AVJennings
Annual Report 2011

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ANNuAL rEporT 2011 AV JENNINGS LIMITED ABN 44 004 327 771 A V J E N N I N G S L I M I T E D A N N u A L r E p o r T 2 0 1 1 coNTENTS Managing Director’s Statement Company Highlights Chairman’s Report 1 3 4 Creating and Supporting Communities 7 Property Portfolio Directors’ Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of AVJennings Limited Corporate Governance Statement Shareholder Information Company Particulars Front Cover: Elysium, Noosa Heads, Queensland Steve Waugh AO, Corporate Ambassador 8 12 23 24 25 26 27 80 81 82 86 88 To build a community means understanding how people want to interact with their surroundings. Welcome to the AVJennings 2011 AnnuAl RepoRt. While this R epoRt is mAinly A bout the eVents of the pAst yeAR it is A lso About ouR pAst A nd ouR futu Re, ouR stR Ategies A nd V ision. AVJennings has been creating residential communities across Australia since 1932. In that time we have learnt much about what buyers want in their homes, in their streets and in their communities. Diversity and choice of land and housing options is the key to our approach in developing our residential projects. Our objective is to plan and then develop land to create the right infrastructure and community spaces to meet the varied needs of our customers and their families. We recognise that choosing a place to live is the biggest economic and emotional decision for most of our customers. AVJennings is proud of its long history of delivering innovative, quality, affordable land and housing to meet the needs and dreams of Australians. Peter Summers Managing Director 2 | AVJennings limited · A bn 44 004 327 771 good design meets mARket demAnd, is efficient A nd cost effectiVe to deVelop And is AffoRdAble foR ouR bu yeRs – i t’s A simple p Remise foR A design led eVolution of AVJennings pR oJects. compAny highlights 26.6 30 25 16.4 20 16.2 15 9.7 25.9 11.2 10 AVJennings deliVeRs solid m $ A Results in unceRtAin mARket. 5 AnnuAl R epoRt 2011 | 3 14.2 14.6 12.9 · Solid result in face of difficult market conditions; focus 5.4 now on delivering Land and Integrated Housing projects 9.6 · The Company continues to deliver housing products -1.7 that are affordable in its chosen markets 0 -5 -10 -15 -20 m $ A 30 25 20 15 10 5 0 -5 -10 -15 -20 -10.4 -6.7 · Reflecting buying opportunities that exist in the -4.6 Australian residential market, AVJennings added 3,000 lots across 4 states. -12.7 -14.7 -18.1 2006 2007 (annualised) 2008 2009 2010 2011 Profit After Tax 2006–2011 26.6 16.2 -10.4 16.4 9.7 -6.7 25.9 11.2 -14.7 5.4 -12.7 -18.1 Developments Reported Result Contract Building 14.2 9.6 -4.6 14.6 12.9 -1.7 (one month) 2006 2007 (annualised) 2008 2009 2010 2011 Key financial highlights to 30 June 2011 A$m (unless stated otherwise) Revenues from Continuing Operations Profit before tax from Continuing Operations Profit after tax from Continuing Operations Loss after tax from Discontinued Operations† Net Profit after Tax Net Debt (includes share of JV debt) Net Debt (Balance Sheet) Gross Margins Earnings per share – Continuing Operations Earnings per share – All Operations Net Assets per share Net Tangible Assets per share † Division sold 2 August 2010. * Restated. Developments Contract Building Reported Result FY11 v FY10 % Change -21.4 +5.9 +2.5 Not applicable +34.1 +1.1 -1.7 +7.7 +2.8 +34.5 +1.8 +1.9 FY11 210.2 19.9 14.6 (1.7) 12.9 82.3 56.9 26.1% 5.35c 4.72c $1.11 $1.10 FY10 267.6* 18.8 14.2 (4.6) 9.6 81.4 57.9 18.4%* 5.20c 3.51c $1.09 $1.08 4 | AVJennings limited · A bn 44 004 327 771 chAiRmAn’s RepoRt to my felloW sh AReholdeRs A final fully franked dividend of 1.5 cents was declared, bringing total dividends for the year to 2.5 cents. Market Overview Capital Management The 2011 financial year provided many challenges. The uncertainty in global economic market conditions has generally led to greater caution with consumer confidence at lower levels. Additionally, the wet weather experienced by most of the eastern Australian states for much of the year created difficulties in developing and completing inventory for the Company’s operations. Despite these challenges, the Company was able to achieve a solid result for the financial year. Residential property markets are cyclical. Often, the best times for acquiring new projects are the times when selling conditions are less favourable. However, buying counter to the cycle requires careful capital management and strict adherence to robust land acquisition strategies, policies and procedures. During the year, the Company acquired four projects totalling some 3,000 lots. These projects were spread across the four states in which we currently operate and increase the Company’s overall land bank it controls or manages to some 11,300 lots as at our financial year end. Staying focused on the overarching strategic plan is essential in current times. While not blind to the challenges of the economic conditions, the Board is confident that the work it has done to build robust business systems and property analysis models will provide a solid foundation as we develop our broad range of projects across Australia and in New Zealand. 2011 Results The Company increased its Net Profit after Tax by 34.1% to $12.9m for the full year to 30 June 2011. Profit from Continuing Operations was $19.9m before tax, an increase of 5.9%, and $14.6m after tax. Discontinued Operations, which consisted of Contract Building, lost $1.7m after tax from 1 July to 31 July 2010, being the date of its sale. Revenue at $225.8m was lower from $471.2m due primarily to the inclusion of only one month’s revenue of $15.5m for this financial year from Contract Building prior to its sale. Revenue from Continuing Operations also dipped, however increased margins resulted in an overall improved result. Earnings per share from All Operations rose solidly by 34.5% to 4.72 cents per share (2010: 3.51 cents). An on-going focus of the Company has been capital management. As mentioned, the Company has been able to make significant progress in growing its land base. Through appropriate structuring using a combination of term payments, joint ventures and development agreement structures, it has been able to achieve this whilst maintaining overall net debt levels at similar levels to the previous year. Importantly, the Company also renewed its main banking facilities for the next two years on generally improved terms. We value both the support of our banking partners and the strong relationships we have developed with them over the years. We look forward to continuing to build and strengthen those relationships in the future. Land and Integrated Housing The sale of Contract Building in early August 2010 enabled Management to focus fully on AVJennings’ core strengths—land development, integrated housing and low-rise apartments. While the separation did take a considerable amount of management time, we used the sale as an opportunity to restructure and streamline business processes across all parts of the Company and the Board is pleased with the progress made to date. AVJennings is focused on providing quality product choice for its customers, whether that be land for building, or housing and low-rise apartments constructed by the Company on its projects. It strives to provide this product choice within high quality developments that create great communities. One of the well-documented issues facing some consumers is affordability. It is also well-documented that much of this relates to government land release and taxing policies. The Company, through its land management and urban design skills, together with its internal building capabilities, is well placed to provide solutions to this issue. The issue of affordability may have escalated in recent times, but it is not new. For generations, Australians, especially younger Australians, have faced the issues of saving a deposit and entering the market. Over eight decades, AVJennings has been there to meet these challenges. AnnuAl R epoRt 2011 | 5 A sense of arrival to an AVJennings project is part of the overall master planning of a community. Welcome home. AVJennings cites its point of difference as providing a greater range of affordable living choices with land sales playing a vital role in delivering this promise. Our Staff Despite the challenging year, our staff have remained focused on the job at hand. We continue to invest in our staff through the provision of internal scholarships, training and leadership and mentoring programs. Board The Board recognises that the past year has not been an easy one and is pleased with the drive and dedication that everyone has shown to produce a solid result in the 2011 financial year. The Board, through its individual and collective skills has been able to assist Peter and his management team to refine the Company’s business models and develop further its Land and Integrated Housing processes. Outlook Despite the uncertainty in the residential market, the underlying long term fundamentals remain in place. There is a gap between having enough adequate supply to meet demand for housing with factors such as infrastructure and affordability weighing more largely in this equation. Recent months have seen continuing challenging market conditions, due primarily to lower consumer confidence levels. On a more positive note, pressure to increase interest rates has now been replaced with expectations of no change or possibly a reduction. Likewise the carbon tax, while it will affect housing costs post its introduction, could in the short-term act as an incentive for new home buyers seeking to avoid the additional imposts. On behalf of the Board, I would like to thank the professional and dedicated work of our staff as they have risen to meet the new challenges and changes over the past year. I also take this opportunity to thank my fellow directors for their continued support, dedication and guiding hand in steering AVJennings through these challenging times. The foundations we establish and build on today will serve us well in the long-term. The strength of our business and brand, our ability to adapt and meet market conditions, and the dedication and continued efforts of our staff will be the key drivers of our future. Simon Cheong Chairman 6 | AVJennings limited · A bn 44 004 327 771 Community infrastructure – sports facilities, health and medical centres, recreational parks are at the core of our planning. AVJennings takes seriously its role as a corporate citizen supporting a broad range of community and charitable activities. Staff with balanced lives contribute better not only to their careers, but also their communities. AnnuAl R epoRt 2011 | 7 AVJennings – cReAting And suppoRting communities AcRoss the yeARs the AVJennings bR And hAs come to RepResent quAlity And ReliAbility. We hAVe cReAted communities foR countless thousA nds of AustR AliAns. As AVJennings enters its 80th year, we recognise that many of our customers are not first-time buyers and many are making their second or even third purchase from AVJennings. That is something that gives us great pride. AVJennings is built on its understanding of what buyers want. To deliver on that over a sustained period requires many skills, including the ability to move with changing times. Choosing a place to live is part of the great Australian dream. Our investment in innovative design, excellent land management practices, delivering outstanding community facilities and great living environments are our way of staying true to our goal of creating high-quality communities. We also recognise that we have a crucial role in ensuring that as many Australians as possible can achieve that dream by providing affordable choice. Recently, AVJennings appointed Steve Waugh AO as our first corporate ambassador. His personal qualities reflect qualities of AVJennings—dedication to a goal, positive leadership and integrity, community entrepreneurship and caring for others. As our ambassador, Steve will assist AVJennings to ensure that we build connections with all generations of buyers. Steve will also play a critical role in helping the Company and its staff in being the best we can be and being true to those values which the AVJennings brand stands for. As a Company whose foundations are in the creating of communities, we recognise that it is also our role to lend a helping hand where we can. Great communities support each other. We recognise that we all need a helping hand at different times in our lives. The staff we attract have a strong commitment to their own communities. As a Company we recognise that staff with balanced lives contribute better not only to their careers, but also their communities. To this end AVJennings has always encouraged its staff to take an active role in volunteering and supporting charitable activities and to provide opportunities for them to do so. AVJennings has also announced its commitment to support the Steve Waugh Foundation, which works to improve the quality of life for children and their families affected by rare diseases. The Foundation and our staff work together on various fundraising initiatives to generate significant revenue for the Foundation for medication, specialised equipment and support programs. The qualities that Steve Waugh AO brought to the cricket field reflect qualities of the AVJennings brand. Steve is the Company’s first Corporate Ambassador. 8 | AVJennings limited · A bn 44 004 327 771 pRopeRty poRtfolio undeRpinning AVJennings’ stRength As A ResidentiAl pRopeRty deVelopeR is ouR bRoAd R Ange of pRoJects. this spReAd meAns We cAn pRoV ide A diVeRse R Ange of housing And lAnd options. Whether it is land or a completed home or apartment, AVJennings has the solution, and our commitment to our projects delivers true peace of mind to our buyers who can see our attention to detail in all aspects of our work. Additionally, the geographic spread of our projects across four states and New Zealand gives the Company greater scope to weather economic cycles. This competitive advantage means the Company has the ability to adapt to changing market conditions as property markets across Australia often move in different cycles. As noted in the Chairman’s Report, AVJennings added just under 3,000 lots across four projects in the past twelve months, bringing the total number of lots under control or management to approximately 11,300 (2010: 9,500). These projects add depth to our project range and further strengthen growth opportunities over the coming years. In particular, the projects acquired in South Australia (Penfield) and New South Wales (Cobbitty) will assist our growth in these two states for a significant period. AVJennings is committed to developing housing products that are affordable to the broadest cross section of home buyers. We are constantly working to achieve this goal. Our developments cater for all walks of life delivering good community infrastructure, well planned parks and open spaces and access to transport and schools. With a long tradition in providing quality living options, AVJennings has become the choice for many Australians seeking the reassurance that comes with buying from a trusted Company that offers experience and expertise, integrity and understanding. Portfolio strategy balances market cycles and conditions Projects No of lots (at 30 June 2011) NSW 11 VIC 8 QLD 12 SA 9 2,087 3,496 2,221 2,912 NZ 1 543 TOTAL 41 11,259 Note: Total includes 18 remnant lots across all projects % of Net Funds Employed % of Lots by State New South Wales Victoria Queensland South Australia New Zealand 38% 23% 24% 13% 2% New South Wales Victoria Queensland South Australia New Zealand 18% 31% 20% 26% 5% AnnuAl R epoRt 2011 | 9 The Ridges, New South Wales Fitzgibbon Chase, Queensland Lyndarum internal, Victoria queenslAnd NOOSA HEADS CALOUNDRA MANGO HILL FITZGIBBON BRISBANE LEICHHARDT RICHLANDS CALAMVALE BETHANIA COOMERA AVJennings added two new projects in 2011. The 318 lot Big Sky project at Coomera and the 174 lot project, Elysium at Noosa Heads. While the Queensland market has been subdued, the Company’s range of projects will provide a good base for future years. The Company has focused on the delivery of innovative, quality affordable housing options for this market. Map: Plus Project Mackay Location # of Lots Pre FY12 FY13 FY14 FY15 FY16 Post Halpine Lake Stage 10, Mango Hill Northgate, Mango Hill Creekwood, Caloundra Glenrowan, Mackay Essington Rise, Leichhardt Nottingham Square, Calamvale Creekwood Stage 7, Caloundra Villaggio, Richlands Bethania Fitzgibbon Chase, Fitzgibbon Elysium, Noosa Heads Big Sky, Coomera 183 42 666 258 135 206 6 128 102 3 174 318 Current projects Under development Major city Pre-delivery Re-zoning and obtaining development approval etc. Development Construction period Start of Settlements Date where settlements are scheduled to commence 10 | AVJennings limited · A bn 44 004 327 771 VictoR iA MERNDA WOLLERT EPPING NORTH MELBOURNE OFFICER PORTARLINGTON Lyndarum continues to be a stand-out project, providing a wide choice of land, housing, and lifestyle options for the growing Epping and Wollert corridor. Ideally situated near main arterial transport infrastructure, the development is near a newly opened shopping centre and sports facilities. During the year we acquired an interest in Arlington Rise, a 300 lot project at Portarlington. The Company’s other major project, Arena at Officer is in the south-east region and has been a solid performer for a number of years. Location # of Lots Pre FY12 FY13 FY14 FY15 FY16 Post Riverdale on Plenty, Mernda Arena at Officer Lyndarum North, Wollert 5 247 774 Wollert (options) 1,820 Lyndarum, Epping North Lyndarum JV, 100 O’Herns Rd, Epping North Lyndarum, 150 O’Herns Rd, Epping North Arlington Rise, Portarlington 133 121 109 287 neW s outh WAles HAMLYN TERRACE WADALBA CENTRAL COAST SCHOFIELDS EASTWOOD WEST HOXTON SYDNEY SYDNEY OLYMPIC PARK COBBITTY ELDERSLIE SPRING FARM GOULBURN WOLLONGONG The acquisition of 469 lots at Cobbitty marked the first acquisition in NSW for some years. The project is in the rapidly growing south-west sector of Sydney. In recent years, the Company has looked to increase the amount of integrated housing in its projects. This has enabled greater land efficiency to be achieved and resulted in delivering to customers greater choice at lower price points. Cavanstone at Eastwood continues to demonstrate AVJennings’ capabilities in brown-field developments. A former brickworks site, it is now a high quality project offering a range of housing choices to customers. Map: Plus Project Sandy Beach Location # of Lots Pre FY12 FY13 FY14 FY15 FY16 Post The Ridges, Elderslie Hamlyn Terrace Spring Farm Ravensworth Heights, Goulburn Seacrest, Sandy Beach Schofields Cavanstone, Eastwood Charterwood, Wadalba West Hoxton Boulevard, Sydney Olympic Park 365 440 185 189 137 13 192 45 42 2 Cobbitty 469 AnnuAl R epoRt 2011 | 11 The 1,750 lot Penfield development acquired in December 2010, is situated north-west of Adelaide and will be a staged project. The development further demonstrates AVJennings’ history of partnering with governments. It ideally complements another joint venture project, St Clair. south AustR AliA PENFIELD CHELTENHAM WOODVILLE ADELAIDE MURRAY BRIDGE HUNTFIELD HEIGHTS GOOLWA Location # of Lots Pre FY12 FY13 FY14 FY15 FY16 Post Paringa View, Huntfield Heights Pathways, Murray Bridge River Breeze, Goolwa North St Clair Cheltenham JV, Cheltenham St Clair Woodville JV, Woodville 5 92 86 924 21 Penfield 1,750 Charles Matthew Circle, Woodville Brocas Terrace, St Clair Cameo 2 9 13 neW Ze AlAnd HOBSONVILLE AUCKLAND Hobsonville Point, the redevelopment of the old New Zealand Air Force base in Auckland, is a joint venture with the New Zealand government. The project is the first public, private partnership of its type in New Zealand. All involved in the project are committed to making Hobsonville Point the leading project in Auckland and establishing it as a benchmark for the future. Location # of Lots Pre FY12 FY13 FY14 FY15 FY16 Post Hobsonville Point, Hobsonville 543 Current projects Under development Major city Pre-delivery Re-zoning and obtaining development approval etc. Development Construction period Start of Settlements Date where settlements are scheduled to commence 12 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 Your Directors present their Report on the Consolidated Entity (referred to hereafter as “AVJennings”, “Consolidated Entity” or “Group”) consisting of AVJennings Limited (“Company” or “Parent”) and the entities it controlled at the end of, or during, the year ended 30 June 2011. DIRECTORS The names and details of the Company’s Directors in office during the financial year and until the date of this Report are as follows. Directors were in office for this entire period unless otherwise stated. S Cheong RJ Rowley PK Summers Chairman (Non-Executive) Deputy Chairman (Non-Executive) Managing Director and Chief Executive Officer E Sam Director (Non-Executive) HR Hochstadt Director (Non-Executive) Director (Non-Executive) B Chin Director (Non-Executive) BG Hayman COMPANY SECRETARY The names of the Company Secretaries in office during the financial year and until the date of this Report (unless otherwise stated) are as follows: CD Thompson PK Summers SA Vogiatzakis PRINCIPAL ACTIVITY The principal activity of the Consolidated Entity during the year was Residential Development. On 1 August 2010 the Company ceased Contract Building, other than in relation to a Home Improvements operation in South Australia. OPERATING RESULTS The consolidated profit after tax for the financial year was $12.9 million (2010: $9.6 million). DIVIDENDS Dividends paid to members during the financial year were as follows: 2011 $’000 4,119 2,746 2010 $’000 - - 2010 final of 1.5 cents per fully paid share, paid 30 September 2010. Fully franked @ 30% tax 2011 interim of 1.0 cent per fully paid share, paid 18 April 2011. Fully franked @ 30% tax Total dividends paid 6,865 - In addition to the above dividends, since the end of the financial year, the Directors have recommended a fully franked final dividend of 1.5 cents per share to be paid on 19 October 2011 (2010: 1.5 cents). The Dividend Reinvestment Plan remains suspended. REVIEW OF OPERATIONS Financial Results The Company increased its Net Profit after Tax by 34.1% to $12.9m for the full year to 30 June 2011. Profit from Continuing Operations was $19.9m before tax, an increase of 5.9%, and $14.6m after tax. Discontinued Operations, Contract Building, lost $1.7m after tax from 1 July to 31 July 2010, being the date of its sale. Revenue, at $225.8m, was down from $471.2m due primarily to the inclusion of only one month’s revenue of $15.5m from Contract Building prior to its sale. Revenue from continuing operations was also lower, however increased margins resulted in an overall improved result. The Company has produced a solid result in what were generally difficult trading conditions. Weather remained one of the biggest hurdles to the Company reaching its internal revenue targets. The result was also affected by continuing poor market conditions in Queensland and while New South Wales has shown some improvement, it still is a market operating at levels which are very low historically. AnnuAl R epoRt 2011 | 13 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 REVIEW OF OPERATIONS (CONTINUED) Outlook Business Overview Overall, the year has seen an increased profit achieved in difficult market conditions, an increase in the Company’s inventory levels that support a more sustainable business, continued low debt levels and a 2 year extension of the Company’s main banking facilities, and the completion of the sale of its former Contract Building division. During the financial year, the Company acquired one or more projects in each of the Australian States in which it operates. At 30 June 2011, the total number of lots under control or management was approximately 11,300 compared to some 9,500 at the start of the year. The increased inventory levels provide a more solid and longer term basis for the Company’s operations. The projects acquired in South Australia and New South Wales, in particular, will underpin operations in those States for a significant period. While market conditions remain difficult in many regions, the market for acquiring land is very healthy. The Company still believes medium to long term fundamentals are solid and is therefore still actively pursuing acquisitions. The Company has continued to strengthen its balance sheet maintaining the emphasis of the past three years on capital management. The Company is therefore well placed to grow appropriately the number of projects under control or management. As at 30 June 2011, Net Debt, including a proportionate share of joint venture debt, was $82.3m, almost on par with the previous year, and a 57.6% reduction from 2008 when Net Debt was $194.3m. Since year end, the Company has also renewed its main banking facilities. The facilities, which were due to expire in September 2011, have been renewed for a further 2 years on generally more favourable terms. The sale of the loss-making Contract Building operations has enabled the Company to focus more strongly on its core strengths of land development, integrated housing and low-rise apartment construction. However, the process also required considerable time and effort in restructuring, particularly in areas such as administration. This has all been completed during the year and the Company starts the new financial year better placed in this regard. Accordingly, the Board and Management were pleased with the progress made for the year, in that the Company as a whole managed well those issues that were within its control. As the Company enters the new financial year, there are certainly challenges ahead with a softening of market conditions in most States in which the Company operates. Consumer confidence remains low and the continued focus on global economic concerns is reinforcing this. However, there have been some signs in recent months in relation to factors that may lead to some improvement in the new residential housing sector. The significant upward pressure on interest rates that existed for much of the first 6 months of the 2011 calendar year has moderated to some extent. Furthermore, the forecast uplift in immigration levels from the previous year is expected to assist demand for housing. There have also been some more positive signs emerging in New South Wales following the recent election and change in government although any improvements are coming off a very low base. The introduction of the carbon tax, whilst increasing the cost of housing post introduction of the tax, will provide an incentive for purchasers in the short term. The Company is well placed to capitalise on any such activity. The recently announced $10,000 grant for new residential housing in Queensland, which commenced on 1 August 2011, will hopefully also improve activity. The Queensland market has suffered from a number of setbacks in recent times. However, it remains a traditionally strong market and is expected to return to more normal levels at some point. Affordability remains a factor in potential purchasers’ ability to transact, despite the chronic shortage of housing in many areas. AVJennings has been a market leader in meeting the challenges of delivering high quality, affordable land and housing and will continue to focus on this area. