CROMWELL GROUP
annual
report 2010
Reflecting
on the yeaR
looking to
the futuRe
InSIDe
CROMWELL GROUP
annual report 2010
Chairman’s review ........................................................3
performance Highlights ................................................4
Ceo’s review .................................................................8
Directors’ report .........................................................10
auditor’s Independence Declaration ............................25
Consolidated Statement of Comprehensive Income ...26
Consolidated Statement of Financial position .............27
Consolidated Statement of Changes In equity ............28
Consolidated Statement of Cash Flows .....................29
notes to the Financial Statements ............................30
Directors’ Declaration .............................................79
Independent auditor’s report ....................................80
Corporate Governance Statement ..............................82
Securityholder Information .........................................88
Directory ......................................................................91
E D ON A
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Group Overview
Cromwell Group is an internally managed reIt with an australian property portfolio valued in excess of
$1.3 billion and a funds management business that promotes and manages unlisted property investments.
CM W
Cromwell’s income is underpinned by a focus on quality income producing office properties with strong
tenant covenants. We aim for 4% annual growth in ‘like for like’ property income.
Cromwell’s australian property focus enables it to provide a full suite of property related services including
deal sourcing, due diligence, property management, leasing and asset enhancement.
Cromwell internally manages all of its properties to ensure buildings operate efficiently, projects are
delivered on time and on budget, and tenants are managed professionally.
This document is issued by
Cromwell Group consisting of
Cromwell Corporation limited aBn 44 001 056 980
and Cromwell property Securities limited aFS 238052
aBn 11 079 147 809 as responsible entity for
Cromwell Diversified property trust arSn 102 982 598
aBn 30 074 537 051 (“Dpt”)
level 19, 200 Mary Street
Brisbane QlD 4000 auStralIa
phone: +61 7 3225 7777
Fax: +61 7 3225 7788
Web: www.cromwell.com.au
email: invest@cromwell.com.au
Securityholder Enquiries
all enquiries and correspondence regarding
securityholdings should be directed to
Cromwell’s registry provider:
Link Market Services Limited
level 15, 324 Queen Street
Brisbane QlD 4000 auStralIa
phone: 1300 550 841
outside australia: +61 2 8280 7124
Fax: +61 2 9287 0303
Web: www.linkmarketservices.com.au
email: cmw@linkmarketservices.com.au
Current unlisted investment funds*
Cromwell property Fund arSn 119 080 410 (“CpF”)
Cromwell phoenix property Securities Fund arSn 129 580 267 (“pSF”)
Cromwell riverpark trust arSn 135 002 336 (“Crt”)
this Annual Report forms part of Cromwell Group’s
2010 annual reporting suite. the Annual Update and
Sustainability Report can be downloaded from
www.cromwell.com.au or by calling 1800 334 533.
CROMWELL GROUP
ANNUAL
REPORT 2010
REFLECTING
ON THE YEAR
LOOKING TO
THE FUTURE
CROMWELL GROUP
ANNUAL
UPDATE 2010
REFLECTING
ON THE YEAR
LOOKING TO
THE FUTURE
CROMWELL GROUP
SUSTAINABILITY
REPORT 2010
REFLECTING
ON THE YEAR
LOOKING TO
THE FUTURE
* Units in the DPT, CPF, PSF and CRT are issued by Cromwell Property Securities Limited. The CPF and CRT are closed to new investments. An investment in the PSF can only
be made on an application form accompanying the Product Disclosure Statement dated 1 July 2009 (“PDS”). Investors should consider the PDS when making a decision about
whether to acquire, or continue to hold, units in the PSF. The PDS is available from www.cromwell.com.au or by calling 1800 334 533.
This document has been prepared without taking into account your objectives, financial situation or needs. Therefore, in deciding whether to acquire or continue to hold an
investment, you should consider the relevant offer document available from us and assess, with or without your financial advisor, whether the product fits your objectives,
financial situation or needs. Past performance is not indicative of future performance. Certain statements in this document are also forward-looking and are not guarantees of
future performance. Actual results could differ materially from those expressed.
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Chairman’s Review
the 2010 financial year has been
a time of reflection and refocus
for Cromwell – reflecting on the
challenges of the past few years and
refocusing on the core strengths of
the Group to allow us to navigate a
successful path for the future.
once again the year has been a difficult
one for the property sector and despite
the gradual improvement evident in the
broader economy, rental markets and
property valuations remained subdued
for much of the year. However, over
the past few months we have begun to
see some positive signs in the property
sector, with improving fundamentals
in some office markets, including
Melbourne where Cromwell has a
strong weighting.
this year the Group earned $64.6
million, or 8.5 cents per security, made
up almost entirely of recurring income
from our property assets. this stability
of earnings was possible in the current
environment because of the quality
of our portfolio and, in particular, our
office properties, which have continued
to generate reliable earnings. the
Group’s full year distributions of
8.0 cps were in line with guidance.
Cromwell has retained operating
earnings and distributions throughout
the cycle at high levels relative to other
a-reIt’s, although we have not entirely
escaped the impact of moderating
rents and higher interest rates.
Cromwell has always had a long
term focus on delivering superior
performance to securityholders
throughout the property cycle and
in this regard we have continued
to outperform our peers. We have
not been afraid to differentiate
ourselves from the pack, selling
properties valued at $273 million at
the height of the market in 2007 and
beginning to acquire quality assets
from mid 2008 onwards. 2010 has
seen a continuation of our property
acquisitions programme whilst at the
same time the Group has divested
some smaller assets which we believe
will deliver below average returns over
the medium term.
Cromwell avoided the need to raise
funds through the worst of the market,
contrary to many of our peers who
significantly diluted securityholder
wealth through discounted capital
raisings. Instead, in December
2009 Cromwell introduced redefine
australia as a long-term cornerstone
securityholder, raising $73 million at
a minimal discount to then current
trading price and above our most
recent nta per security.
redefine was attracted to Cromwell
due to the strong defensive nature of
our property portfolio, coupled with
our demonstrated ability to add value
through internalised property expertise
and our disciplined acquisition
strategy.
the strategic alliance with redefine
is a key part of Cromwell’s growth
strategy. this investment by redefine
has already allowed us to make
acquisitions that we believe will be of
long-term value to the Group.
Since the end of the financial year
the Group has raised over $70 million
through a further placement and
rights Issue, again on terms that were
non-dilutive to existing investors.
I would like to thank all of those
investors who demonstrated their
support for the Group by taking up
their entitlements in our rights Issue.
In another step forward, Cromwell
will this year publish its second
Sustainability report, using the Global
reporting Initiative G3 guidelines as
the framework for reporting on the
Group’s environmental, economic and
social performance. the adoption of a
systematic report on these activities
gives the Group another avenue
to demonstrate our sustainability
commitment to the market.
I would like to thank the management
and staff of Cromwell for their
hard work through the year and
congratulate them on the Group’s
positive achievements. I would also
like to thank my fellow board members
for their valuable contribution and to
welcome new board member Marc
Wainer from redefine.
Finally, I would like to thank all of our
investors for their ongoing support and
look forward to sharing in the fruits of
an improving market.
Geoffrey H Levy, AO
Chairman
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Performance Highlights
Operating Earnings
•
Full year operating earnings
of $64.6m or 8.5 cents per
security
•
•
result underpinned by
$65.5m net contribution from
property investment
Growth in like-for-like
property income of 6.0%
Financial Position
•
nta of $0.71 per security
•
Security price of $0.725 on
31 august 2010 represents
approximately 10% yield on
distribution guidance for the
2011 financial year of 7.0-7.4
cps
Statutory Profit
•
Statutory profit of $19.1m
or 2.5 cps
•
negatively impacted by
property revaluations
Results Summary
Statutory accounting profit/(loss) ($’000)
Operating earnings ($’000)
Operating EPS (cents)
Distributions ($’000)
Distributions per security (cents)
Payout Ratio (%)
Net Tangible Assets ($’000)
Securities on Issue ($’000)
NTA per security ($)
Gearing(1) (%)
Look-through gearing (%)
FY09
(113,511)
63,761
9.1
63,278
9.0
99%
537,357
702,943
$0.76
53%
55%
(1) Calculated as (total borrowing less cash)/(total assets less cash)
Statutory Profit/Loss
Operating earnings
Adjustments
FY09
($’000)
63,761
FY09
EPS
9.1
FY10
($’000)
64,630
Fair value – investment properties
(104,288)
(14.9)
(32,146)
Fair value – interest rate derivatives
Fair value – equity accounted investments
Write-downs – development inventory
Other items
(22,479)
(20,237)
(11,463)
(18,805)
(3.2)
(2.9)
(1.6)
(2.7)
(1,283)
(2,643)
(6,331)
(3,174)
Net Profit (Loss) after tax
(113,511)
(16.2)
19,053
Composition of Earnings
Property Investment
Funds Management
Property Development
Operating Profit
FY09
($’000)
63,236
3,183
(2,658)
63,761
FY09
EPS
9.0
0.5
(0.4)
9.1
FY10
($’000)
65,482
2,920
(3,772)
64,630
FY10
19,053
64,630
8.5
60,619
8.0
94%
570,120
807,835
$0.71
48%
50%
FY10
EPS
8.5
(4.2)
(0.2)
(0.3)
(0.9)
(0.4)
2.5
FY10
EPS
8.6
0.4
(0.5)
8.5
Change
▲ 1%
▼ 7%
▼ 4%
▼ 11%
▼ 5%
▲ 6%
▲ 15%
▼ 7%
▼ 5%
▼ 5%
Change
▲ 1%
▼ 69%
▼ 94%
▼ 87%
▼ 45%
▼ 83%
Change
▲ 4%
▼ 8%
▼ 42%
▲ 1%
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Capital Management
•
all debt in australian dollars,
spread amongst major
australian banks
•
•
Have commenced discussions
on FY11 and FY12 debt
expiries
proforma 30 June 2010
gearing of 53% within target
range
Earnings Guidance FY11
•
expect operating earnings of
7.3 – 7.8 cps
•
Distributions of 7.0 – 7.4 cps
forecast in line with policy
of distributing 90-95% of
operating earnings
•
High level of tax deferral
expected to continue
Outlook
•
expect FY11 to be low point in
earnings cycle
•
•
Continue to focus internally
on re-leasing and portfolio
improvement opportunities
Focus on opportunities which
protect or enhance earnings
per security and nta per
security
Major ASX Announcements
Outperformance
9 JULY 2009
Riverpark Settlement
announces the Cromwell
riverpark trust has settled
acquisition of land at 33
Breakfast Creek road in
newstead, Brisbane.
24 December 2009
Redefine Placement
Cromwell announces it has
completed a placement of
stapled securities to redefine
australia of approximately $73.3
million.
23 December 2009
$91 million raised for
Riverpark Trust
Cromwell announces it
has closed applications for
riverpark trust fully subscribed,
successfully raising $91 million.
2 FebrUarY 2010
Director Appointment
Cromwell announces it has
appointed Marc Wainer as a
director of the Group.
18 FebrUarY 2010
Strong first half
Cromwell announces it is on track
to achieve full year earnings of
8.5 cps, with total distributions
of 8.0 cps, after reporting a
strong first half underpinned by
recurring income from the Group’s
investment property portfolio.
6 apriL 2010
Strategic review of unlisted
fund
Cromwell announces strategic
review of Cromwell property Fund
and potential acquisition of 321
exhibition Street, Melbourne and
tGa Complex at Symonston, aCt.
25 maY 2010
Interest rate hedging extended
Cromwell announces it has
extended its interest rate hedging
so it is now 92 per cent hedged for
FY11.
10 JUne 2010
Qantas HQ due diligence
Cromwell announces it is
undertaking due diligence on
Qantas Headquarters in Mascot,
Sydney. (Cromwell acquired the
asset on 20 august 2010.)
Total Securityholder Return
(to 30 June 2010)
60%
40%
20%
0%
–20%
–40%
49.4%
29.1%
20.3%
39.2%
30.9%
18.5%
-5.8%
-8.3%
-24.3%
1 Year
3 Years
5 Years
Cromwell Group
Benchmark S&p/aSX 300 a-reiT
accumulation index
Outperformance
Direct Property Outperformance
(to 31 March 2010)
20%
15%
10%
5%
0%
9.4%
9.2%
11.6%
9.6%
1.1%
0.6%
0.5%
0.2%
2.0%
1 Year
5 Years
10 Years
Cromwell Managed Properties
Benchmark (pca/ipD all Fund Universe excl.
Super & major regional Shopping centres)
Outperformance
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Performance Highlights
Debt Facility Expiry Profile
a$ million
600
500
400
300
200
100
0
$528m
62.4%
$42m
5.0%
FY11
FY12
$3m
0.4%
FY13
$165m
19.5%
FY14
$108m
12.7%
FY16
$0m
0%
FY15
Transactions vs. PCA/IPD Property Index
1400
pCa/IpD property Index
net Cromwell property transactions
1200
1000
800
600
400
200
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Gross Assets under Management
a$ million
2,000
1,600
1,200
800
400
0
external Funds
internal Funds
$1,368
$779
$562
$344
$279
$145
$1,788
$1,723
$1,765 $1,774
$1,642
4
4
2
,
1
$
4
4
5
$
5
0
2
,
1
$
7
1
5
$
3
4
1
,
1
$
9
9
4
$
5
0
2
,
1
$
5
8
1
,
1
$
0
6
5
$
9
8
5
$
Jun
01
Jun
02
Jun
03
Jun
04
Jun
05
Jun
06
Jun
07
Jun
08
Jun
09
Dec
09
Jun
10
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the Group has no debt expiries until March
2011 with negotiations on this facility and
others expiring later in 2011 already having
commenced. Cromwell expects to be in
a position to extend or refinance these
facilities well ahead of their due dates. all
debt facilities are with australian banks,
with 92% of interest costs hedged for the
2011 financial year.
$600m
$500m
$400m
$300m
$200m
$100m
$0
($100m)
($200m)
Cromwell actively manages the Group’s
portfolio, realising profits while the market
is strong and acquiring assets at opportune
times.
the Group sold $260 million of assets in
2007 at the height of the market and has
acquired $482 million since the global
financial crisis began.
Despite very challenging market conditions,
in December 2009 Cromwell successfully
completed a $91 million capital raising for
the Cromwell riverpark trust, the largest
retail unlisted property raising in australia
for two years.
the Group’s gross assets under
management have remained fairly stable
throughout the global financial crisis despite
falls in underlying asset values.
Cromwell delivers over 95% of earnings from its property portfolio,
which is underpinned by a focus on quality Australian assets with
strong tenant covenants.
Portfolio Statistics
Cromwell’s philosophy is to actively manage all property
assets internally. this is one of the Group’s key competitive
advantages.
the property team oversees the management of the assets
with the aim of ensuring that tenants are happy, space is
leased, buildings are operating efficiently and projects are
delivered on time and on budget.
June-10 proforma1
Sector Diversification by Income 1
Industrial 10%
Retail/
Entertainment 3%
Commercial 87%
Total Value
Number of properties
Occupancy
Weighted Average Lease Term
Weighted Average Cap Rate
Net Lettable Area
Weighting to office markets
(by income)
NABERS Energy Rating*
NABERS Water Rating*
$1.37b
24
94.5%
6.0 years
8.54%
531,252 m2
87%
4 Stars
4 Stars
* NABERS assessments are undertaken for the whole portfolio, excluding
industrial and some commercial assets where the tenant has full operational
control and manages the total resource consumption.
Gross Income by Tenant Classification 1
Private
Company 12%
Listed Co/
Subsidiary 43%
Government
Authority 45%
Lease Expiry Profile
% Gross Income by Financial Year
Geographical Diversification by Gross Income 1
60%
50%
40%
30%
20%
10%
0%
51.3%
VIC 32%
TAS 3%
SA 7%
WA 1%
QLD 13%
NSW 20%
ACT 24%
6.8%
5.6%
4.9%
6.5% 6.7% 6.7%
Vacant
FY11
FY12
FY13
FY14
FY15
11.5%
Thereafter
FY16
(1) Portfolio statistics based on proforma as at 30 June 2010 including assets
acquired or under contract to 29 July 2010 (Qantas HQ, Exhibition Street and
TGA Complex). Assumes 100% of Qantas HQ building is retained.
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CEO’s Review
this has been a landmark year for
Cromwell Group. We have worked to
maximise operating earnings while
implementing a long-term strategy
for growth in a capital-constrained
market.
the key elements of our strategy
have been the alliance with our new
cornerstone investor redefine and the
rebalancing of our portfolio towards
quality assets (such as the Qantas
Headquarters in Mascot, nSW), that
we believe will provide superior risk-
adjusted returns in future years.
our existing portfolio has performed
well, with operating earnings of $64.6
million or 8.5 cps, largely underpinned
by recurring property income. this
property income has allowed us to
pay full-year distributions of 8.0 cps,
in line with guidance. although this
represents a fall from previous year’s
levels (and I acknowledge that any
fall is disappointing), the result is
significantly more robust than most in
the a-reIt sector. We have been able
to deliver a relatively strong earnings
result mainly because our portfolio
of australian commercial office
properties has generated consistent
cash flows in spite of soft rental
markets around the country.
another factor in the relatively stable
distribution has been our decision to
resist the temptation to raise capital
on a dilutive basis to retire debt. By
raising money the hard way, at a
fair price, we have ensured that our
distribution yield per security has not
been significantly impacted by the
$143 million we have raised since 30
June 2009.
after completing valuations on all of
our property assets during the year,
there was a decrease of 2.9% at 30
June 2010 compared to the same
time last year. property valuation
decreases during the second half were
a comparatively small 0.6%, giving
reason to believe that the market has
bottomed.
as a consequence of the decrease,
Cromwell’s nta per security at 30 June
2010, was $0.71, down from $0.76 at
30 June 2009. this is broadly in line
with our securities’ trading price on
the aSX.
after more than two years of downward
revisions in valuations we believe
the market for quality commercial
property has now reached bottom and
will start to recover in the medium
term in line with economic growth.
However, we are not anticipating
rapid gains, instead, we envisage
a slow recovery in property rentals
and values as the economic recovery
builds momentum and do not discount
the possibility of further setbacks
along the way. In particular, we can
expect continued pressure on asset
values for lower quality property as
the traditional gap in yields between
less risky well located, and higher risk
lower quality property is restored.
throughout the current property cycle
we have maintained our consistent
and disciplined approach to managing
our portfolio, by disposing of a number
of assets at the top of the market
and acquiring a number of assets at
market lows.
this strategy has served us well. the
properties that were acquired for
Cromwell Group and unlisted funds
in 2008 and 2009 have delivered total
returns in excess of 10% pa to date.
We have recently made several major
acquisitions. In July 2010, we acquired,
from the unlisted Cromwell property
Fund, 321 exhibition Street, Melbourne
and the one third of the tGa Complex
in Canberra we did not already own.
Since balance date, we have also
acquired the Qantas Headquarters in
Mascot, nSW for approximately $143
million.
the acquisitions have improved the
already excellent tenancy profile of
the portfolio, with the tGa Complex
tenanted by the Federal Government,
321 exhibition Street to be occupied by
origin energy and, of course, Qantas
occupying its headquarters in Mascot.
the result is that the portfolio has
achieved a weighted average lease
term of 6 years, an occupancy rate of
95% and receives 88% of its income
from government or blue chip tenants.
It also has an increased weighting to
Melbourne and Sydney office markets
where we expect to see the best
growth in the short term.
this excellent leasing profile reflects
the experience and quality of our
leasing team and demonstrates the
superiority of our internalised property
management model which remains
one of our key competitive advantages.
two major recent leases deserve to be
highlighted as examples of their work.
Firstly, the agreement with origin
energy to lease 78% of 321 exhibition
Street and secondly, the retention of
anchor tenant reed elsevier with 9,117
sqm at the 475-501 Victoria avenue
office complex in Sydney.
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The key elements of our strategy have been the alliance with
our new cornerstone investor Redefine and the rebalancing
of our portfolio towards quality assets (such as the Qantas
Headquarters in Mascot, NSW), which we believe will provide
superior risk-adjusted returns in future years.
looking forward, we plan to continue
our disciplined approach to growth
this year, focussing on maximising
the quality of our portfolio through
selected acquisitions, while
supplementing property earnings
with increasing contributions from
our funds management division.
We will also consider opportunistic
transactions as the economy and
confidence continue to recover.
our focus on identifying and acquiring
australian assets with long lease
profiles and quality tenants has served
us very well over the last decade and
should continue to give investors
confidence about the future.
Irrespective of any future transactions,
we remain well placed to deliver solid
earnings in the coming year through
continued strong underlying property
earnings, supplemented by possible
improving contributions from our funds
management activities.
Paul Weightman
Managing Director / CEO
Both leases were key agreements that
protected the value of these assets.
another major success during the
year was the finalisation in December
2010 of the Cromwell riverpark trust’s
acquisition of the riverpark Building
in Brisbane. this $91 million capital
raising was the largest retail unlisted
property raising in australia in the past
two years, reflecting the strength of
our funds management division.
During the year, we also completed a
strategic review of our largest unlisted
fund, the Cromwell property Fund,
which has struggled since 2008 with
higher gearing exacerbated by falls in
asset values. as a result of the review
we took the decision to sell a number
of assets, including 321 exhibition
Street asset and the one third stake
in the tGa Complex to the Cromwell
Group and two other assets to third
parties. these sales significantly
reduced debt within the Fund and
enabled an extension of its main debt
facility, putting it on a more sound
financial footing.
the Fund represents the only
investment we have ever promoted
in which investors are likely to lose
some capital value. the performance
of the Fund remains our greatest
disappointment and is a stark
reminder to us of the difficulties
which have been prevalent in the
market in australia over the past 2
½ years and the unique challenges
that this situation has presented.
the stabilisation of the Cromwell
property Fund since balance date
was an important step forward for the
Group’s funds management division
and the investors in the Fund, after the
Fund was frozen in 2008 as a result of
market volatility.
It demonstrated the value to
unitholders of having a strong
manager, as many other unlisted
funds continue to struggle to find
a way forward. We are determined
to continue to work hard to restore
further value for investors in this Fund
over the years to come.
another very important event during
the year was the cementing of our
relationship with redefine properties
limited, a South african reIt, through
a $73.3 million placement of securities
to a subsidiary, redefine australian
Investments limited. the introduction
of redefine australia as a long-
term investor is expected to benefit
Cromwell beyond the immediate
impact of the placement. We view this
as a strategic alliance which will allow
us to leverage off Cromwell’s strengths
in an improving market and provide
flexible solutions.
