THE CROMWELL GROUP
Annual Report 2007
NOW WE ARE ONE.
Contents
About Cromwell Group
Performance Highlights
Chairman’s Report
Property Portfolio
Directors’ Report
Auditor’s Independence Declaration
Income Statements
Balance Sheets
Statements of Changes in Equity
Cash Flow Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Securityholder Information
Directory
1
2
4
6
8
31
32
33
34
36
37
94
95
97
101
Cromwell Group
Cromwell Corporation Limited ABN 44 001 056 980
Cromwell Property Securities Limited ABN 11 079 147 809
AFSL 238052 as responsible entity for
Cromwell Diversified Property Trust ABN 30 074 537 051
ARSN 102 982 598
Level 19, 200 Mary St, Brisbane QLD 4000
GPO Box 1093, Brisbane QLD 4001
Telephone: (07) 3225 7777
Facsimile: (07) 3225 7788
Website: www.cromwell.com.au
E-mail: cromwell@cromwell.com.au
Securityholder Information and Enquiries
All enquiries and correspondence regarding securityholdings
should be directed to Cromwell’s share registry provider:
Computershare Investor Services Pty Limited
Level 19, 307 Queen St, Brisbane QLD 4000
Telephone: 1300 850 505
Outside Australia: 61 3 9415 4000
Facsimile: (07) 3237 2151
Website: www.computershare.com.au
E-mail: web.queries@computershare.com.au
About Cromwell Group
Summary
Cromwell Group is a stapled security (ASX: CMW) consisting of a $1 billion property trust and a successful property funds
management business. The Group is an Australian owned entity with a track record for developing high quality, high yielding
investment products and delivering growth to investors.
On 12 December 2006, the Group initiated trading at $1.20 with a market capitalisation of $835 million.
This milestone was achieved after the successful merger of the Cromwell Diversified Property Trust (the Trust) with five Cromwell
managed Syndicates and the subsequent stapling to Cromwell Corporation Limited (the Company) creating a Group with property
assets in excess of $1 billion.
Upon listing, Cromwell Group became the 17th largest listed entity in Queensland and the 190th largest listed entity in Australia.
Cromwell Group Stapled Security (ASX: CMW)
Cromwell Corporation
Limited
ACN 001 056 980
Cromwell Diversified
Property Trust
ARSN 102 982 598
Cromwell Property
Securities Limited
ACN 079 147 809
Cromwell Property
Services Pty Ltd
ACN 080 159 280
Cromwell Operations
Pty Ltd
ACN 107 377 677
Cromwell Finance
Limited
ACN 111 461 093
Responsible Entity
Property Management
Finance
Debenture Issuer
Funds Management
Facilities Management
Compliance
Property Transactions
Capital Raising
Registry
Subsidiaries of the Company
Cromwell Property Securities Limited
Responsible for managing and promoting the Group’s investment products and holds an Australian Financial Services licence
entitling it to act as a responsible entity.
Cromwell Property Services Pty Ltd
Holds a corporate real estate licence and manages the property portfolio of the Group.
Cromwell Finance Limited
Provides working capital and other funding to Cromwell Group.
Performance Highlights
• Record full-year profit of $113.9 million
• Operating earnings of $37.6 million exceeded forecast of $36.3 million
• Assets Under Management (AUM) of $1.64 billion, up 20% on prior year
• Net Tangible Assets of 96 cents per security, up 23% since December 2006
• Significant platform for ongoing growth
Core Statistics
2007
2006
Change
AUM ($m)
Total Assets ($m)
Net Tangible Assets ($m)
Market Capitalisation ($m)
1,640
1,295
668
827
1,368 ▲ 20%
50
12
175 ▲ 374%
Operating Earnings ($m)
Operating EPS
37.6
8.5 ▲ 344%
$0.086 $0.056 ▲ 54%
Distributions/Dividends ($m)
DPS
36.8
6.9 ▲ 433%
$0.084 $0.045 ▲ 85%
FY07 Major Announcements
13 July 2006
Launch of new $276 million fund
Cromwell announces the launch of a new $276 million
open-ended unlisted property fund, the Cromwell
Property Fund.
31 August 2006
Gold Coast development announced
Cromwell announces plans for a master-planned
development around the Cromwell Diversified Property
Trust’s iconic Corporate Centre One building.
12 September 2006
Full-year earnings up 63 per cent
Cromwell reports record full-year earnings for the 12
months to 30 June, 2006, with a net profit for the period of
$7.9 million.
23 October 2006
Stapled property group proposed
Cromwell proposes creation of a $1 billion stapled
property group, the Cromwell Group.
6 December 2006
Shareholders and unitholders approve merger
and stapling
Shareholders in Cromwell Corporation Limited and
unitholders in Cromwell-managed property vehicles
approve merger and stapling proposal to create the
Cromwell Group.
18 December 2006
Sale of Queensland property
Cromwell sells industrial site at Pinkenba, Brisbane
for $10.4 million. The property was acquired in 2004 for
$4.8 million.
22 December 2006
Acquisition of ACT office tower
Cromwell acquires Lovett Tower for $73.17 million on
behalf of Cromwell Property Fund.
28 February 2007
Cromwell half-year result
Cromwell declares underlying Net Profit After Tax
(NPAT) for six months to 31 December, 2006, of $3.96
million before one-off stapling costs of $6.95 million.
We are a customer focused property investment manager.
We act with integrity and are committed to building
investor wealth through outstanding performance.
Cromwell Group Mission Statement - June 2007
16 May 2007
Sale of Victorian property
Cromwell agrees to sell Village City Centre in
Melbourne for $32.75 million, $5.5 million above
its book value of $27.3 million.
7 June 2007
Acquisition of Queensland green building
Cromwell agrees to acquire a commercial
development site at Kelvin Grove Urban Village
in Brisbane’s CBD fringe. The price will be
determined upon completion to give a 6.75 per
cent yield.
27 June 2007
Sale of Gold Coast asset
Cromwell agrees to sell the Bundall Corporate
Centre and associated development site for
$106 million, 18 months after acquiring it for
$53 million.
28 June 2007
Sale of New South Wales asset
Cromwell sells 59 Goulburn Street, Sydney,
offi ce tower for $92.5 million, $5.5 million more
than book value after selling costs.
Growth in AUM and Security Price
1,800
1,600
1,400
1,200
1,000
800
600
400
200
AUM ($’000,000)
Security Price ($)
1,640
1,368
732
544
294
351
2002
2003
2004
2005
2006
2007
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
Total Securityholder Returns (% per annum)
120%
100%
80%
60%
40%
20% 12.6
Cromwell
S&P/ASX All Ordinaries
S&P/ASX 200 Property Trusts
107.6
70.8
30.3
25.9
26.4
20.6
44.2
19.6 18.2
13.0 14.5
1 Year
3 Year
5 Year
10 Year
Investment Period
3
Chairman’s Report
Now we are one...
The 2007 financial year saw the successful
merger of the Cromwell Diversified Property
Trust (“the Trust”) with five other Cromwell
managed funds and the stapling of the
consolidated Trust to Cromwell Corporation
Limited (“the Company”) to form Cromwell
Group.
The merger and stapling was undertaken to build scale and
fully integrate the core business activities of the Company,
the Trust and the other Cromwell funds. The transaction has
also aligned the interests of all stakeholders and positioned
the Group to take advantage of future growth opportunities.
The subsequent performance of the Group since the merger
and stapling has vindicated the decision of shareholders and
unitholders to support the proposal. The highlights of the
year’s performance include:
•
•
•
•
•
•
A record full year profit of $113.9m;
Operating earnings of $37.6m (compared to $36.3m
forecast in the Explanatory Memorandum for the
merger and stapling proposal);
An increase in Assets under Management of 20% from
30 June 2006 to $1.64b;
Strong property revaluations of $69.8m after the
merger and stapling;
An increase in the NTA of the Cromwell Group from
$0.78 per stapled security at the merger and stapling to
$0.96 at 30 June 2007; and
An increase in the trading price for Cromwell Group
securities from the valuation range of $1.04 to $1.12
in the merger and stapling Explanatory Memorandum
to $1.18 at 30 June 2007 and $1.28 at the date of this
report.
Most importantly, the Group now has a strong platform for
future growth. This is reflected in the decision by the Board
to increase annualised distributions to 10 cents per stapled
security for FY08 with effect from November 2007.
In addition, since 30 June 2007, the Board has taken the
opportunity to dispose of some non-core assets, and has
applied the proceeds in reduction of debt. As a result, the
Group is in a very strong position, with gearing expected to
reduce to below 35% and substantial cash reserves currently
available. Cromwell Group’s debt management has resulted
in a strong balance sheet and little, if any, exposure to
fluctuations in interest rates and availability of credit.
At the time of writing this report, there is continuing volatility
in global debt markets. The Board believes that this volatility
will present opportunities for the Group to acquire assets for
its funds management business and to acquire portfolios and
businesses which are not well placed to deal with market
volatility.
Cromwell’s investment products continue to attract good
support from retail investors. Our flagship fund, the
Cromwell Property Fund (“CPF”) has increased the value
of its assets under management to over $400 million at 30
June 2007 and fund inflows in recent months have averaged
$3 million per week. The CPF will shortly issue a revised
Product Disclosure Statement and is expected to continue to
attract strong fund inflows during the 2008 year.
Cromwell also plans to promote additional investment
products including a Property Securities Fund in the 2008
year to increase the number of product options available to
investors and subsequent investment inflows.
Whilst Cromwell intends to grow funds management
revenues by increasing its suite of retail products and the
volume of its capital inflows, it also intends to maintain the
relativity between property investment earnings and funds
management earnings. In part we intend to achieve this
by co-investing in funds with investors. We also see the
opportunity to acquire other funds and portfolios and package
selective assets for securitisation and inclusion in our retail
unlisted funds.
Cromwell continues to maintain a number of competitive
advantages including:
•
•
•
An efficient management structure;
Majority of earnings from property investment activities;
Significant portfolio weighting to the commercial office
sector, which presently demonstrates good opportunity
for growth;
I had flagged in the 2006 report that I intended to stand down
as Chairman prior to 30 June 2007, and assume the role of
Chief Executive Officer. Our search for a new Chairman has
taken a little longer than originally anticipated. However,
I expect to be able to make an announcement on the
appointment of an independent Chairman in the coming
months.
My extended tenure as Chairman has afforded me the
opportunity to have one more farewell, and in doing so I
would like to thank the present and former Directors and
employees of Cromwell who have contributed to Cromwell’s
success and to its growth and achievements in the last nine
years.
The 2008 financial year has started positively, with the
executive team finalising our five year strategic plan for
Cromwell Group. The mission statement which we adopted in
our planning meetings reflects our achievements to date and
reinforces our commitment to continue to build the Group in
the future:
“We are a customer focused property
investment manager. We act with integrity
and are committed to building investor
wealth through outstanding performance.”
I am delighted to present to you a strong and integrated
Group which is committed to delivering a substantial and
reliable cash flow and excellent opportunities for future
growth.
Paul Weightman
Chairman
•
•
An internalised retail funds management business with
a proven track record and demonstrated capital raising
capability;
An internalised asset, property and facilities
management business which facilitates a high rate of
tenancy retention, value add opportunities to our assets
and a range of income streams which complement our
funds management activities; and
•
A limited reliance on higher risk income streams.
As indicated in the 2006 annual report, I believe that
Cromwell’s rapid growth has been possible as a result
of its ability to act quickly in taking advantage of market
opportunities. That was, in turn, possible because of the
fact that it had an active and decisive Board, dominated by
executive Directors who have had a day-to-day involvement
in the business. I also indicated that accepted corporate
governance principles recommend that there be a bias in
favour of independence and a greater separation between
executive and board functions.
Since the successful implementation of the merger and
stapling proposals, the Board has implemented a number
of initiatives to ensure that Cromwell better meets the
Australian Securities Exchange’s “Principles of Good
Corporate Governance and Best Practice Recommendations”.
Those initiatives include:
•
The appointment of David Usasz and Michelle McKellar
as additional independent Directors, balancing the
number of executive and non-executive Directors on
the Board. Both David and Michelle have contributed
strongly and positively to the Board since their
appointment and have continued to provide active and
decisive leadership to the Group;
•
The establishment of Audit & Risk and Remuneration
Committees; and
•
The adoption of the Cromwell Risk Management Policy.
I welcome David and Michelle to the Board and thank them
and my fellow Directors Richard Foster, Robert Pullar and
Daryl Wilson for their contributions.
2007 saw Ross Stiles retire from the Board and from his
executive role at Cromwell. I would like to thank Ross for his
efforts over the years. Ross was instrumental in establishing
and building the Cromwell business and his contribution to
the business and culture of the Group cannot be overstated.
Property Portfolio
WA 3%
$34 million
Perth, WA
GEOGRAPHIC
DIVERSIFICATION
BY VALUE
QLD 19%
$211 million
SA 8%
$89 million
Brisbane, QLD
Gold Coast, QLD
NSW 21%
$230 million
ACT 13%
$151 million
Sydney, NSW
Adelaide, SA
VIC 33%
$367 million
Canberra, ACT
Albury, NSW
Geelong, VIC
Melbourne, VIC
TAS 3%
$35 million
Launceston, TAS
Hobart, TAS
Lease Expiry Profile (Gross income by FY)
15%
12%
9%
6%
3%
0%
H oldover
/casual
2008
2009
2010
2011
2012
2013
2014
2015
2016
Thereafter
2017
Sector diversification
Commercial 81%
Industrial 14%
Retail/
Entertainment 5%
Snapshot of the Portfolio
At 30 June 2007, the Cromwell Group property portfolio
contains 27 properties throughout Australia valued at
approximately $1.1 billion.
Property
Market Valuation
Albury Cinema Centre
Bird Cameron
Total Assets
$1.295 billion
Bowen Hills
NTA per stapled security
Portfolio Value
96 cents
$1.117 billion
Weighted Average Lease Term
5.1 years
Bundall Corporate Centre
Centenary House
700 Collins Street
Elders Woolstore
Occupancy
99.0%
Forsyth Distribution Centre
Net Debt (interest bearing liabilities less cash) $569 million
Gearing (net debt:total assets)
Percentage of debt hedged
44%1
55%
59 Goulburn Street
101 Grenfell Street
Hellman Distribution Centre
Henry Waymouth Centre
Weighted average hedge maturity
5.2 years
380-390 La Trobe Street
1. Debt is expected to be reduced in the first half of FY08 as a
result of the settlement of a number of asset sales by the Trust,
with the result that gearing on the same basis is expected to fall
to below 35%.
Marcus Clarke
200 Mary Street
Northbourne Avenue
NQX Distribution Centre
Scrivener
Spicers Paper
Terrace Office Park
Therapeutic Goods Administration
475 Victoria Avenue
Village Geelong
Village Hobart
Village Launceston
Vodafone Call Centre
Wesfarmers Woolstore
$10,600,000
$21,600,000
$3,000,000
$64,400,000
$40,750,000
$161,300,000
$15,800,000
$47,000,000
$86,500,000
$35,000,000
$11,900,000
$38,500,000
$95,000,000
$9,750,000
$100,000,000
$33,200,000
$25,000,000
$14,725,000
$12,500,000
$36,000,000
$52,066,667
$125,500,000
$10,500,000
$15,450,000
$3,400,000
$16,500,000
$41,000,000
Geographic diversification by income
Tenant classification
Victoria 31%
South Australia 9%
Tasmania 5%
3% Western Australia
29% Private
Company
15% Queensland
ACT 17%
20% New South Wales
27% Listed Company
/Subsidiary
44% Government
Authority
Directors’ Report
The directors of Cromwell Corporation Limited (“the Company”) and Cromwell Property Securities Limited as responsible entity
of the Cromwell Diversifi ed Property Trust (“the Trust”) present their report for Cromwell Group (“the Group”) consisting of
Cromwell Corporation Limited and its controlled entities and Cromwell Diversifi ed Property Trust and its controlled entities for
the year ended 30 June 2007.
The units of the Trust and the shares of the Company are combined and issued as stapled securities in the Group. The units of the
Trust and shares of the Company cannot be traded separately and can only be traded as stapled securities.
1. Directors & Offi cers
Directors
The persons who were directors of the Company at any time during the fi nancial year and up to the date of this report were:
Mr Paul Weightman –Executive Chairman – Appointed August 1998
Mr Weightman practised as a solicitor for more than 20 years, and holds degrees in commerce and law. He has extensive
experience in property development and investment, fi nancial structuring, public listings, mergers and acquisitions, revenue
matters and joint ventures. Mr Weightman has been Cromwell’s Executive Chairman since 1998, and has acted as a director of
companies in the property, energy and retail sectors.
Mr Robert Pullar – Non-Executive Director – Appointed July 2002
Mr Pullar is a director of the Brisbane based property development company operating in Australia and Asia, Citimark
Properties. He was previously a partner with chartered accounting fi rm Douglas Heck and Burrell (now known as Pitcher
Partners), specialising in property investment, taxation and corporate reorganisation. Mr Pullar is a member of the Institute of
Chartered Accountants and a Fellow of the Australian Institute of Company Directors. He is also Chairman of the Nomination and
Remuneration Committee, and a member of the Audit Committee.
Ms Michelle McKellar – Non-Executive Director – Appointed 1 March 2007
Ms McKellar joins Cromwell Group with a wealth of property business and portfolio management experience, having held a
number of senior positions with Intro International Limited (now Jen Retail Properties) and CB Richard Ellis throughout Asia-
Pacifi c. She is a Senior Member of the Property and Land Economy Institute and has recently established her own family property
company. Ms McKellar is a member of the Audit Committee and a member of the Nomination and Remuneration Committee.
8
PaUl
rOBErT
MichEllE
Mr David Usasz – Non-Executive Director – Appointed 26 April 2007
Mr Usasz has 20 years experience as partner with PricewaterhouseCoopers and has been involved in merger and acquisition
advice, accounting and financial consultancy, specialising in corporate re-organisations. He holds a Bachelor of Commerce
and is a Fellow of the Institute of Chartered Accountants. Mr Usasz is Chairman of the Audit Committee and a member of the
Nomination and Remuneration Committee.
Mr Ross Stiles – Executive Director – Appointed August 1998; Resigned 26 April 2007
Mr Stiles has in excess of 30 years experience in the financial services industry and acted as an Executive Director of the company
from August 1998 until his resignation in April 2007. During his career he has served in senior executive positions with some
of Australia’s most prominent funds management companies, where his duties included the management and supervision of
significant client investment accounts and marketing of unit trusts. Mr Stiles is a member of the Financial Planning Association of
Australia and the Australian Institute of Company Directors.
Mr Daryl Wilson – Finance Director – Appointed December 2001
Mr Wilson is a member of the Institute of Chartered Accountants, and joined the Company in August 1999 in the role of Chief
Financial Officer. He has many years experience in senior finance roles. Mr Wilson has led the development of the Group’s funds
management capabilities, and has primary responsibility for the finance function. He holds a Bachelor of Commerce and a
Diploma of Financial Planning.
Mr Richard Foster – Executive Director – Appointed July 2005
Mr Foster is a licensed real estate agent with substantial experience in the real property industry specialising in large-scale
property acquisition for most of his professional life. He has also been closely involved with the acquisition and marketing of direct
property investments valued in excess of $1.2 billion. He has had substantial input to the growth and development of the business
and its investment products.
No director has been a director of another listed company in the last 3 years.
david
daryl
richard
Directors’ Report continued
Company Secretary
Mr Daryl Wilson – Appointed October 2001; Resigned 25 January 2007
The Company Secretary from the start of the period until his resignation on 25 January 2007.
Mrs Suzanne Morgan – Appointed 25 January 2007
Mrs Morgan is the Company Secretary for the Cromwell Group and is responsible for ensuring the Group operates within an
appropriate legal and compliance framework with specific focus on the Group’s statutory obligations. Mrs Morgan was appointed
to the role of Company Secretary after joining Cromwell in 2006 as the Group’s Corporate Legal Counsel. She has over 10 years
experience as an in-house corporate lawyer having worked primarily in the banking and financial services industry. Mrs Morgan
has a Bachelor of Laws and an Associate Diploma in Applied Finance and Investment from the Securities Institute of Australia.
Directors’ Meetings
The number of directors’ meetings (including meetings of committees of the Board) and number of meetings attended by each of
the directors of the Company during the financial year were:
Director
Paul Weightman
Robert Pullar
Michelle McKellar
David Usasz
Ross Stiles
Daryl Wilson
Richard Foster
Board
Nomination and
Remuneration Committee
Audit
Committee
A
13
10
5
4
9
13
11
B
13
13
5
4
10
13
13
A
–
1
–
–
–
–
–
B
–
1
–
–
–
–
–
A
–
–
1
1
–
–
–
B
–
1
1
1
–
–
–
A – Number of meetings attended
B – Number of meetings eligible to attend
2. Corporate Governance Statement
The Board is committed to the Group meeting stakeholders’ expectations of sound corporate governance, while seeking to achieve
superior financial performance. The Board is proactive with respect to corporate governance, and actively reviews developments
to determine which corporate governance arrangements are appropriate for the Group and its stakeholders.
The Board is committed to a philosophy of prudent business management designed to create long-term securityholder wealth.
They believe the establishment of, and adherence to, sound corporate governance practices can assist in this process. Some
areas of the ASX Guidelines are considered not necessarily appropriate for the Group at this time.
This section sets out the extent to which the Group has followed the ASX recommendations during this financial year, identifies
any of the ASX recommendations which were not followed, and provides reasons for departure.
Copies of the Group’s corporate governance practices are available on its website at www.cromwell.com.au.
Principle 1 – Lay solid foundations for management and oversight
A Board Charter has been established, detailing the philosophy, values and functions of the Board, as well as its requirements
and expectations of management.
The Board has overall responsibility for the business of the Group and is accountable to securityholders for the Group’s
performance.
0
Board operation
The Board holds a scheduled meeting each month. The Board may convene additional meetings as required. The agenda for each
meeting is prepared by the Company Secretary in consultation with the Chairman. The Board has access to senior executives, and
may seek information on any issue from senior executives.
Board papers are designed to focus Board attention on key issues, and standing items include major strategic initiatives,
corporate governance, compliance, reports from each functional division and financial performance. Board papers include
minutes of Board Committees and subsidiaries and details of significant issues for consideration.
Day-to-day management of the Group’s affairs and implementation of corporate strategy and policy initiatives are delegated by
the Board to the executives. The Board has also delegated specific responsibilities to Board Committees to deal with particular
matters.
Principle 2 – Structure the board to add value
At the present time the Board is comprised of three non-executive directors and three executive directors. For each director, their
qualifications, experience, special responsibilities and attendances at Board meetings are detailed in the directors’ report.
The Board considers that although ASX principles recommend having a majority of independent directors, having an equal
number will not interfere with the Board’s ability to adequately discharge its duties or exercise independent judgement. The Board
considers that its members comprise directors with an appropriate mix of skills, personal attributes and experience that allow
the directors individually and the Board collectively to discharge their duties effectively and efficiently. The Board is structured
with individuals who understand the business of the Group and the environment in which it operates, and who can effectively
assess management’s performance in meeting agreed objectives and goals.
The Group recognises that independent directors are important in assuring shareholders that the Board is properly fulfilling its
role. The non-executive directors are considered to meet the test of independence under the ASX Guidelines. Whilst currently
an equal number of directors are executives, the Board believes those executive directors bring a wealth of relevant practical
experience to the Group and they all have a significant vested interest in ensuring proper governance. The Board believes that
each individual director makes considered and independent judgements on matters in the best interests of the Group, or abstains
from voting.
The executive directors do not undertake activities personally that would be in conflict with, or are substantially the same as those
of, the Group. The Board distinguishes between the concept of independence and the issues of conflict of interest or material
personal interests that may arise from time-to-time. Whenever there is an actual or potential conflict of interest or material
personal interest, the Board’s policies and procedures ensure that:
•
•
the interest is fully disclosed and the disclosure is recorded in the Board minutes; and
the relevant director is excluded from all considerations of the matter by the Board, unless the other directors unanimously
otherwise decide.
If considered warranted, the Board may resolve to obtain professional advice about the execution of Board responsibilities at the
Group’s expense. Non-executive directors also have the right, at the Group’s expense, to seek independent professional advice,
subject to Board approval which will not be unreasonably withheld. Where appropriate, such advice is shared with the other
directors.
Mr Weightman is the Chairman of the Group. The Board has noted the ASX best practice recommendation that listed companies
have an independent director as Chairman. However, the Board believes that Mr Weightman has been the most appropriate
person to be the Chairman. Mr Weightman has wide experience and a deep understanding of the Group’s operations. However,
in accordance with the increased size and scale of operations of the Group, it is intended that an independent Chairman will be
appointed within the near future.
The ASX Guidelines also suggest that the roles of Chairperson and Chief Executive Officer should not be exercised by the same
individual. The Group does not yet comply with this recommendation, however, it is the intention of the Board to comply with this
recommendation within the near future.
Directors’ Report continued
Board membership is regularly reviewed. This includes an assessment of the necessary and desirable competencies of directors,
Board succession plans, evaluation of the Board’s performance and consideration of appointments and removals.
When a director vacancy occurs, the Board through the Nomination and Remuneration committee identifies the particular skills,
experience and expertise that will best complement Board effectiveness, and then undertakes a process to identify candidates
who can meet those criteria. Appointment of directors is documented by way of a formal agreement between the Group and each
director, dealing with such issues as performance expectations, conflicts of interest, disclosure obligations, remuneration and
Group policies.
In its deliberations there is particular focus on the number and nature of other directorships, and availability of time to commit to
the Group’s affairs, of all present and potential directors.
Under the Group’s constitution and the ASX Listing Rules, all directors other than the Managing Director must retire at least every
three years (but are eligible to stand for re-election).
There were a number of changes to the composition of the Board during the year. As a result of the Stapling transaction, and
the resultant increase in market capitalisation of the Group which resulted in inclusion in the ASX All Ordinaries Index, it was
recognised that it was desirable that additional independent directors be appointed to the Board. The Board appointed two new
independent directors, Ms Michelle McKellar and Mr David Usasz, during the year.
In addition, Mr Ross Stiles retired from his role as an executive director during the year.
For executive directors and key staff, formal performance objectives are set annually with discussion on their success and failures
taking place at assessment time.