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS The Consolidated Entity’s main banking facilities mature on 30 September 2011. As a result, the borrowings under these facilities are shown as a current liability on the Consolidated Statement of Financial Position at 30 June 2011. As mentioned in the Review of Operations, subsequent to the end of the financial year, the Company has renewed its main banking facilities for a further 2 years to 30 September 2013. Ownership of the Contract Building Division was transferred to Sekisui House Limited effective 1 August 2010. Results for the year ended 30 June 2011 include the result of the Contract Building Division, as a discontinued operation for the month of July 2010. 14 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE Other than matters relating to the renewal of the Consolidated Entity’s main banking facilities detailed in note 24(a), no matter or circumstance has arisen since 30 June 2011 that has significantly affected, or may significantly affect: a) the Consolidated Entity’s operations in future financial years; or b) the results of those operations in future financial years; or c) the Consolidated Entity’s state of affairs in future financial years. FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES Future developments in the operations of the Consolidated Entity and the expected results of those operations have not been included in this Report as the Directors believe that the inclusion of such information would be likely to result in unreasonable prejudice to the Consolidated Entity. The prospects and business strategies of the Consolidated Entity are discussed on pages 12 to 13 of this Report. ENVIRONMENTAL REGULATION The Consolidated Entity’s operations are subject to various environmental regulations under both Commonwealth and State legislation, particularly in relation to its property development activities. The Consolidated Entity’s practice is to ensure that where operations are subject to environmental regulations, those obligations are identified and appropriately addressed. This includes the obtaining of approvals, consents and requisite licences from the relevant authorities and complying with their conditions. There have been no significant known breaches of environmental regulations to which the Consolidated Entity is subject. INFORMATION ON THE DIRECTORS Simon Cheong B.Civ.Eng. MBA Director since 20 September 2001. Mr Cheong has over 30 years experience in real estate, banking and international finance. He currently serves as Chairman and Chief Executive Officer of SC Global Developments Limited. Mr Cheong has formerly held positions with Citibank (Singapore) as their Head of Real Estate Finance for Singapore as well as with Credit Suisse First Boston as a Director and Regional Real Estate Head for Asia (excluding Japan). In 1996, Mr Cheong established his own firm, SC Global Pte Limited, a real estate and hotel advisory and direct investment group specialising in structuring large and complex transactions worldwide. He was elected President of the prestigious Real Estate Developers’ Association of Singapore (REDAS) for 2 terms from 2007 until 2010. In April 2008, he was supported to serve on the Board of the Institute of Real Estate Studies, National University of Singapore. In August 2008, he was appointed to the Republic Polytechnic Board of Governors. He was also a Council Member of the Singapore Business Federation, a position he held from 2007 to 2010. Resident of Singapore. Responsibilities: Chairman of the Board, Non-Executive Director, Chairman of Investments Committee, Member of Remuneration Committee, Member of Nominations Committee. Directorships held in other listed entities: SC Global Developments Limited, Chairman and Chief Executive Officer, since 14 March 2000. Jerome Rowley SF Fin, FAICD Director since 22 March 2007. Mr Rowley has been a career banker since the early 1970s with Citigroup, Morgan Grenfell and ABN Amro. From 1992 until 2002, he served as Managing Director and CEO of ABN Amro Australia and Head of Relationship Management and Structured Finance for ABN Amro, Asia Pacific. He has been active in both wholesale and investment banking domestically and internationally. During his career, Mr Rowley devoted considerable effort towards the recognition, understanding and management of risk as a means of profit optimization. Of particular significance was his involvement in advising and funding including debt, equity and hybrids, of infrastructure projects in both Australia and Asia Pacific. Resident of Sydney. Responsibilities: Deputy Chairman of the Board, Non-Executive Director, Chairman of Risk Management Committee, Member of Audit Committee, Member of Investments Committee, Member of Nominations Committee. Directorships held in other listed entities: Anaeco Limited, from 15 August 2005 to 30 April 2009. AnnuAl R epoRt 2011 | 15 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 INFORMATION ON THE DIRECTORS (CONTINUED) Peter K Summers B.Ec. CA Director since 27 August 1998. Mr Summers is a Chartered Accountant and has been employed with the Company and its related corporations since 1984, when he joined the Jack Chia Australia Limited Group from Price Waterhouse (now PricewaterhouseCoopers). During Mr Summers’ early period with the group, he held various management and directorship roles within the Group. Following the acquisition of the AVJennings residential business in September 1995, Mr Summers was appointed Chief Financial Officer, becoming Finance Director of AVJennings in August 1998. He was appointed Managing Director and Chief Executive Officer of the Company on 19 February 2009. Mr Summers has extensive experience in general and financial management as well as mergers and acquisitions. Resident of Melbourne. Responsibilities: Managing Director and Chief Executive Officer. Directorships held in other listed entities: None. Elizabeth Sam B.A. Hons (Econ) Director since 20 September 2001. Mrs Sam has over 40 years experience in international banking and finance. She has served on numerous high level Singaporean government financial and banking review committees and was the Chairman of the Singapore International Monetary Exchange from 1987 to 1990 and 1993 to 1996. Resident of Singapore. Responsibilities: Non-Executive Director, Chairman of Nominations Committee, Chairman of Remuneration Committee, Member of Audit Committee. Directorships held in other listed entities: Boardroom Limited, since 15 August 2000. Kasikorn Bank Plc, Thailand, since 29 March 2001. SC Global Developments Limited, since 23 July 2002. Banyan Tree Holdings Limited, since 23 March 2004. The Straits Trading Company Limited, since 30 April 2008. Herman R Hochstadt B.A. (Hons), AMP (Stanford-Insead) Director since 30 June 2004. Mr Hochstadt has over 40 years experience in public administration in several Singaporean government departments, including over 10 years in the Ministry of Finance and Monetary Authority of Singapore, and in business, including as Chairman of Export Credit Insurance Corporation of Singapore, the Neptune Orient Lines and APL and as a Board Director of Singapore Airlines. He was Chairman of the Singapore Turf Club and a member of the Economic Development Board, Inland Revenue Authority of Singapore, Mass Rapid Transit Corporation, Port of Singapore Authority and National Productivity Board; and served as Special Advisor to the Port & Maritime Authority of Singapore and as High Commissioner for Singapore to Botswana, Mauritius, Namibia, South Africa, Swaziland and Tanzania. Mr Hochstadt is currently Pro-Chancellor of the Nanyang Technological University. Resident of Singapore. Responsibilities: Non-Executive Director, Member of Nominations Committee, Member of Remuneration Committee. Directorships held in other listed entities: None. Bobby Chin CA (ICAEW) B.Acc. Director since 18 October 2005. Mr Chin is the Chairman of Singapore Totalisator Board and serves on the Boards of Competition Commission of Singapore and Singapore Labour Foundation. He is also a member of the Singapore Council of Presidential Advisers. Mr Chin served 31 years with KPMG Singapore and was its Managing Partner from 1992 until September 2005. He is a Fellow of the Institute of Certified Public Accountants in Singapore, and an Associate Member of the Institute of Chartered Accountants in England and Wales. Resident of Singapore. Responsibilities: Non-Executive Director, Chairman of Audit Committee. Directorships held in other listed entities: Oversea-Chinese Banking Corporation Limited, since 1 October 2005. Yeo Hiap Seng Limited, since 15 May 2006. Ho Bee Investment Limited, since 29 November 2006. Neptune Orient Lines Limited, since 26 December 2006. Sembcorp Industries Limited, since 1 December 2008. Bruce G Hayman Director since 18 October 2005. Mr Hayman has over 42 years commercial management experience with 20 of those at operational Chief Executive or General Manager Level. He is currently Chairman of Chartwell Management Services where he brings his very wide business experience to clients by way of the leadership, marketing, business performance and coaching programs he offers. He has fulfilled senior management roles both in Australia and overseas for companies such as Nicholas Pharmaceutical Group, Dairy Farm Group, Hong Kong Land and Seagram Corporation. During his time in Singapore, he held the position of Foundation President of the Singapore Australia Business Council. He has also served as CEO of the Australian Rugby Union. For his contribution to tourism in Australia, he has been recognised by Tourism Training Australia with a Platinum award. He is Chairman of the Board of The Rugby Club Ltd and is the Deputy Chairman and a Director of the Australian Diabetes Council – NSW. Resident of Sydney. 16 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 INFORMATION ON THE DIRECTORS (CONTINUED) The Remuneration Report is presented under the following sections: Bruce G Hayman (Continued) Responsibilities: Non-Executive Director, Member of Remuneration Committee, Member of Nominations Committee, Member of Investments Committee, Member of Risk Management Committee. Directorships held in other listed entities: None. INFORMATION ON COMPANY SECRETARIES Carl D Thompson LLB B. Comm. Company Secretary since 12 January 2009. Mr Thompson previously held the company secretary and general counsel role at Downer EDI Limited. Prior to that he was a partner at national law firm Corrs Chambers Westgarth, practising in corporate and commercial work. Resident of Melbourne. Sandra A Vogiatzakis B.A. Company Secretary since 9 November 2004. Mrs Vogiatzakis has been with the Company and its related corporations since 1990 and was appointed Executive Officer in April 2006. Resident of Melbourne. REMUNERATION REPORT (AUDITED) This Remuneration Report outlines the remuneration arrangements of the Company and its controlled entities in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act. The Remuneration Report details the remuneration arrangements of Key Management Personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and its controlled entities, directly or indirectly, including any Director (whether executive or otherwise) of the Parent Entity and certain of the Executive Committee members. In addition, information relating to the five executives receiving the highest remuneration is provided. 1. Individual Key Management Personnel disclosures Details of KMP including the top five remunerated executives are set out below: (i) Directors S Cheong RJ Rowley PK Summers E Sam HR Hochstadt B Chin BG Hayman (ii) Executives Chairman (Non-Executive) Deputy Chairman (Non-Executive) Managing Director and Chief Executive Officer Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Executive Committee Members (KMP) M Henesey-Smith Chief Operating Officer SC Orlandi CD Thompson Chief Financial Officer Company Secretary/ General Counsel General Manager, Human Resources L Hunt Other Executives (not KMP but in top five remunerated) P Vlitas G Marshall State Manager (Victoria) State Manager (Queensland) 2. Principles Used to Determine the Nature and Amount of Remuneration 2.1 The Remuneration Committee The Remuneration Committee is responsible for making recommendations to the Board on the remuneration arrangements for Directors and Executives. The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of Directors and Executives on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high performing Board and Executive team. The Remuneration Committee comprises four Non-Executive Directors. The Chief Executive Officer attends Remuneration Committee Meetings at the invitation of the Committee’s Chairman. 2.2 Remuneration Strategy AVJennings’ remuneration strategy is designed to attract, motivate and retain employees and Directors by identifying and rewarding high performers and recognising the contribution of each employee to the continued growth and success of the Consolidated Entity. AnnuAl R epoRt 2011 | 17 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 REMUNERATION REPORT (AUDITED) (CONTINUED) 2.3 Remuneration Structure In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive remuneration is separate and distinct. 2.4 Non-Executive Director Remuneration The Board seeks to set aggregate remuneration at a level that provides the Consolidated Entity with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost that is acceptable to Shareholders. The amount of aggregate remuneration sought to be approved by Shareholders and the fee structure is reviewed periodically against fees paid to Non-Executive Directors of comparable companies. Two Non-Executive Directors, Mr S Cheong and Mrs E Sam, do not receive fees, however AVJennings pays a consulting fee to the Ultimate Parent Entity, SC Global Developments Limited. Non-Executive Directors do not participate in any incentive programs. The remuneration of Non-Executive Directors for the years ended 30 June 2011 and 30 June 2010 is detailed on page 20 of this Report. 2.5 Executive Remuneration AVJennings aims to reward Executives with a level and mix of remuneration commensurate with their position and responsibilities and aligned with market practice. Targets are set for the Consolidated Entity, each business unit and individual performance, and Executives are rewarded against these. The Chief Executive, members of the Executive Committee and other senior executives receive a mix of fixed and variable remuneration. The proportion of fixed and variable remuneration varies for different levels within the organisation based on the capacity of managers to influence the overall outcome of the Consolidated Entity’s operations and returns to Shareholders. In addition, AVJennings has in place a Long Term Incentive (LTI) scheme. The scheme structure was approved by the Board in April 2010 and allocations were made to executives in September 2010. i) Fixed Remuneration Fixed Remuneration is represented by Total Employment Cost (TEC) which comprises base salary, superannuation contributions and other benefits. Executive contracts of employment do not include any guaranteed base pay increases. TEC is reviewed annually by the Remuneration Committee. The process consists of a review of the Consolidated Entity, business unit and individual performance, and relevant comparative remuneration internally and externally. The fixed component of executive remuneration is detailed in the tables on page 21. ii) Variable Remuneration – Short Term Incentive (STI) A formal STI program has been developed for senior executives. The objective of the STI program is to link executive remuneration with appropriate performance targets. STI’s for corporate executives are linked to corporate results as well as individual performance targets, whereas STI’s for state executives are linked to business unit results as well as individual performance targets. An STI program exists for operational management. The objective of the STI program is to link the achievement of the Consolidated Entity’s operational targets with the remuneration received by the Executives charged with meeting those targets. The potential STI available is set at a level so as to provide sufficient incentive to the Executive to achieve the operational targets and such that the cost to AVJennings is reasonable in the circumstances. Actual STI payments awarded depend on the extent to which specific targets set at the beginning of the financial year are met. The targets consist of a number of Key Performance Indicators (KPIs) relating to financial outcomes (such as contribution to net profit before tax for the business unit or the business segment); business outcomes (such as efficient and effective performance of functions); and cultural factors (such as improved safety performance and leadership). These measures were chosen because they represent the key drivers for the short-term success of the business and provide a framework for delivering long-term value. On an annual basis, after consideration of the performance against the KPIs, the Remuneration Committee determines the amount, if any, of the short- term incentive to be paid to each Executive. This usually occurs within two months of the reporting date. Amounts payable are delivered as a cash bonus in the following reporting period. 18 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 REMUNERATION REPORT (AUDITED) (CONTINUED) 2.5 Executive Remuneration (Continued) iii) Variable Remuneration – Long Term Incentive (LTI) Share-based compensation The AVJ Deferred Employee Share Plan (the Plan) was formed to administer the employee share scheme. The Plan operates schemes under which shares may be acquired by the Plan Trustee on behalf of employees for no cash consideration subject to certain vesting conditions being satisfied. Shares acquired under the Plan for employees are acquired on-market. Employees may elect not to participate in the scheme. Shares held by the Plan’s trust and not yet allocated to employees at the end of the reporting period are shown as treasury shares in the financial statements. Share-based compensation benefits are provided to Executives via the Plan. These equity-settled transactions are measured at fair value at the grant date. The original cost of the shares is treated as a reduction in share capital and the underlying shares identified separately as treasury shares. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period and the credit taken to share-based payment reserve in equity. Vesting subject to service condition only The Chief Executive Officer was granted 1,000,000 shares on 7 March 2009 which vest in equal proportions on the first, second and third anniversary of his appointment. The vesting dates are 19 February 2010, 19 February 2011 and 19 February 2012. The market value of the shares at the grant date is taken to be the fair value. The service condition is the continuity of employment over the 3 years. The unvested shares are held by the AVJ Deferred Employee Share Plan Trust. Vesting subject to both service and performance conditions A total of 1,375,452 shares were granted on 28 September 2010 to certain executives. As detailed in the table on page 19, these include 1,136,816 shares for KMP and 97,800 shares for executives who are amongst the five highest remunerated. The remaining shares were granted to executives who were neither KMP nor amongst the five highest remunerated. These shares are subject to both service and performance conditions and will vest to the extent that each of these conditions is satisfied. The service vesting condition is that the employee must still be employed by AVJennings at 30 September 2013, except in the event of death or permanent disablement in which case the shares will vest to the estate. In the event that the employee is retrenched, the shares may vest subject to certain conditions. • The performance vesting conditions are: • Total Shareholder Return (TSR) performance measured against the ASX Small Industrials Index; and Earnings Per Share (EPS) growth. AVJennings’ EPS growth for the performance period must meet or exceed the target set. The EPS hurdle for total vesting of this grant is 10% p.a. growth for the three financial years to 30 September 2013. Half of the allocation is assessed against each performance condition. The vesting schedule for the TSR performance condition is set out in the table below. The holder of the shares is entitled to receive all dividends paid between grant and vesting date. AVJennings’ TSR rank against companies in the Index Percentage vesting < median At the median Nil 50% > median but < 75th percentile Pro-rata between 50th and 75th percentiles >=75th percentile 100% The fair value of the EPS element of the shares is the market value at grant date. The Monte Carlo Model is used to fair value the TSR element. The Model simulates AVJennings’ TSR and compares it against the ASX Small Industrials Retail Index. The Model takes into account historic dividends, share price volatilities and the risk-free yield on an Australian Government Bond at the grant date matching the remaining effective life of 3 years. AnnuAl R epoRt 2011 | 19 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 REMUNERATION REPORT (AUDITED) (CONTINUED) 2.5 Executive Remuneration (Continued) iii) Variable Remuneration – Long Term Incentive (LTI) (Continued) Name Executive Committee Members (KMP) PK Summers PK Summers M Henesey-Smith CD Thompson SC Orlandi L Hunt Other Executives (not KMP but in top five remunerated) P Vlitas G Marshall Total Shares Granted Number of Shares Vested Year Granted Number Fair Value Unvested at 1 July 2010 Vested during the year Unvested at 30 June 2011 2009 2011 2011 2011 2011 2011 2011 2011 1,000,000 $ 180,000 666,667 333,333 333,334 691,591 $ 312,945 691,591 158,344 $ 71,651 158,344 106,183 $ 48,048 102,458 $ 46,362 106,183 102,458 78,240 $ 35,404 78,240 51,229 46,571 $ $ 23,181 21,074 51,229 46,571 - - - - - - - 691,591 158,344 106,183 102,458 78,240 51,229 46,571 2,234,616 $ 738,665 1,901,283 333,333 1,567,950 AVJennings prohibits Executives from entering into arrangements to protect the value of unvested LTI awards. This prohibition includes entering into hedging arrangements in relation to AVJennings shares. 