AVJennings Annual Report 2014

← All annual reports

FY2014 Annual Report · AVJennings

Loading PDF…

Annual Report 2014
AVJennings Limited ABN 44 004 327 771

Building on our past.
Shaping your future.

Contents

Managing Director’s Statement 1

Company Highlights

Chairman’s Report

Creating and Supporting
Communities

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 Shareholders
of AVJennings Limited

Corporate Governance
Statement

Diversity Report

Shareholder Information

Company Particulars

Welcome to the
2014 Annual Report

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 1

At the November 2012 AGM we told
shareholders we were starting to see
green shoots emerge in the important
New South Wales market and that we
saw an overall improvement in market
conditions ahead.

It is pleasing to now see those
forecasts, based on the experience of
our management team combined with
the lead indicators we have developed
over many years, now coming
through although we believe, barring
unforeseen events, there is further
improvement ahead.

However, even more pleasing is how
we have not just waited for improved
conditions to emerge. In recent years
we have been active in our strategies
and actions to manage short
term issues as well as position the
Company for the future.

The sale of our contract building
division just over 4 years ago is one
example. It was a brave and complex
decision. It represented a significant
revenue stream to the Company but
on analysing this business we believed
it did not achieve the types of returns
required. The sale itself took some
time to complete and the adjustments
required internally even longer. But
it has enabled us to now be a leaner
Company whose business model is
primarily focused on achieving results
from our strengths of developing great
communities whether that be from a
land development aspect or building
housing, town houses or apartments.

Accommodation is a basic need for
all Australians and we are proud we
can continue our heritage of providing
quality, affordable housing and great
places to live.

As developers of residential
communities, our staff take great
pride in the places we create. We
see the parks, waterways, wetlands,
playing fields, schools, public art and
many other amenities that emerge in
the communities we create. We see the
teams playing sport on our playing
fields or families spending time
together in our parks, couples going
for a walk on pathways we create,
children making new and lifelong
friends as they head off to school
at the start of a new year.

We also take great pride in ensuring
the communities we create become
part of the wider communities in which
our customers live.

And we will continue to invest in our
people, our brand and our products
to ensure we can continue to deliver
even better results for all stakeholders,
whether they be shareholders,
employees, customers or the wider
community.

As the current custodians of a
Company formed in 1932 we take
our responsibility to respect and
build on that legacy seriously.

Building on our past. Shaping
your future.

Peter Summers
Managing Director

Building
on our past.
Shaping
your future.

2 | AVJENNINGS LIMITED · ABN 44 004 327 771

Company Highlights

Profit/(Loss) Before Tax

Revenue

FY13

FY14

$250.6m

($23.3m)

$27.0m

$158.5m

Contracts signed (units)

Settlements (units)

FY13

FY14

1,415

1,254

819

829

Work in progress levels

667

e
n
u
J

1
1
0
2

572

1
1
0
2

c
e
D

554

2
1
0
2

c
e
D

318

e
n
u
J

2
1
0
2

1,264

974

715

e
n
u
J

3
1
0
2

c
e
D

e
n
u
J

4
1
0
2

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 3

Highlights

• Solid FY14 Result

– Profit before tax of $27.0m up 216% on FY13

($23.3m loss before tax and after impairments)

– Revenue $250.6m up 58.1% on FY13 ($158.5m) as a result

of completion of inventory, strong sales and settlement
activity in 2H14

•

Increased work in progress levels

– 77% increase on prior year and 298% increase over 2 years ago

•

Increased contract signing and settlement numbers

• Fully franked final cash dividend of 2.0cps

•

Improvement in gross margins through net price growth
and greater impact of new, higher margin projects

•

Net debt remains low at $80.8m (debt to total asset ratio 17%)

4 | AVJENNINGS LIMITED · ABN 44 004 327 771

Chairman’s Report

Your
community
developer

To My Fellow Shareholders

Market Overview

The 2014 result showed an improved
turnaround from the previous
year. The performance reflected
improved market conditions and
the Company’s ability to execute
a carefully planned strategy over
several years to decrease production
as markets slowed post–GFC and
then to escalate production again
to capitalise on the rising demand
for housing which the Company
first reported in late 2012. Marking
a strong return to profitability,
the Board believes the Company
took an important step forward in
fiscal 2014. The increase in work
in progress, which is expected
to continue, is a key element to
delivering improved outcomes; in
particular going forward as the
majority of the Company’s estates
enter full production including those
acquired in late 2010.

Some mixed signals in the broader
economy notwithstanding,
consumer confidence to transact
in housing remains firm with
higher rates of contract conversion
being experienced at most of the
Company’s estates. The general
level of retail and business enquiry
as well as contracts carried past
the Company’s latest fiscal year
end also suggests a positive start
to fiscal 2015. The continuing
low interest rate environment has
provided support to the housing
market while some sign of steadily
rising unemployment has been
reported but mainly in certain
discrete economic sectors that are
experiencing a slowdown.

Good quality, affordable housing
remains a basic consumer need and
years of below trend development

activity have driven down rental
vacancy rates creating pent
up demand in key locations.
Speculative activity has not been a
defining feature of the Company’s
markets. Price growth is relatively
low by reason of strong competition
but sales volumes are meaningfully
higher, due largely to the activity of
the second and subsequent owner-
occupiers and local investors who
form the majority of the Company’s
clientele.

The Company will continue to
concentrate on deeper parts of the
market and focus on delivering good
quality, affordable land and housing
products that satisfy the needs of its
customers. Through this strategy,
continued growth in shareholder
value can be achieved.

2014 Results

The Company recorded a profit
before tax of $27.0 million in fiscal
2014, a 216.0% turnaround on
the previous year (FYE-13: $23.3
million loss before tax). Revenue
was $250.6 million, up 58.1% on
fiscal 2013 ($158.5 million) due to
increased completion of inventory,
and strong sales and settlement
activity as market conditions
continued to improve in Queensland,
New South Wales, New Zealand and
Victoria.

In line with the Directors’ statement
in the release of the first half
2014 results, increased cash from
settlements flowed into the business
in the second half. As a result of the
Company’s overall performance,
the Directors have declared a fully
franked final dividend of 2.0 (two)
cents per share which was paid in
September 2014.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 5

Our Brand

Our Board

AVJennings is an iconic Australian
brand with a proud heritage of 82
years. The Board and Management
recognise the value of the brand to
the business and the importance of
continued investment in its brand
to remain relevant to the changing
demographic composition of its
customer base. As such, in the
year ahead Management will work
to refresh and reposition brand
messages through significant
marketing programs as well as
renewed investment in people and
products.

Our People

On behalf of the Board, I would like to
thank the Management team and staff
of AVJennings whose energy, diligence
and dedication have helped to well
position the Company to participate
in the long-awaited improvement in
market conditions.

As Chairman, I would also like to thank
my fellow Directors for their support
and whose active engagement, skill
and business experience has provided
the proper guidance and oversight in
the interests of all stakeholders.

Outlook

The past few years have been
challenging but the Company is well
positioned going forward. The basic
factors driving demand are sound
and appear to be enduring. We are
confident we have sufficient land
holdings to ensure new opportunities
are looked at prudently and with a
view to ensuring they meet both our
strategic requirements and return
on investment targets. Our brand
is an important asset when dealing
with land owners, and we have both
experienced internal resources and
sophisticated acquisition models, all
of which gives us confidence that we

will achieve our goals. AVJennings’
core estates are well located in their
catchments, its balance sheet is
healthy, and Management continues
to seek new sites for development
while moving forward at a healthy
pace in production on existing
projects.

Directors and Management look
forward with greater confidence
and thank all shareholders for their
continued support.

Simon Cheong
Chairman

6 | AVJENNINGS LIMITED · ABN 44 004 327 771

Creating & Supporting
Communities

Our people are what makes the
difference and we continue to ensure
we attract, retain and develop the
highest calibre people who have the
same values for which we are known.
We do like to lend a hand and make a
difference where we can. Our people
have strongly embraced this and
actively volunteer and participate in
supporting charitable activities.

The year was a busy one, seeing
various fundraising events taking
place, including The Sydney
City2Surf, Waugh in The West, The
Queensland Bike Ride challenge and
various AVJ community days. The
year also saw the second house in
“The Renee” series, “The Renee II” at
AVJennings’ Lyndarum community in
Victoria, being built. Thanks to the
generosity and help of staff, family,
friends and suppliers, the home
was successfully sold at auction
and resulted in significant funds
being raised for the Steve Waugh
Foundation’s activities. A third home
building project in “The Renee” series
is in the pipeline and construction is
expected to commence later this year.

The partnership with the Foundation is
going from strength to strength, and
so too is the Corporate Ambassador
role Steve Waugh, AO has with
AVJennings. Steve’s dedicated sense
of community as demonstrated
through his humanitarian work and
strong family values, embodies all of
the qualities of AVJennings and we are
delighted to see this very successful
partnership continue into the future.

From Strength
to Strength

Throughout the years, AVJennings
has maintained focus on its core
strengths of creating great and
affordable places and communities
for our customers to live in. Creating
and supporting communities is
therefore in our blood. Our brand
has been built on 82 years of listening
to our customers and ensuring we
meet their needs. We continue to be
recognised for quality, value, integrity
and reliability.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 7

Proudly partnering with

8 | AVJENNINGS LIMITED · ABN 44 004 327 771

Property Portfolio

Development
distribution
by state

WA
Investment in fund
developing apartment
site in Subiaco, WA
(187 lots)

SA
No. of lots:
2,598

VIC
No. of lots:
2,850

QLD
No. of lots:
1,548

NSW
No. of lots:
1,744

NZ
No. of lots:
479

Number of Lots
by Location

Net Funds Employed
by Location

17%
31%
19%
28%
5%

QLD
VIC
NSW
SA
NZ

24%
23%
31%
15%
7%

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 9

Developments Project Pipeline as at 30 June 2014

Project Name

Project
Acquired

Project
Commenced

Total Gross
Revenue

Original No.
of Lots

Remaining
No. of Lots

Pre

FY
2015

FY
2016

FY
2017

FY
2018

FY
2019+

Halpine Lake, Mango Hill

Mar-04

Jul-04

$165.8m

Creekwood, Caloundra

Glenrowan, Mackay

Essington Rise, Leichardt

Nov-07

Aug-08

Dec-09

Apr-09

Jul-10

Mar-10

$186.9m

$56.6m

$26.1m #

Nottingham Square, Calamvale

Sep-07

Aug-09

$101.1m

Villaggio, Richlands

Bethania

Elysium, Noosa Heads

Big Sky, Coomera

Jul-09

Jun-10

Nov-10

Jun-11

Jun-10

$46.5m

Jan-11

Oct-11

$41.7m

$52.8m

$76.5m #

The Ridges, Elderslie

Oct-99

Aug-05

$220.2m

Hamlyn Terrace

Spring Farm

Jul-01

Jun-14

$169.0m

Jan-02

$108.6m

Ravensworth Heights, Goulburn

Apr-07

Aug-07

$92.4m

Seacrest, Sandy Beach

Sep-07

May-10

$25.0m

Cavanstone, Eastwood

Arcadian Hills,Cobbitty

Lakes Edge, The Ponds

Oct-07

Oct-10

Oct-12

Aug-08

$354.7m #

Aug-13

$205.4m

Apr-13

$62.0m #

Arena, Officer

Lyndarum North, Wollert

Jul-04

Jul-07

May-08

$139.2m

Mar-10

$163.8m

689

684

278

158

258

142

128

174

334

578

460

185

279

141

274

469

685

856

521

177

105

128

256

262

472

206

127

417

352

Wollert (Options)

Purchase not yet finalised

1,820

Lyndarum, Epping North

Aug-03

Nov-07

$220.1m

Arlington Rise, Portarlington

Mar-11

Hazelcroft, Doreen

Aug-11

Apr-11

Jul-13

$53.8m

$71.9m

D
N
A
L
S
N
E
E
U
Q

S
E
L
A
W
H
T
U
O
S
W
E
N

A
R
O
T
C
V

A Pathways, Murray Bridge

Jul-05

Mar-06

$25.7m

River Breeze, Goolwa North

Jun-07

Mar-08

$15.6m

St Clair, Cheltenham JV

Nov-07

May-09

$375.1m

H
T
U
O
S

I
L
A
R
T
S
U
A

Eyre at Penfield

Jan-11

May-12

$359.6m#

1,763

Z Hobsonville Point, Hobsonville
N

Catalina, Hobsonville

Apr-08

Jun-14

Aug-09

$77.9m #

Oct-14

$78.5m

625

412

• Total gross revenue from inception of project
• Total number of remaining lots does not include 18 remnant lots
• # Indicates Joint Venture or Development Agreement so not all revenues flow to AVJ
• NC = Not commenced

945

256

365

238

130

937

222

356

725

1,713

412

10 | AVJENNINGS LIMITED · ABN 44 004 327 771

Queensland

MACKAY

NOOSA HEADS

MERIDAN PLAINS

MANGO HILL

BRISBANE

LEICHHARDT

RICHLANDS

CALAMVALE

COOMERA

Activity in Brisbane is rapidly
accelerating with positive knock-
on to the Caloundra and Coomera
Queensland markets.

New South Wales

SANDY BEACH

CENTRAL COAST

THE PONDS

EASTWOOD

SYDNEY

COBBITTY

ELDERSLIE

GOULBURN

WOLLONGONG

Sydney remains our strongest market
with flow-on benefits to the NSW
Central Coast.

Victoria

WOLLERT

DOREEN

MELBOURNE

OFFICER

PORTARLINGTON

Melbourne residential continues to
improve for the Company, with its
estates in the east virtually complete and
those in the north performing strongly.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 11

South Australia

PENFIELD

ST CLAIR

ADELAIDE

MURRAY BRIDGE

GOOLWA NORTH

Activity at the Company’s ‘St Clair’
and ‘Eyre’ projects is rising as these
high quality masterplanned estates
provide consumers with attractive
points of difference from competing
offerings.

New Zealand

HOBSONVILLE POINT

AUCKLAND

Auckland remains a strong market
and the Company’s outstanding
Hobsonville Point joint venture project
continues to experience significant
demand.

12 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

Your Directors present their Annual Financial Report
(“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 2014.

The most pleasing aspect of the results for the year is that
they were the outcome of AVJennings’ strong commitment
to strategy over a number of years and reliance upon our
experience and our systems, developed over many years, to
analyse and forecast our markets and develop appropriate
strategies.

DIRECTORS

Business Overview

The names 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

Chairman (Non-Executive)

RJ Rowley

Deputy Chairman (Non-Executive)

PK Summers

E Sam

B Chin

Managing Director and
Chief Executive Officer

Director (Non-Executive)

BG Hayman

Director (Non-Executive)

TP Lai

D Tsang

Director (Non-Executive)

Director (Non-Executive) –
Appointed 2 June 2014

COMPANY SECRETARY

The name of the Company Secretary in office during the
financial year and until the date of this Report is as follows:

CD Thompson

PRINCIPAL ACTIVITY

The principal activity of the Consolidated Entity during the
year was Residential Development.

Being a developer with a mainly horizontal development
profile has also enabled us to adapt strategies to match our
market forecasts as we can scale up or down more easily
than if we had a significant high rise apartment or vertical
development profile.

In past years this has seen the Company reduce its level
of activity as market conditions deteriorated to avoid a
build-up of exposure to unsold inventory. However, in recent
years it has resulted in increased volumes and turnover but,
encouragingly, it has been achieved without any increased
exposure to completed unsold stock.

We have also maintained a focus on our core strengths of
building great but affordable places and communities for our
customers to live in. Our brand has been built on 82 years of
listening to our customers and ensuring we meet their needs.
We continue to be recognised for quality, value, integrity and
reliability.

We don’t see our business as just developing land and
building houses; we see the parks, playgrounds and wetlands
we create, the schools and students our projects support, the
sporting teams that compete on our playing fields, the public
art we commission and other aspects we create to develop
outstanding communities.

Our people are what make the difference and we will continue
to ensure we attract, retain and develop the highest calibre
people who have the same values for which we are known.

OPERATING RESULTS

Outlook

Looking forward, we expect market fundamentals to remain
supportive. Consumer confidence, whilst still somewhat
volatile, is strong as it relates to residential property. Interest
rates remain historically low and there is a significant
housing shortage in many markets, most notably Auckland,
Brisbane and Sydney. Adding to this the population continues
to increase, placing further pressure on an industry which
typically struggles to meet underlying demand due to
constraints around the supply of suitably zoned and serviced
land.