Principle 3 – Promote ethical and responsible decision making
The Group’s directors and staff are required to maintain high ethical standards of conduct. The various practices and policies
of the Group reinforce this. All directors and employees are expected to act with integrity, striving at all times to enhance the
reputation and performance of the Group.
To reinforce this culture the Group has established a Code of Conduct, designed to formally provide guidance in officer and
employee attitudes and behaviour and to maintain confidence in the integrity of the Group.
The Code of Conduct is distributed to all directors and employees and its standards are communicated and reinforced at induction
programs and staff meetings.
Employees are encouraged to participate in appropriate training programs covering such areas as workplace health and safety,
risk management, legal compliance, privacy and confidentiality, trade practices legislation and corporate governance principles
incorporating Board approved codes and policies.
The Board has established written guidelines, set out in its Insider Trading & Share Trading Policy, that restricts dealings by all
Group directors and employees in the Group’s securities, and provides an understanding of insider trading and issues relevant to
price-sensitive information. A copy of the Group’s trading policy is available at www.cromwell.com.au.
Principle 4 – Safeguard integrity in financial reporting
The Board has responsibility for the integrity of the Group’s financial reporting. To assist the Board in discharging this function it
has adopted the processes below.
Audit committee
The Board has established an audit committee during the year. The audit committee has responsibility for overseeing the quality and
integrity of the accounting, auditing and financial reporting practices of the Group. The audit committee has a written charter which is
reviewed not less than annually. The committee charter provides that the committee must comprise at least 3 members, with a majority
of independent directors. The chairman of the committee may not be the chairman of the Board.
The members of the committee since establishment, and up to the date of this report, were:
•
•
•
Mr David Usasz (Chairman) – Non-executive director
Mr Robert Pullar – Non-executive director
Ms Michelle McKellar – Non-executive director.
The Company Secretary also acts as secretary of the committee. Meetings are attended, when appropriate, by the Chief Executive
Officer, the Finance Director, the external auditors and other external advisors.
The external auditor has declared its independence to the Board. The Board is satisfied that the standards for auditor
independence and associated issues are complied with.
The Group requires that the Chief Executive Officer and the Chief Financial Officer state in writing to the Board that the Group’s
financial reports present a true and fair view, in all material respects, of the Group’s financial position and operational results and
are in accordance with relevant accounting standards.
The statements from the Chief Executive Officer and Chief Financial Officer are based on the Group’s existing formal sign-off
framework previously established in other areas of operations.
The Chief Executive Officer and the Chief Financial Officer are required to state to the Board in writing that:
•
•
the statement given in relation to 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 Group’s risk management and internal compliance and control system is operating efficiently and effectively in all
material respects.
Principle 5 – Make timely and balanced disclosure
The Group believes that all stakeholders should be informed of all the major business events and risks that influence the Group in
a timely and widely available manner. The Group has a written communications policy that is designed to ensure compliance with
ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance.
This policy was established to ensure that the Group complies not only with its obligations at law and under the ASX Listing Rules,
but with best practice as it has evolved in recent years.
The Company Secretary has been designated as the person responsible for communications with the ASX, including ensuring
compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing information going to the ASX,
shareholders and other interested parties.
Authority to speak about the Group’s affairs to the media, brokers, analysts or investors is generally restricted to the Chairman or
Finance Director.
All directors have obligations under a written contract entered into with the Group to keep it promptly informed of any personal or
related interests in securities trading and contracts relevant to securities. The Group, in turn, promptly reports such trading to the
ASX.
It is the policy of the Group that any price-sensitive material for public announcement will be:
•
•
lodged with the ASX as soon as practical and before external disclosure elsewhere; and
posted on the Group’s website as soon as practical after lodgement with the ASX.
3
Directors’ Report continued
Principle 6 – Respect the rights of securityholders
A Board approved communications strategy has been developed, designed to not only comply with the ASX Guidelines but to
generate and foster a long-term close association with securityholders and investors in the Group’s financial products.
The Group aims to keep securityholders informed of the Group’s performance and all major developments in an ongoing manner.
All documents that are released publicly are made available on the Group’s website.
Securityholders are also encouraged to participate in the annual general meeting to ensure a high level of accountability and
identification with the Group’s strategies and goals. Notices of meeting will be accompanied by explanatory notes on the items of
business and together they will seek to accurately and clearly explain the nature of the business of the meeting.
A copy of the AGM notice is sent to the Company’s external auditor as required by law. The current audit partner attends the
AGM and is available to answer questions from securityholders about the audit. The Chairman reminds securityholders of this
opportunity at the commencement of each AGM.
Principle 7 – Recognise and manage risks
The Group places a high priority on risk management and identification throughout the Group’s operations and regularly reviews
its adequacy. A risk control program has been developed which includes legislative compliance, both from a corporate perspective
and in view of the Group’s statutory obligations, as a manager of investment products. The Board is responsible for the overall
internal control framework, but recognises that no cost-effective system will preclude the possibility of errors, mistakes and
irregularities.
In this regard, because Cromwell Property Securities Limited holds an Australian Financial Services Licence, and has responsible
entity status, a compliance committee has also been formed. The compliance committee reports to the Board of Cromwell
Property Securities Limited.
As part of its activities in managing investment schemes, the Cromwell Property Securities Limited has adopted a compliance
regime to ensure compliance with relevant legislation and scheme constitutions. In addition, each registered managed investment
scheme has a compliance plan lodged with ASIC. An annual audit of the responsible entity’s compliance with the legislation,
scheme constitutions and compliance plans is undertaken in respect of each managed investment scheme. The compliance
committee, members of which are predominantly independent of the Group, monitors the compliance plans. This committee
meets regularly and reports to the Board on risk issues associated with the Group’s managed investment scheme activities.
The Group has appointed a compliance officer who oversees the design and implementation of the risk control program, monitors
performance and develops appropriate programs to enhance awareness and compliance. These programs include training for
employees, using both internal and external experts.
The compliance officer reports in writing and personally to meetings of the compliance committee and follows up any non-
compliance or identified areas requiring further training or risk management.
Principle 8 – Encourage enhanced performance
The Board intends to undertake an annual review of its performance together with an assessment of the Group’s executive
management.
For executive directors and key staff, formal performance objectives are set annually with discussion on their successes and
failures taking place at assessment time.
It is intended that a formal annual performance assessment will be required for each Board member with separate assessments
of key executives. Further, each committee will be evaluated at least annually. The Company Secretary attends all Board
meetings, is responsible for monitoring adherence to Board policy and procedures, and is accountable on all governance matters.
Principle 9 – Remunerate fairly and responsibly
The Group’s remuneration policy is determined by the nomination and remuneration committee that makes recommendations to
the Board:
•
•
the case of non-executive directors, for consideration of any increase by securityholders at the AGM; and
the case of executives, for decision.
External professional advice is sought from experienced consultants, where appropriate, to assist in the committee’s and the
Board’s deliberations.
The Group’s remuneration policy links the nature and amount of executive directors’ and officers’ emoluments to the Company’s
financial and operational performance.
The Group operates a legacy Employee Share Ownership Plan, a Performance Rights Plan and a Tax Exempt Plan. The Group does
not currently pay any other form of equity-based remuneration.
Nomination and remuneration committee
The Board has established a formally constituted nomination and remuneration committee operating under an approved written
charter that incorporates various responsibilities, including reviewing and recommending compensation arrangements for the
directors, the Chief Executive Officer and key executives, and setting remuneration policy.
Until July 2007, the committee acted in an advisory capacity to the Board, and comprised a non-executive director and one or
more external members. Following the appointment of Ms Michelle McKellar and Mr David Usasz as non-executive directors
in March 2007 and April 2007 respectively, the nomination and remuneration committee was formally reconstructed as a Board
subcommittee in July 2007.
Meetings of the committee are attended, by invitation, by appropriate professional advisers from time to time.
Minutes of all committee meetings are provided to the Board, and it is intended that the Chairman of the committee reports to the
Board after each committee meeting.
Details of the number of committee meetings and attendances by directors are included in the directors’ report.
Non-executive director remuneration
The structure of non-executive directors’ remuneration and that of executive directors is set out in the relevant section of the
directors’ report.
Details of the nature and amount of each element of the remuneration of each director of the Group and other key management
personnel of the Group are disclosed in the relevant section of the directors’ report.
There is no retirement benefit scheme for non-executive directors other than payment of statutory superannuation.
Principle 10 – Recognise the legitimate interests of stakeholders
The Group has well-entrenched policies, systems and procedures, as well as a formal Code of Conduct, which the Board seeks
to promote throughout the Group, and in the areas in which it operates its businesses. The Group encourages, a culture of
compliance with legal requirements and ethical standards.
The Board recognises that managing natural, human, social and other forms of capital as suggested in the ASX Guidelines
may also assist in creating value for securityholders. To this end the Board seeks, by the individual contributions of directors
and by encouraging activities of its executives, to uphold community standards and to maintain good relations with community
and government organisations. However, the Board seeks to balance these considerations in order to ensure that the claims
of legitimate securityholders do not prejudice or diminish the rightful expectations of its securityholders and investors in other
Group products.
Directors’ Report continued
3. Principal Activities
As a result of the stapling of shares in the Company to units in the Trust in December 2006, the Group now undertakes significant
property investment activities. The principal activities of the Group during the financial year consisted of property investment and
management, the promotion and management of property related managed investment schemes and property development.
Other than the increase of property investment and development activities, there were no significant changes in the nature of the
Group’s principal activities during the financial year.
4. Dividends/Distributions
Dividends/distributions paid or declared since the start of the financial year are detailed below.
Net profit attributable to parent entity shareholders
Basic EPS
Change in share price
* adjusted for share reconstruction on a 0.8879: 1 basis in December 2006
2007
$’000
8,620
1.24¢
+6%*
2006
$’000
7,894
1.14¢
+230%
2005
$’000
4,839
3.14¢
+131%
Dividend
per Security
Distribution
per Security
Total
per Security
Total
$’000
Franked amt
per Security
Record
Date
Payment Date
Dividends/distributions for
the year ended 30 June 2007
Interim dividend – stapling
0.10¢
Interim distribution
Interim distribution
Final dividend/distribution
Dividend for the year
ended 30 June 2006
–
–
0.80¢
0.90¢
N/A
1.50¢
1.50¢
1.45¢
4.45¢
0.10¢
1.50¢
1.50¢
2.25¢
5.35¢
139
10,458
10,470
15,740
36,807
0.10¢
–
–
0.27¢
0.37¢
18/12/06
12/02/07
03/04/07
29/06/07
18/12/06
20/03/07
21/05/07
31/08/07
Final dividend
4.50¢
N/A
4.50¢
6,855
1.50¢
05/10/06
12/10/06
With a weighted average number of fully paid shares on issue during 2007 of 694,363,728 (2006: 690,907,268) the basic earnings
per share were 1.24¢ (2006: 1.14¢).
5. Review of Operations
Highlights
•
•
•
•
•
•
Record full year net profit after tax but before unitholders’ finance costs of $113.9 million;
Operating profit (excluding significant and non-cash items) of $37.6 million exceeded forecast of $36.3 million;
Completed Merger and Stapling in December 2006 to create the Cromwell Group;
Significant increase in NTA to 96c per security;
Assets Under Management (AUM) of $1.64 billion, up 20 per cent from June 2006;
Boosted senior management to reflect increased AUM and provide a platform for future growth.
Overview
In October 2006, Cromwell announced Merger and Stapling proposals which were put to investors in the Company, the Trust and
5 Cromwell managed Syndicates. In December 2006, after overwhelming support for the proposals by investors, the Trust merged
with all 5 Cromwell managed Syndicates. The units in the merged Trust were then stapled to shares in Cromwell Corporation
Limited, the parent of the Responsible Entity, to create the Cromwell Group.
In the intervening period, the new Cromwell Group has delivered value for all securityholders, reinforcing the strategic benefits
associated with the transactions. The operating profit (excluding significant and non-cash items) exceeded the forecasts set out
in the Explanatory Memorandum (“EM”), despite the stapling occurring later than forecast, which reduced the contribution from
the Trust and the Syndicates for the year. Net profit after tax but before unitholders’ finance costs was significantly higher than
forecast, primarily due to the increases in the value of the investment property portfolio, coupled with gains from asset sales.
Financial performance
The financial performance for the year reflects the significant increase in the assets of the Group as a result of the Merger and
Stapling, and the resulting increase in income. The results include the financial performance of the Trust, including the merged
Syndicates, from 19 December 2006. Net realised income from investment properties recognised in the income statement for the
period was $48.8 million.
The Group booked a gain on sale of $5.0 million relating to the sale of the Bourke Street Cinema Complex in Melbourne for $32.7
million during the financial year. The financial results have also been positively impacted by net increases in the fair value of
investment properties of $69.8 million.
Finance costs of $24.5 million predominantly reflected the cost of borrowings associated with the investment properties. An
increase in value of the interest rate derivatives of $4.6 million has also been booked, primarily due to the effect of increases in
both short and long term forward interest rates during the year. The Group has substantial hedging in place at balance date, with
56% of debt subject to fixed interest rates, or other hedge agreements, for up to 10 years.
The Group booked net development earnings of $5.1 million for the year, as a result of the sale of an industrial property in
Brisbane. Development inventory also includes property at Bundall on the Gold Coast carried at cost of approximately $12 million.
Significant progress has been made towards approval of a master plan for the site, and the property was subject to put & call
options at balance date, and is expected to be sold at a profit in FY08.
Ongoing management fees were slightly higher than last year, despite the elimination of all post-stapling fees to the Trust.
Transactional fees from acquisition and capital raising were lower than the previous year, with approximately $90 million in total
raised for the Cromwell Property Fund (CPF). However, the results excluded approximately $5.4 million in acquisition fees from
properties already acquired by the CPF at balance date. These fees are not chargeable under the Product Disclosure Statement
issued for the CPF, until a total of $143 million in equity is issued by the fund, which is expected to occur during the first half of FY08.
Employee costs were approximately 26% higher than the previous corresponding year, and are reflective of the significantly
increased scale of activities of the Group.
Directors’ Report continued
One-off costs of $7 million associated with the stapling transaction were incurred during the year. Transaction costs associated
with the Merger of the Syndicates with the Trust of approximately $8 million, predominantly stamp duty, were a pre-stapling cost
of the Trust. Of this, approximately $5 million relates to assessed stamp duty which is subject to appeal by the Trust.
Income tax was a credit item for the second successive year. This is as a result of prior year unrecognised tax losses available,
which the Company recognises as a deferred tax asset, based on the expected taxable profits of the Company for a limited period
into the future.
The Trust previously had a limited term (80 years), and in accordance with AASB 132, net assets attributable to unitholders were
recognised as debt, rather than equity. This also led to the recognition of the finance cost attributable to unitholders in the income
statement. The responsible entity amended the constitution of the Trust on 1 June 2007 to remove the limitation on the Trust term.
The net assets attributable to unitholders have therefore been reclassified as equity since that date.
Operating profits and dividends/distributions to securityholders
The Board excludes certain items from the net profit after tax but before unitholders’ finance costs to arrive at an operating profit
before significant and non-cash items, when considering amounts available for distribution by the Group.
Details of operating profit before significant and non-cash items and dividends/distributions paid/payable are as follows:
Consolidated
2007
$’000
113,957
(69,779)
(4,610)
(6,341)
(4,963)
(1,374)
2,221
1,089
414
7,049
37,663
20,928
10,150
12,584
–
(6,855)
36,807
98%
2006
$’000
7,894
–
–
–
–
–
–
–
380
197
8,471
–
–
2,257
6,855
(2,257)
6,855
81%
Profit before unitholders’ finance costs
Adjustments:
Net (gain)/loss from fair value adjustments to:
• Investment properties
• Interest rate derivatives
Gain on dilution of interest in associate
Gain on sale of investment property
Straight-line lease income
Lease incentives and lease costs amortised
Amortisation of finance costs
Amortisation and depreciation
Stapling transaction costs
Operating profit before significant and non-cash items
Distributions paid – recognised in unitholders’ finance costs
Distributions payable – recognised in unitholders’ equity
Dividends paid/payable – recognised in shareholders’ equity
Adjustment – final dividend not recognised at year end
Adjustment - dividend declared relating to prior year
Dividends/distributions paid/payable in current year
Payout ratio
8
Property performance
The performance of the investment property portfolio was strong during the year, and reflects Cromwell Group’s commitment
to an in-sourced management model, with significant benefits attached to the integrated property management and tenant
relationship management activities. High renewal rates with tenants continue to be achieved, and the portfolio was 99% leased at
year-end, with a 5.1 year weighted average lease term.
Significant leasing activity was undertaken during the year, including a new 10-year lease to the Australian National Audit Office
of over 7,000 square metres at Centenary House, Canberra.
Financial position
Total assets
Net assets
Net tangible assets
Net debt
Gearing (%)
Securities issued
NTA per security
Consolidated
2007
$’000
1,295,154
673,064
667,691
569,121
44%
698,784
$0.96
2006
$’000
49,918
16,625
12,384
11,422
23%
152,329
$0.08
The Group’s financial position changed significantly during the year as a result of the stapling transaction. The transaction
effectively resulted in the acquisition of $584 million net assets of the Trust and its controlled entities.
Since the date of the stapling the Group has recognised disposals of approximately $351 million of investment property as a
result of the deconsolidation of the Cromwell Property Fund (“CPF”), and $27 million (carrying amount) as a result of the sale
of the Village Cinema Complex at Bourke Street, Melbourne. At balance date, a further $156 million of investment property was
classified as held for sale. This represents the 59 Goulburn Street, Sydney and Corporate Centre One, Gold Coast commercial
office properties. These properties were subject to sale or option agreements at balance date.
At balance date the Group, through the Trust, held approximately 22% of the issued units in CPF, down from approximately 59% at
the time of the stapling transaction. The assets, liabilities and financial performance of CPF were deconsolidated from the results
of the Cromwell Group at 12 February 2007 due to the Group’s holding of ordinary units in CPF being reduced to below 50%.
NTA per security has increased by 23% since the half-year, from 78 cents to 96 cents, primarily as a result of the increases in
value of the investment property.
At balance date the Group held borrowings (net of available cash) of $569 million, representing gearing (net debt: total assets) of
44%, down from 59% at the half-year. Debt is expected to be reduced further in the first half of FY08 as a result of the settlement
of a number of asset sales.
Changes to Board and additions to management team
The composition of the Board changed during the year with the appointment of two additional independent directors, Michelle
McKellar and David Usasz. Long-serving executive director Ross Stiles announced his retirement during the year, and formally
resigned from the Board in April 2007. The Group has also announced its intention to appoint an independent Chairman. An
appointment is expected within the first half of FY08.
Directors’ Report continued
During the year the Group also appointed Paul Cronan to the newly created role of Chief Operations Officer and Suzanne Morgan
as Company Secretary. These additions to the executive team ensure the Group is sufficiently resourced to continue to grow into
the future.
Outlook and strategy
The outlook for FY08 remains very positive, with the Group set to further build on the excellent business platform created by
the combination of Cromwell’s successful funds management business with the substantial property portfolio of the Trust. The
FY08 year, being the first full year for the stapled Cromwell Group, is expected to deliver increased operating earnings and
distributions.
The recently announced sale of a number of investment properties reflect the Group taking advantage of current market
conditions to effect a rebalancing of the portfolio. Settlement of these asset sales will largely occur in FY08, and are expected to
provide approximately $100 million cash available for future investment property or other strategic acquisitions.
The Group also plans a number of funds management initiatives to ensure Cromwell Group can continue to grow earnings into
the future. The Group expects to be able to continue to grow external assets under management by a minimum of $350 million
per year, and also expects to launch additional retail funds during FY08, to further capitalise on the Group’s funds management
capabilities.
6. Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the Group during the financial year other than as disclosed in this
report and the accompanying financial report.
7. Subsequent Events
Details of subsequent events are included in note 43 in the accompanying financial report.
8. Likely Developments
The Group will continue to pursue activities which increase profitability of the Group, and create value for securityholders.
Further information in relation to likely developments, and the impact on the operations of the Group, has not been included in
this report as the directors believe it would result in unreasonable prejudice to the Group.
9. Environmental Regulation
The directors are not aware of any particular and significant environmental regulation under a law of the Commonwealth, State or
Territory relevant to the Group.
10. Directors’ Interests
The interests of current directors in securities of Cromwell Corporation Limited are as follows:
Paul Weightman
Robert Pullar
Daryl Wilson
Michelle McKellar
David Usasz
Richard Foster
0
Stapled
Securities
Property Preference
Shares
Options over
Securities
15,364,167
13,545,269
2,205,982
20,000
1,490,400
5,349,598
3,500
1,000
2,000
–
–
–
–
–
–
–
–
–
11. Options
No options have been granted during or since the end of the financial year.
Shares under option
Stapled securities in Cromwell Group held by the Employee Share Ownership Plan, which are accounted for as in-substance
options, at the date of this report are as follows:
Number of options
Date granted
Exercise date
Exercise price
Expiry date
16,010
443,950
32,186
443,950
936,096
28/8/05
28/8/05
28/8/05
28/8/05
(1)
(2)
(3)
(4)
30.9¢
30.9¢
30.9¢
30.9¢
30/6/09
30/9/09
30/6/09
30/9/09
(1) Exercisable from 1 July 2007 to 30 June 2008.
(2) Exercisable from 1 October 2007 to 30 September 2008.
(3) Exercisable from 1 July 2008 to 30 June 2009.
(4) Exercisable from 1 October 2008 to 30 September 2009.
Movement in number of in-substance options:
Number of options
Opening balance 1 July 2006 (1)
Vested and exercised prior to share reconstruction (2)
Reconstruction (0.8879:1) (2)
Remaining options for stapled securities
Vested and exercised prior to year end
Closing balance 30 June 2007
(1) Refer note 42 in the accompanying financial report.
(2) Refer note 27 in the accompanying financial report.
4,313,750
(3,145,000)
1,168,750
(131,018)
1,037,732
(101,636)
936,096
All remaining options expire on the earlier of their expiry date or termination of the employee’s employment. Further details are
included in the remuneration report.
Directors’ Report continued
12. Remuneration Report
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share-based compensation
E Additional information
A Principles used to determine the nature and amount of remuneration (audited)
The Group has appointed a remuneration committee to set and review the remuneration structure for executive officers,
including executive directors. The committee also advises the Board on remuneration policy and practices. The Nomination and
Remuneration committee is chaired by Mr RJ Pullar, a non-executive director. External consultants are appointed to advise the
committee as required. The remuneration of executives is considered by the committee for recommendation to the Board.
Executive remuneration is benchmarked periodically against the market, based on national remuneration levels for similar
companies.
Performance is assessed not less than annually in light of performance against individual and Group related goals.
The employment or remuneration of any executive of the Group is not influenced by the executive’s shareholding in the Group.
The Group seeks to emphasise payment for results when setting remuneration for executives, through providing short and long
term incentives, and linking these to key performance indicators which reinforce both the short and long-term goals of the Group
and provide a common interest between management and securityholders. Long term incentives may include share-based
compensation.
Executive pay
The executive pay and reward framework has four components:
•
•
•
•
base pay and benefits
performance-related bonuses
long-term incentives
other remuneration such as superannuation.
The combination of these comprises the executive’s remuneration.
Base pay
Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-
financial benefits at the executive’s discretion. There are no guaranteed base pay increases included in any executive’s contract.
Performance-related bonuses
Performance-related cash bonus entitlements are linked to the achievement of individual objectives, both financial and non-
financial, which are relevant to meeting the Group’s business objectives. Further information is provided in part E.
The executives’ cash bonus entitlements are assessed and paid based on the actual performance against the relevant key
performance indicator targets. For all executives, the Chief Executive Officer is responsible for assessing whether an executive’s
targets have been met, and key performance indicator targets are reviewed and reset annually. The key performance indicator
targets for the Chief Executive Officer are set, revised and reviewed by the remuneration committee.
Long-term incentives
Subsequent to balance date, the Group established the Cromwell Group Performance Rights Plan and the Cromwell Group Tax
Exempt Plan. The Performance Rights Plan enables eligible employees to acquire performance rights. Each performance right
enables the holder to acquire a stapled security in Cromwell Group, at a future date and exercise price, subject to performance
conditions. The Tax Exempt Plan enables eligible employees to acquire up to $1,000 of stapled securities in a tax effective manner
within a 12 month period. Eligibility for the Performance Rights Plan and the Tax Exempt Plan is approved by the Board or the
nomination and remuneration committee, having regard to individual circumstances and performance.
Securities allocated under the Performance Rights Plan generally vest in 3 years. Until securities have vested, the employee
cannot sell or otherwise deal with the securities except in certain limited circumstances. It is a condition of the Performance
Rights Plan that an employee must remain employed by the Group in order for securities to vest. Any securities which have not yet
vested on an employee leaving service must be forfeited.
The Group has previously established the Cromwell Employee Share Ownership Plan. Under the Employee Share Ownership Plan,
eligible employees were allocated shares in Cromwell Corporation Limited. The shares were acquired by the eligible employees at
the time of allocation, funded by a loan from Cromwell Corporation Limited to the eligible employee. The loan was limited recourse
to the shares only and interest was payable on the loan at the rate prescribed by the ATO for fringe benefits tax purposes from time
to time. Dividends received on shares allocated to the eligible employee are applied against the outstanding loan balance.
Under AIFRS, the shares held within the Employee Share Ownership Plan are classified as in-substance options, and accounted
for as treasury stock, reducing contributed capital. The Group is required to expense the options over the period from grant date
to vesting date. Shares on issue under the Employee Share Ownership Plan at the time of the Stapling were effectively converted
to Stapled Securities, in the same way as other shares issued by the Company.
No grants were made under the Employee Share Ownership Plan during the 2007 financial year, and it is not intended that any
further grants will be made by this plan in the future.
The number of employees participating in the Employee Share Ownership Plan in the 2007 financial year was 16 (2005: 16). The
number of stapled securities (2006: shares) allocated to employees at 30 June 2007 was 936,096 (2006: 4,313,750).
Directors’ fees
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors.