3. Group Performance The table below shows the Consolidated Entity’s earnings performance as well as the movement in the Consolidated Entity’s Earnings Per Share (EPS) and Total Shareholder Return (TSR) over the current and previous 4 years. Financial Report Date 30 June 2007 30 June 2007 30 June 2008 30 June 2009 30 June 2010 30 June 2011 * Pro-rata for 12 months. Financial Period 15 months 12 months annualised * 12 months 12 months 12 months 12 months Profit / (Loss) After Tax $’000 12,164 9,731 11,231 (12,724) 9,616 12,893 Basic EPS Cents TSR Cents 5.50 4.40 4.87 (4.68) 3.51 4.72 (0.02) (0.02) (0.67) (0.34) 0.21 0.05 4. Employment Contracts i) Chief Executive Officer Mr Summers’ contract of employment does not have a termination date and does not stipulate a termination payment. However, it specifies a six month notice period. Details regarding the remuneration paid to Mr Summers are contained in the table on page 20. During the year no options were either granted to, or exercised by, Mr Summers. There are currently no unexercised or outstanding options. ii) Other Executives The remaining AVJennings Executives are full time permanent employees with executive employment contracts. The employment contracts do not have termination dates or termination payments. However, they specify a notice period of three months. There are no other terms or conditions that differ significantly from the standard employment contracts applicable to other AVJennings employees. During the year, no options were granted to, or exercised by, the Executives. There are currently no unexercised or outstanding options. 20 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 REMUNERATION REPORT (AUDITED) (CONTINUED) 5. Remuneration of Key Management Personnel and the five highest paid Executives of the Company and the Consolidated Entity Details of the nature and amount of each element of remuneration of Directors and Executives are set out in the tables on pages 20 and 21. The Directors are the same as those identified in the Directors’ Report and Executives include the five highest paid Executives. 6. Remuneration Options: Granted and Vested During the Year No options were either granted or exercised during the year. There are currently no unexercised or outstanding options. None of the Directors or Executives hold any options. Directors Short-Term Post Employment Long-Term Share- based Payment Total Performance Related Salary / Fees $ Cash Bonus $ Other $ Superannuation(3) $ Long Service Leave $ Shares $ $ % 30 June 2011 S Cheong(1) - RJ Rowley 77,982 - - - - - 7,018 - - - - - 85,000 - - PK Summers(2) 424,847 123,750 63,200 46,543 38,192 163,989 860,521 23.47 E Sam(1) - HR Hochstadt 50,000 B Chin 60,000 BG Hayman 45,872 - - - - - - - - - - - 4,128 - - - - - - - - - 50,000 60,000 50,000 658,701 123,750 63,200 57,689 38,192 163,989 1 ,105,521 30 June 2010 S Cheong(1) - RJ Rowley 82,482 - - - - PK Summers(4) 453,254 87,500 262,500 E Sam(1) - HR Hochstadt 50,000 B Chin 60,000 BG Hayman 60,872 - - - - - - - - - 50,585 25,000 - - - 5,478 - - - - - 133,067 12,508 60,000 900,762 38.86 - - - - - - - - - 50,000 60,000 66,350 - - - - 706,608 87,500 262,500 81,063 12,508 60,000 1,210,179 (1) These Directors were not paid fees. A consulting fee of (a) Directors are also reimbursed for airfares (other than the $50,000 per month was paid to the ultimate parent entity SC Global Developments Limited which covers the services of these Directors. International airfares to attend meetings are paid for by a related entity. (2) ‘Other’ relates to the value of motor vehicle benefits. (3) Payments to Defined Contribution Plans. Consists of Superannuation Guarantee Contribution payments as well as employee voluntary contributions. The Consolidated Entity does not contribute to any Defined Benefit Plans. (4) ‘Other’ relates to a non-cash bonus. The post-tax amount of the bonus was allocated to the existing Employee Share Plan to purchase AVJennings shares which vested immediately. The shares cannot be sold or transferred until 8 September 2013. international airfares for those Directors referred to in (1)), and other expenses relating to the provision of their services. (b) With the exception of share-based compensation for the Chief Executive referred to in 2.5(iii), there were no other share-based payments made to Directors in the year under review. - - - - - - AnnuAl R epoRt 2011 | 21 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 REMUNERATION REPORT (AUDITED) (CONTINUED) Executives Short-Term Post Employment Salary / Fees $ Cash Bonus $ Other (1) $ Superannuation (2) $ Long- Term Long Service Leave $ Share- Based Payment Shares $ Total Performance Related $ % 30 June 2011 M Henesey-Smith 285,828 42,500 15,000 SC Orlandi 282,216 8,250 CD Thompson 222,227 21,375 L Hunt 196,615 10,500 - - - Other Executives P Vlitas G Marshall 266,584 - 17,951 222,127 30,000 9,489 52,128 15,199 56,599 15,199 20,575 23,989 18,074 17,913 431,443 9,490 11,591 326,746 3,067 12,012 315,280 1,758 8,851 232,923 15,441 5,795 326,346 9,826 5,268 300,699 14.00 6.07 10.59 8.31 1.78 11.73 1,475,597 112,625 42,440 183,689 57,656 61,430 1,933,437 30 June 2010 M Henesey-Smith 265,051 80,000 15,577 A Soutar(3) SC Orlandi 272,370 - - 260,517 20,000 20,025 CD Thompson 249,347 25,000 L Hunt 197,441 15,000 - - 49,812 49,708 13,747 37,135 13,966 11,409 1,768 7,403 1,624 807 - - - - - 421,849 18.96 323,846 321,692 313,106 227,214 - 6.22 7.98 6.60 Other Executives P Vlitas 249,435 40,000 18,641 18,692 9,766 - 336,534 11.89 1,494,161 180,000 54,243 183,060 32,777 - 1,944,241 (1) Represents the value of motor vehicle benefits. (2) Payments to Defined Contribution Plans. Consists of Superannuation Guarantee Contribution payments as well as employee voluntary contributions. The Consolidated Entity does not contribute to any Defined Benefit Plans. (3) Transferred with the discontinued Contract Building division. MEETINGS OF DIRECTORS AND DIRECTORS’ COMMITTEES The number of meetings of Directors and Directors’ committees held during the year, for the period the Director was a Member of the Board or a Committee, and the number of meetings attended by each Director are detailed below. Full Meetings of Directors Meetings of Committees Audit Remuneration Nominations Risk Management Held Attended Held Attended Held Attended Held Attended Held Attended S Cheong RJ Rowley PK Summers E Sam HR Hochstadt B Chin BG Hayman 7 7 7 7 7 7 7 7 7 7 7 7 7 7 - 3 - 3 - 3 - - 3 - 3 - 3 - 1 - - 1 1 - 1 1 - - 1 1 - 1 1 1 - 1 1 - 1 1 1 - 1 1 - 1 - 1 - - - - 1 - 1 - - - - 1 Investments Committee The Investments Committee does not formally meet in person. It conducts physical inspections of certain major development sites and receives detailed briefings from management on all major development sites prior to consideration of formal acquisition proposals which are dealt with by way of circular resolution. 22 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ RepoRt foR the yeAR ended 30 June 2011 DIRECTORS’ INTERESTS The relevant interests of the Directors in the shares of the Company at the date of this Report are: Director S Cheong E Sam PK Summers RJ Rowley Number 137,370,023 149,534 942,147 180,000 INDEMNIFYING OFFICERS During the year, the Consolidated Entity paid a premium in respect of a contract insuring its Directors and employees against liabilities that may be incurred in defending civil or criminal proceedings that may be brought against the Officers in their capacity as Officers of entities in the Consolidated Entity. In accordance with common practice, the insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. ROUNDING OF AMOUNTS The amounts contained in this Report and in the Financial Statements have been rounded to the nearest $1,000 (where rounding is permitted) under the option available to the Company under the Australian Securities and Investments Commission (ASIC) Class Order 98/100. The Company is an entity to which the Class Order applies. AUDITOR’S INDEPENDENCE DECLARATION We have obtained the following Independence Declaration from our auditors, Ernst & Young: In relation to our audit of the financial report of AVJennings Limited for the financial year ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young 28 September 2011 NON-AUDIT SERVICES David Simmonds Partner Liability limited by a scheme approved under Professional Standards Legislation A number of non-audit services were provided by the Consolidated Entity’s auditor, Ernst & Young. These non-audit services are detailed in note 8 to this Financial Report. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. This Report is made in accordance with a resolution of the Directors. Simon Cheong Director 28 September 2011 Peter Summers Director consolidAted stAtement of compRehensiVe i ncome foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 23 Note 2011 $’000 2010 $’000 Continuing operations Revenues Share of profits of associates and joint venture entities accounted for using the equity method Change in inventories, finished goods and work-in-progress 5 210,246 267,639 1,779 (153,986) 2,124 (219,083) Other operational expenses Advertising expenses Display costs Employee expenses Depreciation and amortisation expense Finance costs Fair value gain on interest rate derivatives Other expenses Profit from continuing operations before income tax Income tax expense Profit from continuing operations after income tax Discontinued operations (5,375) (3,437) (1,088) (21,535) (486) (914) 441 (5,702) 19,943 (5,343) 14,600 5 5 9 (4,030) (3,389) (1,096) (21,869) (1,639) (641) 2,856 (2,043) 18,829 (4,584) 14,245 Loss from discontinued operations after income tax 10 (1,707) (4,629) Net profit for the year 12,893 9,616 Other comprehensive income Foreign currency translation Other comprehensive loss for the year net of tax (427) (427) (1) (1) Total comprehensive income for the year 12,466 9,615 Earnings per share for profit from continuing operations attributable to ordinary equity holders of the parent: Cents Cents Basic earnings per share Diluted earnings per share Earnings per share for profit attributable to ordinary equity holders of the parent: Basic earnings per share Diluted earnings per share 12 12 12 12 5.35 5.19 4.72 4.57 5.20 5.16 3.51 3.48 24 | AVJennings limited · A bn 44 004 327 771 consolidAted s tAtement of f inAnciAl p osition As At 30 June 2011 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other current assets Assets of disposal group classified as held for sale Total current assets NON-CURRENT ASSETS Inventories Investments accounted for using the equity method Property, plant and equipment Intangible assets Total non-current assets Total assets CURRENT LIABILITIES Trade and other payables Derivative financial instruments Interest-bearing loans and borrowings Tax payable Provisions Liabilities directly associated with the assets classified as held for sale Total current liabilities NON-CURRENT LIABILITIES Trade and other payables Interest-bearing loans and borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Note 2011 $’000 2010 $’000 13 14 15 16 15 17 21 22 23 24 25 27 23 24 26 27 12,260 17,159 131,231 1,300 - 24,110 15,409 100,571 1,712 43,228 161,950 185,030 285,630 41,131 1,087 2,816 241,591 41,268 1,866 2,816 330,664 287,541 492,614 472,571 48,485 68 62,529 3,540 3,235 - 34,288 509 67,212 905 3,565 21,966 117,857 128,445 43,400 6,619 19,516 694 11,650 15,014 17,398 646 70,229 44,708 188,086 173,153 304,528 299,418 Equity attributable to equity holders of the parent Contributed equity Reserves Retained earnings Total equity 28 29(a) 29(c) 121,835 122,578 (94) 81 182,787 176,759 304,528 299,418 consolidAted s tAtement of chAnges in equity foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 25 At 1 July 2009 Profit for the year Other comprehensive loss for the year Total comprehensive income for the year Transactions with owners in their capacity as owners: - Share-based payment reserve At 30 June 2010 Profit for the year Other comprehensive loss for the year Total comprehensive income for the year Transactions with owners in their capacity as owners: Attributable to equity holders of the Parent Total equity Foreign Currency Translation Reserve Share-based Payment Reserve Retained Earnings Issued capital Note $’000 $’000 $’000 $’000 $’000 122,578 1 21 167,143 289,743 - - - - - - (1) (1) - - - 9,616 9,616 - (1) 9,616 9,615 - 60 - 60 (1) 60 9,616 9,675 122,578 - - - - - (427) (427) 81 176,759 299,418 - - - - - 242 12,893 12,893 - (427) 12,893 12,466 - - - (743) 10 242 - (6,865) (6,865) - Treasury shares acquired 28(b) (743) - - Foreign currency translation reserve - Share-based payment reserve - Dividends paid 11 - - - 10 - - At 30 June 2011 121,835 (417) 323 182,787 304,528 (743) (417) 242 6,028 5,110 26 | AVJennings limited · A bn 44 004 327 771 consolidAted s tAtement of cA sh f loWs foR the yeAR ended 30 June 2011 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers, land vendors and employees Interest paid Income tax paid Note 2011 $’000 2010 $’000 248,672 (254,104) (10,863) (1,157) 491,400 (434,203) (13,751) - Net cash (used in) / from operating activities 30 (17,452) 43,446 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment 21 Proceeds from sale of discontinued operations Interest received Distribution received Dividends received Investments in associates and joint venture entities Net cash from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings Loans from related parties Repayment of borrowings Payment of finance lease liability Payment for treasury shares Equity dividends paid 28(b) 819 (657) 21,304 907 4,510 1,000 (3,594) 24,289 124,238 2,000 (137,120) (207) (743) (6,865) 629 (756) - 567 1,120 - (243) 1,317 136,098 - (162,549) (677) - - Net cash used in financing activities (18,697) (27,128) NET INCREASE (DECREASE) IN CASH HELD Cash and cash equivalents at beginning of year Effects of exchange rate changes on cash and cash equivalents (11,860) 24,110 10 17,635 6,475 - CASH AND CASH EQUIVALENTS AT END OF YEAR 13 12,260 24,110 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 27 1. CORPORATE INFORMATION b) New accounting standards and interpretations The Consolidated Financial Report of AVJennings Limited for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the Directors on 28 September 2011. AVJennings Limited (the Parent) is a Company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange and the Singapore Exchange through the Central Limited Order Book (CLOB). The ultimate parent is SC Global Developments Limited, a company incorporated in Singapore which owns 50.03% of the ordinary shares in AVJennings Limited. The Consolidated Entity (“AVJennings”, “Consolidated Entity” or “Group”) consists of AVJennings Limited (the “Company” or the “Parent Entity”) and its controlled entities. The nature of the operations and principal activities of the Consolidated Entity are described in the Directors’ Report. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The Financial Report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The Financial Report has also been prepared on a historical cost basis, except for derivative financial instruments which have been measured at fair value. The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements, are disclosed in note 4. The Financial Report is presented in Australian Dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated. a) Compliance with IFRS The Financial Report also complies with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The accounting policies adopted are consistent with those of the previous financial year except as follows: The following new Standards and amendments to Standards are mandatory for the first time for the financial year beginning 1 July 2010. The adoption of these Standards did not have any impact on the current period or any prior period and is not likely to affect future periods: • • • AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions [AASB 2] effective 1 January 2010 AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 5, 8, 101, 107, 117, 118, 136 & 139] effective 1 January 2010 AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project effective 1 July 2010 Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by AVJennings for the annual reporting period ended 30 June 2011. The Directors believe that these new or amended Standards and Interpretations do not have any material effect on the Financial Statements presented. c) Basis of consolidation The Consolidated Financial Statements incorporate the assets and liabilities of all subsidiaries of AVJennings Limited as at 30 June 2011 and the results of all subsidiaries for the year then ended. Subsidiaries are all entities (including special purpose entities) over which the Group 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 a Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to note 2(d)). Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. 28 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c) Basis of consolidation (Continued) Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of the subsidiaries are consistent with the policies adopted by the Group. Non-controlling interests are allocated their fair share of the net profit or loss after tax in the Consolidated Statement of Comprehensive Income and are presented within equity in the Consolidated Statement of Financial Position, separately from the equity of the owners of the parent. The Group has formed the AVJ Deferred Employee Share Plan Trust to administer the Group’s employee share scheme. This Trust is consolidated, as substance of the relationship is that the trust is controlled by the Group. Shares held by the Trust are disclosed as treasury shares and deducted from contributed equity. d) Business combinations Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Consolidated Entity. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition- related costs are expensed as incurred. For each business combination, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit and loss as a bargain purchase. Where settlement of any part of the cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit and loss. e) Investments in subsidiary companies and controlled entities Investments in controlled entities are accounted for in the Consolidated Financial Statements as set out in note 2(c). Joint ventures are accounted for as set out in note 2(f) and investments in associates are accounted for as set out in note 2(g). f) Joint ventures Jointly controlled assets: Interest in jointly controlled assets is accounted for using proportionate consolidation. AVJennings recognises its interest in the jointly controlled assets by recognising its interest in the assets and liabilities of the joint venture. It also recognises its share of expenses and income from the use and output of the jointly controlled asset. Details of the jointly controlled assets are set out in note 20. Joint venture entities: The interest in a joint venture entity is accounted for using the equity method after initially being recognised at cost. Under the equity method, the share of the profits or losses of the joint venture entity are recognised in the profit and loss, and the share of post-acquisition movements in reserves is recognised in other comprehensive income. Dividends received from joint venture entities are recognised as a reduction in the carrying amount of the investment. Details relating to joint venture entities are set out in note 17(b). Profits or losses on transactions with joint venture entities are eliminated to the extent of the Consolidated Entity’s ownership interest until such time as they are realised by the jointly controlled entity on consumption or sale. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. g) Investments in associates Investments in associates are accounted for using the equity method of accounting. Associates are entities over which the Consolidated Entity has significant influence and that are neither subsidiaries nor joint ventures. Under the equity method, investments in associates are carried in the Consolidated Statement of Financial Position at cost plus post-acquisition changes in the Consolidated Entity’s share of the net assets of the associates, less any impairment with respect to the net investment in the associate. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 29 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) g) Investments in associates (Continued) The Consolidated Entity’s share of an associate’s profits or losses is recognised in the Consolidated Statement of Comprehensive Income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment. Details relating to associates are set out in note 17(a). When the Consolidated Entity’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables, the Consolidated Entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Profits or losses on transactions with associates are eliminated to the extent of the Consolidated Entity’s ownership interest until such time as they are realised by the associate on consumption or sale. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. The reporting dates of the associate and the Consolidated Entity are identical and the associate’s accounting policies conform to those used by the Consolidated Entity. h) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. Discreet financial information is available for each segment to assess its performance and enable the chief operating decision maker to make decisions about allocation of resources. Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the Financial Statements. Information about the business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category called “other”. i) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as follows: Plant, equipment, and motor vehicles Motor vehicles Leasehold improvements 3–7 years 2–3 years 3–10 years Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. 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 Consolidated Statement of Comprehensive Income. The assets’ useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year-end. Derecognition: An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. j) Borrowing costs Borrowing costs consist of interest and other costs that are incurred in connection with the borrowing of funds. A condition of the main banking facilities (refer to note 24(a)) is that the Consolidated Entity manages interest rate risk by entering into interest rate derivative contracts. To the extent that borrowings under the main banking facilities relate to qualifying assets, the net amounts payable under these derivative contracts are capitalised to the cost of the underlying assets. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, (i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale), are capitalised as part of the cost of those assets during the period of time required to complete and prepare the assets for their intended use or sale. Temporary investment income earned on borrowings pending their expenditure on qualifying assets is deducted from borrowing costs eligible for capitalisation. All other borrowing costs are expensed. 30 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) k) Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of the acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The Consolidated Entity does not capitalise any expenditure resulting in the creation of internally generated intangible assets. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the expected useful life of the asset and tested for impairment whenever there is an indication that the asset may be impaired. The amortisation period and the amortisation method for an intangible asset is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in accounting estimate and is thus accounted for on a prospective basis. l) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Estimates of net realisable value are based on the most recent evidence available at the time the estimates are made, of the amount the inventories are expected to realise and the estimate of costs to complete. Development projects and land: Cost includes the costs of acquisition, development, borrowings and all other costs directly related to specific projects. Borrowing and holding costs such as rates and taxes incurred after completion of development and construction are expensed. Costs expected to be incurred under penalty clauses and rectification provisions are also included. Construction contracts: Construction work-in-progress is stated at the aggregate of contract costs incurred to date plus recognised profits less recognised losses and progress billings. Contract costs include all costs directly related to specific contracts, and costs that are specifically chargeable to the customer under the terms of the contract. The stage of completion is measured using the percentage of completion method. m) Non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction instead of use. For an asset or disposal group to be classified as held for sale, it must be available for an immediate sale in its present condition and its sale must be highly probable. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business and is part of a single coordinated plan to dispose of such a line of business. The results of discontinued operations are presented separately on the face of the Consolidated Statement of Comprehensive Income and the assets and liabilities are presented separately on the face of the Consolidated Statement of Financial Position. n) Trade and other receivables Trade receivables are carried at the amount invoiced less a provision for impairment. Settlement terms for trade receivables are: Development housing and land sales – • generally between 30 and 180 days Contract building (progress billing) – generally between 7 and 30 days • Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written-off when identified. A provision for impairment is recognised when there is objective evidence that the Consolidated Entity will not be able to collect the receivable. The amount of the impairment loss is the difference between the carrying amount of the receivable and the present value of estimated future cash flows, which are not discounted for short-term receivables as the effect of discounting is immaterial. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 31 The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. r) Employee benefits Wages, 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 in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non- accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. Long service leave: The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the project unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted at a pre-tax rate that reflects the time value of money. Superannuation contributions: Contributions to superannuation plans are recognised as an expense in the Consolidated Statement of Comprehensive Income as they become payable. Bonus entitlements: A liability is recognised for bonus entitlements where contractually obliged or where there is a past practice that has created a constructive obligation. s) Share-based payment transactions Share-based compensation benefits are provided to Executives via the AVJ Deferred Employee Share Plan. These equity-settled transactions are measured at fair value at the grant date. The original cost of equity-settled transactions is treated as a reduction in share capital and the underlying shares identified separately as treasury shares. The fair value determined at the grant date of the equity-settled share- based payments is expensed on a straight-line basis over the vesting period and the credit taken to share-based payment reserve in equity. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) n) Trade and other receivables (Continued) Where a receivable is expected to be settled more than twelve months after the reporting date, its carrying amount is discounted using the effective interest rate method. The difference between the carrying amount and the present value is recorded in the Statement of Comprehensive Income. o) Cash and cash equivalents Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with a maturity of three months or less, that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of bank overdrafts. Bank overdrafts are included within interest- bearing loans and borrowings in current liabilities in the Consolidated Statement of Financial Position. p) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. The difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit and loss over the period of the borrowings using the effective interest method. Fees paid on establishment of loan facilities are capitalised as a prepayment and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. q) Provisions Provisions are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. When the Consolidated Entity expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Consolidated Statement of Comprehensive Income net of any reimbursement. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. 32 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) t) Leases Consolidated Entity as lessee: Finance leases, which transfer to the Consolidated Entity substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Consolidated Entity will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability. Consolidated Entity as lessor: Leases in which the Consolidated Entity retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income. u) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised for the major business activities as follows: Development projects and land sales: Revenue from the sale of land, houses and apartments is recognised when the risks and rewards have been transferred and the Consolidated Entity retains neither continuing managerial involvement to the degree associated with ownership, nor effective control over the units sold. This is usually considered to occur on settlement. In certain circumstances, land sales are recognised prior to settlement where there is a signed unconditional contract for sale. Construction contracts: Contract building relates to Home Building Agreements and the like, where there is a contract to build a house or provide other residential construction services. Contract revenue and expenses are recognised in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Where the outcome of a contract cannot be reliably estimated, contract costs are recognised as an expense as incurred, and where it is probable that the costs will be recovered, revenue is recognised to the extent of costs incurred. Where it is probable that a loss will arise from a construction contract, the excess of total costs over revenue is recognised as an expense immediately. Interest revenue: Revenue is recognised as interest accrues using the effective interest rate method. Management fees: Revenue is recognised upon delivery of the services. v) Income tax Current tax assets and liabilities for the current year are measured at the amount expected to be recovered from, or paid to, the taxation authorities based on current year’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the Consolidated Statement of Comprehensive Income. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to be applied in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 33 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. v) Income tax (Continued) Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Tax consolidation: AVJennings Limited and its wholly-owned controlled entities implemented the Tax Consolidation Legislation as of 1 July 2002. The Head Entity, AVJennings Limited, has entered into an agreement with its wholly-owned subsidiary, AVJennings Properties Limited, under which AVJennings Properties Limited will account for the current and deferred tax amounts of the controlled entities in the Tax Consolidated Group. The Consolidated Entity has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to the members of the Tax Consolidated Group. In addition to its own current and deferred tax amounts, AVJennings Properties Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the Tax Consolidated Group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from, or payable to, other entities in the Group. w) Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: • when the GST incurred on purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable receivables and payables, which are stated with the amount of GST included. • The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Consolidated Statement of Financial Position. Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. x) Derivative financial instruments The Consolidated Entity uses interest rate swaps and caps to hedge its risk associated with interest rate fluctuations. These derivatives do not qualify for hedge accounting and changes in fair value are recognised immediately as income or expenses in profit and loss. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. Derivative financial instruments are not held for trading purposes. y) Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 60 days of recognition. z) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • costs of servicing equity (other than dividends); • the after tax effect of dividends and interest • associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. aa) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Treasury shares: The Company’s own equity instruments, which are reacquired for later use in employee share-based payment arrangements (treasury shares), are deducted from equity. No gain or loss is recognised in profit or loss for the purchase, sale, issue or cancellation of the Company’s own equity instruments. 34 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ab) Foreign currency translation (i) Functional and presentation currency: Both the functional and presentation currency of AVJennings Limited and its Australian subsidiaries is Australian Dollars ($). A controlled entity, AVJ Hobsonville Pty Limited, has a branch in New Zealand whose functional currency is New Zealand Dollars which is translated to the presentation currency for consolidation reporting. (ii) Transactions and balances: Foreign currency transactions are translated into the Entity’s functional currency at the rates of exchange prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss, except when they are deferred in equity as they are attributable to part of the net investment in a foreign operation. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (iii) Translation of Group Companies’ functional currency to presentation currency: The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each statement of comprehensive income are translated at average exchange rates; • • all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When a foreign investment is sold, the proportionate share of such exchange difference is reclassified to profit and loss as part of the gain or loss on sale where applicable. ac) Comparative figures To enable meaningful comparison, some comparatives have been reclassified to conform with the current year’s presentation. 3. FINANCIAL RISK MANAGEMENT The Consolidated Entity’s principal financial instruments comprise receivables, payables, finance leases, derivatives, cash, bank loans and overdrafts. Risk Management is carried out by a central treasury department under policies approved by the Board of Directors. The objective of the policies is to support the delivery of financial targets and manage key financial risks such as interest rates, foreign currency, credit and liquidity. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity. AVJennings enters into derivative transactions, principally interest rate cap and interest rate swap contracts, to hedge interest rate risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Consolidated Entity uses different methods to measure and manage different types of risks to which it is exposed. These methods include sensitivity analysis in the case of interest rates and ageing analysis for credit risk. Liquidity risk is managed through the development of future rolling cash flow forecasts and the continuity of funding through the facilities mentioned in notes 24(a) and 24(b). Primary responsibility for identification and control of financial risks rests with management under the authority of the Board. The Board reviews and agrees on policies for managing each of the risks identified below. (i) Interest rate risk The Consolidated Entity’s exposure to market interest rates relates to the obligations arising from interest- bearing loans and overdraft. The level of debt is disclosed in note 24. The policy is to manage finance costs using a mix of fixed and variable rate debt with a target to have approximately 50% of forecast average borrowings at fixed or capped rates of interest. Forecast average borrowings are derived from periodic rolling cash flow forecasts which include an allowance for potential acquisitions. Please refer to the table on page 35 for the position at the reporting date. To manage the mix of fixed and variable debt in a cost efficient manner, the Consolidated Entity enters into interest rate cap and floating-to-fixed interest rate swap contracts. It is acknowledged that fair value exposure on derivatives is a by product of the Consolidated Entity’s attempt to manage the cash flow volatility arising from interest rate changes. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 35 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (i) Interest rate risk (Continued) Interest rate cap contracts are entered into for a notional principal amount by paying an upfront premium that covers a specific period. The strike rates for these contracts are benchmarked against the BBSY bid rate (Australian Bank Bill Swap Reference Rate - Average Bid Rate) on a quarterly basis. Settlement occurs quarterly, in favour of the Consolidated Entity, should the BBSY bid rate be above the cap strike rate (movements in the variable rate are directly proportional to movements in the BBSY bid rate). By entering into interest rate swaps, the Consolidated Entity agrees to exchange, at the end of each quarter, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. The Consolidated Entity’s interest rate derivatives do not qualify for hedge accounting treatment. Gains or losses arising from changes in fair value are recognised in profit or loss. At the reporting date, the following variable rate borrowings, interest rate swap and interest rate cap contracts were outstanding: Weighted average interest rate % 4.04 6.72 9.16 2011 2010 Weighted average interest rate % 4.04 6.98 8.33 Balance $’000 (24,110) 82,000 226 58,116 (65,000) (65,000) (71,884) Balance $’000 (12,260) 69,119 29 56,888 (15,000) (15,000) 26,888 Cash Bank loans Lease liabilities Net financial liabilities Interest rate caps Interest rate swaps Under/(over)-hedged borrowings Interest rate derivative contracts are exposed to fair value movements if interest rates change. Details of these contracts are outlined in note 24(e). At 30 June 2011, after taking into account the effect of interest rate swaps, approximately 17.3% of available borrowings are at fixed or capped rates of interest (2010: 76.0%). The Consolidated Entity constantly analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates. The following sensitivity analysis is based on the interest rate exposures in existence at the balance sheet date. At 30 June 2011, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows: +1.00% (100 basis points) +0.50% (50 basis points) -0.50% (50 basis points) Post Tax Profit Higher/(Lower) Other Comprehensive Income Higher/(Lower) 2011 $’000 203 94 (84) 2010 $’000 48 24 (7) 2011 $’000 - - - 2010 $’000 - - - 36 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (i) Interest rate risk (Continued) The above fluctuations in post tax profit and other comprehensive income are net of interest capitalised to inventories. The effect on the basis that no interest is capitalised, would be as follows: Post Tax Profit Higher/(Lower) Other Comprehensive Income Higher/(Lower) 2011 $’000 (54) (34) 44 2010 $’000 48 24 (24) 2011 $’000 - - - 2010 $’000 - - - +1.00% (100 basis points) +0.50% (50 basis points) -0.50% (50 basis points) (ii) Foreign currency risk AVJ Hobsonville Pty Limited is a subsidiary which has a branch in New Zealand. The entire operations of the branch, including purchases of inventory denominated in New Zealand Dollars, are funded by AVJennings Properties Limited (another subsidiary) through an intragroup account. The Consolidated Statement of Financial Position can be affected by the exchange rate movements between New Zealand Dollar and Australian Dollar. This exposure is not hedged as the effects are not considered to be material. The Consolidated Entity also has transactional exposures. Such exposure arises from sales or purchases by an operating entity in currencies other than the functional currency. This exposure is not material in relation to the branch in New Zealand. At balance date, the Consolidated Entity had the following exposure to New Zealand Dollar foreign currency that is not designated in cash flow hedges: Financial Assets Cash and cash equivalents Trade and other receivables Total Financial Assets Financial Liabilities Trade and other payables Total Financial Liabilities Net exposure 2011 NZ$’000 2010 NZ$’000 1,390 4,080 5,470 (12,342) (12,342) (6,872) 610 481 1,091 (9,611) (9,611) (8,520) notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 37 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (ii) Foreign currency risk (Continued) At balance date, had the Australian Dollar moved, the effect of exposure to New Zealand Dollar foreign currency that is not designated in cash flow hedges is illustrated in the following table: Post Tax Profit Higher/(Lower) Other Comprehensive Income Higher/(Lower) 2011 $’000 2010 $’000 - - - - - - 2011 $’000 (834) 483 1,019 2010 $’000 (706) 409 863 Consolidated AUD/NZD +10% AUD/NZD - 5% AUD/NZD -10% (iii) Price risk The Consolidated Entity does not have commodity and equity securities price risk. (iv) Credit risk Credit risk arises from financial assets which comprise cash and cash equivalents, trade and other receivables, derivative instruments and the granting of financial guarantees. Exposure to credit arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of the financial assets (as outlined in each applicable note) as well as $15,663,000 (2010: $871,000) in relation to financial guarantees granted – see note 32 for further information. Contracts for Land, Integrated Housing and Apartments usually require payment in full prior to passing of title to customers. In the event that title is to pass without full payment being received, appropriate credit verification procedures are performed prior to executing the contract. Derivative counterparties and cash deposits are limited to financial institutions approved by the Board. The Consolidated Entity has no significant concentrations of credit risk and does not hold any credit derivatives to offset its credit exposure. (v) Liquidity risk Liquidity risk arises from the financial liabilities of the Consolidated Entity and its ability to repay them as and when they fall due. The objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, finance leases and committed available credit facilities. Liquidity risk is managed by monitoring forecast cash flows on a monthly basis and matching the maturity profiles of financial assets and liabilities. The current main banking facilities were due to mature on 30 September 2011. Subsequent to the year-end, the Consolidated Entity has received approval to extend these for a further 2 years to 30 September 2013. Documentation is in the process of being completed and is expected to be signed by 30 September 2011, as outlined in note 24(a). In addition, the Consolidated Entity operates certain project funding facilities which are discussed in note 24(b). At 30 June 2011, 90.4% (2010: 81.7%) of the Consolidated Entity’s interest bearing loans and borrowings will mature in less than one year. Based upon the approved extension of the Company’s main banking facilities to 30 September 2013, 18.1% of the Consolidated Entity’s debt at 30 June 2011 will mature in less than one year. A. Non-derivative financial liabilities: The liquidity risk disclosures on page 38 reflect all contractually fixed pay-offs, repayments and interest resulting from recognised financial liabilities and financial guarantees as of 30 June 2011. For the other obligations, the respective undiscounted cash flows for the respective upcoming fiscal years are presented. The timing of cash flows is based on the contractual terms of the underlying contract. However, where the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which it can be required to be paid. For financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee can be called. The risk implied from the values shown in the table on page 38, reflects a balanced view of cash inflows and outflows of non-derivative financial instruments. The Consolidated Entity ensures that sufficient liquid assets are available to meet all the required short-term cash payments. 38 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (v) Liquidity risk (Continued) A. Non-derivative financial liabilities: (Continued) Year ended 30 June 2011 Liquid Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Interest-bearing loans and borrowings* Financial Guarantees < 6 months $’000 6–12 months $’000 > 1–5 years $’000 Total $’000 12,260 17,159 29,419 27,045 58,805 15,663 - - - - - - 21,440 5,266 - 43,400 7,132 - 12,260 17,159 29,419 91,885 71,203 15,663 101,513 26,706 50,532 178,751 Net maturity (72,094) (26,706) (50,532) (149,332) Year ended 30 June 2010 Liquid Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Interest-bearing loans and borrowings* Financial Guarantees < 6 months $’000 6–12 months $’000 > 1-5 years $’000 Total $’000 24,110 15,409 39,519 27,233 66,337 871 - - - - - - 7,055 3,052 - 11,650 17,505 - 24,110 15,409 39,519 45,938 86,894 871 94,441 10,107 29,155 133,703 Net maturity (54,922) (10,107) (29,155) (94,184) * Expected settlement amounts of interest-bearing loans and borrowings include an estimate of the interest payable to the date of expiry of the facilities. In addition to maintaining sufficient liquid assets to meet short-term payments, at reporting date, the Consolidated Entity has approximately $135 million (2010: $106 million) of unused credit facilities available for its immediate use. Please refer to note 24(a). notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 39 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (v) Liquidity risk (Continued) B. Derivative financial liabilities: The table below details the liquidity risk arising from the derivative liabilities held by the Consolidated Entity at balance date. Year ended 30 June 2011 Derivatives Net settled (interest rate swaps) Net maturity Year ended 30 June 2010 Derivatives Net settled (interest rate swaps) Net maturity (vi) Fair value < 6 months $’000 6–12 months $’000 > 1-5 years $’000 Total $’000 15 15 - - - - < 6 months $’000 6–12 months $’000 > 1-5 years $’000 273 273 - - - - 15 15 Total $’000 273 273 The methods used in estimating the fair value of a financial instrument are: Level 1 - the fair value is calculated using quoted prices in active markets. Level 2 - the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or the liability, either directly (as prices) or indirectly (derived from prices). Level 3 - the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below. Year ended 30 June 2011 Year ended 30 June 2010 Total Quoted market price (Level 1) Valuation technique - market observable inputs (Level 2) Valuation technique - non market observable inputs (Level 3) Quoted market price (Level 1) Valuation technique - market observable inputs (Level 2) Valuation technique - non market observable inputs (Level 3) Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Financial liabilities Derivative instruments Interest rate swaps - - 68 68 - - 68 68 - - 509 509 - - 509 509 40 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (i) Critical accounting judgements (vi) Fair value (Continued) Quoted market price represents the fair value determined based on quoted prices in active markets as at the reporting date without any deduction of transaction costs. The fair value of the listed equity investments are based on quoted market prices. For financial instruments not quoted in active markets, valuation techniques such as present value techniques, comparison to similar instruments for which market observable prices exist and other relevant models used by market participants are used. These valuation techniques use both observable and unobservable market inputs. Financial instruments that use valuation techniques with only observable market inputs or unobservable inputs that are not significant to the overall valuation include interest rate swaps not traded on a recognised exchange. The fair value of unlisted debt and equity securities, as well as other instruments that do not have an active market, are based on valuation techniques using market data that is not observable. Where the impact of credit risk on the fair value of a derivative is significant, and the inputs on credit risk (e.g. CDS spreads) are not observable, the derivative would be classified as based on non observable market inputs (Level 3). There were no transfers between any of the categories during the year. 4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS Judgements, estimates and assumptions affect the amounts reported in the Financial Statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenues and expenses. Judgements and estimates are based on historical experience and on other relevant factors which form the basis of the carrying values of assets and liabilities. Judgements, estimates and assumptions made in the preparation of these Financial Statements are outlined in the following column. Actual results may differ from these estimates and may materially affect financial results or the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant Notes to the Consolidated Financial Statements. Recovery of deferred tax assets: Deferred tax assets are recognised for deductible temporary differences and tax losses as management considers that it is probable that future taxable profits will be available to utilise these. Cost of goods sold: Management uses judgement in determining the method to be used for cost apportionment. Costs may be apportioned based on yield, unit entitlement, percentage of revenue or other equitable methods. Costs include costs incurred to date as well as forecast costs to bring the inventory into a saleable state. (ii) Critical accounting estimates and assumptions Estimates of net realisable value of inventories: The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and costs of selling. Estimates take into consideration fluctuations in price or cost. The key assumptions used in this exercise require the use of management judgement and are reviewed half yearly. Profit recognised on developments: Profit on developments is generally recognised on settlement as discussed in note 2(u). The calculation of profit for projects that are in progress, is based on actual costs to date and estimates of costs to complete. Share-based payment transactions: The cost of equity settled securities allocated to employees is measured by reference to the fair value of the equity instruments at the date on which they are granted. As explained in note 35(b), the fair value of some equity instruments is determined using the Monte Carlo simulation model which includes a number of judgements and assumptions. These judgements and assumptions have no impact on the carrying value of assets and liabilities in the Consolidated Statement of Financial Position but may impact the share-based payment expense taken to profit and loss. Valuation of derivatives: Derivatives not quoted in an active market are valued based on certain assumptions and estimates. These valuations can change depending on market volatility. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 41 5. REVENUES AND EXPENSES Profit from ordinary activities before income tax includes the following revenues and expenses: Revenues from continuing operations Developments Home Improvements Interest revenue Management fees Rental revenue Royalty revenue Sundry revenue Total revenues Note 2011 $’000 2010 $’000 194,995 256,854 7,993 958 3,579 47 1,655 1,019 6,380 685 3,012 67 - 641 210,246 267,639 Changes in inventories, finished goods and work-in-progress Amortisation of finance costs capitalised to inventories 6,246 14,319 Depreciation and amortisation expense Depreciation Leasehold improvements Plant, equipment and motor vehicles Amortisation Motor vehicles under lease Brand name Total depreciation and amortisation expense Other expenses Minimum operating lease payments Finance costs Bank loans and overdrafts Finance charges payable under finance leases Total finance costs Less: Amount capitalised to inventories Finance costs expensed 21 21 21 22 101 325 60 - 486 222 895 276 246 1,639 3,346 4,267 10,844 19 10,863 (9,949) 914 13,676 75 13,751 (13,110) 641 42 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 6. OPERATING SEGMENTS Operating segments States: This includes activities relating to Land Development, Integrated Housing, Apartments Development and Home Improvements. Other: This includes corporate transactions entered into by the Head Office which are not state based. Contract Building: The customer contracts to build a home with AVJennings on land they have sourced themselves. This is a discontinued operation as discussed in note 10. Identification of reportable segments The Consolidated Entity has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision makers in assessing performance and in determining the allocation of resources. The operating segments are identified by management based on the states in which the Consolidated Entity sells its products and services. Discrete financial information about each of these operating businesses is reported on a monthly basis. Types of products and services The Consolidated Entity operates primarily in residential development. Accounting policies The accounting policies used in reporting segments are the same as those contained in note 2 to the Financial Report. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 43 s n o i t a r e p O l a t o T s n o i t a r e p O d e u n i t n o c s i D s n o i t a r e p O g n u n i t n o C i 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ d e t a d i l o s n o C g n d i l i u B t c a r t n o C l a t o T r e h t O A S D L Q I C V W S N s t n e m g e s g n i t a r e p O 2 1 0 , 3 5 6 5 , 1 9 7 5 , 3 2 9 6 , 3 2 7 1 3 1 - - 2 1 0 , 3 3 9 3 , 1 9 7 5 , 3 9 7 6 , 3 9 7 5 , 6 6 4 1 9 4 , 8 1 2 5 4 3 , 3 0 2 3 0 5 , 5 1 4 3 2 , 3 6 2 8 8 9 , 2 0 2 - - - - 3 9 3 , 1 9 7 6 3 , 3 6 8 , 8 2 7 1 5 9 2 , 8 9 5 5 2 , 7 2 6 1 3 , 8 9 9 , 1 8 8 0 4 , 8 8 5 7 7 , 6 2 1 6 3 4 , 3 5 s e a s l l a n r e t x E s e u n e v e R - - - - 6 8 5 0 2 4 3 6 1 1 , 5 9 8 3 6 2 , 1 4 6 2 , 2 s e e f t n e m e g a n a M - - - - - - e u n e v e r r e h t O 6 5 1 , 1 7 4 2 6 7 , 5 2 2 7 1 5 , 3 0 2 6 1 5 , 5 1 9 3 6 , 7 6 2 6 4 2 , 0 1 2 3 9 3 , 1 9 7 6 3 , 3 6 8 , 8 2 7 1 5 , 9 2 4 8 1 , 6 2 7 4 0 , 2 3 1 6 1 , 3 8 3 0 3 , 9 8 8 3 0 , 8 2 1 0 0 7 , 5 5 s e u n e v e r t n e m g e s l a t o T 3 8 5 , 2 3 5 1 4 , 9 2 5 7 7 , 6 ) 1 5 2 ( 8 0 8 , 5 2 6 6 6 , 9 2 7 6 2 ) 0 6 1 ( 9 8 0 4 , 4 2 7 4 , 9 6 9 6 7 2 4 0 4 0 1 , 4 1 4 , 2 2 9 7 0 , 0 1 2 1 4 , 2 * s t l u s e r t n e m g e S s t l u s e R 6 1 2 , 2 1 3 2 5 , 8 1 ) 0 0 6 , 2 ( ) 0 3 6 , 5 ( 6 1 6 , 9 3 9 8 , 2 1 ) 9 3 6 , 1 ( ) 6 8 4 ( ) 8 0 5 , 2 2 ( ) 5 2 6 , 3 1 ( ) 1 4 6 ( ) 4 1 9 ( - - - 6 5 8 , 2 5 6 5 , 1 1 4 4 - 2 9 6 , 3 2 7 1 3 1 - - - - 3 9 3 , 1 9 7 6 , 3 3 9 3 , 1 9 7 6 3 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - n i t n e m e v o m e u a v r i a F l s e v i t a v i r e d e t a r t s e r e t n i e m o c n i r e h t O i n o i t a c e r p e d d e t a c o l l a n U s e s n e p x e d e t a c o l l a n U t s e r e t n i d e t a c o l l a n U n o i t a s i t r o m a d n a e s n e p x e x a t e r o f e b t fi o r P x a t e m o c n I t fi o r p t e N . x a t r e t f a s s o l e h t o t s n o i t a r e p o d e u n i t n o c s i d e h t f o s t l u s e r t n e m g e s e h t f o n o i t a i l i c n o c e r a r o f 0 1 e t o n o t r e f e r e s a e P * l : 1 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o f s t n e m g e s g n i t a r e p o g n d r a g e r n o i t a m r o f n i i s t l u s e r d n a s e u n e v e r e h t s t n e s e r p e b a t g n w o i l l l o f e h T I ) D E U N T N O C ( S T N E M G E S G N T A R E P O I . 6 44 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 s n o i t a r e p O l a t o T s n o i t a r e p O d e u n i t n o c s i D s n o i t a r e p O g n u n i t n o C i d e t a d i l o s n o C g n d i l i u B t c a r t n o C r e h t O A S D L Q I C V W S N 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ 0 1 0 2 0 0 0 $ ’ 1 1 0 2 0 0 0 $ ’ g n i t a r e p O s t n e m g e s s t e s s A 1 7 5 , 2 7 4 4 1 6 , 2 9 4 8 2 2 , 3 4 1 7 5 , 2 7 4 4 1 6 , 2 9 4 8 2 2 , 3 4 3 5 1 , 3 7 1 6 8 0 , 8 8 1 6 6 9 , 1 2 3 5 1 , 3 7 1 6 8 0 , 8 8 1 6 6 9 , 1 2 - - - - 2 9 5 , 1 3 6 6 9 2 2 , 5 7 6 0 6 , 9 6 9 4 6 , 9 3 8 0 8 , 0 1 2 , 4 4 1 2 0 6 6 0 1 , 2 4 0 , 2 9 5 3 6 , 9 4 1 7 2 4 , 8 6 1 s t e s s a t n e m g e S 2 9 5 , 1 3 6 6 9 , 2 2 5 7 6 0 6 , 9 6 9 , 4 6 9 3 8 , 0 8 0 1 2 , 4 4 1 , 2 0 6 6 0 1 2 4 0 , 2 9 5 3 6 , 9 4 1 7 2 4 , 8 6 1 s t e s s a l a t o T 8 6 1 , 0 9 2 1 0 3 8 , 5 9 0 1 2 , 6 0 9 7 1 , 0 3 0 5 , 1 8 8 , 1 5 4 6 9 8 2 , 9 8 3 , 1 2 0 3 9 , 5 8 9 8 , 3 1 s e i t i l i b a i l t n e m g e S 8 6 1 , 0 9 2 1 0 3 8 , 5 9 0 , 1 2 6 0 9 7 1 , 0 3 0 5 , 1 8 8 , 1 5 4 6 9 , 8 2 9 8 3 , 1 2 0 3 9 , 5 8 9 8 , 3 1 s e i t i l i b a i l l a t o T s e i t i l i b a L i : 1 1 0 2 e n u J 0 3 t a s a s t n e m g e s g n i t a r e p o g n d r a g e r n o i t a m r o f n i i s e i t i l i b a i l d n a s t e s s a e h t s t n e s e r p e b a t g n w o i l l l o f e h T I ) D E U N T N O C ( S T N E M G E S G N T A R E P O I . 6 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 45 7. KEY MANAGEMENT PERSONNEL DISCLOSURES (a) Compensation of Key Management Personnel and the five highest paid Executives Short-term - Salary/Fees - Cash bonus - Other (1) Post employment - Superannuation (2) Long-term - Long service leave Share-based payment 2011 $ 2010 $ 2,134,298 2,200,769 236,375 105,640 267,500 316,743 241,378 264,123 95,848 225,419 45,285 60,000 3,038,958 3,154,420 (1) ‘Other’ represents the value of motor vehicle benefits (2010: includes the value of motor vehicle benefits and a non-cash bonus of $262,500 to the Chief Executive Officer. The post-tax amount of the bonus was allocated to the existing Employee Share Plan to purchase AVJennings shares which vested immediately. The shares cannot be sold or transferred until 8 September 2013). (2) Payments to Defined Contribution Plans: consist of Superannuation Guarantee Contribution payments as well as employee voluntary contributions. The Consolidated Entity does not contribute to any Defined Benefit Plans. Detailed remuneration disclosures are provided in the Remuneration Report on pages 20 and 21. (b) Shareholdings of Key Management Personnel The number of shares in the Company held during the financial year by each Key Management Personnel of the Consolidated Entity, including their personally related parties, are set out below and on page 46. Details of shares granted as compensation during the reporting period are given in note 7(d). Number of shares held in AVJennings Limited For the year ended 30 June 2011 Directors S Cheong E Sam PK Summers(1) RJ Rowley Executives CD Thompson Total For the year ended 30 June 2010 Directors S Cheong E Sam PK Summers RJ Rowley Total Opening Balance Vested as Remuneration Net Other Change(2) Closing Balance 137,370,023 149,534 - - 333,333 608,814 180,000 - - - - - - - 137,370,023 149,534 942,147 180,000 319,500 319,500 138,032,890 608,814 319,500 138,961,204 137,370,023 149,534 - - - 333,333 - - - 150,000 - 30,000 137,370,023 149,534 333,333 180,000 137,669,557 333,333 30,000 138,032,890 (1) Includes 333,333 shares vested during the year (refer to note 7(d)) and 275,481 shares purchased by the AVJ Deferred Employee Share Plan in lieu of 2010 non-cash bonus, which vested immediately. (2) The “net other change” relates to shares acquired on market. 46 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 7. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (b) Shareholdings of Key Management Personnel (Continued) No other Key Management Personnel held shares in AVJennings Limited at any time during the year. All equity transactions with Key Management Personnel have been entered into under terms and conditions no more favourable than those the Company would have adopted if dealing at arm’s length. (c) Compensation options: granted and vested during the year No options were granted or exercised during the year. There are currently no unexercised or outstanding options. None of the Key Management Personnel hold any options. (d) Equity instrument disclosures relating to Key Management Personnel Share-based compensation benefits based on different vesting conditions are provided to certain Key Management Personnel via the AVJ Deferred Employee Share Plan. Vesting subject to service condition only The Chief Executive Officer was granted 1,000,000 shares on 7 March 2009 which vest in equal proportions on the first, second and third anniversary of his appointment. The vesting dates are 19 February 2010, 19 February 2011 and 19 February 2012. The market value of the shares at the grant date is taken to be the fair value. The service condition is the continuity of employment over the 3 years. The unvested shares are held by the AVJ Deferred Employee Share Plan Trust. Vesting subject to both service and performance conditions A total of 1,375,452 shares were granted on 28 September 2010 to certain Executives. As detailed below, these include 1,136,816 shares for KMP and 97,800 shares for executives who are amongst the five highest remunerated. The remaining shares were granted to executives who were neither KMP nor amongst the five highest remunerated. Name Executive Committee Members (KMP) PK Summers PK Summers M Henesey-Smith CD Thompson SC Orlandi L Hunt Other Executives (not KMP but in top five remunerated) P Vlitas G Marshall Total Shares Granted Number of Shares Vested Year Granted Number Fair Value Unvested at 1 July 2010 Vested during the year Unvested at 30 June 2011 2009 2011 2011 2011 2011 2011 2011 2011 1,000,000 $ 180,000 666,667 333,333 333,334 691,591 $ 312,945 158,344 $ 71,651 106,183 $ 48,048 102,458 78,240 $ $ 46,362 35,404 691,591 158,344 106,183 102,458 78,240 51,229 46,571 $ $ 23,181 21,074 51,229 46,571 - - - - - - - 691,591 158,344 106,183 102,458 78,240 51,229 46,571 2,234,616 $ 738,665 1,901,283 333,333 1,567,950 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 47 7. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED) (d) Equity instrument disclosures relating to Key Management Personnel (Continued) Vesting subject to both service and performance conditions (Continued) These shares are subject to both service and performance conditions and will vest to the extent that each of these conditions is satisfied. The service vesting condition is the employee must still be employed by AVJennings at 30 September 2013 for the shares to vest, except in the event of death or permanent disablement in which case the shares vest to the estate. In the event that the employee is retrenched, the shares may vest subject to certain conditions. The performance vesting conditions include the achievement of an Earnings per Share (EPS) hurdle and a Total Shareholder Return (TSR) hurdle. The fair value of the EPS element of the shares is the market value at grant date. The Monte Carlo Model is used to fair value the TSR element. The model simulates AVJennings TSR and compares it against the ASX Small Industrials Retail Index. The model takes into account historic dividends, share price volatilities and the risk-free yield on an Australian Government Bond at the grant date matching the remaining effective life of 3 years. Please refer to note 2(s), note 28(b) and note 35(b). (e) Loans to Key Management Personnel There are currently no outstanding loans receivable from Key Management Personnel. No loans were made to Key Management Personnel during the year. (f) Other Transactions with Key Management Personnel Services: A Director, Mr. BG Hayman, is the Chairman of Chartwell Management Services Pty Limited. Chartwell Management Services Pty Limited provided consulting services to AVJennings Limited and its controlled entities on normal commercial terms and conditions in the year ended 30 June 2010. No service was provided in the year ended 30 June 2011. The amount recognised as an expense for the year ended 30 June 2011 is $Nil (2010: $63,712). 8. AUDITOR’S REMUNERATION Amounts received or due and receivable by Ernst & Young (Australia) for: An audit or review of the 30 June full-year and 31 December interim financial reports of the Entity and other entities in the Consolidated Group 2011 $ 2010 $ 225,450 312,000 - Share of audit or review costs of the financial reports of the Consolidated - 1,000 Entity’s joint ventures - Other services in relation to the Entity and any other entities in the Consolidated Group - non-audit related fees Total auditor’s remuneration 15,000 - 240,450 313,000 48 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 9. INCOME TAX Income tax expense The major components of income tax expense are: Current income tax Current income tax charge Adjustment for prior periods Deferred income tax Current year temporary differences Adjustment for prior periods Income tax expense reported in the Consolidated Statement of Comprehensive Income Numerical reconciliation between aggregate tax expense recognised in Consolidated Statement of Comprehensive Income and tax expense calculated per the statutory income tax rate: Accounting profit before income tax from continuing operations Loss before income tax from discontinued operations Note 2011 $’000 2010 $’000 3,522 117 2,000 (9) 771 20 1,766 43 5,630 2,600 10 19,943 (1,420) 18,829 (6,613) Total accounting profit before income tax 18,523 12,216 Tax at Australian income tax rate of 30% (2010 – 30%) Adjustment for prior periods Equity accounted share of Joint Venture profits Other non-deductible items and variations Aggregate income tax expense Aggregate income tax expense is attributable to: Continuing operations Discontinued operations 5,557 108 (520) 485 3,665 (559) (544) 38 5,630 2,600 5,343 287 4,584 (1,984) 5,630 2,600 Tax losses The Consolidated Entity has capital tax losses of $1,013,526 (2010: $1,013,526) for which no deferred tax asset has been recognised. These are available indefinitely for offset against future capital gains subject to satisfaction of the relevant statutory tests. Tax consolidation AVJennings Limited and its wholly-owned resident entities have formed a tax consolidated group with effect from 1 July 2002 and are therefore taxed as a single entity from that date. The accounting policy in relation to tax consolidation is set out in note 2(v). The Head Entity, AVJennings Limited, has entered into an agreement with its wholly-owned subsidiary, AVJennings Properties Limited, under which AVJennings Properties Limited will account for the current and deferred tax amounts of the controlled entities in the Tax Consolidated Group. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the Tax Consolidated Group. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 49 9. INCOME TAX (CONTINUED) Nature of tax funding arrangements and tax sharing agreements Entities within the Tax Consolidated Group have entered into a tax funding arrangement and a tax sharing agreement with the Head Entity. Under the terms of the Tax Funding Arrangement, each of the entities in the Tax Consolidated Group has agreed to pay or receive a tax equivalent payment to, or from, the Head Entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from, or payable to, other entities in the Tax Consolidated Group. The Tax Sharing Agreement entered into between members of the Tax Consolidated Group provides for the determination of the allocation of income tax liabilities between the entities should the Head Entity default on its tax payment obligations or if an entity should leave the Tax Consolidated Group. The effect of the Tax Sharing Agreement is that each member’s liability for tax payable by the Tax Consolidated Group is limited to the amount payable to the Head Entity under the Tax Funding Arrangement. Taxation of financial arrangements (TOFA) Legislation is in place which changes the tax treatment of financial arrangements including the tax treatment of hedging transactions. The Consolidated Entity has assessed the potential impact of these changes on its tax position. No impact has been recognised and no adjustments have been made to the deferred tax and income tax balances at 30 June 2011 (2010: $Nil). 10. DISCONTINUED OPERATIONS During the year, total proceeds amounting to $21.3 million were received in respect of the sale of the Contract Building Division to Sekisui House Limited. AVJennings will retain ownership of the “AVJennings” brand and continue to use this brand for its developments operations. It has licensed to Sekisui House the “AVJennings” brand and associated trade marks for use in the contract building business in return for a cash royalty based generally on the revenue and cumulative profit for the business for a three year term effective 1 August 2010. The results of the discontinued operations for the current year (the month of July 2010 only) and prior year (12 months) are presented below: External sales Other revenue Change in inventories, finished goods and work-in-progress Other expenses Loss from discontinued operations before tax Tax (expense)/benefit 2011 $’000 2010 $’000 15,503 203,345 13 (12,794) (4,142) (1,420) (287) 172 (165,252) (44,878) (6,613) 1,984 Loss from discontinued operations after tax (1,707) (4,629) Reconciliation to segment results Segment results Other revenue Indirect expenses Interest expense Loss from discontinued operations before tax Tax (expense)/benefit Note 6 6 2011 $’000 (251) 13 (1,119) (63) (1,420) (287) 2010 $’000 6,775 172 (13,339) (221) (6,613) 1,984 Loss from discontinued operations after tax (1,707) (4,629) 50 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 11. DIVIDENDS Dividends paid and recognised during the year 2010 final dividend of 1.5 cents per fully paid share, paid 30 September 2010. Fully franked @ 30% tax 2011 interim dividend of 1.0 cent per fully paid share, paid 18 April 2011. Fully franked @ 30% tax Total dividends paid Dividends proposed 2010 final dividend of 1.5 cents per fully paid share, paid 30 September 2010. Fully franked @ 30% tax 2011 final dividend of 1.5 cents per fully paid share, to be paid 19 October 2011. Fully franked @ 30% tax Total dividends proposed Dividends proposed after the year-end have not been recognised as a liability as at 30 June 2011 but will be brought into account during the 2012 financial year. The Company’s Dividend Reinvestment Plan remains suspended. Franking credit balance Franking credits available for subsequent financial years based on a tax rate of 30% 2011 $’000 2010 $’000 4,119 2,746 6,865 - - - - 4,119 4,119 4,119 - 4,119 23,880 23,030 The above amounts represent the balance of the franking account as at the reporting date, adjusted for franking credits that will arise from the payment of the amount of the provision for income tax. The impact on the franking account of the dividend recommended by the Directors since the end of the reporting period, but not recognised as a liability at the reporting date, will be a reduction in the franking account of $1,765,000 to $22,115,000. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 51 12. EARNINGS PER SHARE (a) Earnings used in calculating earnings per share For basic earnings per share: Net profit from continuing operations attributable to ordinary equity holders of the parent Loss attributable to discontinued operations Net profit attributable to equity holders of the parent For diluted earnings per share: Net profit from continuing operations attributable to ordinary equity holders of the parent (from basic EPS) Tax effected share-based payment expense - liability component Net profit from continuing operations attributable to ordinary equity holders adjusted for the effect of future share-based payment expense Loss attributable to discontinued operations Net profit attributable to equity holders of the parent (b) Weighted average number of shares used as denominator Weighted average number of ordinary shares (excluding treasury shares) for basic earnings per share Effect of dilution: Treasury shares Weighted average number of ordinary shares for diluted earnings per share 2011 $’000 2010 $’000 14,600 (1,707) 14,245 (4,629) 12,893 9,616 14,600 14,245 (336) (69) 14,264 (1,707) 14,176 (4,629) 12,557 9,547 2011 Number 2010 Number 272,879,908 273,922,027 1,708,786 666,667 274,588,694 274,588,694 There have been no transactions involving ordinary shares that would significantly change the number of ordinary shares outstanding between the reporting date and the date of completion of these Financial Statements. 