Annual Report 2014
Delivering
Value
ALE has finished the
year to June 2014
with a number of
positive achievements.
The properties have
again increased in value,
a refinancing has been
successfully completed
and we were pleased to
mark our 10th anniversary
by receiving the award
‘AREIT of the Year’.
FOUR YEARS FROM NOW
Around four years until
ALE’s first major market
rent review
2018 MARKET REVIEW
Rents are reviewed to
market and may increase
or decrease by 10% from
2017 rent levels for 79 of 86
of the properties
2028 MARKET REVIEW
Rents are reviewed
to market and may
increase or decrease by
an unlimited amount for
each of the properties
BEYOND 2028
Open market rent reviews
occur on expiry dates in
2038, 2048 and 2058 with the
leases finally expiring 2068
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
>
ALE Property Group
Comprising Australian Leisure and Entertainment
Property Trust and its controlled entities
Report For the Year ended 30 June 2014
ABN 92 648 441 429
- 02 -
Directors Report
- 23 -
Statement of changes in Equity
- 20 -
Auditor's
Independence
Declaration
- 21 -
Financial
Statements
- 21 -
Statement of
Comprehensive
Income
- 22 -
Statement of
Financial
Position
Contents
ANNUAL REPORT
2014
ALE Property Group (ASX: LEP)
ALE Property Group is Australia's largest listed freehold
owner of pubs. Established in November 2003. ALE
owns a property portfolio of 86 pubs across the five
mainland states of Australia. All the pubs in the portfolio
are leased to members of Australian Leisure and
Hospitality Group Limited (ALH) for a remaining initial
lease term of 14 years.
WWW.ALEGROUP.COM.AU
- ibc -
Investor Information
and
Corporate Directory
- 24 -
Statement of
Cash Flows
- 25 -
Notes to the
Financial Statements
- 62 -
Director's
Declaration
- 63 -
Independent
Auditor's Report
to Stapled
Securityholders
- 66 -
Australian Leisure
and Entertainment
Property Management
Limited
Annual Report 2014
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
DIRECTORS' REPORT
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 10
6 O'Connell Street
Sydney NSW 2000
The directors of the Company present their report, together with the financial statements of ALE, for the year ended 30 June 2014.
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
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
A F O Wilkinson (Managing Director)
J T McNally
Type
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Executive
Executive
Appointed
8 September 2003
19 August 2003
8 September 2003
26 November 2013
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, the following significant changes in the state of affairs of ALE occurred during the year:
•
•
•
•
•
new debt funding of $335 million was raised successfully, through an Australian Medium Term Note (AMTN) issue;
the existing CMBS debt was repaid in June 2014 and a partial on-market buy back of the listed ALE Notes 2 of $62.4 million was
undertaken in June 2014. The remaining ALE Notes 2 are expected be redeemed on 20 August 2014;
the previous interest rate hedging was unwound and restructured in line with the new fixed rate debt structure;
the 86 individual property values increased an average of 5.14% to $821.68 million; and
Net Assets increased by 2.42% to $377.29 million and net borrowings (total borrowings less cash) as a percentage of assets (total
assets less cash and derivatives) increased slightly from 50.9% to 51.7%.
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
securityholders.
In accordance with the leases of its investment properties over the medium term, ALE expects to receive annual increases in rental
income in line with increases in the consumer price index until the first major market rent review in November 2018.
Apart from the above matters, the directors are not aware of any other future development likely to significantly affect the operations
and/or results of ALE.
2
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
5. DISTRIBUTIONS AND DIVIDENDS
Trust distributions paid out and payable to stapled securityholders, based on the number of stapled securities on issue at the respective
record dates, for the year were as follows:
30 June
2014
cents per
security
30 June
2013
cents per
security
30 June
2014
30 June
2013
$’000
$’000
Final Trust income distribution for the year ending 30 June 2014 to be
paid on 5 September 2014
8.25
8.00
16,145
15,539
Interim Trust income distribution for the year ending 30 June 2014
paid on 5 March 2014
Total distribution for the year ending 30 June 2014
8.20
16.45
8.00
16.00
16,048
32,193
15,486
31,025
No provisions for or payments of Company dividends have been made during the year (2013: nil).
6. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
In the opinion of the Directors of the Company, no transaction or event of a material and unusual nature has occurred between the end
of the financial year and the date of this report that may significantly affect the operations of ALE, the results of those operations or the
state of affairs of ALE in future financial years.
7. OPERATIONAL AND FINANCIAL REVIEW
Background
ALE Property Group is Australia's largest listed freehold owner of pub properties. Established in November 2003, ALE owns a property
portfolio of 86 pubs across the five mainland states of Australia. All the pubs in the portfolio are leased to members of the Australian
Leisure and Hospitality Group (ALH) for an average remaining initial lease term of 14.3 years plus options for ALH to extend.
ALE's high quality freehold pubs have very long term leases that include a number of unique features that add to the security of net
income and opportunity for rental growth. Some of the significant features of the leases (for 83 of the 86 properties) are as follows:
•
•
•
•
•
Leases commenced in November 2003 with an initial term of 25 years and four options of 10 years for ALH to extend;
The leases are triple net which require ALH to take responsibility for rates, insurance and essentially all structural repairs and
maintenance, as well as land tax in all states except Queensland (3 of the 86 properties are double net);
Annual CPI rent increases are not subject to any cap and rents do not decline with negative CPI;
There is a market rent review in November 2018 that is capped and collared within 10% of the 2017 rent; and
There is a full open market rent review (no cap and collar) in November 2028 at which time ALH has four options of 10 years to
extend the leases.
Current year performance
ALE produced a profit after tax of $37.2 million for the year ended 30 June 2014 compared to a profit of $14.9 million for the year ended
30 June 2013. The increase is primarily due to an increase in the fair value increment to the properties. Other factors include:
•
•
•
•
Rental income increased by 2.0% following the annual rent review in November 2013;
Interest income was lower on the back of decreasing interest rates and lower cash balances;
Finance costs were higher due to costs associated with the early redemption of the CMBS, partial early redemption of the ALE Notes
2 and restructure of hedging arrangement; and
Management costs increased but ALE's management expense ratio continues to be one of the lowest in the A-REIT sector.
ALE has a policy of only paying distributions subject to the minimum requirement to distribute taxable income of the trust under the
Trust Deed. Distributable Profit is a non-IFRS measure that shows how free cash flow is calculated by ALE. Distributable Profit excludes
items such as unrealised fair value (increments)/decrements arising from the effect of revaluing derivatives and investment property, non-
cash expenses and non-cash financing costs. It is also equivalent to Funds from Operations (FFO).
3
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
During the financial year ALE produced a distributable profit of $31.2 million compared to $31.7 million in the previous financial year. The
table below separates the cash components of ALE's profit that are available for distribution from the non-cash components. The
directors believe this will assist stapled securityholders in understanding the results of operations and distributions of ALE. Distributable
Profit was impacted by the same cash items that affected Operating Profit, namely increased rent and finance costs.
Profit/(loss) after income tax for the year
Adjustment for non-cash items
Fair value decrements /(increments) to derivatives and investment properties
Loss/(Gain) on disposal of investment properties
Employee share based payments
Finance costs - non-cash
Income tax expense
Total adjustments for non-cash items
Total profit available for distribution
Distribution paid or provided for
Available and under/(over) distributed for the year
Reconciliation of accumulated undistributed income
Opening balance
Available and undistributed/(over distributed) for the year
Closing balance
Earnings and distribution per stapled security:
Basic and diluted earnings
Earnings available for distribution
Total distribution
Accumulated undistributed income at the end of the year
Financial position
30 June
2014
$’000
30 June
2013
$’000
37,194
14,909
(18,977)
42
272
7,701
5,000
(5,962)
31,232
32,193
(961)
10,350
(490)
166
6,208
572
16,806
31,715
31,025
690
11,405
10,715
(961)
690
10,444
11,405
Percentage
Increase /
(Decrease)
30 June
2014
Cents
30 June
2013
Cents
131.79%
(2.21%)
2.81%
19.03
15.96
16.45
5.34
8.21
16.32
16.00
5.87
ALE's net assets increased by 2.42%, compared with the previous year which was largely attributable to an increase in property values
during the year.
Investment property revaluations increased the continuing portfolio value by 5.14% from $781.5 million to $821.7 million (after the sale
of the Shepparton Hotel) during the year. The average capitalisation rates decreased from 6.59% to 6.42% with the increase in property
valuations coming from the November 2013 CPI rent increase and lower capitalisation rates across the portfolio.
Net assets per stapled security increased by 1.58% from $1.90 to $1.93 compared to June 2013 primarily as a result of the increase in
property values and reduction due to terminated derivatives.
ALE’s market capitalisation increased by around 11% to more than $570 million during the year.
4
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
ALE’s funding structure continues to be characterised by diverse sources of funding instruments with maturity dates averaging 6.5 years.
In June 2014 ALE successfully raised $335 million in debt through an AMTN issue. The AMTN issue contained two tranches, one of $110
million with a term of 3.25 years and fixed interest rate of 4.25% p.a. and a second of $225 million with a term of 6.25 years and a fixed
interest rate of 5.00% p.a. The debt was issued with an investment grade rating of Baa2 and was the largest AMTN issue by an AREIT
since 2011. The issue was significantly over subscribed and scaled to deliver a very competitive issue margin outcome for the benefit of
ALE securityholders.
The ALE Notes 2 are scheduled to mature in August 2014. Following the AMTN issue, ALE has advised noteholders that redemption of the
ALE Notes 2 is expected to occur on 20 August 2014. Currently $102.6 million of notes remain on issue and are expected to be repaid
using part of existing cash reserves of approximately $150 million. Following this, ALE's next scheduled maturity date is August 2017.
At 30 June 2014, net covenant gearing was up from 50.9% to 51.7%. ALE continues to maintain appropriate headroom to all debt
covenants with the nearest equivalent to an average 14.4% fall in property values.
ALE has consistently sought to protect investors from inflation and interest rate risk and continues to have long term hedging in place to
achieve this objective. At the time of the issue of fixed rate AMTN debt ALE terminated existing interest rate hedging arrangements that
were no longer required.
In the previous year ALE entered into a ten year interest rate hedge which was set at a low 3.83% p.a., being a level not available since
1908 when the long term bond market was first established in Australia. The fixed rate AMTN debt raised in June 2014 saw ALE enter
into fixed rate debt with 3.25 and 6.25 year maturities and accordingly the previously arranged interest rate hedge for the next three and
six years was terminated. The debt raising and hedging restructure ensures that ALE remains hedged for its base interest rates on 100%
of its net debt for an average of 8.8 years.
Business strategies and prospects
ALE has continued to preserve the quality of the existing property portfolio. The refinanced debt and restructured hedging position
provides significant certainty around a stable distribution profile for the medium term.
ALE's objective is to continue to grow distributions by at least CPI.
ALE continues to hold a positive outlook for the market rent prospects for the portfolio. In around four years time the first major review
will occur with the market rent capped and collared within 10% of the 2017 rent for each property. It is notable that all the independent
valuers DCF valuation of ALE properties at June 2013 and June 2014 assumed a 10% increase for this review. There is also a full open
market rent review (no caps or collars) in November 2028.
ALE will continue to seek acquisition opportunities that are of a high quality, meet all specified criteria and represent an accretive value
opportunity for securityholders. Even if these opportunities are not available, ALE will continue to work constructively with ALH to ensure
that the existing portfolio of properties continues to perform at the strong profitability levels that currently prevail.
8. INFORMATION ON DIRECTORS
Mr Peter Warne B.A, FAICD, 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 Chairman of OzForex Group Limited and a board member of three other
listed entities, being ASX Limited, Macquarie Group Limited and Crowe Horwath Australasia Limited. He is also on the board of NSW
Treasury Corporation and Securities Industry Research Centre for Asia Pacific (SIRCA) and is a member of the Advisory Board for the
Australian Office of Financial Management.
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.
5
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
Mr John Henderson B.Bldg, MRICS, AAPI, Non-executive Director.
Experience and expertise
John was appointed as a non-executive director of the Company in August 2003. John has been a director of Marks Henderson Pty Ltd
since 2001 and is actively involved in the acquisition of investment property.
Previously an International Director at Jones Lang LaSalle and Managing Director of the Sales and Investment Division, he was
responsible for overseeing the larger property sales across Australasia, liaising with institutional and private investors, and coordinating
international investment activities. John graduated from the University of Melbourne and is a member of the Royal Institution of
Chartered Surveyors, is an associate of the Australian Property Institute and is a licensed real estate agent.
Ms Helen Wright LL.B, MAICD, Non-executive Director.
Experience and expertise
Helen was appointed as a non-executive director of the Company in September 2003. Helen was a partner of Freehills, a leading
Australian firm of lawyers, from 1986 to 2003. She practiced as a commercial lawyer specialising in real estate projects, including
development and financing and related taxation and stamp duties.
Helen is the Chair of the Advisory Committee of Screen NSW (formerly Film & Television Office), and is the Statutory and Other Offices
Remuneration Tribunal and until very recently was the Local Government Remuneration Tribunal for NSW. Prior appointments include the
Boards of several State, university, commercial and charitable entities. 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.
Ms Phillipa Downes, BSc (Bus Ad), MAppFin, GAICD, Non-executive Director.
Experience and expertise
Pippa was appointed a Director on 26 November 2013.
Ms Downes is a director of the ASX Group clearing and settlement facility licensees and their intermediate holding companies. She is also
a director of the Pinnacle Foundation. Ms Downes was a Managing Director and Equity Partner of Goldman Sachs in Australia until
October 2011, working in the Proprietary Investment division. Ms Downes has had a successful international banking and finance career
spanning over 19 years where she has led the local derivative and trading arms of several of the world’s leading Investment Banks. She
has extensive experience in Capital Markets, derivatives and asset management.
Prior to joining Goldman Sachs in 2004, Ms Downes was a director and the Head of Equity Derivatives Trading at Deutsche Bank in
Sydney. When Morgan Stanley was starting its equity franchise in Australia in 1998 she was hired as the Head of the Equity Derivative
and Proprietary Trading business based in Hong Kong and Australia. Ms Downes started her career working for Swiss Bank O’Connor on
the Floor of the Pacific Coast Stock Exchange in San Francisco, followed by the Philadelphia Stock Exchange before returning to work in
Sydney as a director for UBS.
Pippa graduated from the University of California at Berkeley with a Bachelor of Science in Business Administration majoring and Finance
and Accounting. Pippa also completed a Masters of Applied Finance from Macquarie University in 1998.
Mr Andrew Wilkinson B.Bus, CFTP, MAICD, 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 around 35 years’ experience in banking, corporate finance and funds management. He was
previously a corporate finance partner with PricewaterhouseCoopers and spent 15 years in finance and investment banking with
organisations including ANZ Capel Court and Schroders.
Mr James McNally B.Bus (Land Economy), Dip. Law, Executive Director.
Experience and expertise
James was appointed as an executive and founding director of the company in June 2003. James has over 20 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’
qualifications include a Bachelor of Business in land economy and a Diploma of Law. James is also a registered valuer and licensed real
estate agent.
6
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
Mr Brendan Howell B.Econ, G.Dip App Fin (Sec Inst), Company Secretary.
Experience and expertise
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. He was formerly an associate member of both the Securities Institute of Australia
and the Institute of Chartered Accountants in Australia.
Brendan has over 23 years’ experience in the funds management and financial services industries. 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 14 years Brendan has been directly involved with MIA Services Pty Limited, a company which specialises in funds management
compliance, and acts as an independent consultant and external compliance committee member for a number of property, equity and
infrastructure funds managers. Brendan also acts as an independent director for several unlisted public companies, some of which act as
responsible entities.
Brendan is a member of the Australian Institute of Company Directors.
Independent member of the Audit, Compliance and Risk Management Committee (ACRMC)
Mr David Lawler B.Bus, CPA, Independent ACRMC Member.
Experience and expertise
David was appointed to ALE’s ACRMC on 9 December 2005 and has over 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 the Chair of the Australian Trade Commission Audit and
Risk Committee and is an audit committee member of the Australian Office of Financial Management, the Defence Materiel Organisation,
the Australian Sports Anti-Doping Authority, the National Mental Health Commission, the Australian Maritime Safety Authority 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
P H Warne
P H Warne
P H Warne
P H Warne
Directorships of listed entities
ASX Limited
Crowe Horwath Australasia Limited
OzForex Group Limited
Macquarie Group Limited
Type
Non-executive
Non-executive
Chairman
Non-executive
Resigned
Appointed
July 2006
May 2007
October 2013
July 2007
Special responsibilities of directors
The following are the special responsibilities of each director:
Director
P H Warne
H I Wright
J P Henderson
P J Downes
Special responsibilities
Chairman of the Board
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Chair of the Nominations Committee
Chair of the Remuneration Committee
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
7
ALE Property Group
DIRECTORS' REPORT
For the Year ended 30 June 2014
Director
Special responsibilities
A F O Wilkinson
Chief Executive Officer and Managing Director of the Company
Responsible Manager of the Company under the Company’s Australian Financial Services Licence
(AFSL)
J T McNally
Responsible Manager of the Company under the Company’s 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
P H Warne
J P Henderson
H I Wright
P J Downes
A F O Wilkinson
J T McNally
A J Slade
M J Clarke
D J Shipway
Role
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Executive Director
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number
held at the
start of the
year
Net
Movement
Number
held at the
end of the
year
1,185,000
176,365
150,000
-
168,468
-
27,900
9,121
-
-
-
-
213,394
45,200
55,164
3,518
2,606
4,000
1,185,000
176,365
150,000
213,394
213,668
55,164
31,418
11,727
4,000
The following key management personnel currently hold rights over stapled securities in ALE:
Name
Performance Rights
A F O Wilkinson
A J Slade
ESSS Rights
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
Executive Director
Capital Manager
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number
held at the
start of the
year
Granted
during the
year
Lapsed /
Issued
during the
year
Number
held at the
end of the
year
45,200
11,790
43,136
58,182
-
-
-
-
(45,200)
(3,518)
34,878
19,092
8,825
8,825
-
-
-
-
-
8,272
78,014
77,274
8,825
8,825
Meetings of directors
The number of meetings of the Company’s Board of Directors held and of each Board committee during the year ended 30 June 2014
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
P J Downes
A F O Wilkinson
J T McNally
Board
ACRMC
Nominations and
Remuneration Committee
Held1
12
12
12
9
12
12
Attended
12
11
11
9
12
12
Held1
7
7
7
4
n/a
n/a
Attended
7
7
7
4
n/a
n/a
Held1
6
6
6
4
n/a
n/a
Attended
6
6
6
4
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
D J Lawler
n/a
n/a
7
7
n/a
n/a
1 “Held” reflects the number of meetings which the director or member was eligible to attend.
8
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
9 Remuneration Report (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2014 for employees of ALE
including the directors, the Managing Director and key management personnel.
9.1 Remuneration Objectives and Approach
In determining a remuneration framework, the Board aims to ensure the following:
●
●
●
attracts, rewards and retains high calibre executives;
motivates executives to achieve performance that creates value for stapled securityholders; and
links remuneration to performance and outcomes achieved.
The framework aligns executive reward with achievement of strategic objectives and creation of value for stapled securityholders. To do this
the Board endeavours to ensure that executive reward satisfies the following objectives:
●
●
●
●
●
alignment with ALE's financial, operational, compliance and risk management objectives so as to achieve alignment with positive
outcomes for stapled securityholders;
alignment with ALE's overall performance;
transparent, reasonable and acceptable to employees and securityholders;
rewards the responsibility, capability, experience and contribution made by executives; and
market competitive and complementary to the reward strategy of the organisation.
The framework provides a mix of fixed and variable remuneration. Since the year ending 30 June 2012 the variable remuneration has been
provided through the Executive Incentive Scheme (EIS). Any award under the EIS is paid 50% in cash at the year end and 50% in stapled
securities with delivery deferred three years. The previous long term incentive arrangements (performance rights) have been discontinued.
9.2 Remuneration and Nominations Committee
The Remuneration and Nominations Committee ("the Committee") is a committee comprising non-executive directors of the Company. The
Committee strives to ensure that ALE's remuneration structure strikes an appropriate balance between the interests of ALE securityholders
and rewarding, motivating and retaining employees.
The Committee's charter sets out its role and responsibilities. The charter is reviewed on an annual basis. In fulfilling its role the Committee
endeavours to ensure the remuneration framework established will:
●
●
●
reward executive performance against agreed strategic objectives;
encourage alignment of the interests of executives and stapled securityholders; and
ensure there is an appropriate mix between fixed and "at risk" remuneration.
The Committee operates independently of management in its recommendations to the Board and engages remuneration consultants
independently of management. During the year ended 30 June 2014, the Committee consisted of the following:
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Refer page 5 of this report for information on the skills, experience and expertise of the Committee members.
The number of meetings held by the Committee and the members' attendance at them is set out on page 8.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee retained Godfrey Remuneration Group Pty Limited to provide remuneration advice and Herbert Smith Freehills to draft updated
executive service agreements.
Godfrey Remuneration Group Pty Limited was paid $25,000 for remuneration advice and Herbert Smith Freehills was paid $20,643 for
drafting of executive service agreements. Herbert Smith Freehills was paid $17,000 for other non remuneration related services in the
current year.
9
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
9.3 Executive Remuneration
Executive remuneration comprises both a fixed component and an 'at risk' component. It specifically comprises:
●
●
Fixed Annual Remuneration (FAR)
Executive Incentive Scheme (EIS)
9.3.1 Fixed Annual Remuneration (FAR)
What is FAR?
FAR is the guaranteed salary package of the executive and includes superannuation guarantee levey and salary
sacrificed components such as motor vehicles, computers and superannuation.
How is FAR set?
FAR is set by reference to external market data for comparable roles and responsibilities within similar listed
and unlisted entities within Australia.
When is FAR Reviewed?
FAR is reviewed in December each year with any changes being effective from 1 January of the following year.
9.3.2 Executive Incentive Scheme (EIS)
What is EIS?
EIS is an "at risk" component of executive remuneration.
EIS is used to reward executives for achieving and exceeding annual individual key performance indicators
(KPIs).
The target EIS opportunity for executives varies according to the role and responsibility of the executive.
EIS awards comprise 50% cash and 50% deferred delivery stapled securities issued under the Executive
Stapled Securities Scheme (ESSS). For executives not invited to participate in the ESSS, the EIS is paid fully in
cash.
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Position
Managing Director
Capital Manager
Finance Manager
Asset Manager
1. EIS awards are at the discretion of the Committee and the Board
Standard
EIS Target
(as a % of
FAR)
60%
50%
n/a1
n/a1
% of EIS
paid as cash
50%
50%
50%
50%
% of EIS
paid as
ESSS
50%
50%
50%
50%
How are EIS targets and
objectives chosen?
At the beginning of each year, in addition to the standard range of operational requirements, the Board sets a
number of strategic objectives for ALE for that year. These objectives are dependent on the strategic
opportunities and issues facing ALE for that year and may include objectives that relate to the short and longer
term performance of ALE. Additionally, specific KPIs are established for all executives with reference to their
individual responsibilities which link to the addition to and protection of securityholder value, improving business
processes, ensuring compliance with legislative requirements, reducing risks within the business and ensuring
compliance with risk management policies, as well as other key strategic non-financial measures linked to
drivers of performance in future economic periods.
How is EIS performance
assessed?
The Committee is responsible for assessing whether the KPIs have been met. To facilitate this assessment, the
Board receives detailed reports on performance from management.
The quantum of EIS payments and awards are directly linked to over or under achievement against the specific
KPIs. The Board has due regard to the achievements outlined in section 9.4.
10
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
How are EIS awards
delivered?
EIS cash payments are made in August each year following the signing of ALE's full year statutory financial
statements.
The deferred component comprises an award of stapled securities under the ESSS. Any securities awarded
under the ESSS are delivered three years after the award date provided certain conditions have been met.
How is the ESSS award
calculated?
The number of ESSS Rights awarded annually under the ESSS will be determined by dividing the value of the
grant by the volume weighted average price for the five trading days commencing the day following the signing
of ALE's full year statutory financial statements, and grossing this number up for the future value of the
estimated distributions over the three year deferred delivery period.