Since balance date, we raised over $70
million from a further placement and
rights Issue to fund the acquisition
of the Qantas Headquarters. the
introduction of new securityholders
through the placement should assist
our liquidity in the future, opening up
the possibility of participation in the
aSX 200 and aSX 300 indices over time.
participation in these market indices
remains an important goal for the
Group as it significantly broadens the
number of institutional fund managers
who can potentially invest in Cromwell.
In regards to our debt position, we
have already commenced negotiations
on facilities expiring later in 2011.
Based on preliminary discussions, we
expect that we will be able to extend or
refinance these facilities well ahead of
their due dates.
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9
Directors’ Report
Geoffrey Levy, AO
Chairman
Paul Weightman
Chief Executive Officer
Daryl Wilson
Finance Director
Richard Foster
Non-Executive Director
Robert Pullar
Non-Executive Director
the Directors of Cromwell Corporation limited (“the
Company”) present their report for Cromwell Group (“the
Group”) for the year ended 30 June 2010.
the shares of the Company and units of Cromwell Diversified
property trust (“the trust”) are combined and issued as
stapled securities in the Group. the shares of the Company
and units of the trust cannot be traded separately and can
only be traded as stapled securities.
1. Directors & Officers
(a) Directors
the persons who were Directors of the Company at any time
during the financial year and up to the date of this report
were:
Mr Geoffrey Levy (AO) – Chairman
Mr levy has extensive public company executive and
directorship experience and is the former Chief executive
officer and current Deputy Chairman of Investec Bank
(australia) ltd. He is currently Chairman of Speciality
Fashion Group limited. He was appointed an officer in the
order of australia in the Queen’s Birthday Honours list in
June 2005.
Mr Robert Pullar – Non-Executive Director
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 firm Douglas Heck and Burrell,
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 Chairman of
Cromwell’s nomination & remuneration Committee,
Chairman of Cromwell’s Investment Committee, and a
member of Cromwell’s audit & risk Committee.
Ms Michelle McKellar – Non-Executive Director
Ms McKellar has a wealth of property 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-pacific.
She is a Senior Member of the property and land economy
Institute and runs her private property companies. Ms
McKellar is a member of Cromwell’s nomination &
remuneration, audit & risk and Investment Committees.
Mr David Usasz – Non-Executive Director
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 is currently
Chairman of Queensland Mining Corporation limited.
He holds a Bachelor of Commerce and is a Fellow of the
Institute of Chartered accountants. Mr usasz is Chairman
of Cromwell’s audit & risk Committee and a member of
Cromwell’s nomination & remuneration and Investment
Committees.
Mr Richard Foster – Non-Executive Director
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 had substantial input to the growth and
development of the business and the Group’s investment
products. Mr Foster is a member of Cromwell’s nomination
& remuneration and Investment Committees.
Mr Marc Wainer – Non-Executive Director
Mr Wainer has more than 35 years experience in the
property industry in South africa, including founding Investec
property Group, Investec Bank's property division. Marc is
Chief executive officer and an executive Director of listed
South african property group redefine properties which
he founded, and a director of redefine International, a
listed property investment company which is a substantial
securityholder of Cromwell Group. He also is a non-
executive director of Hyprop Investments limited, a South
african listed retail property fund.
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10
David Usasz
Non-Executive Director
Michelle McKellar
Non-Executive Director
Marc Wainer
Non-Executive Director
Michael Flax
Alternate Director
Nicole Riethmuller
Company Secretary
Mr Paul Weightman – Chief Executive Officer
(b) Directorships of other listed entities in last 3 yrs
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, financial structuring, public listings, mergers
and acquisitions, revenue matters and joint ventures. Mr
Weightman was Cromwell’s executive Chairman from 1998
until the appointment of Mr levy in april 2008, and has
acted as a Director of companies in the property, energy and
retail sectors. Mr Weightman is a member of Cromwell’s
Investment Committee.
Mr Daryl Wilson – Finance Director
Mr Wilson is a member of the Institute of Chartered
accountants, and joined Cromwell 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
Cromwell’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
Wilson is a member of Cromwell’s Investment Committee.
Mr Michael Flax – Alternate Director
Mr Flax was appointed in January 2010 as an alternate
director to Mr Marc Wainer.
all Directors of the Company are also Directors of Cromwell
property Securities limited, the responsible entity of the trust.
(d) Directors’ Meetings
Mr. Geoffrey levy has been a Director of Specialty Fashion
Group since 8 april 2005. Mr. levy was a director of ten
network Holdings from 3 april 1998 until his resignation
from the Board on 25 october 2007 and a director of StW
Group limited from 24 november 1993 until his resignation
from the Board on 1 July 2008.
Mr usasz has been a director of Queensland Mining
Corporation limited since 15 June 2007.
no other Director has been a director of any other listed
company during the 3 years preceding the end of the
financial year, and up to the date of this report.
(c) Company Secretary
Ms Nicole Riethmuller - Company Secretary
Ms riethmuller has 15 years experience as a corporate
lawyer having worked primarily in the financial services
industry. prior to joining Cromwell, nicole was General
Counsel at the Queensland Investment Corporation where
she headed the in-house legal team. Before that she was a
Senior associate in the Funds Management team at Minter
ellison lawyers in Sydney. nicole has also been a lawyer
and assistant Company Secretary at Queensland Sugar
Corporation. She has a Bachelor of laws and a Bachelor of
Commerce from the university of Queensland.
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
Board
Nomination &
Remuneration Committee
Geoffrey Levy
Robert Pullar
Michelle McKellar
David Usasz
Richard Foster
Marc Wainer
Michael Flax
Paul Weightman
Daryl Wilson
a
14
14
14
13
14
4
1
14
14
B
14
14
14
14
14
6
1
14
14
a
-
1
1
1
1
-
-
-
-
B
-
1
1
1
1
-
-
-
-
A – Number of meetings attended
B – Number of meetings eligible to attend
Audit &
Risk Committee
B
a
-
-
7
6
7
7
7
7
-
-
-
-
-
-
-
-
-
-
Investment
Committee
a
-
1
1
-
1
-
-
1
1
B
-
1
1
-
1
-
-
1
1
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A
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N
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2
0
1
0
11
2. Principal 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.
there were no significant changes in the nature of the Group’s principal activities during the financial year.
3. Dividends/ Distributions
2010
Interim distribution
Interim distribution
Interim distribution
Final distribution
2009
Interim distribution
Interim distribution
Interim distribution
Final distribution
Dividend
per Security
Distribution
per
Security
Total per
Security
Total $’000
Franked
amt per
Security
Record Date
-
-
-
-
-
-
-
-
-
-
2.00¢
2.00¢
2.00¢
2.00¢
8.00¢
2.50¢
2.50¢
2.50¢
1.50¢
9.00¢
2.00¢
2.00¢
2.00¢
2.00¢
8.00¢
2.50¢
2.50¢
2.50¢
1.50¢
9.00¢
14,062
14,242
16,157
16,157
60,618
17,577
17,577
17,577
10,546
63,277
-
-
-
-
-
-
-
-
-
-
06/10/09
31/12/09
07/4/10
30/6/10
01/10/08
31/12/08
14/04/09
30/06/09
Payment
Date
16/11/09
15/2/10
14/5/10
31/8/10(1)
14/11/08
16/02/09
15/05/09
31/08/09
(1) Expected payment date
4. Review of Operations
(a) Financial Performance
the Group recorded a profit after tax of $19,053,000 for the year ended 30 June 2010 compared with a loss of $113,511,000
for the previous year. the achievement of this positive result has come as the general economic recovery in the market place
continues at a sluggish pace.
the statutory accounting profit was impacted by a number of substantial non-cash items. these included:
•
•
•
a decrease in the fair value of the Group’s investment properties of $32,146,000 (2009: decrease of $104,288,000) which
represented a decrease of approximately 3% in the value of investment properties;
Write down of $6,331,000 (2009: $11,463,000 ) relating to the Group’s property development obligations; and
Gain on the sale of available-for-sale financial assets of $3,431,000 (2009: write down of $3,663,000).
other significant items impacting the operating results for the year included:
•
•
•
rental income and recoverable outgoings of $117,262,000 increased by 4% on the previous year;
Fund management fees of $9,283,000 mainly as a result of fees charged in relation to the Cromwell riverpark trust; and
net finance costs (net of interest received) decreased by 11% on the previous year, due to lower interest rates.
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1
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12
(b) Operating Profit/(loss)
the profit for the year includes a number of items which, in the opinion of the Directors, need to be adjusted for in order to
allow securityholders to gain a better understanding of the Group’s profit from operations. a reconciliation of profit from
operations, as assessed by the Directors, to the reported net profit/(loss) for the year is as follows:
Profit from operations (1)
Reconciliation to profit/(loss) for the year
Loss on sale of investment properties
Gain on sale of available–for–sale financial assets
Fair value net gains/(write-downs):
Investment properties
Interest rate derivatives
Investments at fair value through profit or loss
Available for sale financial assets
Property development inventories/provision
Investment in associate
Loan receivable
Non-cash property investment income/(expense):
Straight-line lease income
Lease incentive and lease cost amortisation
Other non-cash expenses:
Amortisation of finance costs
Employee options expense
Amortisation and depreciation
Relating to equity accounted investments (2)
Net tax losses incurred/(utilised)
Net profit/(loss) for the year
2010
$’000
64,630
(554)
3,431
(32,146)
(1,283)
836
-
(6,331)
-
1,932
852
(5,411)
(1,861)
(339)
(552)
(2,643)
(1,508)
19,053
2009
$’000
63,761
-
-
(104,288)
(22,479)
(3,107)
(3,663)
(11,463)
(232)
(4,890)
1,716
(4,303)
(1,415)
(233)
(545)
(20,237)
(2,133)
(113,511)
(1) Includes other income of $nil (2009: $6,217,000).
(2) Comprises fair value adjustments included in share of profit of equity accounted entities.
profit from operations for the year was $64,630,000 (2009: $63,761,000). Despite the economic environment remaining
extremely challenging, profit from operations remained largely resilient through the economic turmoil of global markets.
the performance of the investment property portfolio reflects Cromwell Group’s commitment to an in-sourced management
model, with significant benefits attached to the integrated property management and tenant relationship activities. High
renewal rates with tenants continue to be achieved, and the portfolio was 96% leased at year-end, with a 4.8 year weighted
average lease term. Importantly, tenant quality is also exceptional, with 51% of rental income at balance date underpinned by
Government or Government owned/funded entities, and a further 33% from listed companies or their subsidiaries.
the acquisition of 321 exhibition Street in Melbourne, the Qantas headquarters in Sydney and the balance of the tGa complex
since balance date are expected to continue to improve the portfolio quality.
(c) Earnings per Stapled Security
Basic/diluted operating earnings per stapled security (1)
Basic/diluted earnings/(loss) per stapled security
(1) Based on profits from operations disclosed above.
2010
Cents
8.5
2.5
2009
Cents
9.1
(16.1)
Basic operating earnings attributable to stapled securityholders were 8.5 cents (2009: 9.1 cents). Distributions paid for the
year were 8.0 cents (2009: 9.0 cents), including a June quarter distribution of 2.0 cents per stapled security to be paid on 31
august 2010.
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(d) Financial Position
Total assets ($’000)
Net assets ($’000)
Net tangible assets ($’000) (1)
Net debt ($’000) (2)
Gearing (%) (3)
Securities issued (’000)
NTA per security
2010
1,282,828
571,407
570,120
568,117
48%
807,835
$0.71
2009
1,308,823
539,593
537,358
656,195
53%
702,943
$0.76
(1) Net assets less deferred tax asset and intangible assets.
(2) Borrowings less cash and cash equivalents and restricted cash.
(3) Net debt divided by total assets less cash and cash equivalents and restricted cash.
nta per security has decreased during the year, from $0.76 to $0.71, primarily as a result of the decreases in fair value of the
investment properties and other non-cash items noted above.
Gearing decreased from 53% to 48%, despite the decrease in investment property values, due to the Group repaying
$56,988,000 of debt during the year, and net assets increasing due to the placement of securities in December 2009 of
$72,990,000 (net of equity issue transaction costs).
(e) Outlook
the outlook remains positive for the Group, despite the sluggish pace of economic recovery. the proportion of earnings from
recurring sources of property investment and funds management was higher during the current year, and this is expected to
continue in the coming year.
the Groups’ property portfolio is expected to continue to deliver consistent earnings. However, the Group is not immune to
the impacts of recent events and higher interest rates combined with a higher than normal percentage of lease expiries in the
2011 financial year are expected to have some impact on operating earnings. Despite these impacts, growth in funds under
management and funds management earnings is expected to continue in future years.
the portfolio values are now anticipated to have stabilised. the Group aims to maintain gearing below the target maximum of
55% through a combination of some sales of smaller non-core assets and prudent capital management.
5. Significant Changes in the State of Affairs
Changes in the state of affairs of the Group during the financial year are set out within the financial report.
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.
6. Subsequent Events
other than as set out in note 41 of the financial report, no matter or circumstance has arisen since 30 June 2010 that has
significantly affected or may significantly affect:
•
•
•
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
7. 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.
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8. 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.
9. Directors’ Interests
the interests of current Directors in securities of the Company at the date of this report are as follows:
Geoffrey Levy
Robert Pullar
Michelle McKellar
David Usasz
Paul Weightman
Richard Foster
Daryl Wilson
Marc Wainer
Michael Flax
10. Options
Stapled
Securities
370,000
14,000,000
330,000
1,927,580
15,464,167
5,261,765
1,955,744
-
-
39,309,256
Performance
Rights
-
-
-
-
738,733
-
344,200
-
-
1,082,933
Options over
Securities
-
-
-
-
-
-
-
-
-
-
(a) Securities under option through the Performance Rights Plan
Stapled securities in Cromwell Group under option through the performance rights plan at the date of this report are as
follows:
Date granted
18/09/07
18/09/07
06/12/07
16/12/09
08/02/10
Exercise date
19/12/10 – 19/01/11
19/12/10 – 19/01/11
07/03/11 – 07/04/11
16/12/11 – 15/01/12
07/02/12 – 07/03/12
Exercise price
$1.21
$0.00
$1.21
$0.20
$0.00
Expiry date
19/01/11
19/01/11
07/04/11
15/01/12
07/03/12
Number of options
2,811,434
8,600
1,082,933
659,600
126,859
4,689,426
no option holder has any right under the options to participate in any other share or interest issue of the Company or any
other entity, except that the performance right holders have a matching in-substance option for units in Cromwell Diversified
property trust as a result of the Group’s stapling arrangement.
(b) Securities issued on the exercise of options through the Performance Rights Plan
no stapled securities have been issued on the exercise of options through the performance rights plan during the year and up
to the date of this report.
(c) Securities under option through Employee Share Ownership Plan
there were no securities in Cromwell Group held by the employee Share ownership plan at the date of this report.
Movements during the year are outlined below.
Movement in number of options
Balance at 1 July 2009
Vested and exercised prior to year end
Balance at 30 June 2010
Number of options
141,875
(141,875)
-
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11. Remuneration Report
the remuneration report outlines the remuneration practices for the Directors and executives which include Key Management
personnel (“KMp”) and the five highest paid executives.
the remuneration report is set out under the following main headings:
(a) remuneration principles
(b) Details of remuneration
(c) performance assessment
(d) Share-based compensation
(e) employment contracts and termination provisions
(a) Remuneration principles
(i)
Governance
the Group has appointed a nomination and remuneration Committee (“Committee”). the Committee has overall
responsibility for the remuneration strategies of the Group. the Committee also advises the Board on remuneration policy and
practices. the Committee is chaired by Mr rJ pullar, a non-executive director. external consultants are appointed to advise
the Committee as required.
(ii) Policy
the Group aims to remunerate competitively and appropriately such that it attracts, retains and motivates the highest calibre
employees. 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.
executive remuneration is benchmarked periodically against the market, based on national remuneration levels for similar
companies taking into account factors such as number of employees, revenue and market capitalisation/total assets. the
Group seeks to align all of its key performance metrics for employees from the objectives set by the Board at the beginning of
each financial year, such that all service agreements and key performance indicators for both executives and non-executives
align with these objectives.
performance is assessed not less than annually in light of performance against individual and Group related goals. the
Group looks to mitigate risk by conservatively balancing the base pay to short term and long term incentives ratio. long term
incentives are paid by way of security based compensation. the remuneration of individual employees is structured in such
a way that it reflects the individual’s previous experience, qualifications, responsibility and performance. the employment or
remuneration of any executive of the Group is not influenced by the executive’s shareholding in the Group.
Executive remuneration
the executive remuneration framework has three components:
•
•
•
base pay and benefits, including superannuation
short term incentives
long term incentives.
Base pay 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.
Short term and long term incentives are linked to the achievement of individual objectives, both financial and non-financial,
which are relevant to meeting the Group’s business objectives.
Short term incentives are generally paid as cash bonuses. Cash bonus entitlements are assessed and paid based on the actual
performance against the relevant key performance indicator targets. For all executives except the Chief executive officer,
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 Committee or the Board.
long term incentives comprise participation in equity compensation plans. the Group established a performance rights plan
(“prp”) during the 2008 year. the prp 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 conditions.
eligibility for the prp is approved having regard to individual circumstances and performance.
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performance rights generally vest in 3 years. until the performance rights have vested, the employee cannot sell or
otherwise deal with the performance rights except in certain limited circumstances. an employee must remain employed
by the Group in order for the performance rights to vest. any performance rights which have not yet vested on an employee
leaving service must be forfeited.
the number of key management personnel participating in the prp during the year was 6 (2009: 10). the number of
performance rights allocated to key management personnel at balance date was 2,755,958 (2009: 2,663,982).
the Group established the Cromwell employee Share ownership plan (“eSop”) during 2003. no grants were made under the
eSop during 2009 or 2010, and it is not intended that any further grants will be made by this plan in the future. under the
eSop, eligible employees were allocated shares in the Company. the shares were acquired by the eligible employees at the
time of allocation, funded by a loan from the Company to the eligible employee.
under aIFrS, the shares held within the eSop were 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.
the number of key management personnel participating in the eSop in the 2010 year was nil (2009: 1). the number of stapled
securities allocated to key management personnel under the eSop at balance date was nil (2009: 141,875).
Directors’ remuneration
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
securityholders from time to time. this maximum currently stands at $700,000 per annum in total for 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 security-based compensation plans, and are not provided with retirement benefits other than
statutory superannuation.
annual fees to non-executive Directors for Board and Board Committees for 2010 are shown in the table below:
Chairman
Non-Executive Director
Audit & Risk Committee – Chairman
Audit & Risk Committee – Member
Nomination & Remuneration Committee – Chairman
Nomination & Remuneration Committee – Member
Investment Committee
2010
$
150,000
75,000
18,000
12,000
7,500
5,000
-
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17
(b) Details of remuneration
remuneration paid, payable, or otherwise made available, directly or indirectly, to key management personnel is set out below.
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 below include the five highest remunerated Group executives and
Company executives.
Key management personnel during the year were:
Non-Executive Directors:
Mr GH Levy (AO)
Mr RJ Pullar
Ms MA McKellar
Chairman
Director
Director
Executive Directors:
Mr PL Weightman
Mr DJ Wilson
Chief Executive Officer
Chief Financial Officer
Other Senior Executives:
Mr DE Usasz
Mr M Wainer
Mr WR Foster
Director
Director
Director
Mr PW Howard
Mr DA Gippel
Ms NE Riethmuller
Chief Operating Officer
Structured Finance Manager
General Counsel/Company Secretary
Ms JA Clark
Mr B Binning
Mr MJ Blake
Transactions Manager
National Leasing Manager
National Head of Distribution
Short-
term
benefits
Cash
salary and
fees
$
Short-
term
benefits
Accrued
leave (4)
Short-
term
benefits
Cash
bonus
Short-
term
benefits
Non-cash
benefits
Post-em-
ployment
Super-
annuation
$
$
$
$
Long-
term
benefits
Long
service
leave
$
Share-
based
payments
Options
Total
Remunera-
tion
$
$
% of
Remun.
that is
perform-
ance
based
2010
Non-Executive
Directors
GH Levy
RJ Pullar
MA McKellar
DE Usasz
M Wainer (1)
WR Foster (2)
Executive
Directors
PL Weightman
DJ Wilson
Other key
management
personnel
PW Howard
DA Gippel
MJ Blake
NE Riethmuller
B Binning (3)
JA Clark
137,615
86,697
84,404
89,908
31,250
97,416
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,385
7,803
7,596
8,092
-
6,968
-
-
-
-
-
-
-
-
-
-
-
-
150,000
94,500
92,000
98,000
31,250
104,384
-
-
-
-
-
-
678,356
386,256
6,433
14,279
150,000
100,000
157,900
-
13,744
13,744
10,041
8,440
36,482
16,998
1,052,956
539,717
18%
22%
236,870
247,202
236,254
250,000
208,999
145,999
2,917,226
7,288
2,852
(909)
11,538
5,627
(119)
46,989
-
60,000
63,700
-
137,500
-
511,200
-
22,564
-
-
-
-
180,464
14,461
14,461
14,461
14,461
14,461
13,218
155,855
1,669
8,182
5,366
1,068
2,515
2,426
39,707
-
99,935
20,328
-
26,728
6,261
206,732
260,288
455,196
339,200
277,067
395,830
167,785
4,058,173
-
35%
25%
-
41%
4%
(1) Appointed on 29 January 2010
(2) Became a non executive director on 1 July 2009
(3) Became a KMP from 1 July 2009
(4) Comprises movement in annual leave entitlements
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
18
Short-
term
benefits
Cash
salary and
fees
$
Short-
term
benefits
Accrued
leave (4)
Short-
term
benefits
Cash
bonus
Short-
term
benefits
Non-cash
benefits
Post-em-
ployment
Super-
annuation
$
$
$
$
Long-
term
benefits
Long
service
leave
$
Share-
based
payments
Options
Total Re-
munera-
tion
$
$
% of
Remun.
that is
perform-
ance
based
137,615
92,500
84,404
89,908
678,355
195,000
386,256
235,049
88,662
246,956
182,092
236,038
200,000
250,926
158,654
152,912
3,415,327
-
-
-
-
-
-
-
-
-
2,000
-
-
77,688
-
14,668
-
-
75,000
157,900
-
-
9,110
(6,691)
1,841
1,652
(4,672)
3,077
(8,340)
3,070
588
91,991
-
-
75,000
-
-
-
-
-
-
150,000
-
-
19,568
-
-
-
-
-
7,123
186,591
12,385
-
7,596
8,092
14,718
-
14,485
13,745
12,550
13,745
13,745
13,745
13,745
13,745
10,309
12,367
174,972
-
-
-
-
-
-
-
-
7,369
-
19,181
28,725
-
13,384
851
(1,689)
8,003
3,461
4,743
2,438
3,803
255
2,074
50,489
-
(3,610)
31,450
13,733
17,654
10,453
12,149
-
5,556
129,494
150,000
94,500
92,000
98,000
964,755
195,000
522,974
258,755
89,222
396,563
214,683
267,508
229,713
272,283
172,288
180,620
4,198,864
-
-
-
-
3%
-
17%
-
-
27%
6%
7%
5%
4%
-
3%
2009
Non-Executive
Directors
GH Levy
RJ Pullar
MA McKellar
DE Usasz
Executive
Directors
PL Weightman
WR Foster
DJ Wilson
Other key
management
personnel
PW Howard
SM Morgan (1)
DA Gippel
MC McLaughlin (2)
MJ Blake
PJ McDonnell (2)
PJ Cowling (2)
NE Riethmuller (3)
JA Clark
(1) Resigned on 11 November 2008
(2) Not considered a Key Management Person in 2010
(3) Appointed on 11 November 2008
(4) Comprises movement in annual leave entitlements
(c)
Performance assessment
performance linked remuneration includes both short term and long term incentives. performance remuneration seeks to
link the overall level of executive reward with the performance of the Group over a number of years, with greater emphasis
given to the current year. performance is monitored through the identification of performance criteria which must be met for
each executive.