13. CASH AND CASH EQUIVALENTS Reconciliation to Consolidated Statement of Cash Flows For the purposes of Consolidated Statement of Cash Flows, cash and cash equivalents comprise the following at 30 June: Cash at bank and in hand 12,260 24,110 2011 $’000 2010 $’000 52 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 14. TRADE AND OTHER RECEIVABLES Current Amounts due under construction contracts and trade receivables Related parties receivables Other receivables Allowance for impairment of other receivables 2011 $’000 2010 $’000 5,046 6,014 6,177 (78) 9,065 4,208 2,304 (168) Total current trade and other receivables 17,159 15,409 (a) Allowance for impairment loss No impairment loss has been recognised by the Consolidated Entity in the current year (2010: $Nil). At 30 June, the ageing analysis of trade receivables is a follows: Number of days outstanding Total $’000 0–30 31–60 $’000 $’000 5,046 3,949 9,065 8,369 96 464 61–90 PDNI* $’000 132 84 + 91 PDNI* $’000 869 148 + 91 CI# $’000 - - 2011 2010 * Past due not impaired (PDNI) # Considered impaired (CI) With regards to receivables past due not impaired (PDNI), the relevant debtors have been directly contacted and the Consolidated Entity is satisfied that payment will be received in full. Movements in provision for impairment of trade and other receivables At the beginning of the year Amounts recovered during the year Amounts written-off during the year At the end of the year 2011 $’000 168 (90) - 2010 $’000 334 - (166) 78 168 (b) Related party receivables For terms and conditions relating to related party receivables, refer to note 34. (c) Other receivables Other receivables generally arise from transactions outside the usual operating activities of the Consolidated Entity. These receivables are not past due or impaired. (d) Fair value and credit risk Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the Consolidated Entity’s policy to transfer (on-sell) receivables to special purpose entities. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 53 15. INVENTORIES Current Home Improvements Work-in-progress on contracts Cost plus attributable profits Less: progress billings Excess progress billings on contracts Land, Housing and Apartments Developments Broadacres Land to be subdivided - at cost Borrowing and holding costs capitalised Total Broadacres Work-in-progress Note 2011 $’000 2010 $’000 7,677 (8,683) 3,501 (3,630) (1,006) (129) 15(a) 3,458 1,347 18,028 4,777 4,805 22,805 Land subdivided or in the course of being subdivided - at cost Development costs capitalised Houses and apartments under construction - at cost Borrowing and holding costs capitalised 15(a) Total work-in-progress Completed inventory Completed houses and apartments - at cost Completed residential land lots - at cost Borrowing and holding costs capitalised Total completed inventory Total current inventories 15(a) 34,617 26,688 18,181 11,929 17,103 16,680 11,695 6,663 91,415 52,141 23,642 10,902 1,473 11,643 12,687 1,424 36,017 25,754 131,231 100,571 54 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 15. INVENTORIES (CONTINUED) Non-current Land, Housing and Apartments Developments Broadacres Land to be subdivided – at cost Borrowing and holding costs capitalised Total Broadacres Work-in-progress Land subdivided or in the course of being subdivided – at cost Development costs capitalised Borrowing and holding costs capitalised Total work-in-progress Completed inventory Completed houses and apartments – at cost Completed residential land lots – at cost Borrowing and holding costs capitalised Total completed inventory Note 2011 $’000 2010 $’000 15(a) 117,444 29,126 86,676 23,790 146,570 110,466 15(a) 15(a) 90,797 22,862 19,922 49,707 59,077 22,341 133,581 131,125 1,483 3,608 388 5,479 - - - - Total non-current inventories 285,630 241,591 Total inventories 416,861 342,162 (a) (b) Borrowing costs are recognised as part of the carrying amount of the qualifying asset. Borrowing costs include interest, fees and costs associated with interest rate derivatives. These costs have been capitalised at a weighted average rate of 13.96% (2010: 13.04%). Inventory with a book value of $87,772,000 (2010: $87,687,000) had been pledged as security for project specific borrowings (refer to note 24(b)). The Consolidated Entity’s remaining inventory has been pledged as security for the main banking facility (refer to note 24(a)). (c) No inventory write-downs were recognised during the year (2010: $Nil). 16. OTHER CURRENT ASSETS Prepayments Deposits Total other current assets 2011 $’000 1,182 118 2010 $’000 1,570 142 1,300 1,712 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 55 17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Investment in Associate – unincorporated Interest in Joint Venture Entities – unlisted Total equity accounted investments Note 17(a) 17(b) 2011 $’000 2010 $’000 1,484 39,647 1,614 39,654 41,131 41,268 Investments in Associates are accounted for in accordance with the policy outlined in note 2(g) while Joint Venture Entities are accounted for in accordance with note 2(f). (a) Investment in Associate The Consolidated Entity has significant influence over the Associate because it is represented on the project governing body and its employees provide essential technical knowledge to the project. The Associate is an unincorporated partnership which trades in Australia. It has a 30 June year-end and its principal activity is the development and sale of residential lots. Investment details Associate name and principal activity Epping JV – Land Development Movements in carrying amount At the beginning of year Distribution received Share of net profit At the end of year Interest held 2011 2010 10% 10% 2011 $’000 1,614 (370) 240 2010 $’000 1,423 (120) 311 1,484 1,614 Summarised financial information of the Associate: The Consolidated Entity’s share of the results of the Associate and its aggregated assets and liabilities are as follows: Assets Liabilities Revenues Profit Impairment 2011 $’000 1,624 140 1,677 240 2010 $’000 1,766 151 1,084 311 The Consolidated Entity’s investment in the Associate was not impaired at any time during the year. Share of Associate’s commitments and contingent liabilities The Associate’s commitments and contingent liabilities have been entered into on a non-recourse basis and therefore the Consolidated Entity has no exposure to the Associate’s commitments and contingent liabilities as at the date of this Report. The share of contingent liabilities in respect to certain performance guarantees granted by the Associate in the normal course of business to unrelated parties, at 30 June 2011, amounted to $163,968 (2010: $98,967). 56 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 17. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) (b) Interest in Joint Venture Entities Investment details Joint Venture Entity and principal activities Meridan Plains - Land Development and Building Construction Eastwood - Land Development and Building Construction Sydney Olympic Park - Commercial Development and Construction Woodville - Land Development and Building Construction Arlington Rise - Land Development and Building Construction Movements in carrying amount At the beginning of year Contributions to the joint venture entities Distributions received Dividends received Share of net profit At the end of year Interest held 2011 2010 50% 50% 50% 50% 45% 50% 50% 50% 50% - 2011 $’000 2010 $’000 39,654 38,598 3,594 (4,140) (1,000) 1,539 243 (1,000) - 1,813 39,647 39,654 The Consolidated Entity’s share of the Joint Venture Entities’ assets (including goodwill), liabilities, revenue and expenses are as follows: Share of assets and liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilites Net assets Share of revenue, expenses and results Revenues Expenses Profit before tax Tax Profit after tax 2011 $’000 2010 $’000 39,511 31,174 70,685 12,970 18,068 31,038 17,404 50,685 68,089 2,600 25,835 28,435 39,647 39,654 30,014 (28,032) 1,982 (443) 1,539 19,893 (17,172) 2,721 (908) 1,813 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 57 18. PARENT ENTITY FINANCIAL INFORMATION (a) Summary financial information The individual financial statements for the Parent show the following aggregate amounts: Balance Sheet Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Issued capital Reserves Share-based payment reserve Retained earnings Contributed equity Profit for the year Total comprehensive income 2011 $’000 31,382 194,668 19,118 19,118 2010 $’000 31,382 194,668 18,751 18,751 121,835 122,578 323 53,392 81 53,258 175,550 175,917 135 135 - - (b) Guarantees entered into by the parent entity The parent entity has not provided any financial guarantees. (c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2011 (2010: Nil). 58 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 19. CONTROLLED ENTITIES (a) Investment in controlled entities The following economic entities are the controlled entities of AVJennings Limited: ECONOMIC ENTITY (1) 2011 2010 2011 2010 % Equity Interest Included in Banking Cross Deed of Covenant (2) Entities included in the Closed Group A.V. Jennings Real Estate Pty Limited AVJennings Real Estate (VIC) Pty Limited AVJennings Holdings Limited^ AVJennings Properties Limited^ Jennings Sinnamon Park Pty Limited Long Corporation Limited^ Orlit Pty Limited^ Sundell Pty Limited^ AVJennings Housing Pty Limited^ AVJennings Housing VIC. Pty Limited* AVJennings Housing N.S.W. Pty Limited* AVJennings Housing S.A. Pty Limited* AVJennings Housing QLD. Pty Limited* AVJennings Home Improvements S.A. Pty Limited^ AVJennings Mackay Pty Limited^ 100 100 100 100 100 100 100 100 100 - - - - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 No No Yes Yes No Yes Yes Yes Yes N/A N/A N/A N/A Yes Yes No No Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes (1) All entities are incorporated in Australia. (2) These entities, including AVJennings Limited, are included under the Banking Cross Deed of Covenant referred to in note 24(a). ^ These entities, including AVJennings Limited, are included in the Deed of Indemnity for Surety bond facility referred to in note 24(c). * These entities were transferred to Sekisui House Australia on 2 August 2010. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 59 19. CONTROLLED ENTITIES (CONTINUED) (a) Investment in controlled entities (Continued) ECONOMIC ENTITY (1) 2011 2010 2011 2010 % Equity Interest Included in Banking Cross Deed of Covenant (2) Entities excluded from the Closed Group Crebb No 12 Pty Limited Dunby Pty Limited Epping Developments Limited Montpellier Gardens Pty Limited Sirda Pty Limited AVJ ODP Pty Limited AVJennings (Cammeray) Pty Limited AVJennings Syndicate No 2 Limited AVJennings Syndicate No 3 Limited AVJennings Syndicate No 4 Limited AVJennings Syndicate No 5 Limited (3) AVJennings Syndicate No 6 Limited (3) AVJennings Officer Syndicate Limited AVJennings Hindmarsh Syndicate Limited (3) AVJennings Properties SPV No 1 Pty Limited AVJennings Properties SPV No 2 Pty Limited AVJennings Properties SPV No 3 Pty Limited AVJennings Properties SPV No 4 Pty Limited AVJennings Wollert Pty Limited AVJ Erskineville Pty Limited AVJ Hobsonville Pty Limited AVJ SPV No 8 Pty Limited AVJennings Properties SPV No 9 Pty Limited AVJennings SPV No 10 Pty Limited AVJennings Properties SPV No 11 Pty Limited AVJennings Properties SPV No 12 Pty Limited (3) AVJennings Properties SPV No 13 Pty Limited (3) AVJennings Properties SPV No 14 Pty Limited (3) AVJennings Properties SPV No 15 Pty Limited AVJennings Properties SPV No 16 Pty Limited (3) AVJennings Properties SPV No 17 Pty Limited (3) AVJennings Properties SPV No 18 Pty Limited (3) 100 100 100 100 100 100 100 100 100 100 - - 100 - 100 100 100 100 100 100 100 100 100 100 100 - - - 100 - - - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Yes Yes No Yes No No No No No Yes No No Yes No No No No No No No Yes No No No No No No No No No No No Yes Yes No Yes No No No No No Yes No No Yes No No No No No No No Yes No No No No No No No No No No No (1) All entities are incorporated in Australia. With the exception of AVJ Hobsonville Pty Limited, which has a branch in New Zealand, all entities operate within Australia. (2) These entities, including AVJennings Limited, are included under the Banking Cross Deed of Covenant referred to in note 24(a). (3) These entities were deregistered during the year. (b) Ultimate parent AVJennings Limited is the ultimate Australian parent entity. SC Global Developments Limited is the ultimate parent entity. 60 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 19. CONTROLLED ENTITIES (CONTINUED) (c) Deeds of cross guarantee Certain entities within the Group are parties to deeds of cross guarantee under which each controlled entity guarantees the debts of the others. By entering into these deeds, the controlled entities are relieved from the requirement to prepare Financial Statements and Directors’ Reports under Class Order 98/1418 (as amended by Class Orders 98/2017, 00/321, 01/1087, 02/248, 02/1017, 04/663, 04/682, 04/1624, 05/542, 06/51, 08/11, 08/255, 08/618 and 09/626) issued by the Australian Securities and Investments Commission (ASIC). Those entities included in the Closed Group are listed in note 19(a). These entities represent a “Closed Group” for the purposes of the Class Order, and as there are no other parties to the deeds of cross guarantee that are controlled by AVJennings Limited, they also represent the “Extended Closed Group”. (d) Class order closed group Certain controlled entities were granted relief by ASIC (under provisions of Class Orders) from the requirement to prepare separate audited financial statements, where deeds of indemnity have been entered into between the Parent Entity and the Controlled Entities to meet their liabilities as required (refer to note 19(c)). The Extended Closed Group referred to in the Directors’ Declaration therefore comprises all of the entities within the Class Order. Certain entities falling outside of the Extended Closed Group are listed in note 19(a), and are therefore required to prepare separate annual financial statements. The Consolidated Statement of Comprehensive Income for those controlled entities which are party to the deed is as follows: Continuing operations Revenues Cost of sales Other expenses Profit from continuing operations before income tax Income tax expense Closed Group 2011 $’000 2010 $’000 97,331 196,315 (56,139) (34,684) (164,131) (28,278) 6,508 (5,221) 3,906 (4,415) Profit/(loss) from continuing operations after income tax 1,287 (509) Discontinued operations Loss from discontinued operations after income tax (1,707) (4,629) Loss for the year (420) (5,138) notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 61 19. CONTROLLED ENTITIES (CONTINUED) (d) Class order closed group (Continued) The Consolidated Statement of Financial Position for those controlled entities which are party to the deed is as follows: CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other current assets Assets of disposal group classified as held for sale Total current assets NON-CURRENT ASSETS Inventories Property, plant and equipment Intangible assets Total non-current assets Total assets CURRENT LIABILITIES Trade and other payables Derivative financial instruments Interest-bearing loans and borrowings Tax payable Short-term provisions Liabilities directly associated with the assets classified as held for sale Total current liabilities NON-CURRENT LIABILITIES Trade and other payables Interest-bearing loans and borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Equity attributable to equity holders of the parent Contributed equity Reserves Retained earnings Total equity Closed Group 2011 $’000 2010 $’000 11,017 60,850 79,494 1,143 - 16,307 95,849 74,340 1,703 43,228 152,504 231,427 236,947 167,250 1,090 2,816 1,869 2,816 240,853 171,935 393,357 403,362 - 68 4,432 509 50,029 62,212 3,540 3,235 - 905 3,565 21,966 56,872 93,589 43,401 11,650 - 19,341 694 14 17,273 646 63,436 29,583 120,308 123,172 273,049 280,190 121,835 122,578 323 81 150,891 157,531 273,049 280,190 62 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 19. CONTROLLED ENTITIES (CONTINUED) (d) Class order closed group (Continued) The Consolidated Statement of Changes in Equity for those controlled entities which are party to the deed is as follows: Closed Group 2011 $’000 2010 $’000 At beginning of the year 280,190 274,821 Changes in equity due to members entering/exiting the closed group Loss for the year Total income and expenses for the year Equity transactions - Treasury shares acquired - Share-based payment reserve - Dividends received from non closed group member - Dividends paid to equity holders of parent 645 (420) 747 (5,138) 225 (4,391) (743) 242 - (6,865) - 60 9,700 - (7,141) 5,369 At end of the year 273,049 280,190 20. INTEREST IN JOINT VENTURE OPERATIONS A number of controlled entities have entered into joint venture operations. Information relating to the Joint Ventures is set out below: Joint Venture name and principal activities Cammeray Joint Venture – Apartments Development Cheltenham Joint Venture – Land Development and Building Construction Hobsonville Joint Venture – Land Development INTEREST IN OUTPUT 2011 2010 50% 50% 50% 50% 50% 50% The Consolidated Entity’s interest in the profits and losses of the Joint Venture Operations are included in the Consolidated Statement of Comprehensive Income, in accordance with the accounting policy described in note 2(f), under the following classifications: Revenues Cost of sales Other expenses Profit / (loss) before income tax Income tax (expense) / credit 2011 $’000 10,364 (8,783) (803) 778 (233) 2010 $’000 63 - (312) (249) 75 Net profit / (loss) for the year 545 (174) notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 63 20. INTEREST IN JOINT VENTURE OPERATIONS (CONTINUED) The Consolidated Entity’s interest in the assets and liabilities of Joint Venture Operations are included in the Consolidated Statement of Financial Position, in accordance with the policy described in note 2(f), under the following classifications: CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets NON-CURRENT ASSETS Inventories Total non-current assets Total assets CURRENT LIABILITIES Trade and other payables Total current liabilities NON-CURRENT LIABILITIES Trade and other payables Total non-current liabilities Total liabilities Net assets 2011 $’000 2010 $’000 129 831 948 6 314 - 11,000 83 1,914 11,397 39,651 29,024 39,651 29,024 41,565 40,421 127 127 7,745 7,745 12,555 11,650 12,555 11,650 12,682 19,395 28,883 21,026 64 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 21. PROPERTY, PLANT AND EQUIPMENT Leasehold improvements At cost Less: accumulated depreciation Total leasehold improvements Plant, equipment and motor vehicles At cost Less: accumulated depreciation Total plant and equipment Motor vehicles under finance lease At cost Less: accumulated amortisation Total motor vehicles under finance lease 2011 $’000 2010 $’000 789 (587) 202 1,967 (1,493) 474 8,222 (7,366) 11,551 (10,371) 856 1,180 45 (16) 29 407 (195) 212 Total property, plant and equipment 1,087 1,866 Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the year are set out below: For the year ended 30 June 2010 Note Carrying amount at 1 July 2009 Additions Disposals Depreciation/amortisation charge for the year 5 Depreciation on assets held for sale Leasehold improvements $’000 921 37 (86) (222) - Plant, equipment and motor vehicles $’000 3,130 719 (359) (895) (15) Leased motor vehicles $’000 1,156 - (411) (276) - Total $’000 5,207 756 (856) (1,393) (15) Assets reclassified as assets held for sale (176) (1,400) (257) (1,833) Carrying amount at 30 June 2010 474 1,180 212 1,866 For the year ended 30 June 2011 Carrying amount at 1 July 2010 Additions Disposals Depreciation/amortisation charge for the year 5 474 21 (192) (101) 1,180 636 (635) (325) 212 1,866 - (123) (60) 657 (950) (486) Carrying amount at 30 June 2011 202 856 29 1,087 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 65 22. INTANGIBLE ASSETS Brand name at cost Less: accumulated amortisation Total intangible assets Reconciliation Note 2011 $’000 9,868 (7,052) 2,816 2010 $’000 9,868 (7,052) 2,816 Reconciliation of the carrying amount of the intangible asset at the beginning and end of the year is set out below: Carrying amount at beginning of year Amortisation charge for the year Carrying amount at end of year 5 2,816 - 2,816 3,062 (246) 2,816 The intangible asset relates to the value of the “AVJennings” brand name which was acquired as part of a business combination in 1995. On recognition, the asset was determined to have a finite life of 20 years and has since been amortised over the expected useful life. In accordance with the accounting policy discussed in note 2(k), the amortisation period and the amortisation method for an intangible asset are reviewed at least each financial year-end. A review carried out at 31 December 2009 determined that the brand name has indefinite useful life. This change in accounting estimate has been applied prospectively with amortisation ceasing as of 31 December 2009. The brand name is tested for impairment annually, or more frequently if there are indicators of impairment. At 30 June 2011, there were no indicators of impairment. 23. TRADE AND OTHER PAYABLES Current Secured Land creditors Unsecured Land creditors Trade creditors Related party payables Other creditors and accruals Total current payables Non-Current Secured Land creditors Unsecured Land creditors 2011 $’000 2010 $’000 5,300 - 23,235 10,380 2,300 7,270 13,959 8,982 - 11,347 43,185 34,288 48,485 34,288 5,600 - 37,800 11,650 Total non-current payables 43,400 11,650 66 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 23. TRADE AND OTHER PAYABLES (CONTINUED) Land creditors The amounts due to secured land creditors are secured over the title to properties acquired by way of either mortgage back or bank guarantee in favour of the land vendor. These security arrangements remain in place until final settlement of the amounts due to the land vendor. Titles for the unsecured land creditors only transfer to the Consolidated Entity on full payment of the amount outstanding or upon provision of some other security. Related party payables For terms and conditions relating to related party payables, refer to note 34. Fair value Due to the short-term nature of these payables, their carrying amount is assumed to approximate their fair value. 24. INTEREST-BEARING LOANS AND BORROWINGS Current Secured Bank loans Unsecured Lease liabilities Note 2011 $’000 2010 $’000 62,500 67,000 31(b) 29 212 Total current interest-bearing liabilities 62,529 67,212 Non-current Secured Bank loans Unsecured Lease liabilities 6,619 15,000 31(b) - 14 Total non-current interest-bearing liabilities 6,619 15,014 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 67 24. INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED) Financing arrangements The Consolidated Entity has access to the following lines of credit: 30 June 2011 Main banking facilities - bank overdraft - bank loans - performance bonds and other non-cash facilities (1) Project funding - bank loans - performance bonds and other non-cash facilities Surety bond facility - performance bonds Leasing facilities 30 June 2010 Main banking facilities - bank overdraft - bank loans - performance bonds and other non-cash facilities Project funding - bank loans - performance bonds and other non-cash facilities Note Available $’000 Utilised $’000 Unutilised $’000 24(a) 24(b) 24(c) 2,200 137,800 31,000 - 50,000 16,298 2,200 87,800 14,702 171,000 66,298 104,702 33,500 23,500 19,119 17,669 14,381 5,831 57,000 36,788 20,212 10,000 1,139 8,861 24(d) 1,200 29 1,171 24(a) 24(b) 2,200 137,800 31,000 - 62,000 19,706 2,200 75,800 11,294 171,000 81,706 89,294 31,000 20,000 11,000 5,000 - 5,000 36,000 20,000 16,000 Leasing facilities 24(d) 1,200 482 718 (1) At 30 June 2011 these facilities are interchangeable up to $5 million (2010: $10 million) between the bank loans and performance bonds/other non-cash facilities. Significant terms and conditions (a) Main banking facilities The main banking facilities are secured by a fixed and floating charge over all the assets and undertakings of the entities within the Consolidated Entity, other than those assets pledged as security for project funding (see note 24(b)), and those assets pledged as security for properties acquired as detailed in note 23 (secured land creditors). The Parent Entity has entered into a cross deed of covenant with various controlled entities to guarantee obligations of those entities in relation to the main banking facilities. Details of entities included in the cross deed of covenant are set out in note 19. There is no overdraft utilisation at year-end and the current interest rates on the bank loans range from 6.88% to 7.07% (2010: 7.28% to 7.30%). The Consolidated Entity’s main banking facilities which were due to mature on 30 September 2011 have been renewed for a further 2 years to 30 September 2013. Documentation is in the process of being completed and is expected to be signed by 30 September 2011. The renewed main banking facilities will be secured by a fixed and floating charge over all the assets and undertakings of the entities within the Consolidated Entity as mentioned above, and by first registered mortgages over various real estate inventories other than those assets pledged as security for project funding (see note 24(b)) and secured land creditors (see note 23). 