What conditions are
required to be met for
the delivery of an ESSS
award?
During the three year deferred delivery period, the delivery of the Stapled Securities issued under the ESSS
remains subject to the following clawback tests. ESSS rights will be forfeited in whole or in part at the discretion
of the Remuneration Committee if before the end of the deferred delivery period:
• the Committee becomes aware of any executive performance matter which, had it been aware of the
the matter at the time of the original award, would have in their reasonable opinion resulted in a lower
original award; or
• the executive engages in any conduct or commits any act which, in the Committee's reasonable
opinion, adversely affects ALE Property Group including, and without limitation, any act which:
・
・
・
results in the ALE having to make any material negative financial restatements;
causes the ALE to incur a material financial loss; or
causes any significant financial or reputational harm to ALE and/or its businesses.
9.3.3 Summary of Key Contract Terms
Contract Details
Executive
Position
Managing
Director
Capital
Manager
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$425,000
6 months
6 months
Ongoing
$240,000
3 months
3 months
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
James
McNally
Brendan
Howell
Finance
Manager and
Assistant
Company
Secretary
Ongoing
$196,000
3 months
3 months
Asset
Manager
Executive
Director
Company
Secretary and
Compliance
Officer
Ongoing
$186,550
1 month
1 month
Ongoing
$100,000
1 month
1 month
Ongoing
$90,000
1 month
1 month
Managing Director
Andrew Wilkinson's current service agreement expires on 31 August 2014. On 30 July 2014 Mr Wilkinson signed a new service agreement
that starts on 1 September 2014. The agreement stipulates the minimum base salary, inclusive of superannuation, as being $425,000, to be
reviewed annually each 31 December by the Board. An EIS, if earned, would be paid 50% as a cash bonus in August each year and 50% in
stapled securities issued under the ESSS and delivered three years following each of the annual grant dates.
In the event of the termination of Andrew Wilkinson’s service agreement and depending on the reason for the termination, amounts may be
payable for unpaid accrued entitlements and a proportion of EIS entitlements as at the date of termination. If employment is terminated in
circumstances of redundancy or without cause then he is entitled to an amount of fixed remuneration for six months. In addition he may
receive a pro-rata EIS award for the period of employment in the year of redundancy.
11
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
9.4 Executive Remuneration outcome for year ended 30 June 2014
Details of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 16.
Executive Incentive Scheme Outcomes
ALE continues to perform well when compared to other Australian real estate investment trusts (AREITs).
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2014.
It was the view of the Committee that all standard KPIs and most of the major items in the Board approved corporate strategy had been
met. In particular, it was the Committee’s view that the refinancing of the CMBS and ALE Notes 2 with Australian Medium Term Notes
(AMTN) had been very successful and the ten month project to implement the refinancing was managed very well. In particular the
Committee noted;
Capital Matters
●
An investment grade unsecured rating from Moodys of Baa2 was awarded;
●
●
●
●
●
●
●
●
●
●
ALE issued one of the first AMTN's ranking behind a secured bond (CIBs);
ALE issued the only dual tranche AMTN in the market this year;
The capital management review during the year and the AMTN transaction were internally advised with management reviewing all options
and project managing the process. Accordingly the upfront cost was significantly lower than previous refinancing's;
The debt investor market accepted the AMTN issue very well with it being significantly over subscribed;
Achieved very aggressive market pricing resulting in significant interest expense savings. The refinancing delivered a margin reduction of
1.75% (from 318 to 143 bps) equating savings of $5.7m p.a.;
Risk managed the outcome by running a parallel US Private Placement alternative funding process. This applied competitive pressure on
the AMTN market and was one of the factors that helped to drive a very positive outcome for AMTN pricing and terms;
Effective and concentrated road show marketing of ALE by the management team to more than 25 US based and 40 Australian and Asian
based debt investors helped to position ALE in a very positive light;
Funding diversification was achieved. ALE’s name is now established and well regarded in the significantly more liquid and flexible AMTN
capital market;
A sophisticated and well executed restructure was completed to materially simplify ALE's long term hedging arrangements; and
The completion of the AMTN refinancing delivered a diversified, flexible and increasingly simplified capital structure for ALE.
Other matters
●
ALE was awarded "AREIT of the Year" from Property Investment Research;
●
●
●
●
Sold the Victoria Hotel at Shepparton, Victoria at a low cap rate of 6.3%, delivering a strong value outcome for a property in that regional
location;
Considered a range of investment opportunities;
Positive investor feedback was received from publication of a Property Portfolio Valuation; and
Continued to deliver best in AREIT sector total returns for securityholders.
The Remuneration Committee considered these achievements and compared them to key performance indicators for each executive that
were set at the beginning of the year. The EIS result for the Managing Director and Capital Manager particularly reflect the positive
contributions they made to the various capital management activities, as outlined above. Other executives contributed to a range of the
important and valuable outcomes outlined above that were recognised in the EIS payments made. All the EIS payments are included in staff
remuneration expenses in the current year.
The EIS awarded to each member of the management team was as follows:
Target EIS
(as % of
FAR)
EIS
Awarded
(as % of
FAR)
EIS Awarded
as a % of
Target
EIS
Awarded
Cash
Component
ESSS
Component
60%
50%
n/a
n/a
76.5%
66.7%
20.4%
10.7%
127.5%
133.3%
-
-
$325,000
$160,000
$40,000
$20,000
$162,500
$80,000
$20,000
$10,000
$162,500
$80,000
$20,000
$10,000
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
12
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
ALE's Financial Performance History
To provide context to ALE's performance, the following data and graphs outline a five year history of financial metrics.
FY10
FY11
FY12
FY13
FY14
Distributable profit ($m)
Distribution per Security
38.1
31.3
26.7
31.7
31.2
24.00
19.75
16.00
16.00
16.45
Continuing property values ($m)2
709.8
753.9
767.2
781.5
821.6
Net gearing 1
52.1%
51.7%
51.9%
50.8%
51.7%
1. Total borrowings less cash as a percentage of total assets less cash and derivatives
2. Includes only the value of properties held as at 30 June 2014
The accumulated value of $1.00 initial public offering (IPO) investment in ALE and reinvested distributions, rights renunciation payments and
current market value of securities as at 1 July 2014 totalled $7.93.
According to UBS for the period ending 30 June 2014 ALE continued to out perform other equity return benchmarks including the AREIT 200
index and the All ordinaries index for periods including three, five and ten years. For the one year period ALE's return of 15.1% outperformed
the AREIT 300 index of 11.1% and was slightly behind the All Ordinaries index of 17.3% p.a.
Growth in the value of the continuing properties between ALE's 2003 IPO and 30 June 2014 has averaged 4.32% p.a. This has exceeded
growth in CPI at 2.77% p.a
Distributable Profit ($m)
Gearing
Continuing Property Values ($m)
$30
$20
$10
$0
60.0%
55.0%
50.0%
45.0%
40.0%
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
$850
$800
$750
$700
$650
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
Accumulated Value for: AREITs $1.50, All Ords $2.62, ALE $7.931
1. Distributions include payment for renouncing Sep 2009 rights and all other distributions paid and declared to September 2014
13
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were granted during the year are as follows:
Executive
Performance Rights
A J Slade
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
D J Shipway
Number of
Rights
Outstanding
Grant Date
Performance
Period Start
Date
Fair value of
Right at
Grant Date
($)
Delivery
Date
% vested in
year
% forfeited
in year
8,272
1 Jul 09
1 Jul 09
43,136
34,878
23,611
34,571
19,092
8,825
8,825
23 Aug 12
30 Sep 13
23 Aug 12
28 Jun 12
30 Sep 13
30 Sep 13
30 Sep 13
1 Jul 11
1 Jul 12
1 Jul 11
1 Jul 10
1 Jul 12
1 Jul 12
1 Jul 12
0.91
1.65
2.27
1.65
1.45
2.27
2.27
2.27
1 Jul 14
31 Jul 15
31 Jul 16
31 Jul 15
31 Jul 14
31 Jul 16
31 Jul 16
31 Jul 16
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
9.5.2 Modification of terms of equity settled share based payment transactions
No terms of equity settled share based payment transactions (including options and rights granted as compensation to key management
personnel) have been altered or modified by the issuing entity during the reporting period or the prior period.
9.5.3 Analysis of movements in performance rights
The movement during the reporting period, by value of performance rights over stapled securities in ALE is detailed below.
Executive
A F O Wilkinson
A J Slade
Granted in
year $ (a)
Vested in
year $ (b)
Lapsed in
year $ (c )
-
-
-
-
-
-
Securities
Issued in
the year $
122,193
9,510
Securities
Issued in
the year
(Number)
45,200
3,518
(a) The value of performance rights granted during the year 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.
(b) The value of performance rights vested during the year is calculated as the market price of the stapled securities of ALE as at the close of
trading on the day the performance rights vested.
(c) The value of performance rights lapsed during the year is calculated using the market price of the stapled securities of ALE as at the close
of trading on the day the performance rights lapsed.
9.5.4 Analysis of movements in ESSS rights
The movement during the reporting period, by value and number of ESSS rights over stapled securities in ALE is detailed below.
Executive
By Value ($)
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
By Number
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Opening
Balance
Granted in
Year
Stapled
Securities
Issued in
the Year
Lapsed in
the Year
Closing
Balance
71,250
89,000
-
-
43,136
58,182
-
-
79,040
43,264
20,000
20,000
34,878
19,092
8,825
8,825
14
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,290
132,264
20,000
20,000
78,014
77,274
8,825
8,825
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
9.6 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, the risk-free interest
rate for the term of the performance right and any delayed delivery in the securities to the executive.
The value of ESSS disclosed in section 9.5.4 and 9.8 is based on the value of the grant at the award date. The number of Stapled Securities
issued annually under the ESSS award will be determined by dividing the value of the grant by the volume weighted average price for the
five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements, and grossing this
number up for estimated distributions over the deferred delivery period. The number of securities granted in the current year will be
determined on 14 August 2014.
9.7 Non-executive Directors' Remuneration
9.7.1 Remuneration Policy and Strategy
Non-executive directors' individual fees are determined by the Company Board within the aggregate amount approved by shareholders. The
current aggregate amount which has been approved by shareholders at the AGM on 10 November 2010 was $500,000. During the year P J
Downes was appointed to the Board which has increased aggregate non-executive directors fees to slightly below this amount. In order to
facilitate the continuing Board renewal process shareholders will be asked at the next AGM on 6 November 2014 to approve an increase in
aggregate remuneration to $650,000. The individual directors fees will not change as a result of this increase if it is approved.
The Board reviews its fees to ensure that ALE non-executive directors are remunerated fairly for their services, recognising the level of skill,
expertise and experience required to conduct the role. The Board reviews its fees from time to time to ensure it is remunerating directors at
a level that enables ALE to attract and retain the right 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 reviewed by Godfrey
Remuneration Group Pty Limited in the current financial year. The result of this review was that no changes to fees and payments were
made. The Chairman’s fees are determined independently from the fees of the other 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 any equity based payments, retirement benefits or other incentive payments.
9.7.2 Remuneration Structure
ALE non-executive directors receive a cash fee for service and they have no entitlement to any performance based remuneration, nor can
they participate in any security based incentive scheme.
The current remuneration was last independently reviewed in January 2014. This resulted in no change to the Fee levels indicated below.
The Directors' fees are inclusive of superannuation, where applicable.
Board
ACRMC
Remuneration Committee
Chairman*
Member
Chairman
Member
Chairman
Member
Board and Committee fees
$175,000
$85,000
$15,000
$10,000
$15,000
$5,000
* The Chairman of the Board's fees are inclusive of all committee fees.
James McNally's (Executive Director) remuneration is determined in accordance with the above fees. He receives an additional $5,000 for
being a Responsible Manager of the Company under the Company’s AFSL and $10,000 for being a director of ALE Finance Company Pty
Limited.
15
9.8 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 9.4 headed “Executive Incentive Scheme Outcomes”. Equity based payments for 2014 are non-market based performance related as set out in section 9.4. All other elements of remuneration were not directly related to performance.
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
Table 1 Remuneration details 1 July 2013 to 30 June 2014
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2014 are set out in the following table:
Key management personnel
Short term
Post
employment
benefits
Other long
term
Equity based
payment
Name
Role
Salary &
Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
$
Termination
benefits
$
ESSS
$
Total
$
$
S300A(1)(e)(i)
proportion of
remuneration
performance
based
P H Warne
Non-executive Director
J P Henderson
Non-executive Director
H I Wright
P J Downes
B R Howell
Non-executive Director
Non-executive Director
Company Secretary
160,183
100,000
96,110
54,847
90,000
-
-
-
-
-
A F O Wilkinson
Executive Director
393,567
162,500
J T McNally
Executive Director
100,000
-
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
212,076
80,000
175,222
20,000
163,949
10,000
1,545,954
272,500
-
-
-
-
-
-
-
-
-
-
-
160,183
100,000
96,110
54,847
90,000
556,067
100,000
292,076
195,222
173,949
1,818,454
14,817
-
8,890
5,073
-
-
-
-
-
-
-
-
175,000
-
-
-
100,000
-
-
-
105,000
-
-
-
59,920
-
-
-
90,000
-
17,775
21,156
-
162,500
757,498
42.9%
-
17,625
17,266
17,015
98,461
-
-
-
100,000
-
12,843
-
80,000
402,544
7,281
-
20,000
239,769
6,446
-
10,000
207,410
39.7%
16.7%
9.6%
47,726
-
272,500
2,237,141
Table 2 Remuneration details 1 July 2012 to 30 June 2013
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2013 are set out in the following table:
Key management personnel
Short term
Post
employment
benefits
Other long
term
Equity based
payment
Name
Role
P H Warne
Non-executive Director
J P Henderson
Non-executive Director
H I Wright
B R Howell
Non-executive Director
Company Secretary
A F O Wilkinson
Executive Director
J T McNally
Executive Director
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
S300A(1)(e)(i)
proportion of
remuneration
performance
based
Salary &
Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
$
Termination
benefits
$
ESSS
$
Total
$
$
160,550
100,000
96,330
90,000
378,888
100,000
186,743
162,926
164,029
-
-
-
-
79,040
-
43,264
20,000
20,000
-
-
-
-
-
-
8,737
8,917
-
160,550
100,000
96,330
90,000
457,928
100,000
238,744
191,843
184,029
1,439,466
162,304
17,654
1,619,424
14,450
-
8,670
-
-
-
-
-
-
-
175,000
-
-
-
100,000
-
-
-
105,000
-
-
-
90,000
-
16,470
11,310
-
79,040
564,748
28.0%
-
-
-
100,000
-
4,353
-
43,264
302,818
3,565
-
20,000
229,969
3,173
-
20,000
221,216
28.6%
17.4%
18.1%
22,401
-
162,304
1,888,751
-
16,457
14,561
14,014
84,622
16
S300A(1)(e)(vi)
Value of equity
based payment
as proportion of
remuneration
$
-
-
-
-
-
21.5%
-
19.9%
8.3%
4.8%
S300A(1)(e)(vi)
Value of equity
based payment
as proportion of
remuneration
$
-
-
-
-
14.0%
-
14.3%
8.7%
9.0%
ALE Property Group
DIRECTORS REPORT
For the Year ended 30 June 2014
10 Stapled securities under option
No Performance Rights over unissued stapled securities of ALE were granted during or since the end of the year.
11 Stapled securities issued on the exercise of options
The following stapled securities were issued on the exercise of performance rights during the financial year.
Executive
A F O Wilkinson
A J Slade
Number of Stapled
Securities Issued
45,200
3,518
12 Insurance of officers
During the financial year, the Company paid a premium of $61,276 (2013: $53,163) 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 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. During the current and previous financial years, no non-audit services were performed by the auditors.
Details of amounts paid or payable to the auditor (KPMG) for 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
30 June
2014
$
30 June
2013
$
180,500
8,500
201,000
-
189,000
201,000
14 Environmental regulation
While 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 responsibilities and compliance with 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, in most cases ALE is indemnified
by third parties against any remediation amounts likely to be required. ALE does not expect to incur any material environmental
liabilities.
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 19.
17
ALE Property Group
STATEMENT OF COMPREHENSIVE INCOME
For the Year ended 30 June 2014
Revenue
Rent from investment properties
Interest from cash deposits
Total revenue
Other income
Fair value increments to investment properties
Profit / (Loss) on disposal of investment property
Other income
Total other income
Total revenue and other income
Expenses
Fair value decrements to derivatives - net
Finance costs (cash and non-cash)
Queensland land tax expense
Other expenses
Total expenses
Profit/(Loss) before income tax
Income tax expense/(benefit)
Profit/(Loss) after income tax
Profit/(Loss) attributable to stapled securityholders of ALE
Other comprehensive income
Other comprehensive income for the year after income tax
Note
6
7
17
8
10
9
12
2014
$'000
54,187
2,216
56,403
40,180
(42)
550
40,688
97,091
21,203
26,737
2,122
4,835
54,897
42,194
5,000
37,194
37,194
-
-
2013
$'000
53,099
2,763
55,862
15,105
490
236
15,831
71,693
25,455
24,029
2,252
4,476
56,212
15,481
572
14,909
14,909
-
-
Total comprehensive income for the year
37,194
14,909
Profit/(Loss) attributable to:
Members of ALE
Non-controlling interest
Profit/(Loss) for the year
Total comprehensive income attributable to:
Members of ALE
Non-controlling interest
Total comprehensive income for the year
Basic and diluted earnings per stapled security
14(a)
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
37,194
-
37,194
37,194
-
37,194
Cents
19.03
14,909
-
14,909
14,909
-
14,909
Cents
8.21
20
ALE Property Group
STATEMENT OF FINANCIAL POSITION
For the Year ended 30 June 2014
Note
2014
$'000
15
16
17
11
13
18
20
11
19
20
11
21
23
22
149,963
2,147
249
152,359
821,680
4,108
31
339
826,158
978,517
8,523
102,383
-
16,271
127,177
474,051
-
474,051
601,228
377,289
257,870
604
118,815
377,289
$
$1.93
Current assets
Cash and cash equivalents
Receivables
Other
Total current assets
Non-current assets
Investment properties
Derivatives
Plant and equipment
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Derivatives
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivatives
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserve
Retained profits
Total equity
Net assets per stapled security
2013
$'000
54,652
1,377
226
56,255
786,000
17,425
42
5,337
808,804
865,059
4,236
-
356
15,640
20,232
457,659
18,811
476,470
496,702
368,357
254,080
382
113,895
368,357
$
$1.90
The above statement of financial position should be read in conjunction with the accompanying Notes.
21
ALE Property Group
STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2014
Share
Capital
$'000
Note
Share
based
payments
reserve
$'000
Retained
Earnings
$'000
Total
$'000
2014
Total equity at the beginning of the year
254,080
382
113,895
368,357
Total comprehensive income for the period
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with Members of ALE recognised directly in
Equity:
Employee share based payments
Employee share based payments - securities purchased
Securities issued - Distribution Reinvestment Plan
Costs associated with on market purchase of Securities for
Distribution Reinvestment Plan
Distribution paid or payable
Total equity at the end of the year
23
21
21
21
14
-
-
-
-
-
3,939
(149)
-
-
-
-
272
(50)
-
-
-
37,194
-
37,194
37,194
-
37,194
-
(81)
-
272
(131)
3,939
-
(32,193)
(149)
(32,193)
257,870
604
118,815
377,289
2013
Total equity at the beginning of the year
182,255
207
130,039
312,501
Total comprehensive income for the period
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with Members of ALE recognised directly in
Equity:
Employee share based payments
Securities issued - Placement
Securities issued - Security Purchase Plan
Securities issued - ALE Executive Performance Rights Plan
Securities issued - Distribution Reinvestment Plan
Capital raising costs
Distribution paid or payable
Total equity at the end of the year
23
21
21
21
21
21
14
-
-
-
-
40,000
27,024
19
6,253
(1,471)
-
254,080
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
-
-
-
166
-
-
9
-
-
-
382
14,909
-
14,909
-
-
-
(28)
-
-
(31,025)
14,909
-
14,909
166
40,000
27,024
-
6,253
(1,471)
(31,025)
113,895
368,357
22
ALE Property Group
STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2014
Note
Cash flows from operating activities
Receipts from tenant and others
Payments to suppliers and employees
Interest received - bank deposits
Net interest received - interest rate hedges
Borrowing costs paid
Net cash inflow from operating activities
15
Cash flows from investing activities
Net proceeds from disposal/resumption of properties
Payments for plant and equipment
Net cash inflow from investing activities
Cash flows from financing activities
Capitalised borrowing costs paid
Derivative termination payments
Proceeds from borrowings
Proceeds from securities issued
Capital raising costs paid
Costs of on-market acquisition of securities for DRP
Borrowings repaid
CPI hedge indexation payment
CMBS
ALE Notes 2
Distributions paid (net of DRP securities issued)
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2014
$'000
60,232
(12,586)
2,075
7,413
(27,235)
29,899
4,458
(6)
4,452
(1,522)
(27,053)
339,736
-
-
(149)
-
(160,000)
(62,404)
(27,648)
60,960
95,311
54,652
2013
$'000
58,486
(10,129)
3,271
9,308
(26,621)
34,315
-
-
-
(908)
(69,453)
40,000
67,025
(1,472)
-
(37,264)
-
-
(22,022)
(24,094)
10,221
44,431
54,652
15
149,963
The above statement of cash flows should be read in conjunction with the accompanying Notes.
23
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 1
Reporting Entity
ALE is domiciled in Australia. 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 results reflect the performance of the Trust and its subsidiaries including the Company
from 1 July 2013 to 30 June 2014.
The stapled securities of ALE are quoted on the Australian Stock Exchange under the code LEP and comprise one unit in the Trust and
one share in the Company. The unit and the share are stapled together under the terms of their respective constitutions and cannot
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 ALE Property Group is a for-profit entity.
The Company is the Responsible Entity of the Trust.
Note 2
Basis of preparation
(a) Compliance Statement
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act
2001. The financial statements also comply with the International Financial Reporting Standards (IFRS) and interpretations adopted
by the International Accounting Standards Board.
(b) Basis of measurement
The financial statements are prepared on the historical cost basis except for the following which are measured at fair value:
•
•
•
derivative financial instruments
financial instruments at fair value through profit or loss
investment property
The methods used to measure fair value are discussed further in Note 4.
The consolidated financial statements were authorised for issue by the Board of Directors on 5th August 2014.
(c) Functional and presentation currency
These financial statements are presented in Australian dollars, which is ALE's functional currency.
ALE is an entity 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 17 - Investment property
Note 24 - Measurement of share based payments
Note 33 - Valuation of financial instruments
24
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 3
Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all years presented unless otherwise stated. The financial statements include financial statements for the ALE
Property Group (ALE), consisting of the Australian Leisure and Entertainment Property Trust and its subsidiaries. Summarised financial
information in relation to Australian Leisure and Entertainment Trust as the parent entity is presented in Note 34 to the financial
statements.
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to
other standards, with a date of initial application of 1 July 2013.
AASB 10 Consolidated Financial Statements (2011) (see (i))
AASB 13 Fair Value Measurement (see (ii))
AASB 119 Employee Benefits (2011)
Annual Improvements to Australian Accounting Standards 2009–2011 Cycle
(i) Subsidiaries
As a result of AASB 10 (2011), the Group has changed its accounting policy for determining whether it has control over and
consequently whether it consolidates its investees. AASB 10 (2011) introduces a new control model that is applicable to all investees,
by focusing on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the
investee and ability to use its power to affect those returns. In particular, AASB 10 (2011) requires the Group to consolidate investees
that it controls on the basis of de facto circumstances. This change in policy did not change the entities that are consolidated.
(ii) Fair value measurement
AASB 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such
measurements are required or permitted by other AASBs. In particular, it unifies the definition of fair value as the price at which an
orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It
also replaces and expands the disclosure requirements about fair value measurements in other AASBs, including AASB 7 Financial
Instruments: Disclosures.
