26 million drawn under the NAB facility. Subsequent drawdowns under the NAB facility have
been fully matched with swap contracts. Under these swap contracts ALE is obliged to receive floating rate interest and pay fixed
rate interest.
On 7 December 2007 contracts were entered into which offset (on a Group basis) the existing swap contracts for interest on the
$245 million CMBS. ALE will continue to receive payments until 2015 arising from the difference between fixed rates payable and
fixed rates receivable in respect of the offsetting swaps.
Interest rate swaps remain in place on the $36 million drawn on the NAB facility. The earliest maturity on these swaps is
November 2013. The fixed interest rate payable (after swaps) on these borrowings is 6.92% ($25 million) and 7.68% ($11 million).
Interest rate swap contracts – CPI Hedge
From 7 December 2007 ALE has a 16 year CPI Hedge in place in respect of the $245 million of floating rate CMBS. Under the
hedge ALE receives floating interest rates plus a margin of 0.2575% and pays a fixed rate of 3.61% on a balance escalating with
CPI until November 2023. CPI Hedge capitalised interest is calculated with reference to prevailing inflation rates. Interest that is
capitalised is added to the notional balance of the hedge. The capitalised interest is payable by ALE on maturity of the CPI Hedge
which is scheduled for November 2023. The hedge counterparty has a right to break the hedge such that the capitalised amount
may become payable in December 2012 or December 2017.
At 30 June 2008, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:
Less than 1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
Greater than 5 years
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
–
–
–
36,000,000
–
245,000,000
281,000,000
–
–
80,000,000
30,000,000
–
115,000,000
225,000,000
–
–
56,250,000
6,250,000
56,250,000
56,250,000
175,000,000
–
–
–
56,250,000
6,250,000
112,500,000
175,000,000
The contracts require settlement of net interest receivable or payable each 90 days. The settlement dates coincide with
the dates on which interest is payable on the underlying debt. The contracts are settled on a net basis.
The average weighted term of the interest rate hedges in relation to the total borrowings of ALE is 14.9 years.
Post balance date ALE has entered into additional CPI Hedging contracts that hedge all ALE borrowings for a period of 15 years.
Refer Note 24 for further details)
The gain or loss from remeasuring the hedging instruments at fair value is taken directly to the profit and loss statement.
In the year ended 30 June 2008 a gain of $716,000 was transferred to the profit and loss (2007: gain of $4,876,000).
28 / Ale property group AnnuAl report 30 June 2008
Note 12 Other expenses
Accounting services
Acquisition proposal due diligence
Annual reports
Accounting, tax and professional fees
Corporate advisory services
Depreciation expense – plant and equipment
Insurance
Legal fees
Dispute costs
Occupancy costs
Other expenses
Property condition and compliance audits
Registry fees
Salaries, fees and related costs
Staff training
Taxation services
Travel and accommodation
Trustee and custodian fees
Note 13 Income tax
Current tax expense/(benefit)
Deferred tax expense
Deferred income tax expense included in income tax
expense comprises:
Decrease/(increase) in deferred tax asset (Note 25)
(Decrease)/increase in deferred tax liabilities (Note 26)
Reconciliation of income tax expense to
prima facie tax payable
Profit before income tax expense
Less: Profit attributable to entities not subject to tax
Profit before income tax expense subject to tax
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2
10
53
156
120
53
72
158
202
114
225
–
95
1,630
36
40
23
143
3,132
–
2,122
2,122
(163)
2,285
2,122
34
97
66
178
105
63
79
91
–
76
320
98
74
1,340
12
45
30
122
2,830
7
1,534
1,541
(423)
1,957
1,534
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
125
126
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
–
–
104
105
–
–
–
–
–
–
8,659
(1,607)
7,052
99,273
(94,034)
5,239
18,863
(18,863)
–
15,972
(15,972)
–
Tax at the Australian tax rate 30% (2005: 30%)
2,116
1,572
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Share based payments
Other
Under/(over) provision in prior years
Income tax expense
66
(104)
44
2,122
1
1
(33)
1,541
–
–
–
–
–
–
–
–
–
–
Ale property group AnnuAl report 30 June 2008 / 29
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Note 14 Distributions
Reconciliation of profit after tax to amounts available
for distribution:
Profit after income tax for the year
(a)
6,537
97,732
18,863
15,972
Plus/(less)
Profit on sale of investment properties
Fair value adjustments to investment properties
Fair value adjustments to derivatives
Employee share based payments
Finance costs – non-cash
Income tax expense
Adjustments for non-cash items
–
2,098
(716)
221
11,399
2,122
15,124
(449)
(81,617)
(4,876)
3
5,758
1,541
(79,640)
–
–
859
–
1,935
–
2,794
–
–
600
–
1,778
–
2,378
Profit after income tax adjusted for non-cash items
(b)
21,661
18,092
21,657
18,350
Plus/(less)
Fair value adjustments to investment properties identified
for distribution
Total available for distribution
Distribution paid or provided for
Available and under/(over) distributed for the year
(c)
(d)
(e)
(f)
7,242
28,903
28,899
4
11,303
29,395
29,553
(158)
Number of
Number of
Stapled Securities Stapled Securities
On Issue
On Issue
7,242
28,899
28,899
–
Stapled
Securities
On Issue
11,303
29,653
29,553
100
Stapled
Securities
On Issue
Weighted average number of stapled securities
used as the denominator in calculating earnings
per stapled security at (a) and (b) below
Stapled securities on issue at the end of the year
used in calculating distribution per stapled security
at (c) below
Note 35
86,631,833
90,928,711
86,631,833
90,928,711
Note 35
85,813,747
90,660,614
85,813,747
90,660,614
(a) Basic and diluted earnings per stapled security
(b) Basic and diluted earnings per stapled security
before fair value adjustments, non-cash amortisation
of borrowing costs and prepaid advisory fees
(c) Fair value adjustments to investment properties
identified for distribution
(d) Total available for distribution
(e) Distribution per stapled security
(f) Available and under/(over) distributed for the year
Note
35
14(g)
Consolidated
Parent Entity
2008
Cents
2007
Cents
2008
Cents
2007
Cents
7.55
107.48
21.77
17.59
25.00
19.90
25.00
20.21
8.41
33.41
33.60
(0.19)
12.23
32.13
32.50
(0.37)
8.41
33.41
33.60
(0.19)
12.23
32.44
32.50
(0.06)
(g) Fair value adjustments to investment properties identified for distribution
For the years ending June 2007 and 2008, ALE had a policy of distributing 50% of property value movements that related to
matters other than changes in property capitalisation rates. These included valuation increases relating to the increase in rent and
completion of development properties.
For the year ending 30 June 2008, ALE increased the value of its properties by $9.458 million as a direct result of the increases in
net rental income. In addition the substantial completion of the Burleigh and Narrabeen Hotels and the sale of the Parkway Hotels
as at 30 June 2008 together would have provided a valuation premium of $6.423 million. These increases in values would have
totalled $15.881 million of which 45.6% was distributed as an ongoing capital distribution in the current year.
ALE will be revising its distribution policy for future years and will have closer regard to the free cash flow available for distribution.
30 / Ale property group AnnuAl report 30 June 2008
Note 15 Cash assets and cash equivalents
Cash at bank and in hand
Deposits at call
Cash reserve
An amount of $5.5 million is required to be held as a cash
reserve as part of the terms of the CMBS and CIB issues in order
to provide liquidity for CMBS and CIB obligations to scheduled
maturities of 20 May 2011 and 20 November 2023 respectively
and $2.058 million (2007: $0.768 million) of deposits at call is
required to be held as collateral for certain Trust interest rate
derivatives.
Following balance debt it is expected that the cash reserve of
$2.058 million will be released as security.
During the year ended 30 June 2008 all cash assets were placed
on deposit with either the ANZ Banking Group Limited, National
Australia Bank Limited or Macquarie Group Limited. As at
30 June 2008 the weighted average interest rate on all cash
assets was 7.63% (2007: 5.99%).
Note 16 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 is recoverable from its tenant, Australian Leisure and
Hospitality Group Limited, or from the Foster’s Group Limited
and other parties.
Note 17 Other
Current
Other prepaid expenses
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
908
61
7,558
8,527
10,215
8,282
6,268
24,765
42
–
2,058
2,100
416
–
768
1,184
326
1,580
–
–
1,906
259
139
–
–
398
–
–
1,687
18,196
19,883
–
8
1,671
16,488
18,167
563
1,180
12
12
Ale property group AnnuAl report 30 June 2008 / 31
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Note 18 Investment properties
Investment properties – at fair value
820,270
769,110
–
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
Additions
Acquisitions
Disposals – at fair value
Net gain from fair value adjustments
Carrying amount at the end of the year
769,110
–
53,258
–
(2,098)
820,270
695,470
173
–
(8,150)
81,617
769,110
–
–
–
–
–
–
–
–
–
–
–
–
–
Property
New South Wales
Blacktown Inn, 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 Tavern, Penrith
Pritchards Hotel, Mount Pritchard
Pymble Hotel, Pymble
Smithfield Tavern, Smithfield
Total New South Wales properties
Date
acquired
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Oct-07
Nov-03
Nov-03
Cost
including
additions
$’000
Valuation
type and
date
Fair value at
30 June 2008
$’000
Fair value at
30 June 2007
$’000
Fair value
gains/(losses)
30 June 2008
$’000
5,472
5,660
8,208
8,772
5,849
3,114
8,867
5,849
21,130
2,830
4,151
79,902
A
B
A
B
A
B
B
B
B
B
A
8,080
8,390
12,030
13,080
8,390
4,430
12,870
8,210
20,440
3,740
6,260
105,920
8,080
8,350
12,060
12,920
8,360
4,400
12,710
8,170
–
3,730
6,260
85,040
–
40
(30)
160
30
30
160
40
(690)
10
–
(250)
32 / Ale property group AnnuAl report 30 June 2008
Note 18 Investment properties (continued)
Property
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
Camp Hill Hotel, Camp Hill
CBX Caloundra Hotel, Caloundra
Chardons Corner Hotel, Annerly
Dalrymple Hotel, Townsville
Edge Hill Tavern, Manoora
Edinburgh Castle Hotel, Kedron
Ferny Grove Tavern, Ferny Grove
Four Mile Creek, Strathpine
Hamilton Hotel, Hamilton
Holland Park Hotel, Holland Park
Kedron Park Hotel, Kedron Park
Kirwan Tavern, Townsville
Lawnton Tavern, Lawnton
Miami Tavern, Miami
Mount Gravatt Hotel, Mount Gravatt
Mount Pleasant Tavern, Mackay
Noosa Reef Hotel, Noosa Heads
Nudgee Beach Hotel, Nudgee
Oxford 152, Bulimba
Palm Beach Hotel, Palm Beach
Pelican Waters, Caloundra
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, Townsville
Wilsonton Hotel, Toowoomba
Total Queensland properties
Date
acquired
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
Jun-04
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
Cost
including
additions
$’000
Valuation
type and
date
Fair value at
30 June 2008
$’000
Fair value at
30 June 2007
$’000
Fair value
gains/(losses)
30 June 2008
$’000
8,396
4,434
3,303
4,434
3,304
10,659
2,265
4,331
1,416
3,208
2,359
3,114
5,849
3,672
6,604
3,774
2,265
4,434
4,434
4,057
3,208
1,794
6,874
3,020
5,000
6,886
4,237
3,397
1,794
5,189
5,755
9,150
5,377
8,208
5,661
4,529
166,391
B
B
B
A
B
B
B
A
A
B
B
B
B
B
B
A
B
A
B
A
B
A
B
B
B
B
B
A
A
A
B
B
B
A
A
A
11,360
6,740
4,790
6,640
4,700
13,890
3,340
6,770
1,990
4,550
3,780
4,610
8,290
5,900
8,580
5,930
3,190
7,080
6,290
6,550
4,690
2,840
11,100
4,530
7,200
10,550
6,200
5,090
2,590
7,620
8,650
12,970
8,510
11,570
8,990
6,580
244,650
11,270
6,790
4,870
6,650
4,680
13,700
3,440
6,580
2,030
4,560
3,750
4,570
8,320
5,560
8,490
5,970
3,250
6,830
6,270
6,440
4,780
2,740
10,710
4,570
7,320
10,400
6,150
5,060
2,740
7,600
8,550
12,860
8,420
12,020
8,630
6,430
243,000
90
(50)
(80)
(10)
20
190
(100)
190
(40)
(10)
30
40
(30)
340
90
(40)
(60)
250
20
110
(90)
100
390
(50)
(120)
150
50
30
(150)
20
100
110
90
(450)
360
160
1,650
Ale property group AnnuAl report 30 June 2008 / 33
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 18 Investment properties (continued)
Property
South Australia