68 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 24. INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED) (a) Main banking facilities (Continued) The renewed facilities are expected to be sufficient for the Consolidated Entity’s normal ongoing business operations. The renewed main banking facilities currently being documented are: Main banking facilities - bank overdrafts - bank loans - performance bonds and other non-cash facilities Total facilities (b) Project funding Facilities as at 30 June 2011 $’000 Facilities Renewed $’000 2,200 137,800 31,000 5,000 134,000 33,600 171,000 172,600 Project funding facilities are secured by: • fixed and floating charge over all assets and undertakings of the entity involved in the relevant project, namely, AVJennings Wollert Pty Limited; • first registered mortgage over the real estate inventories of the entity involved in the relevant project, namely, • • • AVJennings Wollert Pty Limited; fixed and floating charge over the assets and undertakings of a related company involved in the relevant project, namely, St Clair JV Nominee Pty Limited; deed of mortgage over the shares held by the relevant entity, namely, AVJennings Properties SPV No 4 Pty Limited, in a related company, namely, St Clair JV Nominee Pty Limited; and fixed and floating charge over the assets and undertakings, including project rights, of a relevant entity, namely, AVJennings Properties SPV No 4 Pty Limited. At 30 June 2011 the facilities shown are interchangeable up to $5,000,000 (2010: $5,000,000) between the bank loans and performance bonds/other non-cash facilities. The lines of credit shown are maximum limits which are available progressively as projects are developed. The expiry dates for the facilities are between February 2014 and March 2014. Individual projects are expected to be completed and the outstanding amounts repaid or refinanced prior to expiry of each facility. As at 30 June 2011, the balance outstanding on these facilities was $19,119,000 (2010: $20,000,000). The carrying amounts of the pledged assets are as follows: Wollert, Victoria Cheltenham, South Australia 2011 $’000 2010 $’000 47,211 41,509 47,663 40,361 The weighted average interest rate on the project funding loans at the year-end was 6.07% (2010: 6.03%). (c) Surety bond facility The Consolidated Entity has entered into a Surety bond facility of $10,000,000 (2010: $Nil). The Surety bond facility is subject to review annually. The next review is due by 30 April 2012. The Surety bond facility is secured by a Deed of Indemnity between the Parent Entity and various controlled entities. Details of the controlled entities, included in the Deed of Indemnity are set out in note 19. (d) Leasing facilities No separate security has been provided by the Consolidated Entity in relation to lease liabilities. The rights to the leased assets revert to the lessor in the event of default. The facility was due to mature on 30 September 2011. A renewed facility of $1,200,000 has been approved by its bankers for a further 2 years to 30 September 2013. Documentation is in the process of being completed and is expected to be signed by 30 September 2011. The current interest rates on finance leases range from 8.95% to 9.36% (2010: 6.51% to 10.14%). The lease terms are 36 months. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 69 24. INTEREST-BEARING LOANS AND BORROWINGS (CONTINUED) (e) Interest rate hedge instruments The Consolidated Entity manages the cash flow effect of interest rate risk by entering into interest rate cap and interest rate swap contracts. Interest rate cap contracts are entered into for a principal Australian Dollar amount by paying an upfront premium that covers a specific period. The strike rates for these contracts are benchmarked against the BBSY bid rate (Australian Bank Bill Swap Reference Rate – Average Bid Rate) on a quarterly basis. Settlement occurs quarterly, in favour of the Consolidated Entity, should the BBSY bid rate be above the cap strike rate (movements in the variable rate are directly proportional to movements in the BBSY bid rate). Under the interest rate swaps, at the end of every quarter, the Consolidated Entity and the counterparty agree to exchange the difference between the interest calculated by applying the fixed contract rates and that calculated by applying the BBSY bid rate to the principal Australian Dollar amounts. Details of interest rate derivative contracts are as follows: Type of derivative Expiry Date 14 January 2013 14 January 2013 14 January 2013 14 January 2013 1 July 2010 1 July 2010 1 July 2010 Interest rate cap Interest rate cap Interest rate swap Interest rate swap Interest rate cap Interest rate swap Interest rate swap 25. TAX PAYABLE Income tax payable 26. DEFERRED TAX LIABILITIES The provision for deferred income tax is made up as follows: - capitalisation of development costs - accrued income - prepayments, accruals/provisions and investments - brand name - unrealised loss on interest derivatives Deferred tax liabilities Strike Rate % 5.35 5.39 - - 7.75 - - Fixed Rate % - - 5.35 5.39 - 7.60 7.62 Principal amount 2011 $’000 7,500 7,500 7,500 7,500 2010 $’000 - - - - - - - 65,000 35,000 30,000 2011 $’000 2010 $’000 3,540 905 2011 $’000 2010 $’000 19,542 - (850) 845 (21) 17,951 713 (1,958) 845 (153) 19,516 17,398 70 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 26. DEFERRED TAX LIABILITIES (CONTINUED) Reconciliations Reconciliations of the carrying amount of the deferred tax liability at the beginning and end of the year are set out below: Carrying amount at beginning of year Arising temporary differences Carrying amount at end of year Tax losses 2011 $’000 17,398 2,118 2010 $’000 15,651 1,747 19,516 17,398 The Consolidated Entity has capital tax losses of $1,013,526 (2010: $1,013,526) which are available indefinitely for offset against future capital gains subject to satisfaction of the relevant statutory tests. 27. PROVISIONS Current Employee benefits Other Total current provisions Non-current Employee benefits Total non-current provisions 28. CONTRIBUTED EQUITY Ordinary shares Treasury shares Share capital 2011 $’000 2010 $’000 2,739 496 2,915 650 3,235 3,565 694 694 646 646 Note 2011 Number 2010 Number 2011 $’000 2010 $’000 28(a) 274,588,694 274,588,694 122,837 122,837 28(b) (1,708,786) (666,667) (1,002) (259) 121,835 122,578 (a) Movement in ordinary share capital Number Number $’000 $’000 As at the beginning of the year 274,588,694 274,588,694 122,837 122,837 As at the end of the year 274,588,694 274,588,694 122,837 122,837 Fully paid ordinary shares carry one vote per share and carry the right to dividends. There are currently no unexercised or outstanding options. No options were exercised during the year. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 71 28. CONTRIBUTED EQUITY (CONTINUED) (b) Movement in treasury shares 2011 Number 2010 Number 2011 $’000 As at the beginning of the year (666,667) (1,000,000) (259) Acquisition of shares by AVJ Deferred Employee Share Plan Trust Employee share scheme issue (1,375,452) - 333,333 333,333 (1,042,119) 333,333 (743) - (743) 2010 $’000 (259) - - - As at the end of the year (1,708,786) (666,667) (1,002) (259) Treasury shares are shares in AVJennings Limited that are held by the AVJ Deferred Employee Share Plan Trust for the purpose of issuing shares to Executives via the AVJ Deferred Employee Share Plan. The original cost of the shares is treated as a reduction in share capital and the underlying shares identified separately as treasury shares. (c) Capital risk management When managing capital, management’s objective is to ensure that the Consolidated Entity continues as a going concern. Management also aims to maintain an optimal capital structure that reduces the cost of capital. In order to maintain or adjust the capital structure, management may change the amount of dividends paid to shareholders, offer a dividend reinvestment plan, return capital to shareholders, issue new shares or sell assets to reduce debt. During the year ended 30 June 2011, a total dividend of $6,865,000 was paid (2010: $Nil). Management monitors the capital mix through the debt to equity ratio (net debt/total equity) and the debt to total assets ratio (net debt/total assets). Based on continuing operations of the Consolidated Entity, these ratios are as follows: Interest-bearing loans and borrowings * Less: cash and cash equivalents Net debt Total equity Total assets Net debt to equity ratio Net debt to total assets ratio * Excludes leased liabilities amounting to $29,000 (2010: $226,000). 2011 $’000 2010 $’000 69,119 (12,260) 82,000 (24,110) 56,859 57,890 304,528 299,418 492,614 472,571 18.7% 19.3% 11.5% 12.3% 72 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 29. RESERVES AND RETAINED EARNINGS (a) Reserves At 1 July 2009 Foreign currency translation Share-based payment At 30 June 2010 Foreign currency translation Share-based payment At 30 June 2011 (b) Nature and purpose of reserves Foreign currency translation reserve Foreign Currency Translation Reserve $’000 Share-based Payment Reserve $’000 1 (1) - - (417) - (417) 21 - 60 81 - 242 323 Total $’000 22 (1) 60 81 (417) 242 (94) The foreign currency translation reserve is used to record exchange differences arising from the translation of the Financial Statements of subsidiaries which have functional currency different to the Australian dollar. Refer to note 2(ab). Share-based payment reserve The share-based payment reserve is used to recognise the grant date fair value of shares issued to employees. Refer to notes 2(s) and 7(d) for further details of the plan. (c) Retained earnings Movements in retained earnings were as follows: At the beginning of the year Net profit for the year Dividends At the end of the year 2011 $’000 2010 $’000 176,759 12,893 (6,865) 167,143 9,616 - 182,787 176,759 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 73 30. CASH FLOW STATEMENT RECONCILIATION Reconciliation of net profit after tax to net cash flows from operations Net profit after tax Adjustments for: Depreciation Depreciation - Discontinued operations Amortisation Net loss on disposal of property, plant and equipment Interest income classified as investing cash flow Share of profits of associates and joint venture entities Share based payments expense Fair value adjustment to derivatives Change in operating assets and liabilities: (Increase)/decrease in inventories (Increase)/decrease in trade and other receivables Decrease in prepayments and deposits Increase in deferred tax liability Increase in current tax liability Increase/(decrease) in trade and other payables Decrease in provisions Increase in net operating assets held for sale 2011 $’000 2010 $’000 12,893 9,616 426 - 60 15 (907) (1,779) 242 (441) 1,117 15 522 224 (567) (2,124) 60 (2,856) (70,948) 63,811 3,288 352 1,990 2,635 35,004 (282) - (180) 2,655 1,747 905 (10,347) (1,467) (19,685) Net cash flows from (used in) operating activities (17,452) 43,446 Non-cash financing and investing activities Property, plant and equipment held for sale Lease liability associated with assets held for sale - - (1,833) 256 74 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 31. COMMITMENTS (a) Capital commitments Conditional contracts for the acquisition of land which have not yet been recognised in the Financial Statements are as follows: Within one year Total expenditure commitments 2011 $’000 5 5 2010 $’000 5 5 (b) Finance lease commitments – Consolidated Entity as lessee Finance leases are employed as a means of funding the acquisition of employer provided motor vehicles. Lease payments are generally fixed. Where leases have renewal or purchase options, they are exercisable at market prices. No finance lease arrangements create restrictions on other financing transactions. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows: Finance leases Analysis of finance lease commitments Minimum lease payments Within one year After one year, but not more than five years Total minimum lease payments Less amounts representing finance charges Within one year After one year, but not more than five years Total finance charges Present value of minimum lease payments Present value of lease payments Within one year After one year, but not more than five years Total present value of minimum lease payments Note 2011 $’000 2010 $’000 30 - 30 (1) - (1) 29 29 - 29 24 24 224 15 239 (12) (1) (13) 226 212 14 226 The Consolidated Entity has no finance lease arrangements where the Consolidated Entity is the lessor. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 75 31. COMMITMENTS (CONTINUED) (c) Operating lease commitments – Consolidated Entity as lessee Operating leases include property, display homes, computer equipment leases and leases for motor vehicles provided under novated leases. Certain property leases include inflation escalation and market review clauses. No renewal or purchase options exist in relation to operating leases, and no operating leases contain restrictions on financing or other leasing activities. Future minimum rentals payable under non-cancellable operating leases as at 30 June 2011 are as follows: Operating leases Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities: Within one year After one year, but not more than five years Total operating leases Represented by: Non-cancellable operating leases Cancellable operating leases Total operating leases 2011 $’000 2010 $’000 844 1,082 1,926 1,926 - 1,926 3,126 1,558 4,684 3,818 866 4,684 (d) Operating lease commitments – Consolidated Entity as lessor Operating leases include property leases. Future minimum rentals receivable under non-cancellable operating leases as at 30 June 2011 are as follows: Commitments in relation to leases contracted for at the reporting date but not recognised as assets: Within one year Total operating leases 2011 $’000 - - 2010 $’000 17 17 76 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 32. CONTINGENCIES 33. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE Other than matters relating to the renewal of main banking facilities detailed in note 24(a), no matter or circumstance has arisen since 30 June 2011 that has significantly affected, or may significantly affect: a) the Consolidated Entity’s operations in future financial years; or b) the results of those operations in future financial years; or c) the Consolidated Entity’s state of affairs in future financial years. Unsecured Cross guarantees The Parent Entity has entered into deeds of cross guarantee in respect of the debts of certain of its controlled entities as described in note 19. Banking facilities The Parent Entity has entered into a cross deed of covenant with various controlled entities to guarantee the obligations of those entities in relation to the banking facilities. Details of these entities are set out in note 19. Surety bond facility The Parent Entity has entered into a Deed of Indemnity with various controlled entities to indemnify the obligation of those entities in relation to the Surety bond facility. Details of these entities are set out in note 19. Contingent liabilities in respect of certain performance bonds, granted by the Consolidated Entity’s financiers, in the normal course of business as at 30 June 2011, amounted to $1,139,000 (2010: $Nil). No liability is expected to arise. Legal issues From time to time a controlled entity defends actions served on it in respect of rectification of building faults and other issues. It is not practicable to estimate the amount, if any, which the entity could be liable for in this respect. The Directors anticipate that the resolution of any such matters currently outstanding will not have a material effect on the Consolidated Entity’s results. Secured Performance guarantees Contingent liabilities in respect of certain performance guarantees, granted by the Consolidated Entity bankers in the normal course of business to unrelated parties, at 30 June 2011, amounted to $18,304,000 (2010: $18,836,000). No liability is expected to arise. Financial guarantees Financial guarantees granted by the Consolidated Entity’s bankers to unrelated parties in the normal course of business at 30 June 2011, amounted to $15,663,000 (2010: $871,000). No liability is expected to arise. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 77 34. RELATED PARTY DISCLOSURES (a) Ultimate parent AVJennings Limited is the ultimate Australian parent entity. SC Global Developments Limited (incorporated in Singapore) is the ultimate parent entity. (b) Share and share option transactions with Directors and Director-related entities The aggregate number of shares and options held at the reporting date either directly or indirectly or beneficially by the Directors or by an entity related to those Directors of AVJennings Limited are as follows: Owned by Directors directly, or indirectly or beneficially 2011 Number 2010 Number Fully paid ordinary shares 138,641,704 138,308,371 Directors and Director-related entities received normal dividends on these ordinary shares. (c) Entity with significant influence over AVJennings Limited 137,370,023 ordinary shares equating to 50.03% of the total ordinary shares on issue (2010: 137,370,023 & 50.03% respectively) were held by SC Global Developments Limited and its associates in the Parent Entity at 30 June 2011. Certain Directors of SC Global Developments Limited are also Directors of AVJennings Limited. Details of Directors’ interests in the shares of the Parent Entity are set out in the Directors’ Report. (d) Parent Entity amounts receivable from and payable to controlled entities At 30 June 2011, the Parent Entity has not set up any provisions against debts owed by related parties as recoverability is considered probable (2010: $Nil). An impairment assessment is undertaken each financial year-end to determine whether there is objective evidence that a related party receivable is impaired. If evidence of impairment exists, the impairment loss is recognised immediately. 78 | AVJennings limited · A bn 44 004 327 771 notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 34. RELATED PARTY DISCLOSURES (CONTINUED) (e) Transactions with related parties Entity with significant influence over the Consolidated Entity: SC Global Developments Limited Consultancy fee paid/payable Reimbursement of sundry expenses Associate: Epping JV Note 2011 $ 2010 $ (i) (ii) 600,000 9,552 663,712 7,612 Management fee received/receivable 527,386 1,162,833 Joint Ventures: Meridan Plains Management fee received/receivable Accounting services fee received/receivable Eastwood Management fee received/receivable Accounting services fee received/receivable Arlington Rise Management fee received/receivable Woodville Licence fees paid to access land Dividends received 419,736 50,000 586,253 50,000 1,768,632 1,262,976 50,000 50,000 367,440 2,274,162 1,000,000 - - - (i) Consultancy fees paid to SC Global Developments Limited of $600,000 (2010: $600,000 consultancy fees paid to SC Global Developments Limited and $63,712 consulting fees paid to Chartwell Management Services Pty Limited of which a Director, BG Hayman is the Chairman). (ii) Overseas airfares reimbursed for HR Hochstadt and B Chin to attend meetings in Australia. (f) Joint ventures in which related entities in the Consolidated Entity are venturers Joint ventures in which the Consolidated Entity has an interest are set out in note 17 and note 20. (g) Outstanding balances arising from provision of services The following balances are outstanding at the end of the reporting period in relation to transactions with related parties. Current receivables Joint Ventures (h) Loans from related party Loan received Joint Venture 2011 $’000 2010 $’000 6,014 4,208 2,000 - (i) Terms and conditions of transactions with related parties Transactions with related parties are made at arm’s length both at normal market prices and on normal commercial terms. Outstanding balances at year-end are unsecured, interest free, at call and settlement occurs in cash. notes to the consolid Ated fin AnciAl stAtements foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 79 35. SHARE-BASED PAYMENT PLANS (a) Recognised share-based payment expenses Total expenses arising from share-based payment transactions were recognised by AVJennings Properties Limited. The amount recognised as part of employee benefit expenses is shown in the table below: Expense arising from equity-settled share-based payment transactions Total expense arising from share-based payment transactions 2011 $’000 242 242 2010 $’000 60 60 Vesting subject to both service and performance conditions A total of 1,375,452 shares were granted on 28 September 2010 to certain executives. These shares are subject to both service and performance conditions and will vest to the extent that each of these conditions is satisfied. The service vesting condition is that the employee must still be employed by AVJennings at 30 September 2013, except in the event of death or permanent disablement in which case the shares will vest to the estate. In the event that the employee is retrenched, the shares may vest subject to certain conditions. The performance vesting conditions include the achievement of an Earnings Per Share (EPS) hurdle and a Total Shareholder Return (TSR) hurdle. The fair value of the EPS element of the shares is the market value at grant date. The Monte Carlo Model is used to fair value the TSR element. The Model simulates AVJennings TSR and compares it against the ASX Small Industrials Retail Index. The Model takes into account historic dividends, share price volatilities and the risk-free yield on an Australian Government Bond at the grant date matching the remaining effective life of 3 years. The share-based payment plan is described in note 35(b). There have been no cancellations or modifications to the plan during 2011. (b) Type of share-based payment plan AVJ Deferred Employee Share Plan The AVJ Deferred Employee Share Plan (the Plan) was formed to administer the employee share scheme. The Plan operates schemes under which shares may be acquired by the Plan Trustee on behalf of employees for no cash consideration subject to certain vesting conditions being satisfied. Shares acquired under the Plan for employees are acquired on-market. Employees may elect not to participate in the scheme. Shares held by the Plan’s trust and not yet allocated to employees at the end of the reporting period are shown as treasury shares in the financial statements. Share-based compensation benefits are provided to Executives via the Plan. These equity-settled transactions are measured at fair value at the grant date. The original cost of the shares is treated as a reduction in share capital and the underlying shares identified separately as treasury shares. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period and the credit taken to share-based payment reserve in equity. Vesting subject to service condition only The Chief Executive Officer was granted 1,000,000 shares on 7 March 2009 which vest in equal proportions on the first, second and third anniversary of his appointment. The vesting dates are 19 February 2010, 19 February 2011 and 19 February 2012. The market value of the shares at the grant date is taken to be the fair value. The service condition is the continuity of employment over the 3 years. The unvested shares are held by the AVJ Deferred Employee Share Plan Trust. 80 | AVJennings limited · A bn 44 004 327 771 diR ectoRs’ decl AR Ation In accordance with a resolution of the Directors of AVJennings Limited, we state that: 1) In the opinion of the Directors: i) the Financial Statements and Notes of the Consolidated Entity are in accordance with the Corporations Act 2001, including; a) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2011 and of their performance for the year ended on that date; and b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001; ii) the Financial Statements and Notes also comply with International Financial Reporting Standards as disclosed in note 2; and iii) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2) This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011. 