In accordance with the transitional provisions of AASB 13, the Group has applied the new fair value measurement guidance
prospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no
impact on the measurements of the Group’s assets and liabilities.
Principles of consolidation
(a)
The 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 collectively in this financial report as ALE. Entities are fully
consolidated from the date on which control is transferred to the Trust; where applicable, entities 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.
25
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 3
Summary of significant accounting policies
Investment property
(b)
Properties (including land and buildings) held for long term rental yields and capital appreciation 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 expenditure will flow to ALE and the cost of the item can be reliably measured. Maintenance and capital works
expenditure is the responsibility of the tenant under the triple net leases in place over 83 of the 86 properties. For the remaining three
hotels capital works expenditure and structural maintenance is the responsibility of ALE. ALE undertakes periodic 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 each property is independently revalued at least
every three years. Changes in the fair values of investment properties are recorded in the Statement of Comprehensive Income.
Gains and losses on disposal of a property are determined by comparing the net proceeds on disposal with the carrying amount of the
property at the date of disposal. Net proceeds on disposal are determined by subtracting disposal costs from the gross sale proceeds.
Cash and cash equivalents
(c)
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.
(d)
Trade debtors are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts.
Receivables
Collectability 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 Statement of Comprehensive Income.
26
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 3
Summary of significant accounting policies (continued)
Plant and equipment
(e)
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 Statement of
Comprehensive Income during the financial period in which they are incurred.
Depreciation
Depreciation relating to depreciable plant and equipment (office fixtures, fittings and operating equipment) is calculated using the
straight line method or diminishing value 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 Statement
of Comprehensive Income.
Investments and financial assets
(f)
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.
Trade and other payables
(g)
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.
Borrowings
(h)
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.
27
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 3
Summary of significant accounting policies (continued)
Derivatives
(i)
ALE documents, at the inception of any 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 Statement of Comprehensive Income.
Provisions
(j)
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.
Distributions and dividends
(k)
Provisions are made for the amounts 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)
Ordinary units and ordinary shares are classified as contributed equity.
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 securityholders that include a return of capital are shown in Equity as a transfer from (or reduction of)
Contributed Equity.
Revenue recognition
(m)
Rental income from operating leases is recognised on a straight line basis over the lease term. Rentals that are based on the future
amount that changes other than the passage of time, including CPI linked rental increases, are only recognised when contractually
due. 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 Statement of Financial Position as a receivable.
Expenses
(n)
Expenses including operating expenses, Queensland land tax expense and other outgoings (if any) are brought to account on an
accruals basis. Borrowing costs are recognised using the effective interest rate method.
(o)
(i)
Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave due 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 accumulated sick leave are recognised as an expense
when the leave is taken and measured at the rates paid or payable.
(ii)
Share based payments
Executive Stapled Security Scheme (ESSS)
The grant date fair value of ESSS 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 ESSS rights. The amount recognised as an
expense is adjusted to reflect the actual number of ESSS Rights that vest.
28
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Summary of significant accounting policies (continued)
Note 3
The fair value at grant date is determined as the value of the ESSS Rights in the year in which they are awarded. The number of ESSS
Rights issued annually under the ESSS will be determined by dividing the value of the grant by the volume weighted average price for
the five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements.
Upon the exercise of ESSS rights, the balance of the share based payments reserve relating to those performance rights is transferred
to Contributed Equity.
Performance Rights
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-tradeable
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.
Bonus and incentive plans
(iii)
Liabilities and expenses for bonuses and incentives are recognised where contractually obliged or where there is a past practice that
may create a constructive obligation.
(iv)
Long service leave
ALE recognises 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.
Retirement benefit obligations
(v)
ALE pays fixed contributions to employee nominated superannuation 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.
29
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 3
Summary of significant accounting policies (continued)
Income tax
Trusts
(p)
(i)
Under current legislation, Trusts are not liable for income tax, provided that their taxable income and taxable realised gains are fully
distributed to securityholders each financial year.
Companies
(ii)
The income tax expense or benefit for the reporting period is the tax payable on the current reporting period's taxable income based
on the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused tax losses.
Deferred tax balances are calculated using the balance sheet method. Under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No deferred
tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Similarly, no deferred
tax asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in controlled
entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary differences at the
tax rates expected to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for temporary differences and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to 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.
Earnings per stapled security
Basic earnings per stapled security
(q)
(i)
Basic earnings per stapled security is calculated by dividing the profit attributable to the equity holders of ALE by the weighted
average number of stapled securities outstanding during the reporting period.
Diluted earnings per stapled security
(ii)
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.
Goods and services tax (GST)
(r)
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.
30
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 3
Summary of significant accounting policies (continued)
Financial risk management
(s)
ALE's activities expose it to a variety of financial risks: market risk, credit risk and liquidity 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 hedges to reduce certain risk exposures (Notes 5
and 33 provide further information).
New accounting standards and interpretation not yet adopted
(t)
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January
2013, and have not been applied in preparing these financial statements. Those which may be relevant to the Group are set out
below. The Group does not plan to adopt these standards early.
IFRS 9 Financial Instruments (2010), IFRS 9 Financial Instruments (2009)
IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial
assets are classified and measured based on the business model in which they are held and the characteristics of their contractual
cash flows. IFRS 9 (2010) introduces additional changes relating to financial liabilities, THE IASB currently has an active project to
make limited amendments to the classification and measurement requirements of IFRS 9 and add new requirements to address the
impairment of financial assets and hedge accounting
IFRS 9 (2010) and (2009) are effective for annual reporting periods beginning on or after 1 January 2015, with early adoption
permitted. The adoption of these standards is not expected to have an impact on the Group's financial assets or financial liabilities.
Segment reporting
(u)
An operating segment is a component of ALE that engages in business activities from which it may earn revenues and incur expenses,
including revenues and expenses that relate to transactions with any of ALE's other entities. All operating segments’ operating results
are regularly reviewed by the Company's Managing Director to make decisions about resources to be allocated to the segment and
assess its performance, and for which discrete financial information is available.
Segment results that are reported to the Managing Director include items directly attributable to a segment, as well as those that can
be allocated on a reasonable basis.
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.
When measuring the fair value of an asset or a liability, ALE uses market observable data as far as possible. Fair values are categorised
into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e
as prices) or indirectly (i.e derived from prices);
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
•
•
•
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that
is significant to the entire measurement.
ALE recognises transfers between levels of fair value hierarchy at the end of the reporting period during which the change has
occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
Note 17
Note 33
Investment property
Financial instruments
31
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 5
Financial Risk Management
Overview
The Trust and Group have 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 an 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 its training and management standards and procedures, has developed 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 ALE’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 ALE if its tenant or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from ALE’s receivables from the tenant, investment securities and derivatives contracts.
Trade and other receivables
ALE’s exposure to credit risk is influenced mainly by the individual characteristics of its tenant. ALE has one tenant (Australian Leisure
and Hospitality Group Limited) and therefore there is significant concentration of credit risk with that company. Credit risk of the
tenant is constantly monitored to ensure the tenant has appropriate financial standing. There are also cross default provisions in the
leases and the properties are essential to the tenant's business operations and those of the tenant's shareholders.
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 manages its liquidity risk by
using detailed forward cash flow planning and by maintaining strong relationships with banks and investors in the capital markets.
ALE has liquidity risk management policies which assist 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.
32
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 5
Financial Risk Management
Interest rate risk and consumer price index risk
ALE adopts a policy of ensuring that all exposure to changes in interest rates on borrowings are hedged. This is achieved by entering
into interest rate hedges to fix the interest rates or by issuing fixed rate borrowings.
Property valuation risk
ALE owns a number of investment properties. Those property valuations may increase or decrease from time to time. ALE's financing
facilities contain gearing covenants. ALE reviews the risk of gearing covenant breaches by constantly monitoring gearing levels and
has contingency capital management plans to ensure that sufficient headroom is maintained.
Capital management
ALE monitors securityholder equity and manages it 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 ALE defines as distributable income divided
by total contributed equity, excluding minority interests. The Board of Directors also monitors the level of gearing.
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 may
undertake on-market buybacks of ALE stapled securities and ALE Notes 2. ALE has also from time to time made ongoing capital
distribution payments to stapled securityholders 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 in the context of any increase or decrease from time to time based on existing property value
movements, acquisitions completed, the levels of debt financing used and a range of prudent financial metrics, both at the time and
on a projected basis going forward.
The outcomes of ALE's strategic planning process plays an important role in determining acquisition and financing priorities over time.
The total gearing ratios (total liabilities as a percentage of total assets) at 30 June 2014 and 30 June 2013 were 61.5% and 57.2%
respectively.
The net gearing ratios (total borrowings less cash as a percentage of total assets less cash and derivatives) at 30 June 2014 and 30
June 2013 were 51.7% and 50.9% respectively.
33
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 6
Rent from investment properties
Rent from continuing properties
During the current and previous financial years, ALE's investment property lease rentals were
reviewed to state based CPI annually and are not subject to fixed increases, apart from the
lease for the Pritchard's Hotel, NSW which has fixed increases of 3%.
2014
$'000
2013
$'000
54,187
54,187
53,099
53,099
Note 7
Interest income
Operating bank and term deposit interest
2,216
2,763
As at 30 June 2014 the weighted average interest rate earned on cash was 3.39% (2013:
3.73%)
Note 8
Current year fair value adjustments to derivatives
Fair value increments/(decrements) to interest rate hedge derivatives
Fair value increments/(decrements) to CPI hedge derivatives
During the current year a portion of the derivative value movement was realised upon
termination of hedges.
(21,203)
-
(21,203)
(4,045)
(21,410)
(25,455)
Note 9
Other expenses
Annual reports
Audit, accounting, tax and professional fees
Depreciation expense
Insurance
Legal fees
Occupancy costs
Corporate and other expenses
Property revaluations, and condition and compliance audits
Registry fees
Salaries, fees and related costs
Staff training
Travel and accommodation
Trustee and custodian fees
Total other expenses
Less: Share based payments expense
Total cash other expenses
114
213
17
177
208
120
799
276
147
2,519
20
82
143
4,835
4,835
(272)
4,563
127
273
21
166
271
116
713
240
129
2,206
16
58
140
4,476
4,476
(166)
4,310
34
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
2014
$'000
2013
$'000
Note 10 Finance costs (cash and non-cash)
Finance costs - cash
Capital Indexed Bonds (CIB)
Commercial Mortgage Backed Securities (CMBS)
Australian Medium Term Notes (AMTN)
ALE Notes 2
Interest rate derivative payments/(receipts)
CMBS early redemption penalty
ALE Notes 2 buyback premium
Other finance expenses
Finance costs - non-cash
Accumulating indexation - CIB
Accumulating indexation - CPI Hedges
Amortisation - CIB and CMBS
Amortisation - CPI Hedge
Amortisation - AMTN
Amortisation - AMTN discount
Amortisation - ALE Notes 2
Finance costs (cash and non-cash)
Note
20(b)
20(c)
20(d)
20(e)
-
(iv)
(v)
(ii)
(i)
20(b)
20(f)
(iii)
(iii)
(iii)
(iii)
(iii)
(i)
(ii)
(iii)
(iv)
(v)
Amounts represent net cash finance costs after derivative payments and receipts.
Other borrowing costs such as rating agency fees and liquidity fees. In 2013
hedging restructure costs were also included.
Establishment costs of the various borrowings are amortised over the period of
the borrowing on an effective rate basis. During the year the CMBS borrowing
were redeemed and therefore all unamortised establishment costs were written
off.
The CMBS had a maturity date of 20 May 2016 and were redeemed early on 20
June 2014. In accordance with the loan agreement an early repayment penalty
was incurred.
During June 2014 ALE undertook an on-market buyback of ALE Notes 2 at $101
per note. The ALE Notes have a face value of $100 so a $1 premium per note
was paid on the notes bought back and cancelled.
Note 11
Derivatives
Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Net assets/(liabilities)
4,752
7,748
875
10,454
(7,677)
1,680
624
580
19,036
3,625
-
2,603
-
8
1
1,464
7,701
26,737
2014
$'000
-
4,108
4,108
-
-
-
4,108
4,642
8,924
-
10,931
(8,946)
-
-
2,270
17,821
2,972
1,290
777
57
-
-
1,112
6,208
24,029
2013
$'000
-
17,425
17,425
(356)
(18,811)
(19,167)
(1,742)
35
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
2014
$'000
2013
$'000
Note 11
Derivatives (continued)
Instruments used by ALE
ALE uses derivative financial instruments in the normal course of business in order to hedge
exposure to fluctuations in interest rates and previously the consumer price index in
accordance with ALE's financial risk management policies. As at balance date, ALE has
hedged all non CIB net borrowings past the maturity date of the AMTN through nominal
interest rate hedges. Interest rate hedges and the previous CPI Hedges are carried on the
Statement of Financial Position at fair value. Changes in the mark to market fair value of
these derivatives are recognised in the Statement of Comprehensive Income.
Note 20 contains further information on the derivative financial instruments in place over net
borrowings.
Note 12
Income tax
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Income tax expense/(benefit)
Deferred income tax expense included in income tax
expense/(benefit) comprises:
Decrease/(increase) in deferred tax asset (Note 13)
Reconciliation of income tax expense to prima facie tax payable
Profit/(loss) before income tax expense
Profit/(loss) attributable to entities not subject to tax
Profit/(loss) before income tax expense subject to tax
Tax at the Australian tax rate of 30% (2012: 30%)
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/(benefit)
2
4,998
5,000
4,998
4,998
42,194
25,706
16,488
4,946
42
10
2
5,000
-
572
572
572
572
15,481
13,732
1,749
525
46
1
-
572
36
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 13 Deferred tax assets
Deferred tax assets
The balance is attributable to:
Derivatives - interest rate hedges
Employee benefits
Acquisition proposal due diligence costs
Amortised borrowing costs
Accruals
Other items
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the income statement (Note 12)
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
Note 14 Earning and distributions per stapled security
Reconciliation of profit after tax to amounts available for distribution:
Profit after income tax for the year
Plus /(less)
Fair value increments to investment properties
Fair value decrements to derivatives
Loss/(Gain) on disposal of property
Employee share based payments
Finance costs - non cash
Income tax expense
Adjustments for non-cash items
Total available for distribution
Distribution paid or provided for
Available and under/(over) distributed for the year
Reconciliation of accumulated undistributed income
Opening balance
Available and undistributed/(over distributed) for the year
2014
$'000
2013
$'000
339
-
38
1
56
-
(11)
255
339
5,337
(4,998)
-
339
273
66
339
5,337
5,736
30
2
(481)
17
(4)
37
5,337
5,909
(572)
-
5,337
71
5,266
5,337
Note
(a)
17
8
23
10
12
(b)
(d)
(e)
37,194
14,909
(40,180)
21,203
42
272
7,701
5,000
(5,962)
31,232
32,193
(961)
11,405
(961)
(15,105)
25,455
(490)
166
6,208
572
16,806
31,715
31,025
690
10,715
690
Closing balance
(f)
10,444
11,405
37
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 14 Earning and distributions per stapled security (continued)
Weighted average number of stapled securities used as the denominator in calculating
earnings per stapled security at (a) and (b) below
2014
$'000
2013
$'000
Number of
Stapled
Securities On
Issue
Number of
Stapled
Securities On
Issue
195,437,564
181,563,372
Weighted average number of stapled securities and potential stapled securities used as the
denominator in calculating diluted earnings per stapled security
195,437,564
181,563,372
Stapled securities on issue at the end of the year used in calculating total available for
distribution per stapled security at (c) below
195,702,333
194,238,078
2014
cps
19.03
15.98
15.96
16.45
(0.49)
5.34
10,389
131,184
8,390
149,963
2013
cps
8.21
17.47
16.32
16.00
0.32
5.87
1,928
44,334
8,390
54,652
(a)
(b)
(c)
(d)
(e)
(f)
Basic and diluted earnings per stapled security
Basic and diluted earnings per stapled security excluding non-cash items
(Distributable Profit)
Total available for distribution
Distribution per stapled security
Available and under/(over) distributed for the year
Accumulated undistributed income at the end of the year
cps = cents per security
Note 15 Cash assets and cash equivalents
Cash at bank and in hand
Deposits at call
Cash reserve
An amount of $8.39 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 2016 and 20 November 2023 respectively. On 20 June 2014
the CMBS was redeemed, however, the cash reserve is still required for the CIB.
In the prior year an amount of $10.15 million was held in a Sales Proceeds Account in
accordance with an Issuer Loan Agreement for the CIB and CMBS facilities. During the
current year, following the early redemption of the CMBS, this cash was released. The cash
held in this account was placed on short term deposit or used to acquire property to be
placed within the security pool. Refer note 20(h) for further details on the assets pledged as
security for the CIB.
During the year ended 30 June 2014 all cash assets were placed on deposit with either the
National Australia Bank Limited, Bank of China, or the Industrial and Commercial Bank of
China. As at 30 June 2014, the weighted average interest rate on all cash assets was 3.39%
(2013: 3.73%).
38
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 15 Cash assets and cash equivalents (continued)
Reconciliation of profit after income tax to net cash inflows from operating activities
Profit for the year
Plus/(less):
Fair value decrements/(increments) to investment property
Fair value decrements/(increments) to derivatives
Finance costs amortisation
Loss/(gain) on disposal of investment property
Accumulated indexation on CIB
Accumulated indexation on CPI Hedges
Share based payments expense
Share based payment securities purchased
Depreciation
Decrease/(increase) in receivables
Decrease/(increase) in deferred tax asset
Decrease/(increase) in other assets
Increase/(decrease) in payables
Increase/(decrease) in provisions
Net cash inflow from operating activities for the year
Distribution payments totalling $3,939,103 (2013: $6,253,121) were satisfied by the issue of
securities under the Distribution Reinvestment Plan.
Note 16
Receivables
Accounts receivable
Interest receivable
Note 17 Investment properties
Investment properties - at fair value
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
Disposals
Net gain/(loss) from fair value adjustments
Carrying amount at the end of the year
2014
$'000
2014
$'000
37,194
(40,180)
21,203
4,076
42
3,625
-
272
(131)
17
(770)
4,998
(23)
(449)
25
29,899
2013
$'000
2013
$'000
14,909
(15,105)
25,455
1,947
(490)
2,972
1,290
166
-
21
2,023
572
176
324
55
34,315
1,783
364
2,147
1,253
124
1,377
821,680
786,000
786,000
(4,500)
40,180
821,680
771,530
(635)
15,105
786,000
All investment properties are freehold and 100% owned by ALE and comprise land, buildings and fixed improvements. The plant and
equipment, liquor and gaming licences, leasehold improvements and certain development rights are held by the tenant.
Leasing arrangements
83 of the 86 properties in the portfolio are leased to ALH on a triple net basis for 25 years, mostly starting in November 2003, with four
10 year options for ALH to renew. The remaining three properties are leased on long term leases to ALH on a double net basis.
39
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
2014
$'000
2013
$'000
Note 17 Investment properties (continued)
Measurement of fair value
Valuation approach
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. As at 30 June 2014, the weighted average investment property capitalisation rate used to
determine the value of all investment properties was 6.42% (2013: 6.59%).
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 the Board's 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 weighted average lease term of the properties is around 14 years.
In accordance with ALE's policy of independently valuing at least one-third of its property portfolio annually, 31 properties were
independently valued as at 30 June 2014. The independent valuations are identified as "A" in the investment property table under the
column labelled "Valuation type and date". These valuations were completed by CBRE (VIC and SA), Urbis Valuations (QLD and WA)
and Colliers (NSW).
The remaining 55 properties were subject to Directors' valuations as at 30 June 2014, identified as "B". The Directors' valuations of the
55 properties were determined by taking each property's net rent as at 30 June 2014 and capitalising it at a rate equal to the prior year
capitalisation rate for that property, adjusted by the average change in capitalisation rate evident in the 31 independent valuations
completed at 30 June 2014 on a state by state basis. The Directors have received advice from CBRE, Urbis and Colliers that it is
reasonable to apply the same percentage movement in the weighted average capitalisation rates, on a state by state basis.
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
2014
Yields
5.57% - 7.84%
5.23% - 7.19%
5.29% - 6.87%
6.03% - 6.76%
6.49% - 7.29%
2013
Yields
5.60% - 7.89%
5.46% - 7.50%
5.15% - 6.91%
6.44% - 6.80%
6.58% - 7.34%
2014
Average
6.56%
6.41%
6.33%
6.52%
6.75%
2013
Average
6.60%
6.68%
6.38%
6.71%
6.83%
Valuations reflect, where appropriate, the tenant in occupation, the credit worthiness of the tenant, the triple-net nature and remaining
term of the leases (83 of 86 properties), land tax liabilities (Queensland only) 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.
40
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
2014
$'000
2013
$'000
Note 17 Investment properties (continued)
Fair value hierarchy
The fair value of investment property was determined by having external, independent property valuers, having appropriate recognised
professional qualifications and recent experience in the location and category of the property being valued value approximately one
third of the portfolio every 12 months. The remaining properties are valued by Directors by reference to the movement in capitalisation
rates advised by the independent valuers. The Directors receive advice from the independent valuers that it is reasonable to apply the
same percentage movement in the weighted average capitalisation rates in the sample independently valued, on a state by state basis,
to the remaining properties.
The fair value measurement for investment property of $821.680 million has been categorised as a level 3 fair value based on inputs to
the valuation technique used.
Level 3 fair value
The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values.
