ANNUAL REPORT 2012
well versed well timed well considered
CONTENTS
08Continued Outperformance
06Performance Highlights
04Chairman’s Review
In the 2012 financial year, we continued our
strategy of working to improve our portfolio
both through acquisition and refurbishment,
while remaining consistent with the
requirements of a disciplined approach to
capital management.
10Major ASX Announcements
Acquisition of Ipswich City Heart Property
| Acquisition of HQ North office tower
| Ipswich City Heart Trust launched |
Re-acquisition of Bundall Corporate |
Strong First Half Centre | Sale of Industrial
Property
16
Annual Financial Report
Cromwell Property Group annual financial
report 30 June 2012.
36Consolidated Statements of
Comprehensive Income
For the year ended 30 June 2012
FY12 results in line with guidance
| Disciplined and effective capital
management | FY13 guidance
Well known for outperformance.
Cromwell’s focus is on delivering superior
long term property and investment
performance.
12
Property Portfolio Highlights
Key transactions | Continuing portfolio
improvement | Defensive portfolio
characteristics
The Directors present their report together
with the consolidated financial statements
for the year ended 30 June 2012.
18Directors’ Report
37Consolidated Statements of
Financial Position
AS at 30 June 2012
14
CEO’s Review
Cromwell was rewarded this year for our long-
term strategy of consolidating and improving
our portfolio, an approach which successfully
positioned us to achieve record earnings
despite an economic environment which
continues to be challenging.
Declaration
JOHNSTON RORKE | Chartered
Accountants
35Auditor’s Independence
38Consolidated Statements of
Changes in Equity
For the year ended 30 June 2012
p | 2
well versed well timed well considered 39Consolidated Statements of
Cash Flows
For the year ended 30 June 2012
90Independent Auditor’s Report
Independent Auditor’s Report to
the Securityholders of Cromwell Property
Group to the unit holders of
Cromwell Diversified Property Trust
99Securityholder Information
For the year ended 30 June 2012
40Notes to the Consolidated
Financial Statements
For the year ended 30 June 2012
89
Directors’ Declaration
P.L. Weightman | Director
Overview of Cromwell Property Group
Cromwell Property Group is an internally managed Australian Real Estate Investment Trust (A-REIT)
with an Australian property portfolio valued in excess of $1.7 billion and a funds management
business that promotes and manages unlisted property investments.
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 Property 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
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
p | 3
well versed well timed well consideredChairman’s
review
Geoffrey H Levy, AO
“The highlights of the year
include the acquisition of
three high quality assets, the
Bundall Corporate Centre
on the Gold Coast, the
HQ North office tower in
Brisbane, and the Ipswich
City Heart project in
Ipswich.”
In the 2012 financial year, we continued our strategy of working to improve
our portfolio both through acquisition and refurbishment, while remaining
consistent with the requirements of a disciplined approach to capital
management.
Adherence to this strategy allowed us to achieve another year of strong earnings
with an operating profit of $80.01 million, despite an economic environment
characterised by low consumer and investor confidence, low inflation and
sluggish growth.
The highlights of the year include the acquisition of three high quality assets,
the Bundall Corporate Centre on the Gold Coast, the HQ North office tower in
Brisbane, and the Ipswich City Heart project in Ipswich.
Ipswich City Heart has been offered to investors through the Cromwell Ipswich
City Heart Trust, a 7-year single property syndicate which has much in common
with its predecessor, the Cromwell Riverpark Trust, and recently closed
oversubscribed.
As well as acquiring assets which suit our long-term vision for the Cromwell
portfolio, we took the opportunity to sell the Masters Distribution Centre at
Hoppers Crossing in Victoria which did not.
On the capital management front, our gearing levels continue to be within our
preferred range of 35-55%. Cromwell has no material debt maturities until May
2014 and a weighted average debt expiry of 2.4 years. During the year we took
advantage of the lower interest environment to extend our swap profile with a
2.6 year weighted average hedge term and 93% of debt hedged for FY13 at an
average all-up cost of 6.6%. This will underpin the continued stability of our
earnings and distributions.
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Chairman’s
review
Origin Fit out, Melbourne, VIC
Qantas HQ, Mascot, NSW
“...this merger will reinforce
our reputation as an
investment manager that
looks out for the interests of
its investors...”
Consistent with our prudent approach to capital management, Cromwell also
raised $131 million in new equity during the year, through placements and an
entitlement offer, to fund the acquisition of HQ North and for working capital. I
would like to thank all investors who took up their rights under the offer.
In another significant opportunity for the Group we recently offered to merge
the Cromwell Property Group with the unlisted Cromwell Property Fund, with
consideration to be paid on an NTA for NTA basis. The transaction was approved
by fund unit holders recently and means that Cromwell has 100% ownership
of the five properties held by the fund, which were valued at approximately
$168 million as at 30 June 2012. We believe that this merger has reinforced our
reputation as a manager that looks out for the interests of its investors and
supports it’s funds management business.
I would like to thank the management and staff of Cromwell for their tireless
work through the year which has left us in a very strong position to continue to
grow our earnings and capitalise on future opportunities.
I would also like to thank my fellow board members for their insights and their
efforts.
Finally, I would like to thank all of our investors for their continued support as we
continue to reap the benefits of our discipline in these demanding times.
Geoffrey H Levy, AO
Chairman
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Performance
highlights
FY12 results in line with guidance
Operating profit increased by 23%
to $80.0M or 7.5 cps
Distributions maintained at 7.0 cps
Statutory accounting profit of $23.1M
impacted by fair value adjustments
Increase in like-for-like property
income of 6.8% over FY11
Growth in operating earnings
per security of 6% to 7.5 cents
Financial Results Summary
Operating profit ($’000)1
Operating profit (cents per security)
Distributions ($’000)
Distributions (cents per security)
Payout Ratio (%)
Statutory profit ($’000)
Statutory profit (cents per security)
(1) Calculated as (total borrowings less cash)/(total tangible assets less cash)
FY11
65,297
7.1
64,988
7.0
98%
88,102
9.6
FY12
80,010
7.5
75,019
7.0
93%
23,077
2.2
Change
23%
6%
15%
0%
5%
(74%)
(77%)
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well versed well timed well considered Operating Earnings and Statutory Profit
Operating Earnings
Adjustments
Fair Value - investment properties
Fair Value - interest rate swaps
Other items
Profit after tax
FY13 guidance
FY11 $000
65,297
FY12 $000
80,010
33,659
(1,920)
(8,934)
88,102
(12,353)
(38,483)
(6,097)
23,077
FY11 cps
FY12 cps
7.1
3.7
(0.2)
(1.0)
9.6
7.5
(1.2)
(3.6)
(0.5)
2.2
Operating earnings expected to be at least 7.5 cps in FY13
Distributions expected to be 7.25 cps in FY13
Increase in funds management income expected
Financial Position
Total assets ($’000)
Net assets ($’000)
Net tangible assets ($’000) (1)
Net debt ($’000) (2)
Gearing (%) (3)
Securities issued (’000)
NTA per security
NTA per security (excluding interest rate swaps)
(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.