Short term incentives
executives receive performance related cash bonuses which are linked to the achievement of individual objectives relevant to
their business unit and the Group’s business objectives.
although the performance criteria may be different for each executive the overriding principles involve assessment of
performance against the following areas:
Financial
Including Group’s financial performance and performance of the individual executive’s business unit, with
concentration on operating profit per security as assessed by the Directors and set out in part 4 of the
Directors report and long term total Shareholder returns (“tSr”) relative to peers.
non-Financial
achievement of personal objectives related to identified non-financial business targets, implementing
operational improvements for the Group, achieving performance enhancements and overseeing personal
and staff development.
Governance
achieving performance consistent with the Group’s values and obligations and meeting standards of
professional conduct.
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E
L
L
G
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A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
19
Long term incentives
the Group has established a performance rights plan. For executives, the ability to exercise the performance rights is
generally conditional on the executive meeting internal performance hurdles, remaining employed by the Group for a specified
period and, in some cases, the Group achieving predefined tSr (total Shareholder return) hurdles . tSr is defined as being
the amount of dividends/distributions per security paid/payable by the Group during the review period (divided by the share
price at the beginning of the review period) plus the percentage change in the price at which securities in the Group are traded
between the beginning and the end of the period.
the dividends/distributions per security and share price at year end for the past two financial years were as follows:
Dividend/distributions per security
Share price at year end
2010
8.0¢
69.0¢
2009
9.0¢
52.0¢
the operating earnings for the Group for the past two financial years and tSr for the last one, three and five financial years
compared with relevant indices are shown below.
Operating profit
Operating profit (as assessed by the Directors – see part 4(b) above)
Operating profit per security
Change over previous year
TSR
TSR – Group
TSR - S&P/ASX 300 A-REIT accumulation index
Group outperformance against S&P/ASX 300 A-REIT accumulation index
TSR – All Ords
Group outperformance against All Ords
$64,630,000
8.0 cents
(12%)
$63,761,000
9.1 cents
(10%)
3 Year
(6%)
(24%)
19%
(8%)
2%
5 Year
30%
(8%)
38%
5%
25%
1 Year
49%
20%
29%
14%
36%
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 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
vesting conditions as outlined above (under the heading of long term incentives). no options will vest if the conditions are
not satisfied, hence the minimum value of options yet to vest is $nil. the maximum value of the options yet to vest has been
determined as the amount of the grant date fair value of the options that is yet to be expensed.
Name
Cash
Bonus Paid
%
Cash
Bonus
Forfeited %
Year
Options
Granted
Options
Vested in
2010
%
Options
Forfeited in
2010
%
Years in
which
options
may vest
PL Weightman
DJ Wilson
PW Howard
DA Gippel
MJ Blake
NE Riethmuller
B Binning
JA Clark
100%
100%
-
100%
-
-
92%
-
-
-
-
-
-
-
8%
-
2008
2008
-
2008/2010
2008
-
2008/2010
2008
-
-
-
28%
-
-
-
-
-
-
-
-
-
-
-
-
2011
2011
-
2011-2012
2011
-
2011-2012
2011
Minimum
total value
of grant to
vest
$
-
-
-
-
-
-
-
-
Maximum
total value
of grant to
vest
$
13,835
6,447
-
205,891
5,183
-
63,377
1,998
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E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
20
(d) Share-based compensation
Details of the performance rights plan and the employee Share ownership plan are set out at part (a) of the remuneration
report. no further securities are expected to be granted under the employee Share ownership plan.
In prior years an allocation of options was granted to executive Directors and executives as share based compensation. all
Directors and executives of the Company and its controlled entities are considered for participation in the performance rights
plan subject to a minimum period of service, which may be waived by the Committee. participation by Directors is subject to
securityholder approval.
Consideration for granting options, grant periods, vesting and exercise dates, exercise periods and exercise prices are
determined by the Board or Committee in each case. options granted under the employee Share ownership plan carry the
same voting rights as ordinary Stapled Securities. performance rights granted under the performance rights plan carry no
voting rights. When exercisable, each performance right is convertible into one stapled security.
the terms and conditions of each grant of options under the performance rights plan affecting remuneration in the previous,
this or future reporting periods are as follows:
Grant Date
Expiry Date
Exercise Price
No of Options Granted
Assessed Value per
Option at Grant Date
18/09/2007
18/09/2007
18/09/2007
06/12/2007
16/12/2009*
08/02/2010*
19/01/2010
19/01/2011
19/01/2011
07/04/2011
15/01/2012
07/03/2012
$1.21
$1.21
$1.21
$1.21
$0.20
-
407,500
2,439,300
92,100
1,624,400
659,600
126,859
9.2¢
10.6¢
15.0¢
8.9¢
41.5¢
59.1¢
*These options were granted under the Performance Rights Plan during 2010. No options under the Performance Rights Plan were granted during 2009.
no options under the employee Share ownership plan were granted during the 2010 or 2009 years.
Details of changes during the 2010 year in performance rights which were provided to Key Management personnel under the
performance rights plan are set out below.
Opening
balance
Granted
during year
Exercised
during the year
Forfeited
during the year
Lapsed
during year
Closing
balance
2010
PL Weightman
DJ Wilson
DA Gippel
MJ Blake
B Binning
J A Clark
738,733
344,200
460,083
338,000
200,133
92,100
2,173,249
-
-
659,600
-
126,859
-
786,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(203,750)
-
-
-
(203,750)
738,733
344,200
915,933
338,000
326,992
92,100
2,755,958
as the tSr for 2009 was above the hurdle of 13% no performance rights relating to that year were forfeited during the current
year by executives. as the review dates for performance rights occur in September and December each year, the impact of the
2010 tSr will be reviewed in those months and performance rights will be forfeited if required.
the assessed fair value at grant date of performance rights granted is allocated equally over the period from grant date to
vesting date, and the amount is included in the remuneration tables above. Fair value at grant date for performance rights
with no market based vesting conditions are independently determined using a Black-Scholes option pricing model that
takes into account the exercise price, the term of the option, the security price at grant date and expected price volatility of
the underlying securities, the expected divided/distribution yield and the risk-free interest rate for the term of the option.
Fair value at grant date for performance rights with market based vesting conditions are determined using a Monte Carlo
simulation (tSr hurdle) and the Black-Scholes option pricing model that takes into account the exercise price, the term of
the option, the security price at grant date and expected price volatility of the underlying securities, the expected dividend/
distribution yield and the risk-free interest rate for the term of the option.
a total of 786,459 performance rights were granted during the 2010 year. no performance rights were granted in 2009.
plan rules contain a restriction on removing the “at risk” aspect of the instruments granted to executives. plan participants
may not enter into any transaction designed to remove the “at risk” aspect of an instrument before it vests without explicit
approval from the Board.
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L
L
G
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A
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N
U
A
L
R
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P
O
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2
0
1
0
21
Further details relating to options are set out below:
Name
PL Weightman
DJ Wilson
PW Howard
DA Gippel
MJ Blake
NE Riethmuller
B Binning
JA Clark
Remuneration
consisting of
options (1)
3%
3%
0%
22%
6%
0%
7%
4%
Value at grant
date (2)
$
-
-
-
273,914
-
-
75,000
-
Value at exercise
date (3)
$
-
-
-
-
-
-
-
-
Value at forfeit
date (4)
$
-
-
-
-
-
-
-
-
(1) The percentage of the value of remuneration consisting of options, based on the value of options expensed during the current year.
(2) The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration.
(3) The value at exercise date of options that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the options at that date.
(4) The value at lapse date of options that were granted as part of remuneration and that were forfeited during the year because a vesting condition was not satisfied.
(5) Non-executive directors are not entitled to be granted options and therefore are not included in the above table.
(e) Employment contracts and termination provisions
Termination
there are no fixed terms in executive employment contracts. Where an employee is guilty of misconduct, fraud or serious
or repeated breaches of the employee code of conduct, the Group may terminate immediately without notice. In the event of
termination of employment by the Group for other reasons, termination payments are payable if minimum notice periods are
not adhered to.
notice periods for executives are as follows:
CEO, Finance Director, Structured Finance Manager
All other executives
Notice Period
6 months
3 months
on termination, a portion of short term incentives may also be paid at the discretion of the Ceo, or the Board in the case of
termination of the Ceo. In addition, other statutory entitlements such as accrued leave may be taken as termination benefits.
Employment Contract – Chief Executive Officer
remuneration and other terms of employment for paul Weightman, Chief executive officer, are formalised in an employment
agreement. 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 2010 year of $850,000, thereafter to be reviewed annually by the
remuneration committee.
•
performance cash bonus of up to $150,000 with targets to be reviewed annually by the remuneration committee.
Employment Contract – Finance Director
remuneration and other terms of employment for Daryl Wilson, Chief Financial officer, are formalised in an employment
agreement. Mr Wilson 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 2010 year of $400,000, to be reviewed annually by the remuneration
committee.
•
performance cash bonus of up to $100,000 with targets to be reviewed annually by the remuneration committee.
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A
N
N
U
A
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P
O
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2
0
1
0
22
12. Indemnifying Officers or Auditor
Subject to the following, no indemnity or insurance premium was paid during the financial year for a person who is or has been
an officer of the Group.
the constitution of the Company provides that to the extent permitted by law, a person who is or has been an officer of the
Company is indemnified against certain liabilities and costs incurred by them in their capacity as an officer of the Company.
Further, the Company has entered into a Deed of access, insurance and indemnity with each of the Directors and the company
secretary. under the deed, the Company agrees to, amongst other things:
•
•
•
indemnify the officer to the extent permitted by law against certain liabilities and legal costs incurred by the officer as an
officer of the Company and its subsidiaries;
maintain and pay the premium on an insurance policy in respect of the officer; and
provide the officer with access to board papers and other documents provided or available to the officer as an officer of
the Company and its subsidiaries.
the Group has paid premiums for Directors and officers’ liability insurance with respect to the Directors, company secretary
and senior management as permitted under the Corporations act 2001. the terms of the policy prohibit disclosure of the
nature of the liabilities covered and the premiums payable under the policy.
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.
13. 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.
14. Auditor
Johnston rorke continues in office in accordance with section 327 of the Corporations act 2001.
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.
the Directors have considered the position and, in accordance with advice received from the audit & risk Committee, are
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 & risk Committee to ensure they do not impact the
impartiality and objectivity of the auditor.
Details of the amounts paid or payable to the auditor and its related parties for non-audit services are set out below:
Non-audit Services
Tax compliance services
Other
Total remuneration for non-audit services
2010
$
-
-
-
2009
$
860
3,200
4,060
the auditor receives remuneration for audit and other services relating to other entities 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 $128,000 (2009: $97,500).
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2
0
1
0
23
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 18th day of august 2010
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24
Level 30, Central Plaza One
345 Queen Street Brisbane Q 4000
GPO Box 1144 Brisbane Q 4001
Ph 07 3222 8444 / Fax 07 3221 7779
Website www.jr.com.au
Email jr@jr.com.au
the Directors
Cromwell Corporation limited
level 19
200 Mary Street
BrISBane QlD 4000
Auditor’s Independence Declaration
as lead auditor for the audit of Cromwell Corporation limited for the financial year ended 30 June 2010, 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.
this declaration is in respect of Cromwell Corporation limited and the entities it controlled during the
period.
JOHNSTON RORKE
Chartered accountants
RCN WALKER
partner
Brisbane, Queensland
18 august 2010
liability limited by a scheme approved under professional Standards legislation
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A
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N
U
A
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O
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2
0
1
0
25
Consolidated Statement Of Comprehensive Income for the
year ended
30 June 2010
Revenue and other income
Rental income and recoverable outgoings
Funds management fees
Property development sales
Distributions
Interest
Other revenue
Share of profits of equity accounted entities
Gain on sale of available-for-sale financial assets
Increase in recoverable amount:
Loans receivable
Fair value net gain from:
Investments at fair value through profit or loss
Other income
Total revenue and other income
Expenses
Property expenses and outgoings
Property development costs
Funds management commissions
Employee benefits expense
Finance costs
Share of losses of equity accounted entities
Loss on sale of investment properties
Fair value net loss from:
Interest rate derivatives
Investment properties
Investments at fair value through profit or loss
Decrease in recoverable amount:
Available-for-sale financial assets
Jointly controlled entity/associates
Property development inventories/provision
Loans receivable
Other expenses
Total expenses
Profit/(loss) before income tax
Income tax expense
Profit/(loss)
Other comprehensive income
Available-for-sale financial assets
Other comprehensive income, net of tax
Total comprehensive income/(loss)
Profit/(loss) is attributable to:
Company shareholders
Trust unitholders – non-controlling interest
Profit/(loss)
Total comprehensive income/(loss) is attributable to:
Company shareholders
Trust unitholders – non-controlling interest
Total comprehensive income/(loss)
Basic earnings/(loss) per company share
Diluted earnings/(loss) per company share
Notes
15 (b)
8 (c)
5 (a)
10
5 (b)
5 (b)
15 (b)
5 (b)
12
15 (b)
22
8 (c)
6
27
29
29
2010
$’000
117,262
9,283
-
429
6,265
524
3,882
3,431
2009
$’000
112,522
4,863
2,847
658
11,973
44
-
-
1,932
-
836
-
143,844
19,260
3,487
3,274
11,102
40,529
-
554
1,283
32,146
-
-
-
6,331
-
5,681
123,647
20,197
1,144
19,053
-
-
19,053
(7,650)
26,703
19,053
(7,650)
26,703
19,053
(1.0¢)
(1.0¢)
-
6,217
139,124
17,545
3,874
385
10,196
50,294
13,231
-
22,479
104,288
3,107
3,663
232
11,463
4,890
4,530
250,177
(111,053)
2,458
(113,511)
868
868
(112,643)
(18,971)
(94,540)
(113,511)
(18,971)
(93,672)
(112,643)
(2.7¢)
(2.7¢)
the above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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Consolidated Statement Of Financial Position
as at
30 June 2010
Current Assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Derivative financial instruments
Other current assets
Total current assets
Non-Current Assets
Trade and other receivables
Inventories
Investment properties
Available-for-sale financial assets
Investments at fair value through profit or loss
Investments in jointly controlled entity and associates
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
Derivative financial instruments
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
Retained earnings/(accumulated losses)
Total equity attributable to shareholders
Non-controlling Interests
Equity attributable to unitholders
Contributed equity
Reserves
Retained earnings/(accumulated losses)
Total equity attributable to unitholders
Total equity attributable to securityholders
Notes
7
8
9
11
8
10
12
13
14
15
16
17
18
19
20
21
9
22
23
20
22
24
25
26
27
27
27
2010
$’000
98,469
17,988
389
1,353
2,266
120,465
30,000
4,925
1,064,100
-
3,987
56,802
1,262
791
496
1,162,363
1,282,828
11,933
29,232
16,157
3,626
6,022
6,618
73,588
637,354
479
637,833
711,421
571,407
49,197
3,595
(46,021)
6,771
599,384
-
(34,748)
564,636
571,407
2009
$’000
66,653
23,820
74
-
2,771
93,318
30,062
-
1,117,175
3,547
2,919
58,295
1,272
1,721
514
1,215,505
1,308,823
16,424
81,201
10,546
3,112
7,804
8,131
127,218
641,647
365
642,012
769,230
539,593
43,688
3,256
(38,371)
8,573
531,853
-
(833)
531,020
539,593
the above consolidated statement of financial position should be read in conjunction with the accompanying notes.
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Consolidated Statement Of Changes In Equity for the
year ended
30 June 2010
Notes
Balance at 1 July 2009
Total comprehensive
income/(loss)
Transactions with equity holders in their
capacity as equity holders:
Attributable to Equity Holders of the Company
Avail-
Con-
Total
able-
tributed
for- Sale
Equity
Reserve
Accu-
mulated
Losses
Share
Based
Pay-
ments
Reserve
Non-
con-
trolling
Interest
(Trust)
$’000
43,688
$’000
(38,371)
$’000
2,340
$’000
916
$’000
8,573
$’000
531,020
-
(7,650)
-
(7,650)
26,703
Contributions of equity, net of
transaction costs
Dividends/distributions paid/payable
Employee share options
24
28
24/25
5,459
-
50
-
-
-
-
-
339
5,459
-
389
5,848
6,771
67,531
(60,618)
-
6,913
564,636
5,509
49,197
-
(46,021)
-
2,340
339
1,255
Non-
con-
trolling
Interest
(Exter-
nal)
$’000
-
-
-
-
-
-
-
Total
Equity
$’000
539,593
19,053
72,990
(60,618)
389
12,761
571,407
43,644
(18,800)
2,340
683
27,867
687,969
(600)
715,236
-
(18,971)
Total transactions
with equity holders
Balance at 30 June 2010
Balance at 1 July 2008
Total comprehensive
income/(loss)
Transactions with equity holders in their
capacity as equity holders:
Dividends/distributions paid/payable
Contributions of equity
Transfer from non-controlling interest
Employee share options
28
24
26
24/25
-
44
-
-
-
-
(600)
-
Total transactions
with equity holders
Balance at 30 June 2009
44
43,688
(600)
(38,371)
-
2,340
-
(18,971)
(93,672)
-
(112,643)
-
-
-
233
233
916
-
44
(600)
233
(63,277)
-
-
-
(323)
8,573
(63,277)
531,020
-
-
600
-
600
-
(63,277)
44
-
233
(63,000)
539,593
-
-
-
-
-
-
-
-
-
the above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated Statement Of Cash Flows for the
year ended
30 June 2010
Cash Flows From Operating Activities
Receipts in the course of operations
Payments in the course of operations
Distributions received
Interest received
Finance costs paid
Income tax paid
Net cash provided by operating activities
Cash Flows From Investing Activities
Payments for investment properties
Proceeds from sale of investment properties
Payments for property, plant and equipment
Payments for investment in associate
Payments for controlled entity, net of cash acquired
Payments of property development provision
Proceeds from other financial assets
Proceeds from sale of available-for-sale financial assets
Payments for investments at fair value through profit or loss
Proceeds from sale of investments at fair value through profit or loss
Payments for software and other intangible assets
Loans to related entities
Repayment of loans by related entities
Loans to other persons
Repayment of loans by other persons
Refund of transaction costs on merger
Net cash provided by/(used in) investing activities
Cash Flows From Financing Activities
Proceeds from borrowings
Repayment of borrowings
Payment of loan transaction costs
Proceeds from issue of treasury shares/securities
Proceeds from issue of stapled securities
Equity issue transaction costs
Payment of dividends/distributions
Payment for derivative financial instruments
Net cash provided by/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
Notes
30
38
7
2010
$’000
147,974
(56,159)
7,226
4,646
(39,133)
(521)
64,033
(11,051)
21,574
(253)
-
(226)
(8,217)
-
6,978
(2,599)
2,367
(288)
(26,926)
26,476
(131)
1,791
-
9,495
-
(56,988)
(1,143)
50
73,324
(342)
(55,007)
(1,606)
(41,712)
31,816
66,653
98,469
2009
$’000
132,500
(44,114)
8,739
12,942
(48,031)
(2,605)
59,431
(15,480)
-
(37,489)
(237)
-
-
25,700
-
(2,411)
1,500
(362)
(5,062)
-
(219)
-
5,284
(28,776)
538,100
(437,356)
(2,759)
44
-
-
(70,314)
-
27,715
58,370
8,283
66,653
the above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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Notes to the Financial Statements for the
year ended
30 June 2010
1. Summary of Significant Accounting Policies
Cromwell Group was formed by the stapling of Cromwell Corporation limited (‘the Company’) and Cromwell Diversified
property trust (‘the trust’). Cromwell Group is also defined as ‘the Group’.
the Group was established for the purpose of facilitating a joint quotation of the Company and the trust on the australian
Securities exchange. the constitutions of the trust and 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
interests 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.
the stapling arrangement will cease upon the earliest of either the winding up of the Company or the trust.
the financial statements relate to the Group as defined above. as a result of changes to the Corporations act 2001 separate
financial statements of Cromwell Corporation limited as an individual entity (parent entity) are no longer presented. limited
financial information for the Cromwell Corporation limited, as an individual entity, is disclosed in note 34 and has been
prepared on the same basis as the consolidated financial statements.
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 complies with the International Financial reporting Standards (IFrS) and interpretations adopted by the
International accounting Standards Board.
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 and investments at fair value through profit or loss 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 the functional currency of the Group.
Changes in accounting policies
the Group has adopted the following new and revised australian accounting Standards issued by the aaSB which are
mandatory to apply to the current period.
Presentation of financial statements
aaSB 101 prescribes the contents and structure of the financial statements. Changes reflected in this financial report include:
•
•
•
the replacement of the income statement with a statement of comprehensive income. Items of income and expense
not recognised in profit or loss are now disclosed as components of “other comprehensive income”. In this regard, such
items are no longer reflected as equity movements in the statement of changes in equity;
the adoption of the single statement approach to the presentation of the statement of comprehensive income; and
other statements are renamed in accordance with the Standard.