Balance at the beginning of the year
Disposals - at fair value
Changes in fair value (unrealised)
Carrying amount at the end of the year
Valuation techniques and unobservable inputs
786,000
(4,500)
40,180
821,680
771,530
(635)
15,105
786,000
Fair value
hierarchy
Class of
property
Fair Value
30 June 2014
$000's
Valuation technique
Inputs Used to Measure
Fair Value
Range of Individual
Property
Unobservable
inputs
Level 3
Pubs
821,680
Capitalisation method
Gross rent p.a ($'000)
Land tax p.a ($'000)
Adopted capitalisation rate
$174 - $1,537
$12 - $127
5.23% - 7.84%
41
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 17
Investment properties (continued)
Property
New South Wales
Blacktown Inn, Blacktown
Brown Jug Hotel, Fairfield Heights
Colyton Hotel, Colyton
Crows Nest Hotel, Crows Nest
Melton Hotel, Auburn
Narrabeen Sands Hotel, Narrabeen
New Brighton Hotel, Manly
Pioneer Tavern, Penrith
Pritchard's Hotel, Mount Pritchard
Smithfield Tavern, Smithfield
Total New South Wales properties
Queensland
Albany Creek Tavern, Albany Creek
Alderley Arms Hotel, Alderley
Anglers Arms Hotel, Southport
Balaclava Hotel, Cairns
Breakfast Creek Hotel, Breakfast Creek
Burleigh Heads Hotel, Burleigh Heads
Camp Hill Hotel, Camp Hill
Chardons Corner Hotel, Annerly
Dalrymple Hotel, Townsville
Edge Hill Tavern, Manoora
Edinburgh Castle Hotel, Kedron
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
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
Vale Hotel, Townsville
Wilsonton Hotel, Toowoomba
Total Queensland properties
Cost
including
additions
$'000
Valuation
type and
date
Fair value
at 30 June
2014
$'000
Fair value
at 30 June
2013
$'000
Date
acquired
Fair value
gains/
(losses)
30 June
2014
$'000
240
220
350
350
150
400
390
270
690
180
5,472
5,660
8,208
8,772
3,114
8,945
8,867
5,849
21,130
4,151
80,168
8,396
3,303
4,434
3,304
10,659
6,685
2,265
1,416
3,208
2,359
3,114
3,672
6,604
3,774
2,265
4,434
4,434
4,057
3,208
1,794
6,874
3,020
6,886
4,237
3,397
1,794
5,189
5,755
9,150
5,377
5,661
4,529
B
A
B
B
B
A
B
A
B
B
B
A
B
B
B
B
A
B
B
B
B
A
B
B
B
B
B
B
A
B
B
A
B
A
A
B
A
A
B
B
B
B
8,960
9,450
13,450
13,380
5,580
11,650
15,010
9,800
19,600
6,990
8,720
9,230
13,100
13,030
5,430
11,250
14,620
9,530
18,910
6,810
113,870
110,630
3,240
12,200
5,350
7,790
5,990
14,680
11,500
3,625
2,120
5,740
4,690
4,940
6,350
9,610
6,420
3,400
8,730
7,200
8,790
5,325
3,380
12,250
4,750
11,340
6,825
5,800
3,160
8,825
9,075
13,730
9,010
10,390
7,960
11,800
5,220
7,570
5,820
14,240
11,160
3,420
2,110
5,570
4,560
4,790
6,000
9,300
6,220
3,260
8,480
6,940
8,480
4,980
3,280
11,780
4,240
11,080
6,560
5,730
3,050
8,210
8,850
13,320
8,740
10,090
7,790
400
130
220
170
440
340
205
10
170
130
150
350
310
200
140
250
260
310
345
100
470
510
260
265
70
110
615
225
410
270
300
170
145,254
240,945
232,640
8,305
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Mar-09
Nov-03
Nov-03
Oct-07
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-08
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
Jun-04
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
Nov-03
42
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 17
Investment properties (continued)
Property
South Australia
Aberfoyle Hub Tavern, Aberfoyle Park
Eureka Tavern, Salisbury
Exeter Hotel, Exeter
Finsbury Hotel, Woodville North
Gepps Cross Hotel, Blair Athol
Hendon Hotel, Royal Park
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
Deer Park Hotel, Deer Park
Doncaster Inn, Doncaster
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
Olinda Creek Hotel, Lilydale
Pier Hotel, Frankston
Plough Hotel, Mill Park
Prince Mark Hotel, Doveton
Royal Exchange, Traralgon
Sandbelt Club Hotel, Moorabbin
Sandown Park Hotel/Motel, Noble Park
Sandringham Hotel, Sandringham
Somerville Hotel, Somerville
Stamford Inn, Rowville
Sylvania Hotel, Campbellfield
Tudor Inn, Cheltenham
The Vale Hotel, Mulgrave
Victoria Hotel, Shepparton
Village Green Hotel, Mulgrave
Young & Jackson, Melbourne
Cost
including
additions
$'000
Valuation
type and
date
Fair value
at 30 June
2014
$'000
Fair value
at 30 June
2013
$'000
Date
acquired
Fair value
gains/
(losses)
30 June
2014
$'000
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
3,303
3,303
1,888
1,605
2,171
1,605
4,435
18,310
3,963
9,905
15,888
9,433
1,982
17,943
9,717
5,095
8,301
6,981
12,169
4,718
3,114
9,622
6,886
7,689
8,584
1,511
3,963
8,019
8,490
9,810
2,171
10,849
6,321
4,529
2,642
12,733
5,377
5,472
5,566
2,265
12,546
6,132
A
A
B
A
B
B
B
B
A
B
A
B
B
B
B
A
A
A
B
B
B
A
A
A
B
B
B
B
B
A
A
A
B
B
B
B
A
A
C
A
B
5,850
5,800
3,650
3,200
4,290
3,140
7,710
5,510
5,700
3,480
2,940
4,090
2,990
7,350
340
100
170
260
200
150
360
33,640
32,060
1,580
7,200
17,300
18,610
14,950
4,190
21,190
16,490
9,770
14,500
12,200
19,270
9,190
6,480
14,810
11,650
13,250
14,100
3,290
6,800
13,190
13,060
16,870
4,360
18,350
10,400
9,380
5,280
19,620
10,300
9,900
9,600
-
20,000
10,420
6,740
16,400
17,340
14,070
3,920
19,840
15,440
9,140
14,270
11,400
19,030
8,610
6,060
13,870
10,900
12,830
13,130
3,080
6,370
12,350
12,230
15,790
4,300
16,490
9,690
8,780
4,940
18,370
9,640
8,860
8,960
4,500
17,300
9,760
460
900
1,270
880
270
1,350
1,050
630
230
800
240
580
420
940
750
420
970
210
430
840
830
1,080
60
1,860
710
600
340
1,250
660
1,040
640
-
2,700
660
Total Victorian properties
250,386
405,970
384,400
26,070
43
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 17
Investment properties (continued)
Property
Western Australia
Queens Tavern, Highgate
Sail & Anchor Hotel, Fremantle
The Brass Monkey Hotel, Northbridge
Balmoral Hotel, East Victoria Park
Total Western Australian properties
Total investment properties
Cost
including
additions
$'000
Valuation
type and
date
Fair value
at 30 June
2014
$'000
Fair value
at 30 June
2013
$'000
Date
acquired
Fair value
gains/
(losses)
30 June
2014
$'000
Nov-03
Nov-03
Nov-07
Jul-07
4,812
3,114
7,815
6,377
22,118
516,236
A
B
B
A
8,000
4,650
8,330
6,275
7,700
4,480
8,040
6,050
27,255
26,270
300
170
290
225
985
821,680
786,000
40,180
Reconciliation of fair value gains/losses for year ending 30 June 2014
Fair value as at beginning of the year
Disposals during the year
Carrying amount before revaluations
Fair value as at end of the year
Fair value gain/(loss) for year
Valuation type and date
786,000
(4,500)
781,500
821,680
771,530
( 635)
770,895
786,000
40,180
15,105
A
B
C
Independent valuations conducted during June 2014 with a valuation date of 30 June 2014.
Directors' valuations conducted during June 2014 with a valuation date of 30 June 2014.
Property was sold during the current financial year
44
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 18
Payables
Trade creditors
Interest accrued on CIB
Interest accrued on CMBS
Interest accrued on AMTN
Prepaid interest on AMTN received
Interest accrued on interest rate hedges
Interest accrued on ALE Notes 2
Other accruals
Note 19
Provisions
Provision for distribution
Provision for employee entitlements
Provision for distribution
Balance at the beginning of the year
Provisions made during the year
Provisions used during the year
Balance at the end of the year
Provision for employee entitlements
Balance at the beginning of the year
Provisions made during the year
Provisions used during the year
Balance at the end of the year
2014
$'000
2013
$'000
237
538
-
983
4,736
-
789
1,240
8,523
16,145
126
16,271
15,539
32,237
(31,631)
16,145
101
111
(86)
126
177
521
918
-
-
167
1,285
1,168
4,236
15,539
101
15,640
12,789
31,025
(28,275)
15,539
46
114
(59)
101
Distribution
The provision for distribution relates to distributions paid to stapled securityholders. The balance
at 30 June 2014 will be paid to securityholders on 5 September 2014.
Employee entitlements
The provision for employee entitlements relates to annual leave and long service leave owing to
employees. It will be paid out as and when employees take leave.
Note 20
Borrowings
Current borrowings
ALE Notes 2
Non-current borrowings
CIB
CMBS
AMTN
ALE Notes 2
Note
(e)
(b)
(c)
(d)
(e)
2014
$'000
2013
$'000
102,383
102,383
140,536
-
333,515
-
474,051
-
-
136,860
157,449
-
163,350
457,659
45
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 20
Borrowings (continued)
Capital Indexed Bond (CIB)
Gross value of debt
Accumulated indexation
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Accumulating indexation
Amortisation of establishment costs
Closing balance
Commercial Mortgage Backed Securities (CMBS)
Gross value of debt
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Borrowings repaid
Borrowing establishment costs capitalised
Amortisation of establishment costs
Closing balance
Australian Medium Term Notes (AMTN)
Gross value of debt
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Proceeds from AMTN issue
Prepaid interest on AMTN received
Borrowing establishment costs capitalised
Discount on issue
Amortisation of establishment costs and discount
Closing balance
ALE Notes 2
Gross value of debt
Unamortised borrowing costs
Net balance
Movements for the year
Opening balance
Proceeds of borrowings
Borrowings repaid
Borrowing establishment costs capitalised
Amortisation of establishment costs
Closing balance
46
2014
$'000
2013
$'000
111,900
29,501
(865)
111,900
25,876
(916)
140,536
136,860
136,860
3,625
51
134,857
1,979
24
140,536
136,860
-
-
-
160,000
(2,551)
157,449
157,449
(160,000)
-
2,551
-
335,000
(1,485)
333,515
-
339,736
(4,736)
(1,387)
(107)
9
333,515
156,718
-
-
731
157,449
-
-
-
-
-
-
-
-
-
-
102,597
(214)
165,001
(1,651)
102,383
163,350
163,350
-
(62,404)
(27)
1,464
123,145
40,000
(907)
1,112
102,383
163,350
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 20
Borrowings (continued)
CPI Hedge - Terminated in 2013
Opening balance
Accumulating indexation
Amortisation of establishment costs
Borrowings repaid
Closing balance
(a) Terms and Repayment Schedule
-
-
-
-
-
35,917
1,290
57
(37,264)
-
CIB
CMBS
CMBS
AMTN
AMTN
ALE Notes 2
Nominal
Interest Rate
Maturity
Date1
Face Value
Carrying
Amount
Face Value
Carrying
Amount
30 June 2014
30 June 2013
3.4%2
BBSW + 2.20%
BBSW + 3.75%
4.25%
5.00%
BBSW + 4.00%
Nov-2023 111,900
-
May-2016
-
May-2016
110,000
Aug-2017
225,000
Aug-2020
102,597
Aug-2014
141,401
-
-
110,000
225,000
102,597
111,900
146,000
14,000
-
-
165,001
137,776
146,000
14,000
-
-
165,001
549,497
578,998
436,901
462,777
Unamortised borrowing costs
Total borrowings
(2,564)
(5,118)
576,434
457,659
1. Maturity date refers to the first scheduled maturity date for each tranche of borrowing. The CMBS and ALE Notes 2 borrowings had extension
provisions as outlined in (c) and (d) below.
2. Interest is payable on the indexed balance of the CIB at a fixed rate.
(b) CIB
$125 million of CIB was issued in May 2006 of which $111.9 million face value remains outstanding. 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 accumulating quarterly
in line with the national consumer price index. The total amount of the accumulating indexation is not payable until maturity of the CIB in
November 2023.
(c) CMBS
On 29 April 2011 $160 million of CMBS were issued with a scheduled maturity of 20 May 2016.
On 20 June 2014 the outstanding CMBS were redeemed in full in accordance with their terms of issue.
As required by the CMBS issue on 29 April 2011, ALE put in place $160 million of interest rate hedge contracts to cover 100% of the
floating rate CMBS interest payments. Under these hedge contracts, ALE is obliged to receive floating rate interest and pay fixed rate
interest. Following the redemption of the CMBS the interest rate hedge contracts were terminated.
(d) AMTN
On 10 June 2014 ALE issued $335 million AMTNs in 2 tranches. $110 million with a maturity date of 20 August 2017 and $225 million
with a maturity date of 20 August 2020. The AMTNs are fixed rate securities with interest payable semi annually.
(e) ALE Notes 2
$125 million of ALE Notes 2 were issued on 30 April 2010, with a scheduled maturity date of 20 August 2014. During the prior period an
additional $40 million of notes were issued with the same maturity date. Under the terms of the issue, ALE had the right to extend the
maturity date by one or two years, at which time a redemption premium of $1 or $2 respectively becomes due and payable upon
maturity. Interest is payable on the ALE Notes 2 on a floating rate basis.
During the period ALE conducted an on-market buyback of ALE Notes 2 at $101 per note. A total of 624,038 ALE Notes 2 were bought
back and cancelled. The remaining ALE Notes 2 are expected to be redeemed on their maturity date of 20 August 2014.
47
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 20
Borrowings (continued)
(f) CPI Hedge
On 7 December 2007, ALE entered into a 16 year CPI Hedge in respect of the $245 million of floating rate debt. Under the hedge ALE
received floating interest rates plus a margin of 0.2575% and paid a fixed rate of 3.61% on a balance escalating with CPI until
November 2023. The CPI Hedge indexation was calculated with reference to the national CPI. The indexation that accumulated was
added to the $245 million notional balance of the CPI Hedge. During the prior period the CPI Hedge was terminated.
(g) Interest rate hedges
At 30 June 2014, the notional principal amounts and periods of expiry of the interest rate hedge contracts are as follows:
Less than 1 year
1 - 2 years
2 - 3 years
3 - 4 years
4 - 5 years
Greater than 5 years
Nominal Interest Rate
Hedges
Counter Hedges on Nominal
Interest Rate Hedges
Net Derivative Position
2014
$'000
-
-
-
-
-
280,000
280,000
2013
$'000
25,000
70,000
-
-
-
345,000
440,000
2014
$'000
-
-
-
-
-
(30,000)
(30,000)
2013
$'000
-
(106,000)
-
-
-
(54,000)
(160,000)
2014
$'000
-
-
-
-
-
250,000
250,000
2013
$'000
25,000
(36,000)
-
-
-
291,000
280,000
The hedge contracts require settlement of net interest receivable or payable on a quarterly basis. The settlement dates coincide with the
dates on which interest is payable on the underlying borrowings. The contracts are settled on a net basis.
The average weighted term of the interest rate hedges and fixed rate securities in relation to the total borrowings of ALE has decreased
from 9.7 years at 30 June 2013 to 8.8 years at 30 June 2014.
The gain or loss from marking to market the interest rate hedges (derivatives) at fair value is taken directly to the statement of
comprehensive income. In the year ended 30 June 2014, a decrement in value of $21.203 million was recognised to the Statement of
Comprehensive Income (2013: decrement in value of $25.455 million).
(h) Assets pledged as security
The ALE Notes 2 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 - CIB/CMBS borrowings reserve
Cash - CIB/CMBS Sales Proceeds Account
Cash - Hedging collateral
Non-current assets
Total investment properties
Less: Properties not subject to mortgages
Pritchard's Hotel, Mt Pritchard, NSW
Properties subject to mortgages
Total assets pledged as security
2014
$'000
8,390
-
-
2013
$'000
8,390
10,150
10,000
821,680
786,000
(19,600)
802,080
810,470
(18,910)
767,090
795,630
Following the early redemption of the CMBS the cash held within the sale proceeds account was withdrawn. During the prior period the
Boundary Hotel was transferred into the security pool and $19.85 million of cash was withdrawn from the Sale Proceeds Account.
In the unlikely event of a default by the properties' tenant, Australian Leisure and Hospitality Group Pty Limited (ALH), and if the assets
pledged as security are insufficient to fully repay CIB borrowings, the CIB holders are also entitled in certain circumstances to recover
certain unpaid amounts from the business assets of ALH.
48
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 20
Borrowings (continued)
(i) Financial Covenants
ALE is required to comply with certain financial covenants in respect of its borrowing facilities. The major financial covenants are
summarised as follows:
Loan to Value Ratio covenants (LVR)
Borrowing
CIB
CIB
AMTN
AMTN
AMTN
ALE Notes 2
LVR Covenant
Outstanding indexed value of CIB not to exceed
30% of the CIB property security values
Outstanding value of CIB not to exceed 66.6% of
the CIB property security values
Net Priority Debt not to exceed 20% of Net Total
Assets
Consequence
ALE cannot borrow additional CIB if doing so would
cause the LVR to be exceeded
Counterparty can terminate the CIB
ALE DPT cannot borrow additional secured debt if
doing so would cause the LVR to be exceeded
Net Finance Debt not to exceed 60% of Net Total
Assets
Net Finance Debt not to exceed 65% of Net Total
Assets
New debt cannot be issued, equity cannot be
bought back and special distributions cannot be
paid if to do so would make total borrowings (total
borrowings less cash) exceed 67.5% of total assets
(total assets less cash and derivatives). This
covenant is not breached by any other action,
including a change in the value of ALE's property
assets
Stapled Security distribution lockup
Note holders may call for notes to be redeemed
Stapled Security distribution lockup. A step up margin
of 2.0% will be added
Definitions
All covenants exclude the mark to market value of derivatives
Interest Cover Ratio covenants (ICR)
Borrowing
CIB
CIB
AMTN
LVR covenant
ALH EBITDAR to be greater than 7.5 times CIB
Interest
ALH EBITDAR to be greater than 5.0 times the CIB
interest
ALE DPT EBITDA to be greater than or equal to 1.5
times ALE DPT interest expense
Consequence
Stapled security distributions lockup
Stapled security distributions and ALE Notes 2 interest
lockup
Note holders may call for notes to be redeemed
ALE Notes 2
No covenant
Nil
Definitions
Interest amounts include all derivative rate swap payments and receipts
EBITDAR - Earnings before Interest, Tax, Depreciation, Amortisation and Rent
No ICR covenants exist in relation to the various hedging facilities.
49
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 20
Borrowings (continued)
Rating covenant
Borrowing
AMTN
LVR covenant
AMTN issue rating to be maintained at investment
grade. (ie at least Baa3/BBB-)
Consequence
Published rating of Ba1/BB+ or lower results in a step
up margin of 1.25% to be added to the interest rate
payable
ALE currently considers that significant headroom exists with respect of all the above covenants.
At all times during the years ended 30 June 2014 and 30 June 2013, ALE and its subsidiaries were in compliance with all the above
covenants.
Note 21
Contributed equity
Balance at the beginning of the period
Securities issued - Placement
Securities issued - Security Purchase Plan
Securities issued - ALE Executive Performance Rights Plan
Securities issued - Distribution Reinvestment Plan
Costs associated with on-market purchase of securities for the Distribution
Reinvestment Plan
Capital raising costs
Movements in the number of fully paid stapled securities during the year
Stapled securities on issue:
Balance at the beginning of the period
Securities issued - Placement
Securities issued - Security Purchase Plan
Securities issued - ALE Executive Performance Rights Plan
Securities issued - Distribution Reinvestment Plan
Balance at the end of the period
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 unit holder is entitled to one
vote for each fully paid unit.
2014
$'000
2013
$'000
254,080
182,255
-
-
-
3,939
(149)
-
40,000
27,024
19
6,253
-
(1,471)
257,870
254,080
2014
Number of
Stapled
Securities
2013
Number of
Stapled
Securities
194,238,078
-
-
-
1,464,255
159,862,513
18,779,343
12,686,573
8,801
2,900,848
195,702,333
194,238,078
50
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 21
Contributed equity (continued)
Institutional placement and security purchase plan
During the prior year ALE Property Group undertook a Placement of stapled securities. These
stapled securities were issued at $2.13 each. In addition a Security Purchase Plan was conducted
with the stapled securities issued at $2.13 each.
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 4.43% 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.
Note 22
Retained profits
Balance at the beginning of the year
Profit attributable to stapled securityholders
Transfer from share based payments reserve
Total available for appropriation
Distributions provided for or paid during the year
Balance at the end of the year
Note 23
Share Based Payments Reserve
Balance at the beginning of the year
Employee share based payments
Transfer to/(from) Retained Profits on lapsing of Performance Rights
Issue of stapled securities
Share based payments are detailed further in Note 24.
2014
$'000
2013
$'000
113,895
37,194
(81)
151,008
(32,193)
118,815
382
272
(50)
-
604
130,039
14,909
(28)
144,920
(31,025)
113,895
207
166
28
(19)
382
51
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 24
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 at nil cost to the employee. Under the Performance Rights Plan grants of performance rights have
been made to Mr Wilkinson and Mr Slade. In accordance with the plan the performance rights vest upon performance hurdles being
achieved. The Performance Rights Plan was discontinued in 2012 and replaced with an Executive Stapled Securities Scheme. The
following table lists the vested performance rights that remain outstanding at the end of the year.
Performance Rights (PR) Plan
The terms and conditions of outstanding grants are as follows:
Employee
Grant date
Number of PR
Vesting
conditions
Mr A J Slade
1 Jul 2009
8,272
1. Service period
2. Absolute Total Shareholder Return (TSR)
3. Total TSR compared to comparative group
Contractual life
of PRs
30 Jun 2012
The vesting conditions for Mr Slade's performance rights are tested annually soon after 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
Issued during year
Lapsed during year
Outstanding at 30 June
Number of
performance
rights
Weighted
average fair
value
Number of
performance
rights
Weighted
average fair
value
2014
2014
2013
2013
56,990
-
(48,718)
-
8,272
1.05
-
1.27
-
1.05
65,791
-
(8,801)
-
56,990
1.05
-
1.27
-
1.05
During July 2013 45,200 securities owing to Mr Wilkinson and 3,518 securities owing to Mr Slade were purchased on market to satisfy the
delivery of performance rights that had vested on 1 July 2013 following the expiry of the two year delayed delivery period.
Executive Stapled Securities Scheme
For the year ended 30 June 2013 the following table summarises the number of ESSS Rights granted. The number of Stapled Securities
awarded was determined by dividing the value of the 2013 grant by the volume weighted average price for the five trading days
commencing the day following the signing of ALE Property Group’s 2013 full year statutory financial statements.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
2013
Number
2012
Number
34,878
19,092
8,825
8,825
43,136
23,611
-
-
52
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 24
Share based payments (continued)
For the year ended 30 June 2014 the following ESSS Rights were granted to executives under the ESSS. The number of Stapled
Securities awarded will be determined by dividing the value of the grant by the volume weighted average price for the five trading days
commencing the day following the signing of ALE Property Group’s full year statutory financial statements for the year. The number of
securities granted for the current year grants will be determined on 14 August 2014.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
The numbers of ESSS Rights outstanding at the end of the financial year is as follows:
2014
$
2013
$
162,500
80,000
20,000
10,000
79,040
43,264
20,000
20,000
Number
ESSS rights
Weighted
average fair
value
Number of
ESSS rights
Weighted
average fair
value
2014
2014
2013
2013
101,318
71,620
-
-
172,938
1.58
2.27
-
-
1.87
34,571
66,747
-
-
101,318
1.45
1.65
-
-
1.58
Outstanding at beginning of the year
Granted during year
Vested during year
Lapsed during year
Outstanding at the end of the year
Note 25
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
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
A F O Wilkinson (Managing Director)
J T McNally
Type
Non-executive
Non-executive
Non-executive
Non-executive
Executive
Executive
Appointed
8 September 2003
19 August 2003
8 September 2003
26 November 2013
16 November 2003
26 June 2003
Other key management personnel
(b)
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
M J Clarke
D J Shipway
B R Howell
Title
Capital Manager
Finance Manager and Assistant Company Secretary
Asset Manager
Company Secretary and Compliance Officer
Compensation for key management
(c)
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
Other long term benefits
Share based payments
Termination benefits
53
2014
$
2013
$
1,818,454
98,461
47,726
272,500
-
1,619,424
84,622
22,401
162,304
-
2,237,141
1,888,751
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 26 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
Note 27 Related party transactions
(a)
Details are set out in Note 34.
Parent entity and subsidiaries
2014
$
2013
$
180,500
8,500
201,000
-
189,000
201,000
(b)
Key management personnel and their compensation is set out in Note 25.
Key management personnel
Transactions with related parties
(c)
For the year ended 30 June 2014, the Company received $3,843,332 of expense reimbursement from the Trust (2013: $4,056,771),
and the Finance Company charged the Sub Trust $45,368,224 in interest (2013: $21,112,469).
Peter Warne is a non-executive director of Macquarie Group Limited (Macquarie). Macquarie has provided corporate advice and
underwriting services 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 any of the above matters.
(d)
All related party transactions are conducted on normal commercial terms and conditions.
Terms and conditions
Outstanding balances are unsecured and are repayable in cash and callable on demand.
Note 28 Commitments
(a)
The Directors are not aware of any capital commitments as at the date of this report.
Capital commitments
Leases as Lessee
(b)
The Company has entered into a 5 year non-cancellable operating lease for office premises at Level 10, 6 O'Connell Street, Sydney
starting November 2010. The Company has also entered into a non-cancellable operating lease for office equipment. The minimum net
lease commitments under these leases are:
(i) Future minimum lease payments
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
(ii) Amount recognised in the profit and loss
2014
$'000
2013
$'000
123
46
-
169
112
154
-
266
Rent expense
114
110
54
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 28 Commitments (continued)
(b)
The Group leases out its investment properties (see note 17)
Leases as lessor
(i) Future minimum lease payments
The future minimum lease payments in relation to non-
cancellable leases are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
(ii) Amount recognised in the profit and loss
2014
$'000
2013
$'000
55,223
237,674
619,316
54,254
230,921
687,688
912,213
972,863
Rental income
54,187
53,099
The above amounts are based on the assumption of CPI rental increases of 2.50% per annum and a 10% increase in rentals per applicable property at the November
2018 market rent review (10% cap and floor is applicable at this time).