FY11
1,539,428
705,160
703,636
737,037
49%
964,737
$0.73
$0.73
FY12
1,837,601
788,989
787,442
905,024
51%
1,169,689
$0.67
$0.71
Disciplined and effective capital management
Gearing remains within target range of 35-55%
No material debt maturities until FY14
Weighted average debt maturity of 2.4 years
High degree of certainty over interest expense in FY13 and FY14
Debt diversified across seven different facilities and five major banks
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well versed well timed well considered
Continued
outperformance
Focus on performance1
TOTAL SECURITYHOLDER RETURNS
TO JUNE 2012 (Annualised)
Cromwell’s focus is on delivering superior long term
property and investment performance.
Returns to securityholders are measured by comparing
Cromwell to the S&P/ASX A-REIT 300 Accumulation Index.
This index is considered to be an appropriate benchmark
as it broadly captures the total return performance of all
major A-REITs, weighted by market capitalisation.
%
Cromwell aims to outperform this index over rolling 3
and 5 year periods reflecting Cromwell’s focus on
returns over the medium to long term.
Cromwell has significantly outperformed the index, with
excess returns of 9.3% pa over 3 years and 12.7% pa over
5 years.
Cromwell measures its effectiveness as a property
manager by comparing total annual returns from all
Cromwell managed properties (including assets in unlisted
funds) against the IPD Australian All-Fund Universe.
This benchmark is considered appropriate because it
is a broad-based property index which measures total
returns from a $134 billion portfolio of investment
properties managed by over 70 managers including the
majority of larger A-REITs and property fund managers.
Cromwell aims to outperform this index over rolling 3,
5 and 10 years and has successfully done so with excess
returns of 2.0% pa, 2.5% pa and 2.6% pa respectively.
“Cromwell has significantly outperformed
the index, with excess returns of 9.3% pa
over 3 years and 12.7% pa over 5 years.”
%
p | 8
(1) Past performance is no indication of future performance
35
30
25
20
15
10
5
0
-5
-10
-15
31.0
29.3
21.5
12.2
9.3
12.7
0.1
1.7
-12.6
3 years
5 years
10 years
Cromwell Property Group
S&P/ASX 300 A-REIT Accumulation Index
Outperformance
DIRECT PROPERTY RETURNS
TO JUNE 2012 (Annualised)
14
12
10
8
6
4
2
0
12.6
10.0
11.0
9.0
8.6
6.1
0.1
2.0
2.5
2.6
3 years
5 years
10 years
Cromwell Property Group
IPD Australian All-Fund Universe
Outperformance
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well versed well timed well considered
475-501 Victoria Avenue, Chatswood, NSW
HQ North Tower, Fortitude Valley, QLD
Major ASX Announcements
11NOV 2011
Acquisition of Ipswich
City Heart Property
Cromwell acquires Ipswich
City Heart office property for
new syndicate, seed funded
from a $28 million institutional
placement.
22NOV 2011
Acquisition of HQ North
office tower
Cromwell acquires the award-
winning HQ North office tower
in Fortitude Valley, Brisbane
for $186 million funded by a
$31 million placement and
a c. $75 million partially
underwritten entitlement offer.
20
DEC 2011
Ipswich City Heart Trust
launched
Cromwell launches a PDS to
raise up to $49.25 million for
the unlisted Cromwell Ipswich
City Heart Trust. The Trust owns
the Ipswich City Heart Building.
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HQ North Tower, Fortitude Valley, QLD
Synergy Building, Kelvin Grove, QLD
23
DEC 2011
Re-acquisition of Bundall
Corporate Centre
Cromwell announces
re-acquisition of the
Bundall Corporate Centre
on the Gold Coast for $63.4
million. Cromwell had
previously purchased the
asset in December 2005 for
$52.9 million and sold it in
October 2007 for $106 million.
27
FEB 2012
Strong First Half
Cromwell reports a 13%
increase in first half
operating earnings to
$37 million.
30
MAY 2012
Sale of Industrial
Property
Cromwell sells the Masters
Distribution Centre at Hoppers
Crossing in Victoria for $35.35
million, in line with its carrying
value.
p | 11
Property
portfolio highlights
$1.7 billion
Portfolio value
(excluding unlisted fund assets)
96.4%
Occupancy
6.2 yrs
Weighted average
lease term (WALT)
½ million
Square metres of net
lettable area (NLA)
Key transactions
Acquisition of award-winning HQ North Tower, Brisbane for $186m.
The building is near new with rent increases of 4.2%pa expected for
the next 4 years.
Acquisition of Bundall Corporate Centre, Gold Coast for $63m.
Occupancy increased to 91% by June 2012 from 86% at purchase.
Sale of Masters Distribution Centre at Hoppers Crossing Victoria
for $39m due to low yield in low growth market.
Continuing portfolio improvement
Average asset value increased to $78.4m from $68.8m
in FY11
Weighted Average Capitalisation Rate increased slightly to
8.28% from 8.18% in FY11 due to higher yielding assets having
been acquired
NABERS Energy Rating up to 4.1 Stars from 3.8 Stars
in FY11
Office assets increased from 90% to 93% of portfolio
Defensive portfolio characteristics
WALE of 6.2 years is one of the longest in the sector
84% of gross income from government or listed
company tenants
Balanced exposure to Brisbane, Sydney, Melbourne, Canberra
(89% of portfolio)
Average of only 6.3% annual lease expiry FY13 – FY15
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well versed well timed well considered Lease expiry profile
% gross income by financial year
Geographic diversification by
gross income
%
70
60
50
40
30
20
10
0
1.4%
1.4%
Latrobe
Latrobe
Street VIC
Street VIC
63.1
1.0%
1.0%
Mary
Mary
Street QLD
Street QLD
1.0%
1.0%
Victoria
Victoria
Ave NSW
Ave NSW
3.3%
3.3%
Collins
Collins
Street VIC
Street VIC
2.2%
2.2%
Waymouth
Waymouth
Street SA
Street SA
1.1%
1.1%
Bundall
Bundall
QLD
QLD
2.3%
2.3%
Brooklyn
Brooklyn
VIC
VIC
1.3%
1.3%
Mary
Mary
Street QLD
Street QLD
1.5%
1.5%
Other
Other
3.0%
3.0%
Other
Other
2.3%
2.3%
Other
Other
2.3%
2.3%
Other
Other
6.5
5.6
6.9
14.2
3.7
Vacant
FY13
FY14
FY15
FY16
Thereafter
VIC 26.8%
TAS
1.4%
SA
4.5%
QLD
29.7%
NSW
17.5%
ACT
20.1%
Portfolio NABERS rating1
Tenant classification by gross income
s
r
a
t
s
S
R
E
B
A
N
5
4
3
2
1
0
3.9 star
3.9 star
4.1 star
4.1 star
2.9 star
5.6
Government
Authority
39.1%
Private
Company
15.7%
Listed
Entity
45.2%
2008
2009
2010
2011
2012
Sector diversification by gross income
1 NABERS assessments are not undertaken for some assets where the tenant
has full operational control and manages the total resource consumption.
OFFICE
93.4%
INDUSTRIAL
4.8%
RETAIL
1.8%
p | 13
CEO’s
review
Paul Weightman
Quality and diversification
Despite a challenging economic environment, FY12 was a
rewarding and successful year for Cromwell. We achieved
record earnings, continued to consolidate and improve
our portfolio and grow our funds management business.
Our operating earnings increased 23% to $80.01 million
underpinned by a sustainable 28 per cent increase in net
income from property to $150.97 million.