Aberfoyle Hub Tavern, Aberfoyle Park
Enfield Hotel, Clearview
Eureka Tavern, Salisbury
Exeter Hotel, Exeter
Finsbury Hotel, Woodville North
Gepps Cross Hotel, Blair Athol
Hendon Hotel, Royal Park
Ramsgate Hotel, Henley Beach
Stockade Tavern, Salisbury
Total South Australian properties
Victoria
Ashley Hotel, Braybrook
Bayswater Hotel, Bayswater
Berwick Inn, Berwick
Blackburn Hotel, Blackburn
Blue Bell Hotel, Wendouree
Boundary Hotel, East Bentleigh
Burvale Hotel, Nunawading
Club Hotel – FTG, Ferntree Gully
Cramers Hotel, Preston
Daveys Hotel, Frankston
Deer Park Hotel, Deer Park
Doncaster Inn, Doncaster
Elsternwick Hotel, Elwood
Eltham Hotel, Eltham
Ferntree Gully Hotel/Motel, Ferntree Gully
Gateway Hotel, Corio
Keysborough Hotel, Keysborough
Mac’s Melton Hotel, Melton
Meadow Inn Hotel/Motel, Fawkner
Mitcham Hotel, Mitcham
Morwell Hotel, Morwell
Mountain View Hotel, Glen Waverley
Olinda Creek Hotel, Lilydale
Pier Hotel, Frankston
Plough Hotel, Mill Park
Prince Mark Hotel, Doveton
Rifle Club Hotel, Williamstown
Rose Shamrock & Thistle, Reservoir
Royal Hotel – Essendon, Essendon
Royal Exchange, Traralgon
Royal Hotel – Sunbury, Sunbury
Sandbelt Club Hotel, Moorabbin
Sandown Park Hotel/Motel, Noble Park
Sandringham Hotel, Sandringham
Somerville Hotel, Somerville
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
Jun-08
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
Valuation
type and
date
Fair value at
30 June 2008
$’000
Fair value at
30 June 2007
$’000
Fair value
gains/(losses)
30 June 2008
$’000
3,303
2,454
3,303
1,888
1,605
2,171
1,605
3,774
4,435
24,538
3,963
9,905
15,888
9,433
1,982
17,935
9,717
5,095
8,301
2,548
6,981
12,169
3,303
4,717
4,718
3,114
9,622
6,886
8,113
8,584
1,511
7,169
3,963
8,019
8,490
9,810
2,737
2,642
4,340
2,171
3,114
10,849
6,321
4,529
2,642
B
B
B
A
B
A
B
B
A
B
B
A
B
A
A
A
B
B
B
B
B
A
B
B
A
A
B
B
A
B
B
B
B
A
B
B
B
B
A
A
A
B
B
B
4,810
3,710
4,820
2,800
2,370
3,290
2,420
5,650
6,650
36,520
5,790
14,520
17,730
13,580
3,040
19,200
14,540
7,380
13,600
4,130
10,730
17,210
4,800
7,300
7,830
4,900
13,550
9,790
11,540
12,470
2,390
11,590
5,680
11,360
12,310
14,320
4,420
3,990
6,410
3,440
4,350
16,920
9,070
7,220
4,310
4,730
3,600
4,720
2,780
2,320
3,280
2,370
5,580
6,580
35,960
5,890
14,760
17,660
13,780
3,190
–
15,130
7,450
13,670
4,180
10,810
17,420
4,990
7,430
7,930
5,130
14,090
9,950
11,730
12,470
2,420
11,730
5,780
11,400
12,330
14,500
4,450
4,020
6,460
3,500
4,520
16,890
9,200
7,330
4,360
80
110
100
20
50
10
50
70
70
560
(100)
(240)
70
(200)
(150)
1,265
(590)
(70)
(70)
(50)
(80)
(210)
(190)
(130)
(100)
(230)
(540)
(160)
(190)
–
(30)
(140)
(100)
(40)
(20)
(180)
(30)
(30)
(50)
(60)
(170)
30
(130)
(110)
(50)
34 / Ale property group AnnuAl report 30 June 2008
Note 18 Investment properties (continued)
Property
Victoria (continued)
Stamford Inn, Rowville
Sylvania Hotel, Campbellfield
Tudor Inn, Cheltenham
The Vale Hotel, Mulgrave
Victoria Hotel, Shepparton
Village Green Hotel, Mulgrave
Westmeadows Tavern, Westmeadows
Young & Jacksons, Melbourne
Total Victorian properties
Western Australia
Balmoral Hotel, East Victoria Park
The Brass Monkey Hotel, Northbridge
Queens Tavern, Highgate
Sail & Anchor Hotel, Freemantle
Total Western Australian properties
Total investment properties
Date
acquired
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Jul-07
Nov-07
Nov-03
Nov-03
Cost
including
additions
$’000
Valuation
type and
date
Fair value at
30 June 2008
$’000
Fair value at
30 June 2007
$’000
Fair value
gains/(losses)
30 June 2008
$’000
12,733
5,377
5,472
5,566
2,265
12,546
2,737
6,132
284,109
6,377
7,815
4,812
3,114
22,118
577,058
A
B
B
B
A
B
B
A
B
B
A
B
18,690
7,780
8,120
8,290
3,480
18,080
4,110
8,090
408,050
6,280
7,420
7,230
4,200
25,130
820,270
18,660
7,850
8,180
8,410
3,780
18,170
4,140
8,410
394,150
–
–
6,880
4,080
10,960
769,110
Reconciliation of fair value gains/losses for year ending 30 June 2008
Fair value as 30 June 2007
Disposals during the year ended 30 June 2008
Additions during year ended 30 June 2008
Carrying amount before 30 June 2008 valuations
Fair value at 30 June 2008
Fair value gain/(loss) for year ended 30 June 2008
30
(70)
(60)
(120)
(300)
(90)
(30)
(320)
(4,035)
(98)
(395)
350
120
(23)
(2,098)
769,110
–
53,258
822,368
820,270
(2,098)
Valuation type and date
A Independent valuations conducted during June 2008 with a valuation date of 30 June 2008.
B Directors’ valuations conducted June 2008 with a valuation date of 30 June 2008.
Investment properties
All investment properties are freehold and 100% owned by ALE and are comprised of land, buildings and fixed improvements.
The plant and equipment, liquor, gaming licences and certain development rights are held 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 as at 30 June 2008
In accordance with ALE’s policy of independently valuing at least one-third of its property portfolio annually, 36 properties were
independently valued as at 30 June 2008. The independent valuations are identified as “A” in the investment property table under
the column labelled “Valuation type and date” (above). These valuations were completed by DTZ Australia (NSW) Pty Limited.
As at June 2008 the weighted average investment property capitalisation rate used to determine the value of the investment
properties was 6.20% (2007: 6.07%).
Ale property group AnnuAl report 30 June 2008 / 35
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 18 Investment properties (continued)
Directors’ valuations as at 30 June 2008
36 of ALE’s portfolio of 99 completed properties (an additional three property acquisitions remain subject to completion, refer
to Note 19) were independently valued as at 30 June 2008. The remaining 67 completed properties were subject to Directors’
valuations as at 30 June 2008, identified as “B”. The Directors’ valuations were determined by taking each property’s net rent as
at 31 May 2008 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 30 June 2008 independent valuations on a state by state basis.
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 2008, three of the properties are yet to be acquired (Note 19 contains further information).
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Note 19 Loans and deposits – investment properties
Current
Non-current
19,576
19,576
2,551
2,551
–
–
–
–
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 (Note 18 contains further
information). The loan amounts are classified as current as they are repayable at settlement/completion of development.
As at 30 June 2008
Property
Expected
acquisition
quarter ending
Deposits
(10% of
purchase price)
$’000
Loans
(90% of
purchase price)
$’000
Current
Burleigh Heads Hotel, Burleigh Heads, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Parkway Hotel, Frenchs Forest, NSW
Non-current
Burleigh Heads Hotel, Burleigh Heads, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Parkway Hotel, Frenchs Forest, NSW
Sep 2008
Sep 2008
Sep 2008
Sep 2008
Sep 2008
Sep 2008
Total loans and deposits – investment properties
Total investment properties (Note 18)
Total investment properties and loans and
deposits – investment properties
–
–
–
–
658
879
638
2,175
2,175
5,914
7,914
5,748
19,576
–
–
–
–
19,576
Costs
$’000
–
–
–
–
114
152
110
376
376
Total
acquisition
costs
$’000
5,914
7,914
5,748
19,576
772
1,031
748
2,551
22,127
820,270
842,397
36 / Ale property group AnnuAl report 30 June 2008
Note 19 Loans and deposits – investment properties (continued)
As at 30 June 2007
Property
Expected
acquisition
quarter ending
Deposits
(10% of
purchase price)
$’000
Loans
(90% of
purchase price)
$’000
Current
Burleigh Heads Hotel, Burleigh Heads, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Parkway Hotel, Frenchs Forest, NSW
Non-current
Burleigh Heads Hotel, Burleigh Heads, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Parkway Hotel, Frenchs Forest, NSW
Dec 2007
Dec 2007
Dec 2007
Dec 2007
Dec 2007
Dec 2007
Total loans and deposits – investment properties
Total investment properties (Note 18)
Total investment properties and loans and
deposits – investment properties
–
–
–
–
658
879
638
2,175
2,175
5,914
7,914
5,748
19,576
–
–
–
–
19,576
Costs
$’000
–
–
–
–
114
152
110
376
376
Total
acquisition
costs
$’000
5,914
7,914
5,748
19,576
772
1,031
748
2,551
22,127
769,110
791,237
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 2008 the annual interest receivable was $2,025,000 (June 2007: $1,990,000).
This equates to a weighted average interest rate of 10.34% (June 2007: 10.17%) on the loan amount of $19,576,000 (June 2007:
$19,576,000) and a weighted average interest rate of 8.84% (June 2007: 8.69%) on the purchase price of $22,898,000
(June 2007: $22,898,000).
Under the conditional sale contracts ALE is to 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 are to be
undertaken on each of the developments when complete and, if necessary, the purchase price is to be adjusted down to
reflect the value. If the completion valuation results in an increase in value there is to be no adjustment to the purchase price.
ALE and members of the 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. Upon completion of the Burleigh Heads and Narrabeen properties ALE becomes entitled to pre-agreed
rental income totalling $1,314,693 per annum.
The Parkway development has not commenced. After the balance date ALE’s interest in the Parkway development was
sold for $8.45 million.
As at the balance date ALE obtained the following valuations relating to the imminent completion of the two remaining
development properties:
Property
Burleigh Heads Hotel, Burleigh Heads, QLD
Narrabeen Sands Hotel, Narrabeen, NSW
Valuer
Value
DTZ
JLL
$10.4m
$9.7m
The valuation or sale price of the three development properties existing at balance date together represent a $4.5 million premium
to the book value of the properties as at balance date. Final independent valuations will be sought upon completion (expected by
30 September 2008).
Ale property group AnnuAl report 30 June 2008 / 37
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
63
(40)
23
85
(65)
20
180
(112)
68
328
(217)
111
29
–
(6)
23
20
19
(2)
(17)
20
2
94
(28)
68
51
113
(2)
(51)
111
–
–
63
(34)
29
80
(60)
20
85
(83)
2
228
(177)
51
34
4
(9)
29
36
8
–
(24)
20
31
–
(29)
2
101
12
–
(62)
51
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180,656
180,656
210,943
210,943
Note 20 Plant and equipment
Furniture, fittings and equipment
At Cost
Accumulated depreciation
Software
At Cost
Accumulated depreciation
Office fitout
At Cost
Accumulated depreciation
Total
At Cost
Accumulated depreciation
Net book value
Movement in Plant and Equipment
Furniture, fittings and equipment
Net book value at the beginning of the year
Additions
Depreciation charge
Net book value at the end of the year
Software
Net book value at the beginning of the year
Additions
Disposals
Depreciation charge
Net book value at the end of the year
Office fitout
Net book value at the beginning of the year
Additions
Depreciation charge
Net book value at the end of the year
Total
Net book value at the beginning of the year
Additions
Disposals
Depreciation charge
Net book value at the end of the year
Note 21 Investment in controlled entities
Unlisted units in controlled trust:
Sub Trust
The Trust owns 100% of the issued units of the Sub Trust.
38 / Ale property group AnnuAl report 30 June 2008
Note 22 Payables
Trade creditors
Interest accrued on CMBS
Interest accrued on CIB
Interest accrued on NAB Facility
Interest accrued on ALE Notes
Other accruals
Note 23 Provisions and other liabilities
(a) Provisions
Provision for distribution
Provision for annual leave
(b) Current liabilities – other
Unearned interest income
Note 24 Borrowings
Current borrowings
Non-current borrowings
Current borrowings – Comprising
Loan at call – ALH
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
165
2,243
524
349
2,747
1,842
7,870
62
1,708
506
–
2,747
1,003
6,026
–
–
–
–
2,747
37
2,784
–
–
–
–
2,747
226
2,973
14,460
37
14,497
15,251
32
15,283
14,460
–
14,460
15,251
–
15,251
201
31
8,450
–
–
–
–
–
564,593
497,805
146,252
144,317
8,450
–
–
–
On 27 June 2008 ALE purchased the Boundary Hotel from
Orchard Diversified Property Fund. The acquisition was funded
by cash and a short term loan from ALH of $8.45 million. The loan
was interest free and repayable within 30 days of the acquisition
of Boundary. The loan was repaid following the disposal of
ALE’s interest in the Parkway Hotel to ALH on 28 July 2008.