Note 29 Contingent liabilities and contingent assets
Put and call options
For most 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 of four subsequent ten year terms if the lease in not renewed, there is a call option for ALE (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, at that time, as
determined by the valuation methodology set out in the leases. ALE must pay the purchase price on expiry of the lease. Any leasehold
improvements funded and completed by the tenant will be purchased by ALE from the tenant for an amount of $1.
Bank guarantee
ALE has entered into a bank guarantee of $184,464 in respect of the office tenancy at Level 10, 6 O'Connell Street, Sydney.
Note 30 Investments in controlled entities
The Trust owns 100% of the issued units of the Sub Trust. The Sub Trust owns 100% of the issued shares of the Finance Company.
The Trust owns none of the issued shares of the Company, but is deemed to be its "acquirer" under IFRS.
In addition, the Trust owns 100% of the issued units of ALE Direct Property Trust No.2, which in turns owns 100% of the issued shares
of ALE Finance Company No.2 Pty Limited. Both of these Trust subsidiaries are dormant.
Note 31 Segment information
Business segment
The results and financial position of ALE's single operating segment, ALE Strategic Business Unit, are prepared for the Managing
Director on a quarterly basis. The strategic business unit covers the operations of the responsible entity for the ALE Property Group.
Comparative information has been presented in conformity with the requirements of AASB 8 Operating Segments.
All ALE Property Group's properties are leased to members of the ALH Group, and accordingly 100% of the rental income is received
from ALH (2013: 100%).
Geographical segment
ALE owns property solely within Australia.
Note 32 Events occurring after reporting date
There has not arisen in the interval between the end of the financial year and the date of this report, any 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 Group,
the results of those operations, or the state of affairs of the Group, in future financial years.
55
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 33
Financial Instruments
Credit risk
(a)
ALE's major credit risk is 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 if the tenant has appropriate financial
standing having regard to the various security arrangements that are in place.
Credit risk on cash is managed through ensuring all cash deposits are held with authorised deposit taking institutions.
The credit risk on the financial assets of ALE which have been recognised in the statement of financial position is generally the carrying
amount net of any provision for doubtful debts.
Exposure to credit risk
Receivables
Derivatives
Cash and cash equivalents
Impairment losses
The ageing of trade receivables at balance date was:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121-365 days
More than one year
Note
16
11
15
2014
$'000
2,147
4,108
149,963
156,218
2013
$'000
1,377
17,425
54,652
73,454
2014
Gross
2013
Gross
Receivable Impairment
$'000
-
-
-
-
-
$'000
2,147
-
-
-
-
Receivable Impairment
$'000
-
-
-
-
-
$'000
1,363
-
14
-
-
2,147
-
1,377
-
Based on historic default rates, ALE believes that no impairment allowances are necessary in respect of trade receivables as at 30 June
2014, 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.
30 June 2014
Carrying
amount
$'000
Contractual
cash flows
6 months or
less
6-12 months
1-2 years
2-5 years
More than five
years
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative financial liabilities
Trade and other payables
CIB
AMTN
ALE Notes 21
8,523
140,536
333,515
102,383
(8,523)
(230,354)
(424,224)
(104,326)
(8,523)
(2,420)
(7,962)
(104,326)
(2,452)
(7,962)
-
(5,000)
(15,925)
-
(15,773)
(150,500)
-
(204,709)
(241,875)
-
Derivative financial instruments
Interest rate hedges
(4,108)
5,414
448
135
207
(118)
4,742
580,849
(762,013)
(122,783)
(10,279)
(20,718)
(166,391)
(441,842)
1 - Assumes ALE's rights to extend for a further one or two years are not exercised
56
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 33
Financial instruments (continued)
30 June 2013
Carrying
amount
$'000
Contractual
cash flows
6 months or
less
6-12 months
1-2 years
2-5 years
More than five
years
$'000
$'000
$'000
$'000
$'000
$'000
Non-derivative financial liabilities
Trade and other payables
CIB
CMBS
ALE Notes 21
4,236
136,860
157,449
163,350
(4,236)
(250,526)
(183,612)
(177,732)
(4,236)
(2,358)
(4,118)
(5,631)
-
(2,395)
(4,051)
(5,539)
-
(4,900)
(8,169)
(166,562)
-
(15,592)
(167,274)
-
-
(225,281)
-
-
Derivative financial instruments
Interest rate hedges2
1,742
785
4,114
3,350
(4,830)
(11,162)
9,313
463,637
(615,321)
(12,229)
(8,635)
(184,461)
(194,028)
(215,968)
1 - Assumes ALE's rights to extend for a further one or two years are not exercised
2 - Contractual cashflows reported in 2013 Financial Statements contained a transposition error that has been amended
Interest rates used to determine contractual cash flows
The interest rates used to determine the contractual cash flows, where applicable, are based on interest rates, including the relevant
credit margin, applicable to the financial liabilities at balance date. The contractual cash flows have not been discounted. The inflation
rates used to determine the contractual cash flows, where applicable, are based on inflation rates applicable at balance date.
Interest rate risk
(c)
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 (hedges) 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 or hedged 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, ALE's interest rate sensitive financial instruments were as follows:
Derivative financial assets
Derivative financial liabilities
Borrowings
CIB
CMBS
AMTN
ALE Notes 2
2014
$'000
4,108
-
(140,536)
-
(333,515)
(102,383)
2013
$'000
17,425
(18,811)
(136,860)
(157,449)
-
(163,350)
(572,326)
(459,045)
57
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 33
Financial instruments (continued)
Sensitivity analysis
A change of 100 basis points in the prevailing nominal market 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 was performed on the same basis for 2013.
30 June 2014
Interest rate hedges
CIB
CMBS
AMTN
ALE Notes 2
30 June 2013
Interest rate hedges
CIB
CMBS
ALE Notes 2
Statement of
Comprehensive Income
Equity
100 bps
increase
100 bps
decrease
100 bps
increase
100 bps
decrease
$'000
$'000
$'000
$'000
3,789
-
-
-
-
(4,345)
-
-
-
-
3,789
-
-
-
-
(4,345)
-
-
-
-
3,789
(4,345)
3,789
(4,345)
16,912
-
-
-
(18,752)
-
-
-
16,912
-
-
-
(18,752)
-
-
-
16,912
(18,752)
16,912
(18,752)
The impact on the Statement of Comprehensive Income 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.
(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 property valuations.
Profile
At the reporting date, ALE's CPI sensitive financial instruments were as follows:
Financial instruments
Investment properties
CIB
2014
$'000
2013
$'000
821,680
(140,536)
786,000
(136,860)
681,144
649,140
58
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 33
Financial instruments (continued)
Sensitivity analysis for variable rate instruments
A change of 100 bps in CPI at the reporting date would have increased/(decreased) Statement of Comprehensive Income and Equity by
the amounts shown below. This analysis assumes that all other variables, in particular the interest rates and capitalisation rates
applicable to investment properties, remain constant. The analysis was performed on the same basis for 2013.
30 June 2014
Investment properties
CIB
30 June 2013
Investment properties
CIB
Statement of
Comprehensive Income
100 bps
decrease
$'000
100 bps
increase
$'000
Equity
100 bps
increase
$'000
100 bps
decrease
$'000
8,878
-
8,878
7,724
-
7,724
-
-
-
-
-
-
8,878
-
8,878
7,724
-
7,724
-
-
-
-
-
-
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. Under the terms of the leases on the
ALE properties there is no change to rental income should CPI decrease.
There is no impact on the Statement of Comprehensive Income or Equity arising from a 100 bps movement in CPI at the reporting date
on the CIB, as the terms of this instrument use CPI rates for the quarters ending the preceding March and December to determine their
values at 30 June.
59
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
(e)
Fair values
ALE measures and recognises the following financial assets and liabilities at fair value.
Derivative financial instruments
Fair Value hierarchy
The basis for determining fair values is disclosed in Note 4.
The ALE Notes 2 is a traded debt security on the Australian Securities Exchange. The fair value disclosed reflects the market value of the
ALE Notes 2 at the balance date.
The fair value of derivative financial instruments (level 2) is disclosed in the balance sheet.
The carrying amounts of receivable, cash, trade and other payables are assumed to approximate their fair values due to their short term
nature.
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:
Financial assets measured at fair value
Derivatives
Financial assets not measured at fair value
Cash and cash equivalents
Receivables
Other assets
Financial liabilities not measured at fair value
Trade and other payables
CIB
CMBS
AMTN
ALE Notes 2
Carrying
Amount
2014
Fair
Value
2013
Fair
Value
Carrying
Amount
Fair
Value
Fair
Value
$'000
$'000 Hierarchy
$'000
$'000
Hierarchy
4,108
4,108
4,108
4,108
Level 2
(1,742)
(1,742)
(1,742) (1,742)
Level 2
149,963
2,147
249
152,359
149,963
2,147
249
152,359
-
-
-
54,652
1,377
226
54,652
1,377
226
56,255
56,255
-
-
-
(8,523)
(140,536)
-
(333,515)
(102,383)
(8,523)
(144,663)
-
(337,264)
(103,623)
-
Level 1
-
Level 1
Level 1
(4,236)
(136,860)
(157,449)
-
(163,350)
(4,236)
(136,296)
(162,236)
-
(167,872)
-
Level 1
Level 1
Level 1
Level 1
(584,957)
(594,073)
(461,895)
(470,640)
Valuation techniques used to derive level 2 fair values
The fair value of derivatives is determined by using counterparty mark-to-market valuation notices, cross checked internally by using a
generally accepted pricing model based on discounted cash flows analysis using quoted market inputs (interest rates) adjusted for
specific features of the instruments and applying a debit or credit value adjustment based on ALE's or the derivative counterparty's credit
worthiness.
Credit value adjustments are applied to mark-to-market assets based on the counterparty's credit risk using the credit default swap
curves as a benchmark for credit risk.
Debit value adjustments are applied to mark-to-market liabilities based on the ALE's credit risk using the credit rating of ALE issued by a
rating agency for the recent AMTN issue.
60
ALE Property Group
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended 30 June 2014
Note 34
Parent Entity Disclosures
As at, and throughout, the financial year ending 30 June 2014 the parent entity of ALE was Australian Leisure and Entertainment
Property Trust.
Result of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of the parent entity
Current assets
Cash
Receivables
Other
Non current assets
Investments in controlled entities
Total assets
Current liabilities
Payables
Provisions
Non current liabilities
Borrowings
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Issued units
Retained earnings
Total equity
2014
$'000
2013
$'000
32,193
-
32,193
23,982
-
23,982
33
67,009
-
275,656
342,698
789
16,184
102,383
119,356
29
124,242
-
275,656
399,927
1,331
15,539
163,351
180,221
223,342
219,706
252,192
(28,850)
248,553
(28,847)
223,342
219,706
61
Australian Leisure and Entertainment Property Management Limited
ABN 45 105 275 278
- 67 -
Directors Report
- 81 -
Auditor's
Independence
Declaration
- 82 -
Financial
Statements
- 82 -
Statement of
Comprehensive
Income
- 83 -
Statement of
Financial Position
- 84 -
Statement of changes
in Equity
- 85 -
Statement of
Cash Flows
- 86 -
Notes to the
Financial Statements
- 102 -
Director's
Declaration
- 104 -
Independent
Auditor's Report
to Stapled
Securityholders
Contents
ANNUAL REPORT
2014
Australian Leisure and Entertainment
Property Management Limited
WWW.ALEGROUP.COM.AU
- ibc -
Investor Information
and
Corporate Directory
66
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
The Directors of Australian Leisure and Entertainment Property Management Limited (the "Company") present their report for the year
ended 30 June 2014.
The registered office and principal place of business of the Company is:
Level 10
6 O'Connell Street
Sydney 2000
Directors
1
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
P H Warne
J P Henderson
H I Wright
P J Downes
A F O Wilkinson
J T McNally
(Chairman)
(Managing Director)
Type
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Executive
Executive
Appointed
8 September 2003
19 August 2003
8 September 2003
26 November 2013
16 November 2004
26 June 2003
Principal activities
2
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.
Dividends
3
No provisions for or payments of Company dividends have been made during the year (2013: nil).
Review of operations
4
A summary of the revenue and results for the year is set out below:
Revenue
Expense reimbursement
Interest income
Total revenue
Expenses
Salaries, fees and related costs
Other expenses
Total expenses
Profit/(loss) before income tax
Income tax expense
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
5
Significant changes in the state of affairs
30 June
2014
$
30 June
2013
$
3,843,332
93,199
4,056,771
76,873
3,936,531
4,133,644
2,490,680
1,568,256
2,176,071
1,880,700
4,058,936
4,056,771
(122,405)
76,873
16,576
(138,981)
Cents
(0.07)
-
7.35
69,187
7,686
Cents
0.00
-
7.32
In the opinion of the Directors, there were no significant changes in the state of affairs of the Company that occurred during the year.
67
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
Matters subsequent to the end of the financial year
6
In the opinion of the Directors of the Company, no transaction or event of a material and unusual nature has occurred between the end
of the financial year and the date of this report that may significantly affect the operations of the Company, the results of those
operations or the state of the affairs of the Company in future financial years.
Likely developments and expected results of operations
7
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.
Information on Directors
8
Mr Peter Warne B.A, MAICD, 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 Chairman of OzForex Group Limited and a board member of three other
listed entities, being ASX Limited, Macquarie Group Limited and Crowe Horwath Australasia Limited. He is also on the board of NSW
Treasury Corporation and Securities Industry Research Centre for Asia Pacific (SIRCA) and is a member of the Advisory Board for the
Australian Office of Financial Management.
Peter graduated from Macquarie University with a Bachelor of Arts, majoring in Actuarial Studies. He qualified as an associate of, and
received a Certificate of Finance and Investment from, the Institute of Actuaries, London.
Mr John Henderson B.Bldg, MRICS, AAPI, Non-Executive Director.
Experience and expertise
John was appointed as a non-executive director of the Company in August 2003. John has been a director of Marks Henderson Pty Ltd
since 2001 and is actively involved in the acquisition of investment property.
Previously an International Director at Jones Lang LaSalle and Managing Director of the Sales and Investment Division, he was
responsible for overseeing the larger property sales across Australasia, liaising with institutional and private investors, and coordinating
international investment activities. John graduated from the University of Melbourne and is a member of the Royal Institution of
Chartered Surveyors, is an associate of the Australian Property Institute and is a licensed real estate agent.
Ms Helen Wright LL.B, MAICD, Non-Executive Director.
Experience and expertise
Helen was appointed as a non-executive director of the Company in September 2003. Helen was a partner of Freehills, a leading
Australian firm of lawyers, from 1986 to 2003. She practiced as a commercial lawyer specialising in real estate projects, including
development and financing and related taxation and stamp duties.
Helen is the Chair of the Advisory Committee of Screen NSW (formerly Film & Television Office), and is the Statutory and Other Offices
Remuneration Tribunal and until very recently was the Local Government Remuneration Tribunal for NSW. Prior appointments include the
Boards of several State, university, commercial and charitable entities. 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.
68
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
Ms Phillipa Downes, BSc (Bus Ad), MAppFin, GAICD, Non-executive Director.
Experience and expertise
Pippa was appointed a Director on 26 November 2013.
Ms Downes is a director of the ASX Group clearing and settlement facility licensees and their intermediate holding companies. She is also
a director of the Pinnacle Foundation. Ms Downes was a Managing Director and Equity Partner of Goldman Sachs in Australia until
October 2011, working in the Proprietary Investment division. Ms Downes has had a successful international banking and finance career
spanning over 19 years where she has led the local derivative and trading arms of several of the world’s leading Investment Banks. She
has extensive experience in Capital Markets, derivatives and asset management.
Prior to joining Goldman Sachs in 2004, Ms Downes was a director and the Head of Equity Derivatives Trading at Deutsche Bank in
Sydney. When Morgan Stanley was starting its equity franchise in Australia in 1998 she was hired as the Head of the Equity Derivative
and Proprietary Trading business based in Hong Kong and Australia. Ms Downes started her career working for Swiss Bank O’Connor on
the Floor of the Pacific Coast Stock Exchange in San Francisco, followed by the Philadelphia Stock Exchange before returning to work in
Sydney as a director for UBS.
Pippa graduated from the University of California at Berkeley with a Bachelor of Science in Business Administration majoring and Finance
and Accounting. Pippa also completed a Masters of Applied Finance from Macquarie University in 1998.
Mr Andrew Wilkinson B.Bus. CFTP, MAICD, 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 around 35 years’ experience in banking, corporate finance and funds management. He was
previously a corporate finance partner with PricewaterhouseCoopers and spent 15 years in finance and investment banking with
organisations including ANZ Capel Court and Schroders.
Mr James McNally B.Bus (Land Economy), Dip. Law, Executive Director.
Experience and expertise
James was appointed as an executive and founding director of the company in June 2003. James has over 20 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’
qualifications include a Bachelor of Business in land economy and a Diploma of Law. James is also a registered valuer and licensed real
estate agent.
Brendan Howell B.Econ, G.Dip App Fin (Sec Inst), Company Secretary.
Experience and expertise
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. He was formerly an associate member of both the Securities Institute of Australia
and the Institute of Chartered Accountants in Australia.
Brendan has over 23 years’ experience in the funds management and financial services industries. 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 14 years Brendan has been directly involved with MIA Services Pty Limited, a company which specialises in funds management
compliance, and acts as an independent consultant and external compliance committee member for a number of property, equity and
infrastructure funds managers. Brendan also acts as an independent director for several unlisted public companies, some of which act as
responsible entities.
Brendan is a member of the Australian Institute of Company Directors.
69
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
Independent member of the Audit, Compliance and Risk Management Committee (ACRMC)
Mr David Lawler B.Bus, CPA, Independent ACRMC Member.
Experience and expertise
David was appointed to ALE’s ACRMC on 9 December 2005 and has over 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 the Chair of the Australian Trade Commission Audit and
Risk Committee and is an audit committee member of the Australian Office of Financial Management, the Defence Materiel Organisation,
the Australian Sports Anti-Doping Authority, the National Mental Health Commission, the Australian Maritime Safety Authority 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
P H Warne
P H Warne
P H Warne
P H Warne
Directorships of listed entities
ASX Limited
Crowe Horwath Australasia Limited
OzForex Group Limited
Macquarie Group Limited
Type
Non-executive
Non-executive
Chairman
Non-executive
Appointed
July 2006
May 2007
October 2013
July 2007
Resigned
Special responsibilities of Directors
The following are the special responsibilities of each Director:
Director
P H Warne
H I Wright
J P Henderson
P J Downes
Special responsibilities
Chairman of the Board
Member of the Audit, Compliance and Risk Management Committee (ACRMC)
Chair of the Nominations Committee
Chair of the Remuneration Committee
Chair of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
Member of the ACRMC
Member of the Nominations Committee
Member of the Remuneration Committee
A F O Wilkinson
Chief Executive Officer and Managing Director of the Company
Responsible Manager of the Company under the Company’s Australian Financial Services Licence (AFSL)
J T McNally
Responsible Manager of the Company under the Company’s AFSL
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
P H Warne
J P Henderson
H I Wright
P J Downes
A F O Wilkinson
J T McNally
A J Slade
M J Clarke
D J Shipway
Role
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director
Executive Director
Capital Manager
Finance Manager
Asset Manager
70
Number held
at the start of
the year
1,185,000
176,365
150,000
-
168,468
-
27,900
9,121
-
Net
Movement
-
-
-
213,394
45,200
55,164
-
2,606
4,000
Number held
at the end of
the year
1,185,000
176,365
150,000
213,394
213,668
55,164
27,900
11,727
4,000
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
The following key management personnel currently hold rights over stapled securities in ALE:
Name
Performance Rights
A F O Wilkinson
A J Slade
ESSS Rights
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Role
Executive Director
Capital Manager
Executive Director
Capital Manager
Finance Manager
Asset Manager
Number held
at the start of
the year
Granted
during the
year
Lapsed/
Issued
during the
year
Number held
at the end of
the year
45,200
11,790
43,136
58,182
-
-
-
-
(45,200)
(3,518)
34,878
19,092
8,825
8,825
-
-
-
-
-
8,272
78,014
77,274
8,825
8,825
Meetings of Directors
The number of meetings of the Company’s Board of Directors held and of each Board committee meeting held during the year ended 30
June 2013 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
P J Downes
A F O Wilkinson
J T McNally
Board
ACRMC
Held1
12
12
12
9
12
12
Attended
12
11
11
9
12
12
Held1
7
7
7
4
n/a
n/a
Attended
7
7
7
4
n/a
n/a
Nominations and
Remuneration Committee
Attended
6
6
6
4
n/a
n/a
Held1
6
6
6
4
n/a
n/a
Member of Audit, Compliance and Risk Management Committee
7
D J Lawler
n/a
n/a
7
n/a
n/a
1 “Held” reflects the number of meetings which the Director or member was eligible to attend.
71
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
9 Remuneration Report (Audited)
This report provides details on ALE's remuneration structure, decisions and outcomes for the year ended 30 June 2014 for employees of ALE
including the directors, the Managing Director and key management personnel.
9.1 Remuneration Objectives and Approach
In determining a remuneration framework, the Board aims to ensure the following:
●
●
●
attracts, rewards and retains high calibre executives;
motivates executives to achieve performance that creates value for stapled securityholders; and
links remuneration to performance and outcomes achieved.
The framework aligns executive reward with achievement of strategic objectives and creation of value for stapled securityholders. To do this
the Board endeavours to ensure that executive reward satisfies the following objectives:
●
alignment with ALE's financial, operational, compliance and risk management objectives so as to achieve alignment with positive
outcomes for stapled securityholders;
alignment with ALE's overall performance;
transparent, reasonable and acceptable to employees and securityholders;
rewards the responsibility, capability, experience and contribution made by executives; and
market competitive and complementary to the reward strategy of the organisation.
●
●
●
●
The framework provides a mix of fixed and variable remuneration. Since the year ending 30 June 2012 the variable remuneration has been
provided through the Executive Incentive Scheme (EIS). Any award under the EIS is paid 50% in cash at the year end and 50% in stapled
securities with delivery deferred three years. The previous long term incentive arrangements (performance rights) have been discontinued.
9.2 Remuneration and Nominations Committee
The Remuneration and Nominations Committee ("the Committee") is a committee comprising non-executive directors of the Company. The
Committee strives to ensure that ALE's remuneration structure strikes an appropriate balance between the interests of ALE securityholders
and rewarding, motivating and retaining employees.
The Committee's charter sets out its role and responsibilities. The charter is reviewed on an annual basis. In fulfilling its role the Committee
endeavours to ensure the remuneration framework established will:
●
●
●
reward executive performance against agreed strategic objectives;
encourage alignment of the interests of executives and stapled securityholders; and
ensure there is an appropriate mix between fixed and "at risk" remuneration.
The Committee operates independently of management in its recommendations to the Board and engages remuneration consultants
independently of management. During the year ended 30 June 2014, the Committee consisted of the following:
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Refer page 69 of this report for information on the skills, experience and expertise of the Committee members.
The number of meetings held by the Committee and the members' attendance at them is set out on page 71.
The Committee considers advice from a wide range of external advisors in performing its role. During the current financial year the
Committee retained Godfrey Remuneration Group Pty Limited to provide remuneration advice and Herbert Smith Freehills to draft updated
executive service agreements.
Godfrey Remuneration Group Pty Limited was paid $25,000 for remuneration advice and Herbert Smith Freehills was paid $20,643 for
drafting of executive service agreements. Herbert Smith Freehills was paid $17,000 for other no remuneration related services in the current
year.
72
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
9.3 Executive Remuneration
Executive remuneration comprises both a fixed component and an 'at risk' component. It specifically comprises:
●
●
Fixed Annual Remuneration (FAR)
Executive Incentive Scheme (EIS)
9.3.1 Fixed Annual Remuneration (FAR)
What is FAR?