The key drivers of the revenue surge were renewed
earnings from the 321 Exhibition Street office tower in
Melbourne which was comprehensively refurbished in
the previous financial year, and income from the newly-
acquired HQ North Tower in Brisbane and Bundall
Corporate Centre on the Gold Coast.
Excluding the impact of these new assets, our like-for-like
net property earnings still increased by a solid 6.8% in 2012.
This revenue growth demonstrates the value of Cromwell’s
strong leasing profile which, combined with our in-house
management skills, enabled Cromwell to get the best out
of each of our properties. As at 30 June, 2012, Cromwell’s
portfolio was 96.4% leased with a long Weighted Average
Lease Term (WALT) of 6.2 years.
The quality and diversification of our assets is a key factor
underpinning Cromwell’s performance and these two new
assets have considerably enhanced the overall portfolio.
The $63.5 million Bundall Corporate Centre acquisition in
December, 2011, was an opportunistic step which we believe
will provide significant benefits over time. We originally
purchased the asset, which was then known as Corporate
Centre One, for $52.9 million in December 2005 and later
sold it in October 2007 for $106 million. We have reacquired
the centre for approximately half that price, despite it being
improved by the development of an additional building, the
Wyndham Corporate Centre, which is a 5 star Green Star
rated building with a net lettable area of approximately
8,000m2.
The decision to acquire the Bundall Corporate Centre
reflected our confidence not just in the asset but also in
the South East Queensland market in general and the Gold
Coast in particular where we believe there is substantial
future upside.
Approximately two thirds of the land at the Bundall
Corporate Centre is currently being used as car parking,
this provides us with the opportunity for further substantial
development over time for a range of commercial and
residential uses. We know the property well, having
previously owned and managed it, and are happy to have it
back in our portfolio.
In Brisbane, our $186 million acquisition of the HQ North
office tower on an initial yield of 8.26% was another
significant step in the upgrading of our investment portfolio
towards larger, high quality office assets in predominantly
CBD core and fringe markets.
Since June 2008, Cromwell has acquired five assets with an
average value of $132m, a cap rate of 8.2% and a WALT of
8.7 years. We have sold six assets with an average value of
$9m, a cap rate of 9.1% and WALT of 3.4 years.
We plan to continue to upgrade the portfolio, with further
smaller assets identified for sale over the medium term,
and the capital recycled into higher quality assets.
HQ North, located in Fortitude Valley adjoining the CBD,
also provides additional weighting to the Brisbane office
market where we believe there is growth potential over the
medium term. HQ North was completed in 2010 and was the
winner of the national Urban Taskforce 2011 Development
of the Year Award. It was also Awarded a 6 Star Green Star
Office As Built rating, making it the largest development in
Australia with this rating.
p | 14
well versed well timed well considered “Cromwell Phoenix Property Securities Fund
continued its strong record of outperformance, again
winning Cromwell the title of Fund Manager of the
Year (Australian Property Securities), from Money
Management/Lonsec.”
As a part of our capital recycling process we also disposed
of the Masters Distribution Centre at Hoppers Crossing in
Victoria for $35.35 million, in line with its carrying value.
The transaction was subsequently approved
overwhelmingly by CPF unitholders and the transaction
has since been competed.
This has been an exciting year for our funds management
business, with the launch of our latest back-to-basics
unlisted property syndicate, the $49.25 million Cromwell
Ipswich City Heart Trust (ICH). The trust owns the land
and will fund construction of the $93 million Ipswich
City Heart building in Ipswich, Queensland.
The ICH is a 7-year single property syndicate which
commenced distributions at the attractive rate of
7.75% pa paid monthly. Distributions increased to
8.00% pa in July 2012.
Like the successful Cromwell Riverpark Trust before
it, ICH’s income is underpinned by a long term pre-
commitment from a blue chip tenant, in this case the
Queensland Government which has signed a 15-year
lease over 91% of the building’s net lettable area.
This year, Cromwell made its first move into wholesale
funds management with the launch of Cromwell Real
Estate Partners which will operate from our expanded
Sydney office.
We are also pleased that the Cromwell Phoenix
Property Securities Fund continued its strong record of
outperformance, again winning Cromwell the title of
Fund Manager of the Year (Australian Property Securities),
from Money Management/Lonsec.
After the end of the financial year, Cromwell proposed a
merger with the unlisted Cromwell Property Fund (CPF),
with consideration to be paid in Cromwell securities on an
NTA for NTA basis.
The transaction resulted in Cromwell effectively acquiring
the five properties held by CPF, which were valued at
approximately $168 million as at 30 June 2012. The
transaction provides stable distributions and a liquidity
option for CPF investors, while enabling Cromwell to
acquire a portfolio of value-add properties with minimal
transaction costs.
Looking forward, the outlook for the Group remains positive
despite the continued sluggish pace of economic growth
and the cautious mood of consumers and investors.
We expect to achieve at least modest growth in both
operating earnings and distributions per security in 2013,
underpinned by our strong property portfolio and continuing
growth in our funds management business.
Paul Weightman
Managing Director / CEO
p | 15
well versed well timed well considered
FINANCIALS
Cromwell Property Group
annual financial report 30 June 2012
18
35
36
37
38
39
40
89
90
84
Contents
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statements of Comprehensive Income
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Securityholder Information
Cromwell Corporation Limited
ABN 44 001 056 980
Level 19, 200 Mary Street
Brisbane QLD 4000
Cromwell Diversified Property Trust
ARSN 102 982 598
Responsible Entity:
Cromwell Property Securities Limited
ABN 11 079 147 809 AFSL: 238052
Level 19, 200 Mary Street
Brisbane QLD 4000
p | 16
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Directors report
The directors of Cromwell Corporation Limited and
Cromwell Property Securities Limited as Responsible Entity
for the Cromwell Diversified Property Trust (collectively
referred to as “the Directors”) present their report together
with the consolidated financial statements for the year
ended 30 June 2012 for both:
the Cromwell Property Group (“the Group”) consisting
of Cromwell Corporation Limited (“the Company”) and
its controlled entities and Cromwell Diversified Property
Trust (“the CDPT”) and its controlled entities; and
the CDPT and its controlled entities (“the Trust”).
The shares of the Company and units of the CDPT 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 at any time during
the financial year and up to the date of this report (unless
otherwise stated) 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 ASX listed
Speciality Fashion Group Limited, and Monash Private
Capital. He was appointed an Officer in the Order of
Australia in the Queen’s Birthday Honours List in June 2005.
He has also been appointed by the NSW State Government
to chair its Property Asset Utilisation Taskforce.
Mr Robert Pullar – Non-Executive Director
Mr Pullar is a Director of the Brisbane based property
development company operating in Australia, 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 Chief Executive
positions with CB Richard Ellis throughout Asia Pacific
and subsequently the Jen Group of Companies overseeing
the development and management of a significant
commercial and retail portfolio. She is a senior member
of the Property and Land Economy Institute, a member of
the Australian Institute of Company Directors and operates
her private property companies in Australia and NZ.
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 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
Committee.
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 also been closely involved
with the acquisition and marketing of direct property
investments valued in excess of $1.2 billion. He has
had substantial input to the growth and development
of the business and 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
plc, a listed property investment company which is
a substantial securityholder of Cromwell Property Group.
He also is a non-executive director of Hyprop Investments
Limited, a South African listed retail property fund.