AVJennings is well placed for growth due to strong opening
work in progress levels of 1,264 lots at June 2014 (up 77%
on prior year and 298% in the last two years). This reflects
both the opening of new projects, most of which only partially
contributed to results in FY14, as well as greater production
levels in existing projects.

The consolidated profit after tax for the financial year was
$18.8 million (2013: $15.3 million loss after tax).

DIVIDENDS

No dividends were paid to members during the financial
year (2013: nil). However, subsequent to the end of the
financial year, the Directors recommended a fully franked
final dividend of 2.0 cents per share which was paid on
18 September 2014. The Dividend Reinvestment Plan
remains suspended.

REVIEW OF OPERATIONS

Financial Results

The Company’s revenue was up 58.1% to $250.6 million
and profit increased 216% to $27.0 million before tax
and $18.8 million after tax compared to the previous
corresponding period.

In line with the statement given with the release of the 1H14
accounts, Directors have declared a fully franked final
dividend of 2.0 cents per share. Whilst obviously related
most directly to the FY14 result, it also reflects Directors’
confidence in the future prospects of the Company.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 13

Directors’ Report
For the year ended 30 June 2014

REVIEW OF OPERATIONS (continued)

INFORMATION ON THE DIRECTORS

Growth will also be supported by a more active acquisition
strategy. In recent months we have:

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 Pte Ltd. 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 Ltd, 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. He served on the Board of the Institute of Real Estate
Studies, National University of Singapore from 2008 to 2011
and was a board member of the Republic Polytechnic Board
of Governors from 2008 to 2011. 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:

None.

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 optimisation. 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:

None.

• Agreed to acquire the remaining 50% of the St.Clair

Joint Venture in South Australia;

• Acquired over 400 lots in the Catalina Precinct at

Hobsonville Point Auckland, continuing the Company’s
successful involvement in this project; and

• Recently acquired a relatively small equity stake in a

development in Subiaco, Perth. This is the Company’s
first involvement in the Perth market for over 20 years.

We also continue to look for other acquisition opportunities.
In some markets prices for sites have accelerated beyond
what we believe are reasonable. However, overall we believe
sufficient opportunities exist to acquire sites in line with our
required returns, targets and strategies. Additionally, our low
gearing levels of 17% (net debt to total assets) will support
such an acquisition strategy.

Whilst timing of production and usual seasonal issues will see
results skewed towards the second half of FY15, we expect to
achieve increased contract signings. Our forecast for FY15 is
in the range of 1,500 to 1,700 lots.

Directors and management appreciate the support of
stakeholders during the residential downturn that much
of Australia experienced in recent years and also the
participation and support shown for the rights issue
concluded in early 2013. This equity raising enabled funding
of increased work in progress levels which, in turn, led to the
improved result for FY14. Given the current environment, we
remain confident of continuing improvement in results.

SIGNIFICANT EVENTS AFTER THE BALANCE
SHEET DATE

No matter or circumstance has arisen since 30 June 2014
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

The prospects and business strategies of the Consolidated
Entity are discussed on pages 12 and 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.

14 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

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. (Economics)

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 International Monetary Exchange from 1987-
1990 and 1993-1996. Mrs Sam is a Director of SC Global
Developments Pte Ltd, the Company’s major shareholder.
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:

Banyan Tree Holdings Limited, since 23 March 2004.
The Straits Trading Company Limited, since 30 April 2008.

Bobby Chin CA (ICAEW) B.Acc.

Director since 18 October 2005. Mr Chin is the Chairman
of NTUC Fairprice Co-operative Limited and NTUC Fairprice
Foundation Limited. He is the Deputy Chairman of NTUC
Enterprise Co-operative Limited and a Director of 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
Singapore Chartered Accountants, 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:
Yeo Hiap Seng Limited, since 15 May 2006.
Ho Bee Investment Limited, since 29 November 2006.

Sembcorp Industries Limited, since 1 December 2008.
Singapore Telecommunications Limited, since 1 May 2012.

Other Directorships:

Temasek Holdings (Private) Limited, since 10 June 2014

Bruce G Hayman

Director since 18 October 2005. Mr Hayman has over 45
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 and as Chairman of the Board of the Rugby Club
Ltd. For his contribution to tourism in Australia, he has been
recognised by Tourism Training Australia with a Platinum
award. He is Chairman of the Ella Foundation and is the
Deputy Chairman and a Director of the Australian Diabetes
Council – NSW. Resident of Sydney.

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.

Teck Poh Lai B.A. Hons. (Economics)

Director since 18 November 2011. Mr Lai has been a career
banker since the late 1960s. He joined Citibank Singapore in
April 1968, rising through the ranks to become Vice President
and Head of the Corporate Banking Division. During his time
with Citibank, Mr Lai undertook international assignments
with Citibank in Jakarta, New York and London. His last
position with Citigroup was as Managing Director of Citicorp
Investment Banking Singapore Ltd (Corporate Finance and
Capital Market Activities) from 1986 to 1987. Mr Lai joined
Oversea-Chinese Banking Corporation (OCBC) in January
1988 as Executive Vice President and Division Head of
Corporate Banking. He moved on to various other senior
management positions in OCBC, such as Head of Information
Technology and Central Operations and Risk Management.
He was head of Group Audit prior to retiring in April 2010.
Resident of Singapore.

Responsibilities:

Non-Executive Director, Member of Audit Committee,
Member of Remuneration Committee.

Directorships held in other listed entities:

PT Bank OCBC NISP Tbk (Commissioner) since
4 September 2008.
Oversea-Chinese Banking Corporation since 1 June 2010.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 15

Directors’ Report
For the year ended 30 June 2014

INFORMATION ON THE DIRECTORS (continued)

Individual Key Management Personnel
disclosures

David Tsang B.A. (Economics)

Details of KMP are set out below:

Director since 2 June 2014. Mr Tsang has over 20 years
experience in real estate, corporate finance and investments,
completing transactions in Asia, North America and Europe.
He currently holds the position of Managing Director for SC
Global Developments Pte Ltd and has held various director
and finance positions within the SC Global Group.

Mr Tsang began his career in Investment Banking with
Nesbitt Burns in New York. He relocated from the United
States to Singapore in 1996 and joined Simon Cheong as
a founding member in establishing SC Global Pte Ltd, a
boutique real estate advisory and principal investment firm.
In 1999, Mr Tsang co-led two successful M&A transactions
for the SC Global Group, acquiring controlling interests
in publicly listed companies MPH Ltd and ANA Hotels
(Singapore) Ltd. Mr Tsang took an executive position as
Director of Special Projects at MPH Ltd from 2000 – 2004,
helping to restructure and unlock value for shareholders.
Mr Tsang also helped lead the transformation of ANA Hotels
(Singapore) Ltd into the business of high end residential
development and which continues to operate today as
SC Global Developments. Mr Tsang served previously as a
Director on the Board of AVJennings Ltd from 2004 to 2006.
Resident of Singapore.

Responsibilities:

Non-Executive Director, Member of Investments Committee.

Directorships held in other listed entities:

None.

INFORMATION ON COMPANY SECRETARY

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.

REMUNERATION REPORT (Audited)

This Remuneration Report outlines the remuneration
arrangements of the Company and the Group 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 the Group, directly or indirectly, including
any Director (whether executive or otherwise) of the Parent
Entity and some of the Executive Committee members.

The Remuneration Report is presented under the following
sections:

(i)

Directors

S Cheong

RJ Rowley

PK Summers

E Sam

B Chin

Chairman (Non-Executive)

Deputy Chairman (Non-
Executive)

Managing Director and
Chief Executive Officer

Director (Non-Executive)

BG Hayman

Director (Non-Executive)

TP Lai

D Tsang

(ii)

Executives

Director (Non-Executive)

Director (Non-Executive) –
Appointed 2 June 2014

KMP Executive Committee Members

M Henesey-Smith

A Soutar

Executive General Manager
(Qld, SA & NZ) – Ceased
employment 11 July 2014

Executive General Manager
(NSW & Vic)

L Mahaffy

Chief Financial Officer

SC Orlandi

Chief Strategy Officer

CD Thompson

L Hunt

Company Secretary/
General Counsel

General Manager,
Human Resources

Principles Used to Determine the Nature and
Amount of Remuneration

2.1 The Remuneration Committee

The Remuneration Committee comprises four Non-Executive
Directors.

The Remuneration Committee has delegated decision making
authority for some matters related to the remuneration
arrangements for Executive Directors and Executives, and
is required to make recommendations to the Board on other
matters such as equity-based performance plans.

The Committee approves the remuneration arrangements
of the Chief Executive Officer and other Executives which
includes awards made under the long-term incentive (LTI)
plan. The Board sets the fees for Non-Executive Directors.

The objective is to ensure that remuneration policies and
structures are fair and competitive and aligned with the long-
term interests of the Group.

The Chief Executive Officer attends Remuneration Committee
Meetings by invitation, where management input is required.
The Chief Executive Officer is not present during any
discussions related to his own remuneration arrangements.

16 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

• Sourcing and facilitating business, commercial and

2.2 Use of Remuneration Consultants

In January 2013, the Remuneration Committee engaged
Godfrey Remuneration Group (GRG) to review and report
on market benchmarking of remuneration for Non-Executive
Directors, Executive Directors and Executives. Under the
terms of the engagement, GRG provided remuneration
recommendations as defined in Section 9B of the
Corporations Act 2001.

GRG confirmed that the recommendations were made free
from undue influence by members of AVJennings KMP.

The following arrangements were made to achieve this:

• GRG was engaged by, and reported directly to, a member
of the Remuneration Committee. The agreement for the
provision of the remuneration consulting services was
executed by the Chair of the Remuneration Committee
under delegated authority on behalf of the Board;
The report containing the remuneration recommendations
was provided by GRG directly to a member of the
Remuneration Committee; and

•

• GRG was permitted to speak to management throughout
the engagement to understand company processes,
practises, and other business issues and obtain
management perspectives. However, GRG was not
permitted to provide any member of management with
a copy of their draft or final report that contained the
remuneration recommendations.

As a consequence, the Board is satisfied that the
recommendations were made free from undue influence
from any member of the Management team.

2.3 Non-Executive Director Remuneration Arrangements

The Board seeks to set aggregate remuneration at a level
that provides the Group with the ability to attract and retain
Directors of the highest calibre, whilst incurring a cost that is
acceptable to Shareholders.

Fees and payments to Non-Executive Directors reflect the
demands which are made on, and the responsibilities of, the
Directors.

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. There has been no change to the
basis of Non-Executive Director remuneration since the prior
reporting period.

Three Non-Executive Directors, Mr S Cheong, Mrs E Sam
and Mr D Tsang, do not receive fees, however AVJennings
pays a consulting fee to the Ultimate Parent Entity, SC
Global Developments Pte Ltd. The fees relate to and are paid
pursuant to a consultancy and advisory agreement entered
into in June 2002 (and amended in 2012) for the provision of
services including the following:

• Services of at least two directors on the Board;
• Assistance in sourcing and facilitating financial and

banking requirements particularly from Asian based and
other institutions;

• Assistance in secretarial and administrative matters in
connection with the Company’s Singapore listing;

investment opportunities; and

• Ancillary advice.

The reasonableness and appropriateness of the agreement
and the level of fees is assessed annually by the Australian
based independent Non-Executive Directors taking into
account the actual services provided, comparable market
data for similar services, the benefits to the Company and
the likely cost of replacement of the services provided. The
annual fees payable are $600,000. The agreement may be
terminated by either party providing six months’ notice or by
the Company on 30 days’ notice for cause.

Non-Executive Directors do not participate in any incentive
programs. Fees for Non-Executive Directors are fixed and are
not linked to the financial performance of the Company. The
Board believes this is necessary for Non-Executive Directors to
maintain their independence.

Shareholders approved an annual aggregate cap of
$400,000 for non-executive fees at the 2000 AGM. This cap
has not been altered since. The allocation of fees to Non-
Executive Directors within that cap has been determined
after consideration of a number of factors including the
time commitments of directors, the size and scale of the
Company’s operations, the skill sets of the directors and
fees paid to directors of comparable companies as well as
participation in committee work. Non-Executive Directors are
not entitled to retirement benefits other than (as appropriate
for Australian residents) payment of statutory superannuation
entitlements in addition to directors’ fees.

The remuneration of Non-Executive Directors for the years
ended 30 June 2014 and 30 June 2013 is detailed on page
22 of this Report.

2.4. Executive Remuneration Arrangements

AVJennings’ executive remuneration strategy is designed to
attract, motivate and retain high performing individuals and
align the interests of Executives and Shareholders.

The executive remuneration framework consists of fixed
remuneration and short (assessed annually) and long-term
(assessed over a three year period) incentives as outlined
below.

AVJennings aims to reward Executives with a level and mix
of remuneration commensurate with their position and
responsibilities, and aligned with market practice.

i) Fixed Remuneration

Fixed Remuneration is represented by Total Employment
Cost (TEC) which comprises base remuneration and
superannuation contributions. Base remuneration includes
cash salary and any salary sacrifice items. Superannuation
contributions are capped at the relevant concessional
contribution limit. Fixed remuneration excludes any incentive
entitlements.

Executive contracts of employment do not include any
guaranteed increases. TEC is reviewed annually or on
promotion/appointment to the role. TEC is benchmarked
against market data for comparable roles in comparable
entities in the market. The Company sets TEC based on
relevant market analysis, and having regard to the scope and
nature of the role and the individual executive’s performance,
expertise, skills and experience.

The fixed component of executive remuneration is detailed in
the tables on pages 22 and 23.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 17

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

2.4. Executive Remuneration Arrangements (continued)

ii) Short Term Incentive (STI)

The variable “at risk” component of executive remuneration
ensures that a proportion of remuneration varies with
performance (both of the individual and, as appropriate, the
business unit and the Company as a whole).

Executives participate in a formal STI plan which assesses
performance against pre-determined Key Performance
Indicators (KPIs) over the financial year. The STI is
underpinned by the Company’s performance management
system. Within this system, each executive has KPIs that
are aligned to company, business unit and individual
performance. An STI payment is awarded only when an
agreed level of performance is achieved by individual
executives against KPIs set at the start of each financial year.

STI awards for the executive team in the 2014 financial year
were based on the scorecard measures and weightings as
disclosed below. These targets were set by the Remuneration
Committee and align with the Group’s strategic and business
objectives. They are reviewed annually.

The CEO has a target STI opportunity of 25% of TEC and
other Executives have a STI opportunity of between 10% to
30% of TEC.

Position

CEO

Senior
Executives

State GMs

Max STI
as % TEC

Max LTI
as % TEC

Total
as % TEC

100

The proportions of STI and LTI take into account:

• Market practice;
•

The objectives that the Board seeks to achieve and the
behaviours which support that outcome;
The desire for senior executives to have a shareholding
as a proportion of remuneration in the event that equity
rewards have vested; and
The service period before executives can receive equity
rewards.

•

The table below provides an overview of the STI against key financial and non-financial performance measures.

CEO

Senior
Executives

State GMs

Financial and Business Performance

Underlying Profit
Performance

Group profit before tax.
Return on NFE.

Cost to income ratio.
Appropriate and efficient capital management.
Alignment of priorities and allocation of resources.
Market conditions, in particular performance in the
prevailing market.
Implementation of Company strategy and improvement
in underlying health of the Company.
Increase in the Group’s market share of residential
property sector.
Risk management.

Customer Advocacy.

Employee retention and engagement.
Leadership.

Providing a safe work environment.
Minimise the impact of our activities on the environment.

Business
Performance

Non-Financial

Customer and
Stakeholder
Performance

People

Safety and
Environment

70%

30% to 40%

50%

30%

60% to 70%

50%

The Remuneration Committee is responsible for determining the STI to be paid based on an assessment of whether the
KPIs are met. To assist in this assessment, the Committee receives detailed reports on performance from management. This
usually occurs within two months of the reporting date. Amounts payable are delivered as a cash bonus in the following
reporting period. The Committee has the discretion to adjust STIs upwards or downwards in light of unexpected or unintended
circumstances. The maximum STI that can be earned is capped to minimise excessive risk taking.

18 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

The following allocations have been made under the LTI Plan:

2.4. Executive Remuneration Arrangements (continued)

Based on achievements of the Group this year and
performance against individual KPIs, the Remuneration
Committee determined that Executives had achieved between
25% and 100% of their target opportunity (average 60%).
In making this assessment, the Committee considered the
following factors:

FY2011 Grant

On 28 September 2010, 1,375,452 shares were granted to
certain executives. As detailed in the table on page 20, these
included 1,136,816 shares for KMP. The remaining shares
were granted to executives who were not KMP. All unvested
shares from this grant have been forfeited as the performance
conditions were not achieved.