The Board determines remuneration of non-executive directors within the maximum amount approved by the shareholders
from time to time. This maximum currently stands at $500,000 per annum in total for salary and fees, to be divided among the
non-executive directors in such a proportion and manner as they agree. Non-executive directors are paid a fixed remuneration,
comprising base fees or salary and superannuation (if applicable). Non-executive directors do not receive bonus payments or
participate in employee share plans, and are not provided with retirement benefits other than statutory superannuation. The
Board was comprised of three non-executive directors and four executive directors during the financial year.
3
Directors’ Report continued
B Details of remuneration (audited)
Remuneration paid, payable, or otherwise made available, directly or indirectly, to key management personnel is set out below.
The cash bonuses were dependent on the satisfaction of performance conditions as set out under the Performance-related
bonuses heading above. Other than the key management personnel shown below, there were no other key management
personnel of the Company or Group during the year. Key management personnel during the 2007 financial year other than
directors were:
Mr PA Cronan
Ms SM Morgan
Mr DA Gippel
Chief Operating Officer
Company Secretary
Structured Finance Manager
Ms MC McLaughlin
Associate Director – Sales and Marketing
Mr MJ Blake
Associate Director – Institutional Markets
Mr PJ McDonnell
National Asset Manager
Mr PJ Cowling
National Facilities Manager
Details of remuneration 2007
Post-
employment
Long-term
benefits
Share-based
payment
Non-cash
benefits
Super-
annuation
Long service
leave
Options
Total
$
$
$
$
$
3,567
9,049
10,000
–
–
7,264
–
–
–
28,802
–
–
–
–
11,713
7,152
–
20,000
10,692
11,946
–
5,441
10, 181
12,102
13,115
14,354
12,686
12,686
970
(13,694)
–
–
–
–
–
–
–
–
15,501
4,441
–
93
509
2,096
1,886
2,259
709
1,379
–
–
–
–
39,175
72,697
–
89,161
810,737
232,094
35,000
20,000
10,692
396,648
450,000
77,698
142,974
265,234
252,280
385,100
212,157
353,296
401,780
58,682
142,068
11,708
205,474
3,643,910
Short-term benefits
Cash salary
and fees
Movement
in accrued
salary
$
$
Cash
bonus
$
734,721
247,788
25,000
–
–
330,790
300,000
59,766
(18,201)
–
–
–
–
–
–
–
–
6,706
–
20,000
150,000
2007
Directors
PL Weightman
RL Stiles (1)
RJ Pullar
MA McKellar (2)
DE Usasz (3)
DJ Wilson
WR Foster
–
20,000
35,000
48,480
64,800
18,500
45,000
Other key management personnel
PA Cronan (4)
SM Morgan
DA Gippel
MC McLaughlin
MJ Blake
PJ McDonnell
PJ Cowling
68,442
105,385
175,917
149,836
224,961
180,931
203,662
2,747,433
3,722
6,899
11,317
(212)
6,029
(669)
1,408
76,765
(1) Retired on 26 April 2007
(2) Commenced on 1 March 2007
(3) Commenced on 26 April 2007
(4) Commenced on 12 February 2007
Details of remuneration 2006
Short-term benefits
Cash salary
and fees
Movement
in accrued
salary
$
$
Cash
bonus
$
Post-
employment
Long-term
benefits
Share-based
payment
Non-cash
benefits
Super-
annuation
Long service
leave
Options
Total
$
$
$
$
$
2006
Directors
PL Weightman
RL Stiles
RJ Pullar
DJ Wilson
WR Foster
650,000
216,580
25,000
247,994
300,000
Other key management personnel
SM Morgan (1)
DA Gippel
MC McLaughlin (2)
MJ Blake (2)
PJ McDonnell
PJ Cowling
12,000
117,027
94,241
179,999
178,926
179,433
2,201,200
21,384
-
-
-
(4,413)
125,000
12,139
21,281
-
17,250
-
923
6,450
5,533
12,826
8,700
10,338
78,991
-
15,000
150,000
-
125,000
33,000
148,000
-
20,000
616,000
-
-
-
-
33,314
-
-
-
-
45,453
-
4,704
-
-
-
-
-
12,006
5,828
22,366
-
-
-
-
-
30,611
57,253
-
104,323
26
2,015
692
1,811
253
811
1,080
11,355
10,344
12,066
12,066
12,381
92,579
671,384
375,291
25,000
320,444
450,000
14,029
295,161
174,421
411,955
199,945
327,286
16,140
214,553
3,264,916
(1) Commenced 10 May 2006
(2) Included as key management personnel for the first time in 2006 and 2007
There were no other executives in the current or prior year.
C
Service agreements (audited)
PL Weightman
Remuneration and other terms of employment for Paul Weightman, Executive Chairman, are formalised in an employment
agreement. The Company may terminate the agreement without notice for gross misconduct; otherwise, the Company may
terminate the agreement on six months notice, or payment of entitlements for this period in lieu of notice. Mr Weightman may
terminate the agreement at any time with six months notice. Other major provisions of the agreement are as follows:
•
•
•
Term of agreement – Commencing 1 July 2006, no fixed termination date.
Base salary, inclusive of superannuation, for the year ended 30 June 2007 of $750,000, thereafter to be reviewed annually by
the remuneration committee.
Performance targets to be reviewed annually by the remuneration committee. No performance-related cash bonus is
payable.
DJ Wilson
Remuneration and other terms of employment for Daryl Wilson, Executive Director, are formalised in an employment agreement.
The Company may terminate the agreement without notice for gross misconduct; otherwise, the Company may terminate the
agreement on six months notice, or payment of entitlements for this period in lieu of notice. Mr Wilson may terminate the
agreement at any time with six months notice. Other major provisions of the agreement are as follows:
Directors’ Report continued
•
•
Term of agreement – commencing 1 July 2006, no fixed termination date.
Base salary, inclusive of superannuation, for the year ended 30 June 2007 of $350,000, to be reviewed annually by the
remuneration committee.
•
Performance bonus of $20,000. Targets to be reviewed annually by the remuneration committee.
The performance bonus payable to Mr Wilson for the year ended 30 June 2007 depended on certain criteria being met. The
criteria were assessed as being met in full during the financial year, with 100% of the performance bonus amount being paid.
Richard Foster
Remuneration and other terms of employment for Richard Foster, are formalised in a contract for service with a company related
to Mr Foster. The Company may terminate the agreement without notice for gross misconduct; otherwise, the Company may
terminate the agreement with one months notice. Mr Foster may terminate his contract at any time with one months notice. Other
major provisions of the agreement are as follows:
•
•
•
Term of agreement – commencing 1 July 2006, expired on 30 June 2007.
Base salary, inclusive of superannuation, for the year ended 30 June 2007 of $300,000.
Performance bonus of $150,000 annually. Targets to be reviewed annually by the remuneration committee.
Under the service agreement the performance bonus payable to Mr Foster for the year ended 30 June 2007 depended on certain
criteria being met, most notably an increase in assets under management. The criteria were assessed as being met in full for the
2007 financial year, with 100% of the performance bonus amount being paid.
D Share-based compensation (audited)
Details of the Employee Share Ownership Plan, the Performance Rights Plan and the Tax Exempt Plan are set out at part A of the
remuneration report. No further shares are expected to be granted under the Employee Share Ownership Plan. No performance
rights have yet been granted under the Performance Rights Plan. No securities have been issued under the Tax Exempt Plan.
An allocation of shares/performance rights have been/may be granted to executive directors and executives as share based
compensation. All directors and executives of Cromwell Corporation Limited and its controlled entities were/are eligible
to participate in the Employee Share Ownership Plan/Performance Rights Plan. Participation by directors is subject to
securityholder approval.
Consideration for granting options/performance rights, grant periods, vesting and exercise dates and exercise periods were/are
determined by the Board or remuneration committee in each case. Options/performance rights granted under the Employee
Share Ownership Plan/Performance Rights Plan carry no voting rights. When exercisable, each option/performance right is
convertible into one stapled security.
The exercise price of the option/performance right is determined by the Board or the nomination and remuneration committee.
The terms and conditions of each grant of in-substance options over shares acquired by the Employee Share Ownership Plan
affecting remuneration in the previous, this or future reporting periods are as follows:
Grant Date
Expiry Date
Exercise Price
(cents)
No of Options
Granted (1)
Assessed Value per
Option at Grant Date
27/11/2003
28/8/2005
28/8/2005
31/10/2005
26/11/2006
30/6/2009
30/9/2009
30/6/2009
10.0¢
30.9¢
30.9¢
40.0¢
2,000,000
1,945,000
2,000,000
500,000
8.2¢
10.1¢
10.1¢
7.1¢
(1) The options were granted for no cash consideration, prior to the 0.8879:1 share reconstruction.
The original exercise dates of the above options over shares acquired by the ESOP varied over time as follows:
Exercise Dates
No of Options
27/11/2003
1/7/2004
1/7/2005
28/8/2005
28/8/2005
31/10/2005
1/7/2006
1/7/2006
1/7/2006
1/7/2007
1/7/2007
1/7/2008
1/7/2008
–
–
–
–
–
–
–
–
–
–
–
–
–
500,000
500,000
500,000
30/6/2004
30/6/2005
30/6/2006
30/6/2006
30/9/2006
30/6/2006
26/11/2006
500,000
30/6/2007
30/9/2007
30/6/2008
30/9/2008
30/6/2009
30/9/2009
486,250
486,250
486,250
486,250
2,000,000
1,945,000
500,000
500,000
500,000
500,000
2,000,000
125,000
125,000
125,000
125,000
500,000
As a result of the stapling transaction during the year, all outstanding options became vested and exercisable. All key
management personnel options were exercised, except for 1,000,000 options held by P J Cowling (prior to the 0.8879:1
reconstruction) as shown below. As a result of the acceleration of vesting, the remaining expense attributable to the options
vested and exercised during 2007 was recognised during the 2007 year.
Details of options which were provided as remuneration to key management personnel are set out below:
Opening
balance
Granted during
year
Vested (1)
during year
Exercised
pre-stapling
Stapling
reconstruction (2)
Lapsed
during year
Closing
balance
2007
DJ Wilson
MC McLaughlin
MJ Blake
PJ Cowling
500,000
375,000
750,000
2,000,000
–
–
–
–
500,000
375,000
750,000
(500,000)
(375,000)
(750,000)
–
–
–
1,500,000
(1,000,000)
(112,100)
–
–
–
–
–
–
–
887,900
(1) The stapling transaction triggered the vesting of all outstanding options under the Employee Share Ownership Plan.
(2) Outstanding options at the time of stapling were reconstructed on a 0.8879 : 1 basis.
Opening
balance
Granted
during year
Vested
during year
Exercised
during year
Lapsed
during year
Closing
balance
2006
DJ Wilson
1,000,000
MC McLaughlin
MJ Blake
PJ Cowling
–
–
–
–
500,000
1,000,000
2,000,000
500,000
125,000
250,000
500,000
(500,000)
(125,000)
(250,000)
–
–
–
–
–
500,000
375,000
750,000
2,000,000
Directors’ Report continued
For each option exercised one ordinary share in Cromwell Corporation Limited was issued. The amounts paid per share were:
DJ Wilson
MC McLaughlin
10¢
30.9¢
MJ Blake
PJ Cowling
40.0¢/30.9¢
30.9¢
No amounts are unpaid.
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date
to vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently
determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the
share price at grant date and expected price volatility of the underlying share and the risk-free interest rate for the term of the
option.
All options granted during the 2006 year bore no consideration and vested over time. The model inputs for options granted during
the year ended 30 June 2006 included:
No. of options granted
Exercise price (cents)
Grant date
Share price at grant date (cents)
Expected price volatility of the company’s shares
Expected dividend yield
Risk free interest rate
E Additional information (unaudited)
Options Granted in 2006
3,945,000
30.9¢
28/8/05
34¢
90%
3.66%
5.0%
500,000
40.0¢
31/10/05
38¢
90%
3.66%
5.18%
The overall level of executive reward takes into account the performance of the Group over a number of years, with greater
emphasis given to the current year.
Details of remuneration: cash bonuses and options
For each cash bonus and grant of options included in the tables in Section B above, the percentage of the available bonus or
grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet
the service and performance criteria is set out below. No part of the bonus is payable in future years. The options are subject to
different vesting conditions. Options granted under the Employee Share Ownership Plan originally had four year vesting terms,
provided the conditions were met. However, all options were subject to accelerated vesting as a result of the stapling transaction
in December 2006.
8
Cash bonus
Paid
%
Forfeited
%
Year
Granted
Options
Vested
in 2007
%
Forfeited
%
Name
PL Weightman
RL Stiles
DJ Wilson
WR Foster
SM Morgan
DA Gippel
PJ McDonnell
PJ Cowling
MJ Blake
MC McLaughlin
–
–
100%
100%
100%
70%
50%
100%
44%
92%
–
–
–
–
–
30%
50%
–
56%
8%
–
–
2004
–
–
–
–
2006
2006
2006
–
–
25%
–
–
–
–
75%
75%
75%
–
–
–
–
–
–
–
–
–
–
Financial
years in
which
options may
vest (1)
–
–
2004-2007
–
–
–
–
2006-2007
2006-2007
2006-2007
Minimum
total value of
grant
to vest
Maximum
total value of
grant
to vest
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1) The stapling transaction triggered the vesting of all outstanding options under the Employee Share Ownership Plan.
13. Indemnifying Officers or Auditor
The Company maintained a contract of insurance during the financial year which insures any person who is or has been an officer
of the Group against certain liabilities in respect of their duties as an officer of the Group. The terms of the contract prohibit
disclosure of certain information, including details of the specific nature of liabilities covered, levels of cover and the premium
paid.
No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is
or has been an auditor of the Company or any of its controlled entities.
14. Rounding of Amounts to Nearest Thousand Dollars
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission,
relating to the “rounding off” of amounts in the directors’ report and financial report. Amounts in the directors’ report and
financial report have been rounded off to the nearest thousand dollars, or in certain cases to the nearest dollar, in accordance
with that Class Order.
Directors’ Report continued
15. Auditor
Johnston Rorke continues in office in accordance with section 327 of the Corporations Act 2001.
Non-audit services
The Company may decide to employ Johnston Rorke on assignments additional to their statutory duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out below.
The Board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 as none of the services undermine the general
principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants and all non-audit
services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor.
During the year the following fees were paid or payable to the auditor and its related parties:
Consolidated
Audit Services
Audit and review of financial reports under the Corporations Act 2001
Audit of a controlled entity’s Australian Financial Services Licence
Audit of controlled entities’ compliance plans
Total remuneration for audit services
Non-audit Services
Investigating accountants’ report for Explanatory Memorandum
for Merger/Stapling transactions
IFRS accounting services
Tax compliance services
Total remuneration for non-audit services
2007
$
261,000
4,000
40,000
305,000
200,000
–
17,620
217,620
2006
$
92,000
2,750
–
94,750
–
9,600
14,740
24,340
The auditor receives remuneration for audit and other services relating to other entities (schemes) for which Cromwell Property
Securities Limited, a controlled entity, acts as responsible entity. The remuneration is disclosed in the relevant entity’s financial
reports and totalled $42,500 (2006: $221,700).
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is attached to this
report.
This report is made in accordance with a resolution of the directors.
P.L. Weightman
Director
Dated this 27th day of October 2007
30
The Directors
Cromwell Corporation Limited
Level 19
200 Mary Street
BRISBANE QLD 4000
Auditor’s Independence Declaration
As lead engagement partner for the audit of the financial report of Cromwell Corporation Limited for the
financial year ended 30 June 2007, I declare that, to the best of my knowledge and belief, there have been:
(i)
no contraventions of the auditor independence requirements of the Corporations
Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
JOHNSTON RORKE
Chartered Accountants
J J Evans
Partner
Brisbane, Queensland
27 September 2007
3
Income Statements
for the year ended 30 June 2007
Revenue and other income
Funds management
• Acquisition and capital raising fees
• Management fees
Property development sales
Rental income and recoverable outgoings
Distributions from managed investment schemes
Dividends from controlled entities
Interest
Gain on sale of investment property
Net gain from fair value adjustment to:
• Interest rate derivatives
• Investment properties
Share of profits of equity accounted entities
Gain on dilution of interest in associate
Total revenue and other income
Expenses
Cost of property development sold
Amortisation/depreciation
• Property, plant and equipment
• Intangibles
Commissions
Bad and doubtful debts
Employee benefits expense
Premises rental – minimum lease payments
Property outgoings, rates and taxes
Property administration costs
Stapling transaction costs
Finance costs (excluding unitholders)
Management fees – controlled entity
Other expenses
Profit before income tax and unitholders’ finance costs
Income tax credit
Profit for the year before unitholders’ finance costs
Unitholders’ finance costs (1,2)
Profit for the year
Profit attributable to parent entity shareholders
Profit attributable to minority interest unitholders
Profit for the year
Basic earnings per company share (cents)
Diluted earnings per company share (cents)
Notes
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
8,055
6,306
10,400
60,702
77
–
2,795
4,963
4,610
69,779
2,418
6,341
176,446
17,111
6,138
–
–
952
–
1,230
–
–
–
–
–
25,431
2,321
–
10,400
–
23
–
117
–
–
–
–
–
12,861
7,575
–
–
–
826
1,000
125
–
–
–
–
–
9,526
5,252
–
5,252
–
–
–
–
–
348
–
–
–
798
148
1,100
126
7,772
5,089
1,273
6,362
–
6,362
–
–
–
249
317
–
–
–
–
844
2,280
422
4,112
5,414
1,603
7,017
–
7,017
260
154
2,637
–
7,890
163
11,923
857
7,049
24,515
–
2,512
63,212
113,234
723
113,957
98,265
15,692
8,620
7,072
15,692
Cents
1.24¢
1.24¢
266
114
6,461
249
6,242
271
–
–
197
2,157
–
2,359
18,316
7,115
779
7,894
–
7,894
7,894
–
7,894
Cents
1.14¢
1.14¢
14
16
16
19
21
4
5
6
32
32
(1) AIFRS required the Trust’s issued units to be treated as a liability and Trust distributions/changes in net assets attributable to unitholders to be
treated as a finance cost in the income statement while the Trust had a limited life. Accordingly, for the period from acquisition/stapling of the
Trust to 31 May 2007, $98,265,000 of the Trust’s result (including unrealised gains on fair value adjustments to investment properties) for the year
ended 30 June 2007 has been classified as finance costs. The Trust’s constitution was altered on 1June 2007 such that Trust units on issue are now
classified as equity. As such, the Trust’s result is not recorded as finance costs from that date.
(2) There is no effect on the income tax expense/credit associated with unitholders’ finance costs.
3
The above income statements should be read in conjunction with the accompanying notes.
Balance Sheets
as at 30 June 2007
Current Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Derivative financial instruments
Inventories
Other current assets
Investment properties classified as held for sale
Total current assets
Non-Current Assets
Investment properties
Inventories
Available-for-sale financial assets
Investments in jointly controlled entity and associate
Investments in controlled entities
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current Liabilities
Trade and other payables
Borrowings
Dividends/distributions payable
Current tax liabilities
Provisions
Other current liabilities
Total current liabilities
Non-Current Liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to shareholders
Contributed equity
Reserves
Accumulated losses
Total equity attributable to shareholders
Minority Interests
Equity attributable to unitholders
Contributed equity
Reserves
Total equity attributable to unitholders
Total equity attributable to securityholders
Notes
Consolidated
Parent
2007
$’000
17,845
24,342
121
13,498
12,013
1,108
68,927
156,452
225,379
927,113
–
–
66,245
–
61,250
9,794
5,005
368
1,069,775
1,295,154
13,920
153,993
15,740
882
526
3,862
188,923
432,973
194
433,167
622,090
673,064
43,347
2,950
(31,212)
15,085
526,145
131,834
657,979
673,064
7
8
9
10
11
12
13
14
11
15
16
17
18
19
20
21
22
23
24
25
26
23
25
27
28
29
30
30
2006
$’000
17,400
13,303
–
–
–
310
31,013
–
31,013
–
10,048
3,213
–
–
–
1,403
3,902
339
18,905
49,918
2,932
9,931
–
947
394
44
14,248
18,891
154
19,045
33,293
16,625
2007
$’000
35
6,699
–
–
1,140
–
7,874
–
7,874
–
–
275
–
475
–
–
5,860
–
6,610
14,484
181
–
5,590
882
–
–
6,653
211
–
211
6,864
7,620
2006
$’000
822
7,229
–
–
–
124
8,175
–
8,175
–
1,140
275
–
475
–
–
4,357
–
6,247
14,422
660
–
–
947
–
–
1,607
211
–
211
1,818
12,604
42,391
1,482
(27,248)
16,625
43,347
610
(36,337)
7,620
42,391
328
(30,115)
12,604
–
–
–
16,625
–
–
–
7,620
–
–
–
12,604
The above balance sheets should be read in conjunction with the accompanying notes.
33
Statements of Changes in Equity
for the year ended 30 June 2007
Attributable to Equity Holders of the Company
Notes
Con-
tributed
Equity
Accu-
mulated
Losses
Available-
for-Sale
Reserve
$’000
$’000
$’000
Share
Based
Payments
Reserve
$’000
Total
Minority
Interest
Total
Equity
$’000
$’000
$’000
Consolidated
Balance at 1 July 2006
Changes in the fair value of available-for-
sale financial assets, net of tax
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for
the year
Transfer from net assets attributable
to unitholders (1)
• Contributed equity
• Reserves
Transactions with equity holders
in their capacity as equity holders:
• Dividends/distributions paid/declared
• Contributions of equity
• Employee share options
Balance at 30 June 2007
Balance at 1 July 2005
Adjustment on adoption of AASB 132 and
AASB 139, net of tax:
• Reserve – available-for-sale financial
assets
• Accumulated losses
Restated total equity at the beginning
of the year
Changes in the fair value of available-for-
sale financial assets, net of tax
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for
the year
Transactions with equity holders in their
capacity as equity holders:
• Dividends paid/declared
• Treasury shares acquired by ESOP
• Contributions of equity
• Employee share options
Balance at 30 June 2006
28
31
27
28
28
29
28
31
27
27
28
42,391
(27,248)
1,154
328
16,625
–
–
–
–
–
–
–
956
–
–
–
8,620
1,186
1,186
–
8,620
1,186
–
–
(12,584)
–
–
–
–
–
–
–
43,347
(31,212)
2,340
–
–
–
–
–
–
–
–
282
610
–
–
–
16,625
1,186
1,186
7,072
15,692
1,186
1,186
8,620
9,806
7,072
16,878
–
–
526,119
526,119
134,912
134,912
(12,584)
(10,150)
(22,734)
956
282
26
–
982
282
15,085
657,979
673,064
42,339
(32,605)
–
36
9,770
–
9,770
–
–
–
(280)
42,339
(32,885)
–
–
–
–
–
(200)
252
–
–
–
7,894
7,894
(2,257)
–
–
–
622
–
622
532
532
–
532
–
–
–
–
42,391
(27,248)
1,154
–
–
622
(280)
36
10,112
–
–
–
–
–
–
–
292
328
532
532
7,894
8,426
(2,257)
(200)
252
292
16,625
–
–
–
–
–
–
–
–
–
–
–
–
622
(280)
10,112
532
532
7,894
8,426
(2,257)
(200)
252
292
16,625
(1) Under AIFRS net assets attributable to unitholders of the Trust were initially classified as a liability rather than equity due to the limited life of the
Trust. On 1 June 2007 the constitution of the Trust was amended to effectively remove the limitation of the term of the Trust. Accordingly, as at
1 June 2007 the contributed equity ($526,119,000) and reserves ($134,912,000) of the Trust were transferred from liabilities to contributed equity
and reserves respectively. All the changes in equity listed for the minority interest occurred in the month of June 2007.
3
Notes Contributed
Equity
Accumulated
Losses
Share Based
Payments
Reserve
Total
$’000
$’000
$’000
$’000
42,391
(30,115)
328
12,604
Parent
Balance at 1 July 2006
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Transactions with equity holders in their capacity
as equity holders:
• Dividends paid/declared
• Contributions of equity
• Employee share options
Balance at 30 June 2007
Balance at 1 July 2005
Adjustment on adoption of AASB 132 and AASB 139, net of tax:
• Reserve – available-for-sale financial assets
• Accumulated losses
31
27
28
–
–
–
–
956
–
–
6,362
6,362
(12,584)
–
–
43,347
(36,337)
42,339
(34,875)
–
–
–
–
Restated total equity at the beginning of the year
42,339
(34,875)
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Transactions with equity holders in their capacity
as equity holders:
• Dividends paid/declared
• Treasury shares acquired by ESOP
• Contributions of equity
• Employee share options
Balance at 30 June 2006
–
–
–
–
(200)
252
–
–
7,017
7,017
(2,257)
–
–
–
42,391
(30,115)
31
27
27
28
–
–
–
–
–
282
610
36
–
–
36
–
–
–
–
–
–
292
328
–
6,362
6,362
(12,584)
956
282
7,620
7,500
–
–
7,500
–
7,017
7,017
(2,257)
(200)
252
292
12,604
The above statements of changes in equity should be read in conjunction with the accompanying notes.
3
Cash Flow Statements
for the year ended 30 June 2007
Cash Flows From Operating Activities
Cash receipts in the course of operations
Cash payments in the course of operations
Dividends received
Distributions received
Interest received
Finance costs paid
Income tax paid
Reimbursements received from tax consolidated entities
Net cash provided by operating activities
Cash Flows From Investing Activities
Payments for property, plant and equipment
Payments for investment properties
Proceeds from sale of investment property
Payments for held for trading financial assets
Proceeds on sale of held for trading financial assets
Payments for available-for-sale financial assets
Payments for software and other assets
Loans to schemes
Repayments of loans by schemes
Loans to related entities
Repayment of loans by related entities
Loans to other persons
Repayment of loans by other persons
Payments from/(to) director related entity
Proceeds from sale of subsidiary (net of cash disposed)
Deconsolidation of subsidiary
Acquisition of Trust (net of cash acquired)
Proceeds from other assets
Net cash provided by/(used in) investing activities
Cash Flows From Financing Activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of shares
Proceeds from issue of treasury shares/securities
Payments for treasury shares/securities
Payment of dividends/distributions
Repayment of loans from controlled entities
Other payments
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
Notes
Consolidated
Parent
2007
$’000
2006
$’000
95,142
(49,012)
–
2,590
2,417
(22,567)
(956)
–
27,614
(9,021)
(25,968)
32,745
–
–
–
(183)
(6,000)
–
(900)
2,500
–
736
3,500
(22)
(6,060)
11,761
–
3,088
138,699
(145,320)
139
775
–
(24,232)
–
(318)
(30,257)
445
17,400
17,845
35
34
34
33
31
23,216
(17,444)
–
952
1,004
(2,250)
(130)
–
5,348
(377)
–
–
(13,450)
13,450
(175)
(182)
(1,900)
2,300
–
–
(2,122)
650
(3,500)
–
–
–
102
(5,204)
28,326
(16,880)
–
252
(200)
(2,257)
–
–
9,241
9,385
8,015
17,400
2007
$’000
14,045
(8,868)
–
23
117
(148)
(956)
1,106
5,319
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
139
749
–
(6,994)
–
–
(6,106)
(787)
822
35
2006
$’000
5,415
(4,720)
1,000
826
125
(844)
(130)
1,042
2,714
–
–
–
(13,450)
13,450
(175)
–
(1,900)
2,300
–
583
–
–
–
–
–
–
80
888
175
–
–
252
(200)
(2,257)
(861)
–
(2,891)
711
111
822
3
The above cash flow statements should be read in conjunction with the accompanying notes.