Mr Michael Watters – Non-Executive Director
Mr Watters was appointed in April 2011, is a registered
professional engineer with a BSc Eng. (Civil) Degree
and an MBA and has over 25 years experience in
the investment banking and real estate industries. He has
held directorships of some of South Africa’s top rated
listed property funds including Sycom Property Fund and
Hyprop Investments Limited. He is the CEO of the Redefine
International Group.
Mr Paul Weightman – Managing Director/
Chief Executive Officer
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 Chief Executive Officer since that date. He has
been a director of companies in the property, energy and
retail sectors. Mr Weightman is a member of Cromwell’s
Investment Committee.
p | 18
well versed well timed well considered
Geoffrey H Levy, AO
NON-EXECUTIVE
CHAIRMAN
Paul Weightman
MANAGING DIRECTOR /
CEO
Daryl Wilson
DIRECTOR – FINANCE &
FUNDS MANAGEMENT
Robert Pullar
NON-EXECUTIVE
DIRECTOR
5/29*
14/29*
13/22*
10/27*
Michelle Mckellar
NON-EXECUTIVE
DIRECTOR
6/29*
Michael Watters
NON-EXECUTIVE
DIRECTOR
Richard Foster
NON-EXECUTIVE
DIRECTOR
Marc Wainer
NON-EXECUTIVE
DIRECTOR
3/27*
14/44*
3/37*
David Usasz
NON-EXECUTIVE
DIRECTOR
6/35*
* YEARS wITH CROMwEll
/ YEARS EXpERIENCE
Mr Daryl Wilson – Director – Finance & Funds
Management
Mr Wilson joined Cromwell in August 1999 and has primary
responsibility for the finance and funds management
functions. Mr Wilson has lead the development of
Cromwell’s funds management capabilities, and has
many years experience as a chartered accountant. 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 an Alternate Director to Mr Marc Wainer
and resigned on 1 August 2011.
Mr Geoffrey Cannings – Alternate Director
Mr Cannings is an Alternate Director to Mr Michael Watters
and was appointed on 1 August 2011.
All Directors of the Company are also Directors of
Cromwell Property Securities Limited, the Responsible
Entity of the CDPT.
(b) Directorships of other listed entities in last
3 years
Mr Levy has been a Director of Specialty Fashion Group
since 8 April 2005. Mr Levy was 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.
Mr Wainer is a Director of Redefine International
plc, a property investment company which is listed
on the London Stock Exchange and a Director of
Redefine Properties, a property group which is listed
on the Johannesburg Stock Exchange.
Mr Watters is a Director of Redefine International
plc, a property investment company which is listed
on the London Stock Exchange.
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
Ms Riethmuller has over 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.
p | 19
(d) Directors’ Meetings
The number of Directors’ meetings (including meetings of committees of the Board) and number of meetings attended by
each of the Directors of the Company during the financial year were:
Director
Board
Nomination &
Remuneration Committee
Audit & Risk Committee
Investment
Committee
Geoffrey Levy
Robert Pullar
Michelle McKellar
David Usasz
Richard Foster
Marc Wainer
Michael Watters (1)
Paul Weightman
Daryl Wilson
A
12
14
15
15
15
10
15
15
15
B
15
15
15
15
15
15
15
15
15
A
–
3
3
3
3
–
–
–
–
B
–
3
3
3
3
–
–
–
–
A
–
4
5
5
–
–
–
–
–
B
–
5
5
5
–
–
–
–
–
A
–
2
4
–
2
–
–
4
4
B
–
4
4
–
4
–
–
4
4
A – Number of meetings attended
(1) Includes attendance by alternate director Geoffrey Cannings.
B – Number of meetings eligible to attend
2. Principal Activities
The principal activities of the Group and Trust during the financial year consisted of property investment. The principal
activities of the Group also includes property management, management of property related managed investment
schemes and property development.
There were no significant changes in the nature of the Group’s or Trust’s principal activities during the financial year.
3. Dividends/Distributions
Group
2012
Interim distribution
Interim distribution
Interim distribution
Final distribution
2011
Interim distribution
Interim distribution
Interim distribution
Final distribution
Trust
2012
Interim distribution
Interim distribution
Interim distribution
Final distribution
2011
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
Payment
Date
–
–
–
–
–
–
–
–
–
–
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
16,920
17,602
20,027
20,470
75,019
15,919
15,943
16,243
16,883
64,988
–
–
–
–
–
–
–
–
–
–
04/10/11
30/12/11
30/03/12
29/06/12
14/10/10
23/12/10
25/03/11
30/06/11
16/11/11
15/02/12
16/05/12
16/08/12
17/11/10
16/02/11
18/05/11
19/08/11
Dividend
per Security
Distribution
per Security
Total per
Security
Total
$’000
Franked amt
per Security
Record
Date
Payment
Date
–
–
–
–
–
–
–
–
–
–
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
16,925
17,607
20,032
20,474
75,038
15,923
15,947
16,249
16,888
65,007
–
–
–
–
–
–
–
–
–
–
04/10/11
30/12/11
30/03/12
29/06/12
14/10/10
23/12/10
25/03/11
30/06/11
16/11/11
15/02/12
16/05/12
16/08/12
17/11/10
16/02/11
18/05/11
19/08/11
p | 20
well versed well timed well considered 4. Review of Operations and Results
(a) Financial performance
The Group recorded a profit after tax of $23,077,000 for the year ended 30 June 2012 compared with a profit of $88,102,000
for the previous year. The Trust recorded a profit after tax of $24,359,000 for the year ended 30 June 2012 compared with
a profit of $92,361,000 for the previous year.
The statutory profit/(loss) for the year includes a number of items which are non-cash in nature, occur infrequently and/
or relate to realised or unrealised changes in the values of assets and liabilities and in the opinion of the Directors, need to
be adjusted for in order to allow securityholders to gain a better understanding of the Group and Trust’s underlying profit
from operations.
The most significant of these items impacting the profit of the Group for 2012 were:
A decrease in the fair value of investment properties of $12,353,000 (2011: increase of $33,659,000); and
A decrease in the fair value of interest rate derivatives of $38,483,000 (2011: $1,920,000).
Underlying valuations for investment properties increased by $773,000 during the year, net of property improvements,
leasing incentives and lease costs. However the effective writing off of costs of acquiring the HQ North and Bundall
properties during the year and other adjustments led to an overall decrease in fair value of $12,353,000.
Increase in valuations, net of property improvements, lease costs and incentives
Non-cash adjustments for straight-lining of rentals and lease amortisation
Acquisition transaction costs
Gain/(loss) on fair value of investment properties
Group
2012
$’000
773
813
(13,939)
(12,353)
2011
$’000
46,084
890
(13,315)
33,659
The financial result also included a decrease in fair value of the interest rate derivatives (contracts) held by the Trust of
$38,483,000. This was as a result of decreases in future expectations for variable interest rates at June 2012, compared to
June 2011.