Non-current borrowings – comprising (net of amortised costs)
CIB – maturing November 2023
CMBS – maturing May 2011
ALE Notes – maturing September 2011
NAB Facility – maturing May 2011
CPI Hedge – maturing November 2023
CIB
Opening balance
Capitalised interest
Prepaid borrowing establishment costs capitalised
Amortisation of prepaid borrowing establishment costs capitalised
Closing balance
132,492
244,345
146,252
35,911
5,593
564,593
129,107
3,363
–
22
132,492
129,107
224,381
144,317
–
–
497,805
125,275
3,825
(11)
18
129,107
–
–
146,252
–
–
144,317
–
146,252
–
144,317
–
–
–
–
–
–
–
–
Ale property group AnnuAl report 30 June 2008 / 39
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Note 24 Borrowings (continued)
CMBS
Opening balance
Issued August 2007
Prepaid borrowing establishment costs capitalised
Amortisation of prepaid borrowing establishment costs capitalised
Closing balance
ALE Notes
Opening balance
Amortisation of prepaid borrowing establishment costs capitalised
Premium payable at maturity – accrued
Closing balance
NAB – Working capital facility
Opening balance
Drawdown – October 2007
Drawdown – January 2008
Prepaid borrowing establishment costs capitalised
Amortisation of prepaid borrowing establishment costs capitalised
Closing balance
CPI Hedge
Opening balance
Capitalised interest
Prepaid borrowing establishment costs capitalised
Amortisation of prepaid borrowing establishment costs capitalised
Closing balance
224,381
20,000
(229)
193
244,345
144,317
1,459
476
146,252
–
26,000
10,000
(188)
99
35,911
–
5,666
(75)
2
5,593
224,251
–
(7)
137
224,381
142,539
1,337
441
144,317
–
–
–
–
–
–
–
–
–
–
144,317
1,459
476
146,252
142,539
1,337
441
144,317
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) CIB
A fixed rate of interest of 3.40% p.a. (Including credit margin) applies to the CIB and is payable quarterly with the outstanding
balance of the CIB escalating quarterly in line with the national consumer price index. The amount of the outstanding balance
escalation is referred to as capitalised interest and is not payable until maturity of the CIB in November 2023.
(b) CMBS
$225 million CMBS were issued during May 2006 and $20 million CMBS were issued during August 2007, with a scheduled
maturity of May 2011. ALE’s $245 million of CMBS variable interest rate exposure is fully hedged (100% fixed) up until November
2023. This has been achieved by the use of a CPI Hedge to swap the variable interest rate to a fixed interest rate of 3.61% on an
amount of $245 million which amount escalates with CPI until November 2023.
(c) ALE Notes
$150 million of ALE Notes were issued on 7 November 2003 with a scheduled maturity date of 30 September 2011. A fixed
rate interest of 7.265% is payable semi-annually on the Notes. A 2.5% redemption premium of $3.75 million is payable on the
maturity date. On 24 June 2008 ALE announced its intention to conduct an on-market buyback of ALE Notes. As at the date of this
report no ALE Notes had been bought back and cancelled.
(d) NAB Facility
In October 2007 ALE established a $55 million working capital facility with National Australia Bank. The NAB facility has a floating
interest rate and is subject to review in May 2011.
40 / Ale property group AnnuAl report 30 June 2008
Note 24 Borrowings (continued)
(e) CPI Hedge
A fixed rate of interest of 3.61% p.a. applies to the CPI Hedge and is payable quarterly with the notional balance of the CPI Hedge
escalating quarterly in line with the relevant consumer price index. The increase in the outstanding balance escalation is referred
to as capitalised interest and is not payable until maturity of the CPI Hedge in November 2023. The hedge counterparty has a right
to break the hedge such that the capitalised amount may become payable in December 2012 or December 2017.
Subsequent to the balance date an additional CPI Hedge was established totalling $205 million in two tranches. A real base
interest of 3.77% per annum applies to the CPI Hedge and is settled quarterly with the notional balance of the CPI Hedge
escalating quarterly in line with the relevant consumer price index. The increase in the outstanding balance is referred to as
capitalised interest and is not payable until maturity of the CPI Hedge in November 2023 (or earlier five year extension dates).
The hedge counterparty has a right not to extend the hedge such that the capitalised amount may become payable in May 2013
and May 2018. This CPI Hedge covers the ALE Notes and NAB Facility borrowings.
Note 9 provides further information on ALE’s borrowings.
Assets pledged as security
The ALE Notes are unsecured. The carrying amounts of assets pledged as security as at the balance date for CMBS borrowings,
CIB borrowings, and certain interest rate derivatives are:
Current assets
Cash reserve
Non-current assets
Total investments properties
Less: Properties not subject to mortgages
Boundary Hotel, VIC
Pritchard’s Hotel, Mt Pritchard, NSW
Balmoral Hotel, East Victoria Park, WA
The Brass Monkey Hotel, Northbridge, WA
Properties subject to first mortgages
Total assets
Consolidated
2008
$’000
2007
$’000
7,558
6,268
842,397
791,237
(19,200)
(20,440)
(6,280)
(7,420)
789,057
796,615
–
–
–
–
791,237
797,505
Subsequent to balance date the Parkway Hotel, NSW was removed and the Balmoral Hotel, WA added to the assets pledged
as security.
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 CIB borrowings, the CMBS and CIB holders are also entitled to recover the
amount unpaid from the remaining business assets of ALH.
Ale property group AnnuAl report 30 June 2008 / 41
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Note 25 Deferred tax asset
Deferred tax asset
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Derivatives – interest rate swaps
Employee benefits
Acquisition proposal due diligence costs (2006)
Other accruals
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the income statement (Note 13)
Credited/(charged) to equity
Closing balance
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
1,164
1,001
449
11
186
125
393
1,164
1,001
163
–
1,164
232
932
1,164
238
9
286
107
361
1,001
578
423
–
1,001
572
429
1,001
Note 26 Deferred tax liability
Deferred tax liability
5,890
3,605
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Derivatives – interest rate swaps
Interest income earned but not received
CIB interest amortisation
CIB and CMBS amortisation of costs
Net deferred tax liability
Movements:
Opening balance
Charged / (credited) to income statement (Note 13)
Closing balance
Deferred tax liabilities to be recovered after more than 12 months
Deferred tax liabilities to be recovered within 12 months
5,512
14
226
138
5,890
3,605
2,285
5,890
5,875
15
5,890
3,403
14
110
78
3,605
1,648
1,957
3,605
3,591
14
3,605
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42 / Ale property group AnnuAl report 30 June 2008
Note 27 Contributed equity
Balance at the beginning of the period
Exercise on 20 December 2006 of options over
300,000 stapled securities at a price of $1.036 each.
Proceeds received
Transfer from reserve – share based payments
DRP implementation costs
Stapled securities cancelled as part of on-market
security buyback program
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
80,241
81,787
80,225
81,787
–
–
(34)
311
24
–
–
–
(34)
281
–
–
(19,823)
60,384
(1,881)
80,241
(19,399)
60,792
(1,843)
80,225
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 period
Issue of stapled securities
Stapled securities cancelled upon buyback
Balance at the end of the period
Number of
Stapled Securities Stapled Securities
Number of
Number
of Units
Number
of Units
90,660,614
–
(4,846,867)
85,813,747
90,800,100
300,000
(439,486)
90,660,614
90,660,614
–
(4,846,867)
85,813,747
90,800,100
300,000
(439,486)
90,660,614
Stapled securities
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.
No income voting units (NIVUS)
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 10.58% in the Trust as a result of the issue of NIVUS. The NIVUS are disclosed in the Company and the Trust financial reports
but are not disclosed in the ALE Property Group financial report as they are eliminated on consolidation.
On market stapled security buyback
On 2 May 2007 ALE announced its intention to buyback up to 9,080,010 stapled securities on-market. During the financial year
ALE purchased and cancelled 4,846,867 stapled securities. Contributed equity was reduced by the total cost of $19,823,000.
The security buyback concluded in May 2008.
Ale property group AnnuAl report 30 June 2008 / 43
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 28 Retained profits
Balance at the beginning of the year
Profit attributable to stapled security holders
Total available for appropriation
Distributions provided for or paid during the year
Balance at the end of the year
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 – investment properties (non-cash)
– distributed
Fair value adjustments – investment properties (non-cash)
– not distributed
Fair value adjustments to derivatives (non-cash)
– not distributed
Total fair value adjustments not distributed
Transfers from contributed equity to June 2005
Amortised costs – CMBS repaid May 2006
Amortised costs – CMBS issued May 2006
Amortised costs – ALE Notes issued November 2006
Amortised costs – ALE Notes premium
Amortised costs – NAB Facility
Amortised costs – CPI Hedge
Capitalised interest – CIB issued May 2006
Capitalised interest – CPI Hedge
Amortised costs – CIB issued May 2006
Profit on sale of investment properties
Income tax expense
Total non-cash expenses added back to profit to
arrive at profit available for distribution
Other amounts not distributed
Note 29 Reserve
Balance at the beginning of the year
Employee share based payments
Transfer to contributed equity upon exercise of options
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
225,680
6,537
232,217
(28,899)
203,318
157,501
97,732
255,233
(29,553)
225,680
(12,972)
18,863
5,891
(28,899)
(23,008)
609
15,972
16,581
(29,553)
(12,972)
245,034
247,132
–
–
(18,688)
(11,303)
(18,688)
(11,303)
226,346
235,829
(18,688)
(11,303)
10,612
236,958
6,223
(17,280)
(349)
(5,833)
(1,938)
(99)
(2)
(7,715)
(5,666)
(43)
449
(4,725)
(43,201)
3,338
203,318
–
221
–
221
9,897
245,726
6,223
(17,280)
(156)
(4,374)
(1,462)
–
–
(4,352)
–
(21)
449
(2,603)
(29,799)
3,530
225,680
21
3
(24)
–
(1,371)
(20,059)
6,223
–
–
(5,833)
(1,938)
–
–
–
–
–
–
–
(7,771)
(1,401)
(23,008)
–
–
–
–
(512)
(11,815)
6,223
–
–
(4,374)
(1,462)
–
–
–
–
(5,836)
(1,544)
(12,972)
–
–
–
–
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 exercised the right to subscribe for 300,000 shares at a fixed
price of $1.036 on 20 December 2006. Upon exercise each option was converted to one ordinary unit and one ordinary share.
Share based payments are detailed further in Note 31.
44 / Ale property group AnnuAl report 30 June 2008
Note 30 Reconciliation of profit after income tax to
net cash inflows from operating activities
Profit for the year
Plus/(less):
Fair value adjustment to investment property
Fair value adjustment to derivative financial instruments
Finance costs amortisation
Gain on disposal of investment property
Capitalised interest on CIB
Capitalised interest on CPI Hedge
Share based payments expense
Depreciation
Decrease/(increase) in receivables
Decrease/(increase) in current tax asset
Decrease/(increase) in deferred tax asset
Decrease/(increase) in other assets
Increase/(decrease) in payables
Increase/(decrease) in provisions
Increase/(decrease) in other liabilities
Increase/(decrease) in deferred tax liability
Net cash inflow from operating activities for the year
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
6,537
97,732
18,863
15,972
2,098
(716)
2,251
–
3,363
5,666
221
53
(1,508)
(1)
(163)
617
1,843
5
170
2,285
22,721
(81,617)
(5,018)
1,933
(449)
3,825
–
3
62
615
7
(423)
(1,315)
(1,573)
(29)
(4,296)
1,957
11,414
–
859
1,935
–
–
–
–
–
(9)
–
–
–
(189)
–
–
–
21,459
–
600
1,778
–
–
–
–
–
(7)
–
–
–
200
–
–
–
18,543
Note 31 Share based payments
During 2007 ALE established a Performance Rights Plan that entitles key management personnel, subject to performance, to
become entitled to acquire stapled securities. On 12 December 2007 and 30 June 2008 grants of performance rights (PR) were
made to Mr Wilkinson and Mr Slade respectively. In accordance with the plan the performance rights vest upon performance
hurdles being achieved. The securities issued under the plan are issued at nil cost to the employee.
The terms and conditions of the grants are as follows;
Employee entitled
Grant date
Number of PRs
Vesting conditions
Contractual life of PRs
A F O Wilkinson
12 Dec 2007
90,516
A J Slade
30 Jun 2008
15,552
1. Service period
2. Total Shareholder Return (TSR)
compared to comparative group
3. Absolute TSR
1. Service period
2. Total Shareholder Return (TSR)
compared to comparative group
3. Absolute TSR
1 Jun 2009
30 Jun 2010
The vesting conditions for Mr Wilkinson’s performance rights are tested on 31 May 2009.