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Segment reporting
an operating segment is a component of an entity that engages in business activities from which it may earn revenues and
incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose
operating results are regularly reviewed by the entity’s chief operating decision maker with the objective of making decisions
about resources to be allocated to the segment and assess its performance and for which discrete financial information is
available.
operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker. the chief operating decision maker has been identified as the Chief executive officer.
the Group aggregates two or more operating segments when they have similar economic characteristics, and the segments
are similar in each of the following respects:
•
•
•
•
nature of the products and services;
type or class of customer for the products and services;
Methods used to distribute the products and services; and if applicable
nature of the regulatory environment.
the Group has adopted aaSB 8 operating Segments from 1 July 2009. aaSB 8 replaced aaSB 114 Segment reporting. aaSB 8
requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal
reporting purposes. this has resulted in the same number of reportable segments being presented but certain assets and
liabilities, and their associated income and expenses, have now been allocated to their relevant segments.
Investment property
aaSB 140 (revised) requires property that is being constructed or developed for future use as investment property be
accounted for under aaSB 140 Investment property. Such property was previously accounted for under aaSB 116 property,
plant and equipment under the cost model. under aaSB 140 Investment property, property under construction is measured
under the fair value model unless fair value cannot be reliably determined, in which case, it is measured at cost until either its
fair value becomes reliably determinable or construction is completed (whichever is earlier).
the Group has applied these changes from 1 July 2009. Investment properties under construction previously classified
as property, plant and equipment and measured at cost will now be measured at fair value and classified as investment
properties. on adoption of the revised standard at 1 July 2009 the Group had no properties under construction recognised as
property, plant and equipment and the change in accounting policy resulted in no transfers being recognised by the Group.
AASB 3 Business Combinations
the Standard (as revised) requires that the consideration transferred in a business combination shall be measured at fair
value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the
liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount
of any non controlling interest in the acquiree. For each business combination, the acquirer measures the non controlling
interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. acquisition
related costs are expensed as incurred. refer to note 1 (n).
AASB 7 Financial Instruments: Disclosures
amendments to aaSB 7 Financial Instruments: Disclosures requires disclosure of financial instruments measured at fair value
to be based on a three-level fair value hierarchy that reflects the significance of the inputs in such fair value measurements.
refer to note 4(d).
(b) Principles of consolidation
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)
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
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(3)
the issued units of the trust are not owned by the Company and are presented as non-controlling 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 statement
of comprehensive income and statement of financial position.
Subsidiaries
the consolidated financial statements incorporate the assets and liabilities of all subsidiaries as at 30 June 2010 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 acquisition method of accounting is used to account for the business combinations 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.
non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive
income and statement of financial position respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company. a list of
subsidiaries appears in note 35 to the consolidated financial statements.
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 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.
the Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss 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
Group’s financial statements as a reduction of 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.
Joint venture entities
the interest in a joint venture entity is accounted for in the Group’s financial statements using the equity method. under the
equity method, the share of the profits or losses of the joint venture entity is recognised in profit or loss, and the share of
movements in reserves is recognised in reserves.
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
Rental revenue
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 statement of financial position as a receivable or if paid in advance, as rent in
advance (unearned income). lease incentives granted are considered an integral part of the total rental revenue and are
recognised as a reduction in rental 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.
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Funds management revenue
acquisition and capital raising fee revenue is recognised at settlement of the relevant property or proportionately as
the equity interests are issued/sold to external investors as appropriate. Management fee revenue is recognised on a
proportional basis over time as services are performed.
Other
property development sales revenue is recognised on settlement of the relevant property.
Interest revenue is recognised as it accrues using the effective interest method.
Gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the date of
disposal and the net proceeds from disposal and is included in the profit or loss in the year of disposal. Where revenue is
obtained from the sale of properties, it is recognised when the significant risks and rewards have transferred to the buyer,
which is normally when legal title passes to the buyer.
(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 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.
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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.
(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 impairment of receivables. receivables relating to operating leases of investment properties are due on the first day of each
month, payable in advance. other receivables are usually 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 impairment of receivables 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 profit or loss.
(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
Investment property is property which is held either to earn income or for capital appreciation or both. Investment property
also includes properties that are under construction for future use as investment properties. 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 at balance date.
these valuation processes 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 capitalisation of net income and the discounting of future cash flows to their
present value. these methods incorporate assumptions of future rental income and costs, appropriate capitalisation and
discount rates and also consider market evidence of transaction prices for similar investment properties.
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.
Further information on assumptions underlying management’s assessment of fair value is contained in note 2.
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(i)
Investments and other financial assets
the Group classifies its investments as either financial assets at fair value through profit or loss 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.
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. Financial assets at fair value through profit or loss also includes financial assets which
upon initial recognition are designated as such.
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 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 profit or loss. 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 or loss are subsequently carried at fair value.
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 profit or loss in the period in which they arise. Changes in the fair
value of securities classified as available-for-sale are recognised in other comprehensive income. When securities classified
as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income
are reclassified to profit or loss 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 reclassified from
equity and recognised in profit or loss as a reclassification adjustment. Impairment losses recognised in profit or loss on equity
instruments classified as available for sale are not reversed through profit or loss.
(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 profit or loss 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
Furniture and fittings
Leased plant and equipment
Rate
10-67%
18%
8-37%
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 profit or
loss.
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(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.
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 carrying value less impairment provision of trade and other receivables and payables are assumed to approximate
their fair values due to their short-term nature. 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 acquisition method of accounting is used to account for all business combinations regardless of whether equity
instruments or other assets are acquired. the consideration transferred for the acquisition of a subsidiary comprises the
fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. the consideration
transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing
equity interest in the subsidiary. acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair
values at the acquisition date. on an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.
the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable
assets acquired are recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or
loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. the discount rate used is the entity’s incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
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(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 statement of financial position 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 statement of financial position 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.
(r) Derivative financial instruments
the Group is exposed to changes in interest rates and uses interest rate derivatives 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 derivatives 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 profit or loss.
(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 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.
(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.
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.
(v) Provisions
provisions are recognised when:
•
•
•
the Group has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources will be required to settle the obligation; and
the amount has been reliably estimated.
provisions are not recognised for future operating losses.
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(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 an 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 is adjusted to reflect market vesting conditions, but excludes the impact of any
non-market vesting conditions (for example, profitability and sales growth targets). non-market vesting conditions are
included in assumptions about the number of options that are expected to become exercisable. at each balance date, the
entity revises its estimate of the number of options that are expected to become exercisable. the employee benefit expense
recognised each period takes into account the most recent estimate. the impact of the revision to original estimates, if any, is
recognised in profit or loss with a corresponding adjustment to equity.
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 profit or loss 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 profit
or loss 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).
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(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 profit/(loss) 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.
(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 and interpretations
relevant accounting standards and interpretations that have recently been issued or amended but are not yet effective and
have not been adopted for the year are as follows:
Standard/Interpretation
AASB 9 Financial Instruments and consequential amendments to other accounting standards resulting from its issue
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment
Transactions
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
AASB 2010-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
Application
date of
standard
1 Jan 2013
1 Jan 2010
Application
date for the
Group
1 Jul 2013
1 Jul 2010
1 Jan 2010
1 Jul 2010
1 Jul 2010
1 Jan 2011
1 Jul 2010
1 Jul 2011
the Directors anticipate that the adoption of these Standards and Interpretations in future years may have the following impacts:
aaSB 9 – this revised standard provides guidance on the classification and measurement of financial assets, which is the
first phase of a multi-phase project to replace aaSB 139 Financial Instruments: recognition and Measurement. under the
new guidance, a financial asset is to be measured at amortised cost only if it is held within a business model whose objective
is to collect contractual cash flows and the contractual terms of the asset give rise on specified dates to cash flows that are
payments solely of principal and interest (on the principal amount outstanding). all other financial assets are to be measured
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at fair value. Changes in the fair value of investments in equity securities that are not part of a trading activity may be reported
directly in equity but upon realisation, those accumulated changes in value are not recycled to the profit or loss. Changes in
the fair value of all other financial assets carried at fair value are reported in the statement of comprehensive income. the
Group is yet to assess the impact of the new standard.
aaSB 2009-5 – these amendments affect various aaSBs resulting in minor changes for presentation, disclosure, recognition
and measurement purposes. the amendments are not expected to have a significant impact on the financial statements.
aaSB 2009-8 – Introduces amendments to incorporate the requirements previously included in Interpretation 8 and
Interpretation 11. the amendments require an entity that receives goods and services in share-based payment arrangements
to account for those goods or services no matter which entity in the Group settles the transaction and no matter whether
the transaction is settled in shares or cash. the amendments are not expected to have a significant impact on the financial
statements.
aaSB 2010-3 and aaSB 2010-4 – these amendments introduce various changes to IFrS. the directors have not yet assessed
the impact of the amendments, if any.
2. 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.
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.
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:
Estimates of fair value of investment properties
the Group has investment properties with a carrying amount of approximately $1,064,100,000 (2009: $1,117,175,000)
representing estimated fair value at balance date. In addition, the carrying amount of the Group’s investments in jointly
controlled entity/associate of approximately $56,802,000 (2009: $58,295,000) also reflect underlying investment properties of
the jointly controlled entity/associate carried at fair value. these investment properties represent a significant proportion of
the total assets of the Group.
Fair value is determined within a range of reasonable estimates utilising both capitalisation of net market income and
discounted future cash flow methodologies and comparing the results to market sales evidence.
the best evidence of fair value is considered to be current prices in an active market for similar properties, however global
economic and financial turmoil has had an impact on many classes of real estate, including commercial real estate in
australia. the most significant impact has been a reduction in the availability of capital (debt and equity) for real estate assets.
this reduction in available capital has led to falls in asset values and a relatively low level of transactions in most markets,
although there have been signs in recent times of more stability in pricing and some increases in transactional levels. Where
sufficient market information is not available, or to supplement this information, management considers other relevant
information including:
•
•
•
•
Current prices for properties of a different nature, condition or location, adjusted to reflect those differences;
recent prices of similar properties in a less active market, with adjustments to reflect changes in economic conditions or
other factors;
Capitalised income calculations based on an assessment of current net market income based on current leases
in place for that property or other similar properties, a capitalisation rate taking into account market evidence for
similar properties and adjustment for short term vacancy or lease expiries, incentive costs and capital expenditure
requirements; and
Discounted cash flow forecasts including estimates of future cash flows based on current leases in place for that
property, historical operating expenses, reasonable estimates of current and future rents and operating expenses based
on external and internal assessments and using discount rates that appropriately reflect the degree of uncertainty and
timing inherent in current and future cash flows.
the fair values adopted for investment properties have been supported by a combination of independent external valuations
and detailed internal valuations, which are considered to reflect market conditions at balance date.
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Key factors which impact assessments of value at each balance date include capitalisation rates, vacancy rates and weighted
average lease terms. Details of these factors at each balance date were as follows:
% Value of Portfolio
by Sector
Weighted Average
Cap Rate
Weighted Average
Lease Term
Occupancy
2010
85%
11%
4%
100%
2009
86%
11%
3%
100%
2010
8.47%
9.58%
9.27%
8.62%
2009
8.23%
9.07%
10.45%
8.40%
2010
5.1yrs
2.8yrs
4.3yrs
4.8yrs
2009
5.4 yrs
3.1 yrs
5.1 yrs
5.1 yrs
2010
94.8%
100.0%
100.0%
95.6%
2009
99.6%
100.0%
100.0%
99.8%
Commercial
Industrial
Retail/Entertainment
Total
estimates of fair value take into account factors and market conditions evident at balance date. uncertainty and changes in
global market conditions in the future may impact fair values in the future.
Estimates of fair value of interest rate derivatives
the fair value of interest rate derivatives has been determined using a pricing model based on discounted cash flow analysis
and incorporating assumptions supported by market data at balance date including market expectations of future interest
rates and discount rates, and taking into account estimates prepared by external counterparties. Whilst certain derivatives
may not be quoted on an active market, management have determined a value for those derivatives using market data adjusted
for any specific features of the derivatives. all counterparties to interest rate derivatives are australian financial institutions.
Estimates of property development obligations
the provision for property development obligations involves the assessment of the realisation values of the properties held
by Cromwell property Fund (CpF) which are leased to the Group through property development agreements. these values
are determined within a range of reasonable estimates based on either independent valuations or current prices for similar
properties. See further commentary in note 22.
3. Capital Risk Management
the Group’s capital management strategy seeks to maximise securityholder value through optimising the level and use of
capital resources and the mix of debt and equity funding.
the Group’s capital management objectives are to:
•
•
•
•
•
ensure that Group entities comply with capital and dividend/distribution requirements of their constitutions and/or trust deeds;
ensure sufficient capital resources to support the Group’s operational requirements;
continue to support the Group’s creditworthiness;
comply with capital requirements of relevant regulatory authorities; and
safeguard the Group’s ability to continue as a going concern.
the Group monitors the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its
overall strategic plan. the Group’s capital structure is continuously reviewed to ensure:
•
•
sufficient funds and financing facilities are available, on a cost effective basis, to implement the Group’s strategies; and
dividends/distributions to members are made within the stated policy.
the Group is able to alter its capital mix by:
•
•
•
•
•
issuing new stapled securities;
activating its dividend/distribution reinvestment plan;
adjusting the amount of dividends/distributions paid to members;
activating its security buyback program; and
selling assets to reduce borrowings.
the Group also protects its equity in assets by taking out insurance cover with creditworthy insurers.
Cromwell property Securities limited (“CpS”) holds an australian Financial Services licence (aFSl) and acts as responsible
entity for managed investment schemes, other than Cromwell Hybrid property Fund, 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 and holds cash as part of its required minimum net tangible assets (see note 30). CpS
monitors its net tangible assets on an ongoing basis to ensure it continues to meet its licence requirements. CpS complied
with its aFSl requirements during 2010 and 2009.
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Cromwell Funds Management limited (“CFM”) holds an australian Financial Services licence (aFSl) and acts as responsible
entity for Cromwell Hybrid property Fund. the aFSl requires CFM to maintain net tangible assets of $50,000. as such CFM
is restricted from paying dividends to the parent entity that would breach its licence conditions and holds cash as part of its
required minimum net tangible assets (see note 30). CFM monitors its net tangible assets on an ongoing basis to ensure it
continues to meet its licence requirements. CFM complied with its aFSl requirements during 2010 and 2009.
the Group monitors capital on the basis of the gearing ratio. the ratio is calculated as net debt divided by adjusted assets.
net debt is calculated as total borrowings less cash and cash equivalents and restricted cash. adjusted assets are calculated
as total assets less cash and cash equivalents, restricted cash and intangible assets. the gearing ratios at each balance date
were as follows:
Total borrowings
Less: cash and cash equivalents
Net debt
Total assets
Less: intangible assets and deferred tax assets
Less: cash and cash equivalents
Adjusted assets
Gearing ratio
4. Financial Risk Management
2010
$’000
666,586
98,469
568,117
1,282,826
1,285
98,469
1,183,072
48%
2009
$’000
722,848
66,653
656,195
1,308,823
2,235
66,653
1,239,935
53%
the Group’s activities expose it to a variety of financial risks; credit risk, liquidity risk and market risk (interest rate risk and
price 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 derivatives to hedge certain risk exposures. the Group seeks to deal only with creditworthy counterparties. liquidity risk is
monitored through the use of future rolling cash flow forecasts.
the Group’s management of treasury activities is centralised and governed by policies approved by the Directors who monitor
the operating compliance and performance as required. the Group has policies 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.
the Group holds the following financial instruments:
Financial Assets
Cash and cash equivalents (1)
Trade and other receivables (1)
Derivative financial instruments (2)
Available-for-sale financial assets
Investments at fair value through profit or loss (3)
Total financial assets
Financial Liabilities
Trade and other payables (4)
Derivative financial instruments (2)
Borrowings (4)
Dividends/distributions payable (4)
Total financial liabilities
(1) Loans and receivables
(2) At fair value – held for trading
(3) At fair value – designated
(4) At amortised cost
2010
$’000
98,469
47,988
1,353
-
3,987
151,797
11,924
3,626
666,586
16,167
698,303
2009
$’000
66,653
53,882
-
3,547
2,919
127,001
16,424
3,112
722,848
10,546
752,930
the carrying value of loans and receivables and financial liabilities at amortised cost are assumed to approximate their fair
value due to either their short term nature or their terms and conditions including interest receivable/payable at variable rates.
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M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
42
(a) Credit Risk
Credit risk is the risk that a counterparty will default on its contractual obligations under a financial instrument and result in a
financial loss to the Group. the Group has exposure to credit risk on all financial assets included in the statement of financial
position except available-for-sale financial assets and investments at fair value through profit or loss.
the Group manages this risk by:
•
•
•
•
•
•
establishing credit limits for customers and managing exposure to individual entities;
monitoring the credit quality of all financial assets in order to identify any potential adverse changes in credit quality;
derivative counterparties and cash transactions, when utilised, are transacted with high credit quality financial
institutions;
providing loans as an investment in associates where the Group is comfortable with the underlying exposure;
regularly monitoring loans and receivables on an ongoing basis; and
regularly monitoring the performance of associates on an ongoing basis.
the maximum exposure to credit risk at balance date is the carrying amount of financial assets recognised in the statement of
financial position of the Group. the Group holds no significant collateral as security. there are no significant financial assets
that have had renegotiated terms that would otherwise have been past due or impaired.
Cash is held with australian financial institutions. Interest rate derivative counterparties are all australian financial institutions.
the ageing analysis of receivables past due at balance date but not impaired is as follows:
1 to 3 months*
3 to 6 months*
Over 6 months*
2010
$’000
1,267
352
625
2,244
2009
$’000
1,358
-
2,847
4,205
* Of the amounts above $1,369,000 (2009: $2,847,000) relates to the Cromwell Property Fund (refer note 8)
the Group has amounts owing from Cromwell property Fund of $42,652,000 (2009: $48,405,000) (refer note 8).
(b) 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 Group prepares and monitors rolling forecasts of liquidity
requirements on the basis of expected cash flow. the Group monitors the maturity profile of borrowings and puts in place
strategies designed to ensure that all maturing borrowings are refinanced in the required timeframes.
the current weighted average debt maturity of the Group is 1.9 years (2009: 2.8 years).
Contractual maturity of financial liabilities (borrowings and payables), including interest thereon, is as follows:
Due within one year
Due between one and five years
Due after five years
2010
$’000
98,461
679,484
2,470
780,415
2009
$’000
141,313
597,481
121,679
860,473
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
43
(c) Market Risk
(i)
Price risk
the Group is exposed to equity securities price risk. this arises from investments held by the Group classified on the balance
sheet as available-for-sale financial assets and investments at fair value through profit or loss. the Group is not exposed
to commodity price risk. the majority of the Group’s equity investments are publicly traded and are included in the aSX all
ordinaries index.
Group sensitivity
Based on the financial instruments held at balance date, had the aSX all ordinaries index increased/decreased by 20% (2009:
20%) with all other variables held constant and all the Group’s equity instruments moved in correlation with the index, the
impact on the Group’s profit and equity for the year would have been $794,000 (2009: $1,294,000) higher/lower.
(ii)
Interest rate risk
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, 75% (2009: 37%) of the
Group’s borrowings were effectively hedged.
the Group manages its cash flow interest-rate risk by using interest rate derivatives. Such interest rate derivatives have
the economic effect of converting borrowings from floating rates to fixed or a limited range of rates. Generally, the Group
raises long term borrowings at floating rates and hedges a portion of them into fixed or capped rates. under the interest-rate
derivatives, the Group agrees with other counter parties to exchange, at specified intervals (usually 30 days), the difference
between contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.
the fixed or limited interest rates range between 4.75% and 5.95% (2009: 4.88% and 5.95%) and the variable rates are
generally based on the 30 day bank bill swap bid rate which at balance date was 4.80% (2009: 3.20%). at balance date, 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
2010
$’000
184,661
200,000
-
-
-
118,180
502,841
2009
$’000
71,060
76,745
-
-
-
118,180
265,985
the Group’s interest rate derivatives do not meet the accounting requirements to qualify for hedge accounting treatment.
Gains or losses arising from changes in fair value have been reflected in the profit or loss.
Information on borrowings, the maturity profile of borrowings including interest thereon and the effective weighted average
interest rate by maturity periods is set out in note 20.
Group sensitivity
at balance date, if interest rates for all relevant time periods had changed by +/- 100 basis points from the year end rates
with all other variables held constant, profit would have been $6,579,000 higher/lower (2009 – change of 100 bps: $3,752,000
higher/lower), mainly as a result of increase/decrease in the fair value of interest rate derivatives. equity would have been
$6,579,000 higher/lower (2009: $3,752,000 higher/lower) mainly as a result of an increase/decrease in the fair value of interest
rate derivates.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
44
(d) Fair Value Estimation
the table below analyses financial instruments carried at fair value, by the source of measurement inputs. the different levels
have been defined as follows:
level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices).
level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
For the year ended 30 June 2010
Financial Assets
Derivative financial instruments
Investments at fair value through profit or loss
Financial Liabilities
Derivative financial instruments
5. Profit/(Loss) from Operations
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
3,987
3,987
-
-
1,353
-
1,353
3,626
3,626
-
-
-
-
-
Total
$’000
1,353
3,987
5,340
3,626
3,626
profit/(loss) before income tax includes the following specific items:
(a) Other Income
Refund of stamp duty paid on merger
Other
Other income
(b) Expense Disclosures
Premises rental – minimum lease payments
Loss on Sale of Investment Properties:
Net proceeds from sale of investment properties
Carrying value of investment properties sold and other costs of sale
Loss on sale of investment properties
Employee Benefits Expense:
Wages and salaries including on costs
Contributions to defined contribution superannuation plans
Equity settled share-based payments
Increase in liability for long service and annual leave
Employee benefits expense
Finance Costs:
Total interest
Less: interest capitalised
Interest expense
Amortisation of loan transaction costs
Finance costs
2010
$’000
2009
$’000
-
-
-
5,284
933
6,217
178
149
21,574
(22,128)
(554)
9,837
652
339
274
11,102
38,660
-
38,660
1,869
40,529
-
-
-
9,226
562
233
175
10,196
50,461
(1,582)
48,879
1,415
50,294
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
45
Depreciation/Amortisation:
Depreciation of plant and equipment
Amortisation of intangibles
Depreciation/Amortisation
6.