• Market conditions and performance in the prevailing

FY2012 Grant

market.

• A turnaround resulting in a strong profit before tax.
• An increase in contract signings compared to the previous

year.

• Performance in implementing Company strategy.
•

Improvement in underlying health of the Company.

iii) Long Term Incentive (LTI)

LTI awards are made to executives in order to align
remuneration with the creation of shareholder value over the
long-term. As such, LTI awards are only made to executives
who are in a position to have an impact on the Group’s
performance against the relevant long-term performance
measures.

Share-based compensation:

The AVJ Deferred Employee Share Plan (the LTI Plan)
administers employee share schemes under which shares
may be purchased on-market by the LTI Plan Trustee on behalf
of employees. These shares vest to employees for no cash
consideration subject to certain conditions being satisfied.
Employees may elect not to participate in the scheme. Shares
held by the LTI 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 of the shares at the grant date is
expensed on a straight-line basis over the vesting period with
a corresponding increase in share-based payment reserve
in equity. There is no non-recourse financing provided to
executives in relation to any share-based payments.

Vesting is subject to both service and performance conditions.
The service condition requires the executive to be employed
by the Company as at 30 September in the third year after
the grant date for each grant. The performance conditions
apply to each grant – as to 50% as measured by the TSR
hurdle and as to 50% by the EPS hurdle. The two performance
hurdles are tested differently. The EPS hurdle is tested as at
30 June in the test year (three years after grant). The TSR
hurdle is tested at 30 September of the third year after grant.

On 5 September 2011, 1,695,735 shares were granted to
certain executives. As detailed in the table on page 20, these
included 1,454,555 shares for KMP. The remaining shares
were granted to executives who were not KMP. A total of
124,383 shares from this grant have been forfeited as a result
of executives’ departure.

FY2013 Grant

An additional 513,168 shares were granted on
12 September 2012 to certain executives. As detailed in
the table on page 20, these included 280,712 shares for
KMP. The remaining shares were granted to executives who
were not KMP.

FY2013 Delayed Grant

On 25 September 2013, 527,027 shares were granted to
certain executives. As detailed in the table on page 20, these
include 468,868 shares for KMP. The remaining shares were
granted to executives who were not KMP.

This Delayed Grant was supposed to have been made
about July 2012 in accordance with the usual operation
of the LTI plan. In July 2012, the Remuneration Committee
determined that trading conditions at the time warranted
a deferral of the grant until a later time. The FY2013 grant
was ultimately reconsidered in September 2013. The
Remuneration Committee then considered that trading
conditions and fairness to both executives and the Company
warranted an allocation. However, as the Company’s share
price had increased considerably since the original proposed
allocation date (July 2012) it was impossible to determine an
appropriate allocation amount under the current plan which
did not prejudice either the Company or the executives. If
the original number of shares to be allocated as proposed
in July 2012 were granted, the cost to the Company would
have been considerably more than originally contemplated.
If the same allocation amount had been used as originally
contemplated, executives would have received considerably
fewer shares. As a reasonable compromise and recognising
that staff retention was a critical factor for consideration,
the Committee determined to grant a significantly reduced
amount to each executive (approximately 35.5% of the
proposed original allocation), and to make the grant
subject only to service conditions as to 50% for one year
to 30 September 2014 and as to 50% for two years to
30 September 2015.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 19

Directors’ Report
For the year ended 30 June 2014

AVJennings’ TSR rank against
companies in the Index at
30 September

Percentage
vesting

< median

At the median

Nil

50%

> median but < 75th percentile

Pro-rata between 50th
and 75th percentiles

>=75th percentile

100%

The operation of the EPS hurdle is set out below.

AVJennings’ EPS growth rate
over the performance period

Percentage
vesting

< 5%

5% – 10%

>=10%

Nil

50% of the allocation
for the hurdle

Pro-rata between 50%
and 100%

100% of the allocation
for the 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 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 EPS hurdle was chosen as it provides a measure over
which executives have more direct control.

REMUNERATION REPORT (Audited) (continued)

2.4. Executive Remuneration Arrangements (continued)

FY2014 Grant

On 25 September 2013, 1,610,096 shares with a fair value of
$849,326 were granted to certain executives. As detailed in
the table on page 20, these include 1,356,279 shares for KMP.
The remaining shares were granted to executives who were
not KMP.

Except for the 2013 Delayed Grant which is only subject to
a service condition (explained on page 18), all 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
(for the FY2011 grant), 30 September 2014 (for the FY2012
grant), 30 September 2015 (for the FY2013 grant) and
30 September 2016 (for the FY2014 grant). In the event of
death or permanent disablement, the shares may vest to the
estate at the Board’s discretion. In the event that the employee
is retrenched, the shares may vest subject to Board discretion.
If the employee resigns (in certain circumstances) or is
terminated, the unvested shares will be forfeited.

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 for each grant is as
follows:
– FY2011 grant – 10% p.a. growth for the three financial

years to 30 June 2013

– FY2012 grant – 10% p.a. growth for the three financial

years to 30 June 2014

– FY2013 grant – 10% p.a. growth for the three financial

years to 30 June 2015

– FY2014 grant – 10% p.a. growth for the three financial

years to 30 June 2016

Half of the allocation is assessed against each performance
condition. The vesting schedule for the TSR performance
condition is set out in the following table. The holder of the
shares is entitled to receive all dividends paid between grant
and vesting date.

The TSR hurdle was chosen as a performance measure as it
provides a comparison against external performance. The
comparator group against which performance is measured is
the ASX Small Industrials Index. This peer group was chosen as
the pool of listed pure residential developers was considered
too small to provide a reliable and meaningful comparator
group.

20 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

2.4. Executive Remuneration Arrangements (continued)

Name

KMP Executive
Members

PK Summers

M Henesey-Smith

A Soutar

L Mahaffy

SC Orlandi

CD Thompson

L Hunt

Total

Shares Granted

Movement of Shares Granted

Grant

Number

Fair Value

Unvested
at 1 July
2013

Forfeited
during the
year

Unvested
at 30 June
2014

FY2011

FY2012

FY2013-D

FY2014

FY2011

FY2012

FY2013-D

FY2014

FY2013

FY2014

FY2011

FY2012

FY2013-D

FY2014

FY2011

FY2012

FY2013-D

FY2014

FY2011

FY2012

FY2013-D

FY2014

691,591

884,891

285,241

666,349

158,344

202,601

65,307

147,682

280,712

147,682

107,957

102,458

131,094

42,257

95,558

106,183

135,861

43,794

118,078

78,240

100,108

32,269

72,973

$312,945

$311,924

$166,866

$351,499

$71,651

$71,417

$38,205

$77,902

$74,389

$77,902

$56,947

$46,362

$46,211

$24,720

$50,407

$48,048

$47,891

$25,619

$62,286

$35,404

$35,288

$18,877

$38,493

691,591

884,891

–

158,344

202,601

–

280,712

–

102,458

131,094

–

106,183

135,861

–

78,240

100,108

–

(691,591)

–

884,891

285,241

666,349

(158,344)

–

202,601

65,307

147,682

280,712

147,682

107,957

(102,458)

–

131,094

42,257

95,558

(106,183)

–

135,861

43,794

118,078

(78,240)

–

100,108

32,269

72,973

4,697,230

$2,091,253

2,872,083

(1,136,816)

3,560,414

Note: In the table above, “FY2013-D” refers to the FY2013 Delayed Grant.

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 2010

30 June 2011

30 June 2012

30 June 2013

30 June 2014

Financial
Period

12 months

Profit / (Loss)
After Tax
$’000

9,616

12,893

(29,828)

(15,266)

18,782

Basic
EPS
Cents

3.51

4.72

(10.99)

(5.46)

4.89

TSR
Cents

19.0

4.5

(15.0)

14.0

13.0

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 21

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

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 22.

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.

Remuneration of Key Management Personnel
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 22 and 23. The Directors are the same as
those identified in the Directors’ Report.

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.

7. 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.

Opening
Balance

Vested as
Remuneration

Net Other
Change(1)

Closing
Balance

For the year ended 30 June 2014
Directors
S Cheong
E Sam
PK Summers
RJ Rowley
D Tsang(2)
Executives
A Soutar
L Mahaffy
SC Orlandi
CD Thompson
L Hunt

192,318,030
209,349
2,416,266
252,000
837,396

212,131
19,967
143,337
823,152
41,916

Total

197,273,544

For the year ended 30 June 2013
Directors
S Cheong
E Sam
PK Summers
RJ Rowley
Executives
A Soutar
L Mahaffy
SC Orlandi
CD Thompson(3)
L Hunt

137,370,023
149,535
1,275,481
180,000

–
–
–
319,500
2,222

Total

139,296,761

(1) For the year ended 30 June 2013, includes shares acquired through the Rights Issue.
(2) Appointed 2 June 2014.
(3)

Includes 244,000 shares acquired on market.

–
–
–
–
–

–

–
–
–
–

–
–
–
–
–

–

–
–
–
–
–

–

192,318,030
209,349
2,416,266
252,000
837,396

212,131
19,967
143,337
823,152
41,916

197,273,544

54,948,007
59,814
1,140,785
72,000

192,318,030
209,349
2,416,266
252,000

212,131
19,967
143,337
503,652
39,694

212,131
19,967
143,337
823,152
41,916

57,139,387

196,436,148

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.

22 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

Directors

Short-Term

Post
Employment

Salary /
Fees
$

Cash
Bonus
$

Other
$

Superannuation(3)
$

Long-Term
Long
Service
Leave
$

Share-
based

Total

Performance
Related

Shares
$

30 June 2014

S Cheong(1)

RJ Rowley

–

77,803

–

7,197

–

85,000

–

PK Summers(2)(4)

457,119

104,519

66,434

25,538

21,878

134,732

810,220

17.92

E Sam(1)

B Chin

BG Hayman

TP Lai

D Tsang(1)(5)

–

60,000

45,767

50,000

–

4,233

–

60,000

50,000

–

690,689

104,519

66,434

36,968

21,878 134,732 1,055,220

30 June 2013

S Cheong(1)

RJ Rowley

–

77,982

–

7,018

–

85,000

–

PK Summers(2)

408,415

95,597

61,617

25,000

13,716

205,480

809,825

37.18

E Sam(1)

B Chin

BG Hayman

TP Lai

–

60,000

45,872

50,000

–

4,128

–

60,000

50,000

–

642,269

95,597

61,617

36,146

13,716

205,480

1,054,825

(1)

(2)
(3)

These Directors were not paid fees. A consulting fee of $50,000 per month was paid to the ultimate parent entity SC Global Developments Pte Ltd which
covers the services of these Directors. International airfares to attend meetings are paid for by a related entity.
‘Other’ relates to the value of motor vehicle benefits.
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.
‘Shares’ include a reversal of $181,543 relating to shares from the FY2011 Grant that did not vest.

(4)
(5) Appointed 2 June 2014.

(a)

(b)

Directors are also reimbursed for airfares (other than the international airfares for those Directors referred to in (1) above), and other expenses relating
to the provision of their services.
With the exception of share-based compensation for the Chief Executive referred to in 2.4(iii), there were no other share-based payments made to
Directors in the year under review.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 23

Directors’ Report
For the year ended 30 June 2014

REMUNERATION REPORT (Audited) (continued)

Executives

Short-Term

Post
Employment

Salary /
Fees
$

Cash
Bonus
$

Other(1)
$

Superannuation(2)
$

Long-Term
Long
Service
Leave
$

Share-
based

Total

Performance
Related

Shares
$

30 June 2014

M Henesey-
Smith(5)

A Soutar

L Mahaffy

321,280

67,304

15,173

330,084

31,409

319,712

8,200

SC Orlandi(5)

284,820

21,775

CD Thompson(5)

342,600

35,875

L Hunt(5)

195,400

11,085

36,214

34,660

17,775

23,175

11,895

30,151

482,017

3,874

45,181

445,208

2,957

15,391

364,035

11,633

19,509

355,512

11,203

22,934

430,387

6,111

14,898

250,669

–

1,793,896 175,648

15,173

147,374

47,673

148,064

2,327,828

297,086

35,020

15,000

24,747

4,232

47,046

423,131

30 June 2013

M Henesey-
Smith

A Soutar(3)

L Mahaffy(4)

SC Orlandi

329,864

43,775

207,028

9,600

282,702

14,118

CD Thompson

295,625

16,145

L Hunt

193,704

10,815

–

25,000

12,353

16,470

24,117

1,798

20,105

420,542

935

–

229,916

19,070

30,441

362,801

13,686

31,548

373,474

6,174

23,246

258,056

15.75

17.20

6.48

7.69

10.31

6.12

19.39

15.19

4.18

12.28

12.77

13.20

1,606,009 129,473

15,000

119,157

45,895

152,386

2,067,920

(1)
(2)

Represents the value of motor vehicle benefits.
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.

(3) Appointed on 12 July 2012.
(4) Appointed on 1 November 2012
(5)

‘Shares’ include reversals of $41,565 for M Henesey-Smith, $26,895 for SC Orlandi, $27,873 for CD Thompson and $20,538 for L Hunt relating
to shares from the FY2011 Grant that did not vest.

24 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Report
For the year ended 30 June 2014

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

Audit

Held
4
4
4
4
4
4
4
–

Attended
4
4
4
4
4
4
4
–

Held
–
3
–
3
3
–
3
–

Attended
–
3
–
3
3
–
3
–

Meetings of Committees

Remuneration
Held
3
–
–
3
–
3
3
–

Attended
3
–
–
3
–
3
2
–

Nominations
Held
1
1
–
1
–
1
–
–

Attended
1
1
–
1
–
1
–
–

Risk Management
Attended
–
3
–
–
–
3
–
–

Held
–
3
–
–
–
3
–
–

S Cheong
RJ Rowley
PK Summers
E Sam
B Chin
BG Hayman
TP Lai
D Tsang (1)

(1) Appointed 2 June 2014

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.

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
D Tsang

Number

192,318,030
209,349
2,416,266
252,000
837,396

*Does not include unvested shares under the AVJ Deferred
Employee Share Plan. Refer to page 20.

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.

INDEMNIFICATION OF AUDITORS

To the extent permitted by law, the Company has agreed to
indemnify its Auditors, Ernst & Young, as part of the terms of its
audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount) - except for
any loss in respect of any matters which are finally determined
to have resulted from Ernst & Young’s negligent, wrongful
or wilful acts or omissions. No payment has been made to
indemnify Ernst & Young during or since the financial year.