The Group had hedged future interest rates through contracts over 97% of its debt at 30 June 2012 to minimise the risk
of changes in interest rates in the future. These contracts expire between July 2012 and September 2017 and can be
valued. Although the valuation process is relatively complex, the value is essentially determined by the difference between
the actual interest rates which have been agreed under the contract and what the market forward interest rates are at
the date of the valuation. Market rates, and hence valuations, change daily, but the value at the end of an interest rate
contract will always be nil. Accounting standards require the Group to account for the value of any fixed rate interest
hedges in the balance sheet as an asset or liability and to adjust for any difference in the income statements, even though
if they are held to maturity the asset or liability will unwind over the term of the contract.
p | 21
(b) Operating profit
Profit from operations is considered by the Directors to reflect the underlying earnings of the Group and is a key metric
taken into account in determining distributions for the Group and Trust, but is a measure which is not calculated in
accordance with International Financial Reporting Standards (“IFRS”) and has not been audited or reviewed by the Group
and Trust’s auditor.
Profit from operations has been calculated consistently since stapling of the Group in 2007.
A reconciliation of profit from operations, as assessed by the Directors, to the reported profit for the year is as follows:
Group
Trust
Profit from operations
Reconciliation to profit for the year
Loss on sale of investment properties
Loss on sale of other assets
Fair value net gains/(write-downs):
Investment properties
Interest rate derivatives
Investments at fair value through profit or loss
Property development inventories
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(1)
Net tax losses incurred/(utilised)(2)
Net profit/(loss) attributable to non-controlling interest
Net profit for the year
2012
$’000
80,010
(331)
(44)
(12,353)
(38,483)
(173)
200
6,892
(7,705)
(2,560)
(601)
(604)
(993)
(178)
–
23,077
2011
$’000
65,297
(195)
–
33,659
(1,920)
604
(3,695)
4,883
(5,773)
(2,042)
(333)
(542)
(1,594)
(247)
–
88,102
2012
$’000
80,752
(331)
–
(12,353)
(38,483)
(173)
–
6,892
(7,705)
(2,833)
–
–
(993)
–
(414)
24,359
2011
$’000
66,112
(195)
–
33,659
(1,920)
604
–
4,883
(5,773)
(2,770)
–
–
(1,594)
–
(645)
92,361
(1) Comprises fair value adjustments included in share of profit of equity accounted entities.
(2) Comprises tax expense attributable to changes in deferred tax assets recognised as a result of carried forward tax losses.
Profit from operations for the year was $80,010,000 (2011: $65,297,000). This was derived entirely from property
investment.
Net operating earnings from the property portfolio, after property outgoings costs was $150,158,000 for the year,
an increase of 28% on the previous year. The majority of this increase was attributable to the HQ North and Bundall
Corporate Centre investment properties acquired during the year.
p | 22
well versed well timed well considered
The Group also measures the change in like for like net property earnings, taking into account only properties held
in both the current and previous financial years. On this basis, net property earnings increased by 6.8% in 2012. This
demonstrates the value of the strong leasing profile of the Group combined with the in house management which enables
Cromwell to get the best out of each property.
The other key impact on profit from operations was an increase in interest expense to $61,963,000 (2011: $45,397,000).
This increase occurred mostly as a result of the additional borrowings for properties acquired during the year, although
the average interest cost fell slightly during the year from 7.05% to 6.93%. This fall in average rate reflected lower variable
interest rates as the Reserve Bank reduced the cash rate during the year.
(c) Earnings and Distributions per stapled security
Profit from operations on a per security basis is considered by the Directors to be the most important measure of
underlying financial performance as it excludes certain volatile and non-cash items but includes the impact of changes in
the number of securities on issue.
Profit per security
Profit from operations per security
Distributions per security
2012
Cents
2.2
7.5
7.0
2011
Cents
9.6
7.1
7.0
Profit from operations attributable to stapled securityholders was 7.5 cents (2011: 7.1 cents) per weighted average
stapled security. This represents an increase of approximately 6% which is considered a very satisfactory outcome given
the somewhat difficult market environment over the year.
Distributions paid for the year were 7.0 cents (2011: 7.0 cents), including a June 2011 quarter distribution of 1.75 cents per
stapled security paid on 16 August 2012. Although there was no growth in distributions per security in 2012, this remains
a key priority in the future.
(d) Financial Position
Total assets ($’000)
Net assets ($’000)
Net tangible assets ($’000) (1)
Net debt ($’000) (2)
Gearing (%) (3)
Securities issued (’000)
NTA per security
NTA per security (excluding interest rate swaps)
(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.
Group
Trust
2012
1,837,601
788,989
787,442
905,024
51%
1,169,689
$0.67
$0.71
2011
1,539,428
705,160
703,636
737,037
49%
964,737
$0.73
$0.73
2012
1,820,045
774,720
774,720
913,156
52%
1,169,964
$0.66
$0.70
2011
1,531,741
699,643
699,643
742,532
50%
965,012
$0.73
$0.73
A total of 8 property assets were externally revalued at June 2012, representing approximately 48% of the property
portfolio by value. The balance of the portfolio was the subject of internal valuations (determined by the directors to be fair
value) having regard to previous external valuations and comparable sales evidence. The weighted average capitalisation
rate (WACR) was 8.28% across the portfolio, compared with 8.18% at June 2011.
Net debt has increased due to the additional borrowings of $181,059,000 primarily relating to the acquisition of
the HQ North and Bundall Corporate Centre investment properties. Gearing increased slightly during the year to 51% from
49% at June 2011 but remains within the preferred range of 35-55%.
Stapled securities on issue have increased by 204,951,628 during the year. This occurred through a combination of
placements to institutional and other wholesale investors, a rights issue to existing securityholders and the distribution
re-investment plan (DRP). The average issue price of all stapled securities during the year was 68 cents.
NTA per security has decreased during the year from $0.73 to $0.67, primarily as a result of the decreases in fair value
of the interest rate derivatives. NTA per security excluding the value of interest rate contracts (which will have no value
at the end of their term) fell slightly from $0.73 to $0.71 which is mostly attributable to stamp duty costs of acquiring
HQ North and Bundall and costs of issuing stapled securities.
p | 23
(e) Outlook
The outlook remains positive for the Group, despite the continuing sluggish pace of economic growth.
The Groups’ property portfolio is expected to continue to deliver consistent earnings. The performance of the investment
property portfolio reflects the benefits of Cromwell’s integrated property management and tenant relationship activities.
The portfolio was 96.4% leased at year-end, with a 6.2 year weighted average lease term. Importantly, tenant quality is
also exceptional, with 39% of rental income at balance date underpinned by Government or Government owned/funded
entities, and a further 45% from listed companies or their subsidiaries.
The Group expects to achieve at least modest growth in both operating earnings and distributions per security in 2013,
underpinned by this strong property portfolio and the funds management business, which has the potential to return to
a period of significant growth in future years.
The Group also aims to grow net tangible assets per security in 2013 and to maintain gearing below 55%.
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 40 of the financial report, no matter or circumstance has arisen since 30 June 2012 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.
Likely Developments
7.
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.