FAR is the guaranteed salary package of the executive and includes superannuation guarantee levy and
salary sacrificed components such as motor vehicles, computers and superannuation.
How is FAR set?
FAR is set by reference to external market data for comparable roles and responsibilities within similar
listed and unlisted entities within Australia.
When is FAR Reviewed?
FAR is reviewed in December each year with any changes being effective from 1 January of the following
year.
9.3.2 Executive Incentive Scheme (EIS)
What is EIS?
EIS is an "at risk" component of executive remuneration.
EIS is used to reward executives for achieving and exceeding annual individual key performance indicators
(KPIs).
The target EIS opportunity for executives varies according to the role and responsibility of the executive.
EIS awards comprise 50% cash and 50% deferred delivery stapled securities issued under the Executive
Stapled Securities Scheme (ESSS). For executives not invited to participate in the ESSS, the EIS is paid
fully in cash.
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Position
Managing Director
Capital Manager
Finance Manager
Property Manager
1. EIS awards are at the discretion of the Committee and the Board
Standard
EIS Target
(as a % of
FAR)
60%
50%
n/a1
n/a1
% of EIS
paid as
cash
50%
50%
50%
50%
% of EIS
paid as
ESSS
50%
50%
50%
50%
How are EIS targets and
objectives chosen?
At the beginning of each year, in addition to the standard range of operational requirements, the Board
sets a number of strategic objectives for ALE for that year. These objectives are dependent on the
strategic opportunities and issues facing ALE for that year and may include objectives that relate to the
short and longer term performance of ALE. Additionally, specific KPIs are established for all executives
with reference to their individual responsibilities which link to the addition to and protection of
securityholder value, improving business processes, ensuring compliance with legislative requirements,
reducing risks within the business and ensuring compliance with risk management policies, as well as
other key strategic non-financial measures linked to drivers of performance in future economic periods.
How is EIS performance
assessed?
The Committee is responsible for assessing whether the KPIs have been met. To facilitate this assessment,
the Board receives detailed reports on performance from management.
The quantum of EIS payments and awards are directly linked to over or under achievement against the
specific KPIs. The Board has due regard to the achievements outlined in section 9.4.
How are EIS awards
delivered?
EIS cash payments are made in August each year following the signing of ALE's full year statutory financial
statements.
The deferred component comprises an award of stapled securities under the ESSS. Any securities awarded
under the ESSS are delivered three years after the award date provided certain conditions have been met.
73
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
How is the ESSS award
calculated?
The number of ESSS Rights awarded annually under the ESSS will be determined by dividing the value of
the grant by the volume weighted average price for the five trading days commencing the day following
the signing of ALE's full year statutory financial statements, and grossing this number up for the future
value of the estimated distributions over the three year deferred delivery period.
What conditions are
required to be met for the
delivery of an ESSS award?
During the three year deferred delivery period, the delivery of the Stapled Securities issued under the ESSS
remains subject to the following clawback tests. ESSS rights will be forfeited in whole or in part at the
discretion of the Remuneration Committee if before the end of the deferred delivery period:
• the Committee becomes aware of any executive performance matter which, had it been aware of the
the matter at the time of the original award, would have in their reasonable opinion resulted in a lower
original award; or
• the executive engages in any conduct or commits any act which, in the Committee's reasonable
opinion, adversely affects ALE Property Group including, and without limitation, any act which:
results in the ALE having to make any material negative financial restatements;
causes the ALE to incur a material financial loss; or
causes any significant financial or reputational harm to ALE and/or its businesses.
・
・
・
9.3.3 Summary of Key Contract Terms
Contract Details
Executive
Position
Andrew
Wilkinson
Andrew
Slade
Michael
Clarke
Don
Shipway
James
McNally
Brendan
Howell
Managing
Director
Capital
Manager
Finance
Manager
and
Assistant
Company
Secretary
Ongoing
$196,000
3 months
3 months
Asset Manager Executive
Director
Company
Secretary
and
Compliance
Officer
Ongoing
$186,550
1 month
1 month
Ongoing
$100,000
1 month
1 month
Ongoing
$90,000
1 month
1 month
Contract Length
Fixed Annual Remuneration
Notice by ALE
Notice by Executive
Ongoing
$425,000
6 months
6 months
Ongoing
$240,000
3 months
3 months
Managing Director
Andrew Wilkinson's current service agreement expires on 31 August 2014. On 30 July 2014 Mr Wilkinson signed a new service agreement
that starts on 1 September 2014. The agreement stipulates the minimum base salary, inclusive of superannuation, as being $425,000, to be
reviewed annually each 31 December by the Board. An EIS, if earned, would be paid 50% as a cash bonus in August each year and 50% in
stapled securities issued under the ESSS and delivered three years following each of the annual grant dates.
In the event of the termination of Andrew Wilkinson’s service agreement and depending on the reason for the termination, amounts may be
payable for unpaid accrued entitlements and a proportion of EIS entitlements as at the date of termination. If employment is terminated in
circumstances of redundancy or without cause then he is entitled to an amount of fixed remuneration for six months. In addition he may
receive a pro-rata EIS award for the period of employment in the year of redundancy.
74
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
9.4 Executive Remuneration outcome for year ended 30 June 2014
Details of remuneration paid to Directors and Key Management Personnel is detailed in the table on page 79.
Executive Incentive Scheme Outcomes
ALE continues to perform well when compared to other Australian real estate investment trusts (AREITs).
The Committee reviewed the overall performance of ALE and the individual performance of all executives for the year ending 30 June 2014.
It was the view of the Committee that all standard KPIs and most of the major items in the Board approved corporate strategy had been
met. In particular, it was the Committee’s view that the refinancing of the CMBS and ALE Notes 2 with Australian Medium Term Notes
(AMTN) had been very successful and the ten month project to implement the refinancing was managed very well. In particular the
Committee noted;
Capital Matters
●
●
●
●
An investment grade unsecured rating from Moodys of Baa2 was awarded;
ALE issued one of the first AMTN's ranking behind a secured bond (CIBs);
ALE issued the only dual tranche AMTN in the market this year;
The capital management review during the year and the AMTN transaction were internally advised with management reviewing all
options and project managing the process. Accordingly the upfront cost was significantly lower than previous refinancings;
The debt investor market accepted the AMTN issue very well with it being significantly over subscribed;
Achieved very aggressive market pricing resulting in significant interest expense savings. The refinancing delivered a margin reduction
of 1.75% (from 318 to 143 bps) equating savings of $5.7m p.a.;
Risk managed the outcome by running a parallel US Private Placement alternative funding process. This applied competitive pressure on
the AMTN market and was one of the factors that helped to drive a very positive outcome for AMTN pricing and terms;
Effective and concentrated road show marketing of ALE by the management team to more than 25 US based and 40 Australian and
Asian based debt investors helped to position ALE in a very positive light;
Funding diversification was achieved. ALE’s name is now established and well regarded in the significantly more liquid and flexible AMTN
capital market;
A sophisticated and well executed restructure was completed to materially simplify ALE's long term hedging arrangements; and
The completion of the AMTN refinancing delivered a diversified, flexible and increasingly simplified capital structure for ALE.
●
●
●
●
●
●
●
Other matters
●
●
ALE was awarded "AREIT of the Year" from Property Investment Research;
Sold the Victoria Hotel at Shepparton, Victoria at a low cap rate of 6.3%, delivering a strong value outcome for a property in that
regional location;
●
●
●
Considered a range of investment opportunities;
Positive investor feedback was received from publication of a Property Portfolio Valuation; and
Continued to deliver best in AREIT sector total returns for securityholders.
The Remuneration Committee considered these achievements and compared them to key performance indicators for each executive that
were set at the beginning of the year. The EIS result for the Managing Director and Capital Manager particularly reflect the positive
contributions they made to the various capital management activities, as outlined above. Other executives contributed to a range of the
important and valuable outcomes outlined above that were recognised in the EIS payments made. All the EIS payments are included in staff
remuneration expenses in the current year.
The EIS awarded to each member of the management team was as follows:
Executive
Andrew Wilkinson
Andrew Slade
Michael Clarke
Don Shipway
Target EIS
(as % of
FAR)
EIS
Awarded
(as % of
FAR)
EIS Awarded
as a % of
Target
EIS
Awarded
Cash
Component
ESSS
Component
60%
50%
n/a
n/a
76.5%
66.7%
20.4%
10.7%
127.5%
133.3%
-
-
$325,000
$160,000
$40,000
$20,000
$162,500
$80,000
$20,000
$10,000
$162,500
$80,000
$20,000
$10,000
75
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
ALE Financial Performance History
To provide context to ALE's performance, the following data and graphs outline a five year history of key financial metrics.
Distributable profit ($m)
Distribution per Security (cents)
Continuing property values ($m)
Net gearing 1
FY10
FY11
FY12
FY13
FY14
38.1
31.3
26.7
31.7
31.2
24.00
19.75
16.00
16.00
16.45
709.8
753.9
767.2
781.5
821.6
52.1%
51.7%
51.9%
50.8%
51.7%
1. Total borrowings less cash as a percentage of total assets less cash and derivatives
2. Includes only the value of properties held as at 30 June 2014
The accumulated value of $1.00 initial public offering (IPO) investment in ALE and reinvested distributions, rights renunciation payments
and current market value of securities as at 1 July 2014 totalled $7.93.
According to UBS for the period ending 30 June 2014 ALE continued to out perform other equity return benchmarks including the AREIT 200
index and the All ordinaries index for periods including three, five and ten years. For the one year period ALE's return of 15.1%
outperformed the AREIT 300 index of 11.1% and was slightly behind the All Ordinaries index of 17.3% p.a.
Growth in the value of the continuing properties between ALE's 2003 IPO and 30 June 2014 has averaged 4.32% p.a. This has exceeded
Distributable Profit ($m)
Gearing
Continuing Property Values ($m)
$30
$20
$10
$0
53.0%
52.0%
51.0%
50.0%
$850
$800
$750
$700
$650
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
F
Y
1
0
F
Y
1
1
F
Y
1
2
F
Y
1
3
F
Y
1
4
Accumulated Value for: AREITs $1.50, All Ords $2.62, ALE $7.931
1. Distributions include $0.41 payment for renouncing Sep 2009 rights and all other distributions paid and declared to September 2014
76
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
9.5 Disclosures relating to equity instruments granted as compensation
9.5.1 Outstanding equity instruments granted as compensation
Details of rights over stapled securities that have been granted as compensation and remain outstanding at year end and details of rights
that were issued during the financial period are as follows:
Executive
Performance Rights
A J Slade
ESSS Rights
A F O Wilkinson
A F O Wilkinson
A J Slade
A J Slade
A J Slade
M J Clarke
D J Shipway
Number of
Rights
Outstanding
Performance
Period Start
Date
Grant
Date
Fair value
of Right at
Grant
Date ($)
Delivery
Date
% vested
in year
% forfeited
in year
8,272
1 Jul 09
1 Jul 09
43,136
34,878
23,611
34,571
19,092
8,825
8,825
23 Aug 12
30 Sep 13
23 Aug 12
28 Jun 12
30 Sep 13
30 Sep 13
30 Sep 13
1 Jul 11
1 Jul 12
1 Jul 11
1 Jul 10
1 Jul 12
1 Jul 12
1 Jul 12
0.91
1.65
2.27
1.65
1.45
2.27
2.27
2.27
1 Jul 14
31 Jul 15
31 Jul 16
31 Jul 15
31 Jul 14
31 Jul 16
31 Jul 16
31 Jul 16
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
9.5.2 Modification of terms of equity settled share based payment transactions
No terms of equity settled share based payment transactions (including options and rights granted as compensation to key management
personnel) have been altered or modified by the issuing entity during the reporting period or the prior period.
9.5.3 Analysis of movements in performance rights
The movement during the reporting period, by value of performance rights over stapled securities in ALE is detailed below.
Executive
A F O Wilkinson
A J Slade
Granted in
year $ (a)
Vested in
year $ (b)
Lapsed in
year $ (c )
-
-
-
-
-
-
Securities
Issued in
the year $
122,193
9,510
Securities
Issued in
the year
(Number)
45,200
3,518
(a) The value of performance rights granted during the year 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.
(b) The value of performance rights vested during the year is calculated as the market price of the stapled securities of ALE as at the close
of trading on the day the performance rights vested.
(c) The value of performance rights lapsed during the year is calculated using the market price of the stapled securities of ALE as at the
close of trading on the day the performance rights lapsed.
9.5.4 Analysis of movements in ESSS rights
The movement during the reporting period, by value and number of ESSS rights over stapled securities in ALE is detailed below.
Executive
By Value ($)
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
By Number
A F O Wilkinson
A J Slade
M J Clarke
D J Shipway
Opening
Balance
Granted in
Year
Stapled
Securities
Issued in
the Year
Lapsed in
the Year
Closing
Balance
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,290
132,264
20,000
20,000
78,014
77,274
8,825
8,825
71,250
89,000
-
-
43,136
58,182
-
-
79,040
43,264
20,000
20,000
34,878
19,092
8,825
8,825
77
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
9.6 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, the risk-free interest
rate for the term of the performance right and any delayed delivery in the securities to the executive.
The value of ESSS disclosed in section 9.5.4 and 9.8 is based on the value of the grant at the award date. The number of Stapled Securities
issued annually under the ESSS award will be determined by dividing the value of the grant by the volume weighted average price for the
five trading days commencing the day following the signing of ALE Property Group’s full year statutory financial statements, and grossing
this number up for estimated distributions over the deferred delivery period. The number of securities granted in the current year will be
determined on 14 August 2014.
9.7 Non-executive Directors' Remuneration
9.7.1 Remuneration Policy and Strategy
Non-executive directors' individual fees are determined by the Company Board within the aggregate amount approved by shareholders. The
current aggregate amount which has been approved by shareholders at the AGM on 10 November 2010 was $500,000. During the year P J
Downes was appointed to the Board which has increased aggregate non-executive directors fees to slightly below this amount. In order to
facilitate the continuing Board renewal process shareholders will be asked at the next AGM on 6 November 2014 to approve an increase in
aggregate remuneration to $650,000. The individual directors fees will not change as a result of this increase if it is approved.
The Board reviews its fees to ensure that ALE non-executive directors are remunerated fairly for their services, recognising the level of skill,
expertise and experience required to conduct the role. The Board reviews its fees from time to time to ensure it is remunerating directors at
a level that enables ALE to attract and retain the right 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 reviewed by
Godfrey Remuneration Group Pty Limited in the current financial year. The result of this review was that no changes to fees and payments
were made. The Chairman’s fees are determined independently from the fees of the other 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 any equity based payments, retirement benefits or other incentive payments.
9.7.2 Remuneration Structure
ALE non-executive directors receive a cash fee for service and they have no entitlement to any performance based remuneration, nor can
they participate in any security based incentive scheme.
The current remuneration was last independently reviewed in January 2014. This resulted in no change to the Fee levels indicated below.
The Directors' fees are inclusive of superannuation, where applicable.
Board
ACRMC
Remuneration
Committee
Chairman*
Member
Chairman
Member
Chairman
Member
Board and Committee fees
$175,000
$85,000
$15,000
$10,000
$15,000
$5,000
* The Chairman of the Board's fees are inclusive of all committee fees.
James McNally's (Executive Director) remuneration is determined in accordance with the above fees. He receives an additional $5,000 for
being a Responsible Manager of the Company under the Company’s AFSL and $10,000 for being a director of ALE Finance Company Pty
Limited.
78
Australian Leisure and Entertainment Property Management Limited
DIRECTORS REPORT
For The Year Ended 30 June 2014
9.8 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
9.4 headed “Executive Incentive Scheme Outcomes”. Equity based payments for 2014 are non-market based performance related as set out in section 9.4. All other elements of remuneration were not directly related to performance.
Table 1 Remuneration details 1 July 2013 to 30 June 2014
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2014 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Other long
term
Equity based
payment
Name
Role
Salary &
Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
Termination
benefits
$
$
ESSS
$
Total
$
$
S300A(1)(e)(i)
proportion of
remuneration
performance
based
P H Warne
Non-executive Director
J P Henderson
Non-executive Director
H I Wright
P J Downes
B R Howell
Non-executive Director
Non-executive Director
Company Secretary
160,183
100,000
96,110
54,847
90,000
-
-
-
-
-
A F O Wilkinson
Executive Director
393,567
162,500
J T McNally
Executive Director
100,000
-
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
212,076
80,000
175,222
20,000
163,949
10,000
1,545,954
272,500
-
-
-
-
-
-
-
-
-
-
-
160,183
100,000
96,110
54,847
90,000
556,067
100,000
292,076
195,222
173,949
1,818,454
14,817
-
8,890
5,073
-
-
-
-
-
-
-
-
175,000
-
-
-
100,000
-
-
-
105,000
-
-
-
59,920
-
-
-
90,000
-
17,775
21,156
-
162,500
757,498
42.9%
-
17,625
17,266
17,015
98,461
-
-
-
100,000
-
12,843
-
80,000
402,544
7,281
-
20,000
239,769
6,446
-
10,000
207,410
39.7%
16.7%
9.6%
47,726
-
272,500
2,237,141
Table 2 Remuneration details 1 July 2012 to 30 June 2013
Details of the remuneration of the Key Management Personnel for the year ended 30 June 2013 are set out in the following table:
Key management personnel
Short term
Post employment
benefits
Other long
term
Equity based
payment
Name
Role
P H Warne
Non-executive Director
J P Henderson
Non-executive Director
H I Wright
B R Howell
Non-executive Director
Company Secretary
A F O Wilkinson
Executive Director
J T McNally
Executive Director
A J Slade
M J Clarke
Capital Manager
Finance Manager
D J Shipway
Asset Manager
S300A(1)(e)(i)
proportion of
remuneration
performance
based
Salary &
Fees
$
STI Cash
Bonus
$
Non
monetary
benefits
$
Total
$
Superannuation
benefits
$
Termination
benefits
$
$
ESSS
$
Total
$
$
160,550
100,000
96,330
90,000
378,888
100,000
186,743
162,926
164,029
-
-
-
-
79,040
-
43,264
20,000
20,000
-
-
-
-
-
-
8,737
8,917
-
160,550
100,000
96,330
90,000
457,928
100,000
238,744
191,843
184,029
1,439,466
162,304
17,654
1,619,424
14,450
-
8,670
-
16,470
-
16,457
14,561
14,014
84,622
-
-
-
-
-
-
175,000
-
-
-
100,000
-
-
-
105,000
-
-
-
90,000
-
11,310
-
79,040
564,748
28.0%
-
-
-
100,000
-
4,353
-
43,264
302,818
3,565
-
20,000
229,969
3,173
-
20,000
221,216
28.6%
17.4%
18.1%
22,401
-
162,304
1,888,751
79
S300A(1)(e)(vi)
Value of equity
based payment
as proportion of
remuneration
$
-
-
-
-
-
21.5%
-
19.9%
8.3%
4.8%
S300A(1)(e)(vi)
Value of equity
based payment
as proportion of
remuneration
$
-
-
-
-
14.0%
-
14.3%
8.7%
9.0%
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF COMPREHENSIVE INCOME
For The Year Ended 30 June 2014
Revenue
Expense reimbursement
Interest income
Total revenue
Annual Report and Annual Review
Audit, accounting, tax and professional fees
Depreciation expense and asset write-offs
Insurance
Legal fees
Occupancy costs
Corporate and other expenses
Registry fees
Salaries, fees and related costs
Staff training
Travel and accommodation
Total expenses
Profit/(loss) before income tax
Income tax expense
Profit/(loss) attributable to the shareholders of the Company
Other comprehensive income
Other comprehensive income for the year after income tax
Note
5
30 June
2014
$
30 June
2013
$
3,843,332
93,199
4,056,771
76,873
3,936,531
4,133,644
113,570
213,334
16,987
176,801
65,480
120,086
611,820
147,382
2,490,680
20,488
82,308
127,117
264,001
20,883
165,765
270,837
116,030
713,196
128,643
2,176,071
15,998
58,230
4,058,936
4,056,771
(122,405)
16,576
(138,981)
76,873
69,187
7,686
(138,981)
7,686
-
-
-
-
7
Total comprehensive income for the year
(138,981)
7,686
Profit/(Loss) attributable to:
Equity holders of the Company
Minority interest
Total profit/(loss) for the period
Comprehensive income attributable to:
Equity holders of the Company
Minority interest
Total comprehensive income for the year
Basic and diluted earnings/(loss) per share
Dividends paid and payable per share
The above statement of comprehensive income should be read in conjunction with the accompanying Notes.
(138,981)
-
(138,981)
(138,981)
-
(138,981)
Cents
(0.07)
-
7,686
-
7,686
7,686
-
7,686
Cents
0.00
-
82
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF FINANCIAL POSITION
For The Year Ended 30 June 2014
Current assets
Cash and cash equivalents
Receivables
Prepayments and other assets
Total current assets
Non-current assets
Plant and equipment
Investment in related party
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Payables
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Reserves
Total equity
Net assets per share
The above statement of financial position should be read in conjunction with the accompanying Notes.
Note
8
9
10
11
12
13
14
15
16
30 June
2014
$
2,391,383
3,246,458
248,824
30 June
2013
$
2,454,678
2,960,586
199,658
5,886,665
5,614,922
30,838
9,080,010
41,377
41,679
9,080,010
54,403
9,152,225
9,176,092
15,038,890
14,791,014
535,974
126,378
662,352
662,352
467,277
101,065
568,342
568,342
14,376,538
14,222,672
14,759,025
(986,904)
604,417
14,606,975
(766,975)
382,672
14,376,538
14,222,672
Cents
7.35
Cents
7.32
83
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CHANGES IN EQUITY
For The Year Ended 30 June 2014
2014
Total equity at the beginning of the year
14,606,975
382,672
(766,975)
14,222,672
Share Capital
$
Share based
payments
reserve
$
Retained
Earnings
$
Total
$
Total comprehensive income for the period
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income for the year
Transacations with Members of ALE recognised directly in
Equity:
Purchase of securities to satisfy units required for Executive
Performance Rights Plan
Shares issued - dividend reinvestment plan
Employee share based payments expense
-
-
-
-
-
-
(138,981)
(138,981)
(138,981)
(138,981)
152,050
-
(50,755)
-
272,500
(80,948)
-
-
(131,703)
152,050
272,500
Total equity at the end of the year
14,759,025
604,417
(986,904)
14,376,538
2013
Total equity at the beginning of the year
12,236,792
206,500
(745,621)
11,697,671
Total comprehensive income for the period
Profit/(loss) for the year
Other comprehensive income
Transacations with Members of ALE recognised directly in
Equity:
Issue of units in ALE Property Trust under ALE Property
Group
Executive Performance Rights Plan
Shares issued - dividend reinvestment plan
Shares issued - placement
Shares issued - share purchase plan
Employee share based payments expense
-
-
-
-
-
-
7,686
-
7,686
7,686
-
7,686
624
206,354
1,271,413
891,792
-
10,118
-
-
-
166,054
(29,040)
-
-
-
-
(18,298)
206,354
1,271,413
891,792
166,054
Total equity at the end of the year
14,606,975
382,672
(766,975)
14,222,672
The above statement of changes in equity should be read in conjunction with the accompanying Notes.
84
Australian Leisure and Entertainment Property Management Limited
STATEMENT OF CHANGES IN CASH FLOWS
For The Year Ended 30 June 2014
Note
30 June
2014
$
30 June
2013
$
Cash flows from operating activities
Management fee received and expense reimbursements
Payments to suppliers and employees
Interest received - bank deposits and investment arrangements
Net cash inflow/(outflow) from operating activities
8
Cash flows from investing activities
Payments for plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
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
6,022,182
(6,154,481)
75,150
(57,149)
(6,146)
(6,146)
-
-
(63,295)
2,454,678
Cash and cash equivalents at the end of the year
8
2,391,383
The above statement of cash flows should be read in conjunction with the accompanying Notes.
5,442,718
(5,630,476)
70,925
(116,833)
-
-
2,163,205
2,163,205
2,046,372
408,306
2,454,678
85
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 1
Basis of preparation
(a) Statement of compliance
Australian Leisure and Entertainment Property Management Limited (the Company) is domiciled in Australia. The financial statements are
general purpose financial statements which have 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
statements also comply with the IFRS and interpretations adopted by the International Accounting Standards Board.