Notes to the Financial Statements
for the year ended 30 June 2007
1. Summary of Significant Accounting Policies
Cromwell Group was formed by the stapling of two entities comprising Cromwell Corporation Limited (‘the Company’) and its
controlled entities, and Cromwell Diversified Property Trust (‘the Trust’) and its controlled entities. Cromwell Group is also
defined as ‘the Group’.
The Group was established for the purpose of facilitating a joint quotation of the Company and its controlled entities and the Trust
and its controlled entities on the Australian Securities Exchange. The constitution of the Trust and the Articles of Association of
the Company ensure that, for so long as the two entities remain jointly quoted, the number of units in the Trust and the number of
shares in the Company shall be equal and the unitholders and shareholders are identical. Both the Responsible Entity of the Trust
and the Company must at all times act in the best interest of the Group.
To account for the stapling, Australian Accounting Standards requires an acquirer (Cromwell Corporation Limited) to be identified
and an acquisition to be recognised. The net assets and net profit of the acquiree (the Trust and its controlled entities) are
recognised as minority interest as they are not owned by the acquirer in the stapling agreement. Refer to note 1(b)(i)(3).
The stapling arrangement will cease upon the earliest of either the winding up of the Company or the Trust.
Cromwell Corporation Limited is a company domiciled in Australia. The financial report includes separate financial statements
for Cromwell Corporation Limited as an individual entity (“the Parent”) and Cromwell Group, the stapled consolidated entity (‘the
Group’) consisting of Cromwell Corporation Limited (‘the Company’) and its subsidiaries and Cromwell Diversified Property Trust
(‘the Trust’) and its subsidiaries.
The principal accounting polices adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting
Standards (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB) and
the Corporations Act 2001.
Compliance with IFRS
The financial report of the consolidated entity also complies with the International Financial Reporting Standards (IFRS) and
interpretations adopted by the International Accounting Standards Board. The Company’s financial report does not comply with
IFRS as the Company has elected to apply the relief provided to parent entities by AASB 132 Financial Instruments: Disclosure and
Presentation in respect of certain disclosure requirements.
Historical cost convention
The financial report is prepared on the historical cost basis except for the following:
•
•
•
investment properties are measured at fair value
derivative financial instruments are measured at fair value
available-for-sale financial assets are measured at fair value
The methods used to measure fair values are discussed further below.
Functional and presentation currency
The financial report is presented in Australian dollars, which is the Company’s functional currency and the functional currency of
the Group.
Critical accounting estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates.
3
Notes to the Financial Statements continued
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in the financial statements are described in note 3.
(b) Principles of consolidation
(i)
Stapling
The stapling of the Company and the Trust was approved at separate meetings of the respective shareholders and unitholders on
6 December 2006. Following approval of the stapling, shares in the Company and units in the Trust were stapled to one another
and are quoted as a single security on the Australian Securities Exchange.
Australian Accounting Standards require an acquirer to be identified and an in-substance acquisition to be recognised. In relation
to the stapling of the Company and the Trust, the Company is identified as having acquired control over the assets of the Trust. To
recognise the in-substance acquisition, the following accounting principles have been applied:
1.
2.
3.
no goodwill is recognised on acquisition of the Trust because no direct ownership interest was acquired by the Company in
the Trust;
the equity issued by the Company to unitholders to give effect to the transaction is recognised at the dollar value of the
consideration payable by the unitholders. This is because the issue of shares by the Company was administrative in nature
rather than for the purposes of the Company acquiring an ownership interest in the Trust; and
the issued units of the Trust are not owned by the Company and are presented as minority interests in the Group
notwithstanding that the unitholders are also the shareholders by virtue of the stapling arrangement. Accordingly, the
equity in the net assets of the Trust and the profit/(loss) arising from these net assets have been separately identified in
the Income Statement and Balance Sheet.
(ii) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries and the results of all subsidiaries
for the year then ended.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the
financial and operating policies of an entity, so as to obtain benefits from its activities. In assessing control, potential voting rights
that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(n)).
Inter-entity transactions, balances and unrealised gains on transactions between the Group entities are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and
balance sheet respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company.
(iii) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a holding of
between 20% and 50% of the voting rights. Investments in associates are accounted for in the investor’s financial statements
using the cost method and in the Group’s financial statements using the equity method of accounting, after initially being
recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on
acquisition.
38
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement and its share of post-
acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against
the carrying amount of the investment. Dividends or distributions receivable from associates are recognised in the investor’s
individual income statement, while in the Group’s financial statements they reduce the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
(iv) Joint ventures
Joint venture entities
The interest in a joint venture entity is accounted for in the Group’s financial statements using the equity method and is accounted
for using the cost method by the venturer. Under the equity method, the share of the profits or losses of the joint venture entity is
recognised in the income statement, and the share of movements in reserves is recognised in reserves in the balance sheet.
Profits or losses on transactions establishing the joint venture entity and transactions with the joint venture are eliminated to the
extent of the Group’s ownership interest until such time as they are realised by the joint venture entity on consumption or sale,
unless they relate to an unrealised loss that provides evidence of the impairment of an asset transferred.
Jointly controlled assets
The proportionate interests in the assets, liabilities and expenses of a joint venture activity have been incorporated in the financial
statements under the appropriate headings.
(c) Revenue recognition
Revenue from provision of services is recognised as follows:
(i)
Acquisition and capital raising fees – revenue is recognised at settlement of the relevant property or proportionately as the
equity interests are issued/sold to external investors as appropriate.
(ii) Management fees – revenue is recognised on a proportional basis over time as services are performed.
Property development sales revenue is recognised on settlement of the relevant property.
Rental revenue from investment property is recognised on a straight-line basis over the lease term. Rental revenue not received
at reporting date is reflected in the balance sheet as a receivable or if paid in advance, as rent in advance. Lease incentives
granted are considered an integral part of the total rental revenue and are recognised as a reduction in lease income over the
term of the lease, on a straight-line basis. Contingent rents based on the future amount of a factor that changes other than with
the passage of time, including turnover rents and CPI linked rental increases, are only recognised when contractually due.
Interest revenue is recognised as it accrues using the effective interest method.
(d)
Income tax
Under current income tax legislation the Trust is not liable to pay tax provided its taxable income and taxable realised capital
gains are distributed to unitholders. The liability for capital gains tax that may arise if the properties were sold is not accounted
for in this report.
The Group’s income tax expense for the period is the tax payable on the current period’s taxable income adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their
carrying amounts in the financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are
3
Notes to the Financial Statements continued
applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.
An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred
tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences
and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation
The Company and its wholly-owned entities (this excludes the Trust and its controlled entities) have formed a tax-consolidated
group with effect from 1 July 2003 and are, therefore, taxed as a single entity from that date. The head entity within the tax-
consolidated group is Cromwell Corporation Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members
of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group,
using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate
financial statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities or assets and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the
head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-
consolidated group in conjunction with any tax funding arrangement amounts referred to in the following section. Any difference
between these amounts is recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it
is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any
subsequent period adjustment to deferred tax assets arising from unused tax losses, as a result of revised assessments of the
probability of recoverability, is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement,
which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding
arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any
tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable (payable)
equal in amount to the tax liability (asset) assumed. The inter-entity receivable (payable) are at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head
entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing agreement.
The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the
head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this
agreement, as payment of any amounts under the tax sharing agreement is considered remote.
0
(e) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
(f) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
doubtful debts. Trade and other debtors are due for settlement no more than 90 days from the date of recognition.
Collectibility of trade and other receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written
off. A provision for doubtful debts is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of trade and other receivables. The amount of the provision is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
Cash flows relating to short-term trade and other receivables are not discounted if the effect of discounting is immaterial. The
amount of the provision is recognised in the income statement.
(g)
Inventories
Development properties held for resale are stated at the lower of cost and net realisable value. Cost is assigned by specific
identification and includes the cost of acquisition, and development and borrowing costs during development. When development
is completed borrowing costs and other holding charges are expensed as incurred.
Borrowing costs included in the cost of development properties held for resale are those costs that would have been avoided if
the expenditure on the acquisition and development of the properties had not been made. Borrowing costs incurred while active
development is interrupted for extended periods are recognised as expenses.
(h)
Investment properties
This represents the Group’s investment in various commercial, industrial and retail properties. Investment property is property
which is held either to earn income or for capital appreciation or both. Initially, investment property is measured at cost including
transaction costs. The investment property is subsequently measured at fair value, with any change therein recognised in profit
or loss. As part of the process of determining fair value, an external, independent valuer, having an appropriate recognised
professional qualification and recent experience in the location and category of property being valued, values individual
properties at least every two years on a rotation basis or on a more regular basis if considered appropriate and as determined by
management in accordance with the valuation policy of the Group. In addition, the Group has utilised internal valuation processes
for determining fair value during the period.
These valuations are taken into consideration when determining the fair value of the investment properties. The fair value is
based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between
a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted
knowledgably, prudently and without compulsion.
The valuations are prepared by considering the aggregate of the net annual rents receivable from the property and, where
relevant, associated costs. A yield, which reflects the specific risks inherent in the net cash flows, is then applied to the net annual
rentals to arrive at the property valuation. A table showing the range of yields applied for each type of property in the current
period is included below.
Property Sector
Commercial offices
Industrial
Retail
Yields
6.3% - 9.0%
7.3% - 8.5%
6.8% - 9.0%
Notes to the Financial Statements continued
Valuations reflect, where appropriate:
•
•
•
the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after
letting of vacant accommodation and the market’s general perception of their credit-worthiness;
the allocation of maintenance and other operating cost responsibilities between lessor and lessee; and
the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending
with anticipated reversionary increases, all notices and, where appropriate, counter notices have been served validly and
within the appropriate time.
Any gain or loss arising from a change in fair value is recognised in the income statement.
Where property is acquired for redevelopment and future use as investment property it is treated as property, plant and
equipment until redevelopment is complete.
(i)
Investments and other financial assets
The Group classifies its investments as either financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, or available-for-sale financial assets. The classification depends on the purpose for which the
investments were acquired. Management determines the classification of its investments at initial recognition.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading which are acquired principally for the
purpose of selling in the short term with the intention of making a profit. Derivatives are also categorised as held for trading
unless they are designated as hedges.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the
receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet
date, which are classified as non-current assets.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that
the Group’s management has the positive intention and ability to hold to maturity.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless management intends to dispose of the investment within 12
months of the balance sheet date.
Regular purchases and sales of investments are recognised on trade date – the date on which the Group commits to purchase or
sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair
value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and
transaction costs are expensed in the income statement. 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.
Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value.
Loans, receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains
or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, including
interest and dividend income, are presented in the income statement in the period in which they arise. Changes in the fair value
of securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or
impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as gains or losses
from investment securities.
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is
impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a
security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-
sale financial assets, 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 removed from equity and recognised
in the income statement. Impairment losses recognised in the income statement on equity instruments classified as available for
sale are not reversed through the income statement.
(j) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are
incurred.
Depreciation is calculated using the straight line method to allocate cost of assets, net of their residual values, over their
estimated useful lives, as follows:
Class
Plant and equipment
Leasehold improvements
Rate
10-40%
10%
Leased plant and equipment
10-40%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount (note 1(l)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income
statement.
Property that is being constructed or developed for future use as investment property is accounted for as property, plant and
equipment and is stated at cost until construction of the development is complete. At this time it is remeasured to fair value and
reclassified as investment property. Any gain or loss arising on remeasurement is recognised in profit or loss.
(k)
Intangible assets
Software assets have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight-line method to allocate the cost of software over its estimated useful lives of 3 years
on average.
(l)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
At each reporting date, and whenever events or changes in circumstances occur, the Group assesses whether there is any
indication that any other asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of
recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired
and an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
3
Notes to the Financial Statements continued
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Assets
other than goodwill that suffer an impairment are reviewed for possible reversal of the impairment at each reporting date.
(m) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for
financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the
current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term
debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the
remaining financial instruments.
The nominal value less estimated credit adjustments of short-term receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the Group for similar financial instruments.
(n) Business combinations
The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or
other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed
at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition,
the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be
demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and
valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are
recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition
over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition
is less than the Group’s share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised
directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.
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.
(o) Lease incentives
Prospective lessees may be offered incentives as an inducement to enter into non-cancellable operating leases. These incentives
may take various forms including up front cash payments, rent free periods, or a contribution to certain lessee costs such as fit
out costs or relocation costs. They are recognised as an asset in the balance sheet as a component of the carrying amount of
investment property and amortised over the lease period as a reduction of rental income.
(p)
Initial direct leasing costs
Initial direct leasing costs incurred by the Group in negotiating and arranging operating leases are recognised as an asset in the
balance sheet as a component of the carrying amount of investment property and are amortised as an expense on a straight line
basis over the lease term.
(q) Repairs and maintenance
Repairs and maintenance costs and minor renewals are charged as expenses when incurred. These repairs and maintenance
costs will consist of those that, under the relevant lease agreements, are non-recoverable from tenants.
(r) Derivative financial instruments
The Group is exposed to changes in interest rates and uses interest rate swaps to hedge these risks. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured to fair value at balance date. Derivatives are carried as assets when their fair value is positive and as liabilities when
their fair value is negative.
The Group enters into interest rate swap agreements that are used to convert certain variable interest rate borrowings to fixed
interest rates or vice versa. The swaps are entered into with the objective of hedging the risk of adverse interest rate fluctuations.
While the Group has determined that these arrangements are economically effective, they have not satisfied the documentation,
designation and effectiveness tests required by accounting standards. As a result, they do not qualify for hedge accounting and
gains or losses arising from changes in fair value are recognised immediately in the income statement.
(s) Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. These amounts
represent liabilities for goods and services provided to the Group prior to the end of the year and which are unpaid. The amounts
are usually unsecured and paid within 30-60 days of recognition.
(t) Borrowings and borrowing costs
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost using the effective interest rate method. Under this method fees, costs, discounts and premiums directly related
to the financial liability are spread over its expected life. Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
Borrowing costs incurred for the construction of a qualifying asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. Where funds are borrowed
specifically for the acquisition, construction or production of a qualifying asset the amount of borrowing costs capitalised is the
actual borrowing costs incurred on that borrowing net of any interest earned on those borrowings. Where funds are borrowed
generally the capitalisation rate used to determine the amount of borrowing costs to capitalise is the weighted average interest
rate applicable to the Group’s outstanding borrowings during the year.
Initially, under AASB 132 Financial Instruments: Disclosure and Presentation, the units on issue in the Trust, due to the fixed life
of the Trust, were classified as a financial liability. Consequently, distributions to Trust members (while the units were classified
as a liability) have been recognised as finance costs. The Trust’s constitution was amended on 1 June 2007 to remove the fixed
life of the Trust. Accordingly, from that date units on issue are classified as a minority interest in equity and distributions are no
longer expensed as finance costs.
(u) Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially
measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions,
Contingent Liabilities and Contingent Assets and the amount initially recognised less any cumulative amortisation.
Notes to the Financial Statements continued
The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the
contractual payments under the debt instrument and the payments that would be required without the guarantee, or the
estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or
other payables of subsidiaries or associates are provided for no compensation, the fair values are accounted for as contributions
and recognised as part of the cost of the investment.
Change in accounting policy
The policy set out above was adopted for the first time in the current financial year, following the change to AASB 139 Financial
Instruments: Recognition and Measurement made in September 2005. In previous reporting periods a liability for financial
guarantee contracts was only recognised if it was probable that the debtor would default and a payment would be required under
the contract. The new policy has been applied retrospectively. There was no material impact on the financial statements of the
Parent or Group or the earnings per share.
(v) Provisions
Provisions are recognised when:
(i)
the Group has a present legal or constructive obligation as a result of past events;
(ii)
it is probable that an outflow of resources will be required to settle the obligation; and
(iii)
the amount has been reliably estimated.
Provisions are not recognised for future operating losses.
(w) Employee benefits
Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are
measured at the amounts expected to be paid when the liabilities are settled.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is
given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and
currency that match, as closely as possible, the estimated future cash outflows.
Superannuation
Contributions are made by the Group to defined contribution superannuation funds. Contributions are charged as expenses as
they become payable.
Share-based payments
The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair
value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to
the options.
The fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price,
the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend
yield and the risk-free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and
sales growth targets and performance and service criteria). Non-market vesting conditions are included in assumptions about
the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the
number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into
account the most recent estimate.
Bonus plans
The Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has
created a constructive obligation.
(x) Leases (as lessee)
Leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases.
Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value
of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in liabilities. Each
lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The
depreciable assets acquired under finance leases are depreciated over the estimated useful life of the asset. Where there is no
reasonable certainty that the lessee will obtain ownership, the asset is depreciated over the shorter of the lease term and the
asset’s useful life.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income
statement on a straight-line basis over the period of the lease.
(y) Leasehold improvements
The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated
useful life of the improvement to the Group, whichever is the shorter. The amortisation rate for leasehold improvements is set out
in note 1(j).
(z) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable
costs, is recognised as a deduction from total equity. In the Company’s financial statements, the transactions of the Employee
Share Ownership Plan (ESOP) are treated as being executed directly by the Company. Accordingly, shares held by the ESOP are
recognised as treasury shares and deducted from equity.
(aa) Dividends/distributions
Provision is made for the amount of any dividend/distribution declared, being appropriately authorised and no longer at the
discretion of the Group, on or before the end of the financial year but not distributed at balance date.
(ab) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Notes to the Financial Statements continued
(ac) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
•
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
•
for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
(ad) Comparatives
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
(ae) Rounding of amounts
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission,
relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
(af) New accounting standards
Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not been adopted
for the annual reporting period ended 30 June 2007 are listed below. Application date is for annual reporting periods beginning on
or after the date shown in the table below.
Standard/Interpretation
AASB 2007-4 Amendments to Australian Accounting Standards – April 2007
AASB 2007-7 Amendments to Australian Accounting Standards – June 2007
AASB 7 Financial Instruments: Disclosures
AASB 8 Operating Segments and consequential amendments to other accounting
standards resulting from its issue
AASB 101 Presentation of Financial Statements – revised standard
AASB 123 Borrowing Costs revised and consequential amendments to other
accounting standards resulting from its issue
Interpretation 10 Interim Financial Reporting and Impairment
Interpretation 11 AASB 2 – Group and Treasury Share Transactions
Interpretation 12 Service Concession Arrangements
Interpretation 13 Customer Loyalty Programs
Application date
of standard
Application date
for the Group
1 Jul 2007
1 Jul 2007
1 Jan 2007
1 Jul 2007
1 Jul 2007
1 Jul 2007
1 Jan 2009
1 Jul 2009
1 Jan 2007
1 Jan 2009
1 Nov 2006
1 Mar 2007
1 Jan 2008
1 Jul 2008
1 Jul 2007
1 Jul 2009
1 Jul 2007
1 Jul 2007
1 Jul 2008
1 Jul 2008
Interpretation 14 Limit on a Defined Benefit Asset, Minimum Funding Requirements
and their Interaction
1 Jan 2008
1 Jul 2008
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on
the financial statements of the Group but may change the disclosures presently made in relation to the Group’s assets, liabilities,
segments and financial instruments.
8
2. Financial Risk Management
The Group’s activities expose it to a variety of financial risks; market risk, credit risk, liquidity risk and cash flow interest rate risk.
The Group’s overall risk management program focuses on managing these risks and seeks to minimise potential adverse effects
on the financial performance of the Group. The Group uses derivative financial instruments such as interest rate swaps to hedge
certain risk exposures.
The Group’s management of treasury activities is centralised and governed by policies approved by the board of directors who
monitor the operating compliance and performance as required. The board provides principles for overall risk management, as
well as policies covering specific areas, such as identifying risk exposure, analysing and deciding upon strategies, performance
measurement, the segregation of duties and other controls around the treasury and cash management functions.
(a) Market risk
(i) Currency risk
The Group does not have any direct material currency risk as commercial transactions and recognised financial assets and
liabilities are all in Australian currency.
(ii) Price risk
The Group does not have any direct material market or commodity price risk relating to its financial assets or liabilities.
(b) Credit risk
Derivative counterparties and cash transactions, when utilised, are transacted with high credit quality financial institutions.
The credit risk on financial assets which have been recognised on the balance sheets is generally the carrying amount, net of any
provisions.
The Group has no significant concentrations of credit risk relating to debtors except that at balance date the Group has amounts
owing from the Cromwell Property Fund and its controlled entities of $73,222,000 (2006: $nil) comprising 86% (2006: nil%) of
total receivables and other financial assets. As well as the above the Group has amounts owing from a developer of $3,065,000
comprising 13% of total receivables (refer note 8).
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash reserves and finance facilities to meet the ongoing
operational requirements of the business. It is the Group’s policy to maintain sufficient funds in cash and cash equivalents to meet
expected near term operational requirements. The board monitors the Group’s cash requirements and raises capital as and when
appropriate to meet planned requirements.
(d) Cash flow and fair value interest rate risk
The Group manages its cash flow interest-rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long term borrowings
at floating rates and swaps a portion of them into fixed rates. Under the interest-rate swaps, the Group agrees with other parties
to exchange, at specified intervals (usually 30 days), the difference between fixed contract rates and floating-rate interest
amounts calculated by reference to the agreed notional principal amounts.
The Group has significant interest-bearing assets and liabilities primarily comprising cash and cash equivalents (note 7), certain
receivables (note 8), other financial assets (note 18) and borrowings (note 23).
The Group’s interest-rate risk primarily arises from borrowings. Borrowings issued at variable rates expose the Group to cash
flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group’s policy is to
effectively maintain hedging arrangements on not less than 50% of its borrowings. At balance date 54% of the Group’s borrowings
were effectively hedged.
Notes to the Financial Statements continued
3. Critical Accounting Estimates and Judgements
Critical accounting estimates and judgements are:
(a) Estimates of fair value of interest rate derivatives
The fair value of interest rate derivatives has been determined by a third party financial institution by assessing the net present
value of future cash flows of the interest rate derivatives based on certain assumptions including market expectations of interest
rates and discount rates.
(b) Assumptions underlying management’s estimates of fair value
The Group has investment properties with a carrying amount of approximately $927 million plus $156 million of investment
properties classified as held for sale, representing estimated fair value. In addition, the carrying amount of the Group’s investment
in jointly controlled entity/associate of approximately $66 million also reflects investment properties carried at fair value. These
carrying amounts reflect certain assumptions about expected future rentals, rent-free periods, operating costs and appropriate
discount and capitalisation rates. In forming these assumptions, the independent valuers considered information about current and
recent sales activity, current market rents and discount and capitalisation rates, for properties similar to those owned by the Group.
(c) Deferred tax assets
The benefit of temporary differences and prior year tax losses recognised as deferred tax assets is based on projected earnings
over a limited period that the directors consider to be probable. Projected earnings are re-assessed at each reporting date.
The following material assumptions were made in assessing projected earnings for the purpose of recognising the benefit of
temporary differences and prior year tax losses as deferred tax assets – see also note 20:
(i)
Projections include only the following two financial years.
(ii) Earnings for the two financial years are based on budgets approved by the directors.
(d) Critical judgement in applying the Group’s accounting policies
The Group did not control the Cromwell Property Fund (“CPF”) at balance date and held 22% of the ordinary units of CPF at that
time. The Group holds 61,250,000 convertible financing units (CFUs) issued by CPF. The CFUs are convertible to ordinary units
and, as such, give rise to potential voting rights. However, the CFUs are not considered to be currently exercisable or convertible
as certain third party approvals are necessary prior to conversion. Therefore, the entity was not considered to be a subsidiary.
Refer note 34 for further details.
4. Employee Benefits Expense
Wages and salaries including on costs
Contributions to defined contribution plans
Equity settled ESOP share-based payments
Increase in liability for long service and annual leave
Consolidated
Parent
2007
$’000
7,039
405
282
164
2006
$’000
5,487
279
292
184
7,890
6,242
2007
$’000
66
–
282
–
348
2006
$’000
25
–
292
–
317
0
5. Finance Costs (excluding Unitholders)
Consolidated
Parent
Total interest
Less: interest capitalised
Interest expense
Amortisation of loan establishment costs
Finance costs (excluding unitholders)
6.
Income Tax
Income tax credit
Current tax
Deferred tax
Prior year tax losses recognised
Under/(over) provided in prior years
Numerical reconciliation of income tax credit to prima facie tax
Profit before income tax and unitholders’ finance costs
Unitholders’ finance costs
Profit before income tax
Tax at the Australian tax rate of 30% (2006: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
• Non-taxable trust income
• Non-deductible expenses
• Non-assessable income
• Prior year tax losses recognised (note 20)
• Under/(over) provided in prior years
Income tax credit
Unrecognised deferred tax assets
2007
$’000
23,712
286
23,426
1,089
24,515
2006
$’000
2007
$’000
2006
$’000
2,496
339
2,157
–
2,157
148
–
148
–
148
2,451
(311)
2,607
(357)
1,792
(202)
(2,870)
(3,009)
(2,870)
7
(723)
(20)
(779)
7
(1,273)
113,234
(98,265)
14,969
4,491
(2,122)
63
(292)
7,115
-
7,115
2,135
-
115
-
5,089
-
5,089
1,527
-
63
-
(2,870)
(3,009)
(2,870)
7
(723)
(20)
(779)
7
(1,273)
844
–
844
–
844
1,486
(75)
(2,994)
(20)
(1,603)
5,414
-
5,414
1,624
-
87
(300)
(2,994)
(20)
(1,603)
Deferred tax assets have not been recognised in respect of the following
items:
Tax losses
10,928
14,322
10,928
14,322
The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items
because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefits
from the deferred tax assets. All unused tax losses were incurred by Australian entities.