The vesting conditions for Mr Slade’s performance rights are tested annually on 30 June each year. One third of the number of
performance rights issued are tested at each 30 June over a three year period.
Ale property group AnnuAl report 30 June 2008 / 45
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 31 Share based payments (continued)
The number and weighted average fair values of the performance rights on issue are as follows:
Outstanding at 1 July
Granted during period
Outstanding at 30 June
Weighted
average
fair value
2008
Number of
performance
rights
2008
Weighted
average
fair value
2007
Number of
performance
rights
2007
–
106,068
106,068
–
3.03
3.03
–
–
–
–
–
–
The performance rights outstanding at 30 June 2008 will be issued at nil cost to the employee if and when they vest.
The performance rights value is the assessed fair value at grant date of the performance rights, allocated equally over the period
from grant date to vesting date. The fair value 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 performance rights, the vesting
and performance criteria, the impact of dilution, the non-tradable nature of the performance rights, the security price at grant date
and expected price volatility of the underlying security, the expected distribution yield and the risk-free interest rate for the term of
the performance rights.
Note 32 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 2003
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
B R Howell
M J Clarke
Title
Investment and Acquisitions Manager
Company Secretary and Compliance Officer
Finance Manager
(c) Compensation for key management
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
2008
$
2007
$
1,233,449
68,552
221,076
1,523,077
1,067,198
54,015
2,891
1,124,104
ALE has taken advantage of the relief provided by Corporations Regulation CR2M.6.04 and has transferred the detailed remuneration
disclosures to Section 9 of the Directors’ Report.
46 / Ale property group AnnuAl report 30 June 2008
Note 33 Remuneration of Auditors
Audit services
KPMG 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
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)
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Tax consulting services
Total taxation services
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
125,241
–
125,241
–
–
–
–
25,171
25,171
149,437
28,357
177,794
–
–
25,171
18,893
18,893
196,687
21,700
72,900
94,600
5,300
38,685
43,985
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Ale property group AnnuAl report 30 June 2008 / 47
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 34 Related party transactions
(a) Parent entity, subsidiaries and associates
Details are set out in Note 38.
(b) Key management personnel
Key management personnel and their compensation is set out in Note 32 and Section 9 of the Directors Report.
(c) Transactions with related parties
For the year ended 30 June 2008 the Company had charged the Trust $2,874,89 in management fees (2007: $2,334,810)
and the Finance Company had charged the Sub Trust $23,048,827 in interest (2007: $21,614,426).
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 2,706,162 stapled securities in the ALE Property Group. With the exception of his own
holding, Peter Warne is not involved in any of the decision making processes regarding those securities held by Next Financial in
the ALE Property Group. Procedures have been put into place to ensure Peter Warne’s independence and confidentiality of
information are maintained.
Peter Warne is a director of Macquarie Group Limited (“Macquarie”). Macquarie has provided banking services and corporate
advice to ALE in the past and may continue to do so in the future. Mr Warne does not take part in any decisions to appoint
Macquarie in relation to banking services or corporate advice provided by Macquarie to ALE.
(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 35 Commitments
(a) Capital commitments
ALE is required to acquire certain properties under development under the conditional sale contracts (these amounts are fully
represented in investment property deposits and in the loan to the Foster’s Group Limited).
Other than these amounts the Directors are not aware of any other 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 7, 1 O’Connell 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
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
111
166
–
277
110
274
–
384
–
–
–
–
–
–
–
–
48 / Ale property group AnnuAl report 30 June 2008
Consolidated
Parent Entity
30 June
2008
cps
30 June
2007
cps
30 June
2008
cps
30 June
2007
cps
7.55
107.48
21.77
17.59
Number of
stapled
securities
Number of
stapled
securities
Number of
stapled
securities
Number of
stapled
securities
86,631,833
90,928,711
86,631,833
90,928,711
86,631,833
90,928,711
86,631,833
90,928,711
Note 36 Earnings per stapled security
Basic and diluted earnings per stapled security
Weighted average number of stapled securities used as the
denominator in calculating earnings per stapled security
Weighted average number of stapled securities and potential
stapled securities used as the denominator in calculating
diluted earnings per stapled security
cps = cents per stapled security
Note 37 Contingent liabilities and contingent assets
Put and call options
For each 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 lots of 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 $58,135 in respect of its office tenancy at Level 7, 1 O’Connell Street, Sydney.
Note 38 Investments in controlled entities
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.
In addition, the Trust owns 100% of the issued equity of ALE Direct Property Trust No.2 which in turns owns 100% of the
issued equity of ALE Finance Company No.2 Pty Limited. Both of these Trust subsidiaries are dormant.
Note 39 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 40 Events occurring after reporting date
On 9 July 2008 ALE entered into a second CPI Hedge that hedged real base interest rates on $186 million of debt at 3.77% for
15 years. This transaction substantially reduces the interest rate risk from the refinancing of debt that will occur in 2011 and
further reduces the potential volatility in distributions over the long term. On 1 August 2008 ALE extended the second CPI Hedge
entered into on 9 July 2008 by a further $19 million.
On 28 July 2008 ALE disposed of its interest in the Parkway Hotel, Frenchs Forest for $8.45 million. The sales represents a 30%
premium to the book value of the investment as at 30 June 2008.
Other than the matters disclosed above, there has not arisen in the interval between the end of the financial year and the date
of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company,
to affect significantly the operations of ALE, the results of those operations, or the state of affairs of ALE, in future financial years.
Ale property group AnnuAl report 30 June 2008 / 49
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 41 Financial instruments
(a) Credit risk
ALE’s 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 is monitored, on a continuous basis to determine that the tenant has
appropriate financial standing having regard to the various security arrangements that are in place.
A secondary credit risk for ALE 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 is monitored on a continuous basis to determine that Foster’s Group
Limited has appropriate financial standing having regard to the various security arrangements that are in place.
Credit risk on cash is managed by ensuring all cash deposits are held with major domestic banks.
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.
Exposure to credit risk
Receivables 1
Loans and deposits – investment properties
Cash and cash equivalents
Impairment losses
The aging trade receivables at balance date was:
Not past due
Past due 0-30 days
Past due 31-120 days
More than one year
1 Excluding related party balances
Consolidated
2008
$’000
2007
$’000
Parent
2008
$’000
2007
$’000
1,906
22,127
8,527
32,560
398
22,127
24,765
47,290
–
–
2,100
2,100
8
–
1,184
1,192
2008
Gross
$’000
Impairment
$’000
2007
Gross
$’000
Impairment
$’000
1,716
–
190
–
1,906
–
–
–
–
–
8
–
–
–
8
–
–
–
–
–
Based on historic default rates, ALE believes that no impairment allowances are necessary in respect of trade receivables
as the receivables relate to tenants assessed by ALE as having good credit history.
(b) Liquidity risk
The following are the contracted maturities of financial liabilities, including estimated interest payments and excluding the impact
of netting agreements.
Consolidated
30 June 2008
Carrying
amount
$’000
Contractual
cash flows
$’000
6 months
or less
$’000
6-12 months
$’000
1-2 years
$’000
2-5 years
$’000
More than
five years
$’000
Non-derivative financial liabilities
Trade and other payables
CIB
CMBS
ALE Notes
NAB Facility
Current borrowings
7,870
132,492
244,345
146,252
35,911
8,450
(7,870)
(305,047)
(306,956)
(189,265)
(69,580)
(8,450)
(7,870)
(2,314)
(9,828)
(5,493)
(2,517)
(8,450)
–
(2,365)
(9,668)
(5,404)
(2,486)
–
–
(4,836)
(19,495)
(10,897)
(4,994)
–
–
(15,394)
(267,965)
(167,471)
(59,583)
–
–
(280,138)
–
–
–
–
Derivative financial instruments
Interest rate swaps
CPI Hedge
(10,643)
5,481
570,158
12,051
(32,762)
(907,879)
1,509
5,248
(29,715)
1,606
5,160
(13,157)
2,947
9,865
(27,410)
5,303
27,896
(477,214)
686
(80,931)
(360,383)
50 / Ale property group AnnuAl report 30 June 2008
Note 41 Financial instruments (continued)
Consolidated
30 June 2007
Carrying
amount
$’000
Contractual
cash flows
$’000
6 months
or less
$’000
6-12 months
$’000
1-2 years
$’000
2-5 years
$’000
More than
five years
$’000
Non-derivative financial liabilities
Trade and other payables
CIB
CMBS
ALE Notes
NAB Facility
Derivative financial instruments
Interest rate swaps
CPI Hedge
6,026
129,107
224,381
144,317
–
(6,026)
(284,249)
(312,774)
(200,164)
–
(6,026)
(2,221)
(8,052)
(5,493)
–
–
(2,246)
(8,096)
(5,404)
–
–
(4,576)
(16,237)
(10,898)
–
–
(14,426)
(280,389)
(178,369)
–
–
(260,780)
–
–
–
(10,039)
–
493,792
6,406
–
(796,807)
611
–
(21,181)
593
–
(15,153)
1,312
–
(30,399)
2,984
–
(470,200)
906
–
(259,874)
Parent Entity
30 June 2008
Carrying
amount
$’000
Contractual
cash flows
$’000
6 months
or less
$’000
6-12 months
$’000
1-2 years
$’000
2-5 years
$’000
More than
five years
$’000
Non-derivative financial liabilities
Trade and other payables
ALE Notes
Derivative financial instruments
Interest rate swaps
2,784
146,252
(2,784)
(189,265)
(2,784)
(5,493)
–
(5,404)
–
(10,897)
–
(167,471)
(1,371)
147,665
–
(192,049)
–
(8,277)
–
(5,404)
–
(10,897)
(167,471)
–
–
–
–
Parent Entity
30 June 2007
Carrying
amount
$’000
Contractual
cash flows
$’000
6 months
or less
$’000
6-12 months
$’000
1-2 years
$’000
2-5 years
$’000
More than
five years
$’000
Non-derivative financial liabilities
Trade and other payables
ALE Notes
Derivative financial instruments
Interest rate swaps
2,973
144,317
(2,973)
(200,164)
(2,973)
(5,493)
–
(5,404)
–
(10,898)
–
(178,369)
(512)
146,778
–
(203,137)
–
(8,466)
–
(5,404)
–
(10,898)
–
(178,369)
–
–
–
–
Interest rates used to determine contracted cash flows
The interest rates used to determine the contracted cash flows, where applicable, are based on the interest rates, including the
relevant credit margin, applicable to the financial liabilities at balance date. The contracted cash flows have not been discounted.
Ale property group AnnuAl report 30 June 2008 / 51
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 41 Financial instruments (continued)
(c) Interest rate risk
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 liabilities 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 liabilities impact
upon the net equity value of ALE.
Profile
At the reporting date the interest rate profile of ALE and the Parent Entity interest bearing financial instruments was:
Financial assets
Financial liabilities
Consolidated
Parent Entity
2008
$’000
2007
$’000
19,064
(8,309)
10,755
11,514
(1,475)
10,039
2008
$’000
458
(1,829)
(1,371)
2007
$’000
170
(682)
(512)
Sensitivity analysis
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit and loss
by the amounts shown below. This analysis assumes that all other variables, in particular the CPI, remain constant. The analysis
is performed on the same basis for 2007.
Consolidated
30 June 2008
Interest rate swaps
CPI Hedges
30 June 2007
Interest rate swaps
CPI Hedges
Parent
30 June 2008
Interest rate swaps
30 June 2007
Interest rate swaps
Profit or loss
100bps
increase
100bps
decrease
Equity
100bps
increase
100bps
decrease
1,785
26,267
28,052
1,655
–
1,655
(1,952)
(1,952)
(1,434)
(1,434)
(1,785)
(30,013)
(31,798)
(1,655)
–
(1,655)
1,461
1,461
1,121
1,121
1,785
26,267
28,052
1,655
–
1,655
(1,952)
(1,952)
(1,434)
(1,434)
(1,785)
(30,013)
(31,798)
(1,655)
–
(1,655)
1,461
1,461
1,121
1,121
The impact on the Profit and Loss and Equity arising from a 100 bps movement in interest rates is based on shifting the projected
forward rates by 100 bps at the reporting date, in order to determine the present value of future principal and interest cash flows.
52 / Ale property group AnnuAl report 30 June 2008
Note 41 Financial instruments (continued)
(d) Consumer price index risk
Potential variability in future distributions arise predominantly from Financial Assets and Liabilities through movements in the
consumer price index (CPI). For example, ALE’s investment properties are subject to annual rental increases based on movements
in the CPI. This will in turn flow through to Investment Properties valuations. ALE’s CPI Hedge liabilities are also impacted by
movements in the CPI.