The stapled securities of ALE are quoted on the Australian Stock Exchange under the code LEP and comprise one unit in Australian
Leisure and Entertainment Property 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 a for-profit entity and is primarily involved in property management industry.
The financial statements were authorised for issue by the Board of Directors on 5th August 2014.
(b) Basis of measurement
The financial statements are prepared on the historical cost basis.
The methods used to measure fair values are discussed further in Note 3.
(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.
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 21 - measurement of share based payments
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.
The Company has adopted the following new standards and amendments to standards, including any consequential amendments to
other standards, with a date of initial application of 1 July 2013.
AASB 13 Fair Value Measurement
AASB 119 Employee Benefits (2011)
Annual Improvements to Australian Accounting Standards 2009–2011 Cycle
The adoption of these standards had no material impact on the financial statements.
Cash and cash equivalents
(a)
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.
86
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 2
Summary of significant accounting policies (continued)
Receivables
(b)
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 Statement
of Comprehensive Income.
Investments and financial assets
(c)
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.
Plant and equipment
(d)
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 or diminishing value 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 Statement of
Comprehensive Income.
Trade and other payables
(e)
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.
Provisions
(f)
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.
Dividends
(g)
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.
87
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 2
Summary of significant accounting policies (continued)
(h)
Earnings per share
Basic earnings per share
(i)
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)
Ordinary shares are classified as contributed equity.
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)
(i)
Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the
reporting date, are recognised as a current liability in respect of employees' services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised as an expense
when the leave is taken and measured at the rates paid or payable.
(ii)
Share based payments
Executive Stapled Security Scheme Rights (ESSS)
The grant date fair value of ESSS 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 ESSS rights that vest.
The fair value at grant date is determined as the value of the Executive Incentive Award in the year in which it is awarded. The
number of ESS Rights issued annually under the ESSS awarded annually will be determined by dividing the value of the grant by the
volume weighted average price for the five trading days commencing the day following the signing of ALE Property Group’s full year
statutory financial statements.
Performance Rights
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-tradeable
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 performance right.
The fair value of the performance rights 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 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 options, the balance of the share-based payments reserve relating to those performance rights is transferred to
Contributed Equity.
Bonus plans
(iii)
Liabilities and expenses for bonuses are recognised where contractually obliged or where there is a past practice that may create a
constructive obligation.
88
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 2
Summary of significant accounting policies (continued)
Long service leave
(iv)
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. 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.
Retirement benefit obligations
(v)
The Company pays fixed contributions to employee superannuation 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.
Revenue
(k)
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 is recognised on a time proportion basis using the effective interest method.
Interest income
Expenses
(m)
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.
Income tax
(n)
The income tax expense or revenue for the reporting period is the tax payable on the current reporting period's taxable income, based
on the Australian company tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of the assets and liabilities and their carrying amounts in the financial statements and to unused tax losses.
Deferred tax balances are calculated using the balance sheet method. Under this method, temporary differences arise between the
carrying amount of assets and liabilities in the financial statements and the tax bases for the corresponding assets and liabilities.
However, an exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No deferred
tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Similarly, no deferred tax
asset or liability is recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities
where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences
will not reverse in the foreseeable future. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to apply when the assets are recovered or liabilities settled.
Deferred tax assets are recognised for temporary differences and unused tax losses only if it is probable that future taxable amounts will
be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to 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.
89
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 2
Summary of significant accounting policies (continued)
Goods and Services Tax (GST)
(o)
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.
New accounting standards and UIG interpretation
(p)
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2013,
and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the
financial statements of the Company.
Segment reporting
(q)
An operating segment is a component of ALE that engages in business activities from which it may earn revenues and incur expenses,
including revenues and expenses that relate to transactions with any of ALE's other entities. All operating segments’ operating results are
regularly reviewed by ALE's Managing Director to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available.
Segment results that are reported to the Managing Director include items directly attributable to a segment, as well as those that can be
allocated on a reasonable basis.
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.
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.
90
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 4
Financial Risk Management
Overview
The Company has exposure to the following risks from its 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.
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 its training and management standards and procedures, has
developed 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 assist 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. 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.
Interest rate risk and consumer price index risk
The Company 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 rates. At present the Company has no borrowings outstanding.
91
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
30 June
2014
$
30 June
2013
$
Note 5
Expense reimbursements
Reimbursement of expenses for managing the Head Trust and controlled entities
3,843,332
4,056,771
Fees are charged to the Trust and its controlled entities by the Company for reimbursement of
expenses incurred in the management of the trust and responsible entity services.
Expense reimbursement receipts of $6,022,182 (2013: $5,442,718) 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
Auditors' remuneration
Audit services
KPMG Australian firm:
Audit and review of the financial reports of the ALE Property 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
Note 7
Income tax expense/(benefit)
Current tax expense/(benefit)
Deferred tax expense
Income tax expense
Decrease/(increase) in deferred tax asset
Reconciliation of income tax expense to prima facie tax payable
Profit/(loss) before income tax expense
Tax at the Australian tax rate of 30% (2013: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Share based payments
Non deductible expenses
Under provision in prior years
Income tax expense/(benefit)
180,500
8,500
189,000
201,000
-
201,000
3,550
13,026
16,576
13,026
13,026
(122,405)
(36,722)
42,239
7,368
3,691
16,576
-
69,187
69,187
69,187
69,187
76,873
23,062
46,125
-
-
69,187
92
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 8
Cash and cash equivalents
Cash at bank
Deposits at call
(a) As at 30 June 2014 the weighted average interest rate earned on cash was 3.64%
(2013: 3.84%).
(b) The deposits represent office occupancy security deposits.
Reconciliation of profit after income tax to net cash inflows from operating activities
Profit/(loss) for the year
Depreciation
Non-cash employee benefits expense - share based payments
Share based payment securities purchased
(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
Net cash inflows from operating activities
Note 9
Receivables
Accounts receivable
Loan to related party
Interest receivable
Note 10 Investment in related party
Trust Non-Income Voting Units (NIVUS)
30 June
2014
$
30 June
2013
$
(a)
(b)
206,919
2,184,464
2,391,383
270,214
2,184,464
2,454,678
(138,981)
16,987
272,500
(131,703)
20,042
(49,166)
13,026
(153,864)
25,313
68,697
(57,149)
7,686
20,883
166,054
-
4,755
18,136
68,062
(382,629)
54,592
(74,372)
(116,833)
15,282
3,207,052
24,124
3,246,458
53,372
2,901,138
6,076
2,960,586
9,080,010
9,080,010
The Company was issued 9,080,010 of non-income voting units (NIVUS) in the Trust 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
4.43% in the Trust as a result of the issue of NIVUS. The NIVUS are disclosed in the Company but
are not disclosed in the ALE Property Group financial statements as they are eliminated on
consolidation.
93
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
30 June
2014
$
30 June
2013
$
41,377
54,403
38,256
918
(660)
(7,235)
10,098
41,377
54,403
(13,026)
41,377
31,279
10,098
41,377
232,418
303,556
535,974
30,169
1,490
14,207
(1,822)
10,359
54,403
123,590
(69,187)
54,403
44,042
10,361
54,403
214,021
253,256
467,277
126,378
126,378
101,065
101,065
14,759,025
14,606,975
14,606,975
-
-
-
152,050
14,759,025
12,236,792
1,271,413
891,792
624
206,354
14,606,975
Note 11 Deferred tax asset
Deferred tax assets
The balance comprises temporary differences attributable to:
Amounts recognised in statement of comprehensive income
Employee benefits
Acquisition proposal due diligence
Other accruals
Other
Tax losses
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the statement of comprehensive income (Note 7)
Closing balance at
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Note 12 Payables
Trade creditors
Creditor accruals
Note 13 Provisions
Provision for employee entitlements
Note 14 Contributed equity
(a)
Share capital
Issued share capital
(b)
Movements in ordinary share capital
Opening balance
Shares issued - Placement
Shares issued - Share Purchase Plan
Shares issued - ALE Executive Performance Rights Plan
Shares issued - Dividend Reinvestment Plan
Balance at the end of the period
94
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Shares on issue
Opening balance
Shares issued - Placement
Shares issued - Share Purchase Plan
Shares issued - ALE Executive Performance Rights Plan
Shares issued - Dividend Reinvestment Plan
Closing balance
(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.
During the previous year the ALE Property Group undertook an institutional Placement of stapled
securities. These stapled securities were issued at $2.13 each. In addition a Security Purchase Plan
was conducted with the stapled securities issued at $2.13 per security. The share capital increase
for the Company represents the Company's share of the net proceeds from the new stapled
securities issued.
Note 15 Accumulated losses
Retained losses
Balance at the beginning of the year
Net profit/(loss) attributable to ordinary shareholders
Transfer from/(to) share based payments reserve
Balance at the end of the year
Note 16 Reserves
Share-based payments reserve
Balance at the beginning of the year
Employee share based payments expense
Transfer to/(from) Retained Profits
Issue of stapled securities
Balance at the end of the year
30 June
2014
$
30 June
2013
$
No. of shares
No. of shares
194,238,078
-
-
-
1,464,255
159,862,513
18,779,343
12,686,573
8,801
2,900,848
195,702,333
194,238,078
30 June
2014
$
30 June
2013
$
(986,904)
(766,975)
(766,975)
(138,981)
(80,948)
(986,904)
(745,621)
7,686
(29,040)
(766,975)
604,417
382,672
382,672
272,500
(50,755)
-
604,417
206,500
166,054
29,040
(18,922)
382,672
95
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
30 June
2014
$
30 June
2013
$
Note 17 Segment information
Business segment
ALE has one reportable segment, as described below, which is ALE's strategic business unit. The strategic business unit is based upon
internal management reports that are reviewed by the Managing Director on at least a quarterly basis. The strategic business unit covers
the operations of the responsible entity for the ALE Property Group.
Comparative information has been presented in conformity with the requirements of AASB 8 Operating Segments.
The Company received 100% of its expense reimbursement from the Head Trust (2013: 100%).
Geographical segment
The Company operates solely within Australia.
Note 18 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 19 Contingent liabilities
Bank guarantee
The Company has entered into a bank guarantee of $184,464 in respect of an office tenancy at Level 10, 6 O'Connell Street, Sydney.
The directors are not aware of any material contingent liabilities as at the date of this report.
Note 20 Commitments
(a)
The Directors are not aware of any capital commitments as at the date of this report.
Capital commitments
Lease commitments
(b)
The Company has entered into a non-cancellable operating lease for new office premises at Level 10, 6 O'Connell Street, Sydney starting
November 2010. The Company has also entered into a non-cancellable operating lease for office equipment. The minimum net lease
commitments under these leases are:
Commitments for minimum lease payments in relation to non-cancellable operating leases are
Within one year
Later than one year but not later than five years
Later than five years
30 June
2014
$
123,173
45,695
-
30 June
2013
$
115,251
38,703
-
168,868
153,954
96
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
30 June
2014
$
30 June
2013
$
Note 21 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 at nil cost to the employee. Under the Performance Rights Plan grants of performance rights have
been made to Mr Wilkinson and Mr Slade. In accordance with the plan the performance rights vest upon performance hurdles being
achieved. The Performance Rights Plan was terminated in 2012 and replaced with an Executive Stapled Securities Scheme. The following
tabled lists the vested performance rights that remain outstanding at the end of the year.
Performance Rights Plan
The terms and conditions of outstanding grants are as follows:
Employee
entitled
Grant date
Number of PRs
Vesting
conditions
Mr A J Slade
1 Jul 2009
8,272
1. Service period
2. Absolute Total Shareholder Return (TSR)
3. Total TSR compared to comparative group
Contractual life
of PRs
30 Jun 2012
The vesting conditions for Mr Slade's performance rights are tested annually soon after 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 year
Issued during year
Lapsed during year
Outstanding at 30 June
Number of
performance
rights
2014
Weighted
average fair
value
2014
Number of
performance
rights
2013
Weighted
average fair
value
2013
56,990
-
(48,718)
-
8,272
1.05
-
1.27
-
1.05
65,791
-
(8,801)
-
56,990
1.05
-
1.27
-
1.05
During the year 3,518 stapled securities were delivered to Mr Slade upon expiry of the two year delayed delivery period applicable to the
vested rights.
During the year 45,200 stapled securities were delivered to Mr Wilkinson upon expiry of the two year delayed delivery period applicable
to the vested rights.
The performance rights outstanding at 30 June 2014 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.
During the previous financial year ALE established the Executive Stapled Security Scheme (ESSS) to replace the Performance Rights Plan.
The ESSS entitles key management personnel, subject to performance, to become entitled to acquire stapled securities at nil cost to the
employee.
97
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
30 June
2014
$
30 June
2013
$
Note 21 Share based payments (continued)
For the year ended 30 June 2013 the following ESSS Rights were awarded. The number of Stapled Securities awarded was determined
by dividing the value of the 2013 grant by the volume weighted average price for the five trading days commencing the day following the
signing of ALE Property Group’s 2013 full year statutory financial statements.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
Number
2013
34,878
19,092
8,825
8,825
For the year ended 30 June 2014 the following ESSS Rights were granted to executives under the ESSS. The number of Stapled
Securities awarded will be determined by dividing the value of the grant by the volume weighted average price for the five trading days
commencing the day following the signing of ALE Property Group’s full year statutory financial statements for the year. The number of
securities granted for the current year grants will be determined on 14 August 2014.
Mr A F O Wilkinson
Mr A J Slade
Mr M J Clarke
Mr D J Shipway
The numbers of ESSS Rights outstanding at the end of the financial year is as follows:
Outstanding at 1 July
Granted during year
Vested during year
Lapsed during year
Outstanding at 30 June
Number ESSS
rights
2014
Weighted
average fair
value
2014
101,318
71,620
-
-
172,938
1.58
2.27
-
-
1.87
Note 22 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 and their compensation is set out in Note 23.
Key management personnel
2014
$
162,500
80,000
20,000
10,000
2013
$
79,040
43,264
20,000
20,000
Number of
ESSS rights
2013
34,571
66,747
-
-
101,318
Weighted
average fair
value
2013
1.45
1.65
-
-
1.58
(c)
For the year ended 30 June 2014 the Company had charged the Trust $3,843,332 in expense reimbursement (2013: $4,056,771).
Transaction with related parties
Peter Warne is a Non-Executive 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 and corporate advice provided by Macquarie to ALE.
Terms and conditions
(d)
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.
98
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 23 Key management personnel
(a)
The following persons were Directors of the Company during the financial year:
Directors
Name
P H Warne (Chairman)
J P Henderson
H I Wright
P J Downes
A F O Wilkinson (Managing Director)
J T McNally
Type
Independent non-executive
Independent non-executive
Independent non-executive
Independent non-executive
Executive
Executive
Appointed
8 September 2003
19 August 2003
8 September 2003
26 November 2013
16 November 2004
26 June 2003
Other key management personnel
(b)
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
D J Shipway
Title
Capital Manager
Company Secretary and Compliance Officer
Finance Manager and Assistant Company Secretary
Asset Manager
Compensation for key management personnel
(c)
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
Other long term benefits
Share based payments
Total
Share based payments expense in the year
ESSS rights granted in 2012
ESSS rights granted in 2013
ESSS rights granted in 2014
Total
30 June
2014
$
1,818,454
98,461
47,726
272,500
30 June
2013
$
1,619,424
84,622
22,401
162,304
2,237,141
1,888,751
-
-
272,500
3,750
162,304
-
272,500
166,054
99
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 24 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 securityholders of the stapled entity
Basic and diluted earnings per stapled security before financing costs attributable to
the Company securityholders divided by the average number of securities
Basic and diluted earnings per stapled security using realised operating income
30 June
2014
cents
30 June
2013
cents
(0.07)
(0.07)
(0.07)
0.00
0.00
0.00
Number
2014
Number
2013
(b)
Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator in calculating
earnings per share
195,437,564
181,563,372
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share
195,437,564
181,563,372
100
Australian Leisure and Entertainment Property Management Limited
NOTES TO THE FINANCIAL STATEMENTS
For The Year Ended 30 June 2014
Note 25
Financial Instruments
Credit risk
(a)
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 has been minimised primarily by ensuring, on a continuous basis, 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.
Exposure to credit risk
Receivables
Cash and cash equivalents
Impairment losses
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 120-365 days
More than one year
(b)
Liquidity Risk
2014
$
39,406
2,391,383
2013
$
59,448
2,454,678
2,430,789
2,514,126
2014
2013
Gross
Receivables
$
39,406
-
-
-
-
39,406
Impairment
$
-
-
-
-
-
-
Gross
Receivables
$
44,585
-
14,863
-
-
59,448
Impairment
$
-
-
-
-
-
-
The Company has no contracted financial liabilities and therefore the Company's liquidity risk to external parties is minimal.
(c)
The Company has no financial interest bearing obligations and accordingly the Company's interest rate risk is minimal.
Interest rate risk
101
Corporate Governance Statement 2014
Delivering
Value
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
The Board of Directors of Australian Leisure and Entertainment
Property Management Limited is accountable to stapled
securityholders for the performance of ALE
ALE remains committed to maintaining high standards of corporate governance. The Board considers that ALE’s corporate
governance framework and practices continue to substantially comply with the requirements of the ASX Corporate Governance
Council’s (ASXCGC) Principles of Good Corporate Governance Principles and Recommendations, 2nd Edition (Principles and
Recommendations) and meet the interests of all stakeholders. A range of policies have been further developed and implemented
during the year to ensure that ALE substantially complies with the requirements of the ASX Corporate Council's Principles of Good
Corporate Governance: Principles and Recommendations, 3rd edition from 1 July 2014. These policies may be viewed on our
website (www.alegroup.com.au) This Corporate Governance Statement is effective as at 26 September 2014 and has been
approved by the Board.
Principle 1 – Lay solid foundations for management and oversight
Roles of the Board and management
The Board Charter sets out the principles for the operation of the Board. The Board’s responsibilities encompass the
following:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Input to and approving management’s development of corporate strategy and performance objectives;
Appointing and, where appropriate, removing the Chief Executive Officer;
Ratifying the appointment of and, where appropriate, the removal of the Capital Manager, Asset Manager, Finance
Manager and Company Secretary
Overseeing the operation of ALE, including its controls and accountability systems;
Identifying, assessing and ratifying plans to control and manage risks facing ALE, including interest rate risk, liquidity
risk and financial covenant compliance, as well as overviewing of all systems of risk management, including risk
reporting;
Approving the Annual Review, Annual Report, annual budgets and financial plans;
Overseeing and monitoring organisational performance and the achievement of ALE’s strategic goals and objectives;
Monitoring financial performance and liaising with ALE’s external auditor;
Reviewing and ratifying systems of internal compliance and control, codes of conduct and legal compliance and ensuring
systems are in place to deliver compliance with laws, leases, ASX rules and internal policies and procedures as well as
reviewing their effectiveness and the causes of identified breaches (if any)'
Reviewing capital management strategy formulation including debt and equity raisings, hedging, buybacks and
refinancing arrangements;
Approving all new policies and procedures relating to the proper functioning of ALE, including all financial and
operational matters;
Monitoring senior management performance and implementation of strategy as well as ensuring appropriate resources
are available and succession plans are in place;
Approving and monitoring the progress of major strategic initiatives, including capital expenditure, capital management,
acquisitions and divestitures;
14.
Enhancing and protecting the reputation of ALE;
15.
Reporting to, and communicating with, ALE’s securityholders;
16.
Approving and monitoring financial and other reporting; and
17.
Establishing and maintaining ethical standards.
The Board delegates to the CEO the responsibility for implementing strategic direction and managing the day-to-day operations of
ALE. The CEO consults with the Chairman, in the first place, on matters which are sensitive, extraordinary or of a strategic nature.
1
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
In carrying out its responsibilities, the Board undertakes to serve the interests of stapled securityholders, employees,A80 and the
broader community honestly, fairly, diligently and in accordance with applicable laws.
Principle 2: Structure the Board to add value
Board composition
The full Board determines the Board size and composition, subject to limits imposed by the Company’s Constitution, the Board
Charter and the Corporations Act.
The Board has determined that it is currently appropriate to have six directors, the majority of whom (4), including the Chairman,
are independent non-executive directors. John Henderson will retire at the 2014 AGM and Paul Say was recently appointed to fill the
vacancy that will be created. Therefore presently there are seven directors, of whom five are classed as independent.
The five non-executive directors, Peter Warne, John Henderson, Helen Wright, Pippa Downes and Paul Say, are independent
directors as defined under section 601JA of the Corporations Act, and satisfy the principles of independence as outlined in the
Principles and Recommendations. A review of each director’s independence is undertaken by tabling any changes in director
interests at each and every ALE Board meeting and more formal assessments of independence are undertaken from time to time.
Details of the members of the Board, their experience, expertise, qualifications, terms of office, relationships affecting their
independence and their independent status are set out in the Directors’ Report under the heading “Information on Directors”.
The Chairman is selected by the full Board annually at the first meeting following the annual general meeting (AGM), and is to be
an independent director in accordance with the Board Charter and ASX Corporate Governance guidelines.
The Company Secretary is appointed by the Board and reports directly to the Board.
New directors are provided with an induction process to enable them to actively participate in Board decision making as soon as
possible. The process ensures that the new directors fully understand ALE’s financial position, strategies, operations and risk
management policies and explains the respective rights, duties, responsibilities and roles of the Board and senior executives.
All new directors have appropriate checks done prior to appointment.
The company has a written agreement with each director setting out the terms of their appointment.
The Board has implemented an annual performance evaluation process for management, directors, the Board and its committees.
Part of this process is to also ensure that the Board and its committees maintain an appropriate balance of skills, experience and
expertise.
Details of the performance evaluation process for management are set out in the Directors’ Report in the Annual Report.
The Board appoints a specialist governance adviser every three years to review the performance of the Board and that of directors.
Under the Company’s Constitution and the ASX Listing Rules, a director may not hold office for a continuous period in excess of
three years or past the third annual general meeting following the director’s appointment, whichever is the longer, without
submitting for re-election.
If no director would otherwise be required to submit for re-election, but the ASX Listing Rules require that an election of directors
be held, the director to retire at the AGM is the director who has been longest in office since their last election.
John Henderson will be retiring and and not standing for re-election as a director of the Company at its next AGM.
Helen Wright will be retiring and and standing for re-election as a director of the Company at its next AGM.
Pippa Downes, who was appointed a director since the last AGM will be standing for election as a director of the Company at its
next AGM.
Paul Say, who was appointed a director since the last AGM will be standing for election as a director of the Company at its next
AGM.
2
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
Independence and materiality thresholds
The Board considers that a director is independent if the director is a non-executive director and:
1.
Is not a substantial shareholder of ALE or an officer of, or otherwise associated directly with, a substantial shareholder of ALE;
2.
3.
4.
5.
6.
7.
Within the last three years has not been employed in an executive capacity by ALE or another Group member, or been a
director after ceasing to hold any such employment;
Within the last three years has not been a principal of a material professional adviser or a material consultant to ALE or
another Group member, or an employee materially associated with the service provided;
Is not a material supplier or customer of ALE or other Group member, or an officer of or otherwise associated directly or
indirectly with a material supplier or customer;
Has no material contractual relationship with ALE or another Group member other than as a director of ALE;
Has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the
director’s ability to act in the best interests of ALE; or
Is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially
interfere with the director’s ability to act in the best interests of ALE.
Peter Warne is also a non-executive 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 and corporate advice provided by Macquarie to ALE.
The following table detail the length of service of each director as at the date of this report:
Name
Appointed
Length of Service
P H Warne (Chairman)
J P Henderson
H I Wright
P G Say
P J Downes
A F O Wilkinson (Managing Director)
J T McNally
Independent professional advice
8 September 2003
19 August 2003
8 September 2003
24 September 2014
26 November 2013
16 November 2004
26 June 2003
11.1 years
11.1 years
11.1 years
0.1 Years
0.8 years
9.9 years
11.3 years
After prior approval of the Chairman, directors may obtain independent professional advice at the expense of ALE on matters arising
in the course of their Board duties.