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 stapled securities of the Group at the date of this report are as follows:
Geoffrey Levy
Robert Pullar
Michelle McKellar
David Usasz
Richard Foster
Marc Wainer
Michael Watters
Geoffrey Cannings
Paul L Weightman
Daryl J Wilson
p | 24
Stapled
Securities
2,576,846
14,000,000
454,500
2,320,000
4,061,765
–
–
58,000
15,921,167
1,972,200
41,364,478
Performance
Rights
–
–
–
–
–
–
–
–
4,000,000
1,740,000
5,740,000
Options over
Securities
–
–
–
–
–
–
–
–
–
–
–
well versed well timed well considered
10. Options and Performance Rights
(a) Securities under option through the Performance Rights Plan
The Group issues in-substance options over stapled securities through the issue of performance rights under
the Performance Rights Plan (“PRP”). At the date of this report, performance rights on issue are as follows:
Date granted
23/08/10
23/08/10
23/08/10
23/08/10
23/08/10
07/03/10
26/05/11
26/05/11
26/05/11
05/09/11
05/09/11
05/09/11
Exercise date
21/08/12 – 21/09/12
21/08/12 – 21/09/12
21/08/13 – 21/09/13
21/08/13 – 21/09/13
21/08/13 – 21/09/13
01/07/13 – 01/08/13
01/07/13 – 01/10/13
01/07/14 – 01/10/14
01/07/15 – 01/10/15
06/09/14 – 05/10/14
06/09/14 – 05/10/14
06/09/14 – 05/10/14
Exercise price
$0.00
$0.10
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
$0.20
$0.00
$0.10
Expiry date
21/09/12
21/09/12
21/09/13
21/09/13
21/09/13
01/08/13
01/10/13
01/10/14
01/10/15
05/10/14
05/10/14
05/10/14
Number
170,287
123,459
101,378
47,433
95,894
97,633
1,913,333
1,913,333
1,913,334
393,679
590,622
52,851
7,413,236
No holder has any right under the performance rights to participate in any other security or interest of the Company or any
other entity, except that 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.
No other form of option is on issue at the date of this report.
(b) Securities issued on the exercise of performance rights through the Performance Rights Plan
The following stapled securities were issued during the year ended 30 June 2012 on the exercise of performance rights
granted under the PRP. No further securities have been issued as a result of the exercise of performance rights since that
date. No amounts are unpaid on any of the securities.
Date performance rights granted
16 December 2009
8 February 2010
Issue Price of Securities
$0.20
$0.00
No. of Securities Issued
659,600
126,859
786,459
11. Remuneration Report
The remuneration report is presented for the financial year ending 30 June 2012. The report forms part of the Directors
Report and has been prepared and audited in accordance with the requirements of the Corporations Act 2001.
This report outlines the remuneration for Non-Executive Directors, Executive Directors and other Key Management
Personnel. The report is set out under the following headings:
(a) Remuneration principles
(b) Details of remuneration
(c) Performance assessment
(d) Equity based compensation
(e) Employment contracts and termination provisions
(a) Remuneration principles
Governance
(i)
The Group has appointed a nomination and remuneration committee (“Committee”). The Committee has overall
responsibility for the remuneration strategy 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.
p | 25
Remuneration policy
(ii)
Cromwell Property Group is committed to a fair and transparent remuneration strategy. It is considered imperative that
the remuneration strategy is aligned with the Group’s overall strategy. The Group aims to deliver increases in operating
earnings per security, distributions per security and net tangible asset value per security (excluding interest rate swaps)
on an annual basis. The Group also aims to outperform the S&P/ASX 300 accumulation index over rolling 3 and 5 year
periods. These aims are taken into account and this is reflected in the remuneration strategy and structure.
Key Management Personnel are rewarded with a mixture of fixed remuneration, short term incentives and long term
incentives, designed to allow the Group to retain and motivate key employees.
The Board’s policy on the nature and amount of remuneration encompasses the following objectives:
Fixed pay: Key Management Personnel are remunerated at the market median level of their fixed pay adjusted for
factors such as the external market environment and the employee’s position, qualifications, period of service and
responsibility within the Group. In assessing the level of fixed pay relative to the market, significant weighting is given
to the employees period of service and their performance over the total employment period.
Short term incentives: Short term incentives are generally included as part of the remuneration package for those
employees that can have a material impact on the key marginal drivers of operating earnings in any given financial year.
These include such factors as leasing outcomes and changes in property earnings, interest expense, funds management
earnings and changes in the investment property portfolio. The Group does not generally take into account non-financial
performance indicators in assessing short term incentives. Short term incentives are available to a number of employees
and are generally paid as cash bonuses. For all Key Management Personnel except the Chief Executive Officer and Non-
Executive Directors, the Chief Executive Officer is responsible for setting key performance indicator targets and assessing
annually whether these targets have been met. The key performance indicator targets for the Chief Executive Officer are set,
revised and reviewed annually by the Committee or the Board.
Long term incentives: These are considered to be both a retention tool for employees who are considered key to
the longer term succession of the Group and a reward for exceptional performance in a financial year. The maximum
value of performance rights issued is generally limited to 25% of the annual fixed remuneration of any employee
during the period from grant date to vesting date. Long term incentives are offered by way of the issue of performance
rights which, if they vest, allow the employee to obtain stapled securities at a discount to market value. This allows
employees to align themselves with securityholders by having a financial interest in the long term value of the Group’s
security price. For any given dollar value, a higher discount causes the number of the performance rights offered to
decrease. The use of the discount is intended to reduce or avoid the need for employees to obtain significant funding
or to sell a substantial number of securities to fund the exercise of performance rights on vesting.
The number of Key Management Personnel participating in the PRP during the year was 8 (2011: 9). The number of
performance rights allocated to Key Management Personnel at balance date was 6,663,935 (2011: 6,842,136).
External environment
(iii)
The unemployment rate during the year remained below the 10-year median. This continues to cause labour market
constraint which was evident in Brisbane where approximately 80% of the Groups’ employees are based. The Brisbane
market continues to remain very competitive, partly as a result of significant competition from the resource sector
for employees.
Non-executive directors remuneration
(iv)
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 $1,000,000 per annum in total for fees, having
been increased from $700,000 at the 2011 Annual General Meeting, 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.
Chairman
Non-Executive Director
Audit & Risk Committee – Chairman
Audit & Risk Committee – Member
Nomination & Remuneration Committee – Chairman
Nomination & Remuneration Committee – Member
Investment Committee
p | 26
2012
$
185,000
85,000
18,000
12,000
7,500
5,000
–
2011
$
150,000
75,000
18,000
12,000
7,500
5,000
–
well versed well timed well considered The Non-Executive Directors’ fees were reviewed during the year, and increases applied from 1 November 2011 to reflect
the specific responsibility of each Non-Executive Director and market factors. The current and previous rates are shown
above. Non-Executive Directors fees had not previously been increased since the 2008 financial year.
Use of remuneration consultant
In August 2011, to assist with the review of Non-Executive Directors’ fees the Board employed the services of AON Hewitt
to undertake a market review covering the composition and market competitiveness of Non-Executive Directors’ fees
(for the Board and each Committee), meeting frequency and company practices in relation to Non-Executive Director
remuneration. Under the terms of the engagement, AON Hewitt provided remuneration recommendations and was paid
$7,420 for these services.
The following arrangements were made to ensure the remuneration recommendations were free from undue influence:
AON Hewitt was engaged by and reported directly to the Chairman of the Board;
The report containing the remuneration recommendations was provided by AON Hewitt directly to the Chairman
of the Board; and
AON Hewitt was given access to senior management throughout the engagement to understand board processes and
meeting frequencies.
Based on the above arrangements the Board is satisfied the recommendations were made free from undue influence.
(b) Details of remuneration
Remuneration paid, payable, or otherwise made available, directly or indirectly, to key management personnel is set
out below.