Profile
At the reporting date the Consumer Price Index profile of ALE’s consumer price interest financial instruments was as follows:
Financial instruments
Investment properties
CPI Hedge – fair value of derivatives
CPI Hedge – capitalised interest
CIB
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
820,270
112
(5,593)
(132,492)
682,297
769,110
–
–
(129,107)
640,003
–
–
–
–
–
–
–
–
–
–
Sensitivity analysis for variable rate instruments
A change of 100 bps in CPI at the reporting date would have increased/(decreased) equity and profit and loss by the amounts
shown below. This analysis assumes that all other variables, in particular the interest rates and property capitalisation rates, remain
constant. The analysis is performed on the same basis for 2007.
Consolidated
30 June 2008
Investment properties
CPI Hedges
30 June 2007
Investment properties
CPI Hedges
Profit or loss
100bps
increase
100bps
decrease
Equity
100bps
increase
100bps
decrease
8,230
(27,116)
(18,886)
7,980
–
7,980
(8,400)
24,070
15,670
(7,870)
–
(7,870)
8,230
(27,116)
(18,886)
7,980
–
7,980
(8,400)
24,070
15,670
(7,870)
–
(7,870)
Investment properties have been included in the sensitivity analysis as, although they are not financial instruments, the long term
CPI linked leases attaching to the investment properties are similar in nature to financial instruments.
There is no impact on the Profit and Loss or Equity arising from a 100 bps movement in CPI at the reporting date on the CIB
or CPI Hedge – capitalised interest, as the terms of these instruments use CPI rates for the quarters ending the preceding March
and December to determine their values at 30 June.
Ale property group AnnuAl report 30 June 2008 / 53
notes to the ConsolidAted finAnCiAl stAtements / (Continued)
Note 41 Financial instruments (continued)
(e) Fair Values
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Consolidated
Carrying amount
Fair value Carrying amount
Fair value
30 June 2008
30 June 2007
Cash and cash equivalents
Receivables
Derivatives
Loans and deposits – investment properties
Other assets
Trade and other payables
CIB
CMBS
ALE Notes
NAB Facility
Current borrowings
Parent Entity
Cash and cash equivalents
Receivables
Derivatives
Trade and other payables
ALE Notes
8,527
1,906
10,755
22,127
563
(7,870)
(132,492)
(244,345)
(146,252)
(35,911)
(8,450)
(531,442)
8,527
1,906
10,755
22,127
563
(7,870)
(133,587)
(245,000)
(135,000)
(36,000)
(8,450)
(522,029)
24,765
398
10,039
22,127
1,180
(6,026)
(129,107)
(224,381)
(144,317)
–
–
(445,322)
24,765
398
10,039
22,127
1,180
(6,026)
(130,225)
(225,000)
(153,015)
–
–
(455,757)
Carrying amount
Fair value Carrying amount
Fair value
30 June 2008
30 June 2007
2,100
19,883
(1,371)
(2,784)
(146,252)
(128,424)
2,100
19,883
(1,371)
(2,784)
(135,000)
(117,173)
1,184
18,167
(512)
(2,973)
(144,317)
(128,451)
1,184
18,167
(512)
(2,973)
(153,015)
(137,149)
Basis for determining fair values
The basis for determining fair values is disclosed in Note 4. The ALE Notes are a traded debt security on the Australian Securities
Exchange. The fair value disclosed above reflects the market value of the ALE Notes at balance date.
54 / Ale property group AnnuAl report 30 June 2008
direCtors’ deClArAtion /
In the Directors’ opinion:
(a) the financial statements and Notes and the remuneration disclosures that are contained in Section 9 of the Directors’ Report,
set out on pages 15 to 54 are in accordance with the Corporations Act 2001 including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2008 and of their
performance for the financial year ended on that date; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a); and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
(d) The remuneration disclosures that are contained in the Remuneration Report set out in Section 9 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 Finance Manager and Company Secretary
as required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Peter H Warne
Director
Sydney
Dated this 19th day of August 2008
Ale property group AnnuAl report 30 June 2008 / 55
independent Auditor’s report /
Independent auditor’s report to the securityholders of ALE Property Group
Report on the financial report
We have audited the accompanying financial report of ALE Property Group, which comprises the balance sheets as at
30 June 2008, and the income statements, statements of changes in equity and cash flow statements for the year ended
on that date, a summary of significant accounting policies and other explanatory Notes 1 to 41 and the directors’ declaration
set out on pages 15 to 55 of the Group comprising Australian Leisure and Entertainment Property Trust (the Trust) and the
entities it controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of Australian Leisure and Entertainment Property Management Limited, the Responsible Entity for the Trust, are
responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards
(including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial statements and notes,
complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to
audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with
the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view
which is consistent with our understanding of the Trust’s and the Group’s financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
56 / Ale property group AnnuAl report 30 June 2008
56 / Ale property group AnnuAl report 30 June 2008
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of ALE Property Group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Trust’s and the Group’s financial position as
at 30 June 2008 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001.
(b)
the financial report of the Group also complies with International Financial Reporting Standards as disclosed in Note 2.
Report on the remuneration report
We have audited the Remuneration Report included in pages 8 to 12 of the directors’ report for the year ended 30 June 2008.
The directors of Australian Leisure and Entertainment Property Management Limited are responsible for the preparation and
presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of ALE Property Group for the year ended 30 June 2008, complies with Section 300A
of the Corporations Act 2001.
KPMG
Steve Gatt
Partner
Sydney
19 August 2008
Ale property group AnnuAl report 30 June 2008 / 57
Ale property group AnnuAl report 30 June 2008 / 57
New Brighton Hotel, Manly, NSW
has operated as a pub since 1880. Located
on the Corso pedestrian mall it is just
metres from the world famous Manly Beach.
AustrALiAn LEisurE And EntErtAinmEnt
ProPErty mAnAGEmEnt LimitEd
AnnuAL rEPort for thE yEAr EndEd 30 JunE 2008
ABn 45 105 275 278
CONTENTS
Directors’ Report 59 / Auditor’s Independence Declaration 68 / Financial statements 69 / Income statement 69 / Balance sheet 70 /
Statement of changes in equity 71 / Statement of cash flows 72 / Notes to the financial statements 73 / Directors’ declaration 87 /
Independent auditor’s report 88 / Management Statement Letter to Directors 90 / Corporate directory 92
58 / Ale property group AnnuAl report 30 June 2008
direCtors’ report /
for the yeAr ended 30 June 2008
The Directors of Australian Leisure and Entertainment Property Management Limited (the “Company”) present their report
for the year ended 30 June 2008.
The registered office and principal place of business of the Company is:
Level 7
1 O’Connell Street
Sydney NSW 2000
1. 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
Independent Non-executive
Independent Non-executive
Independent Non-executive
Executive
Executive
8 September 2003
19 August 2003
8 September 2003
16 November 2004
26 June 2003
2. 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 (the “Trust”). There has been no significant change in the nature of
these activities during the year.
3. Dividends
No provisions for or payments of Company dividends have been made during the year (2007: nil).
4. 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
Profit/(loss) before income tax
Income tax expense/(benefit)
Profit/(loss) attributable to the shareholders of the Company
Basic and diluted earnings per share
Dividend per share for the year
Net assets per share
30 June
2008
$
30 June
2007
$
2,874,891
35,070
2,909,961
–
2,909,961
2,334,810
66,570
2,401,380
–
2,401,380
1,610,102
9,576
1,261,313
2,880,990
28,971
77,161
(48,190)
1,319,870
96,581
1,036,425
2,452,876
(51,496)
(7,025)
(44,471)
Cents
Cents
(0.56)
–
Cents
(0.49)
–
Cents
8.88
8.75
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 59
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
5. 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.
6. Matters subsequent to the end
of the financial year
There has not arisen in the interval
between the end of the financial year
and the date of this report any item,
transaction or event of a material and
unusual nature likely, in the opinion of
the Directors of the Company, to affect
significantly the operations of the
Company, the results of those
operations, or the state of affairs of
the Company, in future financial years.
7. Likely developments and expected
results of operations
The Company will continue to maintain
its defined strategy of identifying
opportunities to increase the profitability
of the Company 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.
8. Information on Directors
Mr Peter Warne BA, 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 four
other listed entities, being ASX Limited,
Macquarie Group Limited, WHK Group
Limited and TEYS Limited. 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 BBldg, 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 LLB, 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 also the Local Government
Remuneration Tribunal. 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. Prior boards
include Australia Day Council of NSW,
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.
Mr Andrew Wilkinson BBus, 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.
Mr James McNally BBus (Land
Economy), DipLaw, Executive Director
Experience and expertise
James was appointed as an executive
Director of the Company in June 2003.
James has over 15 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.
60 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
8. Information on Directors (continued)
Brendan Howell BE, GDipAppFin (Sec Inst), Company Secretary and Compliance Officer
Experience and expertise
The Company Secretary is Mr Brendan Howell. Brendan was appointed to the position of company secretary in April 2007, having
previously held the position from September 2003 to September 2006.
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 18 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
administrating listed and unlisted property trusts. For over nine 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 fund 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 BBus, 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,
the Australian Trade Commission, the Australian Sports Anti-Doping Authority, AusAID (the Australian Agency for International
Development) and National ICT Australia.
David is a director of Australian Settlements Limited and chairman of its audit and risk committee.
David has a Bachelor of Business Studies from Manchester Metropolitan University in the UK. He is a Fellow of CPA Australia
and a past 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
Resigned
P H Warne
P H Warne
P H Warne
P H Warne
ASX Limited (a)
WHK Group Limited
Macquarie Group Limited
TEYS Limited
Non-executive
Non-executive
Non-executive
Non-executive
July 2006
May 2007
July 2007
October 2007
(a) In July 2006, the Australian Stock Exchange and SFE Corporation Limited (SFE) merged, with the SFE becoming a wholly owned subsidiary of the
Australian Securities Exchange (ASX). SFE was delisted in July 2006. 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:
Director
Special responsibilities
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
Chairman of the Board.
Member of the Audit, Compliance and Risk Management Committee (ACRMC).
Chair of the Remuneration Committee.
Member of the ACRMC.
Member of the Remuneration Committee.
Chair of the ACRMC.
Member of the Remuneration Committee.
Chief Executive Officer and Managing Director of the Company.
Responsible Officer of the Company under the Company’s Australian Financial Services Licence (AFSL).
Responsible Officer of the Company under the Company’s AFSL.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 61
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
8. Information on Directors (continued)
Directors’ and key management personnel interests in stapled securities and options
The following Directors, key management personnel and their associates 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 2008
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
A J Slade
M J Clarke
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Investment and Acquisitions Manager
Finance Manager
700,000
109,000
100,000
377,650
12,000
1,500
40,000
80,000
–
–
–
–
740,000
189,000
100,000
377,650
12,000
1,500
Name
Role
Number held at the
start of the year
Conversion/sales
/purchases
Number held at
30 June 2008
A F O Wilkinson
A J Slade
Executive Director
Investment and Acquisitions Manager
–
–
90,516
15,552
90,516
15,552
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 2008 and the number of meetings attended by each Director at the time the director held office during the year were:
Board meetings
Held1
Attended
Audit, Compliance
and Risk Management
Committee meetings
Held1
Attended
Remuneration
Committee meetings
Held1
Attended
Director
P H Warne
J P Henderson
H I Wright
A F O Wilkinson
J T McNally
9
9
9
9
9
9
8
9
9
9
8
8
8
n/a
n/a
8
8
8
n/a
n/a
2
2
2
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
8
8
n/a
1 “Held” reflects the number of meetings which the Director or member was eligible to attend.
9. Remuneration report (audited)
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
9.1
9.2 Details of remuneration
9.3 Service agreements
9.4 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.
9.1 Principles used to determine the nature and amount of remuneration
The objectives of the Company’s executive reward framework are 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 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 stapled security holders
• performance linkage/alignment of executive compensation with outcomes for security holders
• 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.
62 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
2
2
2
n/a
n/a
n/a
9.1 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
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 employees’ 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 three years ended 30 June
2008 the total return on ALE’s stapled
securities (inclusive of distribution
returns) was 21.8% (2007: n/a).
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 last reviewed in
2007, the first review since 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 or performance rights over
stapled securities.
Directors’ fees
The current base remuneration was last
reviewed with effect from July 2007.
The Directors’ fees are inclusive of
committee fees.
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 2008,
the KPIs link to STI plans were based
on Company, business and personal
objectives. The KPIs required
performance in seeking value accretive
acquisitions, managing operating
and funding costs, compliance with
legislative requirements, risk and capital
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)
Performance Rights over unissued
stapled securities were granted in June
2008 to Mr Wilkinson and Mr Slade.
Mr Wilkinson has the right to receive up
to 90,516 stapled securities at a nil cost
exercisable from 1 June 2009 or earlier,
if employment is a terminated after a
change of control in the Company.