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.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 25

Directors’ Report
For the year ended 30 June 2014

AUDITOR’S INDEPENDENCE DECLARATION

We have obtained the following Independence Declaration from our auditors, Ernst & Young:

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF AVJENNINGS LIMITED

In relation to our audit of the financial report of AVJennings Limited for the financial year ended 30 June 2014, 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
26 September 2014

Mark Conroy
Partner

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

NON-AUDIT SERVICES

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

26 September 2014

Peter Summers
Director

26 | AVJENNINGS LIMITED · ABN 44 004 327 771

Consolidated Statement of Comprehensive Income
For the year ended 30 June 2014

Revenues

Share of profits of associates and joint venture entities
accounted for using the equity method

Cost of property developments sold

Provision for loss on inventories

Other operational expenses

Selling and marketing expenses

Employee benefits expenses

Depreciation expense

Finance costs

Fair value gain on interest rate derivatives

Management and administration expenses

Profit/(loss) before income tax

Income tax

Profit/(loss) after income tax

Other comprehensive income

Note

2014
$’000

2013
$’000

250,570

158,462

1,967

1,294

(195,656)

(125,061)

5,154

(3,948)

(6,005)

(22,964)

(4,729)

(6,209)

(17,189)

(16,712)

(330)

(457)

–

(381)

(492)

187

(7,093)

(6,686)

27,013

(23,291)

(8,231)

8,025

18,782

(15,266)

Foreign currency translation (recyclable through profit and loss)

2,065

1,380

Other comprehensive income for the year

2,065

1,380

Total comprehensive income/(loss) for the year

20,847

(13,886)

Earnings per share for profit/(loss) from continuing operations attributable to
ordinary equity holders of the parent:

Cents

Basic earnings per share

Diluted earnings per share

4.94

(5.46)

Consolidated Statement of Financial Position
As at 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 27

CURRENT ASSETS

Cash and cash equivalents

Trade and other receivables

Inventories

Other current assets

Total current assets

NON-CURRENT ASSETS

Trade and other receivables

Inventories

Investments accounted for using the equity method

Available-for-sale financial asset

Property, plant and equipment

Deferred tax assets

Intangible assets

Total non-current assets

Total assets

CURRENT LIABILITIES

Trade and other payables

Interest-bearing loans and borrowings

Tax payable

Provisions

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

Contributed equity

Reserves

Retained earnings

Total equity

Note

2014
$’000

2013
$’000

4,796

44,557

11,649

23,033

168,019

109,068

1,387

1,211

218,759

144,961

6,159

4,120

212,804

281,745

27,108

3,000

642

–

2,816

25,181

–

993

3,087

2,816

252,529

317,942

471,288

462,903

46,823

65,365

4,083

251

4,706

7,171

449

4,036

55,863

77,021

13,406

81,500

4,041

698

6,956

82,720

–

845

99,645

90,521

155,508

167,542

315,780

295,361

30(a)

30(c)

160,436

160,960

4,361

2,200

150,983

132,201

315,780

295,361

28 | AVJENNINGS LIMITED · ABN 44 004 327 771

Consolidated Statement of Changes in Equity
For the year ended 30 June 2014

Attributable to equity holders of the Parent

Foreign
Currency
Translation
Reserve

Share-based
Payment
Reserve

Retained
Earnings

Contributed
Equity

Total
equity

Note

$’000

121,096

(257)

687

147,467

268,993

–

1,380

29(a)

29(b)

36(a)

39,956

(92)

–

390

(15,266)

–

1,380

(15,266)

(13,886)

–

39,956

(92)

390

39,864

1,380

390

(15,266)

26,368

At 1 July 2012

Loss for the year

Other comprehensive income for the
year

Total comprehensive loss for the year

Transactions with owners in their
capacity as owners

- Ordinary share capital raised

- Treasury shares acquired

- Share-based payment expense

At 30 June 2013

160,960

1,123

1,077

132,201

295,361

Profit for the year

Other comprehensive income for the
year

Total comprehensive income for the year

Transactions with owners in their
capacity as owners

–

2,065

- Treasury shares acquired

29(b)

(524)

- Share-based payment expense

reversed (forfeited shares)

- Share-based payment expense

36(a)

–

(579)

675

18,782

–

2,065

18,782

20,847

–

(524)

(579)

675

At 30 June 2014

160,436

3,188

1,173

150,983

315,780

(524)

2,065

18,782

20,419

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 29

Consolidated Statement of Cash Flows
For the year ended 30 June 2014

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers

Payments to suppliers, land vendors and employees

Interest paid

Income tax paid

Note

2014
$’000

2013
$’000

251,561

182,136

(242,446)

(171,824)

(9,349)

(1,445)

(9,822)

(40)

Net cash (used in)/from operating activities

(1,679)

450

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment

Purchase of property, plant and equipment

Interest received

Distribution received

Payment for available-for-sale financial asset

Net cash (used in)/from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from borrowings

Repayment of borrowings

Payment for treasury shares

Proceeds from issue of shares

(76)

457

(1,500)

(1,009)

(228)

492

520

–

817

101,591

77,932

(105,899)

(112,278)

29(b)

29(a)

(524)

–

(92)

39,956

Net cash (used in)/from financing activities

(4,832)

5,518

NET (DECREASE)/INCREASE IN CASH HELD

Cash and cash equivalents at beginning of year

Effects of exchange rate changes on cash and cash equivalents

(7,520)

11,649

667

6,785

4,560

304

CASH AND CASH EQUIVALENTS AT END OF YEAR

4,796

11,649

30 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

1. CORPORATE INFORMATION

The Consolidated Financial Statements of AVJennings
Limited for the year ended 30 June 2014 were authorised
for issue in accordance with a resolution of the Directors
on 26 September 2014.

AVJennings Limited (the Parent) is a for-profit Company
limited by shares domiciled and incorporated in Australia
whose shares are publicly traded on the Australian Securities
Exchange and the Singapore Exchange through SGX
Globalquote (formerly known as the Central Limit Order
Book System (CLOB)). The ultimate parent is SC Global
Developments Pte Ltd, 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.

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 with
variations reflected in the profit and loss account.

The preparation of consolidated 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
Consolidated Financial Statements, are disclosed in note 4.
AVJennings is a for-profit entity for the purpose of preparing
the Consolidated Financial Statements.

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.

b) New accounting standards and interpretations

(i)

Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of
the previous financial year.

None of the new Standards and amendments to Standards
that are mandatory for the first time for the financial
year beginning 1 July 2013 affected any of the amounts
recognised in the current year or any prior year and are not
likely to affect future periods.

The Group has adopted all mandatory standards and

amendments for the annual financial year beginning 1 July
2013. Adoption of these standards and amendments has not
had any effect on the financial position or performance of the
Group but has impacted the Report disclosures as follows:

AASB 10 – Consolidated Financial Statements

This standard has changed the criteria for determining
control. Since 1 July 2013, an entity is controlled when the
Group is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the investee.

The Group has reviewed its investments in other entities to
assess whether the conclusion to consolidate is different
under AASB 10. No differences were found and therefore no
adjustments to any of the carrying amounts in the Report are
required as a result of the adoption of AASB 10.

AASB 11 – Joint Arrangements

This standard uses the principle of control in AASB 10 to
define joint control. Under this standard, investments in
joint arrangements are classified as either joint ventures or
joint operations depending on the contractual rights and
obligations of each venturer. Joint ventures are arrangements
that give the venturers rights to the net assets and are
accounted for using the equity method. Joint operations are
arrangements that give the venturers rights to the underlying
assets and obligations and are accounted for by recognising
the share of those assets and obligations. The Group also
recognises the expenses that it incurs and its share of the net
property income that it earns from each joint operation.

Whilst the classification criteria for joint ventures and
joint operations changed, the Group’s accounting for its
investments in joint arrangements was not impacted by the
adoption of AASB 11.

AASB 13 – Fair Value Measurement

This standard has centralised the definition and guidance for
measuring fair values where required to be applied by various
other accounting standards. The new standard requires
quantitative and qualitative disclosures of all fair value
measurements. The additional disclosures required by AASB
13 have been provided in this Report.

AASB 119 – Employee Benefits

The Group has adopted AASB 119: The revised standard
changes the definition of short-term employee benefits. The
distinction between short-term and other long-term employee
benefits is now based on whether the benefits are expected to
be settled wholly within 12 months after the reporting date.

The Consolidated Entity has early adopted AASB 2013-3,
effective 1 January 2014, which amends the disclosure
requirements in AASB 136 Impairment of Assets. The
amendments in AASB 136 include the requirement to disclose
additional information about the fair value measurement
when the recoverable amount of impaired assets is based on
fair value less costs of disposal. AASB 2013-3 removes this
requirement.

(ii)

Accounting Standards and Interpretations issued
but not yet effective

Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
effective have not been adopted by the Group for the annual
reporting period ended 30 June 2014. These are outlined on
the following page.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 31

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

(b) New accounting standards and interpretations

(continued)

Amendments to Australian Accounting Standards – Offsetting
Financial Assets and Financial Liabilities (effective 1 January
2014 / applicable for Group 1 July 2014)

AASB 2012-3 adds application guidance to AASB 132
Financial Instruments: Presentation to address inconsistencies
identified in applying some of the offsetting criteria of AASB
132, including clarifying the meaning of “currently has a
legally enforceable right of set-off” and that some gross
settlement systems may be considered equivalent to net
settlement.

This amendment will have no impact on the disclosure for the
Group.

AASB 9 Financial Instruments (effective 1 January 2018 /
applicable for Group 1 July 2018)

AASB 9 includes requirements for the classification and
measurement of financial assets. It was further amended by
AASB 2010-7 to reflect amendments to the accounting for
financial liabilities.

These requirements improve and simplify the approach for
classification and measurement of financial assets compared
with the requirements of AASB 139.

AASB9 also removes the volatility in profit and loss that was
caused by changes in the credit risk of liabilities elected to be
measured at fair value. This change in accounting means that
gains caused by the deterioration of an entity’s own credit
risk on such liabilities are no longer recognised in profit or
loss.

Consequential amendments were also made to other
standards as a result of AASB 9, introduced by 200911 and
superseded by AASB 2010-7, AASB 2010-10 and AASB 2014-1
– Part E

The Group will review the classification of its existing financial
assets and liabilities in line with the standard.

IFRS 15 Revenue from Contracts with Customers (effective
1 January 2017 / applicable for Group 1 July 2017)

IFRS 15 establishes principles for reporting useful information
to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from
an entity’s contracts with customers.

The Core principal of IFRS 15 is that an entity recognises
revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those
goods or services.

The Group will review contracts it has with customers and
assess the disclosure requirements, if any, of these contracts.

c) Basis of consolidation

The Consolidated Financial Statements incorporate the assets
and liabilities of all subsidiaries of AVJennings Limited as at
30 June 2014 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 de-consolidated
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.
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 in the results and equity of
subsidiaries are shown separately in the Consolidated
Statement of Comprehensive Income, Consolidated Statement
of Changes in Equity and the Consolidated Statement of
Financial Position respectively.

The AVJ Deferred Employee Share Plan Trust was formed to
administer the Group’s employee share scheme. This Trust is
consolidated, as the 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. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination
are measured at their fair values at the acquisition date. 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 and the amount
of any non-controlling interest in the acquiree over the fair
value 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 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 or loss.

32 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

eliminated to the extent of the Consolidated Entity’s interest in
the associates.

e) Joint ventures

Joint operations

The proportionate interests in the assets, liabilities, revenues
and expenses of joint operations have been incorporated in
the Financial Statements under the appropriate headings.
Details of the joint operations 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
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 16(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
joint venture 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.

At each reporting date, the Group determines whether there is
any objective evidence that the investment in the joint venture
entity is impaired. Where evidence exists, the impairment
is calculated as the difference between the recoverable
amount of the joint venture entity and its carrying value, and
recognised in the profit and loss.

Investments in associates

An associate is an entity over which the Consolidated Entity
has significant influence but not control or joint control.
Investments in associates are accounted for using the equity
method.

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 net assets of the associates.

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
16(a).

At each reporting date, the Group determines whether there is
any objective evidence that the investment in the associate is
impaired. Where evidence exists, the impairment is calculated
as the difference between the recoverable amount of the
associate and its carrying value, and recognised in the profit
and loss.

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.

Unrealised gains on transactions with associates are

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.

g) Segment reporting

Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible
for allocating resources and assessing performance of
the operating segments, has been identified as the Chief
Executive Officer.

Information regarding business activities that are below
the quantitative criteria are combined, and disclosed in a
separate category called “other”.

h) Property, plant and equipment

Property, plant and equipment are stated at historical cost
less accumulated depreciation and accumulated impairment
losses, if any.

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 under finance lease
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 to its recoverable
amount if the carrying amount is greater than the 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.

i) Borrowing costs

Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, 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.

Interest income on borrowings pending their expenditure on
qualifying assets is deducted from borrowing costs eligible for
capitalisation.

All other borrowing costs are expensed.

Intangible assets

Intangible assets acquired separately are measured at cost
on initial recognition. The cost of intangible assets acquired
in a business combination are their fair value as at the date
of the acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation
and accumulated impairment losses. The Consolidated Entity
does not capitalise any expenditure resulting in the creation
of internally generated intangible assets.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 33

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Intangible assets (continued)

The useful lives of intangible assets are assessed as either
finite or indefinite.

Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever
there is an indication that the asset may be impaired. The
amortisation period and the amortisation method for an
intangible asset with a finite useful life is reviewed at least at
the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted
for by changing the amortisation period or method, as
appropriate, and are treated as changes in accounting
estimates. The amortisation expense on intangible assets
with finite lives is recognised in the income statement in
the expense category consistent with the function of the
intangible assets.

Intangible assets with indefinite useful lives are not amortised,
but are tested for impairment annually. The assessment of
indefinite life is reviewed annually to determine whether
the indefinite life continues to be supportable. If not, the
change in the useful life from indefinite to finite is made on a
prospective basis.

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 the 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. Refer to note 4(ii).

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.

l) Available-for-sale financial assets

The available-for-sale financial asset is an investment in an
unlisted property fund. Such assets are included in non-
current assets unless the investments mature or management
intends to dispose of the investments within 12 months of
the end of the reporting period. Investments are designated
as available-for-sale if they do not have fixed maturities and
fixed or determinable payments and management intends to
hold them for the medium to long term.

Recognition and derecognition

Purchases and sales of financial assets are recognised on
trade-date; the date on which the Group commits to purchase
or sell the asset. Financial assets are derecognised when
the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold,
the accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit or loss as
gains and losses from investment securities.

Measurement

At initial recognition, the Group measures a financial asset at
its cost plus transaction costs that are directly attributable to
the acquisition of the financial asset.

Available-for-sale financial assets are subsequently carried at
fair value. Changes in the fair value of securities classified as
available-for-sale are recognised in other comprehensive income.

Details of how the fair value of financial instruments is
determined are disclosed in note 17.

Impairment

The Group assesses at the end of each reporting period
whether there is objective evidence that a financial asset is
impaired. A financial asset is impaired and impairment losses
incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after initial
recognition of the asset (a ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows
of the financial asset that can be reliably estimated. In the
case of equity investments classified as available-for-sale,
a significant or prolonged decline in the fair value of the
security below the cost is considered an indicator that the
assets are impaired.

If there is objective evidence of impairment for an available-
for-sale financial asset, the cumulative loss – measured as
the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset
previously recognised in profit and loss, is taken to profit and
loss. Cumulative gains or losses previously recognised in
other comprehensive income are reclassified to profit and loss
in the period.

Impairment losses on equity instruments previously
recognised in profit and loss are not reversed through profit
or loss in a subsequent period. Any increase in fair value
subsequent to an impairment loss is recognised in other
comprehensive income.

m) Trade and other receivables

Trade receivables are carried at the amount invoiced less a
provision for impairment.

Settlement terms for trade receivables are generally between
30 and 180 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.

34 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

m) 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.

n) 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.

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.

Interest-bearing loans and borrowings

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.

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.

p) Provisions

Provisions are recognised when the Consolidated Entity has
a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be
required to settle the obligation and the amount has been
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.

Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to
any one item included in the same class of obligations may
be small.

q) Employee benefits

Short-term employee benefit obligations

Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within
12 months after the end of the reporting period in which
the employees render the related service are recognised in
respect of employees’ services up to the end of the reporting
period. They are measured at the amounts expected to be
paid when the liabilities are settled. The liability for annual
leave is recognised in the provision for employee benefits. All
other short-term employee benefit obligations are presented
as payables.

Other long-term employee benefit obligations
The liability for long service leave and annual leave which is
not expected to be settled within 12 months after the end of
the period in which the employees render the related service
is recognised in the provision for employee benefits and
measured as the present value of expected future payments
to be made in respect of services provided by employees up
to the reporting period 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 contribution
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.

r) Share-based payment transactions
Share-based compensation benefits are provided to
executives via the AVJ Deferred Employee Share Plan.
Information relating to the plan is set out in note 36.

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 of the
shares at the grant date is expensed on a straight-line basis
over the vesting period with a corresponding increase in
share-based payment reserve in equity.

In respect of shares forfeited, no further amounts are expensed.
The cumulative amounts relating to non-market based
measures expensed to the date of forfeiture are reversed.

Leases

s)
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 commencement of
the lease at the fair value of the leased property or, if lower,
at the present value of the minimum lease payments. Lease
payments are apportioned between 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 finance costs in the Consolidated
Statement of Comprehensive Income.

The property, plant and equipment acquired under finance
leases is depreciated over the asset’s useful life or over the
shorter of the asset’s useful life and the lease term if there
is no reasonable certainty that the Consolidated Entity will
obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards
of ownership are not transferred to the Consolidated Entity
as lessee are classified as operating leases. Payments made
under operating leases (net of any incentives received from
the lessor) are charged to profit or loss on a straight-line basis
over the period of the lease.

Consolidated Entity as lessor

Leases in which the Consolidated Entity does not transfer
substantially all the risks and benefits of ownership of an
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 over the
lease term on the same basis as rental income.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 35

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

t) 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 significant risks, rewards of ownership
and effective control have been transferred to the buyer. This
has been determined to occur on settlement.

Revenue from land sales is recognised prior to settlement
when a signed unconditional contract for sale exists,
the significant risks, rewards of ownership and effective
control have been transferred to the buyer, and there is no
management involvement to the degree usually associated
with ownership.

The carrying amount of deferred 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 profits will allow the
deferred tax asset to be recovered.