Key management personnel during the year were:
Non-Executive Directors:
Mr GH Levy (AO)
Mr RJ Pullar
Ms MA McKellar
Mr DE Usasz
Mr M Wainer
Mr WR Foster
Mr M Flax
Mr M Watters
Mr G Cannings
Executive Directors:
Mr PL Weightman
Mr DJ Wilson
Other Senior Executives:
Mr B Binning
Mr MJ Blake
Ms JA Clark
Mr PJ Cowling
Mr DA Gippel
Mr PW Howard
Ms NE Riethmuller
Chairman
Director
Director
Director
Director
Director
Director (Alternate to Mr Wainer – resigned 1 August 2011)
Director
Director (Alternate to Mr Watters – appointed 1 August 2011)
Managing Director/Chief Executive Officer
Director – Finance & Funds Management
National Leasing Manager
National Head of Sales
Transactions Manager, Property Licensee, Director of controlled entity
Associate Director Transactions, Director of controlled entity
Group Treasurer, Director of controlled entity
Chief Operating Officer – resigned 26 October 2011
General Counsel/Company Secretary
p | 27
Short-term
benefits
Short-term
benefits
Short-term
benefits
Short-term
benefits
Post-
employment
Long-term
benefits
Cash
salary and
fees
$
Accrued
leave (1)
$
Cash
bonus
$
Non-cash
benefits
$
Super-
annuation
$
Long
service
leave (1)
$
Share-
based
payments
Total
Remuneration
% of
Remun.
that is
performance
based
Options
$
$
159,021
92,813
98,667
96,024
81,667
79,511
43,333
12,232
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,312
8,353
–
8,642
–
7,156
–
963
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
173,333
101,166
98,667
104,666
81,667
86,667
43,333
13,195
770,252
434,225
(29,417)
(28,008)
200,000
120,000
163,973
–
15,775
15,775
21,790
12,127
180,210
78,391
1,322,583
632,510
275,000
260,471
202,999
300,000
275,000
96,980
275,000
3,553,195
11,232
11,293
(2,670)
(8,705)
5,398
(13,161)
17,189
(36,849)
25,000
27,520
–
–
75,000
–
–
447,520
–
–
–
–
19,186
–
2,009
185,168
15,775
15,775
15,775
15,775
15,775
5,868
15,775
171,494
7,492
11,195
8,080
11,954
13,105
(5,071)
3,759
84,431
37,485
23,934
–
15,110
95,327
(10,144)
37,272
457,585
371,984
350,188
224,184
334,134
498,791
74,472
351,004
4,862,544
–
–
–
–
–
–
–
–
29%
31%
17%
15%
–
5%
34%
–
11%
2012
Non-Executive
Directors
GH Levy
RJ Pullar
MA McKellar
DE Usasz
M Wainer
WR Foster
M Watters(2)
G Cannings(3)
Executive
Directors
PL Weightman
DJ Wilson
Other key
management
personnel
B Binning
M Blake
JA Clark
P Cowling
D Gippel
P Howard(4)
N Riethmuller
(1) Annual and long service leave are accounted for on an accruals basis. The amounts represent the change in accrued leave during the year.
(2) Mr Watters was appointed on 4 April 2011 and commenced receiving director’s fees on 1 November 2011.
(3) Mr Cannings was appointed as an alternate director for Mr Watters on 1 August 2011 and received a share of Mr Watters directors fees for the year.
(4) Mr Howard resigned on 26 October 2011. Unvested performance rights on issue to Mr Howard were forfeited on his resignation.
p | 28
well versed well timed well considered Short-term
benefits
Short-term
benefits
Short-term
benefits
Short-term
benefits
Post-
employment
Long-term
benefits
Cash
salary and
fees
$
Accrued
leave (1)
$
Cash
bonus
$
Non-cash
benefits
$
Super-
annuation
$
Long
service
leave (1)
$
Share-
based
payments
Total
Remuneration
% of
Remun.
that is
performance
based
Options
$
$
2011
Non-Executive
Directors
GH Levy
RJ Pullar
MA McKellar
DE Usasz
M Wainer
WR Foster
M Watters(2)
M Flax(3)
Executive
Directors
PL Weightman
DJ Wilson
Other key
management
personnel
B Binning
MJ Blake
JA Clark
P Cowling
DA Gippel
PW Howard
NE Riethmuller
137,615
86,697
91,367
89,908
75,000
73,395
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12,385
7,803
633
8,092
–
6,605
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,000
94,500
92,000
98,000
75,000
80,000
–
–
–
–
–
–
–
–
–
–
776,901
434,801
102,385
2,485
200,000
120,000
157,900
–
15,199
15,199
17,353
18,037
38,459
17,372
1,308,197
607,894
18%
23%
250,000
248,068
171,180
275,019
250,000
234,801
257,500
3,452,252
(2,462)
(2,226)
918
3,566
9,383
(7,443)
(6,516)
100,090
75,000
37,208
–
–
65,000
–
–
497,208
–
–
5,264
–
20,289
–
–
183,453
15,199
15,199
14,495
15,199
15,199
15,199
15,199
171,605
5,040
7,585
7,007
7,755
9,854
2,461
2,020
77,112
42,103
17,873
1,998
5,240
142,853
10,144
26,710
302,752
384,880
323,707
200,862
306,779
512,578
255,162
294,913
4,784,472
21%
14%
5%
2%
14%
4%
9%
(1) Annual and long service leave are accounted for on an accruals basis. The amounts represent the change in accrued leave during the year.
(2) Mr Watters was appointed on 4 April 2011 and commenced receiving director’s fees on 1 November 2011.
(3) Mr Flax was appointed as an alternate director for Mr Wainer and Mr Watters, and resigned on 1 August 2011. Mr Flax did not receive any remuneration.
Performance assessment
(c)
The Group’s performance conditions are chosen to support the sustainable operation of the Group. Financial performance
metrics are chosen with the aim of supporting or enhancing the operating earnings per security in any given financial
year in a way that does not unduly increase the risk profile of the Group. Short term cash incentives are focused wholly on
financial metrics. The remaining performance criteria are intended to facilitate growth within an appropriate framework
such that the Group can outperform its peers in the longer term.
Although the specific performance criteria may be different for each KMP the overriding principles involve assessment
of performance according to a traditional balanced scorecard methodology. The balanced scorecard assigns key
performance indicators (KPIs) across broad categories. The KPIs are designed to align securityholder interests with
Group goals in the short and long term. Individual KPIs are aligned with the Group’s long term objectives. The balanced
scorecard methodology assigns performance and responsibility criteria for all employees across four broad categories.
These categories are:
Financial Measures: Includes both the performance of the Group and the employees’ business unit. The Group focuses on
maintaining individual securityholder alignment by using operating earnings per security as the major short term financial
metric. Other short term financial metrics include distributions per security and changes in NTA per security (excluding
interest rate swaps). The key long term financial metric is Total Securityholder Return (“TSR”) over rolling 3 and 5 year
periods relative to the S&P/ASX 300-A-REIT Accumulation Index.
p | 29
Internal Business Measures: Concentrate on improvement of systems and processes to create efficiency and accuracy to
support long term business growth. The processes emphasise adherence to governance requirements.
Customer Measures: The Group surveys securityholders, tenants, fund investors and other stakeholders to ascertain
customer relationship trends and set KPIs for employees to meet the needs identified by those trends, and to coincide with
longer term corporate objectives.