Income Tax
(a)
Income tax expense
Current tax
Deferred tax
Prior year tax losses written off
Adjustment in relation to prior periods
Income tax expense
(b) Numerical reconciliation of income tax expense to prima facie tax
Profit/(loss) before income tax
Tax at the Australian tax rate of 30% (2009: 30%)
Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income:
Non-taxable trust (income)/loss
Non-deductible expenses
Loan recovery
Non-deductible property development costs/impairment
Assessable income for tax
Losses (recognised)/written off (note 17)
Adjustment in relation to prior periods
Income tax expense
2010
$’000
2009
$’000
260
291
551
251
294
545
494
(15)
652
13
1,144
20,197
6,059
(8,011)
121
(163)
1,329
1,143
653
13
1,144
964
(1,465)
2,983
(24)
2,458
(111,053)
(33,316)
29,067
155
-
3,593
-
2,983
(24)
2,458
(c) Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Tax losses
16,213
17,009
the tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of tax losses
(both revenue and capital) 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.
(d) 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 (2009: $nil) as tax consolidation contributions by, or distributions to, equity
participants.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
46
7. Cash and Cash Equivalents
Cash at bank
Deposits
Cash and cash equivalents
2010
$’000
33,469
65,000
98,469
2009
$’000
66,653
-
66,653
Cash at bank is held with australian financial institutions earns variable interest at market rates with a weighted average of 4.57%
at balance date (2009: 3.85%). Deposits held with australian financial institutions at 30 June 2010 earned variable interest at
market rates with a weighted average of 6.01%.
8. Trade and Other Receivables
Current Assets
Trade debtors
Other receivables – jointly controlled entity/associates
Loans:
Associate – CPF
Associate – Phoenix Portfolios Pty Ltd
Other entities
Provision for impairment of receivables
Trade and other receivables – current
Non-Current Assets
Loans:
Associate – CPF
Associate – Phoenix Portfolios Pty Ltd
Trade and other receivables – non-current
5,004
1,628
11,024
62
270
-
17,988
30,000
-
30,000
3,966
4,802
15,052
-
4,890
(4,890)
23,820
30,000
62
30,062
trade debtors mainly comprises amounts owing by tenants of the Group’s investment properties and recoverable costs owing
by external managed investment schemes. these amounts are usually non-interest bearing, unsecured and generally payable
on no more than 30 day terms.
other receivables – jointly controlled entity/associates mainly comprises interest owing by the Cromwell property Fund (“CpF”)
on its $30,000,000 loan facility (refer below). as at 30 June 2009, other receivables mainly comprised distributions receivable
and $2,847,000 owing by CpF in relation to the sale of property development inventory. all amounts owing at 30 June 2009
were collected by the Group during the current year. these receivables are payable in cash.
(a) Loans – associates
Cromwell Property Fund
In 2008 the Group provided CpF with a $30,000,000 loan facility. During the current year the Group advanced $nil (2009:
$5,000,000) to CpF under the facility. the loan is unsecured, repayable in cash on 30 June 2010 and earns interest at a floating
rate plus margin of 0.7% capped at 8.00%, which was 5.43% (2009: 3.91%) at balance date. Since balance date, CpF repaid
$10,200,000 of the loan. repayment of the balance ($19,800,000) has been extended to 30 June 2012 – see note 41.
a subsidiary of the Company also provided loans of $15,052,000 to CpF during the 2008 year. Further advances of $450,000
were made during the year (2009: $nil). During the current year the loan was reduced by $4,478,000 as part of the acquisition
of Cromwell altona trust (refer note 38). the loans are unsecured, at call, repayable in cash, with no fixed repayment terms
and earn interest at a variable rate (BBSW) plus a margin of 1.50%, which was 6.23% (2009: 4.71%) at balance date.
Phoenix Portfolios Pty Ltd
During the 2009 year the Group made a 50% investment in phoenix portfolios pty ltd and provided a loan of $62,000. the loan
is unsecured, repayable in cash in 2011 and earns interest at a variable rate (BBSY) plus a margin of 3.00%, which was 7.73%
(2009: 6.25%) at balance date.
(b) Past due but not impaired receivables
at balance date, trade and other receivables of $2,244,000 (2009: $4,205,000) were past due but not impaired. these relate to
a number of tenants for whom there is no recent history of default of $875,000 (2009: $1,358,000) and CpF of $1,369,000 (2009:
$2,847,000).
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
47
(c)
Impaired receivables
at 30 June 2010 the Group had a loan to a property developer of $270,000 (2009: $4,890,000). at 30 June 2009 the loan was
deemed fully impaired and was written down accordingly. the impairment was based on an estimate of the net proceeds
expected to be recovered on the sale of the collateral property. During the 2010 financial year the Group reversed the
impairment provision by $1,932,000 based on repayments received in 2010 of $1,662,000 and the expected recovery of the loan
of $270,000 in 2011.
9. Derivative Financial Instruments
Current Assets
Interest rate derivatives – at fair value
Current liabilities
Interest rate derivatives – at fair value
10. Inventories
Land held for development and resale
Inventories
Movement in inventories
Balance at 1 July
Land acquired (see note 38)
Project costs capitalised
Impairment – transferred to profit or loss
Balance at 30 June
2010
$’000
1,353
3,626
4,925
4,925
-
4,800
125
-
4,925
2009
$’000
-
3,112
-
-
4,030
-
454
(4,484)
-
In 2009 inventories included project holding costs in relation to properties leased from Cromwell property Fund (CpF) under
development agreements. the balance relating to these costs was written off at 31 December 2008 and all subsequent costs
have been expensed. During the current year the Group acquired land located at Maidstone Street, altona, VIC from CpF and
terminated the related development agreement. the Group’s property development obligations in respect of the remaining two
development agreements with CpF are set out in note 22.
11. Other Current Assets
Prepayments
2,266
2,771
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R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
48
12. Investment Properties
Investment properties at fair value
(a) Movement in investment properties
Balance at 1 July
Additions at cost
Transfer from property, plant and equipment (note 16)
Transaction costs
Improvements
Disposals
Straight-lining rentals
Lease costs and incentives
Amortisation of lease costs and incentives
Net loss from fair value adjustments
Balance at 30 June
(b) Amounts recognised in profit and loss for investment properties
Rental and outgoings from investment properties
Direct operating expense from properties that generated rental income
2010
$’000
2009
$’000
1,064,100
1,117,175
1,117,175
1,120,716
-
-
3,542
(22,128)
852
2,216
(5,411)
(32,146)
1,064,100
79,545
55
10,197
-
1,716
13,537
(4,303)
(104,288)
1,117,175
116,090
(21,663)
94,427
112,522
(17,545)
94,977
(c) Assets pledged as security
Borrowings (refer note 20) 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.
(d) 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
(e) Valuation basis
96,247
305,681
100,066
501,994
93,841
310,616
164,426
568,883
Independent valuations of properties were carried out by qualified valuers with relevant experience in the types of property
being valued. Independent valuations are mostly carried out at least annually but no later than 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. In addition, the Group has
utilised similar internal valuation processes for determining fair value where independent valuations are not obtained. Further
information on assumptions underlying management’s assessment of fair value is contained in note 2.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
49
(f) Details of investment properties
Title
Acquisi-
tion
Date (1)
Freehold
Freehold
Jun 2001
200 Mary St, QLD
Jun 1999
Terrace Office Park, QLD
Sun Microsystems Building, ACT Leasehold Nov 2001
Leasehold Jun 2000
Quadrant Building, ACT
Leasehold Jun 2000
Scrivener Buildings, ACT
Feb 2003
Freehold
NQX Distribution Centre, QLD
Apr 2003
Freehold
Henry Waymouth Centre, SA
Jun 2003
Freehold
Hellman Distribution Centre, VIC
Jun 2004
Freehold
Brooklyn Woolstore, VIC
Jun 2004
Freehold
Village Cinemas, VIC
Jun 2004
Freehold
Vodafone Call Centre, TAS
Jun 2004
Freehold
Village Cinema Centre, TAS
Jun 2004
Freehold
Village Cinemas, TAS
Jun 2004
Freehold
Regent Cinema Centre, NSW
Freehold
Jun 2004
78 Mallard Way, WA
Jun 2004
Freehold
Elders Woolstore, SA
Freehold Dec 2004
700 Collins Street, VIC
Freehold
Feb 2005
Kmart Distribution Centre, VIC
Leasehold July 2005
19 National Circuit, ACT
Freehold Dec 2005
AWB Building, VIC
Freehold
101 Grenfell St, SA
Jan 2006
Freehold Mar 2006
475 Victoria Av, NSW
Freehold Nov 2008
Synergy, QLD
Leasehold Jun 2008
Tuggeranong Office Park, ACT
Total investment properties
Acqui-
sition
Price (1)
SOLD
$’000
Most
recent
inde-
pendent
valu-
ation
date
29,250
Jun 2010
13,600 Dec 2009
23,550
Jun 2010
5,800
SOLD
10,750
Jun 2010
17,778
Jun 2010
30,420 Nov 2009
9,700
34,000 Nov 2009
8,900 Dec 2009
15,900 Nov 2009
16,000 Dec 2009
3,500
9,900 Dec 2009
7,600 Dec 2009
10,900 Nov 2009
133,000 Nov 2009
41,000 Dec 2009
35,530
Jun 2010
88,000
Jun 2010
30,375
Jun 2010
102,650
Jun 2010
85,727 Nov 2009
166,025
Jun 2010
929,855
SOLD
Independent
valuation
Amount
Carrying amount
Fair value
adjustment
2010
$’000
2009
$’000
2010
$’000
2009
$’000
2010
$’000
2009
$’000
85,500
28,100
34,000
-
10,000
25,750
35,000
-
35,550
11,000
16,400
15,600
-
12,700
8,400
13,900
156,000
33,500
36,000
94,500
37,200
127,500
82,000
167,500
(5,108)
(5,351)
(183)
-
(960)
2,513
(4,752)
-
(220)
1,200
3,102
2,765
329
1,799
(1,577)
(184)
(1,382)
(5,526)
2,234
(8,068)
136
(5,529)
(4,720)
(2,664)
1,066,100 1,131,525 1,064,100 1,117,175 (32,146)
85,500
27,500
34,000
-
10,000
25,750
33,500
-
37,000
11,000
16,400
15,750
-
12,700
8,400
13,900
160,000
32,000
36,000
94,500
37,200
127,500
78,000
167,500
90, 000
32,000
34,000
9,700
11,000
23,400
38,250
8,425
37,300
9,800
12,500
13,000
3,000
10,900
9,800
14,100
162,000
37,500
33,500
102,800
36,500
135,000
82,700
170,000
90,000
33,500
34,000
9,700
11,000
24,000
40,000
8,425
36,500
10,300
12,500
14,400
3,150
11,900
10,000
14,100
167,750
39,000
33,500
102,800
36,500
135,000
83,500
170,000
(10,637)
(4,552)
(360)
(702)
(1,787)
(3,847)
(3,785)
(2,736)
(3,788)
(1,201)
(5,399)
(2,821)
(139)
(1,126)
(2,677)
(1,340)
(21,648)
(6,952)
(3,268)
(7,031)
(5,492)
(7,829)
(8,260)
3,089
(104,288)
(1) Comprises original acquisition date and price for Cromwell Diversified Property Trust or the relevant Syndicate which was mostly prior to the merger and stapling
transactions in December 2006.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
50
13. Available-for-sale Financial Assets
Listed equity securities at fair value
14. Investments at Fair Value Through Profit or Loss
2010
$’000
2009
$’000
-
3,547
Listed equity securities at fair value
3,987
2,919
these investments are designated at fair value through profit or loss. Gains and losses are shown in profit or loss.
15. Investments in Jointly Controlled Entity and Associates
the Group has investments in a jointly controlled entity, Cromwell tGa planned Investment (“tGa”), and associates, Cromwell
property Fund (“CpF”) and phoenix portfolios pty ltd (“phoenix”). these entities were formed in australia and their principal
activities are property investment (tGa and CpF) and investment management (phoenix).
the reporting dates of the jointly controlled entity and associates 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 CpF must
consent to the strategic, financial and operating decisions. tGa and CpF do not recognise income tax expense or liabilities
given their nature.
Investments in equity accounted entities are initially accounted for (recognised) at cost. the carrying amount is reduced
where the fair value of the underlying interest, which for tGa and CpF primarily represents an indirect interest in a share of
investment properties, is less than cost or the equity accounted carrying amount.
(a)
Investments
the investments are accounted for using the equity method of accounting. Information relating to the investments is detailed
below:
Investments accounted for using the equity method:
TGA – jointly controlled entity
CPF – associate
Phoenix – associate
TGA
Ownership Interest
2009
2010
%
%
67
18
50
67
18
50
2010
$’000
49,872
6,903
27
56,802
2009
$’000
51,850
6,442
3
58,295
the Group holds a 67% (2009: 67%) interest in tGa. the remaining 33% interest was held by CpF. the Group exercises joint
control over tGa, but neither the Group nor CpF has control in its own right, irrespective of their ownership interest, as both
the Group and CpF must consent to the strategic, financial and operating decisions relating to tGa. tGa has no borrowings
and no material liabilities. Since balance date the Group has acquired CpF’s one-third interest in tGa – refer note 41(a).
CPF
at balance date the Group held 18% (2009: 18%) of the issued units of CpF. the Group is considered to have significant
influence over CpF due to it being the single largest investor in the CpF, with the next largest investor holding 1.3% (2009:
1.3%) of the issued units of CpF.
Phoenix
the Group holds a 50% interest in phoenix which was acquired in the 2009 financial year.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
51
(b) Movement in carrying amount of investments in jointly controlled entity and associates
2010
Balance at 1 July 2009
Share of profit/(loss) (1)
Distributions received
Balance at 30 June 2010
2009
Balance at 1 July 2008
Additions – at cost
Share of profit/(loss) (1)
Distributions received
Decrease to recoverable amount
Balance at 30 June 2009
Phoenix
$’000
3
24
-
27
-
237
(2)
-
(232)
3
CPF
$’000
6,442
636
(175)
6,903
22,024
-
(13,332)
(2,250)
-
6,442
TGA
$’000
51,850
3,222
(5,200)
49,872
58,569
-
103
(6,822)
-
51,850
Total
$’000
58,295
3,882
(5,375)
56,802
80,593
237
(13,231)
(9,072)
(232)
58,295
(1) Share of profit/(loss) includes fair value gain/(loss) on investment properties and interest rate derivatives where applicable.
(c) Share of assets and liabilities of jointly controlled entity and associates
Assets
Current assets
Non-current assets
Investment properties
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Borrowings
Other
Total current liabilities
Total liabilities
Net assets
Phoenix
$’000
2010
CPF
$’000
TGA
$’000
Phoenix
$’000
66
-
4
4
70
(33)
(10)
(43)
(43)
27
20,202
124
40,924
4,788
45,712
65,914
(57,859)
(1,152)
(59,011)
(59,011)
6,903
50,000
-
50,000
50,124
-
(252)
(252)
(252)
49,872
41
-
8
8
49
(31)
(15)
(46)
(46)
3
2009
CPF
$’000
TGA
$’000
813
1,619
56,265
11,124
67,389
68,202
(52,405)
(9,355)
(61,760)
(61,760)
6,442
51,667
-
51,667
53,286
-
(1,436)
(1,436)
(1,436)
51,850
(d) Share of revenues, expenses and results of jointly controlled entity and associates
Revenue (1)
Expenses (1)
Share of profit/(loss)
148
(124)
24
7,777
(7,141)
636
5,303
(2,081)
3,222
37
(39)
(2)
7,788
(21,120)
(13,332)
5,497
(5,394)
103
(1) Includes share of fair value adjustment to investment properties and interest rate derivatives where applicable.
(e) Assets pledged as security
Borrowings (refer note 20) are secured by a registered floating charge over the investments.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
52
16. Property, Plant and Equipment
Furniture and fittings at cost
Accumulated depreciation
Plant and equipment at cost
Accumulated depreciation
Plant and equipment under finance lease at cost
Accumulated depreciation
Property, plant and equipment
2010
$’000
1,450
(634)
816
1,385
(939)
446
-
-
-
1,262
(a) Movement in property, plant and equipment
reconciliations of the carrying amounts of each class of property, plant and equipment are set out below.
Balance at 1 July 2009
Additions
Transfers
Disposals
Depreciation
Balance at 30 June 2010
Balance at 1 July 2008
Additions
Transfer to investment properties
Transfers
Depreciation
Balance at 30 June 2009
Property
Under
Construction
$’000
-
-
-
-
-
-
42,155
37,390
(79,545)
-
-
-
(b) Additions relating to property under construction
Additions at cost
Construction costs
Holding costs
Capitalised interest
Furniture
and fittings
$’000
Plant and Equipment
Owned
$’000
Under Lease
$’000
750
11
144
-
(89)
816
704
9
-
103
(66)
750
378
242
-
(3)
(171)
446
433
90
-
-
(145)
378
144
-
(144)
-
-
-
287
-
-
(103)
(40)
144
2010
$’000
-
-
-
2009
$’000
1,172
(422)
750
1,150
(772)
378
267
(123)
144
1,272
Total
$’000
1,272
253
-
(3)
(260)
1,262
43,579
37,489
(79,545)
-
(251)
1,272
2009
$’000
35,591
217
1,582
37,390
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
53
17. Deferred Tax Assets
Deferred tax assets
Deferred tax assets and liabilities are attributable to the following:
Interests in managed investment schemes
Payables
Employee benefits
Provisions
Other accruals and sundry items
Tax losses recognised
Movements
Balance at 1 July
Reduction in current tax liability on use of tax losses previously recognised
(Debit)/credit to profit or loss
Losses (recognised)/written off
Adjustments in relation to prior periods
Balance at 30 June
2010
$’000
2009
$’000
791
1,721
(1,898)
33
402
26
64
2,164
791
1,721
(276)
15
(653)
(16)
791
(1,870)
36
331
30
102
3,092
1,721
3,846
(618)
(2)
(1,516)
11
1,721
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 are 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).
18. Intangible Assets
Software – at cost
Accumulated amortisation
Intangible assets
amortisation of software is included in amortisation expense in profit or loss.
Reconciliations of the carrying amounts of software are set out below:
Balance at 1 July
Additions
Disposals
Amortisation
Balance at 30 June
19. Trade and Other Payables
Trade payables and accruals
Tenant security deposits
Other payables
Trade and other payables
1,781
(1,285)
496
1,467
(953)
514
514
288
(15)
(291)
496
452
362
(6)
(294)
514
9,998
171
1,764
11,933
7,934
181
8,309
16,424
trade and other payables are generally unsecured, non-interest bearing and paid in cash within 30-60 days of recognition.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
54
20. Borrowings
Current
Secured
Loans – financial institutions
Lease liabilities
Borrowings – current
Non-Current
Secured
Loans – financial institutions
Borrowings – non-current
2010
$’000
2009
$’000
29,232
-
29,232
81,181
20
81,201
637,354
637,354
641,647
641,647
loans shown above are net of transaction costs which are amortised over the term of the loan.
(a) Borrowing details
Details of borrowings of the Group at balance date are set out below:
Facility
Note
Secured
Bank loan – Syndicate Finance
Bank loan – Tuggeranong (Tranche 1)
Bank loan – Tuggeranong (Tranche 2)
Bank loan – Synergy
Bank loan – TGA
Bank loan – Mary Street
Total facilities
Less unamortised transaction costs
Total borrowings
(i)
(ii)
(ii)
(iii)
(iv)
(v)
Yes
Yes
Yes
Yes
Yes
Yes
(i)
Bank Loan – Syndicate Finance
Maturity
Date
Oct 2011
June 2015
June 2013
July 2011
Mar 2011
Aug 2011
Facility
2010
$’000
430,893
107,916
9,961
46,800
25,946
47,000
668,516
Facility
2009
$’000
452,000
107,916
13,282
77,861
25,946
49,500
726,525
Utilised
2010
$’000
430,893
107,916
9,961
46,800
25,946
47,000
668,516
(1,930)
666,586
Utilised
2009
$’000
452,000
107,916
13,282
77,861
25,946
48,500
725,525
(2,677)
722,848
the Syndicate finance facility is secured by first registered mortgages over the majority of the investment properties held by
the Group and a registered floating charge over the assets of the trust. Interest is payable monthly in arrears at variable rates
based on a margin over the 30 day BBSY rate and was 4.2% at balance date. an amount of $367,925,000 (2009: $238,985,000)
was effectively fixed at balance date through interest rate swap arrangements which expire between July 2010 and September
2017 (2009 expired or due to expire between July 2009 and September 2017). repayments of $21,107,000 (2009: $nil) were
made during the year from proceeds of the sale of investment properties.
(ii) Bank Loan – Tuggeranong
the Group has a $117,877,000 (2009: $121,198,000) loan in relation to its investment in tuggeranong office park. the loan
is secured by a first registered mortgage over the investment property and a registered floating charge over the assets of
tuggeranong trust. the first tranche of the loan matures in June 2015. the second tranche matures in June 2013 with
$830,000 repayable each quarter until June 2013. the loan bears interest at a variable rate based on a margin over the 30 day
BBSY rate. an amount of $107,916,000 (tranche 1) was fixed at balance date through interest rate swap arrangements which
expired in July 2010. repayments of $3,321,000 (2009: $3,321,000) were made during the year.
(iii) Bank Loan – Synergy
this facility was extended in July 2009 and split into two tranches. tranche a ($47,100,000) is repayable in July 2011 and
tranche B ($30,761,000) was repayable by July 2010. repayments of $31,061,000, representing the full amount of tranche B
i.e. $30,761,000 (2009: $nil) and $300,000 relating to tranche a (2009: $nil), were made during the year. the loan is secured by
a registered floating charge over the assets of the Group specific to the Synergy investment property. the loan bears interest
at a variable rate based on a margin over the 30 day BBSY rate.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
55
(iv) Bank Loan – TGA
the Group has a $25,946,000 (2009: $25,946,000) loan in relation to its investment (67%) in Cromwell tGa planned Investment.
the loan is secured by a first registered mortgage over the tGa property and a registered floating charge over the assets of
Cromwell tGa planned Investment. these assets are reflected in the carrying value of the investment in jointly controlled
entity. the loan bears interest at a variable rate based on a margin over the 30 day BBSY rate. the loan was effectively 100%
fixed at balance date through interest rate swap arrangements to august 2010 (2009: 100%).
(v) Bank Loan – Mary Street
the Group has a $47,000,000 (2009: $49,500,000) facility secured over the 200 Mary Street investment property. the loan has
been drawn down in two tranches, tranche 1 for $20,000,000 and tranche 2 for $28,500,000, with both tranches repayable by
august 2011. repayments of $1,500,000, relating to tranche 2 (2009: $nil), were made during the year. the loan bears interest
at a variable rate based on a margin over the 30 day BBSY rate.