Amounts recognised directly in equity
Refer to note 20 for the aggregate deferred tax relating to items that are charged or credited to equity.
Notes to the Financial Statements continued
Tax consolidation
Refer note 1(d) for details regarding the relevance of the tax consolidation system to the consolidated entity, the tax funding
arrangements and other information.
No amounts were recognised during the year (2006: $nil) as tax consolidation contributions by, or distributions to, equity
participants (refer note 38 for further information).
7. Cash and Cash Equivalents
Cash at bank
Deposits
Consolidated
Parent
2007
$’000
14,797
3,048
17,845
2006
$’000
12,300
5,100
17,400
2007
$’000
35
-
35
2006
$’000
822
-
822
Cash at bank is earning variable interest at market rates with a weighted average of 6.0% at 30 June 2007 (2006: 5.5%). The
deposits are earning variable interest at market rates with a weighted average of 6.35% at 30 June 2007 (2006: 5.75%). The
deposits have an average period to maturity of 30 days. At balance date cash and deposits were held at Westpac Banking
Corporation and Bank of Western Australia Ltd.
8. Trade and Other Receivables
Trade and other debtors
Loans
- developer
- director related entity (refer note 36)
- associate
- other persons
Provision for non-recovery – loans to other persons
Amounts owing by controlled entities (refer note 38)
9,305
3,065
–
11,972
–
–
–
6,002
3,801
3,500
–
249
(249)
–
24,342
13,303
2,001
2,241
–
–
–
–
–
4,698
6,699
–
–
–
249
(249)
4,988
7,229
Trade and other debtors mainly comprise amounts owing by tenants of the Group’s investment properties and other managed
investment schemes. Trade and other debtors are usually non-interest bearing, unsecured and generally on 30 day terms. The
Group does not have any material credit risk exposure to any single receivable or group of receivables at balance date except as
disclosed in note 2.
Loan – developer
The loan is secured by a second registered mortgage over the underlying development property with interest payable at the end of
the term at 8.5% fixed. The development property is expected to be sold within 12 months and the loan repaid in full.
Loan – associate
The Trust provided a loan of $13,572,000 to Cromwell Accumulation Fund (now a subsidiary of Cromwell Property Fund) during
the 2007 year (prior to disposal) to fund the acquisition of investment properties. Subsequently, further advances of $900,000 were
made and repayments of $2,500,000 were received prior to 30 June 2007. The loan is unsecured, at call with no fixed repayment
terms and bears interest at a floating rate, which was 7.3% at balance date.
Amounts owing by controlled entities
These amounts are generally non-interest bearing, unsecured and repayable in cash at call.
The net fair values of trade and other receivables approximate their carrying values.
9. Other Financial Assets
Restricted cash
Consolidated
Parent
2007
$’000
121
2006
$’000
–
2007
$’000
–
2006
$’000
–
Restricted cash earns interest at a variable rate, which was 5.95% at balance date.
The net fair values of other financial assets approximate their carrying values.
Held for Trading Financial Assets
Movement in held for trading financial assets
Balance 1 July
Investments acquired during the period
• Interests in TGA
Investments disposed of during the period
• Interests in TGA
Balance 30 June
–
–
–
–
–
26,950
(26,950)
–
–
–
–
–
–
26,950
(26,950)
–
On 8 August 2005 the Parent acquired 18,094,065 units (representing a one-third interest) in Cromwell TGA Planned Investment
(“TGA”), a scheme for which a subsidiary of the Parent acts as the responsible entity. TGA owns an investment property at
Symonston, ACT which is leased by a Commonwealth Government authority, Therapeutic Goods Administration. The purchase
price of $26.95 million was funded in part by the assignment of the vendor’s interest in a bank loan of $13.5 million which was
secured by a charge over the underlying property. The balance of the purchase price was funded by the issue of fixed interest
debentures issued by a subsidiary of the Parent to the Trust.
At the same time the Parent entered into an option agreement to sell its one-third interest in TGA to the Trust. The selling price
of the Parent’s units in TGA under the option agreement was determined by an independent valuation of the property which was
completed when a market review of the underlying lease had been finalised. On 23 December 2005 the option was exercised
and the Parent sold its units in TGA for $26.95 million and assigned the bank loan of $13.5 million to the Trust. The fixed interest
debentures were also repaid at settlement. During the period the Parent held its interest in TGA it received distributions of
$810,000 and paid interest of $338,000 on the bank loan and $489,000 on the fixed interest debentures.
10. Derivative Financial Instruments
Interest rate swaps – at fair value
13,498
–
–
–
Loans of the Group bear variable interest rates as disclosed in note 23. It is policy to protect part of the loans from exposure to
increasing interest rates. Accordingly, the Group has entered into interest rate swap contracts under which it receives interest at
variable rates and pays interest at fixed rates.
3
Notes to the Financial Statements continued
Swaps in place at balance date cover approximately 54% (2006: nil%) of the loan principal outstanding. The fixed interest rates
range between 4.7% and 5.9% and the variable rates are between 0.2% and 0.8% above the 30 day bank bill swap bid rate which at
balance date was 6.4%.
At 30 June 2007, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
Greater than 5 years
Consolidated
2007
$’000
5,820
99,450
15,060
76,745
–
118,180
315,255
2006
$’000
–
–
–
–
–
–
–
The contracts require settlement of net interest receivable or payable, generally every 30 days. The contracts are settled on
a net basis. At balance date these contracts represented assets with fair value of $13,498,000 (2006: $nil). During the year
ended 30 June 2007 there was an increase in fair value of $4,610,000 (2006: $nil). Credit risk arises from the potential failure of
counterparties to meet their obligations under the respective contracts. This arises with amounts receivable from unrealised
gains on derivative financial instruments. The Group currently undertakes all its transactions in interest rate contracts with one
financial institution.
The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in note 23.
11. Inventories
Current
Development property – at cost
Land – at cost
Construction costs
Capitalised interest
Non-current
Development property – at cost
Land – at cost
Construction costs
Capitalised interest
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
9,540
1,848
625
12,013
–
–
–
–
–
–
–
–
9,540
169
339
10,048
1,140
–
–
1,140
–
–
–
–
–
–
–
–
1,140
–
–
1,140
At balance date the development property, which is situated at Bundall, Queensland, was subject to put and call options with an
expected settlement date in October 2007 (refer note 43).
Assets pledged as security
The Group has a loan secured by a registered first mortgage over the development property (refer note 23).
12. Other Current Assets
Prepayments
Deposits and other assets
13. Investment Properties Classified as Held for Sale
Investment properties – at fair value
Movement in assets held for sale
Balance 1 July
Transfer from investment properties
Balance 30 June
Consolidated
Parent
2007
$’000
1,108
–
1,108
156,452
–
156,452
156,452
2006
$’000
194
116
310
2007
$’000
–
–
–
2006
$’000
8
116
124
–
–
–
–
–
–
–
–
–
–
–
–
At balance date the investment property at 59 Goulburn Street, Sydney was subject to a sale contract which settled on 23 July
2007 (refer to note 43). The Bundall Corporate Centre investment property was subject to put and call options at 30 June 2007
with an expected settlement date in October 2007 (refer note 43).
As the investment properties are carried at fair value no material gain or loss on disposal is expected. The investment properties
are included in the property investment segment in note 39.
Notes to the Financial Statements continued
14. Investment Properties
Investment properties – at fair value
Movement in investment properties
Consolidated
Parent
2007
$’000
2006
$’000
927,113
–
2007
$’000
–
2006
$’000
–
Reconciliation of the carrying amounts of investment properties at beginning and end of the financial year is set out below:
Balance at 1 July
Balances assumed at stapling (refer note 33)
Additions at cost:
•
•
•
Acquisition price
Transaction costs
Improvements
Disposal - property held by the Trust
Disposal – property held by subsidiary (refer note 34)
Deconsolidation of CPF (refer note 34)
Transfer to assets held for sale
Straight-lining rentals
Lease incentives
Leasing costs
Net gain/(loss) from fair value adjustments
Balance at 30 June
–
1,388,280
22,725
1,356
1,224
(27,283)
(23,968)
(350,985)
(156,452)
1,374
493
570
69,779
927,113
Amounts recognised in profit and loss for investment properties
Rental from investment properties
Direct operating expense from property that generated rental income
60,702
(11,923)
48,779
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Assets pledged as security
Loans (refer note 23) are secured by fixed and floating charges over each investment property plus charges over any building
document, lease document, performance bond and bank guarantee in addition to a real property mortgage over each property.
Leases as a lessor
The investment properties are generally leased to tenants on long term operating leases with rentals payable monthly. Minimum
lease payments under the non-cancellable operating leases of the investment properties not recognised in the financial
statements are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
81,020
223,065
114,200
418,285
–
–
–
–
–
–
–
–
–
–
–
–
6
0
0
2
0
0
0
’
$
7
0
0
2
0
0
0
’
$
6
0
0
2
0
0
0
’
$
7
0
0
2
0
0
0
’
$
6
0
0
2
0
0
0
’
$
7
0
0
2
0
0
0
’
$
n
o
i
t
a
u
l
a
v
)
1
(
s
n
o
i
t
i
d
d
a
)
2
(
e
t
a
d
0
0
0
’
$
0
0
0
’
$
j
t
n
e
m
t
s
u
d
a
e
u
l
a
v
r
i
a
F
g
n
i
y
r
r
a
C
g
n
i
y
r
r
a
C
t
n
e
d
n
e
p
e
d
n
I
t
n
e
c
e
r
t
s
o
M
t
s
o
C
n
o
i
t
i
s
i
u
q
c
A
n
o
i
t
i
s
i
u
q
c
A
e
l
t
i
T
t
n
u
o
m
a
t
n
u
o
m
a
t
n
u
o
m
a
e
l
a
s
/
n
o
i
t
a
u
l
a
v
t
n
e
d
n
e
p
e
d
n
i
i
g
n
d
u
l
c
n
i
)
1
(
e
c
i
r
p
)
1
(
e
t
a
d
)
d
e
u
n
i
t
n
o
c
(
s
e
i
t
r
e
p
o
r
P
t
n
e
m
t
s
e
v
n
I
.
4
1
.
w
o
l
e
b
t
u
o
t
e
s
e
r
a
s
e
i
t
r
e
p
o
r
p
t
n
e
m
t
s
e
v
n
i
f
o
s
l
i
a
t
e
D
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
)
7
2
(
5
0
8
–
–
)
8
9
1
(
0
3
9
3
–
)
9
7
(
5
1
3
,
4
2
6
5
,
5
7
3
3
,
2
2
1
–
5
1
0
9
,
2
1
3
4
6
2
1
7
9
9
,
3
3
4
8
,
9
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
5
0
,
5
2
1
0
5
,
8
3
0
0
9
,
1
1
4
4
1
,
1
4
0
0
5
,
0
1
–
1
3
5
,
6
1
6
7
4
,
5
1
0
3
4
,
3
3
0
0
,
3
2
2
9
,
0
1
0
0
5
,
2
1
0
0
6
,
1
2
0
0
8
,
5
1
3
6
2
,
1
6
1
0
0
0
,
7
4
8
9
1
,
1
4
0
0
4
,
4
6
8
3
5
,
5
9
0
0
0
,
5
3
0
8
0
,
7
2
1
8
3
8
,
7
9
7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
,
5
2
0
0
5
,
8
3
0
0
9
,
1
1
0
0
0
,
1
4
0
0
5
,
0
1
–
0
0
5
,
6
1
0
5
4
,
5
1
0
0
4
,
3
0
0
0
,
3
0
0
6
,
0
1
0
0
5
,
2
1
0
0
6
,
1
2
0
0
8
,
5
1
6
0
0
2
c
e
D
6
0
0
2
c
e
D
7
0
0
2
n
u
J
6
0
0
2
c
e
D
6
0
0
2
c
e
D
d
l
o
S
6
0
0
2
n
u
J
6
0
0
2
n
u
J
6
0
0
2
n
u
J
6
0
0
2
c
e
D
6
0
0
2
n
u
J
7
0
0
2
n
u
J
7
0
0
2
n
u
J
7
0
0
2
n
u
J
5
2
8
,
8
1
8
0
4
,
3
3
0
2
6
,
0
1
1
6
0
,
7
3
1
3
6
,
9
2
3
4
,
4
3
4
1
9
,
6
1
8
7
0
,
7
1
5
8
7
,
3
0
8
4
,
2
5
7
9
,
0
1
9
2
3
,
8
7
8
1
,
2
1
1
2
8
,
1
1
8
7
7
,
7
1
0
2
4
,
0
3
0
0
7
,
9
0
0
0
,
4
3
0
0
9
,
8
0
0
9
,
1
3
0
0
9
,
5
1
0
0
0
,
6
1
0
0
5
,
3
0
0
3
,
2
0
0
9
,
9
0
0
6
,
7
0
0
1
,
1
1
0
0
9
,
0
1
3
0
0
2
b
e
F
d
l
o
h
e
e
r
F
D
L
Q
,
y
t
r
e
p
o
r
P
X
Q
N
3
0
0
2
r
p
A
d
l
o
h
e
e
r
F
A
S
,
e
r
t
n
e
C
h
t
u
o
m
y
a
W
y
r
n
e
H
3
0
0
2
n
u
J
d
l
o
h
e
e
r
F
C
I
V
,
e
r
t
n
e
C
n
o
i
t
u
b
i
r
t
s
i
D
n
a
m
l
l
e
H
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
C
I
V
,
e
r
o
t
s
l
o
o
W
s
r
e
m
r
a
f
s
e
W
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
C
I
V
i
,
a
m
e
n
C
g
n
o
l
e
e
G
e
g
a
l
l
i
V
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
C
I
V
,
e
r
t
n
e
C
y
t
i
C
e
g
a
l
l
i
V
S
A
T
,
e
s
u
o
H
e
n
o
f
a
d
o
V
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
S
A
T
,
x
e
l
p
m
o
C
a
m
e
n
C
t
r
a
b
o
H
i
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
S
A
T
,
n
o
t
s
e
c
n
u
a
L
e
g
a
l
l
i
V
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
D
L
Q
,
e
s
u
o
H
g
r
e
b
l
e
d
l
i
e
H
:
T
P
D
C
y
b
d
l
e
h
s
e
i
t
r
e
p
o
r
P
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
W
S
N
,
e
r
t
n
e
C
a
m
e
n
C
y
r
u
b
l
A
i
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
A
W
,
r
e
p
a
P
s
r
e
c
i
p
S
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
A
W
,
i
g
n
d
l
i
u
B
n
o
r
e
m
a
C
d
r
i
B
4
0
0
2
n
u
J
d
l
o
h
e
e
r
F
A
S
,
e
r
o
t
s
l
o
o
W
s
r
e
d
l
E
0
0
3
,
1
6
1
6
0
0
2
c
e
D
6
1
1
,
8
3
1
0
0
0
,
3
3
1
4
0
0
2
c
e
D
d
l
o
h
e
e
r
F
C
I
V
,
t
e
e
r
t
S
s
n
i
l
l
o
C
0
0
7
0
0
0
,
7
4
0
5
7
,
0
4
0
0
4
,
4
6
0
0
0
,
5
9
0
0
0
,
5
3
0
0
5
,
5
2
1
0
0
7
,
4
9
7
6
0
0
2
c
e
D
7
0
0
2
n
u
J
6
0
0
2
c
e
D
7
0
0
2
n
u
J
6
0
0
2
c
e
D
e
l
a
s
r
o
f
d
l
e
H
3
8
7
,
3
4
1
1
5
,
8
3
0
4
2
,
7
4
3
0
9
,
5
9
2
2
6
,
2
3
8
1
8
,
1
1
1
9
3
5
,
5
3
7
0
0
0
,
1
4
0
3
5
,
5
3
0
0
0
,
4
4
0
0
0
,
8
8
5
7
3
,
0
3
0
5
6
,
2
0
1
3
5
4
,
4
8
6
5
0
0
2
b
e
F
d
l
o
h
e
e
r
F
C
I
V
,
e
r
t
n
e
C
h
t
y
s
r
o
F
5
0
0
2
y
l
u
J
d
l
o
h
e
s
a
e
L
T
C
A
,
e
s
u
o
H
y
r
a
n
e
t
n
e
C
5
0
0
2
c
e
D
d
l
o
h
e
e
r
F
D
L
Q
,
e
r
t
n
e
C
e
t
a
r
o
p
r
o
C
l
l
a
d
n
u
B
5
0
0
2
c
e
D
d
l
o
h
e
e
r
F
C
I
V
,
t
e
e
r
t
S
e
b
o
r
T
a
L
0
8
3
6
0
0
2
n
a
J
d
l
o
h
e
e
r
F
6
0
0
2
r
a
M
d
l
o
h
e
e
r
F
W
S
N
,
v
A
a
i
r
o
t
c
i
V
5
7
4
A
S
,
t
S
l
l
e
f
n
e
r
G
1
0
1
.
6
0
0
2
r
e
b
m
e
c
e
D
n
i
n
o
i
t
c
a
s
n
a
r
t
g
n
i
l
p
a
t
s
e
h
t
o
t
r
o
i
r
p
s
a
w
h
c
i
h
w
t
s
u
r
T
e
h
t
r
o
f
t
s
o
c
d
n
a
e
c
i
r
p
,
e
t
a
d
n
o
i
t
i
s
i
u
q
c
a
l
a
n
i
g
i
r
o
s
e
s
i
r
p
m
o
C
.
t
s
u
r
T
e
h
t
y
b
d
e
n
i
a
t
b
o
n
o
i
t
a
u
l
a
v
t
n
e
d
n
e
p
e
d
n
i
t
n
e
c
e
r
t
s
o
M
)
1
(
)
2
(
a
m
o
u
n
t
s
c
l
a
s
s
i
fi
e
d
a
s
h
e
l
d
f
o
r
s
a
l
e
)
T
o
t
a
l
i
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
i
e
s
(
i
n
c
l
u
d
n
g
i
T
o
t
a
l
i
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
i
e
s
L
e
s
s
i
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
i
e
s
c
l
a
s
s
i
fi
e
d
a
s
h
e
l
d
f
o
r
s
a
l
e
L
o
v
e
t
t
T
o
w
e
r
,
W
o
d
e
n
,
A
C
T
L
e
a
s
e
h
o
l
d
D
e
c
2
0
0
6
F
o
r
u
m
P
r
o
p
e
r
t
i
e
s
,
G
o
l
d
C
o
a
s
t
,
Q
L
D
F
r
e
e
h
o
l
d
S
e
p
t
2
0
0
6
4
3
B
r
i
d
g
e
S
t
r
e
e
t
,
H
u
r
s
t
v
i
l
l
e
,
N
S
W
F
r
e
e
h
o
l
d
J
u
l
y
2
0
0
6
3
4
9
,
6
7
0
3
7
6
,
2
0
7
7
3
,
1
7
0
3
8
,
0
0
0
3
8
,
0
0
0
7
8
,
2
9
6
4
0
,
2
5
5
4
0
,
8
3
1
P
r
o
p
e
r
t
i
e
s
h
e
l
d
b
y
C
P
F
(
5
)
:
i
3
2
1
E
x
h
b
i
t
i
o
n
S
t
r
e
e
t
,
M
e
l
b
o
u
r
n
e
,
V
I
C
F
r
e
e
h
o
l
d
J
u
l
y
2
0
0
6
1
2
0
,
0
0
0
1
2
9
,
2
4
4
i
T
w
n
F
r
e
e
w
a
y
C
e
n
t
r
e
,
A
v
a
l
o
n
,
V
I
C
F
r
e
e
h
o
l
d
J
u
n
2
0
0
6
H
o
m
e
w
o
r
k
s
C
e
n
t
r
e
,
P
r
o
s
p
e
c
t
,
N
S
W
F
r
e
e
h
o
l
d
J
u
n
2
0
0
6
2
1
,
7
5
0
5
8
,
7
5
0
2
3
,
4
7
9
6
4
,
1
0
2
D
e
c
2
0
0
6
S
e
p
2
0
0
6
J
u
n
2
0
0
7
J
u
n
2
0
0
7
J
u
n
2
0
0
7
J
u
n
2
0
0
7
P
r
o
p
e
r
t
i
e
s
h
e
l
d
b
y
C
A
F
(
4
)
:
P
e
r
c
i
v
a
l
R
d
,
S
m
i
t
h
fi
e
l
d
,
N
S
W
F
r
e
e
h
o
l
d
J
u
n
2
0
0
7
2
2
,
7
2
5
2
3
,
9
6
8
J
u
n
2
0
0
7
1
5
0
,
7
5
0
1
6
5
,
3
2
1
S
c
r
i
v
e
n
e
r
B
u
i
l
d
n
g
i
,
C
a
n
b
e
r
r
a
,
A
C
T
L
e
a
s
e
h
o
l
d
J
u
n
2
0
0
0
P
r
o
p
e
r
t
i
e
s
h
e
l
d
b
y
S
y
n
d
i
c
a
t
e
s
(
3
)
:
Q
u
a
d
r
a
n
t
B
u
i
l
d
n
g
i
,
C
a
n
b
e
r
r
a
,
A
C
T
L
e
a
s
e
h
o
l
d
J
u
n
2
0
0
0
2
4
3
N
o
r
t
h
b
o
u
r
n
e
A
v
e
,
C
a
n
b
e
r
r
a
,
A
C
T
L
e
a
s
e
h
o
l
d
N
o
v
2
0
0
1
T
e
r
r
a
c
e
O
f
fi
c
e
P
a
r
k
,
B
r
i
s
b
a
n
e
,
Q
L
D
F
r
e
e
h
o
l
d
J
u
n
1
9
9
9
5
9
G
o
u
l
b
u
r
n
S
t
,
S
y
d
n
e
y
,
N
S
W
F
r
e
e
h
o
l
d
M
a
y
2
0
0
2
2
0
0
M
a
r
y
S
t
,
B
r
i
s
b
a
n
e
,
Q
L
D
F
r
e
e
h
o
l
d
J
u
n
2
0
0
1
1
0
,
7
5
0
5
,
8
0
0
2
3
,
5
5
0
1
3
,
6
0
0
6
7
,
8
0
0
2
9
,
2
5
0
1
1
,
9
4
9
6
,
7
6
5
2
5
,
6
0
5
1
5
,
2
6
1
J
u
n
2
0
0
7
J
u
n
2
0
0
7
J
u
n
2
0
0
7
J
u
n
2
0
0
7
6
9
,
5
8
5
H
e
l
d
f
o
r
s
a
l
e
3
6
,
1
5
6
J
u
n
2
0
0
7
1
0
0
,
0
0
0
–
–
–
–
–
–
–
–
2
8
5
,
7
2
7
1
4
,
7
2
5
9
,
7
5
0
3
3
,
2
0
0
3
6
,
0
0
0
9
2
,
0
5
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
2
7
,
1
1
3
(
1
5
6
,
4
5
2
)
1
,
0
8
3
,
5
6
5
–
–
–
–
–
–
–
–
2
8
5
,
7
2
7
1
4
,
7
2
5
9
,
7
5
0
3
3
,
2
0
0
3
6
,
0
0
0
9
2
,
0
5
2
1
0
0
,
0
0
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
9
,
7
7
9
–
–
–
–
–
–
–
–
3
9
,
9
3
6
1
,
9
2
5
3
,
9
9
1
8
,
6
9
3
2
,
6
9
7
5
9
5
2
2
,
0
3
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
4
.
I
n
v
e
s
t
m
e
n
t
P
r
o
p
e
r
t
i
e
s
(
c
o
n
t
i
n
u
e
d
)
d
a
t
e
(
1
)
p
r
i
c
e
(
1
)
i
n
c
l
u
d
n
g
i
i
n
d
e
p
e
n
d
e
n
t
v
a
l
u
a
t
i
o
n
/
s
a
l
e
a
m
o
u
n
t
a
m
o
u
n
t
a
m
o
u
n
t
T
i
t
l
e
A
c
q
u
i
s
i
t
i
o
n
A
c
q
u
i
s
i
t
i
o
n
C
o
s
t
M
o
s
t
r
e
c
e
n
t
I
n
d
e
p
e
n
d
e
n
t
C
a
r
r
y
i
n
g
C
a
r
r
y
i
n
g
F
a
i
r
v
a
l
u
e
a
d
u
s
t
m
e
n
t
j
$
’
0
0
0
$
’
0
0
0
d
a
t
e
(
2
)
a
d
d
i
t
i
o
n
s
(
1
)
v
a
l
u
a
t
i
o
n
$
’
0
0
0
2
0
0
7
$
’
0
0
0
2
0
0
6
$
’
0
0
0
2
0
0
7
$
’
0
0
0
2
0
0
6
$
’
0
0
0
2
0
0
7
$
’
0
0
0
2
0
0
6
(
1
)
C
o
m
p
r
i
s
e
s
o
r
i
g
i
n
a
l
a
c
q
u
i
s
i
t
i
o
n
d
a
t
e
,
p
r
i
c
e
a
n
d
c
o
s
t
f
o
r
t
h
e
S
y
n
d
i
c
a
t
e
s
,
C
A
F
a
n
d
C
P
F
w
h
i
c
h
w
a
s
m
o
s
t
l
y
p
r
i
o
r
t
o
t
h
e
m
e
r
g
e
r
(
5
)
(
4
)
(
3
)
(
2
)
a
n
d
s
t
a
p
l
i
n
g
t
r
a
n
s
a
c
t
i
o
n
s
i
n
D
e
c
e
m
b
e
r
2
0
0
6
.
M
o
s
t
r
e
c
e
n
t
i
n
d
e
p
e
n
d
e
n
t
v
a
l
u
a
t
i
o
n
o
b
t
a
i
n
e
d
b
y
t
h
e
S
y
n
d
i
c
a
t
e
s
,
C
A
F
a
n
d
C
P
F.