3) In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Consolidated Entity identified in note 19 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee. On behalf of the Board Simon Cheong Director 28 September 2011 Peter Summers Director independent AuditoR’s R epoRt to the membeRs of AVJennings limited AnnuAl R epoRt 2011 | 81 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AVJENNINGS LIMITED Report on the financial report We have audited the accompanying financial report of AVJennings Limited, which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. Opinion In our opinion: a. the financial report of AVJennings Limited is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2. Report on the remuneration report We have audited the Remuneration Report included in pages 16 to 21 of the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of AVJennings Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001. Ernst & Young David Simmonds Partner Sydney 28 September 2011 82 | AVJennings limited · A bn 44 004 327 771 coRpoR Ate goVeRnAnce stAtement foR the yeAR ended 30 June 2011 This Corporate Governance Statement indicates the Company’s conformance with the Australian Securities Exchange’s (“ASX”) Corporate Governance Council’s, “Corporate Governance Principles and Recommendations” (2nd Edition), as required by the ASX Listing Rules. The AVJennings Corporate Governance Statement is structured with reference to the ASX recommendations. Areas of non compliance will be disclosed under the relevant principle. All corporate practices within this Report were in place for the entire year unless otherwise indicated. This Statement refers to documents that support the Company’s Corporate Governance framework and it is posted in the Corporate Governance section on the Company’s website: www.avjennings.com.au. Principle 1: Lay solid foundations for management and oversight by the Board Recommendation 1.1 of the ASX Corporate Governance Principles requires the Company to establish and disclose the functions reserved for the Board and those delegated to management. The roles and responsibilities of the Company’s Board, Board Committees and senior management have been established through Board approved Charters, which have been operational throughout the period and are disclosed on the Company’s website at www.avjennings.com.au. All persons who are invited and agree to act as a Director of the Company do so by a formal letter of consent. To assist it in carrying out its responsibilities, the Board has established several standing Board Committees of its members. Director appointments to Board Committees are by formal resolutions of the Board. The Chairman of each Committee reports on any matters of substance at the next full Board Meeting. Membership of Board Committees and attendance at Board and Committee meetings is tabulated in the Director’s Report. The Board Committees are: • Audit Committee • Nominations Committee • Remuneration Committee Investments Committee • Risk Management Committee (incorporating the • Occupational Health, Safety and Environment sub-committee) The roles and responsibilities of the Chief Executive Officer and senior management are established through key performance objectives. They are assessed against those objectives on an annual basis, or more frequently if that is indicated. During the period, the Nominations Committee has reviewed the performance of Board members. The Remuneration Committee monitors the performance of the Chief Executive Officer. It also monitors the performance of the Chief Financial Officer and the Company Secretary in consultation with the Chief Executive Officer. The Chief Executive Officer assesses the performance of senior management and these assessments are reviewed by the Remuneration Committee. The process for evaluating the performance of senior executives is set out in the Remuneration Report. The Board has also approved financial delegations and personnel delegations which cover specific areas of delegated responsibility to the Managing Director and senior management. During the period, the Board has considered broad Corporate Governance matters, including the continuing relevance of existing committees and its own performance and reaffirmed its belief that the Committee structures provided sound oversight of Management, by the Board. Principle 2: Structure the Board to add value Directors The Company’s Constitution and Section 201A of the Corporations Act 2001 stipulate that a public company must have at least three Directors. The Board has adopted guidelines concerning its composition. For the time being, the Board has determined that there shall be at least five Directors, increasing where additional expertise is required. The current Directors of the Company are listed in the Directors’ Report with a brief description of their qualifications, experience, special responsibilities and status as Executive, Non- Executive or Independent Director. The Board includes both Executive and Non-Executive Directors with a majority of Non-Executive Directors. The Non-Executive Directors include both independent and non-independent Directors. There is a strong element of independence on the Board, with four of the six Non- Executive Directors being independent, determined in accordance with the ASX guidelines on independence. The other two Non-Executive Directors, who represent SC Global Developments Limited, a substantial shareholder, have no involvement in the operational management of the Company. The Managing Director is an Executive Director. coRpoR Ate goVeRnAnce stAtement foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 83 The Chairman of the Board is selected by the full Board. The current Chairman of the Board, Mr Simon Cheong, is also Chairman of the Board of a substantial shareholder, SC Global Developments Limited. Although there is no lead Independent Director as recommended by the ASX Principles, the Deputy Chairman, Mr Jerome Rowley, is an Independent Director. The roles of the Chairperson and Chief Executive Officer are exercised by different individuals. The Board meets around seven times a year either in person or by teleconference. Meeting venues are planned to enable Directors to familiarise themselves with major development projects. A formal agenda is in place for each meeting. New Directors are inducted individually on the Company’s financial, strategic, operational and risk management positions. Directors have access to Company records and information through the Company Secretary and other relevant senior officers. They receive regular detailed reports on financial and operational aspects of the Company’s business and may request elaboration or explanation of those reports at any time. Each Director has the right to seek independent professional advice at the Company’s expense. Prior approval of the Chairman is required but this may not be unreasonably withheld. Any advice obtained is made available to the Chairman. Nominations Committee The Board has a Nominations Committee, comprising three Independent Directors, Mr RJ Rowley, Mr HR Hochstadt, and Mr BG Hayman and two Non- Executive Directors, Mr S Cheong and Mrs E Sam, who is also Chairperson of the Committee. The Nominations Committee Charter sets out its role, responsibilities, composition, structure, membership requirements and guidelines and is posted on the Corporate Governance section of the Company’s website. The purpose of the Committee is to consider the performance of Directors and the appointment of new Directors. The Committee may make use of external consultants if that is deemed appropriate. The Committee meets at least annually. Company Secretary The Board appoints the Company Secretary and all Directors have access to the Company Secretary. Details of the Company Secretary’s experience and qualifications are set out in this Report. The role of the Company Secretary is to support the effectiveness of the Board by monitoring and advising the Board on its Corporate Governance responsibilities by means of its charters, procedures and updates on legislation and regulation. The Company Secretary is also responsible for lodgements with relevant regulators, management of dividend payments and/or Dividend Reinvestment Plan allotments and management of the relationship between shareholders and the share registry. Principle 3: Promote ethical and responsible decision making Code of Conduct The Company has a Code of Conduct which sets out the behaviour required of all Board members, senior management, employees and contractors throughout the period. The content of the Code is integrated into management practices and forms part of the terms of employment of all Company employees. The Code, which is disclosed on the Company’s website, provides a mechanism to employees to report breaches of the Code without fear of retribution. Senior management deals with breaches of the Code and monitors compliance. The Company Secretary and the Chief Executive Officer report to the Board and the Audit Committee on various aspects of Code Compliance. Dealing in AVJennings’ shares The Company’s Securities Trading Policy places restrictions on the ability of Directors, officers and employees to trade in the Company’s shares during specified restricted “black out” periods. The restrictions are designed to minimise the risk of actual or perceived insider trading. Principle 4: Safeguard integrity in financial reporting Audit Committee The Company has an Audit Committee comprising of two Independent Directors, Mr B Chin (who is a Chartered Accountant and is also the Chairman of the Committee), Mr RJ Rowley and one Non-Executive Director, Mrs E Sam. The Chairman of the Committee is a different individual to the Chairman of the Board. The Audit Committee Charter sets out its role, responsibilities, composition, structure and membership requirements and is posted on the Corporate Governance section of Company’s website. 84 | AVJennings limited · A bn 44 004 327 771 coRpoR Ate goVeRnAnce stAtement foR the yeAR ended 30 June 2011 All other members of the Board are invited to attend Audit Committee meetings as observers and in a non voting capacity. Usually, all Board members attend all Audit Committee meetings either as members or observers. The Audit Committee papers, including the minutes of the previous Committee Meetings, are sent to all Board members. The Chief Executive Officer, Chief Financial Officer, Company Secretary, Internal Auditor and the External Auditor attend Audit Committee meetings at the discretion of the Committee. The Committee also meets privately with the External Auditor at least once a year and usually twice per year, without management being present. In addition, the Internal Auditor reports directly to the Audit Committee and the Committee meets privately with the Internal Auditor at least once per year. The Minutes of each Committee meeting are circulated after the meeting and the signed minutes tabled at the subsequent meeting of the Committee. The Chairman of the Committee is available to report on or answer questions about the Committee’s conclusions and recommendations to the Board. The Committee meets at least three times during the year. Audit Governance The Company has a policy on the provision of auditing and related services. The Committee is satisfied with the independence of the External Auditor. During the reporting period, the Company had its 2010 Annual Report and Audit Committee Charter posted on its website. The Annual Report has details of the Audit Committee’s membership and the number of meetings held and attended. Financial Reporting The Board receives regular reports about the financial condition and operational results of the Company throughout the year. In relation to the half year and annual Financial Statements, senior management is required to sign off on the systems and processes within their area of responsibility. This procedure supports the Managing Director and Chief Financial Officer in their certification to the Board in effect stating that the Company’s accounts present a true and fair view, in all material aspects, of the Company’s financial condition and operational results and accord with the relevant accounting standards. Principle 5: Make timely and balanced disclosure A continuous disclosure regime operates throughout the Group. Policies and Procedures are in place to ensure matters that a person could reasonably expect to have a material effect on the share price are announced to the ASX and Singapore Exchange (SGX) in a timely manner. These policies and procedures have been formally communicated to all relevant staff. The Company Secretary is the nominated Continuous Disclosure Officer. The Board is advised of any notifiable events. The Board approves, or is advised of, all releases that are made to the ASX and the SGX. All announcements made by the Company are posted on the Company’s website in the “Shareholder” section. Principle 6: Respect the rights of Shareholders The Company endeavours to keep its Shareholders fully informed of matters likely to be of interest to them. It does this through: • Reports to the ASX, SGX and the press; • Half and full year profit announcements; • Annual Reports; • Investor briefings and information provided to analysts, (which are released to the ASX and SGX prior to being provided to the analysts); Continuous disclosure to the ASX pursuant to the ASX Listing Rules and notification of the same information to the SGX; and Posting all the above and any other notifications made by the Company to Shareholders, on its website. • • The Company’s website – www.avjennings.com.au has a section titled “Shareholders” with sub sections on: • • The Company’s previous Annual Financial Reports and Half Yearly Reports; The Company’s share price on the ASX- provided by a link to the ASX web site; • Announcements made to the ASX and SGX; • Copies of investor presentations; • Corporate Governance Charters and Policies including a Shareholder Communication Policy; Terms and conditions of the Company’s Dividend Reinvestment Plan; and • • Media releases. At the Annual General Meeting, the Chairman encourages questions and comments from Shareholders and seeks to ensure the Meeting is managed to give the maximum number of Shareholders an opportunity to participate. In the interests of clarity, questions on operational matters may be answered by the Chief Executive Officer or another appropriate member of senior management. The External Auditor attends the Company’s Annual General Meeting and is available to respond to questions about the conduct of the audit and the preparation and content of the Independent Audit Report. coRpoR Ate goVeRnAnce stAtement foR the yeAR ended 30 June 2011 AnnuAl R epoRt 2011 | 85 Principle 7: Recognise and manage risk The Board has ultimate responsibility for risk management, compliance and control functions across the Group. These functions are aligned with the Company’s strategy and business objectives. The Company has in place internal controls intended to identify and manage significant business risks. These include the review of development proposals and the management of their ongoing performance. Management prepares the Risk Management Plan and the Board is responsible for reviewing and approving it. The Board has established a Risk Management Committee, which incorporates a sub-committee responsible for occupational health, safety and environmental matters. The Committee comprises two Independent Directors, Mr RJ Rowley (Chairman) and Mr BG Hayman, and generally meets quarterly. The Committee is supported by the Chief Executive Officer, Chief Financial Officer and the Company Secretary. The Risk Management Committee is responsible for identifying and considering new risks and for monitoring management’s implementation of the Risk Management Plan, taking the Internal Auditor’s review into account. The Company’s assets are insured under a comprehensive insurance program which is reviewed annually. The Company also has an Investments Committee comprising one Non-Executive Director, Mr S Cheong, two Independent Directors, Mr BG Hayman and Mr RJ Rowley and one Non-Director member, Mr David Tsang. The Committee considers all major land development acquisition and disposal proposals that are over monetary limits delegated to management. It also conducts a pre-commencement review and ongoing project reviews during the life of all development projects. The Chief Executive Officer and the Chief Financial Officer are required to provide the Board with a written statement in accordance with section 295A of the Corporations Act to the effect that: • • The integrity of the Financial Statements is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and The Company’s risk management and internal compliance and control system, in so far as it relates to financial risk, is operating efficiently and effectively in all material respects. Principle 8: Remunerate fairly and responsibly The Board has established a Remuneration Committee to review and determine, among other things, remuneration policies and packages applicable to any Executive Directors, the Company Secretary and direct reports to the CEO. It also reviews remuneration to senior managers of the Company and the remuneration policies of the Company. The Committee meets at least annually and usually twice per year and its Charter is available on the Company’s web site under the Corporate Governance Section. The Committee consists of two Non-Executive Directors, Mrs E Sam (Chairperson) and Mr S Cheong, and two Independent Directors, Mr HR Hochstadt and Mr BG Hayman. The Board is of the view that the Committee, which consists entirely of Non-Executive Directors, albeit without an independent majority or Chairperson, is structured appropriately to perform its functions in reviewing the remuneration of Company executives and staff. The Committee reviews and reports to the Board on: • Conditions of service and remuneration of the Chief Executive Officer and his direct reports; • Performance of the Chief Executive Officer; • Remuneration of the Chief Financial Officer and the Company Secretary; Remuneration policies for the Company, which include the performance review of all employees, senior management and Board members; • • Proposals for reward initiatives; • Succession plans for senior management; and • Other related matters as directed by the Board. The Chief Executive Officer attends meetings of the Remuneration Committee by invitation when required to report on, and discuss, senior management performance and remuneration matters. He is excluded from Committee deliberations relating to his position. The Committee is empowered to seek external professional advice on any matter within its terms of reference. Senior managers of the Company receive a balance of fixed and variable (at risk) remuneration. The proportions vary at different levels within the Company, reflecting the capacity of the senior managers to influence the overall outcome of the Company’s operations and returns to Shareholders. The bonuses (if any) to executives are based on a review of individual executive performance as well as the Company’s overall financial performance. Director’s fees paid to Non-Executive Directors and Independent Non-Executive Directors are determined by the Board, and are within the aggregate limits approved by Shareholders at a General Meeting. The Independent Non-Executive Directors currently receive fees paid by the Company. The Committee has available to it data on fees paid to independent directors by a wide range of Companies. The remaining two Non-Executive Directors do not receive fees, however the Company pays a consulting fee to the substantial Shareholder, SC Global Developments Limited. 86 | AVJennings limited · A bn 44 004 327 771 shAReholdeR infoR mAtion As At 16 septembeR 2011 1. NUMBER OF SHAREHOLDERS AND DISTRIBUTION OF EQUITY SECURITIES Australian Securities Exchange Singapore Exchange 584 991 345 416 52 2,388 628 738 1,734 526 469 35 3,502 801 Total 1,322 2,725 871 885 87 5,890 1,429 Range of Holdings of Ordinary Shares 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total number of holders Number of holders of less than a marketable parcel 2. SUBSTANTIAL SHAREHOLDERS As disclosed by latest notices received by the Company: Name SC Global Developments Ltd Guinness Peat Group plc Orbis Australia Group 3. TWENTY LARGEST SHAREHOLDERS ON THE AUSTRALIAN REGISTER Name The Central Depository (Pte) Limited GPG Australia Nominees Limited Citicorp Nominees Pty Limited National Nominees Limited JP Morgan Nominees Australia Ltd AVJ Employee Share Plan Managers Pty Ltd John E Gill Trading Pty Ltd John E Gill Operations Pty Ltd HSBC Custody Nominees (Australia) Limited Gillcorp Pty Limited Allabah Pty Ltd Avoca Equities Pty Limited GPG Nominees Pty Ltd Luton Pty Ltd Ago Pty Ltd (Superannuation Fund A/c) John E Gill Operations Pty Ltd Di Iulio Homes Pty Ltd D R M Gill & J M Gill (Gill Super Fund A/c) Savoy Management Pty Ltd Scorpio Nominees Pty Ltd (Gwenton A/c) Ordinary Shares % 137,370,023 20,938,920 14,133,206 50.03 7.63 5.15 Ordinary Shares % 171,630,250 62.50 20,110,858 12,916,769 11,755,809 9,347,710 3,209,825 3,109,991 3,050,288 2,450,990 2,274,801 2,110,402 1,322,065 1,054,289 1,050,000 928,427 849,660 658,468 643,201 560,758 538,209 7.32 4.70 4.28 3.40 1.17 1.13 1.11 0.89 0.83 0.77 0.48 0.38 0.38 0.34 0.31 0.24 0.23 0.20 0.20 Total 249,572,770 90.89 AnnuAl R epoRt 2011 | 87 shAReholdeR infoR mAtion As At 16 septembeR 2011 4. TWENTY LARGEST SHAREHOLDERS ON THE SINGAPORE REGISTER Name UOB Nominees (2006) Pte Ltd United Overseas Bank Nominees DBS Nominees Pte Ltd UOB Kay Hian Pte Ltd Trimount Pte Ltd Oei Hong Leong Foundation Pte Ltd OCBC Nominees Singapore Lim Chin Tiong Tsang Sze Hang Rowland Wong Kwok Ho Vesmith Investments Pte Ltd Tan Chee Jin Pansbury Investments Pte Ltd Ooi Kim Sew Hexacon Construction Pte Ltd Phillip Securities Pte Ltd Teo Chiang Long HSBC (Singapore) Nominees Pte Ltd Mohamed Salleh So Kadir Goh Choon Eng Ordinary Shares % 128,031,646 46.63 9,567,400 1,650,214 1,597,820 1,185,672 1,044,366 871,545 714,800 598,140 527,738 453,483 400,000 354,400 280,000 263,200 251,864 250,648 248,963 241,532 188,905 3.48 0.60 0.58 0.43 0.38 0.32 0.26 0.22 0.19 0.17 0.15 0.13 0.10 0.10 0.09 0.09 0.09 0.09 0.07 Total 148,722,336 54.16 Percentages are calculated on the total number of shares on issue. 5. VOTING RIGHTS Ordinary Shareholder On a show of hands, every member present in person or by representative, proxy or attorney shall have one vote, and on a poll each fully paid share shall have one vote. 6. TOTAL NUMBER OF SHARES The total number of shares on issue and listed on the Australian Securities Exchange is 274,588,694. SHARE REGISTRY Australia Computershare Investor Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Telephone +61 3 9415 5000 Singapore The Central Depository (Pte) Ltd 4 Shenton Way #02-01 SGX Centre 2 Singapore 068807 Telephone +65 6535 7511 ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held at: Meeting Rooms 23.01 and 23.02 Level 23, Ernst & Young Building 8 Exhibition Street Melbourne VIC 3000 Friday, 18 November 2011 at 10.00am DIVIDENDS An interim dividend of 1.00 cent per share (fully franked) was paid on 18 April 2011. A final dividend of 1.50 cents per share (fully franked) will be paid on 19 October 2011. 88 | AVJennings limited · A bn 44 004 327 771 compAny pARticulAR s DIRECTORS Mr Simon Cheong Mr Jerome Rowley Mr Herman Hochstadt Mrs Elizabeth Sam Mr Bobby Chin Mr Bruce Hayman Mr Peter Summers COMPANY SECRETARIES Mr Peter Summers Mr Carl Thompson Mrs Sandra Vogiatzakis PRINCIPAL REGISTERED OFFICE IN AUSTRALIA 1 Lakeside Drive Burwood East VIC 3151 Telephone +61 3 9210 9888 AUDITORS Ernst & Young 680 George Street Sydney NSW 2000 BANKERS Australia and New Zealand Banking Group Ltd BOS International (Australia) Ltd HSBC Bank Australia Ltd United Overseas Bank Limited STOCK EXCHANGE LISTINGS Australia The Company is listed on: The Australian Securities Exchange 525 Collins Street Melbourne VIC 3000 Singapore The Company’s shares are also quoted and traded on: The Singapore Exchange 2 Shenton Way #19-00 SGX Centre 1 Singapore 068804 through the Central Limit Order Book System (CLOB). ANNuAL rEporT 2011 AV JENNINGS LIMITED ABN 44 004 327 771 A V J E N N I N G S L I M I T E D A N N u A L r E p o r T 2 0 1 1

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