Deferred 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.

Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation authority.

Construction contracts

Tax consolidation

Contract revenue and costs are recognised by reference
to the stage of completion of the contract. Depending on
the nature of the contract, this is measured based on the
proportion of contract costs incurred for work performed to
date relative to the estimated total contract costs; completion
of physical proportion of the contract work; or surveys of
work performed. 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.

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 tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are
recognised 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.

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.

v) 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.

Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
authority.

36 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

w) Derivative financial instruments

The Consolidated Entity uses various techniques, including
interest rate swaps, caps and collars 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.

x) 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.

y) 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.

z) Contributed equity

Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.

Treasury shares

Shares acquired on-market for use in employee share-based
payment plans are referred to as treasury shares. The cost
of these shares is deducted from equity. No gain or loss is
recognised in profit or loss for the purchase, sale, issue or
cancellation of the Company’s shares.

aa) 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 or any borrowings forming part of the net
investment are repaid, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.

ab) 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 and bank loans.

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.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 37

3. FINANCIAL RISK MANAGEMENT (continued)

AVJennings enters into derivative transactions, principally
interest rate swap, cap and collar contracts, to hedge interest
rate risk exposures. Derivatives are exclusively used for
hedging purposes and 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 25(a) and 25(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 following identified risks.

(i) Interest rate risk

The Consolidated Entity’s exposure to market interest rates
relates to the obligations arising from interest-bearing loans.
The level of debt is disclosed in note 25.

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
below 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 collar contracts, as well as floating-to-fixed
interest rate swap contracts. The 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.

Interest rate cap contracts are entered into for notional
principal amounts by paying an upfront premium that covers
a specific period. Interest rate collar contracts are entered
into for notional principal amounts by receiving 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). Conversely,
settlement occurs in favour of the counterparty, should the
BBSY bid rate be below the floor strike rate. If the BBSY bid
rate remains between the ceiling and floor, no settlement
occurs.

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 cap and interest rate collar contracts were outstanding:

Cash

Bank loans

Net financial liabilities

Interest rate cap and collar

Borrowings not hedged

2014

2013

Weighted
average
interest rate

1.88

4.13

Balance

$‘000

(4,796)

85,583

80,787

(55,000)

25,787

Weighted
average
interest rate

2.31

4.23

Balance

$‘000

(11,649)

89,891

78,242

–

78,242

Interest rate derivative contracts are exposed to fair value movements if interest rates change. Details of these contracts are
outlined in note 25(d).

At 30 June 2014, 36.3% of the available borrowings are at capped and collared rates of interest (2013: Nil).

The Consolidated Entity analyses its interest rate exposure on an ongoing basis. 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.

38 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

3. FINANCIAL RISK MANAGEMENT (continued)

(i)

Interest rate risk (continued)

The following sensitivity analysis is based on the interest rate exposures in existence at the balance sheet date.

At 30 June 2014, 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)

2014
$’000

(34)

(22)

2013
$’000

(70)

(35)

2014
$’000

2013
$’000

–

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:

+ 1.00% (100 basis points)

+ 0.50% (50 basis points)

- 0.50% (50 basis points)

(ii) Foreign currency risk

Post Tax Profit
Higher/(Lower)

Other Comprehensive Income
Higher/(Lower)

2014
$’000

(262)

(172)

182

2013
$’000

(548)

(274)

274

2014
$’000

2013
$’000

–

AVJ Hobsonville Pty Limited is a subsidiary which has a branch in New Zealand. The 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 is affected by exchange rate movements between the New Zealand Dollar and
Australian Dollar. This exposure is not hedged.

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 considered to be 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

2014
NZ$’000

2013
NZ$’000

1,478

37,825

39,303

34,038

5,265

18,865

18,906

889

18,017

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 39

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)

2014
$’000

2013
$’000

–

2014
$’000

(1,447)

845

1,779

2013
$’000

(1,202)

696

1,470

The current main banking facilities are due to mature on
30 September 2015 and are therefore non-current. In
addition, the Consolidated Entity operates certain project
funding facilities which are discussed in note 25(b).

At 30 June 2014, 4.8% (2013: 8.0%) of the Consolidated
Entity’s interest-bearing loans and borrowings will mature
in less than one year.

A. Non-derivative financial liabilities:

The liquidity risk disclosures on page 40 reflect all
contractually fixed pay-offs, repayments and interest
resulting from recognised financial liabilities and financial
guarantees as of 30 June 2014. 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
40, 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
required short-term cash payments.

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 $8,367,000 (2013: $12,470,000) in relation
to financial guarantees granted – see note 33 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 arises from the financial liabilities of the
Consolidated Entity and the 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 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.

40 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

3. FINANCIAL RISK MANAGEMENT (continued)

(v) Liquidity risk (continued)

A. Non-derivative financial liabilities: (continued)

Year ended 30 June 2014

Financial Assets

Cash and cash equivalents

Trade and other receivables

Financial Liabilities

Trade and other payables

Interest-bearing loans and borrowings*

Financial Guarantees

Net maturity

Year ended 30 June 2013

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

4,796

35,744

40,540

42,177

5,821

8,367

56,365

(15,825)

–

8,813

4,646

1,698

–

6,344

2,469

–

6,159

4,796

50,716

6,159

55,512

13,406

82,340

–

60,229

89,859

8,367

95,746

158,455

(89,587)

(102,943)

< 6 months
$’000

6-12
months
$’000

> 1-5 years
$’000

Total
$’000

11,649

16,338

27,987

58,422

3,796

12,470

–

6,695

6,943

7,093

–

4,120

11,649

27,153

4,120

38,802

6,956

87,100

–

72,321

97,989

12,470

74,688

14,036

94,056

182,780

Net maturity

(46,701)

(7,341)

(89,936)

(143,978)

* 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 short-term assets to meet short-term payments, at reporting date, the Consolidated
Entity has approximately $83 million (2013: $95 million) of unused credit facilities available for its immediate use. Please refer
to note 25.

B. Derivative financial liabilities:

There was insignificant liquidity risk arising from the derivative liabilities held by the Consolidated Entity at balance date.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 41

3. FINANCIAL RISK MANAGEMENT (continued)

(vi) Fair value

In accordance with AASB 7 Financial Instruments: Disclosures and AASB13 Fair Value Measurement the Group’s financial
instruments are classified into the following fair value measurement hierarchy:

Level 1 Quoted prices (unadjusted) in active market for identical assets or liabilities;

Level 2 Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 Inputs for the asset or liability that are not based on observable market data.

Year ended 30 June 2014

Year ended 30 June 2013

Total

Quoted
market price
(Level 1)

Valuation
technique
– market
observable
inputs
(Level 2)

Valuation
technique
– non market
observable
inputs
(Level 3)

Total

Quoted
market
price
(Level 1)

Valuation
technique
– market
observable
inputs
(Level 2)

Valuation
technique
– non market
observable
inputs
(Level 3)

$’000

Financial assets

Available-for-sale

Unlisted investments

Financial liabilities

Interest-bearing loans
and borrowings

–

3,000

85,583

–

85,583

–

89,891

–

89,891

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, cap and collar contracts 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).

Fair values of the Group’s interest-bearing loans and
borrowings are determined by using DCF method using a
discount rate that reflects the issuer’s borrowing rate as at the
end of the reporting period. The own non-performance risk as
at 30 June 2014 was assessed to be insignificant.

There were no transfers between any of the categories during
the year.

42 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

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 as per note 2(k). Estimates
take into consideration fluctuations in price or cost, and
development time and sales rates. The key assumptions used
in this exercise require the use of management judgement
and are reviewed at least half-yearly.

Profit recognised on developments:

Profit on developments is generally recognised on settlement
as discussed in note 2(t). 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 36(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.

SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS

The preparation of consolidated financial statements
requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the disclosure of
contingent liabilities, at the end of a reporting period.
However, uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to
the carrying amount of the asset or liability affected, in future
periods.

(i) Critical judgements in applying accounting policies

In applying the Group’s accounting policies, management
has made the following judgements, which have the
most significant effect on the amounts recognised in the
Consolidated Financial Statements:

Recovery of deferred tax assets:

The Group has recognised deferred tax assets relating to
carried forward tax losses to the extent there are sufficient
taxable temporary differences (deferred tax liabilities)
relating to the same taxation authority against which the
unused tax losses can be utilised. However, utilisation of the
tax losses also depends on the ability of the consolidated
entity to generate future taxable profits and satisfy certain
tests at the time the losses are recouped. If the entity fails
to satisfy the tests, carried forward deferred tax assets of
$10,338,000 (2013: $10,498,000) would have to be written-
off to income tax expense.

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

Key assumptions concerning the future and other key sources
of estimating uncertainty at the reporting date, that have
a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities are described
below. Assumptions and estimates are based on parameters
currently available. Existing circumstances and assumptions
about future developments, however, may change due to
changes in market condition or circumstances arising beyond
the control of the Group. Future assumptions are altered as
these changes occur.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 43

5. REVENUES AND EXPENSES

Profit/(loss) from ordinary activities before income tax includes the following revenues and expenses:

Revenues

Developments

Home Improvements

Interest revenue

Management fees

Royalty revenue

Sundry revenue

Total revenues

Note

2014
$’000

2013
$’000

242,861

150,516

–

457

4,998

399

1,855

303

492

4,535

1,007

1,609

250,570

158,462

Cost of property developments sold

Amortisation of finance costs capitalised to inventories

10,579

6,089

Employee benefits expenses

Defined contribution superannuation expense

Other employee benefits expenses

Total employee benefits expenses

Depreciation expense

Depreciation

Leasehold improvements

Plant, equipment and motor vehicles

Total depreciation expense

Other expenses

Minimum operating lease payments

Finance costs

Bank loans

Less: Amount capitalised to inventories

Finance costs expensed

Impairment of assets

(Decrease)/increase in provision for loss on inventories

Total impairment

1,307

15,882

1,185

15,527

17,189

16,712

317

330

359

381

2,235

1,863

9,349

(8,892)

457

9,822

(9,330)

492

(5,154)

22,964

(5,154)

22,964

For the year ended 30 June 2014, the decrease in the provision resulted from a realignment of future assumptions with the
improvement in current market conditions predominantly affecting projects in New South Wales and Queensland.

44 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

6. OPERATING SEGMENTS

Identification of reportable segments

Operating segments

Jurisdictions:

This includes activities relating to Land Development,
Integrated Housing and Apartments Development.

Other:

This includes numerous low value items, amongst the most
significant of which are interest and royalty revenue, and
certain sales commissions.

The Consolidated Entity has identified its operating segments
based on the internal reports that are reviewed and used by
the chief operating decision maker 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 the Financial Report.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 45

a
t
o
T

r
e
h
t
O

Z
N

A
S

D
L
Q

C
V

W
S
N

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

s
t
n
e
m
g
e
s
g
n
i
t
a
r
e
p
O

s
e
u
n
e
v
e
R

4
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

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

l
l

o
f
e
h
T

)
d
e
u
n
i
t
n
o
c
(
S
T
N
E
M
G
E
S
G
N
I
T
A
R
E
P
O

5
3
5
4

8
9
9
4

9
1
8
0
5
1

1
6
8
2
4
2

–

8
0
1
3

1
1
7
2

8
0
1
3

1
1
7
2

–

4
4
3
1

7
1
3
2

3
3
1

5
4
1

–

0
1
8

4
5

–

8
4
2
2

2
8
4
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

2
6
4
,
8
5
1

0
7
5
,
0
5
2

8
0
1
,
3

1
1
7
,
2

8
2
6
,
6
1

5
7
9
,
8
2

6
9
0
,
7
2

7
2
1
,
3
2

3
8
7
,
7
3

0
1
8
,
8
7

5
6
6
,
8
2

7
2
3
,
5
4

2
8
1
,
5
4

0
2
6
,
1
7

s
e
u
n
e
v
e
r

t
n
e
m
g
e
s
l

a
t
o
T

4
4
7
9

0
7
8
3
3

4
1
1

)
2
4
(

8
5
8
3

8
1
4
5

2
2
2
3

3
8
3
2

)
3
5
1
1
(

7
8
6
7

7
5
9
1

9
2
5
6

6
4
7
1

5
9
8
1
1

s
t
l
u
s
e
r

t
n
e
m
g
e
S

s
t
l
u
s
e
R

7
8
1

–

)
4
6
9
2
2
(

4
5
1
5

–

8
0
1
3

1
1
7
2

8
0
1
3

1
1
7
2

)
1
8
3
(

)
0
3
3
(

)
3
9
4
2
1
(

)
5
3
9
3
1
(

)
2
9
4
(

)
7
5
4
(

)
1
9
2
3
2
(

3
1
0
7
2

5
2
0
8

)
1
3
2
8
(

)
6
6
2
,
5
1
(

2
8
7
,
8
1

–

)
1
8
(

)
4
3
1
(

)
7
0
2
8
1
(

2
4
5
2

)
1
1
1
3
(

)
2
8
1
(

)
5
6
5
1
(

8
2
9
2

s
e
i
r
o
t
n
e
v
n

n
o

s
s
o

r
o
f
n
o
i
s
i
v
o
r
p
n

t
n
e
m
e
v
o
M

–

d
n
a
n
o
i
t
a
c
e
r
p
e
d
d
e
t
a
c
o

l
l

a
n
U

n
o
i
t
a
s
i
t
r
o
m
a

e
s
n
e
p
x
e
t
s
e
r
e
t
n

d
e
t
a
c
o

l
l

a
n
U

x
a
t
e
r
o
f
e
b
)
s
s
o
l
(
/
t
fi
o
r
P

s
e
s
n
e
p
x
e
d
e
t
a
c
o

l
l

a
n
U

t
n
e
m
e
v
o
m
e
u
a
v

r
i
a
F

s
e
v
i
t
a
v
i
r
e
d
e
t
a
r

t
s
e
r
e
t
n

e
m
o
c
n

r
e
h
t
O

)
s
s
o
l
(
/
t
fi
o
r
p
t
e
N

x
a
t
e
m
o
c
n

4
8
2
5
1

8
5
6
6
2

3
6
9
6
2

2
8
9
2
2

3
8
7
7
3

0
1
8
8
7

5
5
8
7
2

3
7
2
5
4

4
3
9
2
4

8
3
1
9
6

s
e
a
s

a
n
r
e
t
x
E

46 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

a
t
o
T

r
e
h
t
O

Z
N

A
S

D
L
Q

C
V

W
S
N

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

3
1
0
2

0
0
0
$

’

4
1
0
2

0
0
0
$

’

s
t
n
e
m
g
e
s
g
n
i
t
a
r
e
p
O

s
t
e
s
s
A

3
0
9
2
6
4

8
8
2
1
7
4

6
1
4
9
1

6
1
3
4
1

0
9
9
1
2

0
3
8
9
5

0
4
2
0
7

6
9
1
0
7

1
3
6
2
2
1

8
0
2
3
0
1

8
6
0
6
0
1

7
9
6
4
9

8
5
5
2
2
1

1
4
0
9
2
1

s
t
e
s
s
a
t
n
e
m
g
e
S

3
0
9
,
2
6
4

8
8
2
,
1
7
4

6
1
4
,
9
1

6
1
3
,
4
1

0
9
9
,
1
2

0
3
8
,
9
5

0
4
2
,
0
7

6
9
1
,
0
7

1
3
6
,
2
2
1

8
0
2
,
3
0
1

8
6
0
,
6
0
1

7
9
6
,
4
9

8
5
5
,
2
2
1

1
4
0
,
9
2
1

s
t
e
s
s
a

a
t
o
T

2
4
5
7
6
1

8
0
5
5
5
1

2
5
0
0
8

6
7
8
5
8

5
2
4
2

9
2
6
3
3

8
6
4
9
1

0
6
7
6
1

2
0
4
0
4

3
7
8
5

8
6
0
8
1

0
2
5
6

7
2
1
7

0
5
8
6

s
e
i
t
i
l
i

b
a

i
l

t
n
e
m
g
e
S

2
4
5
,
7
6
1

8
0
5
,
5
5
1

2
5
0
,
0
8

6
7
8
,
5
8

5
2
4
,
2

9
2
6
,
3
3

8
6
4
,
9
1

0
6
7
,
6
1

2
0
4
,
0
4

3
7
8
,
5

8
6
0
,
8
1

0
2
5
,
6

7
2
1
,
7

0
5
8
,
6

s
e
i
t
i
l
i
b
a
i
l

a
t
o
T

s
e
i
t
i
l
i
b
a
i
L

4
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

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

l
l

o
f
e
h
T

)
d
e
u
n
i
t
n
o
c
(
S
T
N
E
M
G
E
S
G
N
I
T
A
R
E
P
O

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 47

7. KEY MANAGEMENT PERSONNEL DISCLOSURES

(a) Compensation of Key Management Personnel

Short-term

– Salary/Fees

– Cash bonus
– Other (1)
Post employment
– Superannuation (2)
Long-term

– Long service leave

Share-based payment

2014
$

2013
$

2,484,585

2,248,278

280,167

81,607

225,070

76,617

184,342

155,303

69,551

282,796

59,611

357,866

3,383,048

3,122,745

(1) ‘Other’ represents the value of motor vehicle benefits.
(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.