Board Committees
The Board has established a number of committees to assist in the execution of its duties and to allow detailed consideration of
complex issues. Currently the Board has three standing committees; these are the Remuneration Committee, Nomination
Commitee, and the Audit, Compliance and Risk Management Committee.
The committees operate principally in a review or advisory capacity. Each committee has its own written charter setting out its role
and responsibilities, composition, structure, membership requirements and the manner in which the committee is to operate. All of
these charters are reviewed on an annual basis. All matters determined by committees are submitted to the full Board as
recommendations for Board decisions.
All Directors are entitled to attend meetings of the standing committees. Minutes of committee meetings are tabled at the
subsequent Board meeting. Additional requirements for specific reporting by the committees to the Board are addressed in the
charter of the individual committees.
3
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
Audit, Compliance and Risk Management Committee (ACRMC)
The ACRMC is a standing committee that is composed of five members, being four non-executive independent directors and an
independent consultant. Membership of the Committee is based on directors’ qualifications, skills and experience.
Helen Wright, an independent director, has been appointed as Chair of the Committee. The other members of the Committee are
Peter Warne, Pippa Downes, Paul Say and John Henderson, all independent directors, and independent consultant David Lawler.
The ACRMC meets at least four times a year.
As the Board comprises 50% or more independent directors, an independent compliance committee has not been appointed. The
Board has, however, determined that the ACRMC fulfil this role.
Details of the members of the ACRMC and their attendance at meetings are set out in the Directors’ Report in the Annual Report.
Given the small number of staff within the Company, the Company does not have an internal audit function.
To ensure appropriate levels of internal control, ALE commissions an annual controls review. Following the completion of that
review, Grant Thornton reported to the Board in September 2014 that the standard of controls was assessed as strong.
Remuneration Committee and Nominations Committee
The Remuneration Committee and Nominations Committee are composed of four non-executive independent directors. Peter Warne
has been appointed as chairman of the Committee. The other members of the Committee are Helen Wright, Pippa Downes, Paul
Say and John Henderson.
One of the Committee’s responsibilities is to monitor ALE’s policies in respect of Board Renewal and Appointment of Directors, and
Diversity for the ALE Property Group. The Committee is currently reviewing candidates as part of the Board’s Renewal and
Appointment of Directors Policy.
Details of Committee members and their attendance at meetings held are set out in the Directors’ Report in the Annual Report.
Board and executive remuneration
Details of Board and executive remuneration are set out in the Directors’ Report in the Annual Report.
Principle 3: Promote ethical and responsible decision making
Code of Conduct
In accordance with ALE’s Code of Conduct, all directors and employees are expected to perform their duties professionally and act
with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of ALE.
Trading in securities
ALE has a Trading Policy with which all directors and employees must comply. Directors, employees and their associates may not
utilise information obtained by their position for personal gain or for gain of another person. Each director and employee must
ensure that any information in their possession that is not publicly available and which may have a material effect on the price or
value of ALE’s stapled securities or any derivatives based on these (ALE Securities) is not provided to anyone who may be
influenced to subscribe for, buy or sell ALE Stapled Securities.
Directors, employees and their associates may buy or sell ALE securities only during the four week periods commencing the day
after:
●
●
●
the release of the half-year results;
the release of the full year results; and
the AGM.
Outside these four week periods are closed periods for trading in ALE Securities, unless exceptional circumstances apply.
All directors and employees are precluded from buying or selling ALE Securities at any time if they are aware of price sensitive
information that has not been made public, or at any time while ALE is undertaking a general on-market buyback of that particular
type of ALE Security.
4
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
All directors or employees are entitled to participate in the Distribution Reinvestment Plan on the same terms as other
securityholders, except where the Distribution Reinvestment Plan is partly or wholly satisfied by an on-market buyback of ALE
Securities, in which case directors and employees are precluded from participating.
In accordance with provisions of the Corporations Act 2001 and the Listing rules of the ASX , ALE advises the ASX of any
transaction conducted by directors in ALE Securities.
All directors, officers and employees must disclose their financing arrangements relating to their ALE Securities to the Chairman and
must advise if the following circumstances apply:
●
●
●
the director, officer or employee holds ALE Securities that have been lent, mortgaged or charged to a financier;
circumstances have arisen in which the financier is entitled or is likely to become entitled to exercise a right under the
finance arrangement to demand payment; and
the director, officer or employee expects that the demand will not be able to be satisfied without the disposal of
securities representing 2.5% or more of the total number of issued securities in ALE.
Directors, officers and employees who enter into margin loans or other financing arrangements over ALE Securities are directed to
ensure that they have sufficient available cash or other acceptable collateral to meet margin calls, including during a period of
extreme sudden market downturn. Directors, officers or employees may not be provided with a clearance by ALE to dispose of ALE
Securities that are subject to a margin call.
Details of directors, key management personnel and their associates holdings in ALE Securities are set out in the Directors’ Report
in the Annual report.
Diversity
The Board has adopted a Diversity Policy for the ALE Property Group, which includes details on how the Board and Nominations
Committee take into account the diversity criteria when identifying and assessing potential Director candidates and members of the
senior management team.
To the best of its abilities and recognising that ALE has a small team of directors and employees, ALE has attempted to introduce
diversity standards to ensure the workplace is fair and flexible, promotes personal and professional growth and enables employees
to enhance their contributions to ALE by drawing from their different backgrounds, beliefs and experiences. ALE notes the
Principles and Recommendations, however, because ALE comprises a small team of directors and employees, the Board has
determined that it will not be setting benchmarks for achieving a certain level of gender diversity, and will not be reporting against
its progress to achieve any measurable objective. Nonetheless, ALE is committed to ensuring that the best candidates both at a
Board and employee level are appointed as opportunities arise regardless of gender, beliefs or racial background. ALE believes that
while this is departure from the Principles and Recommendations, it does not diminish the Group’s commitment in principle and fact
to ensuring gender diversity.
As at 30 June 2014, ALE’s gender diversity may best be summarised as follows:
Independent Board positions
ACRMC positions
Other committee positions
Senior management positions
Total women employed in whole
organisation
Women in role
2
2
2
-
Total Positions
5
6
5
4
Percentage
40%
33%
40%
-
4
12
33%
5
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
Principle 4: Safeguarding integrity in financial reporting
As mentioned above, the Audit, Compliance and Risk Management Committees consists of four independent non-executive Directors
and one external consultant.
Members of the Audit, Risk and Compliance Committee are financially literate and have an appropriate understanding of the
industries in which ALE operates.
The Audit, Compliance and Risk Management Committee operates in accordance with a charter. The role of the Committee is to
assist the Board in:
●
●
●
Reviewing ALE’s financial statements and financial information to be distributed externally;
Monitoring the internal control framework, procedures that are designed to ensure compliance with statutory responsibilities
and other external reporting requirements, and the adequacy of ALE’s risk management framework; and
Liaising with the external auditor.
In fulfilling its responsibilities, the Committee:
●
●
●
●
●
●
Receives regular reports from management and the external auditors;
Regularly meets with the external auditor;
Reviews the processes the Managing Director and Finance Manager have in place to support their certifications to the
Board;
Reviews any significant disagreements between the auditors and management, irrespective of whether they have been
resolved;
Meets separately with the external auditors at least once a year without the presence of management; and
Provides the external auditors with a clear line of direct communication at any time to either the Chair of the Audit, Risk
and Compliance Committee or the Chair of the Board.
External Auditors
ALE’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external
auditor is reviewed annually.
An analysis of fees paid to the external auditors, including a break down of fees for non audit services, is provided in the Directors'
Report and in note 26 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their
independence to the Board and the Audit, Compliance and Risk Management Committee.
A representative of the external auditor attends the annual general meeting and is available to answer securityholder questions
about the conduct of the auditor and the preparation and content of the audit report.
Principle 5 and 6: Make timely and balanced disclosures and respect the rights of
securityholders.
ALE has a Continuous Disclosure Policy which is consistent with the continuous disclosure obligations under the Corporations Act
and ASX Listing Rules. The Policy focuses on continuous disclosure of any information concerning ALE that a reasonable person
would expect to have a material effect on the price of ALE securities.
Investor relations
ALE is committed to the provision of timely, full and accurate disclosure of material information concerning ALE.
ALE has a Communications Policy that ensures securityholders have equal access to ALE’s information and has procedures to ensure
that all price sensitive information is disclosed to the ASX in accordance with the continuous disclosure requirements of the
Corporations Act 2001 and the Listing Rules of the ASX.
The Board encourages full participation of securityholders at the AGM.
6
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
The rights of ALE’s securityholders are set out in the constitution, legal and regulatory requirements. ALE’s Communication Policy
allows securityholders to effectively exercise these rights through the provision of high quality, relevant and useful information in a
timely manner. In this regard securityholders are informed about strategic objectives and major developments through:
●
●
●
●
●
ASX announcements;
ALE publications including the Annual Review and Annual Report;
Annual General Meeting;
ALE Website; and
The website of ALES’s security register, Computershare Investor Services Pty Limited, including a facility for
securityholders to amend their particulars.
ALE website
All information provided to the ASX is also posted on the ALE website, www.alegroup.com.au. The ALE website includes various
corporate governance documents and policies, such as the Board’s Charter, ALE’s Code of Conduct and the Audit, Compliance and
Risk Management Committee’s Charter.
Securityholders are encouraged to make their views known to ALE and to directly raise matters of concern. Securityholders are
encouraged to attend the Annual General Meeting and use this opportunity to ask questions. The Annual General Meeting remains
the main opportunity for securityholders to comment and to question ALE’s Board and management.
Principle 7: Recognise and manage risks
Recognise and manage risks
The Board, through the Audit, Compliance and Risk Management Committee, is responsible for ensuring there are adequate policies
in relation to risk management compliance and internal control systems. In summary, ALE’s policies are designed to ensure that
strategic, operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and
monitored to enable achievement of ALE’s business objectives.
Corporate Reporting
The Board has received a declaration from the Managing Director and the Finance Manager, that:
●
●
●
●
The financial records for the financial period have been properly maintained in accordance with the Corporations Act;
ALE’s financial reports are complete and present a true and fair view of the financial condition and performance of the
Group and are in accordance with relevant accounting standards; and
The above statement is founded on a sound system of risk management and internal compliance and control which
implements the policies adopted by the Board; and
That ALE’s risk management and internal compliance and control is operating efficiently and effectively in all material
respects in relation to financial reporting risks.
Principle 8: Remunerate fairly and responsibly
Details of the Remuneration Committee are outlined in the 2014 Annual Report on page 8. The Remuneration Committee operates
in accordance with its charter and is responsible for developing and making recommendations to the Board on a remuneration
framework for the Chairman, the Board Committees, non-executive Directors, ALE’s remuneration and incentive policies and
practices for the Managing Director, direct reports to the Managing Director and other senior executives.
Further information on Directors' and executives' remuneration, including principles used to determine remuneration, is set out in
the Directors' Report under the heading "Remuneration report" on pages 9 to 16. In accordance with ALE’s Trading in Securities
Policy, participants in equity based remuneration plans are not permitted to enter into any transactions that would limit the
economic risk of options or other unvested entitlements. Details of this policy can be found on ALE’s website.
7
Y
Y
Y
Y
Y
Y
Y
Y
Y
2.1
2.2
2.3
2.4
2.5
2.6
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
ASX Corporate Governance Council
Recommendations, 2nd Edition
Principle 1: Lay solid foundations for management and
oversight
Reference
Comply
1.1
1.2
1.3
Companies should establish the functions reserved to the
Board and those delegated to senior executives and
disclose those functions.
Companies should disclose the process for evaluating the
performance of senior executives.
Page 1
Remuneration Report
Companies should provide the information indicated in
Guide to Reporting on Principle 1.
Page 1,
Remuneration Report
Principle 2: Structure the Board to add value
A majority of the Board should be independent Directors.
Page 2
The chair should be an independent Director.
The roles of chair and chief executive officer should not
be exercised by the same individual.
The Board should establish a Nomination Committee.
Page 2
Page 2
Page 3
Companies should disclose the process for evaluating the
performance of the Board, its Committees and individual
Directors.
Companies should provide the information indicated in
Guide to Reporting on Principle 2.
ASX Corporate Governance Council
Recommendations
Page 4,
Remuneration Report
Pages 1 - 2,
Remuneration Report
Reference
Comply
3.1
Principle 3: Promote ethical and responsible decision-
Companies should establish a code of conduct and
disclose the code or summary of the code as to:
• the practices necessary to maintain confidence in the
company’s integrity;
• the practices necessary to take into account their legal
obligations and the reasonable expectations of their
stakeholders; and
3.2
3.3
3.4
• the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
Companies should establish a policy concerning diversity
and disclose the policy or summary of that policy.
The policy should include requirements for the Board to
establish measurable objectives for achieving gender
diversity and for the Board to assess annually both the
objectives and progress in achieving them.
Companies should disclose in each annual report the
measurable objectives for achieving gender diversity set
by the Board in accordance with the diversity policy and
progress towards achieving them.
Companies should disclose in each annual report the
proportion of women employees in the whole
organisation, women in senior executive positions and
women on the Board.
3.5
Companies should provide the information indicated in
Guide to Reporting on Principle 3.
Page 4
Page 5
N/A
Page 5
Pages 4 - 5
Y
N
N
Y
Y
8
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
Principle 4: Safeguard integrity in financial reporting
The Board should establish an Audit Committee.
Page 3
4.1
4.2
4.3
4.4
The Audit Committee should be structured so that it:
• consists only of non-executive Directors;
• consists of a majority of independent Directors;
• is chaired by an independent chair, who is not chair of
the Board;
• has at least three members.
The Audit Committee should have a formal charter.
Companies should provide the information indicated in
Guide to Reporting on principle 4.
Principle 5: Make timely and balanced disclosure
5.1
5.2
Companies should establish written policies designed to
ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior
executive level for that compliance and disclose those
policies or a summary of those policies.
Companies should provide the information indicated in
Guide to Reporting on principle 5.
ASX Corporate Governance Council
Recommendations
Principle 6: Respect the rights of shareholders
6.1
6.2
Companies should design a communications policy for
promoting effective communication with shareholders
and encouraging their participation at general meetings
and disclose their policy or a summary of that policy.
Companies should provide the information indicated in
Guide to Reporting on principle 6.
Principle 7: Recognise and manage risk
7.1
7.2
7.3
Companies should establish policies for the oversight and
management of material business risks and disclose a
summary of those policies.
The Board should require management to design and
implement the risk management and internal control
systems to manage the Company’s material business
risks and report to it on whether those risks are being
managed effectively. The Board should disclose that
management has reported to it as to the effectiveness of
the Company’s management of its material business
risks.
The Board should disclose whether it has received
assurance from the chief executive officer (or equivalent)
and the chief financial officer (or equivalent) that the
declaration provided in accordance with section 295A of
the Corporations Act is founded on a sound system of
risk management and internal control and that the
system is operating effectively in all material respects in
relation to financial reporting risks.
Page 3, 6
Page 5
Pages 3,6
Page 5
Pages 5-6
Reference
Page 5
Pages 5-6
Page 6
Page 6
Page 6
7.4
Companies should provide the information indicated in
Guide to Reporting on principle 7.
Page 6
9
Y
Y
Y
Y
Y
Y
Comply
Y
Y
Y
Y
Y
Y
Australian Leisure and Entertainment Property Management Limited
CORPORATE GOVERNANCE
For The Year Ended 30 June 2014
Principle 8: Remunerate fairly and responsibly
8.1
8.2
8.3
8.4
The Board should establish a remuneration committee.
Page 3
The remuneration committee should be structured so
that it:
• consists of a majority of independent Directors;
• is chaired by an independent chair; and
• has at least three members.
Companies should clearly distinguish the structure of non-
executive Directors’ remuneration from that of the
executive Directors and senior executives.
Page 3
Remuneration Report
Companies should provide the information indicated in
Guide to Reporting on principle 8.
Page 4,
Remuneration Report
Y
Y
Y
Y
10
Securityholders
The securityholder information as set out was applicable as at 8 July 2014.
A. Distribution of Equity sEcuritiEs
Analysis of number of equity securityholders by size of holding:
range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 999,999,999
Total
total
Holders
number of
securities
% of issued
capital
597
1,350
1,060
1,987
218,513
4,126,155
8,284,142
50,345,033
119
132,728,490
5,113
195,702,333
0.11
2.11
4.23
25.73
67.82
100.00
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. The number of securityholders holding less than a marketable
parcel of stapled securities is 244.
b. top 20 Equity sEcurityHolDErs
The names of the 20 largest holders of stapled securities are as listed below:
rank
name
number of
securities
% of issued
capital
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
UBS Nominees Pty Ltd
Woolworths Limited
HSBC Custody Nominees [Australia] Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
35,785,286
17,076,936
13,559,732
12,396,442
8,579,300
5,909,734
Edward Furnival Griffin and Alastair Charles Griffin [Est Jean Falconer Griffin Ac]
2,795,751
UBS Wealth Management Australia Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited [APN Account]
Manderrah Pty Ltd [GJJ Family Account]
HSBC Custody Nominees (Australia) Limited [GSCO ECA]
HSBC Custody Nominees (Australia) Limited [Account 3]
Melic Pty Limited [The Melic Unit Account]
ABN AMRO Clearing Sydney Nominees Pty Ltd [Custodian Account]
Neasham Holdings Pty Ltd [The Neasham Account]
Merlor Holdings Pty Ltd [Basserabie Family Sett Account]
John George Whiting and Diana Patricia Whiting
BT Portfolio Services Limited [Caergwrle Invest P/L Account]
BT Portfolio Services Limited [James Investment Account]
BT Portfolio Services Limited [Maxwell Family Account]
2,391,161
2,256,257
2,242,733
2,010,982
1,955,612
1,448,109
1,378,902
1,275,000
991,877
774,250
745,787
600,939
600,939
18.29
8.73
6.93
6.33
4.38
3.02
1.43
1.22
1.15
1.15
1.03
1.00
0.74
0.70
0.65
0.51
0.40
0.38
0.31
0.31
Totals: Top 20 Holders of Stapled Securities
Totals: Remaining Holders Balance
114,775,729
80,926,604
58.65
41.35
Securityholders continued
c. substAntiAl HolDErs
Substantial holders of ALE (as per notices received as at 8 July 2014) are set out below:
stapled securityholder
Caledonia (Private) Investments Pty Ltd
Allan Gray Australia (formerly Orbis)
Woolworths Limited
number Held
43,487,908
23,453,125
17,076,936
percentage
of Voting
rights (%)
22.22
11.98
8.73
D. Voting rigHts
The voting rights attaching to each class of equity securities are set out below:
(a) Stapled securities
On a show of hands every stapled securityholder present at a meeting in person or by proxy shall be entitled to have one vote and
upon a poll each stapled security will have one vote.
(b) 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 195,702,333 units have been issued by the Trust to stapled securityholders. The NIVUS therefore represent 4.43%
of the voting rights of the Trust.
E. Equity rEsEArcH coVErAgE of AlE
The following equity research analysts currently cover ALE’s stapled securities:
Paul Checchin and Rob Freeman – Macquarie Securities
Scott Molloy – JP Morgan Securities
Adrian Atkins – Morningstar
Fiona Buchanan and Scott Murdoch – CIMB Morgans
Jason Prowd and Jon Mills – Intelligent Investor
Investor Information
The information is provided as a short summary of investor
information. Please view our website at www.alegroup.com.au
for all investor information.
MAJOR AUSTRALIAN SECURITIES
EXCHANGE (ASX) ANNOUNCEMENTS
2014
WEBSITE
The ALE website, www.alegroup.com.au, is a useful source of
information for stapled securityholders. 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. ALE’s property website www.aleproperties.com.au
provides further information on the properties.
5 Sep 2014
Full year distribution payment date
6 Aug 2014
Full Year results, Annual Review / Report and
Property Compendium released
25 Jul 2014
Property Valuations increased by 5.1%
15 Jul 2014
Successful refinancing and hedge restructure
DISTRIBUTIONS
Stapled security distributions are paid twice yearly, normally in
March and September.
SECURITYHOLDER ENQUIRIES
Please contact the registry if you have any questions about your
holding or payments.
19 Jun 2014 Suspension of DRP announced
16 Jun 2014 On-market buy back of ALE Notes 2
13 Jun 2014
Full Year distribution of 16.45 cents declared
29 May 2014 ALE Prices Inaugural AMTN
28 May 2014 ALE reaffirms acquisition and capital
management strategies
8 May 2014
Investment Grade Credit Rating Assigned to ALE
8 Apr 2014
Settlement of sale of Victoria Hotel, Shepparton
5 Mar 2014
Caledonia increases substantial holding to 22.22%
5 Mar 2014
Half year distribution payment date
23 Jan 2014 Half Year results released
2013
16 Dec 2013 Property valuations increased
5 Dec 2013
Half year distribution of 8.20 cents declared
ANNUAL TAX STATEMENT
Accompanying the final stapled security distribution payment,
normally in September each year, will be an annual tax
statement which details the taxable, tax concessional and
deferred tax components of the year’s distribution.
PUBLICATIONS
The Annual Review, Annual Report and Property Compendium
are the main sources of information for stapled securityholders.
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
securityholders 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 stapled securityholders if
they register on ALE’s website. The election by holders to receive
communications electronically is encouraged by ALE.
27 Nov 2013 Appointment of Ms Pippa Downes as
non-executive Director
12 Nov 2013 Annual General Meeting
12 Nov 2013 ALE celebrates the first 10 years
12 Nov 2013 ALE’s perspective on property values
8 Nov 2013
ALE named AREIT of the Year
27 Sep 2013 Annual Report released
25 Sep 2013 Allan Gray reduces substantial holding to 11.98%
16 Sep 2013 Caledonia increases substantial holding to 20.41%
30 Jul 2013
Full year results, property valuations and Annual
Review released
STOCK EXCHANGE LISTING
The ALE Property Group (ALE) is listed on the Australian
Securities Exchange (ASX). Its stapled securities are listed under
ASX code: LEP; stapled security distributions may be paid twice
yearly, normally in March and September; and its ALE Notes 2
are listed under ASX code: LEPHC.
DISTRIBUTION REINVESTMENT PLAN
On the 19 June 2014 the Distribution Reinvestment Plan (DRP)
was suspended. Directors will monitor ALE’s capital position and
should circumstances change the DRP may be reactivated in the
future. Further details are available on ALE’s Website.
ELECTRONIC PAYMENT OF DISTRIBUTIONS
Securityholders 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. Securityholders wishing to take
advantage of payment by direct credit should contact the registry
for more details and to obtain an application form.
REGISTERED OFFICE
Level 10, Norwich House,
6 O’Connell Street, Sydney NSW 2000,
Tel: +61 2 8231 8588
COMPANY SECRETARY
Mr Brendan Howell,
Level 10, Norwich House,
6 O’Connell Street, Sydney NSW 2000
Tel: +61 2 8231 8588
AUDITOR
KPMG, 10 Shelley Street, Sydney NSW 2000
LAWYERS
Allens Linklaters,
Level 28, Deutsche Bank Place,
Corner Hunter and Phillip Streets, Sydney NSW 2000
CUSTODIAN (OF AUSTRALIAN LEISURE AND
ENTERTAINMENT PROPERTY TRUST)
The Trust Company Limited,
Level 15, 20 Bond Street,
Sydney NSW 2000
TRUSTEE (OF ALE DIRECT PROPERTY TRUST)
The Trust Company (Australia) Limited,
Level 15, 20 Bond Street, Sydney NSW 2000
REGISTRY
Computershare Investor Services Pty Ltd,
Reply Paid GPO Box 7115, Sydney NSW 2000
Level 3, 60 Carrington Street, Sydney NSW 2000
Tel: 1300 302 429
Fax: (02) 8235 8150
www.computershare.com.au
For emailed updates, visit the ALE website and join
“Email Alerts” at www.alegroup.com.au.
alegroup.com.au
ALE Property Group
aleproperties.com.au
Property Compendium