I
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
i
e
s
h
e
l
d
b
y
C
P
F
a
r
e
n
o
l
o
n
g
e
r
p
a
r
t
o
f
t
h
e
G
r
o
u
p
f
o
l
l
o
w
i
n
g
t
h
e
l
o
s
s
o
f
c
o
n
t
r
o
l
o
f
C
P
F
i
n
F
e
b
r
u
a
r
y
2
0
0
7
(
r
e
f
e
r
t
o
n
o
t
e
3
4
)
.
I
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
i
e
s
h
e
l
d
b
y
C
A
F
a
r
e
n
o
l
o
n
g
e
r
p
a
r
t
o
f
t
h
e
G
r
o
u
p
f
o
l
l
o
w
i
n
g
t
h
e
d
i
s
p
o
s
a
l
o
f
C
A
F
i
n
J
u
n
e
2
0
0
7
(
r
e
f
e
r
t
o
n
o
t
e
3
4
)
.
I
n
v
e
s
t
m
e
n
t
p
r
o
p
e
r
t
i
e
s
h
e
l
d
b
y
S
y
n
d
i
c
a
t
e
s
w
e
r
e
a
c
q
u
i
r
e
d
b
y
t
h
e
G
r
o
u
p
f
o
l
l
o
w
i
n
g
t
h
e
m
e
r
g
e
r
a
n
d
s
t
a
p
l
i
n
g
t
r
a
n
s
a
c
t
i
o
n
s
i
n
D
e
c
e
m
b
e
r
2
0
0
6
.
8
Notes to the Financial Statements continued
Valuation basis
Independent valuations of properties were carried out by qualified valuers with relevant experience in the types of property being
valued. Independent valuations are carried out at least every two years.
The value of investment properties is measured on a fair value basis, being the amounts for which the properties could be
exchanged between willing parties in an arm’s length transaction, based on current prices in an active market for similar
properties in the same location and condition and subject to similar leases. In assessing the value of the investment properties,
the independent valuers have considered both discounted cash flow and capitalisation methodologies.
15. Available-for-sale Financial Assets
Consolidated
Parent
Interests in managed investment schemes
• Cromwell Mary Street Planned Investment
• Cromwell Diversified Property Trust
Movement in available-for-sale financial assets:
Balance at 1 July
Reclassification other financial assets, at cost
Adjustment to fair value on adoption of AASB 132 and AASB 139:
• Interests in Cromwell Mary Street Planned Investment
• Interests in Cromwell Diversified Property Trust
Revaluation – fair value adjustment
Consolidation adjustment upon stapling (note 33)
2007
$’000
–
–
–
3,213
–
–
–
1,695
(4,908)
2006
$’000
2,938
275
3,213
–
1,389
889
175
760
–
2007
$’000
2006
$’000
–
275
275
275
–
–
–
–
–
–
275
275
–
100
–
175
–
–
275
Balance at 30 June
–
3,213
275
Under AGAAP the Group’s investment in Cromwell Mary Street Planned Investment was recognised at cost whereas under AASB
139 the investment was reclassified as available-for-sale and measured at fair value. At 1 July 2005 the difference between the
asset’s fair value and its carrying value of $889,000 was recognised directly in equity, net of tax of $267,000.
Available-for-sale financial assets are fully eliminated on consolidation following stapling on 19 December 2006.
16. Investments in Jointly Controlled Entity and Associate
The Group has an investment in a jointly controlled entity, Cromwell TGA Planned Investment (“TGA”), and an associate, Cromwell
Property Fund (“CPF”). The CPF was originally a controlled entity. Control was lost in February 2007 following the issue of units,
by the CPF, to external unitholders (refer note 34).
These entities were formed in Australia and their principal activity is property investment. The Group holds a two-thirds interest in
TGA which is held by the Trust. The remaining one-third interest is held by an external investor. The Group exercises joint control
over TGA, but neither the Group nor the other investor has control in its own right, irrespective of their ownership interest, as both
the Group and the other investor must consent to the strategic, financial and operating decisions relating to TGA. The investments
are accounted for in the consolidated financial statements using the equity method of accounting. Information relating to the
investments is detailed below:
Notes to the Financial Statements continued
Equity accounting information
Investments accounted for using the equity method:
TGA – jointly controlled entity
CPF – associate (1)
Ownership Interest
Consolidated
2007
%
67%
22%
2006
%
–
–
2007
$’000
52,349
13,896
66,245
2006
$’000
–
–
–
(1) Controlled entity from 19 December 2006. Associate and deconsolidated from 12 February 2007 (refer note 34).
Movement in the carrying value of the Group’s interest in its investments accounted for using the equity method during the 2007
financial year was as follows:
2007 – Consolidated
Investments acquired on stapling (refer note 33)
Transfer from controlled entity (refer note 34)
Gain on dilution (1)
Share of profit
Distributions received
Balance 30 June 2007
CPF
$’000
–
7,921
6,341
244
(610)
13,896
TGA
$’000
52,211
–
–
2,174
(2,036)
52,349
Total
$’000
52,211
7,921
6,341
2,418
(2,646)
66,245
(1) The gain on dilution of $6.341 million was recognised on the basis of the Group’s interest in the net assets attributable to unitholders of the CPF
increasing since deconsolidation following the raising of additional funds from external unitholders.
Details of the Group’s share of jointly controlled entity’s/associate’s financial information at balance date are as follows:
Assets
Investment properties – at fair value
Other assets
Liabilities
Borrowings
Other liabilities
Net assets attributable to members
Revenue
Profit attributable to members (1)
CPF
$’000
84,291
8,440
(76,944)
(1,891)
13,896
6,938
244
TGA
$’000
52,068
406
–
(125)
52,349
2,367
2,174
Total
$’000
136,359
8,846
(76,944)
(2,016)
66,245
(1) Represents share of profit during the period the interest was accounted for using the equity method.
0
The reporting dates of the jointly controlled entity and associate are the same as for the Group. The proportion of voting power
held equates to the proportion of ownership interest held except for TGA for which both the Group and the other investor must
consent to the strategic, financial and operating decisions. The jointly controlled entity and associate do not recognise income tax
expense or liabilities given their nature.
Investments in equity accounted entities are initially accounted for (recognised) at cost by the relevant entity holding the interest.
The carrying amount is reduced where the fair value of the underlying interest, primarily representing an indirect interest in a
share of an investment property, is less than cost or the equity accounted carrying amount.
There were no investments in jointly controlled entities or associates in 2006 or by the parent.
17. Investments in Controlled Entities
Shares in subsidiaries – at cost
Shares in Subsidiaries
Name
Cromwell Property Securities Limited
Cromwell Property Services Pty Ltd
Marcoola Developments Pty Ltd
Votraint No. 662 Pty Ltd
Peels Trust
Cromwell Capital Limited
Cromwell Finance Limited
Cromwell Operations Pty Ltd
Bundall Corporate Centre Holdings Pty Ltd
Bundall Corporate Centre Partnership
Consolidated
Parent
2007
$’000
-
2006
$’000
-
2007
$’000
475
2006
$’000
475
Country of
Formation
Equity Holding
Parent’s Investment
2007
%
2006
%
2007
$’000
2006
$’000
Carrying Value of
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
50
50
100
100
100
100
100
100
100
100
50
50
345
–
30
–
–
–
345
–
30
–
–
–
100
100
–
–
–
–
–
–
475
475
Notes to the Financial Statements continued
Trust and its Controlled Entities
Name
Cromwell CMBS Pty Ltd
Cromwell Loan Note Pty Ltd
Cromwell Holding Trust No 1
Cromwell Holding Trust No 2
Cromwell Holding Trust No 4
Cromwell Property Fund
Terrace Office Park Property Trust/Planned Investment
Cromwell Mary Street Property Trust/Planned Investment
Cromwell Goulburn Street Property Trust/Planned Investment
Cromwell Northbourne Planned Investment
Cromwell Planned Investment #3
Country of
Formation
Equity Holding
2007
%
2006
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
* The Trust and its controlled entities listed above are consolidated as part of the Group as required under accounting standards (refer to note 1(b)).
The Trust owns 100% of each of its controlled entities except for Cromwell Mary Street Planned Investment for which it owns 92%. The other 8% is
held by a subsidiary of the parent (being Cromwell Property Securities Limited). The units in the Trust are stapled with the shares of the parent as
described in note 33.
Cromwell Property Securities Limited (“CPS”) holds an Australian Financial Services Licence (AFSL) and acts as responsible
entity for the managed investment schemes managed by the Group. The AFSL requires CPS to maintain net tangible assets of $5
million. As such CPS is restricted from paying dividends to the parent entity that would breach its licence conditions. Refer also to
note 35.
Bundall Corporate Centre Holdings Pty Ltd (“BCCH”) is the nominee for the Bundall Corporate Centre Partnership which the
parent entity holds a 50% interest but controls through the appointment of a chairman with a casting vote. The partnership was
formed during the 2006 financial year to lease property at Bundall on the Gold Coast from Cromwell Diversified Property Trust.
Under the arrangement the partnership was to develop the land (included in inventories – note 11). However, at 30 June 2007 the
property was subject to put and call options with an expected settlement date in October 2007. Any profit earned will be shared
between the parent and the outside joint venture partner. Apart from the holding of the land, the partnership has had no other
significant trading. In particular, it has had no significant revenue, expense or equity contributions.
18. Other Financial Assets
Non-current
Convertible financing units
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
61,250
–
–
–
The Group holds 61,250,000 (2006: nil) convertible financing units (CFUs). CFUs are a debt instrument issued by the Cromwell
Property Fund (“CPF”). All CFUs on issue are held by the Group and were issued at $1 each and are repayable at $1 each. CFUs
have been issued by CPF to fund the acquisition of investment properties, and are expected to be repaid by the maturity date of
3 July 2008 from the proceeds of the issue of ordinary units by CPF. CFUs earn interest at a floating rate equal to the bank bill
swap rate, plus a margin of 0.70%, which equated to a rate of 7.1% at 30 June 2007. The net fair values of other financial assets
approximate their carrying values.
19. Property Plant and Equipment
Property under construction – at cost
8,507
–
Leasehold improvements – at cost
Accumulated depreciation
Plant and equipment – at cost
Accumulated depreciation
Plant and equipment under finance lease – at cost
Accumulated depreciation
697
(213)
484
990
(525)
465
514
(176)
338
9,794
691
(158)
533
868
(374)
494
512
(136)
376
1,403
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
Notes to the Financial Statements continued
Reconciliations of the carrying amounts of each class of property, plant and equipment are set out below.
Property Under
Construction
Leasehold
Improvements
$’000
$’000
Plant and Equipment
Owned
$’000
Under Lease
$’000
533
8
–
(57)
484
425
171
–
(63)
533
–
–
494
172
(38)
(163)
465
444
206
–
(156)
494
–
–
376
2
–
(40)
338
407
16
–
(47)
376
–
–
Consolidated
Carrying amount at 1 July 2006
Additions
Disposals
Depreciation
Carrying amount at 30 June 2007
Carrying amount at 1 July 2005
Additions
Disposals
Depreciation
Carrying amount at 30 June 2006
Parent
Carrying amount at 30 June 2007
Carrying amount at 30 June 2006
(1) Represented by:
Acquired on stapling
Additions at cost
• Acquisition price
• Transaction costs
• Construction costs
• Holding costs
• Capitalised interest
–
33,004 (1)
(24,497) (2)
–
8,507
–
–
–
–
–
–
–
2007
$’000
24,163
7,100
364
225
866
286
33,004
(2) Disposal of $24,497,000 was recognised on sale of units in Cromwell Accumulation Fund – refer note 34.
Assets pledged as security
Loans (refer note 23) are secured by a registered floating charge over the assets of the Trust.
Total
$’000
1,403
33,186
(24,535)
(260)
9,794
1,276
393
–
(266)
1,403
–
–
20. Deferred Tax Assets
Deferred tax assets
Deferred tax assets and liabilities are attributable to the following:
Receivables
Interests in managed investment schemes
Plant and equipment
Payables
Employee benefits
Provisions
Lease incentives
Other
Tax losses recognised
Movement in deferred tax assets
Balance 1 July
Change on adoption of AASB 132 & AASB 139
• Reserve – available-for-sale financial assets
• Accumulated losses
Reduction in current tax liability on use of tax losses previously
recognised
Credited to income statement
Prior year tax losses recognised (note 6)
Charged to reserve (note 28)
Balance 30 June
Consolidated
Parent
2007
$’000
5,005
675
(1,562)
–
86
186
30
1
–
5,589
5,005
2006
$’000
3,902
127
(720)
(2)
19
137
28
13
12
4,288
3,902
2007
$’000
5,860
284
(13)
–
–
–
–
–
–
2006
$’000
4,357
75
(6)
–
–
–
–
–
–
5,589
5,860
4,288
4,357
3,902
2,569
4,357
2,931
–
–
(1,569)
311
2,870
(509)
5,005
(267)
120
(1,658)
357
3,009
(228)
3,902
–
–
(1,569)
202
2,870
–
5,860
–
–
(1,643)
75
2,994
–
4,357
The benefit of temporary differences and prior year tax losses recognised as a deferred tax asset was based on projected earnings
over a limited period that the directors considered to be probable. Projected earnings have been re-assessed at each reporting
date. There remains a significant amount of tax losses that have not been recognised as a deferred tax asset (refer note 6).
21. Intangible Assets
Software – at cost
Accumulated amortisation
849
(481)
368
686
(347)
339
–
–
–
–
–
–
Software has been acquired externally. Amortisation of software is included in amortisation/depreciation expense in the income
statement.
Reconciliations of the carrying amounts of software are set out below:
Carrying amount at 1 July
Additions – acquired separately
Disposals
Amortisation
Carrying amount at 30 June
339
230
(47)
(154)
368
271
182
–
(114)
339
–
–
–
–
–
–
–
–
–
–
Notes to the Financial Statements continued
22. Trade and Other Payables
Trade payables and accruals
Security deposits
Consolidated
Parent
2007
$’000
13,530
390
13,920
2006
$’000
2,932
–
2,932
2007
$’000
181
–
181
2006
$’000
660
–
660
Trade and other payables are generally unsecured, non-interest bearing and paid within 30-60 days of recognition.
The net fair values of trade and other payables approximate their carrying values.
23. Borrowings
Current
Secured
Loans – financial institutions
Debentures
Lease liabilities
Non-Current
Secured
Commercial mortgage backed security notes
Debentures
Lease liabilities - development property
- other
Unsecured
Property preference shares
144,106
9,812
75
153,993
427,993
4,692
–
77
432,762
211
432,973
–
9,827
104
9,931
–
10,129
8,400
151
18,680
211
18,891
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
211
211
211
211
Commercial Mortgage Backed Security (“CMBS”) Note Issue
The CMBS facility, repayable in April 2009, is secured by first registered mortgages cross-collateralised over investment
properties held by the Group (refer note 14) and a registered floating charge over the assets of the Trust. Interest is payable to the
note holders monthly in arrears at variable rates based on a margin over the 30 day BBSW rate which was 6.33% at balance date.
The CMBS note issue of $429 million (face value) comprises five tranches rated by Standard and Poors, comprising 266 million
Class A notes (AAA), 42 million Class B notes (AA), 43 million Class C notes (A), 56 million Class D notes (BBB) and 22 million
Class E notes (BBB-). Of the $429 million raised through the CMBS note issue, $288 million is effectively at fixed interest rates
through interest rate swap arrangements (refer note 10).
Financial Institution Loans
Details regarding financial institution (bank) loans at balance date are as follows:
Loan on investment in Cromwell TGA Planned Investment (see note 16)
Amount
Security
$27 million
First registered mortgage over the TGA property and a registered floating charge over the assets of the TGA
(these assets are reflected in the carrying value of the investment in jointly controlled entity)
Maturity date
October 2007
Interest rate
6.89% variable (the loan is effectively fixed through interest rate swap arrangements to 10/08/2010)
Loan on development property (see note 11)
Amount
Security
$5.95 million
First registered mortgage over the development property and a registered floating charge over the assets of
the Trust specific to the development property
Maturity date
October 2007
Interest rate
6.94% variable
Loans over investment properties held by Syndicates
Amount
Security
$111.6 million
First registered mortgages over Syndicate investment properties (excluding Northbourne property which is
included as security for the CMBS) and a registered floating charge over the assets of the Trust
Maturity date
October 2007
Interest rate
6.94% variable
The amount of the CMBS note issue and loans shown above comprise the gross value of the respective borrowings.
Under accounting standards the amounts recognised in the balance sheet are net of transaction costs which are subsequently
amortised using the effective interest method.
Debentures
Cromwell Finance Limited (“CFL”), a controlled entity, has issued a prospectus for the issue of up to $50 million (2006:
$30 million) of fixed interest debentures. The term of the debentures varies between 1 – 3 years. The debentures are secured
by a first ranking charge over all of the assets of CFL. The assets of CFL comprise cash and cash equivalents of $381,000 (2006:
$8,855,000), loans receivable from other Group entities of $14,718,000 (2006: $7,618,000) and loans receivable from other persons
of $nil (2006: $3,725,000). Payment of interest and principal is guaranteed by Cromwell Corporation Limited. The proceeds of the
debentures are principally used to assist in property and property finance related transactions. The interest rate is fixed for the
term of each debenture and is payable at an effective rate of 8% (2006: 8-9%). Interest is payable monthly in arrears and principal
is repayable at varying times throughout the year on maturity of the relevant debentures.
Lease Liabilities
Lease liabilities are effectively secured as the rights to the relevant assets (being leased property, plant and equipment) revert to
the lessor or financier in the event of default.
The development property lease liabilities recognised by the Group in 2006 are now eliminated on consolidation as a result of the
stapling transaction in December 2006 (as the lessee and lessor both form part of the Group).
Notes to the Financial Statements continued
Finance Facilities
The Group has no unused finance facilities.
Interest Rate Risk
The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in the
following table.
Fixed interest rate maturing in
Floating
interest rate
$’000
1 year
or less
$’000
Over 1
to 2 years
$’000
Over 2
to 3 years
$’000
Over 3
to 4 years
$’000
Over 4
to 5 years
$’000
Over
5 years
$’000
Total
$’000
2007
CMBS note issue
Financial institution loans
Debentures
Lease liabilities
Property preference shares
Interest rate swaps *
427,993
144,106
–
–
–
–
–
–
–
9,812
4,692
75
211
77
–
–
–
–
–
–
–
–
–
–
–
(315,255)
5,820
99,450
256,844
15,918
104,219
15,060
15,060
76,745
76,745
Weighted average interest rate %
6.28%
6.81%
5.45%
5.59%
5.50%
2006
Debentures
Property development lease
Lease liabilities
Property preference shares
Weighted average interest rate %
* notional principal amounts
–
–
–
–
–
–
9,827
10,129
–
104
–
–
151
211
9,931
10,491
8.4%
8.4%
–
–
–
–
–
–
–
–
–
–
–
–
The net fair values of borrowings approximate their carrying values.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
118,180
427,993
144,106
14,504
152
211
–
118,180
586,966
–
5.81%
–
19,956
8,400
8,400
–
–
255
211
8,400
28,822
10.0%
8
24. Dividends/Distributions Payable
Dividends/distributions payable
Dividends/distributions
Consolidated
Parent
2007
$’000
15,740
2006
$’000
–
2007
$’000
5,590
2006
$’000
–
The dividends/distributions payable relates to the final June 2007 dividend/distribution for the Group, declared with a record date
of 29 June 2007 and paid 31 August 2007 (refer note 31).
25. Provisions
Current
Employee benefits
Non-Current
Employee benefits
Restoration
Restoration
526
94
100
194
394
62
92
154
–
–
–
–
–
–
–
–
The Group’s operating leases of its premises requires the asset to be returned to the lessor in a lease stipulated condition. The
operating lease payments do not include an element for the refurbishment costs. A provision for refurbishment costs (make good
obligations) is recognised over the period of the lease, measured at each reporting date as the expected cost of returning the
asset to its agreed condition. Movements in provision for restoration were as follows:
Balance 1 July
Additional provisions recognised
Unused amounts reversed
Balance 30 June
26. Other Current Liabilities
Lease incentive
Unearned income
Unearned income comprises rent paid in advance by tenants.
92
8
–
100
3
3,859
3,862
84
8
–
92
44
–
44
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes to the Financial Statements continued
27. Contributed Equity
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
Share Capital
698,783,980 (2006: 152,329,146) fully paid ordinary shares
43,347
42,391
43,347
42,391
Effective 1 July 1998, the corporations legislation in place abolished the concepts of authorised capital and par value shares.
Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.
Movements in ordinary share capital
Balance – 30 June 2005
Purchase of treasury shares by ESOP
Issue of treasury shares to employees for cash on exercise of options
Balance – 30 June 2006
Issue of treasury shares to employees for cash on exercise of options
Reconstruction of issued equity on a 0.8879:1 basis prior to stapling – refer note 33
Issue of shares for stapling – refer note 33
Shares issued as payment to advisor
DRP issue – 20 March 2007 (1)
DRP issue – 21 May 2007 (1)
Issue of treasury shares to employees for cash on exercise of options
No. of Shares
151,697,896
(500,000)
500,000
506,250
125,000
{
152,329,146
3,145,000
(17,428,250)
556,969,129
695,015,025
462,963
1,485,360
1,718,992
101,640
$’000
42,339
(200)
50
152
50
42,391
748
–
139
43,278
8
28
32
1
Balance – 30 June 2007
698,783,980
43,347
(1) The Group has established a distribution reinvestment plan (DRP) under which stapled securityholders may elect to have all or part of their
dividend/distribution entitlements satisfied by the issue of new stapled securities rather than being paid in cash.
The basis of allocation of the issue price of stapled securities issued post stapling is determined by agreement between the
Company and the Trust as set out in the Stapling Deed.
Treasury shares are held by the Employee Share Ownership Plan (ESOP) (refer note 42). Total number of fully paid ordinary shares
at balance date comprises:
2007
Number
698,783,980
936,096
699,720,076
2006
Number
152,329,146
4,313,750
156,642,896
Ordinary shares as shown above
Treasury shares held by ESOP
0
Stapled Securities
The ordinary shares of the Company are stapled with the units of the Trust. These entitle the holder to participate in dividends and
distributions as declared from time to time and the proceeds on winding up. On a show of hands every holder of stapled securities
present at a meeting in person, or by proxy, is entitled to one vote, and upon a poll each stapled security is entitled to one vote.
A reconciliation of the stapled number of ordinary shares of the Company and ordinary units of the Trust is as follows:
Ordinary shares / ordinary units
Treasury stapled securities held by ESOP *
Unstapled units (held by the Company)
Company
Number
Trust
Number
698,783,980
699,995,182
936,096
–
–
(275,106)
699,720,076
699,720,076
* The ESOP holds a similar number of Trust units which are included in the total of 699,995,182 units.
Options
Information relating to the Employee Share Ownership Plan (ESOP), including details of options issued, exercised and lapsed
during the financial year, is set out in note 42.
28. Reserves
Share based payments
Available-for-sale financial assets
Movements in reserves
Share based payments
Balance 1 July
Options expensed
Balance 30 June
Consolidated
Parent
2007
$’000
610
2,340
2,950
328
282
610
2006
$’000
328
1,154
1,482
36
292
328
2007
$’000
2006
$’000
610
–
610
328
282
610
328
–
328
36
292
328
The share based payments reserve is used to recognise the fair value of options issued for goods and services including employee
services.
Available-for-sale financial assets
Balance 1 July
1,154
–
Adjustment on adoption of AASB 132 and AASB 139:
• gross
• deferred tax
Revaluation:
• gross
• deferred tax
Balance 30 June
–
–
1,154
1,695
(509)
2,340
889
(267)
622
760
(228)
1,154
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Notes to the Financial Statements continued
Changes in the fair value of investments classified as available-for-sale are taken to the available-for-sale financial assets reserve.
Amounts are recognised in profit or loss when the associated assets are disposed/sold or impaired. The balance at year end
comprises a reserve of a subsidiary attributable to its pre-stapling interest in a Syndicate which continues to be held.
29. Accumulated Losses
Movements in accumulated losses
Accumulated losses 1 July
Adjustment on adoption of AASB 132 and AASB 139, net of tax (1)
Net profit for the year
Dividends paid/payable
Accumulated losses 30 June
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
(27,248)
(32,605)
(30,115)
(34,875)
–
8,620
(12,584)
(31,212)
(280)
7,894
(2,257)
(27,248)
–
6,362
(12,584)
(36,337)
–
7,017
(2,257)
(30,115)
(1) This adjustment related to remeasurement of a receivable in accordance with AASB 139 upon its adoption.
30. Minority Interests
Minority interests in:
Contributed equity
Reserves
526,145
131,834
657,979
–
–
–
Application of AASB Interpretation 1002 Post-Date-of-Transition Stapling Arrangements and AASB 3 Business Combinations
requires, for stapling arrangements which do not involve one of the combining entities obtaining an ownership interest in another
combining entity, the net assets and profit or loss of the consolidated acquiree to be identified as minority interests. Even though
the interests of the equity holders of the identified acquiree (the Trust) are treated as minority interests (as above) the equity
holders of the acquiree are also equity holders in the acquirer (the Company) by virtue of the stapling arrangement.