(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.

Opening
Balance

Vested as
Remuneration

Net Other
Change(1)

Closing
Balance

For the year ended 30 June 2014

Directors

S Cheong

E Sam

PK Summers

RJ Rowley
D Tsang(2)
Executives

A Soutar

L Mahaffy

SC Orlandi

CD Thompson

L Hunt

Total

192,318,030

209,349

2,416,266

252,000

837,396

212,131

19,967

143,337

823,152

41,916

197,273,544

–

192,318,030

209,349

2,416,266

252,000

837,396

212,131

19,967

143,337

823,152

41,916

197,273,544

48 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

7. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

(b) Shareholdings of Key Management Personnel (continued)

For the year ended 30 June 2013

Directors

S Cheong

E Sam

PK Summers

RJ Rowley

Executives

A Soutar

L Mahaffy

SC Orlandi
CD Thompson(3)
L Hunt

Total

Opening
Balance

Vested as
Remuneration

Net Other
Change(1)

Closing
Balance

137,370,023

149,535

1,275,481

180,000

–

319,500

2,222

139,296,761

–

54,948,007

192,318,030

59,814

209,349

1,140,785

2,416,266

72,000

252,000

212,131

19,967

143,337

503,652

39,694

212,131

19,967

143,337

823,152

41,916

57,139,387

196,436,148

(1) For the year ended 30 June 2013, includes shares acquired through the Rights Issue.
(2) Appointed 2 June 2014.
(3)

Includes 244,000 shares acquired on market.

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.

There are currently no outstanding loans receivable from Key Management Personnel. No loans were advanced to Key
Management Personnel during the year.

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

- Share of audit or review costs of the financial reports of the
Consolidated 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

2014
$

2013
$

243,555

250,460

2,785

2,730

–

10,300

246,340

263,490

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 49

9. INCOME TAX

The major components of income tax are:

Current income tax

Current income tax charge

Adjustment for prior year

Deferred income tax

Current year temporary differences

Adjustment for prior year

Income tax reported in the Consolidated
Statement of Comprehensive Income

2014
$’000

2013
$’000

1,214

6,820

178

916

(383)

(8,556)

(2)

8,231

(8,025)

Numerical reconciliation between aggregate tax recognised in the Consolidated Statement of Comprehensive Income and tax
calculated per the statutory income tax rate:

Accounting profit/(loss) before income tax

27,013

(23,291)

8,104

197

(590)

520

(6,987)

(385)

(368)

(285)

8,231

(8,025)

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
2014 (2013: $Nil).

Tax at Australian income tax rate of 30% (2013 – 30%)

Adjustment for prior year

Equity accounted share of Joint Venture profits

Other non-deductible items and variations

Income tax

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(u).

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.

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.

50 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

10. DIVIDENDS

Dividends proposed

2014 final dividend of 2.0 cents per fully paid share,
to be paid 18 September 2014. Fully franked @ 30% tax

Total dividends proposed

The Company’s Dividend Reinvestment Plan remains suspended.

Franking credit balance

2014
$’000

2013
$’000

7,688

–

Franking credits available for subsequent financial years based on a tax rate of 30%

20,817

11. EARNINGS PER SHARE

(a) Earnings used in calculating earnings per share

For basic and diluted earnings per share:

Net profit/(loss) attributable to ordinary equity holders of the parent

18,782

(15,266)

(b) Weighted average number of shares used as denominator

Weighted average number of ordinary shares

Treasury shares

2014
Number

2013
Number

384,423,851

283,014,405

(4,221,605)

(3,365,100)

Weighted average number of ordinary shares for earnings per share

380,202,246

279,649,305

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 Consolidated Financial Statements.

12. 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

4,796

11,649

2014
$’000

2013
$’000

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 51

13. TRADE AND OTHER RECEIVABLES

Current

Trade receivables

Related parties receivables

Funds held in solicitors trust accounts

Other receivables

Allowance for impairment loss

2014
$’000

2013
$’000

30,311

11,936

2,812

2,090

9,426

(82)

2,497

5,359

3,251

(10)

Total current trade and other receivables

44,557

23,033

Non-current

Trade receivables

Total non-current trade and other receivables

(a) Allowance for impairment loss

6,159

4,120

6,159

4,120

An impairment loss $72,000 (2013: Nil) has been recognised by the Consolidated Entity in the current year.

At 30 June, the ageing analysis of trade receivables is as follows:

Number of days outstanding

Total
$’000

0-30
$’000

31-60*
$’000

61-90*
$’000

+ 91*
$’000

36,470

7,803

2,748

5,868

19,969

16,056

11,147

537

–

4,362

2014

2013

* Receivable under extended terms contracts. There are no amounts due but not paid.
# Considered impaired.

At the beginning of the year

Amounts provided for during the year

At the end of the year

(b) Related party receivables

2014
$’000

+ 91#
$’000

2013
$’000

–

For terms and conditions relating to related party receivables, refer to note 35(i).

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.

52 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

14. INVENTORIES

Current

Broadacres

Land to be subdivided – at cost

Borrowing and holding costs capitalised

Provision for loss on inventories

Total broadacres

Work-in-progress

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

Provision for loss on inventories

Total work-in-progress

Completed inventory

Completed houses and apartments – at cost

Completed residential land lots – at cost

Borrowing and holding costs capitalised

Provision for loss on inventories

Total completed inventory

Total current inventories

Non-current

Broadacres

Land to be subdivided – at cost

Borrowing and holding costs capitalised

Provision for loss on inventories

Total broadacres

Work-in-progress

Land subdivided or in the course of being subdivided – at cost

Development costs capitalised

Borrowing and holding costs capitalised

Provision for loss on inventories

Total work-in-progress

Completed inventory

Completed residential land lots – at cost

Borrowing and holding costs capitalised

Provision for loss on inventories

Total completed inventory

Total non-current inventories

Total inventories

Note

2014
$’000

2013
$’000

14(a)

52,688

9,385

(6,583)

27,958

12,195

(3,237)

55,490

36,916

53,708

27,821

13,978

7,283

(9,424)

24,553

4,600

4,211

2,660

(819)

93,366

35,205

2,726

17,444

934

(1,941)

11,861

29,819

2,789

(7,522)

19,163

36,947

168,019

109,068

164,921

240,755

14(a)

53,110

(28,298)

55,014

(41,258)

189,733

254,511

14(a)

16,509

32,254

3,541

576

2,702

1,090

–

(12,060)

20,626

23,986

2,454

3,248

14(a)

(21)

–

2,445

3,248

212,804

281,745

380,823

390,813

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 53

14. INVENTORIES (continued)

(a) 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
7.64% (2013: 8.31%).

(b) Inventory with a book value of $92,718,000 (2013: $100,227,000) had been pledged as security for project specific

borrowings (refer to note 25(b)). The Consolidated Entity’s remaining inventory has been pledged as security for the main
banking facility (refer to note 25(a)).

(c)

Previous write-downs of inventories to net realisable value reversed and recognised as a credit during the year ended
30 June 2014 amounted to $5,154,000 (2013 write-down: $22,964,000). The credit has been disclosed as a separate
item in the Consolidated Statement of Comprehensive Income.

Movements in provision for loss on inventories

At the beginning of the year

Amounts utilised

Provisions (reversed)/created

At the end of the year

15. OTHER CURRENT ASSETS

Prepayments

Deposits

Total other current assets

2014
$’000

64,896

(13,475)

(5,154)

2013
$’000

48,621

(6,689)

22,964

46,267

64,896

2014
$’000

1,308

2013
$’000

1,067

144

1,387

1,211

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investment in Associate – unincorporated

Interest in Joint Venture Entities – unlisted

Total equity accounted investments

Note

16(a)

16(b)

2014
$’000

2013
$’000

27,103

25,135

27,108

25,181

Investments in Associates are accounted for in accordance with the policy outlined in note 2(f) while Joint Venture Entities are
accounted for in accordance with note 2(e).

(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.

54 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)

(a) Investment in Associate (continued)

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

2014

2013

10%

2014
$’000

(40)

(1)

2013
$’000

499

(520)

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

(Loss)/profit

Impairment

2014
$’000

(1)

2013
$’000

419

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 Associate had no outstanding performance guarantees at 30 June 2014. The share of contingent liabilities in respect to
certain performance guarantees granted by the Associate at 30 June 2013, in the normal course of business to unrelated
parties, amounted to $18,000.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 55

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)

(b) Interest in Joint Venture Entities

Joint Venture Entity and principal activities

Eastwood – Land Development and Building Construction

Woodville – Land Development and Building Construction

Movements in carrying amount

At the beginning of year

Share of net profit

At the end of year

Interest held

2014

2013

50%

2014
$’000

50%

2013
$’000

25,135

1,968

23,908

1,227

27,103

25,135

The Consolidated Entity’s share of the Joint Venture Entities’ assets, 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 liabilities

Net assets

Share of revenue, expenses and results

Revenues

Expenses

Profit before tax

Tax

Profit after tax

17. AVAILABLE-FOR-SALE FINANCIAL ASSET

Non-current assets

Property Fund Units

2014
$’000

2013
$’000

29,564

–

29,564

1,717

744

2,461

20,185

13,648

33,833

1,988

6,710

8,698

27,103

25,135

26,336

(23,525)

2,811

(843)

1,968

19,882

(18,129)

1,753

(526)

1,227

2014
$’000

2013
$’000

3,000

–

Represents the fair value of units in an unlisted property fund. The fair value of the units is $3,000,000 (2013: Nil). Fair value was
determined by directly observable prices for the asset.

Impairment and risk exposure

None of the financial assets are either past due or impaired.

All available-for-sale investments are denominated in Australian currency. As a result, there is no exposure to foreign currency
risk. There is also no exposure to price risk as the intention is to hold the investments to maturity.

56 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

18. PARENT ENTITY FINANCIAL INFORMATION

(a) Summary financial information

The individual financial statements for the Parent Entity show the following aggregate amounts:

Balance Sheet

Current assets

Total assets

Current liabilities

Total liabilities

Shareholders’ equity

Contributed equity

Reserves

Share-based payment reserve

Retained earnings

Total equity

Profit for the year

Total comprehensive income

(b) Guarantees entered into by the Parent Entity

The Parent Entity has not provided any financial guarantees.

The Parent Entity did not have any contingent liabilities as at 30 June 2014 (2013: Nil).

2014
$’000

2013
$’000

51,729

215,015

69,176

232,462

17,025

160,436

160,960

1,173

53,400

1,077

53,400

215,009

215,437

–

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 57

19. CONTROLLED ENTITIES

(a) Investment in controlled entities

The following economic entities are the controlled entities of AVJennings Limited:

ECONOMIC ENTITY (1)

2014

2013

2014

2013

% 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(3)

AVJennings Properties Limited(3)

Jennings Sinnamon Park Pty Limited

Long Corporation Limited(3)

Orlit Pty Limited(3)

Sundell Pty Limited(3)

AVJennings Housing Pty Limited(3)

AVJennings Home Improvements S.A. Pty Limited(3)

AVJennings Mackay Pty Limited(3)

Entities excluded from the Closed Group

Crebb No 12 Pty Limited

Dunby Pty Limited

Epping Developments Limited

Montpellier Gardens Pty Limited

Sirda Pty Limited(4)

AVJ ODP Pty Limited

AVJennings (Cammeray) Pty Limited

AVJennings Syndicate No 2 Limited(4)

AVJennings Syndicate No 3 Limited

AVJennings Syndicate No 4 Limited

AVJennings Officer Syndicate Limited

AVJennings Properties SPV No 1 Pty Limited

AVJennings Properties SPV No 2 Pty Limited

AVJennings Properties SPV No 3 Pty Limited(4)

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(4)

AVJennings Properties SPV No 9 Pty Limited

AVJennings SPV No 10 Pty Limited

AVJennings Properties SPV No 11 Pty Limited

AVJennings Properties SPV No 15 Pty Limited(4)

Creekwood Developments Pty Limited

Portarlington Nominees Pty Limited

100

Yes

(1)

(2)
(3)
(4)

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.
These entities, including AVJennings Limited, are included under the Banking Cross Deed of Covenant referred to in note 25(a).
These entities, including AVJennings Limited, are included in the Deed of Indemnity for Contract performance bond facility referred to in note 25(c).
These entities were deregistered on 2 October 2013.

58 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

19. CONTROLLED ENTITIES (continued)

(b) Ultimate parent

AVJennings Limited is the ultimate Australian parent entity. SC Global Developments Pte Ltd is the ultimate parent entity.

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:

Revenues

Cost of property development sold

Other expenses

Profit/(loss) before income tax

Income tax

Profit/(loss) after income tax

Dividend from non closed group member

Profit/(loss) for the year

Closed Group

2014
$’000

144,792

(108,027)

(28,951)

7,814

(2,470)

2013
$’000

98,616

(97,701)

(31,205)

(30,290)

8,697

5,344

(21,593)

–

5,344

(21,589)

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 59

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

Total current assets

NON-CURRENT ASSETS

Inventories

Property, plant and equipment

Deferred tax assets

Intangible assets

Total non-current assets

Total assets

CURRENT LIABILITIES

Trade and other payables

Provisions

Total current liabilities

NON-CURRENT LIABILITIES

Interest-bearing loans and borrowings

Deferred tax liabilities

Provisions

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Contributed equity

Reserves

Retained earnings

Total equity

2014
$’000

2013
$’000

4,416

10,804

135,796

145,938

78,250

1,335

56,774

931

219,797

214,447

134,188

169,688

642

–

2,816

993

4,304

2,816

137,646

177,801

357,443

392,248

13,409

4,674

57,969

4,015

18,083

61,984

77,000

2,327

698

75,000

–

845

80,025

75,845

98,108

137,829

259,335

254,419

160,436

160,960

1,173

97,726

1,077

92,382

259,335

254,419

60 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

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:

At beginning of the year

Changes in equity due to members entering/exiting the closed group

Profit/(loss) for the year

Total income and expenses for the year

Equity transactions

– Ordinary share capital raised

– Treasury shares acquired

– Share-based payment reserve

– Movements between Closed Group and non Closed Group members

Closed Group

2014
$’000

2013
$’000

254,419

227,631

–

5,344

–

(524)

–

4,916

(21,589)

(21,529)

39,956

(92)

390

8,063

26,788

At end of the year

259,335

254,419

20. INTEREST IN JOINT OPERATIONS

A number of controlled entities have entered into Joint Operations. Information relating to the Joint Operations is set out below:

Joint Operations name and principal activities

Cheltenham Joint Venture – Land Development and Building Construction

Hobsonville Joint Venture – Land Development

INTEREST IN OUTPUT

2014

2013

50%

On 15 July 2014, the Consolidated Entity entered into an agreement to purchase the 50% share held by the joint operation
partner in the Cheltenham Joint Venture. It is anticipated settlement will occur in September 2014. Cheltenham does not
constitute a business and will therefore be accounted for as an asset acquisition in the forthcoming year.