Mr Slade has the right to receive up
to 15,552 stapled securities at a nil
cost exercisable progressively from
30 June 2008 or earlier, if employment
is terminated after a change of control
in the Company.
Non-executive Directors’ fees are
determined within an aggregate
directors’ fee pool limit which will be
periodically recommended for approval
by stapled security holders. The
maximum currently stands at $475,000
per annum, comprised of $385,000 per
annum for Non-executive Directors and
$90,000 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
• long-term incentives
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.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 63
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
9.1 Remuneration report (continued)
The performance rights provide the opportunity to receive fully paid stapled securities for nil cost. The receipt of stapled securities
is contingent on achieving specific performance hurdles over a specified performance period. The performance
hurdles are as follows;
• a Total Shareholder Return (TSR) performance hurdle where ALE’s TSR is ranked against a comparative group consisting
of companies classified as Real Estate Investment Trusts in the S&P/ASX 300 Index;
• a Total Shareholder Return (TSR) performance hurdle based on ALE’s absolute TSR; and
• a service period retention hurdle, whereby the employee must be employed by ALE at the vesting date for the performance
rights to vest.
Stapled security options granted
No options over unissued stapled securities of ALE were granted during or since the end of the year.
Stapled security performance rights granted
The following performance rights over unissued stapled securities were granted during the year;
Executive
A F O Wilkinson
A J Slade
9.2 Details of remuneration
Number of
PRs issued
Grant
date
Performance
period start
date
Fair value of
PR at grant
date ($)
Expiry
date
Number of
PRs vested
during 2008
90,516
15,552
12 Dec 2007
30 Jun 2008
6 Nov 2006
1 Jul 2007
3.11
2.57
1 Jun 2009
30 Jun 2010
–
–
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 were dependent on the satisfaction of performance conditions as set out in the
section headed “Short-term incentives”, above. All other elements of remuneration were not directly related to performance.
Table 1 Remuneration details 1 July 2007 to 30 June 2008
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2008 are set out in the following table:
Key management personnel
Short term employee benefits
Post employment
benefits
Equity based
payment
Name
Role
Salary and fees
$
STI bonus
$
Non-monetary Superannuation
$
$
P H Warne
Non-executive Director
J P Henderson Non-executive Director
H I Wright
Non-executive Director
A F O Wilkinson Executive Director
Executive Director
J T McNally
Company Secretary
B R Howell
Investment and
A J Slade
Acquisitions Manager
Finance Manager
M J Clarke
137,615
85,000
77,982
297,741
90,000
90,000
155,575
79,536
1,013,449
–
–
120,000
–
–
75,000
25,000
220,000
–
–
–
–
–
–
–
–
–
12,385
–
7,018
13,092
–
–
13,092
22,965
68,552
1. The equity based payments expense for Mr Wilkinson’s performance rights covers the period November 2006 to June 2008.
Performance
rights1
$
–
–
–
181,076
–
–
Total
$
150,000
85,000
85,000
611,909
90,000
90,000
40,000
–
221,076
283,667
127,501
1,523,077
64 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
9.2 Details of remuneration (continued)
Table 2 Remuneration details 1 July 2006 to 30 June 2007
Details of the remuneration of the key management personnel for the year ended 30 June 2007 are set out in the following table:
Key management personnel
Name
Role
Short term employee benefits
Post employment
benefits
Equity based
payment
Salary and fees
$
STI bonus
$
Non-monetary Superannuation
$
$
Options
$
Total
$
P H Warne
Non-executive Director
J P Henderson Non-executive Director
Non-executive Director
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
Finance Manager
Group Financial Controller
M J Clarke
D S Barkas1
110,092
70,000
64,220
257,314
75,000
57,500
142,793
44,278
97,101
918,298
–
–
–
75,000
–
–
40,000
15,000
–
130,000
1. Darren Barkas resigned as Group Financial Controller and Company Secretary on 20 April 2007.
–
–
–
–
–
–
–
–
18,900
18,900
9,908
–
5,780
12,686
–
–
12,686
3,992
8,963
54,015
–
–
–
2,891
–
–
–
–
–
2,891
120,000
70,000
70,000
347,891
75,000
57,500
195,479
63,270
124,964
1,124,104
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 are set out below.
Name
A F O Wilkinson
A J Slade
M J Clarke
Paid
Forfeited
2008
%
160
150
100
2007
%
100
100
100
2008
%
–
–
–
2007
%
–
–
–
9.3 Service agreements
On 30 June 2008, the Company entered into a service agreement with the Managing Director, Mr Wilkinson, relating to the period
starting November 2006 and ending on 1 June 2009. The agreement stipulates the minimum base salary, inclusive of
superannuation, for each of the first three years as being $300,000 for Mr Wilkinson, 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
performance rights over stapled securities, vesting from May 2009 (or earlier if there is a termination after a change of control)
are also provided.
In the event of the termination of Mr Wilkinson’s employment contract, amounts may be payable for unpaid accrued entitlements,
proportion of bonus 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 performance right entitlements for the balance of the contract.
At the annual general meeting of the Company to be held on 12 November 2008, the terms of Mr Wilkinson’s new contract
will be put to a shareholder vote.
The employment contracts of Mr Slade and Mr Clarke 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 Compliance Officer of the Company on a continuous basis that may be terminated at any time.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 65
direCtors’ report (Continued) /
for the yeAr ended 30 June 2008
9.4 Equity based compensation
The performance rights value disclosed above as part of specified executive remuneration is the assessed fair value at grant date
of performance rights granted, allocated equally over the period from grant date to vesting date. The fair value 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 performance right, the security price at grant date and expected price volatility of the underlying security, the expected
distribution yield and the risk-free interest rate for the term of the performance right.
10. Stapled securities under option
There are no unissued stapled securities under option at the date of this report.
11. Stapled securities issued on the exercise of options
No securities were issued on the exercise of options during the financial year.
12. Insurance of officers
During the financial year, the Company paid a premium of $24,615 (2007: $28,325) to insure the Directors and officers of the
Company. The auditors of the Company are in no way indemnified out of the assets of the Company.
Under the constitution of the Company, current or former Directors and secretaries are indemnified to the full extent permitted by
law for liabilities incurred by that person in the discharge of their duties. The constitution provides that the Company will meet the
legal costs of that person. This indemnity is subject to certain limitations.
13. 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.
At three properties, ongoing monitoring is being undertaken and further work is required, however, the Company is indemnified by
third parties against any remediation amounts likely to be required.
14. Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company are important.
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.
66 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
14. Non-audit services (continued)
Details of amounts paid or payable to the auditors (KPMG and PricewaterhouseCoopers) for audit and non-audit services provided
during the year are set out below:
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the 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
PricewaterhouseCoopers Australian firm:
Audit and review of the financial reports of the 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)
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Tax consulting services
Total taxation services
30 June
2008
$
30 June
2007
$
125,241
–
125,241
–
–
–
–
25,171
25,171
149,437
28,357
177,794
–
–
25,171
18,893
18,893
196,687
21,700
72,900
94,600
5,300
38,685
43,985
15. 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 68.
This report is made in accordance with a resolution of the Directors.
Peter H Warne
Director
Sydney
Dated this 19th day of August 2008
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 67
Auditor’s independenCe deClArAtion /
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the Directors of Australian Leisure and Entertainment Property Management Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2008 there have been:
(i) no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Steve Gatt
Partner
Sydney
19 August 2008
68 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
inCome stAtement /
for the yeAr ended 30 June 2008
Revenue
Management fees
Interest income
Total revenue
Other income
Total income
Accounting services
Acquisition proposal due diligence
Annual report
Accounting, tax and professional fees
Corporate advisory services
Depreciation expense and asset write-offs
Insurance
Legal fees
Occupancy costs
Other expenses
Registry fees
Salaries, fees and related costs
Staff training
Taxation services
Travel and accommodation
Total expenses
Profit/(loss) before income tax
Income tax expense/(benefit)
Profit/(loss) after income tax
Note
30 June
2008
$
30 June
2007
$
5
6
6
8
2,874,891
35,070
2,909,961
2,334,810
66,570
2,401,380
–
2,909,961
–
2,401,380
1,900
9,576
52,753
155,897
119,616
53,247
71,697
358,798
113,787
139,354
95,073
1,610,102
36,420
39,600
23,170
2,880,990
28,971
77,161
(48,190)
33,877
96,581
65,582
177,794
105,366
62,945
79,488
78,928
75,782
196,078
73,512
1,319,870
11,950
45,185
29,938
2,452,876
(51,496)
(7,025)
(44,471)
Profit/(loss) attributable to the shareholders of the Company
(48,190)
(44,471)
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.
Cents
Cents
(0.56)
–
(0.49)
–
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 69
BAlAnCe sheet /
As At 30 June 2008
Current assets
Cash and cash equivalents
Receivables
Prepayments and other assets
Current tax asset
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
Non-current liabilities
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Retained losses
Reserves
Total equity
Net assets per share
The above balance sheet should be read in conjunction with the accompanying Notes.
Note
30 June
2008
$
30 June
2007
$
9
10
11
12
13
14
15
16
18
19
20
21
102,319
233,319
143,393
1,182
480,213
102,860
260,790
90,762
–
454,412
111,235
9,080,010
398,444
9,589,689
10,069,902
50,635
9,080,010
476,155
9,606,800
10,061,212
641,456
37,094
1,688,315
2,366,865
404,004
31,583
1,670,824
2,106,411
182
182
2,367,047
7,702,855
732
732
2,107,143
7,954,069
8,670,927
(1,189,149)
221,077
7,702,855
9,095,028
(1,140,959)
–
7,954,069
Cents
Cents
8.88
8.75
70 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
stAtement of ChAnges in eQuity /
for the yeAr ended 30 June 2008
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:
Issue of shares
Shares cancelled under share buyback program
Employee share based payments expense
Total transactions with equity holders in their capacity as equity holders
Total equity at the end of the year
30 June
2008
$
30 June
2007
$
7,954,069
(48,190)
(48,190)
8,004,631
(44,471)
(44,471)
–
(424,101)
221,077
(203,024)
7,702,855
30,000
(38,982)
2,891
(6,091)
7,954,069
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.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 71
stAtement of CAsh floWs /
for the yeAr ended 30 June 2008
Cash flows from operating activities
Other revenue (management fee and expense recovery)
Payments to suppliers and employees
Interest received – bank deposits and investment arrangements
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Payments for plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Shares bought back under share buyback program
Shares issued
Net cash (outflow) from financing activities
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
Note
30 June
2008
$
30 June
2007
$
6,012,641
(5,510,304)
35,070
537,407
8,234,121
(8,662,114)
67,946
(360,047)
25
(113,847)
(113,847)
(11,225)
(11,225)
(424,101)
–
(424,101)
(541)
102,860
102,319
(38,982)
30,000
(8,982)
(380,254)
483,114
102,860
9
The above statement of cash flows should be read in conjunction with the accompanying Notes.
72 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
notes to the finAnCiAl stAtements /
Note 1 Basis of preparation
This general purpose financial report has
been prepared in accordance with
Australian Accounting Standards, other
authoritative pronouncements of the
Australian Accounting Standards Board,
Urgent Issues Group Interpretations and
the Corporations Act 2001.
(a) Statement of compliance
The financial report is a general purpose
financial report which has been prepared
in accordance with Australian Accounting
Standards (AASs) (including Australian
Interpretations) adopted by the Australian
Accounting Standards Board (AASB) and
the Corporations Act 2001. The financial
report of the Company also complies
with the IFRS and interpretations
adopted by the International Accounting
Standards Board.
(b) Basis of measurement
The financial report is prepared on the
historical cost basis except for the
following:
• derivative financial instruments are
measured at fair value
• financial instruments at fair value
through profit or loss are measured
at fair value
• investment property is measured
at fair value
• liabilities for cash settled share based
payment arrangements are measured
at fair value.
The methods used to measure fair
values are discussed further in Note 4.
(c) Functional and presentation
currency
These financial statements are presented
in Australian dollars, which is the
Company’s functional currency.
(d) Use of estimates and judgements
The preparation of financial statements
requires management to make
judgements, estimates and assumptions
that affect the application of accounting
policies and the reported amounts of
assets, liabilities, income and expenses.
Actual results may differ from these
estimates. Estimates and underlying
assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates
are recognised in the period in which the
estimate is revised and in any future
periods affected.
Note 2 Summary of significant
accounting policies
The principal accounting policies adopted
in the preparation of the financial report
are set out below. These policies have
been consistently applied to all years
presented, unless otherwise stated.
(a) 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.
(b) 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.
(c) 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.
(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) 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.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 73
notes to the finAnCiAl stAtements (Continued) /
(ii) Share based payments
The grant date fair value of performance
rights granted to employees is recognised
as an employee expense, with a
corresponding increase in equity,
over the period that the employees
become unconditionally entitled to the
performance rights. The amount
recognised as an expense is adjusted to
reflect the actual number of performance
rights that vest, except for those that fail
to vest due to performance hurdles not
being met.