Up to 1 June 2007 the minority interests in contributed equity and reserves were recorded as a liability, net assets attributable to
unitholders. On 1 June 2007 the constitution of the Trust was amended and net assets attributable to unitholders were transferred
to contributed equity and reserves. A reconciliation of the movement is as follows:
Opening net assets attributable to unitholders – note 33
Distributions before 1 June 2007 – note 31
Unitholders’ finance costs
Other
Reclassified on 1 June 2007:
Transfer to contributed equity
Transfer to reserves
$’000
583,970
(20,928)
98,265
(276)
661,031
526,119
134,912
661,031
31. Dividends/Distributions
Dividends paid/payable
Final dividend for the year ended 30 June 2005 of 1.5 cents per fully paid ordinary share paid
on 15 November 2005:
• Fully franked based on tax paid @ 30% - 0.5 cents per share
• Unfranked – 1.0 cents per share
Final dividend for the year ended 30 June 2006 of 4.5 cents per fully paid ordinary share paid
on 12 October 2006:
• Fully franked based on tax paid @ 30% - 1.5 cents per share
• Unfranked – 3.0 cents per share
Interim dividend (stapling) of 0.1 cents per fully paid ordinary share paid on 18 December 2006
(fully franked based on tax paid @ 30%) (1)
Final dividend for the year ended 30 June 2007 of 0.8 cents per fully paid ordinary share,
declared with a record date of 29 June 2007 and paid on 31 August 2007:
• Fully franked based on tax paid @ 30% - 0.27 cents per share
• Unfranked – 0.53 cents per share
Dividends not recognised at year end
In the current year the final dividend of 0.8 cents per fully paid ordinary share was declared
prior to year end with a record date of 29 June 2007. In 2006, after the year end, the directors
declared the payment of a final dividend of 4.5 cents per fully paid ordinary share, partly
franked (1.5 cents) based on the tax paid at 30%. The aggregate amount of proposed dividend
paid out of the profit for the 2006 year, but not recognised as a liability at 30 June 2006, was:
(1) Applied to subscribe for units in Cromwell Diversified Property Trust on behalf of shareholders.
Parent
2007
$’000
2006
$’000
–
–
752
1,505
2,285
4,570
139
1,863
3,727
–
–
–
–
–
12,584
2,257
–
6,855
Franked dividends
Franking credits available for subsequent financial years based on a tax rate of 30% (2006
– 30%)
63
1,033
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The impact on the franking account of the dividend recommended by the directors since year end, but not recognised
as a liability at year end, will be a reduction in the franking account of $nil (2006: $982,000).
3
Notes to the Financial Statements continued
Distributions paid/payable by the Trust
At stapling
Interim stapling distribution of 0.025 cents per fully paid ordinary unit
paid on 18 December 2006 (1)
After stapling up to 1 June 2007 (2)
Interim distribution of 1.5 cents per fully paid stapled security paid on 20 March 2007
Interim distribution of 1.5 cents per fully paid stapled security paid on 21 May 2007
After 1 June 2007 (3)
Final distribution for the year ended 30 June 2007 of 1.45 cents per fully paid stapled security,
declared with a record date of 29 June 2007 and paid on 31 August 2007
Consolidated
2007
$’000
2006
$’000
139
10,458
10,470
20,928
10,150
–
–
–
–
–
(1) Applied to subscribe for shares in Cromwell Corporation Limited on behalf of unitholders.
(2) These distributions are included in unitholders’ finance costs in the income statement. This treatment is due to the limited life of the Trust up to
1 June 2007.
(3) This distribution is recognised in the consolidated statement of changes in equity due to the amendment of the Trust’s constitution on 1 June 2007.
(4) All distributions from the Trust are unfranked.
The determination of the Trust’s distributable income excludes unrealised gains including fair value increments to investment
properties.
Dividends/distributions paid in cash, payable at balance date or satisfied by the issue of securities under the reinvestment plan
during the year were as follows:
Paid in cash (1)
Satisfied by issue of securities (2)
Payable at balance date
(1) Excludes distributions paid at stapling.
(2) Recognised, in part, by both the Company and the Trust.
Consolidated
Parent
2007
$’000
24,232
3,690
15,740
43,662
2006
$’000
2,257
–
–
2,257
2007
$’000
6,994
–
5,590
12,584
2006
$’000
2,257
–
–
2,257
32. Earnings per Share
Basic earnings per share
Diluted earnings per share
Earnings used to calculate basic and diluted earnings per share
Profit for the year
Profit attributable to minority interest
Profit attributable to ordinary equity holders of the company used in
calculating basic/diluted earnings per share
Weighted average number of ordinary shares used in calculating
basic earnings per share
Effect of dilutive securities:
- Director and employee share options
Weighted average number of ordinary shares and potential ordinary
shares used in calculating diluted earnings per share
Consolidated
2007
1.24¢
1.24¢
2006
1.14¢
1.14¢
$’000
$’000
15,692
(7,072)
7,894
–
8,620
7,894
Number of
Shares
Number of
Shares
694,363,728
690,907,268
682,365
1,989,777
695,046,093
692,897,045
Options granted under the Employee Share Ownership Plan are considered to be potential ordinary shares and have been
included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been
included in the determination of basic earnings per share. Details relating to the options are set out in note 42.
The weighted average number of ordinary shares used in calculating basic and diluted earnings per share includes adjustments
for the pre-stapling reconstruction and stapling issue of 556,969,129 ordinary shares as these transactions were not associated
with a corresponding change in resources. Prior year comparatives have also been adjusted.
Notes to the Financial Statements continued
33. Business Combination / Stapling
(a) Summary of Acquisition
On 19 December 2006 the Company, under the provisions of a Stapling Deed, stapled all its issued ordinary shares with the issued
units of the Trust to form the Cromwell Group. Prior to the stapling, between 13 December 2006 and 15 December 2006, the
Trust merged with five other Cromwell managed investment schemes collectively referred to as the Syndicates. These Syndicates
were Cromwell Mary Street Planned Investment, Terrace Office Park Planned Investment, Cromwell Planned Investment No. 3,
Cromwell Northbourne Planned Investment and Cromwell Goulburn Street Planned Investment. Each of these Syndicates also
had an associated trust, which also participated in the Merger.
On 19 December 2006 each Company share was consolidated into 0.8879 restructured shares. A stapling dividend of $0.001 was
paid to each shareholder for each restructured share held. The Company, on behalf of each shareholder, applied the stapling
dividend to subscribe for one unit in the Trust for $0.001 each. On receipt of the subscription amount, Cromwell Property
Securities Limited (“CPS”), a 100% owned subsidiary of the Company and the Responsible Entity of the Trust, issued to each
shareholder one unit in the Trust for each restructured share held. In addition, on 19 December 2006, the Trust paid a stapling
distribution to each unitholder of the Trust of $0.00025 per unit. CPS, on behalf of the unitholders of the Trust, applied the stapling
distribution to subscribe for one restructured share in the Company for $0.00025 each. On receipt of the subscription amount, the
Company issued to each unitholder one share in the Company for each unit held.
The provisions of the Stapling Deed, the Company Replacement Constitution and amended Trust Constitution together took effect
from 19 December 2006 and by operation of these documents each restructured share became stapled to one Trust unit.
For relevant stapling arrangements Australian Accounting Standards require an acquirer to be identified and the general
principles in AASB 3 Business Combinations to be applied. In relation to the stapling of the Company and the Trust, the Company
has been identified as the acquirer. The following additional accounting principles have also been applied:
(i) no goodwill has been recognised on acquisition of the Trust because no direct ownership interest was acquired by the
Company in the Trust;
(ii) the equity issued by the Company to the Trust unitholders to give effect to the transaction is recognised at the dollar value
of the consideration paid by the Trust unitholders. This is because the issue of shares by the Company was administrative in
nature rather than for the purposes of the Company acquiring an ownership interest in the Trust. The consideration paid by
the Trust unitholders was a nominal amount of $139,242. The issue of units by the Trust to the Company shareholders was
treated similarly; and
(iii) the issued units of the Trust are not owned by the Company. As the Trust was a limited life trust its issued units were treated
as a liability rather than equity until amendment of the Trust constitution on 1 June 2007 and were presented as net assets
attributable to unitholders in the balance sheet. Following the amendment to the Trust’s constitution the net assets of the
Trust are now identified as minority interests and presented as such in the consolidated balance sheet within equity.
The Trust contributed revenue and other income of $150,375,000 and profit before unitholders’ finance costs of $107,199,000 to
the Group for the period from 19 December 2006 to 30 June 2007. It also contributed net profit of $7,072,000 to the Group for the
same period. If the acquisition had occurred on 1 July 2006, consolidated revenue and other income and consolidated profit before
unitholders’ finance costs for the year ended 30 June 2007 would have been $290,537,000 and $201,415,000 respectively. The net
profit would not have changed given the limited life nature of the Trust resulted in it recording no net profit (as the ‘profits’ are
reflected in unitholders’ finance costs while the issued units are treated as a liability).
(b) Assets and Liabilities Acquired
The assets and liabilities arising from the acquisition of the Trust at the date of stapling were as follows:
Cash and cash equivalents
Trade and other receivables
Other financial assets
Derivative financial assets
Other assets
Property, plant and equipment
Investment properties
Investment in jointly controlled entity
Deposits and preliminary costs
Lease receivable
Trade and other payables
Other liabilities
Borrowings
Net assets attributable to unitholders (1)
Net assets
Acquiree’s
Carrying
Amount
$’000
11,761
3,646
110
12,439
921
24,163
Fair
Value
$’000
11,761
3,646
110
12,439
921
24,163
1,388,280
1,388,280
52,211
2,273
8,400
(23,690)
(4,957)
(891,587)
(583,970)
–
52,211
2,273
8,400
(23,690)
(4,957)
(891,587)
(583,970)
–
(1) At the date of stapling the Trust had a limited life. Accordingly, under AASB 132 unitholders’ interests were treated as a liability.
(c)
Inflow/Outflow of Cash
Inflow/outflow of cash on acquisition, net of cash acquired:
Payment by the Company for 139,083,632 units in the Trust
Payment by the Trust for 556,969,129 shares in the Company
Cash balances acquired
Net cash inflow
34. Subsidiaries Deconsolidated/Disposed
Cromwell Property Fund (“CPF”)
Consolidated
$’000
Parent
$’000
(139)
139
11,761
11,761
(139)
139
–
–
CPF was a subsidiary of the Trust at the date of stapling. A Product Disclosure Statement (PDS) was issued by CPF prior to the
date of stapling to raise capital from external investors. These funds were used to purchase additional investment properties and
repay short term loans associated with the purchase of investment properties. External investors have subscribed for units in CPF
via the PDS, diluting the Trust’s ownership interest. At 30 June 2007 the Trust’s ownership interest in CPF was 22%.
Notes to the Financial Statements continued
As a result of the above the Trust lost control of CPF on 12 February 2007 at which time the following net assets of CPF were
deconsolidated from the Group:
Cash and cash equivalents
Trade and other receivables
Other assets
Derivative financial instruments
Investment properties
Trade and other payables
Other current liabilities – unearned revenue
Other liabiliti–s - CFUs
Borrowings – financial institutions/other lenders
Net assets attributable to unitholders - the Trust
Net assets attributable to external unitholders
Net assets deconsolidated
Outflow of cash on deconsolidation
Cash received on deconsolidation
Less: cash balances deconsolidated
Net cash outflow
$’000
6,060
859
607
3,358
350,985
(4,472)
(1,236)
(61,250)
(278,822)
(7,921)
(8,168)
–
–
(6,060)
(6,060)
Since deconsolidation, the Group has accounted for CPF using the equity method of accounting – refer note 16.
Cromwell Accumulation Fund (“CAF”)
The CAF was formed on 10 November 2006. The CAF issued 700 units at $1 each. All units were acquired by the Trust. During the
year the CAF acquired land at Lenore Lane, Erskine Park, NSW and investment property at Percival Road, Smithfield, NSW. The
land at Erskine Park was classified as property under construction and development.
On 14 June 2007 the Trust effectively disposed of the units in CAF to CPF at cost of $700. The net assets disposed of are as
follows:
Cash and cash equivalents
Trade and other receivables
Other assets
Investment properties
Property, plant and equipment (property under construction and development)
Trade and other payables
Other current liabilities – unearned revenue
Borrowings – financial institutions
Borrowings – from the Trust
Net assets disposed
Outflow of cash on disposal, net of cash disposed
Cash consideration received
Less: cash balances disposed
Net cash outflow
8
$’000
23
5
304
23,968
24,497
(663)
(150)
(34,412)
(13,572)
–
1
(23)
(22)
35. Cashflow Information
(a)
Reconciliation of Profit for the Year to Net Cash
Provided by Operating Activities
Profit for the year
Tax credit
Tax paid
Reimbursements received from tax consolidated entities
Finance costs - unitholders
Amortisation and depreciation
Amortisation (loan establishment costs)
Bad and doubtful debts
Share of profits of jointly controlled entity/associate
(net of distributions)
Gain on sale of investment property
Share based payments
Net gain on fair value adjustments of:
• Investment properties
• Interest rate derivatives
Gain on dilution of interest in associate
Other
Changes in operating assets and liabilities*:
(Increase)/decrease:
• Trade and other debtors
• Prepayments
• Inventories
Increase/(decrease):
• Trade and other payables
• Provisions
• Unearned revenue
Net cash provided by operating activities
* Net of effects of acquisition/disposal of subsidiaries.
(b) Non-Cash Activities
Securities issued on reinvestment of distributions (1)
Securities issued as payment to advisor (1)
Acquisition of development property (inventories) acquired by means of
finance lease (2)
Acquisition of held for trading financial assets and assignment of vendor
bank debt (3)
Acquisition of plant and equipment by means of finance lease
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
15,692
(723)
(956)
–
98,265
414
1,089
–
228
(4,963)
282
(69,779)
(4,610)
(6,341)
286
(6,449)
(799)
(1,965)
7,483
172
288
27,614
3,690
500
–
–
2
7,894
(779)
(130)
–
–
380
–
249
–
–
292
–
–
–
204
(2,351)
(132)
(1,648)
1,184
192
(7)
5,348
–
–
8,400
13,500
16
6,362
(1,273)
(956)
1,106
–
–
–
–
–
–
282
–
–
–
–
153
124
–
(479)
–
–
5,319
60
8
–
–
–
7,017
(1,603)
(130)
1,042
–
–
–
249
–
–
292
–
–
–
–
(3,281)
(124)
(1,140)
392
–
–
2,714
–
–
–
13,500
–
(1) Recognised in part by both the Company and the Trust (the Trust’s share is included in minority interest while the Company’s share is included
in share capital).
(2) The finance lease was arranged between a subsidiary of the Company and the Trust pre-stapling. It is now eliminated on consolidation.
(3) On disposal of the interests in Cromwell TGA the financial assets and related bank debt were also assigned to the acquirer (the Trust) in 2006 –
see note 9.
In addition to the above notes 33 and 34 detail other non-cash acquisitions and disposals.
Notes to the Financial Statements continued
(c) Finance Facilities
The Group had no available finance facilities at balance date (2006: nil).
(d) Cash held by Cromwell Property Securities Limited (“CPSL”)
At 30 June 2007 cash was held by CPSL, a controlled entity, of $3.3 million (2006: $6.9 million). Of this amount,
approximately $0.5 million (2006: $2.4 million) was held as part of the net tangible assets (NTA) required to be maintained
by CPSL under its Australian Financial Services Licence (AFSL). As such, the cash is effectively restricted in its use as
it cannot readily be used to meet expenses and obligations of other Group entities without consideration of the AFSL
requirements. Other assets are also required to be maintained to meet CPSL’s minimum NTA requirements.
36. Key Management Personnel Disclosures
(a) Directors
The following persons were directors of Cromwell Corporation Limited during the financial year:
Executive directors
PL Weightman
Chairman/Chief Executive Officer
RL Stiles (1)
DJ Wilson (4)
WR Foster
Director – Sales and Marketing
Chief Financial Officer/Company Secretary
Director – Acquisitions and Property
Non-executive directors
RJ Pullar
MA McKellar (2)
DE Usasz (3)
(1) Resigned as a director on 26 April 2007. Retired on 30 June 2007.
(2) Appointed on 1 March 2007.
(3) Appointed on 26 April 2007.
(4) Resigned as company secretary on 25 January 2007.
(b) Other Key Management Personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group,
directly or indirectly, during the past two financial years:
Name
SM Morgan (1)
PA Cronan (2)
DA Gippel
Position
Company Secretary
Chief Operating Officer
Structured Finance Manager
MC McLaughlin
Associate Director – Sales and Marketing
MJ Blake
PJ McDonnell
PJ Cowling
Associate Director – Institutional Markets
National Asset Manager
National Facilities Manager
(1) Commenced on 10 May 2006. Appointed company secretary on 25 January 2007.
(2) Commenced on 12 February 2007.
80
(c) Key Management personnel Compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
Total
Consolidated
Parent
2007
$
2006
$
2007
$
2006
$
3,284,660
2,941,644
1,886,450
1,775,934
142,068
11,708
205,474
92,579
16,140
214,553
61,503
2,777
4,441
33,287
10,532
22,366
3,643,910
3,264,916
1,955,171
1,842,119
Key management personnel compensation for the parent comprises amounts paid to directors of the parent principally
by subsidiaries.
The Company has taken advantage of the relief provided by the Corporations Regulations 2001 and has transferred the detailed
remuneration disclosures to the directors’ report. The relevant information can be found in sections A to D of the remuneration report.
(d) Equity Instrument Disclosures Relating to Key Management Personnel
(i)
Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and
conditions of the options, can be found in section D of the remuneration report in the directors’ report.
(ii) Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Cromwell
Corporation Limited and other key management personnel of the Group, including their personally related parties, are set out below.
Balance at Granted during
1 July
the year as
compensation
Exercised
during the year
Restructured
on stapling
Balance at 30 June
Vested
Not Vested
Name
2007
Directors
PL Weightman
RL Stiles
RJ Pullar
MA McKellar
DE Usasz
DJ Wilson
WR Foster
–
–
–
–
–
500,000
–
Other key management personnel of the Group
SM Morgan
PA Cronan
DA Gippel
MC McLaughlin
MJ Blake
PJ McDonnell
PJ Cowling
–
–
–
375,000
750,000
–
2,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(500,000)
–
–
–
–
(375,000)
(750,000)
–
(1,000,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(112,100)
–
–
–
–
–
–
887,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
Notes to the Financial Statements continued
Name
2006
Balance at
1 July
Granted during Exercised during
Balance at 30 June
the year as
compensation
the year
Vested
Not Vested
Directors
PL Weightman
RL Stiles
RJ Pullar
DJ Wilson
WR Foster
Other key management personnel of the Group
SM Morgan
DA Gippel
PJ McDonnell
PJ Cowling
MJ Blake
MC McLaughlin
–
–
–
1,000,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,000,000
1,000,000
500,000
–
–
–
(500,000)
–
–
–
–
–
(250,000)
(125,000)
–
–
–
–
–
–
–
–
500,000
–
–
–
–
–
500,000
–
–
–
–
1,500,000
750,000
375,000
At 30 June 2007, options entitle the holder to acquire stapled securities in the Group – refer note 42.
Vested options are exercisable.
(iii) Share holdings
The numbers of shares in the Company held during the financial year by each director of Cromwell Corporation Limited and other
key management personnel of the Group, including their personally related parties, are set out below.
Balance at
1 July
On exercise of
options
Net changes
– purchases
(sales)
Restructured on
stapling
Net changes
– purchases
(sales)
Balance at
30 June
Ordinary share holdings
Name
2007
Directors
PL Weightman
RL Stiles (1)
RJ Pullar
MA McKellar (2)
DE Usasz (2)
DJ Wilson
WR Foster
16,233,997
5,141,362
13,301,764
–
1,660,000
1,663,328
6,025,000
Other key management personnel of the Group
PA Cronan
SM Morgan
DA Gippel
MC McLaughlin
MJ Blake
PJ McDonnell
PJ Cowling
–
–
616,357
125,000
1,239,764
20,000
500,000
(1) Resigned as director 26 April 2007; retired 30 June 2007.
(2) Balance at 1 July is balance at date of appointment.
8
–
–
–
–
–
500,000
–
–
–
–
375,000
750,000
–
1,000,000
–
(135,000)
–
–
–
–
–
–
–
–
–
(223,052)
(20,000)
–
(1,819,830)
(561,211)
(1,491,127)
–
(186,086)
(242,508)
(675,402)
–
–
(69,093)
(56,049)
(198,048)
–
(168,150)
950,000
(14,102)
1,734,632
20,000
16,486
285,162
–
–
–
–
13,189
200,000
–
–
15,364,167
4,431,049
13,545,269
20,000
1,490,400
2,205,982
5,349,598
–
–
547,264
457,140
1,768,664
–
1,331,850
Name
2006
Directors
PL Weightman
RL Stiles
RJ Pullar
DJ Wilson
WR Foster
Other key management personnel of the Group
DA Gippel
MC McLaughlin
MJ Blake
PJ McDonnell
PJ Cowling
SM Morgan
Balance at
1 July
On exercise of
options
Net changes
– purchases
(sales)
Balance at
30 June
16,233,997
5,661,362
13,037,364
1,163,328
6,000,000
616,357
–
989,764
–
500,000
–
–
–
–
500,000
–
–
125,000
250,000
–
–
–
–
(520,000)
264,400
–
25,000
16,233,997
5,141,362
13,301,764
1,663,328
6,025,000
–
–
–
20,000
–
–
616,357
125,000
1,239,764
20,000
500,000
–
There were no shares granted during 2007 or 2006 as compensation.
At 30 June 2007 the balances above for the directors and other key management personnel represent the number of stapled
securities of the Group held by them.
Property preference share holdings
The numbers of property preference shares in the Company held during the financial year by each director of Cromwell Corporation
Limited and other key management personnel of the Group, including their personally related parties, are set out below.
Balance at
30 June 2005
Net Change
Other
Balance at
30 June 2006
Net Change
Other
Balance
30 June 2007
Directors
PL Weightman
RL Stiles (1)
RJ Pullar
MA McKellar
DE Usasz
DJ Wilson
WR Foster
Other key management personnel of the Group
PA Cronan
SM Morgan
DA Gippel
MC McLaughlin
MJ Blake
PJ McDonnell
PJ Cowling
3,500
2,500
1,000
–
–
2,000
–
–
–
2,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,500
2,500
1,000
–
–
2,000
–
–
–
2,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,500
2,500
1,000
–
–
2,000
–
–
–
2,000
–
–
–
–
(1) Resigned as director 26 April 2007; retired 30 June 2007.
83
Notes to the Financial Statements continued
(e) Loans – Key Management Personnel
In March 2006 the Group provided Citimark Pty Ltd, a company associated with Robert Pullar (a director of Cromwell Corporation
Limited), a $3,500,000 loan facility to fund the refurbishment of the former Brisbane Magistrates Court building at 179 North
Quay. The loan was secured by a registered second mortgage over the development property. Interest was charged at 15% fixed
per annum and capitalised up to $515,000, thereafter payable monthly in arrears. The loan was repaid on 6 December 2006. Total
interest received in 2007 was $238,000 (2006: $95,000).
No other loans were made during the year or the prior year to key management personnel and no loans were outstanding at the
reporting date.
(f) Other Transactions With Key Management Personnel
Legal services
The Group obtained legal services from Creagh Weightman, a firm of which Paul Weightman was a partner until
30 June 2006. Total fees expensed by the Group in 2006 were $87,647. In addition Creagh Weightman received remuneration
for services relating to other entities (schemes) for which Cromwell Property Securities Limited, a controlled entity, acts as
responsible entity. Total fees paid/payable to Creagh Weightman by scheme entities during the 2006 financial year were $272,352.
Sub-lease
Creagh Weightman had an agreement with the Group to sub-lease premises at 200 Mary Street, Brisbane on a month to month
basis. During the 2006 financial year the Group received $33,371 as sub-lease income from Creagh Weightman.
Transactions are on commercial terms and conditions unless otherwise stated.
37. Auditor’s Remuneration
Consolidated
Parent
2007
$
2006
$
2007
$
2006
$
During the year the following fees were paid or payable for services
provided by the auditor of the Group (Johnston Rorke) and its related
practices:
Audit Services
Johnston Rorke:
Audit and review of financial reports under the Corporations Act 2001
Audit of a controlled entity’s AFS licence
Audit of controlled entities’ compliance plans
Total remuneration for audit services
Other Services
Related practice of Johnston Rorke:
261,000
4,000
40,000
305,000
92,000
2,750
–
70,000
69,000
–
–
–
–
94,750
70,000
69,000
Investigating accountant’s report for merger and stapling
200,000
–
200,000
–
Johnston Rorke:
IFRS accounting services
Tax compliance services
Total remuneration for other services
–
17,620
217,620
9,600
14,740
24,340
–
11,180
211,180
9,600
14,740
24,340
The auditor receives remuneration for audit and other services relating to other entities (schemes) for which Cromwell Property
Securities Limited, a controlled entity, acts as responsible entity. The remuneration is disclosed in the relevant entity’s financial
reports and totalled $42,500 (2006: $221,700).
8
38. Related Parties
Parent Entity and Subsidiaries
Cromwell Corporation Limited is the ultimate parent entity in the Group. Details of subsidiaries are set out in note 17.
Key Management Personnel
Disclosures relating to key management personnel are set out in note 36.
Transactions with Subsidiaries
Current tax payable assumed from wholly-owned tax consolidated entities
Tax losses assumed from wholly-owned tax consolidated entities
Transactions between the parent and its subsidiaries also included:
Parent
2006
$’000
1,106
–
2007
$’000
660
–
•
•
•
•
•
Loans between the parent and its subsidiaries (refer cash flow statement and note 8). All loans are interest free (except as
set out below), unsecured, with no set repayment terms other than being repayable at call in cash;
Interest was charged in 2006 on all intercompany loans provided by Cromwell Finance Limited at an interest rate of 11%
per annum. The parent entity paid Cromwell Finance Limited interest of $489,000 during that year (included in 2006 finance
costs of $844,000 in note 5). No such interest was paid in 2007;
Management fees paid by the parent entity to a controlled entity (refer income statement);
Dividends paid to the parent entity by a controlled entity of $nil (2006: $1,000,000);
Transactions between Cromwell Corporation Limited and its wholly-owned controlled entities in accordance with the tax
funding agreement (refer note 1(d) – being recognition of receivables and payables in relation to current tax payable and tax
losses assumed as disclosed above).
In addition to the above, certain subsidiaries utilise operating leased assets for which the parent is the lessee. As such the
subsidiaries pay the lease rentals directly to the lessor and recognises the associated lease rental expense.
Transactions with Jointly Controlled Entity and Associate
Transactions between the Group and its jointly controlled entity and associate also included:
•
•
•
•
Loans between the Group and its associate (refer note 8);
The Group holds 61,250,000 convertible financing units issued by its associate (refer note 18). The Group received $1,737,000
(2006: $nil) in interest payments during the year on these units;
The Group received $2,646,000 (2006: $nil) in distributions from its jointly controlled entity and associate during the year
(refer note 16);
The Group charged its associate $4,020,000 (2006: $nil) acquisition and capital raising fees during the year, of which the
parent charged $2,321,000 (2006: $nil); and
•
The Group charged its jointly controlled entity and associate $1,118,000 (2006: $nil) management fees during the year.