The Consolidated Entity’s interest in the profits and losses of the individually immaterial Joint Operations are included in the
Consolidated Statement of Comprehensive Income, in accordance with the accounting policy described in note 2(e), under the
following classifications:

Revenues

Cost of property developments sold

Other expenses

Profit before income tax

Income tax

Net profit for the year

Other comprehensive income for the year

Total comprehensive income for the year

2014
$’000

39,431

(32,195)

(993)

6,243

(1,873)

2013
$’000

31,240

(22,376)

(1,702)

7,162

(2,149)

4,370

5,013

–

4,370

5,013

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 61

20. INTEREST IN JOINT OPERATIONS (continued)

The Consolidated Entity’s interest in the assets and liabilities of individually immaterial Joint Operations are included in
the Consolidated Statement of Financial Position, in accordance with the policy described in note 2(e), 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

Property, plant and equipment

Total non-current assets

Total assets

CURRENT LIABILITIES

Trade and other payables

Interest-bearing loans and borrowings

Total current liabilities

NON-CURRENT LIABILITIES

Trade and other payables

Interest-bearing loans and borrowings

Total non-current liabilities

Total liabilities

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

Total property, plant and equipment

2014
$’000

343

2,544

2013
$’000

810

2,999

25,856

15,299

28,745

19,124

18,960

29,400

18,962

29,403

47,707

48,527

8,516

313

4,713

313

8,829

5,026

–

4,500

6,956

4,338

4,500

11,294

13,329

16,320

2014
$’000

405

(343)

6,426

(5,846)

580

642

2013
$’000

399

(330)

8,133

(7,209)

924

993

62 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

21. PROPERTY, PLANT AND EQUIPMENT (continued)

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 2013

Note

Carrying amount at 1 July 2012

Additions

Disposals

Depreciation charge

Carrying amount at 30 June 2013

For the year ended 30 June 2014

Carrying amount at 1 July 2013

Additions

Disposals

Depreciation charge

Carrying amount at 30 June 2014

22. DEFERRED TAX ASSETS

The provision for deferred income tax is made up as follows:

– capitalisation of development costs

– prepayments, accruals/provisions and investments

– brand name

– provisions for asset impairments

– tax loss carried forward

Deferred tax assets

Reconciliations

Leasehold
improve-
ments
$’000

Plant,
equipment
and motor
vehicles
$’000

Total
$’000

–

(22)

–

(13)

1,103

1,174

208

(28)

(359)

228

(28)

(381)

924

993

924

(97)

(317)

993

(97)

(330)

580

642

Note

2014
$’000

2013
$’000

–

(22,336)

(3,699)

(845)

19,469

10,498

3,087

Reconciliations of the carrying amount of the deferred tax asset at the beginning and end of the year are set out below:

Opening balance

Transferred to/from deferred tax liabilities

Arising temporary differences

Carrying amount at end of year

2014
$’000

3,087

(3,087)

–

2013
$’000

–

(5,938)

9,025

3,087

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 63

23. INTANGIBLE ASSETS

Brand name at cost

Less: accumulated amortisation

Total intangible assets

2014
$’000

9,868

(7,052)

2013
$’000

9,868

(7,052)

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(j), 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 2014,
there were no indicators of impairment.

24. TRADE AND OTHER PAYABLES

Current

Unsecured

Land creditors

Trade creditors

Related party payables

Other creditors and accruals

Total current payables

Non-Current

Unsecured

Land creditors

Total non-current payables

Land creditors

2014
$’000

2013
$’000

17,646

11,094

2,750

15,333

47,342

8,689

2,750

6,584

46,823

65,365

13,406

6,956

13,406

6,956

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 35(i).

Fair value

Due to the short-term nature of current payables, their carrying amount is assumed to approximate their fair value. Non-current
land creditors have been discounted using a rate of 7.32% (2013: 7.59%).

64 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

25. INTEREST-BEARING LOANS AND BORROWINGS

Current

Secured

Bank loans

Total current interest-bearing liabilities

Non-current

Secured

Bank loans

Total non-current interest-bearing liabilities

Financing arrangements

The Consolidated Entity has access to the following lines of credit:

2014
$’000

2013
$’000

4,083

7,171

4,083

7,171

81,500

82,720

81,500

82,720

30 June 2014

Main banking facilities

- bank loans

- performance bonds and other non-cash facilities

Project funding facilities

- bank loans

- performance bonds and other non-cash facilities (1)

Note

25(a)

25(b)

Available
$’000

Utilised
$’000

Unutilised
$’000

140,000

13,600

77,000

5,835

153,600

82,835

11,691

16,000

27,691

8,583

9,977

18,560

63,000

7,765

70,765

3,108

6,023

9,131

Contract performance bond facility

25(c)

- performance bonds

15,000

12,140

2,860

30 June 2013

Main banking facilities

- bank loans

- performance bonds and other non-cash facilities

Project funding facilities

- bank loans

- performance bonds and other non-cash facilities

25(a)

25(b)

140,000

18,600

158,600

24,128

19,750

43,878

75,000

7,838

82,838

14,891

12,442

27,333

65,000

10,762

75,762

9,237

7,308

16,545

Contract performance bond facility

25(c)

- performance bonds

10,000

7,396

2,604

(1)

At 30 June 2014 these facilities are interchangeable up to $5 million (2013: $5 million) between the bank loans and performance bonds /other
non-cash facilities.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 65

25. INTEREST-BEARING LOANS AND BORROWINGS (continued)

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 25(b)). 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. The current interest rates
on the bank loans range from 4.20% to 4.26% (2013: 4.34% to 4.54%).

The Consolidated Entity’s main banking facilities mature on 30 September 2015. These facilities are 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 25(b)).

(b) Project funding facilities

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;

• fixed and floating charge over the assets and undertakings, including project rights, of a relevant entity, namely,

AVJennings Properties SPV No 4 Pty Limited;

• fixed and floating charge over the assets of the entity involved in the relevant project, namely, Portarlington

Nominees Pty Limited; and

• first registered mortgage over certain real estate inventories of the entity involved in the relevant project, namely,

Portarlington Nominees Pty Limited.

At 30 June 2014 the facilities shown are interchangeable up to $5,000,000 (2013: $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 March 2015 and August 2015.
Individual projects are expected to be completed and the outstanding amounts repaid or refinanced prior to expiry of each
facility. As at 30 June 2014, the balance outstanding on the bank loan facilities was $8,583,000 (2013: $14,891,000).

The carrying amounts of the pledged assets are as follows:

Wollert, Victoria

Cheltenham, South Australia

Arlington Rise, Victoria

2014
$’000

29,830

47,707

19,054

2013
$’000

40,250

48,527

18,480

The weighted average interest rate on the project funding loans at year-end was 3.27% (2013: 3.52%).

The Consolidated Entity has entered into a Contract performance bond facility of $15,000,000 (2013: $10,000,000). The
Contract performance bond facility is subject to review annually. This facility expires on 31 October 2014 and management
expects the annual review which is underway, to be completed shortly and the facility extended for a further 12 months. The
Contract performance 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) Interest rate hedge instruments

The Consolidated Entity has entered into interest rate cap and collar contracts to limit exposure to changing interest rates. The
interest rate structure is a combination of purchasing a cap and selling a floor, which effectively limits rate fluctuations to within
a range (i.e. a ceiling and floor). The structure is used because it provides the benefit of capping interest rate increases whilst
limiting the benefit of any interest rate decreases to the collar rate.

Interest rate cap and collar contracts have been entered into for a principal Australian Dollar amount which varies quarterly
over the contract term. 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.

66 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

25. INTEREST-BEARING LOANS AND BORROWINGS (continued)

(d) Interest rate hedge instruments (continued)

For the quarter, should the BBSY bid rate be above the cap strike rate, settlement occurs in favour of the Consolidated Entity.
Should the BBSY bid rate be below the floor strike rate, settlement occurs in favour of the counterparty. If the BBSY bid rate
remains between the ceiling and floor, no settlement occurs.

Details of interest rate derivative contracts are as follows:

Type of derivative

Period Start
Date

Period
End Date

Cap Rate
%

Floor Rate
%

Interest rate cap and collar

11-Jun-14

11-Sep-14

Interest rate cap and collar

11-Sep-14

11-Dec-14

Interest rate cap and collar

11-Dec-14

11-Mar-15

Interest rate cap and collar

11-Mar-15

11-Jun-15

Interest rate cap and collar

11-Jun-15

30-Sep-15

2.95

2.50

Principal Amount

2014
$’000

55,000

45,000

40,000

30,000

20,000

2013
$’000

–

The Consolidated Entity’s interest rate derivatives do not qualify for hedge accounted treatment. Gains or losses arising from
changes in fair value are recognised in profit or loss.

26. TAX PAYABLE

Income tax payable

27. DEFERRED TAX LIABILITIES

The provision for deferred income tax is made up as follows:

– capitalisation of development costs

– prepayments, accruals/provisions and investments

– brand name

– provisions for asset impairments

– tax loss carried forward

Deferred tax liabilities

Reconciliations

2014
$’000

251

2013
$’000

449

2014
$’000

2013
$’000

21,742

5,729

845

(13,937)

(10,338)

4,041

–

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

Transferred from/to deferred tax assets

Arising temporary differences

Carrying amount at end of year

Note

2014
$’000

–

(3,087)

7,128

4,041

2013
$’000

5,938

(5,938)

–

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 67

28. PROVISIONS

Current

Employee benefits

Other

Total current provisions

Non-current

Employee benefits

Total non-current provisions

29. CONTRIBUTED EQUITY

Ordinary shares

Treasury shares

Share capital

2014
$’000

3,526

1,180

2013
$’000

3,056

980

4,706

4,036

698

845

Note

29(a)

29(b)

2014
Number

2013
Number

2014
$’000

2013
$’000

384,423,851

162,793

(4,221,605)

(3,365,100)

(2,357)

(1,833)

160,436

160,960

(a) Movement in ordinary share
capital

Number

$’000

As at the beginning of the year

384,423,851

274,588,694

162,793

122,837

Issued pursuant to the Rights Issue
3 June 2013

–

109,835,157

–

39,956

As at the end of the year

384,423,851

162,793

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.

(b) Movement in treasury shares

Number

$’000

As at the beginning of the year

(3,365,100)

(3,071,187)

(1,833)

(1,741)

Acquisition of shares by AVJ Deferred
Employee Share Plan Trust

(856,505)

(293,913)

(524)

(92)

As at the end of the year

(4,221,605)

(3,365,100)

(2,357)

(1,833)

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.

68 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

29. CONTRIBUTED EQUITY (continued)

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 2014, no dividend was paid (2013: 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

Consolidated

2014
$’000

85,583

(4,796)

80,787

2013
$’000

89,891

(11,649)

78,242

315,780

295,361

471,288

462,903

25.6%

17.1%

26.5%

16.9%

AVJennings has complied with the financial covenants of its borrowing facilities during the 2014 and 2013
reporting periods

30. RESERVES AND RETAINED EARNINGS

(a) Reserves

Foreign
Currency
Translation
Reserve
$’000

(257)

1,380

Note

36a

–

Share-based
Payment
Reserve
$’000

687

–

390

Total
$’000

430

1,380

390

1,123

1,077

2,200

2,065

36a

–

2,065

3,188

1,173

4,361

At 1 July 2012

Foreign currency translation

Share-based payment expense

At 30 June 2013

Foreign currency translation

Share-based payment expense

At 30 June 2014

(b) Nature and purpose of reserves

Foreign currency translation reserve

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(aa).

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 note 2(r) for further details of the Plan.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 69

30. RESERVES AND RETAINED EARNINGS (continued)

Movements in retained earnings were as follows:

At the beginning of the year

Net profit/(loss) for the year

At the end of the year

31. CASH FLOW STATEMENT RECONCILIATION

Reconciliation of profit/(loss) after tax to net cash flows from operations

Profit/(loss) after tax

Adjustments for:

Depreciation

Net loss/(gain) on disposal of property, plant and equipment

Interest revenue classified as investing cash flow

Share of profits of associates and joint venture entities

Movement in provision for loss on inventories

Share-based payments expense

Fair value adjustment to derivatives

Change in operating assets and liabilities:

Decrease in inventories

(Increase)/decrease in trade and other receivables

(Increase)/decrease in prepayments and deposits

Decrease/(increase) in deferred tax assets

Increase/(decrease) in deferred tax liability

Increase/(decrease) in current tax liability

Decrease in current tax assets

Decrease in trade and other payables

Increase in provisions

Net cash flows (used in)/from operating activities

2014
$’000

2013
$’000

132,201

18,782

147,467

(15,266)

150,983

132,201

2014
$’000

2013
$’000

18,782

(15,266)

330

(457)

(1,967)

(18,629)

–

28,619

(23,563)

(1,676)

3,087

4,041

(198)

–

381

(5)

(492)

(1,294)

16,275

390

(187)

19,936

8,369

901

(3,087)

(5,938)

449

514

(10,695)

(21,069)

523

(1,679)

573

450

70 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

32. COMMITMENTS

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 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

33. CONTINGENCIES

Unsecured

2014
$’000

2013
$’000

2,092

1,655

1,679

2,052

3,747

3,731

3,087

660

3,058

673

3,747

3,731

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.

Contract performance 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 Contract performance bond facility. Details of these entities are set out in note 18. 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 2014, amounted to $12,140,000 (2013: $7,396,000). 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 2014, amounted to $7,445,000 (2013: $7,811,000). 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 2014, amounted to $8,367,000 (2013: $12,470,000). No liability is expected to arise.

34. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

No matter or circumstance has arisen since 30 June 2014 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.

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 71

35. RELATED PARTY DISCLOSURES

(a) Ultimate parent

AVJennings Limited is the ultimate Australian parent entity. SC Global Developments Pte Ltd (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:

Fully paid ordinary shares

Owned by Directors directly,
or indirectly or beneficially

2014
Number

2013
Number

196,033,041

195,195,645

Directors and Director-related entities receive normal dividends on these ordinary shares.

192,318,030 ordinary shares equating to 50.03% of the total ordinary shares on issue (2013: 192,318,030 and 50.03%
respectively) were held by SC Global Developments Pte Ltd and its associates in the Parent Entity at 30 June 2014. Certain
Directors of SC Global Developments Pte Ltd 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 2014, the Parent Entity has not set up any provisions against debts owed by related parties as recoverability is
considered probable (2013: 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.

(e) Transactions with related parties

Entity with significant influence over the Consolidated Entity:

SC Global Developments Pte Ltd

Consultancy fee paid/payable

Associate:

Epping JV

Note

2014
$

2013
$

(i)

600,000

Management fee received/receivable

54,000

809,882

Joint Ventures:

Eastwood JV

Management fee received/receivable

Accounting services fee received/receivable

Cheltenham JV

2,481,692

2,219,741

50,000

Accounting services fee received/receivable

72,000

Woodville JV

Accounting services fee received/receivable

72,000

72,600

(i) Consultancy fees paid to SC Global Developments Pte Ltd of $600,000 (2013: $600,000).

(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 16 and note 20.

72 | AVJENNINGS LIMITED · ABN 44 004 327 771

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

35. RELATED PARTY DISCLOSURES (continued)

(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

2014
$’000

2013
$’000

2,812

2,497

2,600

(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.

(j) Transactions with Key Management Personnel

Disclosures relating to Key Management Personnel are set out in note 7.

36. SHARE-BASED PAYMENT PLANS

(a) Recognised share-based payment expenses

Total expenses arising from share-based payment transactions and disclosed as part of employee benefit expenses
are shown in the table below:

Expense arising from equity-settled share-based payment transactions

Expense reversed on forfeiture of shares relating to FY2011 grant

Total expense arising from share-based payment transactions

2014
$’000

675

(579)

2013
$’000

390

–

390

The share-based payment plan is described in note 36(b). There were no cancellations or modifications to the plan during the
year.

(b) Type of share-based payment plan

AVJ Deferred Employee Share Plan

The AVJ Deferred Employee Share Plan (the LTI Plan)
administers employee share schemes under which shares
may be purchased on-market by the LTI Plan Trustee on behalf
of employees. These shares vest to employees for no cash
consideration subject to certain conditions being satisfied.
Employees may elect not to participate in the scheme.
Shares held by the LTI Plan’s trustee and not yet allocated to
employees at the end of the reporting period are shown as
treasury shares in the Financial Statements.

The following allocations have been made under the LTI Plan:

FY2011 Grant

Notes to the Consolidated Financial Statements
For the year ended 30 June 2014

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 73

36. SHARE-BASED PAYMENT PLANS (continued)

FY2012 Grant

FY2013 Grant

An additional 513,168 shares were granted on 12 September
2012 to certain executives. As detailed in the table on page
20, these included 280,712 shares for KMP. The remaining
shares were granted to executives who were not KMP.

FY2013 Delayed Grant

This Delayed Grant was supposed to have been made
about July 2012 in accordance with the usual operation
of the LTI plan. In July 2012, the Remuneration Committee
determined that trading conditions at the time warranted
a deferral of the grant until a later time. The FY2013 grant
was ultimately reconsidered in September 2013. The
Remuneration Committee then considered that trading
conditions and fairness to both executives and the Company
warranted an allocation. However as the Company’s share
price had increased considerably since the original proposed
allocation date (July 2012) it was impossible to determine an
appropriate allocation amount under the current plan which
did not prejudice either the Company or the executives. If
the original number of shares to be allocated as proposed
in July 2012 were granted, the cost to the Company would
have been considerably more than originally contemplated.
If the same allocation amount had been used as originally
contemplated, executives would have received considerably
fewer shares. As a reasonable compromise and recognising
that staff retention was a critical factor for consideration,
the Committee determined to grant a significantly reduced
amount to each executive (approximately 35.5% of the
proposed original allocation), and to make the grant
subject only to service conditions as to 50% for one year
to 30 September 2014 and as to 50% for two years to
30 September 2015.