(b) Maturity Profile
Maturity profile of the principal amounts of current and non-current borrowings together with estimated interest thereon:
Due within one year
Due between one and five years
Due after five years
2010
$’000
69,182
674,203
-
743,385
2009
$’000
109,062
584,342
112,524
805,928
(c) Unused Finance Facilities
at balance date the Group had unused finance facilities totalling $nil (2009: $1,000,000).
(d)
Interest Rate Risk
Interest rate Derivatives
the Group manages its cash flow interest-rate risk by using floating-to-fixed interest rate derivatives. Such interest rate
derivatives have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises
long term borrowings at floating rates and a portion of them into fixed or limited range of rates.
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.
Floating
interest
rate
$’000
Fixed interest rate maturing in
1 year or
less
Over 1 to
2 years
Over 2 to
3 years
Over 3 to
4 years
Over 4 to
5 years
Over 5
years
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
-
665,586
(502,841) 184,661
184,661
162,745
4.33%
5.53%
-
200,000
200,000
4.75%
722,828
-
(265,985)
456,843
4.78%
-
20
71,060
71,080
5.06%
-
-
76,745
76,745
5.56%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 118,180
- 118,180
-
5.94%
-
-
-
-
-
-
-
118,180
118,180
5.94%
665,586
-
665,586
722,828
20
-
722,848
2010
Financial institution loans
Interest rate derivatives (1)
Weighted average interest rate %
2009
Financial institution loans
Lease liabilities
Interest rate derivatives (1)
Weighted average interest rate %
(1) notional principal amounts
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
56
21. Dividends/Distributions Payable
Dividends/distributions payable
2010
$’000
2009
$’000
16,157
10,546
Distributions payable relate to June quarter distributions declared in June and payable in august of each year.
22. Provisions
Current
Employee benefits
Property development
Non-Current
Employee benefits
Restoration
Provisions
Movement in provisions
Balance at 1 July
Additional provision recognised
Payments during year
Balance at 30 June
929
5,093
6,022
379
100
479
825
6,979
7,804
265
100
365
Property Development
Restoration
2010
$’000
6,979
6,331
(8,217)
5,093
2009
$’000
-
6,979
-
6,979
2010
$’000
100
-
-
100
2009
$’000
100
-
-
100
Property development Obligations
the Group has entered into development agreements with Cromwell property Fund (“CpF”) in respect of certain properties
leased from CpF. under the development agreements the Group can develop the land on the basis that CpF would fully
recover its cost. at 30 June 2010 the Group assessed the recoverable amount of the properties held by CpF at less than
CpF’s cost and has provided for the difference through an increase in the provision of $6,331,000 (2009: $6,979,000). In 2009
an additional impairment of inventories of $4,484,000 (refer note 10) was recorded resulting in a total charge to profit or loss
of $11,463,000. the recoverable amount of these properties was assessed on the basis of their expected realisation values
without further development. During the current year, the Group paid $5,230,000 to the CpF following the termination of
the development agreement over land located at Maidstone, altona, VIC and $2,987,000 to the CpF in relation to land at
lenore lane, nSW. Since balance date CpF has sold the lenore lane property and terminated the development agreement.
the amount provided as payable to CpF in respect of lenore lane at 30 June 2010 was $4,865,000.
Restoration
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.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
57
23. Other Current Liabilities
Unearned income
unearned income primarily comprises rent paid in advance.
24. Contributed Equity
(a) Share Capital
2010
$’000
2009
$’000
6,618
8,131
807,834,934 (2009: 702,943,059) fully paid ordinary shares
49,197
43,688
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 at 1 July 2009
Placement of shares – 24 December 2009
Issue transaction costs
Issue of treasury shares to employees on exercise of options
Balance at 30 June 2010
Balance at 1 July 2008
Issue of treasury shares to employees on exercise of options
Balance at 30 June 2009
No. of Shares
702,943,059
104,750,000
-
141,875
807,834,934
702,816,227
126,832
$’000
43,688
5,477
(18)
50
49,197
43,644
44
702,943,059
43,688
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 32). total number of fully paid
ordinary shares at balance date comprises:
Ordinary shares as shown above
Treasury shares held by ESOP
(b) Stapled Securities
2010
Number
807,834,934
-
807,834,934
2009
Number
702,943,059
141,875
703,084,934
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)
2010
Company
Number
807,834,934
-
-
807,834,934
2010
Trust
Number
808,110,040
-
(275,106)
807,834,934
2009
Company
Number
702,943,059
141,875
-
703,084,934
2009
Trust
Number
703,360,040
-
(275,106)
703,084,934
* The ESOP held a similar number of Trust units which were included in the total of 703,084,934 units.
(c) Options
Information relating to the employee Share ownership plan and performance rights plan, including details of options issued,
exercised and lapsed during the financial year, is set out in note 32.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
58
25. Reserves
Share based payments
Available-for-sale financial assets revaluation reserve
Reserves
Movements in reserves
Share based payments
Balance at 1 July
Options expensed
Balance at 30 June
2010
$’000
1,255
2,340
3,595
916
339
1,255
2009
$’000
916
2,340
3,256
683
233
916
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 revaluation reserve
Changes in the fair value of investments classified as available-for-sale are taken to the available-for-sale financial assets
revaluation 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. there was no movement in the available-for-sale financial assets revaluation reserve over the last
two financial years.
26. Retained Earnings/(Accumulated Losses)
Retained Earnings/(Accumulated Losses)
(46,021)
(38,371)
Movements in retained earnings/(accumulated losses)
Balance at 1 July
Profit/(loss) for the year
Transfer from minority interest (external)
Balance at 30 June
27. Non-Controlling Interests
Equity attributable to unitholders:
Contributed equity
Reserves
Retained earnings/(accumulated losses)
Equity attributable to unitholders
(38,371)
(7,650)
-
(46,021)
(18,800)
(18,971)
(600)
(38,371)
599,384
-
(34,748)
564,636
531,853
-
(833)
531,020
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 non-controlling
interests. even though the interests of the equity holders of the identified acquiree (the trust) are treated as non-controlling
interests (as above) the equity holders of the acquiree are also equity holders in the acquirer (the Company) by virtue of the
stapling arrangement.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
59
Movements in contributed equity - unitholders
Balance at 1 July
Placement of units – 24 Dec 2009
Unit issue transaction costs
Balance at 30 June
Movements in reserves – unitholders
Available-for-sale financial assets revaluation reserve
Balance at 1 July
Increase/(decrease) in fair value of available-for-sale financial assets
Transfers to statement of comprehensive income:
Impairment loss
Realised gain
Other
Balance at 30 June
General reserve
Balance at 1 July
Transfer to retained earnings/(accumulated losses)
Balance at 30 June
Movement in retained earnings/(accumulated losses) – unitholders
Balance at 1 July
Profit/(loss) for the year
Distributions paid/payable
Transfer from general reserve
Balance at 30 June
28. Dividends/Distributions
2010
$’000
531,853
67,847
(316)
599,384
-
3,431
-
(3,431)
-
-
2009
$’000
531,853
-
-
531,853
(868)
(3,663)
3,663
-
868
-
-
-
-
131,834
(131,834)
-
(833)
26,703
(60,618)
-
(34,748)
25,150
(94,540)
(63,277)
131,834
(833)
Franking credits
Franking credits available for subsequent years based on a tax rate of 30% (2009 – 30%)
1,303
1,025
the above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
•
•
•
franking credits that will arise/(decrease) from the payment/(receipt) of the amount of the provision/(receivable)
for income tax;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Dividends paid/payable by the Company
there were no dividends paid or payable by the Company in respect of the 2009 and 2010 financial years.
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W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
60
Distributions paid/payable by the Trust
2010
Date Paid
16 November 2009
15 February 2010
14 May 2010
31 August 2010
* Cents per stapled security
2009
Date Paid
14 November 2008
16 February 2009
15 May 2009
31 August 2009
2010
Cents*
2.0¢
2.0¢
2.0¢
2.0¢
8.0¢
2009
Cents*
2.5¢
2.5¢
2.5¢
1.5¢
9.0¢
2010
$’000
14,062
14,242
16,157
16,157
60,618
2009
$’000
17,577
17,577
17,577
10,546
63,277
all distributions from the trust are unfranked. the determination of the trust’s distributable income excludes unrealised
gains/(losses) including fair value adjustments to investment properties and interest rate derivatives.
Dividends/distributions paid in cash, payable at balance date or satisfied by the issue of securities under the reinvestment plan
during past two years were as follows:
Paid in cash (1)
Payable at balance date
(1) Includes June dividends/distributions from prior year paid in August.
29. Earnings/(Loss) per Share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Earnings used to calculate basic and diluted earnings/(loss) per share:
Profit/(loss) for the year
Profit attributable to non-controlling interests
Profit/(loss) attributable to ordinary equity holders of the company used in calculating basic/
diluted earnings/(loss) per share
Weighted average number of ordinary shares used in calculating basic earnings/(loss) 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/(loss) per share
2010
$’000
55,007
16,157
71,164
2009
$’000
70,314
10,546
80,860
2010
(1.0¢)
(1.0¢)
2009
(2.7¢)
(2.7¢)
$’000
$’000
19,053
26,703
(113,511)
94,540
(7,650)
(18,971)
Number
of Shares
757,004,542
Number
of Shares
702,816,227
309,857
63,006
757,314,399
702,879,233
options granted under the employee Share ownership plan and the performance rights plan are considered to be potential
ordinary shares and have been included in the determination of diluted earnings/(loss) per share to the extent to which they
are dilutive. the options have not been included in the determination of basic earnings/(loss) per share. Details relating to the
options are set out in note 32.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
61
30. Cash flow Information
(a) Reconciliation of profit/(loss) to net cash provided by operating activities
Net profit/(loss)
Amortisation and depreciation
Amortisation (loan transaction costs)
Amortisation of lease costs and incentives
Share of profits of jointly controlled entity/associates (net of distributions)
(Gain)/loss on sale of available-for-sale financial assets
(Gain)/loss on sale of investment properties
Share based payments
Fair value net (gain)/loss from:
Investment properties
Interest rate derivatives
Investments at fair value through profit or loss
(Increase)/decrease to recoverable amount:
Available-for-sale financial assets
Property development inventories
Jointly controlled entity/associates
Loans receivable
Straight-line rentals
Refund of transaction costs paid on merger
Loss on disposal of property, plant and equipment and intangibles
Other
Changes in operating assets and liabilities:
(Increase)/decrease:
Trade and other receivables
Prepayments
Inventories*
Tax assets
Increase/(decrease):
Trade payables and accruals
Provisions (employee benefits/restoration)
Unearned revenue
Net cash provided by operating activities
* Prior to decrease to recoverable amount.
(b) Finance facilities
refer to note 20 for details of unused finance facilities.
(c) Cash held as part of minimum net tangible assets
2010
$’000
2009
$’000
19,053
551
1,869
5,411
1,493
(3,431)
554
339
32,146
1,283
(836)
-
6,331
-
(1,932)
(852)
-
18
-
2,138
634
(125)
623
61
218
(1,513)
64,033
(113,511)
545
1,415
4,303
22,303
-
-
233
104,288
22,479
3,107
3,663
11,463
232
4,890
(1,716)
(5,284)
-
6
(5,016)
(744)
(454)
(147)
2,384
175
4,817
59,431
at balance date cash held by controlled entities of $1,354,000 (2009: $601,000) was required to be maintained under their
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.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
62
31. Key Management Personnel Disclosures
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
2010
$
2009
$
3,655,879
155,855
39,707
206,732
4,058,173
3,843,909
174,972
50,489
129,494
4,198,864
(b) Equity instrument disclosures relating to key management personnel
(i)
Option holdings
the numbers of options over ordinary shares in the Company (and units in the trust through the stapling arrangement) 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.
Name
Balance
at 1 July
Granted during
the year as
compensation
Exercised
during
the year
Lapsed
during
the year
Balance
at 30 June
Vested
Balance at
30 June Not
Vested
-
738,733
-
-
-
-
-
344,200
-
2010
Directors:
GH Levy
PL Weightman
RJ Pullar
MA McKellar
DE Usasz
M Wainer (1)
M Flax (2)
DJ Wilson
WR Foster
Other key management personnel of the Group:
PW Howard
DA Gippel
MJ Blake
B Binning (3)
NE Riethmuller
JA Clark
-
460,083
338,000
200,133
-
92,100
2,173,249
(1) M Wainer became a KMP on 29 January 2010.
(2) M Flax became a KMP on 29 January 2010.
(3) B Binning became a KMP on 1 July 2009
-
-
-
-
-
-
-
-
-
-
659,600
-
126,859
-
-
786,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(203,750)
-
-
-
-
(203,750)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
738,733
-
-
-
-
-
344,200
-
-
915,933
338,000
326,992
-
92,100
2,755,958
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M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
63
Name
Balance
at 1 July
Granted during
the year as
compensation
Exercised
during
the year
Forfeited
during
the year
Balance
at 30 June
Vested
Balance at
30 June Not
Vested
-
1,108,100
-
-
-
516,300
-
2009
Directors:
GH Levy
PL Weightman
RJ Pullar
MA McKellar
DE Usasz
DJ Wilson
WR Foster
Other key management personnel of the Group:
PW Howard
SM Morgan (2)
DA Gippel
MC McLaughlin (1)
MJ Blake
PJ McDonnell (1)
PJ Cowling (1)
NE Riethmuller (3)
JA Clark
-
229,200
792,000
394,400
507,000
300,200
592,650
-
92,100
4,531,950
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(109,075)
-
-
(109,075)
-
(369,367)
-
-
-
(172,100)
-
-
(229,200)
(331,917)
(131,467)
(169,000)
(100,067)
(113,900)
-
-
(1,617,018)
-
-
-
-
-
-
-
-
-
-
-
-
-
141,875
-
-
141,875
-
738,733
-
-
-
344,200
-
-
-
460,083
262,933
338,000
200,133
227,800
-
92,100
2,663,982
(1) Not considered a KMP during the 2010 financial year.
(2) SM Morgan resigned on 11 November 2008.
(3) NE Riethmuller was appointed on 11 November 2008.
(ii) 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.
Ordinary share holdings
Name
2010
Directors:
GH Levy (1)
PL Weightman
RJ Pullar
MA McKellar
DE Usasz
M Wainer (2)
M Flax (2)
DJ Wilson
WR Foster
Other key management personnel of the Group:
PW Howard
DA Gippel
MJ Blake
B Binning
NE Riethmuller
JA Clark
Balance
at 1 July
On exercise
of options
Net
purchases
(sales)
Balance
at 30 June
370,000
15,464,167
14,000,000
300,000
1,877,580
-
-
2,215,006
5,349,598
-
547,264
1,775,612
10,000
-
71,032
41,980,259
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
50,000
-
-
(259,262)
(87,833)
-
-
-
-
-
-
(267,095)
370,000
15,464,167
14,000,000
330,000
1,927,580
-
-
1,955,744
5,261,765
-
547,264
1,775,612
10,000
-
71,032
41,713,164
(1) GH Levy is a director of Investec Equity Investments Limited, which is the manager of Investec Australian Equity Fund, which owned 1,213,595 (2009: 862,995) stapled
securities in the Cromwell Group. GH Levy has indirect beneficial ownership of the shares as a unitholder in the fund.
(2) M Wainer and M Flax became KMPs on 29 January 2010. M Wainer and M Flax are directors of Redefine International Plc which indirectly owns Redefine Australia
Investments Limited, which owns 104,750,000 stapled securities in the Cromwell Group.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
64
Name
2009
Directors:
GH Levy
PL Weightman
RJ Pullar
MA McKellar
DE Usasz
DJ Wilson
WR Foster
Other key management personnel of the Group:
PW Howard
SM Morgan
DA Gippel
MC McLaughlin
MJ Blake
PJ McDonnell
PJ Cowling
NE Riethmuller
JA Clark
Balance
at 1 July
On exercise
of options
Net
purchases
(sales)
Balance
at 30 June
-
15,464,167
14,000,000
120,000
1,747,602
2,215,006
5,349,598
-
-
547,264
467,151
1,975,612
200,000
1,524,850
-
71,032
43,682,282
-
-
-
-
-
-
-
-
-
-
-
-
-
109,075
-
-
109,075
370,000
-
-
180,000
129,978
-
-
-
-
-
(157,536)
(200,000)
-
-
-
-
322,442
370,000
15,464,167
14,000,000
300,000
1,877,580
2,215,006
5,349,598
-
-
547,264
309,615
1,775,612
200,000
1,633,925
-
71,032
44,113,799
there were no shares granted during 2010 or 2009 as compensation.
at balance date the numbers above for the Directors and other key management personnel represent the number of stapled
securities of the Group held.
(c) Loans to key management personnel
no loans were made during the 2010 or 2009 year to key management personnel and no loans were outstanding at the
reporting date.
(d) Other transactions with key management personnel
the Group entered into a development agreement in 2007 with Citimark properties limited (“Citimark”), an entity related to Mr.
robert pullar, who is a director of the Company. under the agreement, Citimark developed the Synergy investment property in
Kelvin Grove, Brisbane in accordance with specified terms, and to agreed standards. Construction was completed in november
2008. under the development agreement, the Group reimbursed Citimark for the costs of the project, and paid fees contingent
upon the outcomes of certain events, mostly based on total construction costs of and leasing outcomes. Citimark provided a
rental guarantee to the Group over the entire property for 18 months from the date construction was complete. During the
2009 financial year the Group paid $49,706,942 to Citimark for development and construction costs and received $4,286,354 as
settlement of the rental guarantee.
the Group rents an apartment, located at 185 Macquarie Street, Sydney, which is owned by Mr. paul Weightman, a director of
the Company. total rent paid during 2010 was $88,400 (2009: $88,400). the payment of rent is on normal commercial terms
and conditions and at market rates.
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O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
65
32. Share Based Payments
(a) Performance Rights Plan
a performance rights plan (prp) was established in September 2007 by the Company. all full-time and part-time employees
who meet minimum service, remuneration and performance requirements, including executive Directors of Cromwell
Corporation limited, are eligible to participate in the prp at the discretion of the Board. participation in the prp by executive
Directors is subject to securityholder approval. the prp is designed to provide long-term incentives for senior managers and
executive Directors to continue employment and deliver long-term securityholder returns.
under the prp, eligible employees are allocated performance rights. each performance right enables the participant
to acquire a stapled security in Cromwell Group, at a future date and exercise price, subject to conditions. the number of
performance rights allocated to each participant is set by the Board or the remuneration Committee and based on individual
circumstances and performance.
the amount of performance rights that will vest under the prp depends on a combination of factors which may include
the Group’s total securityholder returns (including price growth, dividends and capital returns), internal performance
measures and the participant’s continued employment.
performance rights allocated under the prp generally vest in 3 years. until performance rights have vested, the participant
cannot sell or otherwise deal with the performance rights except in certain limited circumstances. It is a condition of the prp
that a participant must remain employed by the Group in order for performance rights to vest. any performance rights which
have not yet vested on a participant leaving employment must be forfeited.
under aaSB 2 “Share based payment”, the rights granted to employees to securities acquired by the plan are treated as
options for accounting purposes.
Set out below are summaries of the number of performance rights granted and exercised.
Grant Date
Expiry Date
Exercise price
Balance at
start of the
year
Granted
during the
year
Lapsed
during the
year
Exercised
during the
year
Balance at
year end
2010
18/09/2007
18/09/2007
18/09/2007
06/12/2007
16/12/2009
08/02/2010
19/01/2010
19/01/2011
19/01/2011
07/04/2011
15/01/2012
07/03/2012
Weighted average exercise price
2009
18/09/2007
18/09/2007
18/09/2007
06/12/2007
19/01/2010
19/01/2011
19/01/2011
07/04/2011
Weighted average exercise price
$1.21
$1.21
$0.00
$1.21
$0.20
$0.00
$1.21
$1.21
$0.00
$1.21
289,150
2,811,434
8,600
1,082,933
-
-
4,192,117
$1.21
492,900
3,886,800
8,600
1,624,400
6,012,700
$1.21
-
-
-
-
659,600
126,859
786,459
$0.17
-
-
-
-
-
-
(289,150)
-
-
-
-
-
(289,150)
$1.21
(203,750)
(1,075,366)
-
(541,467)
(1,820,583)
$1.21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,811,434
8,600
1,082,933
659,600
126,859
4,689,426
$1.03
289,150
2,811,434
8,600
1,082,933
4,192,117
$1.21
at balance date nil performance rights (2009: nil) were vested and exercisable.
the weighted average remaining contractual life of performance rights outstanding at the end of the year was 0.8 years (2009:
1.7 years).
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W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
66
the assessed fair value of performance rights granted is as follows:
Grant Date
18/09/2007
18/09/2007
18/09/2007
06/12/2007
16/12/2009
08/02/2010
Expiry Date
19/01/2010
19/01/2011
19/01/2011
07/04/2011
15/01/2012
07/03/2012
Fair value (cents)
Exercise price
$1.21
$1.21
$0.00
$1.21
$0.20
$0.00
Non-market based
14.3¢
15.0¢
96.9¢
-
41.5¢
59.1¢
Market based
9.2¢
10.6¢
-
8.9¢
-
-
Fair Value of Performance Rights Granted
the fair values at grant date for performance rights with no market based vesting conditions were determined using a Black-
Scholes option pricing model that takes into account the exercise price, the term of the option, the security price at grant date
and expected price volatility of the underlying security, the expected dividend/distribution yield and the risk-free interest rate
for the term of the option. the fair values at grant date for performance rights with market based vesting conditions were
determined using a Monte Carlo simulation (tSr hurdle) and the Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the security price at grant date and expected price volatility of the underlying
security, the expected dividend/distribution yield and the risk-free interest rate for the term of the option.
the model inputs for performance rights granted during the year ended 30 June 2010 included:
Non-market based vesting conditions
Exercise price
Grant date
Share price at grant date
Expected price volatility
Expected dividend yield
Risk free interest rate
Expiry date
$0.20
16/12/09
$0.74
34%
10.81%
4.83%
15/01/12
-
08/02/10
$0.735
22%
10.88%
4.79%
07/03/12
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.
the model inputs for performance rights granted during the year ended 30 June 2008 included:
Exercise price
Grant date
Share price at grant date
Expected price volatility
Expected dividend yield
Risk free interest rate
Expiry date
TSR hurdle
Non-market based vesting
conditions
$1.21
18/09/07
$1.26
23%
8.06%
6.22%
19/01/11
-
$1.21
18/09/07
$1.26
23%
8.06%
6.26%
19/01/10
-
-
18/09/07
$1.26
23%
8.06%
6.22%
19/01/11
-
Market based vesting
conditions
$1.21
18/9/07 – 6/12/07
$1.25
23%
8.06%
6.22%
19/01/10 – 07/04/11
13%
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.