8
Notes to the Financial Statements continued
Transactions with Managed Investment Schemes (managed by the consolidated entity)
Cromwell Property Securities Limited (“CPS”) is the responsible entity of a number of managed investment schemes. The Group
derives a range of benefits from schemes managed by CPS including management and acquisition fees. The disclosure below
includes the fees and other transactions with the managed investment schemes up to the date of stapling (in December 2006) as
after that date the majority of the relevant schemes became part of the Group. For those schemes which are not part of the Group
after that date, TGA and CPF (refer note 16), fees and transactions after stapling are disclosed above as being transactions with
jointly controlled entity and associate.
(a) Cromwell Diversified Property Trust (“CDPT”)
During the financial year the Group charged CDPT the following fees and received the following distributions:
Revenue from CDPT:
• Acquisition and capital raising fees
• Management fees
• Distributions
During the financial year the following loans were provided to CDPT and repaid:
Balance at beginning of the year
Loans provided to CDPT
Loans repaid by CDPT
Consolidation adjustment upon stapling (1)
Balance at end of year
2007
$’000
2,149
3,386
5,535
12
5,547
–
6,000
–
(6,000)
–
2006
$’000
13,889
4,604
18,493
16
18,509
–
1,900
(1,900)
–
–
(1) The loan balance of $6,000,000 is included in borrowings of CDPT (the Trust) assumed by the Group upon stapling and, as such, is eliminated on
consolidation.
(b) Other Managed Investment Schemes
During the financial year the Group charged other schemes (excluding CDPT), for which it acts as responsible entity, the following
fees and received the following distributions:
Revenue:
• Acquisition and capital raising fees (Cromwell Property Fund)
• Management fees
• Distributions
– Mary Street Planned Investment
– Cromwell TGA Planned Investment
1,886
1,802
65
–
3,753
3,222
1,534
126
810
5,692
Other managed investment schemes are the Syndicates, Cromwell Property Fund and Cromwell TGA Planned Investment (refer
note 16).
Acquisition and capital raising fees charged to managed investment schemes are shared between the parent entity and a
controlled entity.
8
39. Segment Information
(a) Description of Segments
Business segments
The Group is organised into the following divisions by product and service type.
Property Investment
The Trust and its controlled entities invest directly in properties located throughout Australia.
Property Funds Management
The Company and its controlled entities establish and manage property trusts and funds throughout Australia.
Property Development
The Company and its controlled entities develop commercial land throughout Australia for sale to external purchasers.
Geographical segments
The Group operates entirely within Australia.
8
Notes to the Financial Statements continued
(b) Primary Reporting Format – Business Segments
2007
Segment revenue and other income
Sales to external customers
Intersegment sales
Total sales revenue
Share of profits of equity accounted entities
Gain on dilution of interest in associate
Gain on sale of investment property
Gain on fair value adjustments
Total segment revenue and other income
Intersegment elimination
Unallocated revenue
Consolidated revenue and other income
Segment result
Segement result
Intersegment elimination
Unallocated revenue less unallocated expenses
Finance costs (excluding unitholders)
Stapling transaction costs
Profit before income tax and unitholders’ finance costs
Income tax credit
Unitholders’ finance costs
Profit for the year
Segment assets and liabilities
Segment assets
Intersegment elimination
Unallocated assets
Total assets
Segment liabilities
Intersegment elimination
Borrowings (1)
Unallocated liabilities
Total liabilities
Property
Investment
Property
Funds
Management
Property
Development
Consolidated
$’000
$’000
$’000
$’000
60,363
162
60,525
2,418
6,341
4,963
74,389
148,636
14,701
4,982
19,683
10,400
–
10,400
–
–
–
–
–
–
–
–
19,683
10,400
85,464
5,144
90,608
2,418
6,341
4,963
74,389
178,719
(5,144)
2,871
176,446
130,874
11,545
4,916
147,335
(88)
(2,449)
(24,515)
(7,049)
113,234
723
(98,265)
15,692
1,203,680
13,949
12,293
1,229,922
27,157
7,799
514
(1,023)
66,255
1,295,154
35,470
(1,228)
586,966
882
622,090
(1) In accordance with AASB 114 Segment Reporting, borrowings have not been allocated but predominantly relate to the property investment
segment.
88
(b) Primary Reporting Format – Business Segments (continued)
2007
Other segment information
Investments in jointly controlled entity and associate
Acquisitions of non-current segment assets
• Investment properties
• Property, plant and equipment
• Intangibles
Depreciation and amortisation expense
Property
Investment
Property
Funds
Management
Property
Development
Consolidated
$’000
$’000
$’000
$’000
66,245
25,305
8,841
–
34,146
–
–
–
182
230
412
414
–
–
–
–
–
–
66,245
25,305
9,023
230
34,558
414
The acquisitions of non-current segment assets shown above excludes the acquisition on stapling disclosed in note 33. The
stapling acquisition related to the property investment segment.
In 2006 the Group operated in predominantly one business segment. It derived revenue from property funds management services
provided to property related managed investment schemes.
(c) Notes to and Forming Part of the Segment Information
Accounting policies
Segment information is prepared in conformity with the accounting policies of the Group as disclosed in note 1 and Accounting
Standard AASB 114 Segment Reporting.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion
that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist
primarily of operating cash, receivables, inventories, investment properties, plant and equipment and other intangible assets,
net of related provisions. While most of these assets can be directly attributable to individual segments, the carrying amounts
of certain assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities consist
primarily of trade and other payables, employee benefits and provisions. Segment assets and liabilities do not include income
taxes.
Inter-segment transactions
Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an “arms-length”
basis and are eliminated on consolidation.
Equity-accounted investments
The Group has an investment in an Australian jointly controlled entity (Cromwell TGA Planned Investment) and an Australian
associate (Cromwell Property Fund) which are accounted for using the equity method and included in the property investment
segment.
8
Notes to the Financial Statements continued
40. Commitments for Expenditure
Finance Leases
Commitments in relation to finance leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Minimum lease payments
Future finance charges
Recognised as a liability
Representing lease liabilities
Current
Non-current
Consolidated
Parent
2007
$’000
2006
$’000
2007
$’000
2006
$’000
82
81
–
163
(11)
152
75
77
152
959
3,522
12,110
16,591
(7,936)
8,655
104
8,551
8,655
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Finance leases comprise leases over items of plant and equipment under normal commercial terms and conditions. In 2006
finance leases also comprised a lease over a development property. The lease was between the Trust (lessor) and an entity
controlled by the Company (lessee). Following stapling, this finance lease is eliminated on consolidation.
Operating Leases
Commitments for minimum lease payments in relation to non-cancellable operating leases in existence at the reporting date but
not recognised as liabilities are payable as follows:
Within one year
Later than one year but not later than five years
29
37
66
391
462
853
95
50
145
391
462
853
Operating leases primarily comprised the lease of the Group’s premises. The lease is for 5 years ending August 2007, with an
option for a further 5 years with rentals increasing at 3.5% per annum. The lease is with a subsidiary of the Trust and as such the
commitment is no longer recognised on consolidation following stapling. Operating lease commitments of the parent entity are
paid for and recognised as expenses by a controlled entity as from 1 July 2004.
Acquisition of Development Property
Commitments in relation to acquisition of property under contract in existence at the reporting date but not recognised are as
follows:
Purchase of property at Pinkenba
–
4,782
–
4,782
At 30 June 2006 the parent entity had entered into a conditional contract to purchase land and buildings at 200 Holt Street,
Pinkenba for $4,782,000. Settlement was completed in August 2006. The property was subsequently sold in February 2007 for
$10,400,000.
0
Capital Expenditure Commitments
Commitments in relation to capital expenditure contracted for at the reporting date but not recognised as liabilities are payable as
follows:
Within one year
Later than one year but not later than five years
Consolidated
Parent
2007
$’000
50,805
30,625
81,430
2006
$’000
2007
$’000
2006
$’000
–
–
–
–
–
–
–
–
–
The Trust has entered into a development agreement with Citimark Properties Limited (“Citimark”), a company related to Mr.
Robert Pullar, who is a director of the Company. Under the agreement, Citimark will develop a commercial office building in
Kelvin Grove, Brisbane in accordance with specified terms, and to agreed standards. The land was acquired by the Trust for $7.1
million in June 2007, and construction had commenced prior to balance date (included in property under construction – refer
note 19). Under the development agreement, the Trust will reimburse Citimark for the costs of the project, and pay certain fees
contingent upon the outcomes of certain events, primarily total construction costs of the property and leasing outcomes. Citimark
has provided a rental guarantee to the Trust over the entire property for 18 months from the date construction is complete.
41. Contingent Liabilities
Cromwell Corporation Limited has provided guarantees in respect of debentures issued by its controlled entities which had a
carrying value of $14,504,000 at 30 June 2007 (2006: $19,956,000).
42. Share Based Payments
An Employee Share Ownership Plan (ESOP) was established in June 2003 by the directors of the parent entity. All full-time and
part-time employees who meet minimum service requirements, including directors of Cromwell Corporation Limited and its
controlled entities, are eligible to participate in the Plan at the discretion of the Board. Participation of the directors is subject to
shareholder approval. Usually, options granted under the ESOP vest in equal tranches annually between grant date and expiry
date. Once vested each tranche must be exercised within a certain period. The options lapse if not exercised.
Under the ESOP interest is charged on a notional employee loan which effectively increases the exercise price. Dividends paid by
the parent entity on the treasury shares held by the ESOP effectively reduces the options’ exercise price.
The shares allocated to employees under the ESOP are to be transferred at the end of the respective period. If any of the
shares have not been acquired by the end of each period, the right to acquire those shares will not be carried forward, but will
automatically lapse. The right to acquire any additional shares will lapse on the date the employee ceases employment with the
Group. The exercise price of options is to be settled in cash.
Options are granted for no consideration, vest over time and are exercisable by expiry.
Under AASB 2 “Share based Payment”, the rights granted to employees to shares acquired by the plan are treated as options for
accounting purposes.
Notes to the Financial Statements continued
Set out below are summaries of options granted and exercised.
Grant Date
Expiry Date
Exercise price
(cents)
Balance
at start
of the year
Granted
during
the year
Exercised
during
the year
Reconstructed
during
the year
Balance
at year end
2007
27/11/2003
26/11/2006
28/8/2005
28/8/2005
31/10/2005
30/6/2009
30/9/2009
30/6/2009
10.0¢
30.9¢
30.9¢
40.0¢
Weighted average exercise price (cents)
2006
27/11/2003
26/11/2006
28/8/2005
28/8/2005
31/10/2005
30/6/2009
30/9/2009
30/6/2009
10.0¢
30.9¢
30.9¢
40.0¢
500,000
1,438,750
2,000,000
375,000
4,313,750
29.3¢
1,000,000
–
–
–
–
–
–
–
–
–
–
1,945,000
2,000,000
500,000
(500,000)
–
(1,371,640)
(18,914)
(1,000,000)
(112,100)
(375,000)
–
(3,246,640)
(131,014)
28.7¢
(500,000)
(506,250)
–
(125,000)
–
48,196
887,900
–
936,096
34.8¢
500,000
1,438,750
2,000,000
375,000
4,313,750
29.3¢
–
–
–
–
–
–
–
Weighted average exercise price (cents)
10.0¢
31.9¢
22.3¢
1,000,000
4,445,000
(1,131,250)
Notes:
(1) At 30 June 2007 all options (2006: 500,000) were vested and exercisable with a weighted average exercise price of 34.8 cents (2006: 30.9 cents). All
options became vested and exercisable on approval of the stapling by shareholders and unitholders in December 2006.
(2) The weighted average remaining contractual life of share options outstanding at the end of the year was 2.3 years (2006: 1.7 years).
(3) No options were granted in 2007. The assessed fair value of options granted in 2006 was 10.1 cents for options exercisable at 30.9 cents and 7.1
cents for options exercisable at 40 cents.
(4) 3,145,000 options were exercised on 19 December 2006 (stapling date) and 101,640 options were exercised on 30 June 2007 (2006: – all options
were exercised on 30 June 2006). 3,246,640 shares (2006: 1,131,250 shares) were issued to employees on exercise of the options, 3,145,000 on
19 December 2006 and 101,640 on 30 June 2007. The aggregate proceeds received from employees on the exercise of options and recognised as
issued capital was $749,000 (2006: $252,000) for the Company and $26,000 (2006: $nil) for the Trust. The fair value of shares issued at the option
exercise date was $3,601,950 (that is the weighted average share price at the date of exercise was $1.11 per share) (2006 - $1,119,938; $0.99 per
share).
(5) As a result of the stapling transaction (refer note 33) all outstanding options under the ESOP became vested and exercisable. Options not exercised
were subject to the same reconstruction as ordinary issued shares. Although vested, any options not exercised at stapling are still subject to the
same exercisable timetable as prior to stapling.
To 30 June 2007 no options granted under the ESOP have lapsed, been forfeited or expired.
Fair Value of Options Granted
The fair values at grant date were determined using a Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option.
The model inputs for options granted during the year ended 30 June 2006 included:
Exercise price (cents)
Grant date
Share price at grant date
Expected price volatility of the company’s shares
Expected dividend yield
Risk free interest rate
Expiry date
Options Granted
30.9¢
28/8/05
34¢
90%
3.66%
5.0%
40¢
31/10/05
38¢
90%
3.66%
5.18%
30/6-30/9/09
30/6/09
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any
expected changes to future volatility due to publicly available information.
No options were granted during the 2007 financial year.
Expenses arising from share based payment transactions
Total expenses arising from share based transactions recognised during the year as part of employee benefits expense were as
follows:
Options issued under employee share plan
Consolidated
Parent
2007
$’000
282
2006
$’000
292
2007
$’000
282
2006
$’000
292
As noted above the stapling transaction accelerated the vesting of options. Accordingly, the related remaining share option
expense was also recognised this year.
43. Subsequent Events
Since balance date and up to the date of this report, the following transactions have occurred:
Sale of investment properties/development property
The 59 Goulburn Street, Sydney investment property, classified as held for sale at balance date, was settled on 23 July 2007. Of
the $92,050,000 sale proceeds, $51,900,000 was utilised to repay loans to financial institutions, with the balance received in cash.
The 8 St Georges Terrace (Bird Cameron building), Perth investment property was contracted for sale and sold for $27,300,000 on
23 August 2007. The investment property was independently valued at $21,600,000 at 30 June 2007.
The Bundall Corporate Centre investment property, classified as held for sale at balance date, and Bundall development property,
classified as inventories at balance date, were the subject of put and call options at 30 June 2007. Since balance date the call option
has been exercised by the buyer with settlement expected in October 2007. The sale proceeds in relation to the investment property
and the development property are expected to be $64,400,000 and $39,000,000 respectively.
The financial effects of subsequent events were not recognised as at 30 June 2007.
3
Directors’ Declaration
In the directors’ opinion:
(a) the attached financial statements and notes (including the remuneration disclosures that are contained in sections A to D of
the remuneration report in the directors’ report) are in accordance with the Corporations Act 2001, including:
(i) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(ii) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their
performance, as represented by the results of their operations, changes in equity and their cash flows, for the financial
year ended on that date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable; and
(c) the remuneration disclosures contained in sections A to D of the remuneration report in the directors’ report comply with
Australian Accounting Standard AASB 124 Related Party Disclosures and the Corporations Regulations 2001.
The directors have been given the declarations by the chief executive officer and chief financial officer for the financial year ended
30 June 2007 required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
P.L. Weightman
Director
Dated this 27th day of September 2007
Independent auditor’s report to the members of Cromwell Corporation Limited
Report on the financial report and AASB 124 remuneration disclosures contained in the directors’ report
We have audited the accompanying financial report of Cromwell Corporation Limited, which comprises the balance sheet
as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended
on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration for both
Cromwell Corporation Limited (the company) and 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.
As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration of
directors and executives (remuneration disclosures), required by Australian Accounting Standard AASB 124 Related Party
Disclosures, under the heading “remuneration report” of the directors’ report and not in the financial report. We have
audited these remuneration disclosures.
Directors' responsibility for the financial report and the AASB 124 remuneration disclosure contained in the directors’
report
The directors of the company are responsible for the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the
preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances. In Note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101
Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting
Standards ensures that the consolidated financial report, comprising the consolidated financial statements and notes,
complies with International Financial Reporting Standards.
The directors of the company are also responsible for the remuneration disclosures contained in the directors’ report.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement. Our responsibility is to also express an opinion on the remuneration
disclosures contained in the directors’ report based on our audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report
and the remuneration disclosures contained in the directors’ report. The procedures selected depend on the auditor's
judgement, including the assessment of the risks of material misstatement of the financial report and the remuneration
disclosures contained in the directors’ report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the financial report and the
remuneration disclosures contained in the directors’ report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report and the
remuneration disclosures contained in the directors’ report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor's opinion on the financial report
In our opinion:
(a)
the financial report of Cromwell Corporation Limited is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the company’s and consolidated entity's financial position as at 30 June
2007 and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001; and
(b)
the consolidated financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Auditor's opinion on AASB 124 remuneration disclosures contained in the directors’ report
In our opinion the remuneration disclosures that are contained in the remuneration report in the directors’ report comply
with Australian Accounting Standard AASB 124 Related Party Disclosures.
JOHNSTON RORKE
Chartered Accountants
J J EVANS
Partner
Brisbane, Queensland
27 September 2007
Securityholder Information
The securityholder information set out below was applicable as at 18 September 2007.
(a) Distribution of Securityholders
Category (size of Holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of Securityholders
Stapled
Securities
Property Preference
Shares
358
520
633
7,008
1,145
9,664
56
2
2
10
-
70
(b) Unmarketable Parcels
The number of stapled securityholdings held in less than marketable parcels was 193.
The number of property preference shareholdings held in less than marketable parcels was NIL.
(c) Substancial Securityholders
There were no substantial securityholders listed in the company’s register.
(d) Voting Rights
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each security
shall have one vote.
(e) 20 Largest Shareholders
Stapled Securities
RBC Dexia Investor Services Australia Nominees Pty Limited [APN A/C]
National Nominees Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Stara Investments Pty Ltd
AWJ Family Pty Ltd
RJP Family Pty Ltd
ANZ Nominees Limited
RBC Dexia Investor Services Australia Nominees Pty Ltd [BKCUST A/C]
Trial Developments Pty Ltd
Citicorp Nominees Pty Limited [CFSIL CWLTH Property 1 A/C]
Cogent Nominees Pty Limited
Humgoda Investments Pty Ltd
Perpetual Nominees Ltd [MFS Premium Income FD A/C]
Panmax Pty Limited [Super Fund A/C]
Mr Phillip John Wallace & Ms Bernadette Mary Wallace
Mr Bruce William Wallace & Mrs Zelma Wallace
Balcony Developments Pty Ltd
Kovron Pty Ltd
Citicorp Nominees Pty Limited
Number of Stapled
Securities Held
% Held of Issued
Stapled Securities
30,495,540
16,325,135
16,238,241
15,835,219
14,060,433
13,989,184
13,806,604
11,825,209
8,916,292
8,850,042
7,431,143
6,318,692
6,020,115
5,066,562
4,585,392
4,439,500
3,641,378
3,551,600
3,352,387
3,147,071
4.34
2.32
2.31
2.25
2.00
1.99
1.96
1.68
1.27
1.26
1.06
0.90
0.86
0.72
0.65
0.63
0.52
0.51
0.48
0.45
197,895,739
28.16
Securityholder Information continued
(e) 20 Largest Shareholders (continued)
Property Preference Shares
South Pacific Equities Pty Ltd
Findini Pty Ltd [Valesini Family S/F A/C]
ETR Nominees Pty Ltd [Lewis NSW Masonic Youth A/C]
Bond Street Custodians Limited [CGF1 – I59387 A/C]
CJ Cornwell & Son Pty Ltd [Cornwell Executive S/F A/C]
ETR Nominees Pty Ltd [Lewis Sharpe Super A/C]
Bond Street Custodians Limited [CGF1 – V77008 A/C]
ETR Nominees Pty Ltd [Lewis Lewis J&J A/C]
ETR Nominees Pty Ltd [Lewis Rosalie Field Inv A/C]
ETR Nominees Pty Ltd [Lewis Tara Hall Egan A/C]
Mr Robert Victor Harm & Mrs Jean Audrey Harm
Bond Street Custodians Limited [CGF1 – I23261 A/C]
Trial Developments Pty Ltd [Creagh Family A/C]
Mr Daryl John Wilson & Mrs Shona Maree Wilson [Wilson Family Super A/C]
Mr Matthew Dominic Cover & Ms Terina Lee Welch [Our Future Super A/C]
Ms Maureen Lyle Graham
Jobus Investments Pty Ltd
Ms Jennifer Stevenson [Matthew Smith A/C]
Ms Jane Adams
Mr Greg Allport
Number
of Shares Held
% Held of Issued
Shares
64,000
24,000
20,539
20,000
20,000
19,000
15,000
15,000
13,566
12,500
8,000
7,500
4,000
2,000
1,000
1,000
1,000
1,000
500
500
23.26
8.72
7.47
7.27
7.27
6.91
5.45
5.45
4.93
4.54
2.91
2.73
1.45
0.73
0.36
0.36
0.36
0.36
0.18
0.18
250,105
90.91
8
Provision of information for Securityholders
Cromwell is committed to ensuring its securityholders are fully informed on the financial and operational status of the Group as
well as its future prospects, in accordance with the rules and guidelines of the Australian Securities Exchange (ASX) and other
regulatory bodies. The following information can also be found on the Cromwell website at www.cromwell.com.au.
ASX Listing
Cromwell Group has two separate securities listed on the ASX:
•
•
Stapled Securities (ASX Code: CMW)
Property Preference Shares (ASX Code: CMWPA)
Securityholding Details
Securityholders can access information on their holdings and update their details through Cromwell’s share registry provider:
Computershare Investor Services Pty Limited
Level 19, 307 Queen Street, Brisbane QLD 4000
Telephone: 1300 850 505
Outside Australia: 61 3 9415 4000
Facsimile: (07) 3237 2151
Website: www.computershare.com.au
E-mail: web.queries@computershare.com.au
Securityholders can change or update details relating to their address, bank account and Tax File Number (TFN), Australian
Business Number (ABN) or exemption in a number of ways:
•
•
Send written authorisation to the Registry quoting your SRN / HIN and signing the request, or
Call the Registry.
You will have to verify your identity by providing your personal details. Bank detail changes must be requested in writing and
cannot be made over the phone.
Securityholders can also use the Computershare website (www.computershare.com.au) to check current and previous holding
balances, communication delivery preferences, security prices, TFN/ABN details and to download a variety of forms.
Quoting of TFN, ABN or exemption details
Securityholders are not obliged to quote their TFN, ABN or exemption. However, if these details are not lodged with the registry,
Cromwell is obliged to deduct tax from unfranked portions of dividend payments and distribution payments up to the highest
marginal tax rate, depending on residency.
Securityholder Information continued
Distributions/Dividends
Cromwell Corporation Limited Dividends
Dividends paid to Cromwell Corporation Limited shareholders prior to the date of the stapling transaction were:
Period Ending
30 June 2006
Special Dividend*
Dividend
4.5 cents
0.1 cents
Record Date
Payment Date
28 September 2006 5 October 2006
12 December 2006
15 December 2006 100%
Franked
Amount
33%
* Special Dividend used to subscribe for units in the Trust as part of the stapling transaction.
Cromwell Group Dividends/Distributions
In December 2006, following a 0.8879:1 reconstruction, shares in Cromwell Corporation Limited (the Company) were stapled to
units in the Cromwell Diversified Property Trust (the Trust) creating the ASX-listed Cromwell Group stapled security. At the time
of stapling, shareholders in the Company and unitholders in the Trust became Cromwell Group securityholders.
Since the date of the stapling transaction, the following distributions/dividends have been paid:
Period Ending
31 January 2007
31 March 2007
30 June 2007
Distribution/Dividend
1.50 cents
1.50 cents
2.25 cents
Ex Dividend Date
6 February 2007
28 March 2007
25 June 2007
Record Date
12 February 2007
3 April 2007
29 June 2007
Payment Date
20 March 2007
21 May 2007
31 August 2007
DRP Price
$1.1794
$1.1268
$1.1662
Cromwell Property Preference Shares
Cromwell Property Preference Shares (PPS) were created as a liquidity option for the Trust and began trading on the ASX on 5
April 2004. The PPS have the right to an unfranked dividend at a rate equal to the higher of 8.5% pa or 95% of the annualised cash
distributions paid by the Trust. Dividends are paid every 6 months.
Since 1 July 2006, the following PPS dividends have been paid:
Period Ending
30 June 2006
31 December 2006
30 June 2007
Dividend
4.275 cents
4.275 cents
4.275 cents
Further Information
Record Date
Payment Date
17 August 2006
25 January 2007
26 July 2007
24 August 2006
31 January 2007
31 August 2007
Yield
8.55%
8.55%
8.55%
The Cromwell website provides a comprehensive range of information on the company, past performance and products. The
website address is www.cromwell.com.au. Requests for further information about the Group, its dealings and key securityholder
communications should be directed to:
Investor Relations Manager
Cromwell Group
GPO Box 1093, Brisbane Queensland 4001
Telephone: (07) 3225 7777
Facsimile: (07) 3225 7788
Email: cromwell@cromwell.com.au
00
Directory
Board of Directors
Paul L Weightman
Robert J Pullar
Michelle A McKellar
David E Usasz
Daryl J Wilson
W Richard Foster
Company Secretary
Suzanne M Morgan
Share Registry
Computershare Investor Services Pty Ltd
Level 19
300 Queen Street
Brisbane QLD 4000
Telephone: 1300 850 505
Facsimile: (07) 3237 2152
Registered Office
Level 19
200 Mary Street
Brisbane QLD 4000
Telephone: (07) 3225 7777
Facsimile: (07) 3225 7788
Listing
Cromwell Group (CMW) is listed on the
Australian Securities Exchange.
Auditor
Johnston Rorke
Chartered Accountants
Level 30, Central Plaza One
345 Queen Street
Brisbane QLD 4000
Telephone: (07) 3222 8444
Facsimile: (07) 3221 7779