FY2014 Grant

Except for the 2013 Delayed Grant which is only subject to a
service condition (explained below), all 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 (for
the FY2011 grant), 30 September 2014 (for the FY2012
grant), 30 September 2015 (for the FY2013 grant) and 30
September 2016 (for the FY2014 grant). In the event of death
or permanent disablement, the shares may vest to the estate
at the Board’s discretion. In the event that the employee is
retrenched, the shares may vest subject to Board discretion.

If the employee resigns (in certain circumstances) or is
terminated, the unvested shares will be forfeited.

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 for each grant is as
follows:

FY2011 grant – 10% p.a. growth for the three financial
years to 30 June 2013
FY2012 grant – 10% p.a. growth for the three financial
years to 30 June 2014
FY2013 grant – 10% p.a. growth for the three financial
years to 30 June 2015
FY2014 grant – 10% p.a. growth for the three financial
years to 30 June 2016

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.

The TSR hurdle was chosen as a performance measure as
it provides a comparison against external performance. The
comparator group against which performance is measured is
the ASX Small Industrials Index. This peer group was chosen as
the pool of listed pure residential developers was considered too
small to provide a reliable and meaningful comparison group.

AVJennings’ TSR rank against
companies in the Index at
30 September

Percentage
vesting

< median

At the median

Nil

50%

> median but < 75th percentile

Pro-rata between 50th
and 75th percentiles

>=75th percentile

100%

The operation of the EPS hurdle is set out below.

AVJennings’ EPS growth rate
over the performance period

Percentage
vesting

< 5%

5% – 10%

>=10%

Nil

50% of the allocation
for the hurdle

Pro-rata between 50%
and 100%

100% of the allocation
for the hurdle

The EPS hurdle was chosen as it provides a measure over
which executives have more direct control.

74 | AVJENNINGS LIMITED · ABN 44 004 327 771

Directors’ Declaration

In accordance with a resolution of the Directors of AVJennings Limited, we state that:

1) In the opinion of the Directors:

i) the Consolidated Financial Statements and Notes 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 2014 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 Consolidated Financial Statements and Notes also comply with International Financial Reporting Standards as

disclosed in note 2(a); 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 2014.

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

26 September 2014

Peter Summers
Director

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 75

Independent auditor’s report to the shareholders
of AVJennings Limited

Report on the financial report

Independence

We have audited the accompanying financial report of
AVJennings Limited, which comprises the consolidated
statement of financial position as at 30 June 2014, 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(a), 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.

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 2014 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(a).

Report on the remuneration report

We have audited the Remuneration Report included in pages
15 to 23 of the directors’ report for the year ended 30 June
2014. 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 2014, complies with section 300A
of the Corporations Act 2001.

Ernst & Young

Mark Conroy
Partner
Sydney

26 September 2014

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

76 | AVJENNINGS LIMITED · ABN 44 004 327 771

Corporate Governance Statement
For the year ended 30 June 2014

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 section of this 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
considered necessary.

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 section of this 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 section of this 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 seven Non-
Executive Directors being independent, determined in
accordance with the ASX guidelines on independence. The
other three Non-Executive Directors, who represent SC Global
Developments Pte Ltd, a substantial shareholder, have no
involvement in the operational management of the Company.
The Managing Director is an Executive Director.

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 Pte. Ltd.. 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.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 77

Corporate Governance Statement
For the year ended 30 June 2014

The Board usually meets around six scheduled times a year
either in person or by teleconference and additionally on
an ad-hoc basis if required. 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, the culture and values of the Company and
meeting arrangements. 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 two
Independent Directors, Mr R J Rowley, and Mr B G Hayman
and two Non-Executive Directors, Mr S Cheong and Mrs E
Sam, who is also Chairperson of the Committee. 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.

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 review and make recommendations to
the Board on Board composition, to establish the criteria for
Board and Board Committee membership and to evaluate
Board performance and the performance of Directors.

The Nominations Committee assists the Board in identifying,
evaluating and recommending candidates to the Board,
having regard to the relevant skills, experience, personal
attributes, diversity, availability and time commitments
required of new Directors. The Committee may make use of
external consultants if that is deemed appropriate.

The Committee meets at least annually.

A Board skills matrix has been developed and is used to
assess the skills and experience available on the Board and
to identify gaps in skills, if any. Development of strategy
and policy, financial literacy, industry experience, banking
and finance, risk management, compliance oversight, sales
and commercial experience are some of the desirable skills
identified and these are collectively available on the Board.

In November 2013, through the Nominations Committee,
the Directors reviewed the performance of the whole Board
and Board Committees. The review considered each
director’s expertise, skill and experience, along with their
understanding of the company’s business, preparation for
meetings, relationships with other directors and management,
awareness of ethical and governance issues, and overall
contribution. The outcomes of the review were discussed and
considered by all the Directors and the general conclusion
was that the Board and each of the Board Committees were
operating well. The Company had experienced a challenging
year in rapidly improving market conditions and the Board
had provided good oversight of management’s actions and
provided strategic direction to those activities. It was also
considered that the respective committees had done likewise
within their spheres of responsibility.

Details of Directors’ experience and qualifications and
attendance at Board and Committee Meetings are set out on
pages 13 to 15 and page 24 of the Directors’ Report section
in this Report.

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 the Directors’ Report section of 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
for 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.

78 | AVJENNINGS LIMITED · ABN 44 004 327 771

Corporate Governance Statement
For the year ended 30 June 2014

Dealing in AVJennings’ shares

Audit Governance

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.

Diversity

In accordance with the ASX recommendations, the Board
has established a Diversity Policy and has set measurable
objectives to achieve its goals on diversity. The Company’s
progress towards achieving these objectives, together with
details of the proportion of women employees in the whole
organisation, women in senior executive positions and women
on the Board, are shown on page 81 of this Report.

The Diversity Policy is available for viewing on the Company’s
website at www.avjennings.com.au.

Principle 4:

Safeguard integrity in financial reporting

Audit Committee

The Company has an Audit Committee comprising of
three Independent Directors, Mr B Chin (who is a Chartered
Accountant and is also the Chairman of the Committee),
Mr R J Rowley, Mr Teck Poh Lai 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.

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.

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 2013
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. The Company has in place a formal disclosure policy,
contained within the Shareholder Communication Policy,
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.
This policy has 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.

The policy addresses:

• Compliance with continuous disclosure obligations;

• Maintenance of confidentiality where appropriate;
Timely and factual release of information where
•
appropriate;

• Clarity and balance in reporting;
• Equal and timely access to information.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 79

Corporate Governance Statement
For the year ended 30 June 2014

Principle 6:

Principle 7:

Respect the rights of Shareholders

Recognise and manage risk

The Company endeavours to keep its Shareholders fully
informed of matters likely to be of interest to them. The
Shareholder Communication Policy outlines the process
through which the Company will endeavour to ensure
timely and accurate information is provided equally to all
shareholders. Information is communicated to shareholders
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.

All shareholders are encouraged to attend AVJennings’
AGM in person or participate by sending a proxy as their
representative. 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.

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 R
J Rowley (Chairman) and Mr B G 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 and main potential liabilities are
insured under a comprehensive insurance program which is
reviewed annually.

The Company also has an Investments Committee comprising
two Non-Executive Directors, Mr S Cheong and Mr D Tsang
and two Independent Directors, Mr B G Hayman and Mr R J
Rowley. 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 and
the ASX Corporate Governance Principle 7 to the effect that:

•

The integrity of 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.

80 | AVJENNINGS LIMITED · ABN 44 004 327 771

Corporate Governance Statement
For the year ended 30 June 2014

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. 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 Pte Ltd.

AVJennings’ Remuneration Report is set out on pages 15 to 23
of the Directors’ Report section in this Report.

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 website 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 B G Hayman and Mr Teck Poh Lai. 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.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 81

Diversity Report
For the year ended 30 June 2014

Responsibility for Diversity

Employees at all levels of employment are responsible for
the creation and implementation of a diverse, inclusive and
tolerant workplace, and for elimination of discriminatory
practices.

The Board is responsible for monitoring the development and
implementation of diversity initiatives, policies and practices.
The Board reports annually on these matters.

Diversity Targets

This report reflects AVJennings’ focus during the reporting
period on the reporting on gender diversity as required
under the ASX Corporate Governance Council Principles and
Recommendations.

This Diversity Annual Report of AVJennings Limited
(“AVJennings”) is issued in compliance with ASX Corporate
Governance Council Principles and Recommendations.

Approach to Diversity

AVJennings aims to embed equity and diversity principles
in its work practices and organisational environment. To
ensure that these practices remain appropriate and foster
an inclusive environment, AVJennings annually reviews its
workforce diversity profile, its policies and any relevant
external developments.

To enhance efficiency and productivity, employment
decisions such as selection, promotion and training are made
based on merit rather than personal attributes (gender, race,
marital status, age and other characteristics (which can vary
based on the jurisdiction)). AVJennings also actively takes
steps to eliminate discriminatory behaviour and harassment
in the work place.

Measurable Objective

Progress Response

1. At least one female
Board Director

2. At least one female

Executive Committee
Member

3. Non-Discriminatory

Recruitment

4. Non-Discriminatory

Selection

5. Data Collection

One (1) female Board Director of eight (8) as at the reporting date.

Three (3) female Executive Committee Members (of ten (10) including the
CEO), as at the reporting date.

The Company’s Recruitment, Selection and Appointment to Role policies
reflect our position on diversity.

All recruitment, internal and external, identifies that AVJennings is an Equal
Opportunity Employer.

Selection is based on merit and the recruitment process requires that the
Selection Advisory Committee (Interview Panel) comprise both genders.

External recruitment suppliers, where applicable, are requested to provide a
balanced short list.

During the reporting period, 34% of all new hires were female.

Diversity information is sought from employees when they commence
employment. It is provided on a voluntary basis and includes information
on disability, ethnic origin and proficiency in languages other than English.
The diversity statistics are based primarily on this data. During the reporting
period, all employees had the opportunity to review and update their profile.
Data collection is an ongoing process.

Data that is collected is reviewed and action taken as appropriate. During
the reporting period, with a focus on gender diversity, female participation
was reviewed across the different job families in the business, pay equity and
female attrition rates.

EOWA Reporting

2014 report submitted to EOWA was reviewed by the Board.

7. No Cultural Impediments

No impediments identified during reporting period.

Women accounted for 39.3% of employees as at 31 March 2014.

KEY:

met or above target

on track to meet target

below target

As at 30 June 2014, women accounted for 38% of total current permanent employees and the proportion of women at various
levels of the Company was:

Level and Role

Non-executive Director 14%

Executive Team 30%

Company 38%

82 | AVJENNINGS LIMITED · ABN 44 004 327 771

Shareholder Information
As at 16 September 2014

1. NUMBER OF SHAREHOLDERS AND DISTRIBUTION OF EQUITY SECURITIES

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

IOOF Holdings Limited

Paradice Investment Management Pty Ltd

Australian
Securities
Exchange

Singapore
Exchange

Total

546

794

267

396

2,077

209

672

1,583

525

482

3,298

284

1,218

2,377

792

878

110

5,375

493

Ordinary
Shares

192,318,030

43,897,871

22,359,062

50.03

11.42

5.82

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 83

Shareholder Information
As at 16 September 2014

3. TWENTY LARGEST SHAREHOLDERS ON THE AUSTRALIAN REGISTER

Name

The Central Depository (Pte) Ltd

National Nominees Ltd

JP Morgan Nominees Australia Ltd

Citicorp Nominees Pty Ltd

BNP Paribas Nominees Pty Ltd

HSBC Custody Nominees (Australia) Ltd

HSBC Custody Nominees (Australia) Ltd-NT Comnwlth Super Corp

AET SFS Pty Ltd

John E Gill Operations Pty Ltd

Citicorp Nominees Pty Limited

John E Gill Trading Pty Ltd

Gillcorp Pty Limited

Luton Pty Ltd

Gillcorp Pty Limited

D R M Gill & J M Gill (Gill Super Fund A/c)

Di Iulio Homes Pty Ltd (Di Iulio Super Fund A/c)

Peter Summers

Eva Xiradis

UOB Kay Hian Private Ltd

Ago Pty Ltd

Ordinary
Shares

226,295,766

58.87

28,782,529

18,744,001

16,984,534

11,595,421

9,273,163

7,763,215

5,497,119

5,459,927

5,165,970

4,821,996

2,914,090

1,650,000

1,475,123

1,242,832

1,228,700

1,140,785

1,000,000

894,120

859,999

7.49

4.88

4.42

3.02

2.41

2.02

1.43

1.42

1.34

1.25

0.76

0.43

0.38

0.32

0.30

0.26

0.23

0.22

Total

352,789,290

91.77

84 | AVJENNINGS LIMITED · ABN 44 004 327 771

Shareholder Information
As at 16 September 2014

4. TWENTY LARGEST SHAREHOLDERS ON THE SINGAPORE REGISTER

Name

UOB Nominees (2006) Pte Ltd

United Overseas Bank Nominees Pte Ltd

Trimount Pte Ltd

Oei Hong Leong Foundation Pte Ltd

DBS Nominees Pte Ltd

UOB Kay Hian Pte Ltd

Lim Chin Tiong or Sim Lye Wan

Tsang Sze Hang

Rowland Wong Kwok Ho

OCBC Nominees Singapore Private Ltd

Vesmith Investments Pte Ltd

HSBC (Singapore) Nominees Pte Ltd

Pansbury Investments Pte Ltd

Hexacon Construction Pte Ltd

Phillip Securities Pte Ltd

Chng Bee Suan

Teo Chiang Long

Wee Kim Choo @ Elizabeth Sam

Ng Chwee Cheng

Lim Kong Wee (Lin Guangwei)

Total

Ordinary
Shares

179,235,872

46.62

12,167,189

1,659,940

1,462,112

1,390,214

1,297,345

1,033,720

837,396

738,833

677,144

634,876

630,097

496,160

368,480

330,436

276,320

250,648

209,349

207,200

200,974

3.17

0.43

0.38

0.36

0.34

0.27

0.22

0.19

0.18

0.17

0.16

0.13

0.10

0.09

0.07

0.05

204,104,305

53.09

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 384,423,851.

AVJENNINGS LIMITED · ANNUAL REPORT 2014 | 85

Company Particulars

SHARE REGISTRY

Australia

Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
Telephone: 1300 737 760 (within Australia)
+61 2 9290 9600 (outside Australia)

Singapore

The Central Depository (Pte) Ltd
11 North Buona Vista Drive #06-07
The Metropolis Tower 2
Singapore 138589
Telephone +65 6535 7511

ANNUAL GENERAL MEETING

The Annual General Meeting of the Company
will be held at:
The Macquarie Room
Sheraton on the Park
161 Elizabeth Street
Sydney NSW 2000.
Friday, 21 November 2014 at 10.00am.

DIVIDENDS

No dividends were paid in the year under review.
A final dividend of $0.02 for the year ended 30 June 2014
was declared and paid on 18 September 2014.

DIRECTORS

Mr Simon Cheong
Mr Jerome Rowley
Mrs Elizabeth Sam
Mr Bobby Chin
Mr Teck Poh Lai
Mr Bruce Hayman
Mr David Tsang
Mr Peter Summers

COMPANY SECRETARY

Mr Carl Thompson

PRINCIPAL REGISTERED OFFICE IN AUSTRALIA

Level 4, 108 Power Street
Hawthorn Vic 3122
Telephone +61 3 8888 4800

AUDITORS

Ernst & Young
680 George Street
Sydney NSW 2000

BANKERS

Australia and New Zealand Banking Group Ltd
HSBC Bank Australia Ltd
United Overseas Bank Limited
National Australia Bank Ltd

STOCK EXCHANGE LISTINGS

Australia

The Company is listed on:
The Australian Securities Exchange
Level 4, 525 Collins Street
Melbourne VIC 3000

Singapore

The Company’s shares are also quoted and traded on:
The Singapore Exchange
11 North Buona Vista Drive #06-07
The Metropolis Tower 2
Singapore 138589
through SGX Globalquote (formerly known as the Central
Limit Order Book System (CLOB)).