(b) Tax Exempt Plan
the tax exempt plan enables eligible employees to acquire up to $1,000 of stapled securities on-market in a tax effective
manner within a 12 month period. eligibility for the tax exempt plan is approved by the Board having regard to individual
circumstances and performance. no Directors or KMp are eligible for the tax exempt plan.
expenses relating to the plan are recorded in employee benefits expense and all securities are purchased on-market.
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W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
67
(c) Employee Share Ownership Plan
the employee Share ownership plan (“eSop”) was established in 2003 by the Company. no grants were made under the eSop
in the 2010 or 2009 years and it is not intended any further grants will be made by this plan in the future.
under the eSop, eligible employees were allocated shares in the Company. the shares were acquired by the eligible
employees at the time of allocation, funded by a loan from the Company 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 eSop 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 eSop at the time of the Stapling in December 2006 were effectively converted to Stapled Securities,
in the same way as other shares issued by the Company.
as a result of the stapling transaction in December 2006 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.
Set out below are summaries of options granted and exercised.
Grant Date
Expiry Date
Exercise price
Balance
at 1 July
Granted during
the year
Exercised
during the year
Balance
at 30 June
2010
28/8/2005
30/9/2009
34.8¢
Weighted average exercise price (cents)
2009
28/8/2005
28/8/2005
30/6/2009
30/9/2009
34.8¢
34.8¢
Weighted average exercise price (cents)
141,875
141,875
34.8¢
17,757
250,950
268,707
34.8¢
-
-
-
-
-
-
-
(141,875)
(141,875)
34.8¢
(17,757)
(109,075)
(126,832)
34.8¢
-
-
-
-
141,875
141,875
34.8¢
at 30 June 2009 all options were vested and exercisable with a weighted average exercise price of 34.8 cents. all options
became vested and exercisable on approval of the stapling by shareholders and unitholders in December 2006.
the weighted average remaining contractual life of share options outstanding at the end of the year was nil years (2009: 0.3 years).
no options were granted in 2010 or 2009. the assessed fair value of options granted in 2006 was 10.1 cents.
141,875 options were exercised during 2010 (126,832 options were exercised during 2009). 141,875 stapled securities (2009:
126,832 shares) were issued to employees on exercise of the options. the aggregate proceeds received from employees on
the exercise of options and recognised as issued capital was $50,000 (2009: $44,000) for the Company and $nil (2009: $nil)
for the trust. the fair value of securities issued at the option exercise date was $98,000 (that is the weighted average share
price at the date of exercise was $0.69 per security) (2009 - $66,000; $0.52 per security).
to 30 June 2010 no options granted under the eSop have lapsed, been forfeited or expired.
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W
E
L
L
G
R
O
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P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
68
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*
Grant date
Share price at grant date
Expected price volatility
Expected dividend yield
Risk free interest rate
Expiry date
* Prior to reconstruction on stapling
Options Granted
30.9¢
28/8/05
34¢
90%
3.66%
5.0%
30/6-30/9/09
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.
(d) 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 Performance Rights Plan
Tax Exempt Plan
Options issued under Employee Share Ownership Plan
33. Other Related Party Transactions
(a) Parent entity and subsidiaries
2010
$’000
339
-
-
339
2009
$’000
233
-
-
233
Cromwell Corporation limited is the ultimate parent entity in the Group. Details of subsidiaries are set out in note 35.
(b) Transactions with jointly controlled entity and associates
transactions between the Group and its jointly controlled entity and associates also included:
•
•
•
•
loans between the Group and its associates (refer note 8). the Group received interest of $1,373,153 (2009: $2,468,144)
from Cromwell property Fund;
the Group received $5,375,000 (2009: $9,072,000) in distributions from its jointly controlled entity and associate during
the year (refer note 15);
the Group charged Cromwell property Fund $240,328 (2009: $2,370,430) acquisition, capital raising, finance structuring,
registry services and accounting services fees during the year; and
the Group charged its jointly controlled entity and associates $145,249 (2009: $1,837,684) management fees during the
year.
(c) 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. as a result of
the stapling (in December 2006) the majority of the relevant schemes became part of the Group. For those schemes which are
not part of the Group after that date, Cromwell tGa planned Investment and Cromwell property Fund (refer note 15), fees and
transactions are disclosed above as being transactions with jointly controlled entity and associates.
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W
E
L
L
G
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O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
69
34. Parent Entity Disclosures
as at and throughout the financial year ending 30 June 2010 the parent entity of the Group was Cromwell Corporation limited.
Summary financial information
the individual financial statements for the parent entity show the following aggregations.
Cromwell Corporation
Limited
2010
$’000
2009
$’000
(6,990)
(16,621)
(6,990)
(16,621)
16,978
20,391
168
18,529
1,862
49,197
1,255
(48,590)
1,862
-
-
-
17,132
19,720
16,716
16,716
3,004
43,688
916
(41,600)
3,004
-
-
-
Results
Profit/(loss) for the year
Total comprehensive income/(loss)
Financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net Assets
Total equity
Contributed equity
Share based payments reserve
Retained earnings/(accumulated losses)
Total equity
Contingent liabilities
Commitments for capital expenditure
Guarantees provided
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M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
70
35. Investments in Controlled Entities
the Company’s investment in controlled entities are shown below, all of which are domiciled in australia.
Equity Holding
Name
Cromwell Property Securities Limited
Cromwell Property Services Pty Ltd
Marcoola Developments Pty Ltd
Votraint No. 662 Pty Ltd
Cromwell Capital Limited
Cromwell Finance Limited
Cromwell Operations Pty Ltd
Cromwell Paclib Nominees Pty Ltd
Cromwell Funds Management Limited
Cromwell Altona Trust (refer note 38)
trust and its controlled entities (1)
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
Terrace Office Park Property Trust/Planned Investment
Cromwell Mary Street Property Trust/Planned Investment (2)
Cromwell Goulburn Street Property Trust/Planned Investment
Cromwell Northbourne Planned Investment
Cromwell Planned Investment No 3
Tuggeranong Head Trust
Tuggeranong Trust
Cromwell Phoenix Property Securities Fund
CDPT Finance Pty Ltd
EXM Head Trust
EXM Trust
Mascot Head Trust
Mascot Trust
2010
%
100
100
100
100
100
100
100
50
100
100
100%
100%
100%
100%
100%
100%
92%
100%
100%
100%
100%
100%
83%
100%
100%
100%
100%
100%
2009
%
100%
100%
100%
100%
100%
100%
100%
50%
100%
-
100%
100%
100%
100%
100%
100%
92%
100%
100%
100%
100%
100%
83%
100%
-
-
-
-
(1) The Trust and its controlled entities listed above are consolidated as part of the Group as required under accounting standards (refer note 1(b)).
(2) The remaining 8% interest in Cromwell Mary Street Property Trust/Planned Investment is held by Cromwell Property Securities Limited.
EXM Trust and EXM Head Trust
the eXM trust and eXM Head trust were formed during the financial year to facilitate the post balance date purchase of 321
exhibition Street, Melbourne, VIC (“the exhibition property”) from the Cromwell property Fund - refer note 41.
Mascot Trust and Mascot Head Trust
the Mascot trust and Mascot Head trust were formed during the financial year to facilitate the post balance date purchase of
203 Coward Street, Mascot, nSW (“the Qantas property”) - refer note 41.
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W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
71
36. Segment Information
(a) Description of segments
Reportable segments
the Group has identified its operating segments based on its internal reports which are regularly reviewed and used by the
Chief executive officer in order to make decisions about resource allocation and to assess the performance of the Group. the
segments offer different products and services and are managed separately.
Property Investment
the ownership of properties located throughout australia.
Funds Management
the establishment and management of external property funds and the trust.
Property Development
property development, including development management, development finance and joint venture activities.
(b) Other segment information
(i)
Accounting policies
Segment information is prepared in conformity with the accounting policies of the Group as disclosed in note 1 and accounting
Standard aaSB 8 operating Segments.
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.
(ii)
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.
(iii) Equity-accounted investments
the Group has an investment in an australian jointly controlled entity (Cromwell tGa planned Investment) and two australian
associates (Cromwell property Fund and phoenix portfolios pty ltd). Cromwell tGa planned Investment and Cromwell
property Fund are accounted for using the equity method and included in the property investment segment. phoenix portfolios
pty ltd is accounted for using the equity method and included in the funds management segment.
(iv) Major customers
revenue of approximately $42,486,000 (2009: $38,276,000) is derived from a single external customer (Commonwealth of
australia) and is part of the property investment segment.
C
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W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
72
(c) Operating segments
2010
Segment results
Segment revenue and other income
Sales – external customers
Sales – intersegmental
Profit of equity accounted entities (before adjustments)
Distributions
Interest
Other income
Total segment revenue and other income
Segment expenses
Property expenses and outgoings
Property development costs
Property administration costs
Intersegmental costs
Funds management commissions
Employee benefits expense
Finance costs
Other
Total segment expenses
Income tax expense/(benefit)
Segment profit/(loss) (1)
Reconciliation to reported profit/(loss)
Loss on sale of investment properties
Gain on sale of available-for-sale financial assets
Fair value adjustments/write downs:
Investment properties
Interest rate derivatives
Investments at fair value through profit or loss
Property development inventories/provision
Loan receivable
Equity accounted investments
Other property investment income/(expense):
Straight-line lease income
Lease incentive and lease cost amortisation
Other expenses:
Amortisation of finance costs
Employee options expense
Amortisation and depreciation
Net tax losses utilised
Total adjustments
Profit/(loss)
Segment assets and liabilities
Total assets
Total liabilities
Other segment information
Investments in jointly controlled entity and associates
Acquisitions of non-current segment assets:
Investment properties
Inventories
Investments at fair value through profit or loss
Property, plant and equipment
Intangibles
Property
Investment
$’000
Funds
Management
$’000
Property
Development
$’000
121,180
842
6,364
428
5,239
127
134,180
18,624
-
1,015
10,391
-
-
38,668
-
68,698
-
65,482
(554)
3,431
(32,146)
(1,283)
836
-
-
(2,643)
852
(5,411)
(1,861)
-
-
-
(38,779)
26,703
9,283
10,391
24
1
1,026
397
21,122
-
-
-
842
3,274
9,390
-
3,447
16,953
1,249
2,920
-
-
-
-
-
-
-
-
-
-
-
(296)
(482)
(1,508)
(2,286)
634
-
-
-
-
-
-
-
-
3,487
-
-
-
1,373
-
525
5,385
(1,613)
(3,772)
-
-
-
-
-
(6,331)
1,932
-
-
-
-
(43)
(70)
-
(4,512)
(8,284)
Consolidated
$’000
130,463
-
6,388
429
6,265
524
144,069
18,624
3,487
1,015
-
3,274
10,763
38,668
3,972
79,803
(364)
64,630
(554)
3,431
(32,146)
(1,283)
836
(6,331)
1,932
(2,643)
852
(5,411)
(1,861)
(339)
(552)
(1,508)
(45,577)
19,053
1,253,169
701,065
24,285
4,862
5,374
5,494
1,282,828
711,421
56,775
3,542
-
2,599
-
-
6,141
27
-
-
-
253
288
541
-
56,802
-
4,925
-
-
-
4,925
3,542
4,925
2,599
253
288
11,607
(1) Segment profit/(loss) is based on income and expenses excluding adjustments for unrealised fair value adjustments and write downs, gains or losses on sale of
investments, non-cash income and expenses. The adjusting items may vary from time to time based on changes to accounting standards and management’s
assessment as to the nature of the item.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
73
2009
Segment results
Segment revenue and other income
Sales – external customers
Sales – intersegmental
Profit of equity accounted entities (before adjustments)
Distributions
Interest
Other income
Total segment revenue and other income
Segment expenses
Property expenses and outgoings
Property development costs
Property administration costs
Intersegmental costs
Funds management commissions
Employee benefits expense
Finance costs
Other
Total segment expenses
Income tax expense
Segment profit/(loss) (1)
Reconciliation to reported profit/(loss)
Fair value adjustments/write downs:
Investment properties
Interest rate derivatives
Available-for-sale financial assets
Investments at fair value through profit or loss
Loan receivable
Property development inventories/provision
Equity accounted investments
Other property investment income/(expense):
Straight-line lease income
Lease incentive and lease cost amortisation
Other expenses:
Amortisation of finance costs
Employee options expense
Amortisation and depreciation
Net tax losses utilised
Total adjustments
Profit/(loss)
Segment assets and liabilities
Total assets
Total liabilities
Other segment information
Investments in jointly controlled entity and associates
Acquisitions of non-current segment assets:
Investment properties
Inventories
Investments at fair value through profit or loss
Property, plant and equipment
Intangibles
Property
Investment
$’000
Funds
Management
$’000
Property
Development
$’000
114,585
793
7,008
658
10,741
6,260
140,045
17,021
-
1,155
9,852
-
-
48,781
-
76,809
-
63,236
(104,288)
(22,479)
(3,663)
(3,107)
-
-
(20,237)
1,716
(4,303)
(1,415)
-
-
-
(157,776)
(94,540)
4,863
9,852
-
-
1,232
1
15,948
-
-
-
793
385
8,693
98
2,471
12,440
325
3,183
-
-
-
-
-
-
(232)
-
-
-
(203)
(475)
(2,133)
(3,043)
140
2,847
-
-
-
-
-
2,847
-
3,874
-
-
-
1,270
-
361
5,505
-
(2,658)
-
-
-
-
(4,890)
(11,463)
-
-
-
-
(30)
(70)
-
(16,453)
(19,111)
Consolidated
$’000
122,295
-
7,008
658
11,973
6,261
148,195
17,021
3,874
1,155
-
385
9,963
48,879
2,832
84,109
325
63,761
(104,288)
(22,479)
(3,663)
(3,107)
(4,890)
(11,463)
(20,469)
1,716
(4,303)
(1,415)
(233)
(545)
(2,133)
(177,272)
(113,511)
1,277,284
758,804
31,517
10,158
22
268
1,308,823
769,230
58,292
47,642
-
2,411
-
-
50,053
3
-
-
-
99
362
461
-
58,295
-
4,328
-
-
-
4,328
47,642
4,328
2,411
99
362
54,842
(1) Segment profit/(loss) is is based on income and expenses excluding adjustments for unrealised fair value adjustments and write downs, gains or losses on sale
of investments, non-cash income and expenses. The adjusting items may vary from time to time based on changes to accounting standards and management’s
assessment as to the nature of the item.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
74
Segment revenue and other income reconciles to total revenue and other income as follows:
Total segment revenue and other income
Reconciliation to reported revenue and other income
Straight-line lease income
Lease incentive and lease cost amortisation
Gain on sale of available-for-sale financial assets
Fair value net gain from investments at fair value through profit or loss
Increase in recoverable amount of loans receivable
Share of profit of equity accounted entities
Other
Total revenue and other income
37. Commitments for Expenditure
(a) 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
Minimum lease payments
Future finance charges
Recognised as a liability
Representing lease liabilities
Current
Non-current
2010
$’000
2009
$’000
144,069
148,195
852
(5,411)
3,431
836
1,932
(2,506)
641
143,844
1,716
(4,303)
-
-
-
(7,008)
524
139,124
-
-
-
-
-
-
-
-
20
-
20
-
20
20
-
20
Finance leases comprise leases over items of plant and equipment under normal commercial terms and conditions.
(b) 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
59
143
202
69
173
242
operating leases primarily comprised the lease of the Group’s premises. the Company has entered into a number of leases
with the trust and its subsidiaries and as such the commitment is no longer recognised on consolidation following stapling.
operating lease commitments of the Company are paid for and recognised as expenses by a controlled entity.
(c) Capital expenditure commitments
Commitments in relation to capital expenditure on investment properties contracted for at the reporting date but not
recognised as liabilities amounted to $24,750,000 (2009: $nil) and is payable within 12 months.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
75
38. Business Combinations
on 18 March 2010 the Group acquired 100% ownership of the Cromwell altona trust (“Cat”), an unlisted trust domiciled
in australia. the primary asset of the trust is land located at Maidstone Street, altona, VIC. the trust was acquired from
Cromwell property Fund (“CpF”), an associate of the Group.
the consideration transferred was $245,000 reflecting the fair value of the net assets of Cat at acquisition date. as a result of
the acquisition, the Group seeks to benefit from holding the land with the prospect of development and value enhancement and
subsequent sale in the foreseeable future.
the Group has recognised the fair values of the identifiable assets and liabilities of Cat based upon the best available
information at the acquisition date. the business combination accounting is as follows:
Purchase consideration:
Cash paid
Total purchase consideration
Assets and liabilities acquired:
Cash
Prepayments
Inventory (land held for development and resale) – refer note 10
Trade payables
Loan payable to the Group – refer note 8(a)
Net assets acquired
the carrying amount of assets and liabilities acquired was equivalent to their fair value.
The cash flows on acquisition were as follows:
Cash acquired from business combination
Cash paid
Payments for controlled entity, net of cash acquired
$’000
245
245
19
129
4,800
(225)
(4,478)
245
19
(245)
226
prior to the acquisition, Cat leased the land to the Group under a development agreement whereby the Group could develop
the land on the basis CpF would fully recover its costs – see note 22. under the development agreement the Group leased
the property from CpF at a cost of $800,000 per annum and paid all property outgoings. on acquisition of Cat the lease was
terminated. Cat contributed revenue and other income of $1,000 and a loss of $48,000 to the Group for the period from 18
March 2010 to 30 June 2010. Had the acquisition occurred at the beginning of the reporting period, the consolidated statement
of comprehensive income would have shown a reduction in property development costs of $626,000 and a corresponding
increase in profit.
Included in the net assets acquired was land located at Maidstone Street, altona, Vic. the fair value of the land of $4,800,000
was based on an independent valuation performed in november 2009. the Group expects to either develop or sell the land in
the future. the land is accounted for by the Group as inventory (refer note 10)
there were no business combinations in the prior year.
39. Contingent Liabilities
the Directors are not aware of any material contingent liabilities of the Group.
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
76
40. Auditor’s Remuneration
During the year the following fees were paid or payable for services provided by the auditor of the Group
(Johnston Rorke) and its related entities:
Audit Services
Johnston Rorke
Auditing or reviewing financial reports
Auditing of controlled entities’ AFS licences
Auditing of controlled entities’ compliance plans
Other Services
Johnston Rorke
Tax compliance services
Other
2010
$
2009
$
254,000
7,000
32,500
293,500
-
-
-
327,000
5,500
27,500
360,000
860
3,200
4,060
41. Subsequent Events
Since balance date and up to the date of this report, the following transactions have occurred:
(a) Acquisition of Investment Properties from CPF
During the 2010 financial year the Group announced a proposal to acquire certain assets from Cromwell property Fund
(“CpF”). In accordance with the proposal, the Group entered into a purchase contract to acquire 321 exhibition Street,
Melbourne (“the exhibition property”) and a unit sale deed to acquire one third of the units the Group did not already own
in the tGa planned Investment, which owns the tGa Complex, Canberra (“the tGa property”). at balance date the proposal
was subject to satisfaction of certain conditions, including approval of security holders. the expected impact of these
acquisitions on the Group was set out in an explanatory Memorandum lodged with aSX on 8 June 2010.
Subsequent to balance date, security holders approved the proposal and settlement was completed in July 2010.
the acquisition of the exhibition property for $90,200,000 was funded by way of repayment of $10,200,000 of the loan
receivable from CpF and a new debt facility for $80,000,000. as part of the proposal the loan facility to CpF was extended and
the balance of $19,800,000 now expires in June 2012. the acquisition of one-third interest in tGa was effected by way of an
assignment of CpF’s debt facility of $12,973,000 secured against the tGa property and payment of $12,065,000.
Details of the purchase consideration for the one-third interest in tGa planned Investment are set out below. the trust already
held a two-thirds interest in the tGa planned Investment which was previously accounted for using the equity method – see note 15.
Purchase consideration:
Cash paid
Assignment of debt
Investment already held in TGA – see note 15
Assets and liabilities recognised
Cash
Prepayments
Investment property
Trade and other payables
$’000
12,065
12,973
49,872
74,910
103
20
75,000
(213)
74,910
C
R
O
M
W
E
L
L
G
R
O
U
P
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
0
77
(b) Equity raising
on 12 July 2010 the Group announced an institutional placement (“placement”) to raise up to $80,000,000 and a rights
issue (“rights Issue”) to raise a further amount up to a combined total of $120,000,000. the placement was completed on
14 July 2010 with a total of $54,000,000 subscribed at $0.75 per stapled security, less issue transaction costs of $2,680,000.
the rights Issue was completed by the Group on 18 august 2010 with approximately $13,720,000 subscribed at $0.72 per
stapled security. all new securities issued under the placement and rights Issue rank equally with existing securities for
the September quarter distribution.
as a result of the rights Issue, an additional 19,056,000 stapled securities are expected to be issued by the Group at $0.72
per stapled security, on 19 august 2010. all new securities issued under the placement and rights Issue rank equally with
existing securities for the September quarter distribution.
placement participants are also able to subscribe for approximately 68,927,000 additional stapled securities, being the
shortfall from the rights Issue not taken up by rights Holders, at $0.72 per stapled security, for up to 10 weeks after close of
the rights Issue. no additional stapled securities have been issued to placement participants up to the date of this report.
(c) Acquisition of Qantas Headquarters, Mascot, NSW
Cromwell has entered into a binding agreement to acquire the investment property known as Qantas Headquarters in Mascot,
nSW for approximately $143,000,000, and expects to complete the acquisition on 20 august 2010 by utilising the proceeds of
the capital raising together with a new debt facility of $84 million. In addition, Cromwell has agreed to fund lease incentives
totalling approximately $25,600,000 payable under a new 10 year lease agreed with Qantas. these costs are expected to be
payable over the next 12-18 months as underlying works are completed in conjunction with the tenants requirements.
(d)
Interest rate hedging
the Group entered into additional interest rate derivatives subsequent to balance date. the new contracts comprised:
•
•
an interest rate swap for $80 million at 5.00% for three years commencing august 2010; and
an interest rate swap for $64 million at 5.00% for three years commencing September 2010.