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.
(v) Retirement benefit obligations
The Company pays fixed contributions
to employee’s 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.
(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.
Note 2 Summary of significant
accounting policies (continued)
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
74 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
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.
(o) 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.
Note 2 Summary of significant
accounting policies (continued)
(n) 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
effect 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.
(p) New accounting standards and
UIG interpretation
The following standards, amendments to
standards and interpretations have been
identified as those which may impact the
entity in the period of initial application.
They are available for early adoption at
30 June 2008, but have not been applied
in preparing this financial report:
• AASB 8 Operating Segments
introduces the “management
approach” to segment reporting.
AASB 8, which becomes mandatory
for the Company’s 30 June 2010
financial statements, will require the
disclosure of segment information
based on the internal reports regularly
reviewed by the Company’s Chief
Operating Decision Maker in order to
assess each segment’s performance
and to allocate resources to them.
Currently the Company presents
segment information in respect of its
business and geographical segments
(see Note 22). Under the management
approach, there will be no change to
the disclosure.
• Revised AASB 101 Presentation of
Financial Statements introduces as a
financial statement (formerly “primary”
statement) the “statement of
comprehensive income”. The revised
standard does not change the
recognition, measurement or disclosure
of transactions and events that are
required by other AASBs. The revised
AASB 101 will become mandatory for
the Company’s 30 June 2010 financial
statements. The Company has not yet
determined the potential effect of the
revised standard on the Company’s
disclosures.
• AASB 2008-1 Amendments to
Australian Accounting Standard – Share
Based Payment: Vesting Conditions
and Cancellations changes the
measurement of share based payments
that contain non-vesting conditions.
AASB 2008-1 becomes mandatory for
the Company’s 30 June 2010 financial
statements. The Company has not yet
determined the potential effect of the
amending standard on the Company’s
financial report.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 75
notes to the finAnCiAl stAtements (Continued) /
Risk management policies are
established to identify and analyse the
risks faced by the Company, to set
appropriate risk limits and controls, and
to monitor risks and adherence to limits.
Risk management policies and systems
are reviewed regularly to reflect changes
in market conditions and the Company’s
activities. The Company through it’s
training and management standards and
procedures, aims to develop a disciplined
and constructive control environment in
which all employees understand their
roles and obligations.
The Audit Compliance and Risk
Management Committee oversees how
management monitors compliance with
the Company’s risk management policies
and procedures and reviews the
adequacy of the risk management
framework.
Credit risk
Credit risk is the risk of financial loss
to the Company if a customer or
counterparty to a financial instrument
fails to meet its contractual obligations,
and arises principally from the
Company’s receivables from customers
and investment securities.
Trade and other receivables
The Company’s exposure to credit risk
is influenced mainly by the individual
characteristic of each customer. The
Company has few customers and
therefore there is significant
concentration of credit risk. Credit
risk has been minimised primarily by
ensuring, on a continuous basis, that the
customers have appropriate financial
standing.
Liquidity risk
Liquidity risk is the risk that the Company
will not be able to meet its financial
obligations as they fall due. The
Company’s approach to managing
liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity
to meet its liabilities when due, under
both normal and stressed conditions,
without incurring unacceptable losses
or risking damage to the Company’s
reputation.
The Company has liquidity risk
management policies, which assists
it in monitoring cash flow requirements
and optimising its cash return on
investments. Typically the Company
ensures that it has sufficient cash on
demand to meet expected operational
expenses and commitments for the
purchase/sale of assets for a period
of 90 days (or longer if deemed
necessary), including the servicing
of financial obligations.
Market risk
Market risk is the risk that changes in
market prices, such as the consumer
price index and interest rates will affect
the Company’s income or the value of its
holdings of leases and financial
instruments. The objective of market risk
management is to manage and control
market risk exposures within acceptable
parameters, while optimising the return.
The Company enters into derivatives and
financial liabilities in order to manage
market risks. All such transactions are
carried out within the guidelines set by
the Audit, Compliance and Risk
Management Committee.
Note 3 Determination of fair values
A number of the Company’s accounting
policies and disclosures require the
determination of fair value, for both
financial and non-financial assets and
liabilities. Fair values have been
determined for measurement and/or
disclosure purposes based on the
following methods. Where applicable,
further information about the
assumptions made in determining fair
values is disclosed in the Notes specific
to that asset or liability.
(a) Receivables
The fair value of trade and other
receivables, excluding construction work
in progress, is estimated as the present
value of future cash flows, discounted at
the market rate of interest at the
reporting date.
Note 4 Financial risk management
Overview
The Company has exposure to the
following risks from their use of financial
instruments:
• credit risk
• liquidity risk
• market risk.
This note presents information about the
Company’s exposure to each of the
above risks, their objectives, policies and
processes for measuring and managing
risk, and the management of capital.
Further quantitative disclosures are
included throughout this financial report.
The Board of Directors has overall
responsibility for the establishment and
oversight of the risk management
framework. The Board has established
the Audit Compliance and Risk
Management Committee, which is
responsible for developing and
monitoring risk management policies.
The committee reports regularly to the
Board of Directors on its activities.
76 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Note 5 Management fees
Management fees
Fees charged to the Trust by the Company for management and responsible entity services.
Expense reimbursement and management fee receipts (inclusive of GST) of $6,012,641
(2007: $8,234,121) disclosed in the statement of cash flows is comprised predominantly of
expenses paid for by the Company on behalf of the Trust and other ALE Group entities and
subsequently reimbursed from the entities. The legal obligations for these expenses are the
responsibility of the individual ALE Group entities and are not expenses of the Company.
Note 6 Transaction costs and other income
Acquisition proposal due diligence
Amounts (recovered) following non-completion
Net costs incurred
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 7 Auditor’s remuneration
Audit services
KPMG 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
Total remuneration for 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)
Total remuneration for other assurance services
Total remuneration for assurance services
Taxation services
PricewaterhouseCoopers Australian firm:
Tax compliance services
Tax consulting services
Total taxation services
30 June
2008
$
30 June
2007
$
2,874,891
2,334,810
9,576
–
9,576
96,581
96,581
125,241
125,241
–
–
–
25,171
25,171
149,437
28,357
177,794
–
–
25,171
18,893
18,893
196,687
21,700
72,900
94,600
5,300
38,685
43,985
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 77
notes to the finAnCiAl stAtements (Continued) /
Note 8 Income tax expense/(benefit)
Current tax expense/(benefit)
Deferred tax (benefit)
Decrease/(Increase) in deferred tax asset
Increase/(decrease) in deferred tax liabilities
Reconciliation of income tax expense to prima facie tax payable
Profit/(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:
Share based payments
Entertainment
Under provision in prior years
Income tax (benefit)
Note 9 Cash and cash equivalents
Cash at bank
Deposits at call
Note
30 June
2008
$
30 June
2007
$
–
77,161
77,161
77,711
(550)
77,161
(1,918)
(5,107)
(7,025)
(4,002)
(1,105)
(5,107)
28,971
(51,496)
8,691
(15,449)
66,323
937
1,210
68,470
77,161
868
510
7,046
8,424
(7,025)
(a)
(b)
41,161
61,158
102,319
20,807
82,053
102,860
(a) As at 30 June 2008 the weighted average interest rate earned on cash was 7.50% (2007: 6.12%).
(b) The deposits represents office occupancy security deposits.
Note 10 Receivables
Accounts receivable
Interest receivable
232,877
442
233,319
258,350
2,440
260,790
78 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Note 11 Plant and equipment
Furniture, fittings and equipment
At Cost
Accumulated depreciation
Software
At Cost
Accumulated depreciation
Office fitout
At Cost
Accumulated depreciation
Total
At Cost
Accumulated depreciation
Net book value
Movement in Plant and Equipment:
Furniture, fittings and equipment
Net book value at the beginning of the year
Additions
Disposals
Depreciation charge
Net book value at the end of the year
Software
Net book value at the beginning of the year
Additions
Disposals
Depreciation charge
Net book value at the end of the year
Office fitout
Net book value at the beginning of the year
Additions
Depreciation charge
Net book value at the end of the year
Total
Net book value at the beginning of the year
Additions
Disposals
Depreciation charge
Net book value at the end of the year
30 June
2008
$
30 June
2007
$
63,014
(40,150)
22,864
84,986
(64,533)
20,453
94,906
(26,988)
67,918
63,318
(33,800)
29,518
80,089
(60,282)
19,807
84,616
(83,306)
1,310
242,906
(131,671)
111,235
228,023
(177,388)
50,635
29,518
–
(177)
(6,477)
22,864
19,807
18,941
(1,666)
(16,629)
20,453
1,310
94,906
(28,298)
67,918
50,635
113,847
(1,843)
(51,404)
111,235
34,884
3,606
–
(8,972)
29,518
36,567
7,621
–
(24,381)
19,807
30,903
–
(29,593)
1,310
102,354
11,227
–
(62,946)
50,635
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 79
notes to the finAnCiAl stAtements (Continued) /
Note 12 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 had an
initial voting power of 9.09% in the Trust as a result of the issue of NIVUS. The
Company now has a voting power of 10.58% in the Trust as a result of the share
buyback undertaken by the Company.
Note 13 Deferred tax asset
Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Employee benefits
Acquisition proposal due diligence
Other accruals
Other provisions
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the income statement (Note 8)
Closing balance at
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
30 June
2008
$
30 June
2007
$
9,080,010
9,080,010
398,444
476,155
11,127
186,210
120,687
3,000
77,420
398,444
476,155
(77,711)
398,444
230,141
168,303
398,444
9,475
285,984
103,604
3,090
74,002
476,155
472,153
4,002
476,155
285,499
190,656
476,155
80 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Note 14 Payables
Trade creditors
Creditor accruals
Note 15 Provisions
Provision for annual leave
Provision for superannuation
Note 16 Loan from related party
Loan from the Trust
The loan is non-interest bearing, of no fixed term and is repayable on demand.
Note 18 Deferred tax liability
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
Charged to income statement (Note 8)
Closing balance
Deferred tax liabilities to be recovered within 12 months
Deferred tax liabilities to be recovered after more than 12 months
30 June
2008
$
30 June
2007
$
285,719
355,737
641,456
77,167
326,837
404,004
37,094
–
37,094
31,583
–
31,583
1,688,315
1,670,824
182
732
182
–
182
732
(550)
182
182
–
182
732
–
732
1,837
(1,105)
732
732
–
732
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 81
notes to the finAnCiAl stAtements (Continued) /
Note 19 Contributed equity
(a) Share capital
Issued share capital 85,813,747 (2007: 90,660,614) fully paid
(b) Movements in ordinary share capital
Opening balance
Exercise of options
On-market share buyback
Balance at the end of the period
Movements in the number of fully paid shares
Shares on issue
Opening balance
Exercise of options
On-market share buyback
Closing balance
30 June
2008
$
30 June
2007
$
8,670,927
9,095,028
9,095,028
–
(424,101)
8,670,927
9,080,010
54,000
(38,982)
9,095,028
No. of shares
No. of shares
90,660,614
–
(4,846,867)
85,813,747
90,800,100
300,000
(439,486)
90,660,614
(c) Shares
Fully paid stapled securities in the Company 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.
(d) Share buyback
On 2 May 2007 the Company announced its intention to buyback up to 9,080,010 stapled securities on-market. The share
buyback concluded on 2 May 2008 with 5,286,353 shares being bought back for a total cost of $463,083.
82 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Note 20 Retained losses
Balance at the beginning of the year
Net profit/(loss) attributable to ordinary shareholders
Balance at the end of the year
Note 21 Reserves
Share based payments reserve
Balance at the beginning of the year
Employee share based payments expense
Transfer to share capital on exercise of options
Balance at the end of the year
30 June
2008
$
30 June
2007
$
(1,140,959)
(48,190)
(1,189,149)
(1,096,488)
(44,471)
(1,140,959)
221,077
–
–
221,077
–
221,077
21,109
2,891
(24,000)
–
Note 22 Segment information
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 23 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 24 Contingent liabilities
Bank guarantee
The Company has entered into a bank guarantee of $58,135 in respect of its office tenancy at Level 7, 1 O’Connell Street, Sydney.
The Directors are not aware of any other material contingent liabilities as at the date of this report.