In addition, the Group had entered into an interest rate derivative prior to balance date, which had an effective commencement
date of July 2010. this derivative comprised an interest rate cap over $300 million, with interest capped at each 30 day period
at the lower of 5.00% or the prevailing bank bill swap bid rate at the time.
the financial effects of subsequent events were not recognised at balance date.
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Directors’ Declaration
In the Directors’ opinion:
(a) the attached financial statements and notes and the remuneration report in the Directors’ report are in accordance with the
Corporations act 2001, including:
(i) complying with australian accounting Standards (including the australian accounting Interpretations) and the
Corporations regulations 2001; and
(ii) giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance, for the financial year
ended on that date; and
(b) the financial report also complies with International Financial reporting Standards as disclosed in note 1(a); and
(c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and
payable; and
the Directors have been given the declarations by the chief executive officer and chief financial officer for the financial year
ended 30 June 2010 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 18th day of august 2010
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Level 30, Central Plaza One
345 Queen Street Brisbane Q 4000
GPO Box 1144 Brisbane Q 4001
Ph 07 3222 8444 / Fax 07 3221 7779
Website www.jr.com.au
Email jr@jr.com.au
Independent Auditor’s Report to the Members of Cromwell Group
Report on the Financial Report
Cromwell Group comprises the consolidation of Cromwell Corporation limited and the entities it controlled
at the end of the year or from time to time during the financial year, including Cromwell Diversified property
trust and entities it controlled at the end of the year or from time to time during the financial year, which
form the consolidated entity (“Cromwell Group” or “the consolidated entity”).
We have audited the accompanying financial report of Cromwell Group, which comprises the statement of
financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes
in equity and statement of cash flows for the year ended on that date, a summary of significant accounting
policies, other explanatory notes and the directors’ declaration.
Directors’ responsibility for the financial report
the directors of Cromwell Corporation limited and the directors of Cromwell property Securities limited,
the responsible entity of Cromwell Diversified property trust, are responsible for the preparation and
fair presentation of the financial report in accordance with australian accounting Standards (including
the australian accounting Interpretations) and the Corporations act 2001. this responsibility includes
establishing and maintaining internal 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 the financial report, comprising the financial statements and
notes, complies with International Financial reporting Standards.
Auditor’s responsibility
our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with australian auditing Standards. these auditing Standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance whether the financial report is free from material misstatement.
an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. the procedures selected depend on the auditor’s judgement, including the assessment of
the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
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Level 30, Central Plaza One
345 Queen Street Brisbane Q 4000
GPO Box 1144 Brisbane Q 4001
Ph 07 3222 8444 / Fax 07 3221 7779
Website www.jr.com.au
Email jr@jr.com.au
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations act
2001.
Auditor’s opinion
In our opinion:
(a) the financial report of Cromwell Group is in accordance with the Corporations act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of its
performance for the year ended on that date; and
(ii) complying with australian accounting Standards (including the australian accounting
Interpretations) and the Corporations regulations 2001; and
(b) the financial report also complies with International Financial reporting Standards as disclosed in note
1.
Report on the Remuneration Report
We have audited the remuneration report included in part 11 of the director’s report for the year ended 30
June 2010. the directors are responsible for the preparation and presentation of the remuneration report
in accordance with Section 300a of the Corporations act 2001. our responsibility is to express an opinion on
the remuneration report, based on our audit conducted in accordance with australian auditing Standards.
Auditor’s opinion
In our opinion the remuneration report of Cromwell Corporation limited for the year ended 30 June 2010,
complies with Section 300a of the Corporations act 2001.
JOHNSTON RORKE
Chartered accountants
RCN WALKER
partner
Brisbane, Queensland
18 august 2010
liability limited by a scheme approved under professional Standards legislation
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Corporate Governance Statement
Cromwell Group through its Board, Board Committees and management is committed to meeting stakeholders’ expectations
of sound corporate governance, while seeking to achieve superior financial performance and long term prosperity.
the aSX Corporate Governance Council has Corporate Governance principles and recommendations which are designed
to optimise corporate performance and accountability in the interests of shareholders and the broader economy.
the recommendations are not prescriptive. However listed entities are required to disclose the extent of their compliance
and, if any aSX recommendations have not been followed, must give reasons for not following them.
this statement 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.
Principle 1 – Lay solid foundations for management and oversight
the Boards of Cromwell Corporation limited and Cromwell property Securities limited each have common membership.
responsibility for corporate governance and the internal working of each Group entity rests with the relevant Board.
the Board has adopted a formal charter which details the composition, values and functions of the Board.
the Board holds a scheduled meeting each month and additional meetings are convened as required. 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.
Day-to-day management of the Group’s affairs and implementation of corporate strategy and policy initiatives are delegated
by the Board to management under the direction of the Chief executive officer. this has been formalised in the Board Charter
and a Delegations of authority policy. the effectiveness of both these documents is reviewed by the Board annually.
each director has received a letter of appointment which details the key terms of their appointment. the Ceo and CFo
(both of whom are executive directors) have formal job descriptions and letters of appointment outlining the terms of their
employment.
a formal induction program allows new senior executives to participate fully and actively in decision-making as soon as
possible. the Group has an established process for the performance review of all staff. the performance of key executives
is evaluated at least annually, in addition to regular feedback during the performance period. at the time of the reviews,
the professional development of the executive is also discussed, along with any training which could enhance their
performance. Both qualitative and quantitative measures are used in the evaluation. a performance evaluation for each
senior executive has taken place during the reporting period and was subject to the review process explained elsewhere
in this report.
Cromwell property Securities limited acts as responsible entity for a number of registered managed investment schemes.
Cromwell Funds Management limited also has a financial services licence which allows it to act as responsible entity for
managed investment schemes. Both companies are wholly owned subsidiaries of Cromwell Corporation limited. the roles
and responsibilities of a responsible entity are set out in the relevant scheme’s constitution and compliance plan. Day-to-day
management of the schemes has been delegated to management, under the direction of the Chief executive officer. this has
been formalised in the Delegations of authority policy mentioned above.
a compliance committee comprised of a majority of external independent members monitors the extent to which the
responsible entity complies with each managed investment scheme’s compliance plan and reports findings to the responsible
entity. the roles and responsibilities of the compliance committee are outlined in a formal charter which is reviewed annually
by the committee and the Board.
What you can find on our website:
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Corporate Governance Statement
Board Charter
Compliance Committee Charter
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Principle 2 – Structure the board to add value
the Board is comprised of an independent Chairman, three other independent directors (David usasz, Michelle McKellar and
robert pullar) and four non-independent directors (paul Weightman, Daryl Wilson, richard Foster and Marc Wainer). profiles
of each director, including details of their skills, expertise and experience can be found in the directors’ report.
the Group recognises that independent directors are important in assuring securityholders that the Board properly fulfils
its role. the independent directors (including the Chairman) are considered to meet the test of independence under the aSX
Guidelines. each year, their independence is assessed and the independent directors also confirm to the Board, in writing,
their continuing status as an independent director. they have each undertaken to inform the Board as soon as practical if they
think that their status as an independent director has or may have changed.
In assessing a director’s independent status, the Board has adopted a materiality threshold of 5% of the Group’s net operating
income or 5% of the Group’s net tangible assets (as appropriate).
although, with Mr Wainer’s appointment, the Board no longer has a majority of independent directors it should be noted that
Mr Foster ceased to act in an executive capacity during the year. even though Mr Foster does not yet meet the aSX Guidelines
for independence, the Board is satisfied that Mr Foster brings an independent judgment to bear on board decisions and that his
previous business relationships do not interfere with his ability to make independent decisions.
each director’s qualifications, experience, special responsibilities and attendances at Board meetings are detailed in the
directors’ report. 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.
Despite the Board not having a majority of independent members, the directors do not feel that the appointment of another
independent director at this time would be of any benefit to securityholders.
on an ongoing basis directors are provided with updates on legal and corporate developments relevant to the Group.
Independent professional advice
If warranted, the Board may resolve to obtain professional advice about the execution of the Board’s responsibilities at the
Group’s expense. Directors also have the right to seek independent professional advice. Subject to the Chairman’s approval,
which will not be unreasonably withheld, it will be at the Group’s expense. Where appropriate, such advice is shared with the
other directors.
Board Committees
three Board Committees have been established to assist in the execution of the Boards’ responsibilities. the membership
of each Committee and attendance at Board and Committee meetings is set out in the directors’ report.
It is the policy of the Board that the Investment Committee, nomination and remuneration Committee and the audit and risk
Committee consist of a majority of independent directors (other than the Chairman). each committee has a charter which
includes a description of its duties and responsibilities.
the Board charter has a description of the Board’s policies and procedures for the selection, appointment and re-election of
directors.
Performance of the Board
the Board has undertaken its annual formal performance assessment, which includes an assessment of the Board, Board
Committees and individual directors. all directors completed a questionnaire and were able to make comments or raise any
issues they had regarding the Board or a Board Committee’s operations. the results were compiled by the Company Secretary
and discussed at a subsequent Board meeting. the Ceo and CFo also participated in an annual performance review with the
Chairman (who had consulted with the other directors). the review process was the same as for senior executives.
as necessary, directors are provided with training sessions on key issues relevant to the Group’s operations. Directors also
have access to the internal training sessions provided by the Group’s General Counsel and/or Compliance Manager.
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 identifies 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. the Board’s policy and procedure for the selection, appointment and re-election of Directors are set out in the Board
charter.
What you can find on our website:
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remuneration and nomination Committee Charter
Board Charter
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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 to provide guidance about the attitudes and behaviour
necessary to maintain stakeholder confidence in the integrity of the Group and comply with the Group’s legal obligations.
the Code of Conduct is made available to all staff and they are reminded of the importance of the Code of Conduct on a
regular basis. appropriate standards are also communicated and reinforced to all employees at induction programs and
staff meetings.
the Board has approved a Breach reporting policy and a Whistleblower’s policy. the policies are on the Group’s intranet
site and all staff have been made aware of them. all staff have received training with regard the Breach reporting policy.
these policies actively encourage and support reporting to appropriate management of any actual or potential breaches
of the Group’s legal obligations and / or of the Code of Conduct.
Further, the Board has approved a Securities trading policy under which directors and staff are restricted in their ability to
deal in the Group’s securities. appropriate black out periods are in place during which directors and staff are not permitted to
trade. all staff are aware of the policy and receive training annually. the policy is reviewed annually.
Compliance with Board policies is monitored via monthly checklists completed by key management and by investigation
following any report of a breach by an employee. Compliance monitoring is undertaken by the legal & Compliance team under
the direction of the Company Secretary / General Counsel who reports directly to the Board.
What you can find on our website:
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Code of Conduct
Securities trading policy
Whistleblower’s policy
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
the following process has been adopted.
Audit and Risk committee
an audit and risk committee has been appointed by the Board and has responsibility for overseeing the quality and integrity
of the accounting, auditing, financial reporting and compliance and risk management practices of the Group. the audit and
risk Committee is comprised of three independent directors. the names, qualifications and attendance at meetings of the
members of the audit and risk Committee is detailed in the directors’ report.
the responsibilities, roles, composition and structure of the audit and risk Committee are set out in its charter. the charter
includes information on the procedures for selection and appointment of the external auditor and for the rotation of external audit
engagement partners.
Minutes are kept of all Committee meetings, including meetings of the audit and risk Committee, and presented at the next
Board meeting. the Committee reports to the Board on all matters relevant to its role and responsibilities.
the external auditor has declared its independence to the Board and the Committee. the Board is satisfied that the standards
for auditor independence and associated issues have been complied with. the auditor attends the Group’s annual General
Meeting and is available to answer securityholder questions on the conduct of the audit and the content and preparation of
the auditor’s report.
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.
Details of the risk monitoring duties of the audit and risk Committee are set out in principle 7 below.
What you can find on our website:
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audit and risk Committee Charter
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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.
In particular, the Group strives to ensure that any price-sensitive material for public announcement is lodged with the aSX
before external disclosure elsewhere and posted on the Group’s website as soon as practical after lodgement with the aSX.
the Group has a market disclosure protocol which includes polices and procedures designed to ensure compliance with the
disclosure requirements in the aSX listing rules.
the aSX liaison person is the Group’s Company Secretary.
What you can find on our website:
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Market Disclosure protocol
Principle 6 – Respect the rights of shareholders
the Group has an investor relations strategy, approved by the Board, which has been designed 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. In this regard, securityholders receive regular reports, and all documents that are released publicly are made
available on the Group’s website. the Group uses its website as a means of providing information to securityholders and the
broader investment community.
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 meetings 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 is exposed to various risks across its business operations and recognises the importance of effectively identifying
and managing those risks. to this end, the Group has adopted an enterprise risk Management policy, which is a general
statement of the Group’s philosophy with respect to risk management practices. there are also a wide range of underlying
policies and procedures which are designed to mitigate the Group’s material business risks.
risks are identified and assessed so that informed decisions on risk issues can be made. the objective of the Group’s approach
to risk management is to manage the level of risk within acceptable parameters rather than seeking to eliminate risk.
under the direction of the Chief executive officer, management is responsible for identifying relevant business risks, designing
controls to manage those risks and ensuring those controls are appropriately implemented. the risk management system
operates in accordance with australian / new Zealand Standard for risk Management (aS/nZS 4360 risk Management).
although management is expected to identify new or emerging risks and put appropriate controls in place on an ongoing basis,
at least annually the legal & Compliance team will co-ordinate a formal review by all business divisions of their business risks
and mitigating controls.
the legal & Compliance team monitors the adequacy of the risk management system and fulfils the internal audit function
within Cromwell Group. the Company Secretary reports on the risk management system (including internal audit) to the
audit and risk Committee at least quarterly. the internal audit function involves both active testing of the adequacy of
controls for those risks which are inherently extreme or high as well as having management (monthly, quarterly or annually
as appropriate) confirm that the assessment of identified risks and their controls remain appropriate and identify any new
controls or risks.
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under the direction of the Company Secretary, the legal & Compliance team also implement and monitor compliance
arrangements which have been designed to ensure that the Group meets its legal obligations. those compliance
arrangements include key management staff completing a compliance checklist each month and independent compliance
testing. the audit and risk Committee is responsible for oversight of the risk management and internal control systems.
responsibilities include:
a)
overseeing the establishment and implementation of risk management and internal compliance and control systems and
ensuring there is a mechanism for assessing the efficiency and effectiveness of those systems;
b)
regularly reviewing and updating the risk profile; and
c)
monitoring the effectiveness of the internal risk control system.
although the Board has delegated operational oversight of the compliance framework to the committee, the Board will satisfy
itself annually, or more frequently if required, that the risk management system is sound.
a compliance committee assists the Board of Cromwell property Securities limited in overseeing the risk management
framework of the registered managed investment schemes for which it acts as the responsible entity. the compliance
committee monitors compliance with the compliance plans and the underlying compliance framework. the Board receives
regular reports from the compliance committee.
Chief Executive Officer and Chief Financial Officer Declaration
the Chief executive officer and the Chief Financial officer have provided the Board with written confirmation that:
a.
in their view, the Group is effectively managing its material business risks;
b.
their statement given to the Board on the integrity of the Group’s statements (pursuant to section 295a of the Corporations
act) is founded on a sound system of risk management and internal compliance and control which implements the policies
adopted by the Board; and
c.
the Group’s risk management and internal compliance and control system is operating effectively in all material respects
in relation to the Group’s material business risks.
It should be noted that the declarations from the Chief executive officer and Chief Financial officer are reasonable rather than
absolute assurances that the risk management and internal compliance and control system is operating effectively because
it is impossible for all weaknesses to be detected. the Chief executive officer and Chief Financial officer must base their
conclusions on their own observations and judgement and the outcome of the compliance and controls testing and reviews
undertaken by the legal & Compliance team.
What you can find on our website:
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audit and risk Committee Charter
enterprise risk Management policy
Principle 8 – Remunerate fairly and responsibly
the Group’s remuneration policy is determined by the nomination and remuneration Committee which makes
recommendations to the Board:
a.
in the case of non-executive directors, for consideration of any increase by securityholders at the aGM; and
b.
in 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’ remuneration to the Group’s
financial and operational performance.
the Group operates a legacy employee Share ownership plan and tax exempt plan as well as a current performance rights
plan. the Group does not currently pay any other form of security-based remuneration.
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Nomination and Remuneration Committee
the Board has established a 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.
Meetings of the committee are attended, by invitation, by appropriate professional advisers from time to time.
Minutes of all committee meetings are available to the Board and 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. the Boards
undertake an annual review of their performance together with an assessment of the Group’s executive management.
Executive directors and senior executive remuneration
the Group’s remuneration policies and practices in relation to executive directors and senior executives are disclosed in the
directors’ report. Further, details of the nature and amount of remuneration paid to those executives is set out in the directors’
report.
For executive directors and key staff, formal performance objectives are set annually with discussion on their performance
taking place at assessment time.
the Chief executive officer and the Chief Financial officer may participate in the performance rights plan discussed above.
previous participation was approved by shareholders at an annual general meeting. pursuant to the aSX listing rules, any
further participation would also need to be approved by securityholders.
Managed funds
CpS is entitled to various fees for discharging the role of responsible entity. Further, various other Group entities are entitled to
fees for providing services to managed funds such as property and asset management, accounting, registry and transactional
management.
all related party transactions are tested by reference to whether they meet market standards.
Fees are calculated in accordance with a defined formula under the Constitution for the relevant schemes or agreements
which have been assessed as being on arm’s length or better terms. Fees are fully disclosed to investors at inception and
continue to be disclosed to investors in regular reporting.
CpS is also entitled to be reimbursed from the funds for expenses incurred in the proper performance of its duties.
What you can find on our website:
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nomination and remuneration Committee Charter
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Securityholder Information
the securityholder information set out below was applicable as at 4 october 2010.
Spread of stapled securityholders
Category (size of Holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
10,001 – 9,999,999,999
Unmarketable Parcels
the number of stapled securityholdings held in less than marketable parcels was 319.
Substantial Securityholders
Holder
Redefine Australian Investments Limited
APN Funds Management Limited
Voting Rights
Number
of Holders
446
746
887
7,230
1,134
10,443
Number
of Securities
184,929
2,249,338
6,989,283
241,820,351
652,743,466
903,987,367
Stapled
Securities
178,833,333
54,463,571
Date
of Notice
18 August 2010
31 August 2010
on a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a pool each
security shall have one vote.
20 Largest Securityholders
Rank Holder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Redefine Australian Investments Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Stara Investments Pty Ltd
J P Morgan Nominees Australia Limited
AWJ Family Pty Ltd
Humgoda Investments Pty Ltd
Trial Developments Pty Ltd
RJP Family Pty Ltd
Kovron Pty Ltd
Panmax Pty Ltd
Mr Philip John Wallace + Mrs Bernadette Mary Wallace
Citicorp Nominees Pty Limited
Commercial Bureau Pty Ltd
Stara Investments Pty Ltd
Balcony Developments Pty Ltd
Mr Humphrey Firkins + Mr Jamie Dorrington
Mr Neal John Ambrose + Mrs Anne Christine Ambrose
AWJ Family Pty Ltd
Number
of Stapled
Securities
Held
178,833,333
54,738,571
20,249,686
17,358,827
10,513,191
9,457,095
9,361,132
7,282,126
6,395,810
6,392,441
6,060,975
5,703,707
4,883,450
4,479,952
3,968,087
3,735,625
3,463,767
3,377,000
3,262,754
3,007,457
362,524,986
% Held
of Issued
Stapled
Securities
19.78%
6.06%
2.24%
1.92%
1.16%
1.05%
1.04%
0.81%
0.71%
0.71%
0.67%
0.63%
0.54%
0.50%
0.44%
0.41%
0.38%
0.37%
0.36%
0.33%
40.10%
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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 is listed as a Stapled Security on the aSX (Code: CMW).
Securityholding Details
Securityholders can access information on their holdings and update their details through Cromwell’s share registry provider:
Link Market Services Limited
level 15, 324 Queen Street
BrISBane QlD 4000
auStralIa
telephone: 1300 550 841
outside australia: +61 2 8280 7124
Fax: +61 2 9287 0303
Web: www.linkmarketservices.com.au
email: cmw@linkmarketservices.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;
log on to www.linkmarketservices.com.au; or
Call the registry.
You will have to verify your identity by providing your personal details. Bank detail changes must be requested in writing or
electronically and cannot be made over the phone.
Securityholders can also use the link Market Services website 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.
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Securityholder Information
Distributions/Dividends
Cromwell Group Dividends/Distributions
During the year the following distributions/dividends have been paid:
Quarter Ending
30 June 2010
31 March 2010
31 December 2009
30 September 2009
Amount per Security
2.0 cents
2.0 cents
2.0 cents
2.0 cents
Ex Date
24 June 2010
30 March 2010
23 December 2009
29 September 2009
Record Date
30 June 2010
7 April 2010
31 December 2009
6 October 2009
Payment Date
31 August 2010
14 May 2010
15 February 2010
16 November 2009
Further Information
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 QlD 4001
auStralIa
telephone: +61 7 3225 7777
Facsimile: +61 7 3225 7788
email: invest@cromwell.com.au
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Directory
Board of Directors
Geoffrey H levy
robert J pullar
Michelle a McKellar
David e usasz
paul l Weightman
W richard Foster
Daryl J Wilson
Marc Wainer
Michael Flax (alternate for Marc Wainer)
Secretary
nicole e riethmuller
Share Registry
Link Market Services Limited
level 15
324 Queen Street
BrISBane QlD 4000
auStralIa
tel: 1300 550 841
Fax: +61 2 9287 0303
Web: www.linkmarketservices.com.au
Registered Office
level 19
200 Mary Street
BrISBane QlD 4000
auStralIa
tel: +61 7 3225 7777
Fax: +61 7 3225 7788
Web: www.cromwell.com.au
Listing
the company is listed on the
australian Securities exchange (aSX: CMW)
Auditor
Johnston rorke
Chartered accountants
level 30, Central plaza one
345 Queen Street
BrISBane QlD 4000
auStralIa
tel: +61 7 3222 8444
Fax: +61 7 3221 7779
Web: www.jr.com.au
PRODUCED WITH A CONSCIENCE
this document is printed on the
eco-friendly Mega Recycled paper by a
Certified Sustainable Green Printer.
Cert no. L2/0008.2010
COVER IMAGE
Brad Collins leads Cromwell’s national
team of in-house facilities managers.
the photo was taken at the Riverpark
Building in Brisbane, which is owned
by a Cromwell-managed unlisted
property trust.
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