Note 25 Reconciliation of profit after income tax to net cash inflows
from operating activities
(Loss) for the year
Depreciation
Non-cash employee benefits expense – share based payments
(Increase)/decrease in receivables
(Increase)/decrease in other assets
(Increase)/decrease in deferred tax asset
Increase/(decrease) in loan from related party
Increase/(decrease) in provisions
Increase/(decrease) in payables
Increase/(decrease) in current tax liability
Increase/(decrease) in deferred tax liability
Net cash inflows from operating activities
30 June
2008
$
30 June
2007
$
(48,190)
53,247
221,077
27,471
(52,631)
77,711
17,491
5,511
237,453
(1,182)
(551)
537,407
(44,471)
62,946
2,891
590,237
(52,483)
(4,002)
971,680
(29,591)
(1,854,231)
(1,918)
(1,105)
(360,047)
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 83
notes to the finAnCiAl stAtements (Continued) /
Note 26 Share based payments
During 2007 ALE established a Performance Rights Plan that entitles key management personnel to, subject to performance,
become entitled to acquire stapled securities. On 12 December 2007 and 30 June 2008 grants of performance rights (PR) were
made to Mr Wilkinson and Mr Slade respectively. In accordance with the plan the performance rights vest upon performance
hurdles being achieved. The securities issued under the plan are issued at nil cost to the employee.
The terms and conditions of the grants are as follows;
Employee entitled
Grant date
Number of PRs
Vesting conditions
Contractual life of PRs
A F O Wilkinson
12 Dec 2007
90,516
A J Slade
30 Jun 2008
15,552
1. Service period
2. Total Shareholder Return (TSR)
compared to comparative group
3. Absolute TSR
1. Service period
2. Total Shareholder Return (TSR)
compared to comparative group
3. Absolute TSR
1 Jun 2009
30 Jun 2010
The vesting conditions for Mr Wilkinson’s performance rights are tested on 31 May 2009.
The vesting conditions for Mr Slade’s performance rights are tested annually on 30 June each year. One third of the number of
performance rights issued are tested at each 30 June over a three year period.
The number and weighted average fair values of the performance rights on issue are as follows:
Outstanding at 1 July
Granted during period
Outstanding at 30 June
Weighted
average
fair value
2008
Number of
performance
rights
2008
Weighted
average
fair value
2007
Number of
performance
rights
2007
–
106,068
106,068
–
3.03
3.03
–
–
–
–
–
–
The performance rights outstanding at 30 June 2008 will be issued at nil cost to the employee if and when they vest.
The performance rights value is the assessed fair value at grant date of the performance rights, allocated equally over the period
from grant date to vesting date. The fair value 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 performance rights, the vesting
and performance criteria, the impact of dilution, the non-tradable nature of the performance rights, the security price at grant date
and expected price volatility of the underlying security, the expected distribution yield and the risk-free interest rate for the term of
the performance rights.
Note 27 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 7, 1 O’Connell Street, Sydney.
The minimum net lease commitments under theses leases are:
Within one year
Later than one year but not later than five years
Later than five years
30 June
2008
$
111,384
166,036
–
277,420
30 June
2007
$
109,635
273,970
–
383,605
84 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Note 28 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 is set out in Note 29.
(c) Transactions with related parties
For the year ended 30 June 2008 the Company had charged the Trust $2,874,89 in management fees (2007: $2,334,810)
and the Finance Company had charged the Sub Trust $23,048,827 in interest (2007: $21,614,426).
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 2,706,162 stapled securities in the ALE Property Group. With the exception of his own
holding, Peter Warne is not involved in any of the decision making processes regarding those securities held by Next Financial in
the ALE Property Group. Procedures have been put into place to ensure Peter Warne’s independence and confidentiality of
information are maintained.
Peter Warne is a director of Macquarie Group Limited (“Macquarie”). Macquarie has provided banking services and corporate
advice to ALE in the past and may continue to do so in the future. Mr Warne does not take part in any decisions to appoint
Macquarie in relation to banking services or corporate advice provided by Macquarie to ALE.
(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 29 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
Independent Non-executive
Independent Non-executive
Independent 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
A J Slade
B R Howell
M J Clarke
Title
Investment and Acquisitions Manager
Company Secretary and Compliance Officer
Finance Manager
(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
30 June
2008
$
30 June
2007
$
1,233,449
68,552
221,076
1,523,077
1,067,198
54,015
2,891
1,124,104
The Company has taken advantage of the relief provided by the Corporations Regulations CR2M.6.04 and has transferred the
detailed remuneration disclosures to Section 9 of the Directors’ Report.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 85
notes to the finAnCiAl stAtements (Continued) /
Note 30 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 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.
(b) Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator in
calculating earnings per share
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings per share
Note 31 Financial instruments
30 June
2008
Cents
30 June
2007
Cents
(0.56)
(0.49)
(0.56)
(0.56)
(0.49)
(0.49)
Number
Number
86,631,833
90,928,711
86,631,833
90,928,711
(a) Credit risk
ALE’s 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 is monitored on a continuous basis to determine that the tenant has
appropriate financial standing.
Credit risk on cash is managed through ensuring all cash deposits are held with major domestic banks.
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 having regard to the security arrangements that are in place.
Exposure to credit risk
Receivables
Cash and cash equivalents
Impairment losses
The aging of trade receivables at balance date was:
Not past due
Past due 0-30 days
Past due 31-120 days
More than one year
2008
$
2007
$
233,319
102,319
335,638
260,790
102,860
363,650
2008
Gross
$
Impairment
$
2007
Gross
$
Impairment
$
43,307
–
190,012
–
233,319
–
–
–
–
–
1,307
82,589
176,894
–
260,790
–
–
–
–
–
(b) Liquidity risk
The Company has no contracted financial liabilities and therefore the Company’s liquidity risk to external parties is minimal.
(c) Interest rate risk
The Company has no financial interest bearing obligations and accordingly the Company’s interest rate risk is minimal.
86 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
direCtors’ deClArAtion /
In the Directors’ opinion:
(a) the financial statements, Notes and the remuneration disclosures that are contained in Section 9 of the Directors’ Report
as set out on pages 69 to 86 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Company’s financial position as at 30 June 2008 and of its performance as for the
financial year ended on that date; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a);
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
(d) The remuneration disclosures that are contained in the Remuneration Report set out in Section 9 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.
Peter H Warne
Director
Sydney
Dated this 19th day of August 2008
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 87
independent Auditor’s report /
Independent auditor’s report to the members of Australian Leisure and Entertainment Property Management Limited
Report on the financial report
We have audited the accompanying financial report of Australian Leisure and Entertainment Property Management Limited (the
Company), which comprises the balance sheets as at 30 June 2008, and the income statements, statements of changes in equity
and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory
notes 1 to 31 and the directors’ declaration set out on page 69 to 87.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with
Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This
responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial
report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances. In note 1(a), the directors also state, in
accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report,
comprising the financial statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to
audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is
consistent with our understanding of the Company’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
88 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
(a)
the financial report of Australian Leisure and Entertainment Property Management Limited
is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s financial position as at 30 June 2008 and of its performance
for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
(b)
the financial report of the Company also complies with International Financial Reporting Standards
as disclosed in note 1(a).
Report on the remuneration report
We have audited the Remuneration Report included in pages 62 to 66 of the directors’ report for the year ended 30 June 2008.
The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with
Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Australian Leisure and Entertainment Property Management Limited for the year ended
30 June 2008, complies with Section 300A of the Corporations Act 2001.
KPMG
Steve Gatt
Partner
Sydney
19 August 2008
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 89
level 7,
1 o’Connell street
sydney nsW 2000
telephone: + 61 02 8231 8588
facsimile: + 61 02 8231 8500
Web: www.alegroup.com.au
19 August, 2008
The Directors
Australian Leisure and Entertainment Property
Management Limited
Level 7
1 O’Connell Street
Sydney NSW 2000
Subject:
Management Statement Letter to Directors
on ALE Property Group’s Financial Reports
for the year ended 30 June 2008.
Dear Directors,
We confirm to the best of our knowledge and belief that the Financial Reports for the year ended 30 June 2008 of:
• ALE Property Group, being Australian Leisure and Entertainment Property Trust and its controlled entities;
• Australian Leisure and Entertainment Property Management Limited;
• ALE Direct Property Trust; 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
Michael Clarke
Finance Manager
Brendan Howell
Company Secretary
90 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
stApled seCurity holder informAtion /
The equity holder information set out below was applicable as at 15 August 2008.
A. Distribution of equity securities
Analysis of number of equity security holders by size of holding:
CLASS OF EQUITY SECURITY
Number of securities
Number of stapled security holders
Number of No Income Voting Unit (NIVUS) holders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
192
967
666
1,046
11
2,882
-
-
-
-
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 NIVUS have been issued by the Trust to the Company. There were 17 holders of less than a marketable parcel of
stapled securities.
B. Top 20 Equity Security Holders
The name of the 20 largest holders of stapled securities are as listed below:
Rank
Name
Number of stapled securities
% of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Woolworths Limited
HSBC Custody Nominees Australia Limited
Bell Potter Nominees Limited
Mr Jeremy Nicholas Ferris, Mrs Dorothy May Ferris
and Mr Kenneth Charles Ferris
Lady Jean Falconer Griffin
Merrill Lynch (Australia) Nominees Pty Limited
Mr Nicholas Dyer
UBS Wealth Management Australia Nominees Pty Limited
JP Morgan Nominees Australia Limited
Fortis Clearing Nominees Pty Limited
HSBC Custody Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Argo Investments Limited
Oakleigh Nominees Pty Limited
ANZ Nominees Limited
BT Portfolio Services Limited
Irrewarra Investments Pty Limited
Fordholm Investments Pty Limited
Merlor Holdings Pty Limited
Charanda Nominee Company Pty Limited
17,076,936
7,677,163
3,227,498
2,016,652
1,859,120
1,634,406
1,607,205
1,581,406
1,111,070
1,070,363
1,037,995
691,914
610,000
526,140
500,851
500,000
500,000
415,000
347,000
271,721
44,262,440
19.90%
8.95%
3.76%
2.35%
2.17%
1.90%
1.87%
1.84%
1.29%
1.25%
1.21%
0.81%
0.71%
0.61%
0.58%
0.58%
0.58%
0.48%
0.40%
0.32%
51.56%
C. Substantial holders
Substantial holders of ALE (as per notices received as at 15 August 2008) are set out below:
Stapled security holder
Woolworths Limited
Orbis MIS – Orbis/SM Australian Equity Fund
Number held
17,076,936
8,965,773
Percentage of
voting rights
19.90%
10.45%
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(i) 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.
(ii) NIVUS
Each NIVUS entitles 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 91,100,100 units have been issued by the Trust to stapled securities holders. 5,286,353 units have been cancelled
via the on-market stapled security buyback program by the Company.
The NIVUS therefore represent 10.58% of the voting rights of the Trust.
AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008 / 91
inVestor informAtion /
CorporAte direCtory /
Securities Exchange Listing
The ALE Property Group (ALE) is listed on the Australian Securities Exchange (ASX).
Its stapled securities are listed under ASX code:LEP and its ALE Notes are listed
under ASX code:LEPHB.
Registered Office
Level 7, 1 O’Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Distribution Reinvestment Plan
ALE has established a distribution reinvestment plan. Details are available
on ALE’s website.
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 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 Review and Annual Report are the main sources of information for stapled
security holders. In August each year the Annual Review, Annual Report and Full Year
Financial Report, and in February each year, the Half-Year Financial Report are released
to the ASX and posted on the ALE website. The Annual Review is mailed to stapled
security holders unless we are requested not to do so. The Annual Report is only mailed
on request. Periodically ALE may also send releases to the ASX covering matters of
relevance to investors. These releases are also posted on the ALE website and may be
distributed by email to holders if they register on ALE’s website. The election by
holders to receive communications electronically is encouraged by ALE.
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. ASX announcements are also included on the site on a regular basis.
Annual Tax Statement
Accompanying the final stapled security distribution payment, normally in August
each year, will be an annual tax statement which details the taxable, tax concessional
and deferred tax components of the year’s distribution.
Distributions
Stapled security distributions are paid twice yearly, normally in February and August.
Security Holder Enquiries
Please contact the registry if you have any questions about your holding or payments.
Company Secretary
Mr Brendan Howell
Level 7, 1 O’Connell Street
Sydney NSW 2000
Telephone (02) 8231 8588
Auditors
KPMG
10 Shelley Street
Sydney NSW 2000
Lawyers
Allens Arthur Robinson
Level 28, Deutsche Bank Place
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)
Trust Company Fiduciary Services
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 (02) 8235 8150
www.computershare.com.au
92 / AustrAliAn leisure And entertAinment property mAnAgement limited AnnuAl report 30 June 2008
Front Cover
Crows Nest Hotel, Crows Nest, NSW,
has been an institution on Sydney’s lower
North Shore for nearly 80 years. It caters to a
diverse clientele base and is renowned for it’s
entertainment offering.
Right
Young & Jackson Hotel, Cnr Swanston and
Flinders Street. Melbourne, is one of Australia’s
most famous pubs. It was first opened in
1861 as the Princes Bridge Hotel. In 1875 two
successful Irish diggers became the licensees –
Henry Young and Thomas Jackson.
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Breakfast Creek Hotel, Breakfast Creek QLD
ALE ProPErty GrouP
AnnuAl RepoRt 30 June 2008
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www.alegroup.com.au
another round
of solid, low risk results