Innovation & Learning Measures: Focuses on the growth of individuals, departments and corporate culture to innovate
and extend current capabilities throughout the Group.
The weightings of these categories for any individual are set and assessed in consideration of their responsibility and role.
In 2012 there were no non-financial performance conditions in the short term (cash) incentive plans. All short term
conditions related to financial metrics occurring within the financial year 2012. The key short term financial measures for
the last 5 years were:
Operating profit ($’000) (as assessed by the Directors – see part 4(b) above)
Change over previous year
Operating earnings per security (as assessed by the Directors –
see part 4(c) above)
Change over previous year
Distributions per security
Change over previous year
NTA per security
Change over previous year
NTA per security (excl. interest rate swaps)
Change over previous year
2012
80,010
+23%
2011
65,297
+1%
2010
64,630
+1%
2009
63,761
(10%)
2008
70,791
+93%
7.5 cents
6%
7.0 cents
0%
$0.67
(8%)
$0.71
(3%)
7.1 cents
(16%)
7.0 cents
(13%)
$0.73
3%
$0.73
3%
8.5 cents
(12%)
8.0 cents
(11%)
$0.71
(7%)
$0.71
(8%)
9.1 cents 10.1 cents
91%
9.0 cents
102%
$1.01
5%
$0.98
4%
(10%)
9.0 cents
0%
$0.76
(25%)
$0.77
(21%)
The Group has established a Performance Rights Plan. For KMP, the ability to exercise the Performance Rights is
generally conditional on the executive meeting internal performance hurdles including remaining employed by the Group
for a specified period. The Group believes this allows employees to align themselves with securityholders by having
a financial interest in the long term value of the Group’s security price, which acts to maximise TSR.
TSR over 1, 3 and 5 years relative to benchmark indices is shown below: Given the Group’s focus on medium and long term
returns, focus is on performance over 3 and 5 year periods. The 1 year TSR analysis has been included for comparison
purposes:
Total Securityholder Returns (annualised)
TSR – Group
TSR – S&P/ASX 300 A-REIT accumulation index
Group performance against S&P/ASX 300 A-REIT accumulation index
TSR – All Ord’s accumulation index
Group performance against All Ord’s accumulation index
1 Year
9.9%
11%
(1.1%)
(7.0%)
16.9%
3 Year
21.5%
12.2%
9.3%
5.9%
15.6%
5 Year
0.1%
(12.6%)
12.7%
(4.1%)
4.2%
Details of remuneration: cash bonuses and performance rights
For each cash bonus and grant of performance rights 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 performance rights are subject to vesting conditions as outlined above. No performance rights will vest if
the conditions are not satisfied, hence the minimum value of performance rights yet to vest is $nil. The maximum value
of the performance rights yet to vest has been determined as the amount of the grant date fair value of the performance
rights that is yet to be expensed at balance date. References to options in the table below relate to performance rights.
p | 30
well versed well timed well considered Cash Bonus
Paid
%
80%
80%
100%
100%
–
–
–
100%
–
Cash Bonus
Forfeited
%
20%
20%
–
–
–
–
–
–
–
Financial
Year Options
Granted
2011
2011
2010/2012
2011/2012
–
2012
2011
2010/2012
2011/2012
Options
Vested
in 2012
%
–
–
100% (1)
–
–
–
–
100% (1)
–
Options
Forfeited in
2012
%
–
–
–
–
–
–
100%
–
–
Financial
Years Options
may vest
2014/15/16
2014/15/16
2015
2014/2015
–
2015
–
2015
2013/2015
Maximum
value of grant
to vest
$
308,613
134,249
38,992
45,610
–
40,141
–
85,781
20,229
Name
PL Weightman
DJ Wilson
B Binning
MJ Blake
JA Clark
P Cowling
PW Howard
DA Gippel
NE Riethmuller
(1) Relates to performance rights issued in 2010.
(d) Equity based compensation
Details of the PRP are set out in part (a)(ii) of the remuneration report.
All Executive Directors and employees of the Group are considered for participation in the PRP subject to a minimum
period of service and level of remuneration, which may be waived by the Committee. Grants to Executive Directors are
subject to securityholder approval.
Consideration for granting performance rights, grant periods, vesting and exercise dates, exercise periods and
exercise prices are determined by the Board or Committee in each case. Performance rights carry no voting rights.
When exercised, each performance right is convertible into one stapled security.
The terms and conditions of each grant of performance rights under the PRP affecting remuneration for Key Management
Personnel in the current or future reporting periods are included in the table below:
Grant Date
16/12/2009
08/02/2010
23/08/2010
23/08/2010
26/05/2011
26/05/2011
26/05/2011
05/09/2011
05/09/2011
05/09/2011
Expiry Date
Exercise Price
15/01/2012
07/03/2012
21/09/2013
21/09/2013
01/10/2013
01/10/2014
01/10/2015
05/10/2014
05/10/2014
05/10/2014
$0.20
–
$0.20
$0.10
$0.50
$0.50
$0.50
$0.20
$0.10
–
No of Performance
Rights Granted
659,600
126,859
192,218
123,459
1,913,333
1,913,333
1,913,334
393,679
52,851
590,622
Assessed Value
per Right at Grant Date
41.5¢
59.1¢
37.0¢
50.6¢
13.9¢
12.6¢
11.5¢
32.3¢
41.1¢
50.0¢
Details of changes during the 2012 year in performance rights on issue to Key Management Personnel under the PRP are
set out below.
Opening
balance
Granted
during year
Exercised
during the year
Forfeited
during the year
Lapsed
during year
Closing
balance
2012
PL Weightman
DJ Wilson
DA Gippel
B Binning
M J Blake
JA Clark
P Cowling
P Howard
N Reithmuller
4,000,000
1,740,000
659,600
126,859
95,894
–
–
96,324
123,459
6,842,136
–
–
236,248
107,386
136,932
–
171,165
–
52,851
704,582
–
–
(659,600)
(126,859)
–
–
–
–
–
(786,459)
–
–
–
–
–
–
–
(96,324)
–
(96,324)
–
–
–
–
–
–
–
–
–
–
4,000,000
1,740,000
236,248
107,386
232,826
–
171,165
–
176,310
6,663,935
p | 31
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 in part (b) of the remuneration report. Fair value
at grant date for performance rights with no market based vesting conditions are determined using a Black-Scholes
option pricing model that takes into account the exercise price, the term of the performance right, the security price at
grant date, expected price volatility of the underlying securities, the expected dividend/distribution yield and the risk-free
interest rate for the term of the performance right.
A total of 1,037,152 performance rights were granted during 2012 (2011: 6,583,432) of which 704,582 (2011: 6,055,677)
were issued to Key Management Personnel. The model inputs for Performance Rights granted during the 2012 year are
disclosed in note 31.
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.
At 30 June 2012 no performance rights on issue had vested.
Further details relating to performance rights are set out below.
Name
PL Weightman
DJ Wilson
B Binning
MJ Blake
JA Clark
P Cowling
DA Gippel
PW Howard
NE Riethmuller
Remuneration
consisting of
performance
rights (1)
Value
at grant date (2)
$
Value
at exercise date (3)
$
Value
at forfeit date (4)
$
14%
12%
10%
7%
–
5%
18%
14%
11%
–
–
53,669
44,201
–
55,251
118,070
–
21,716
–
–
75,000
–
–
–
273,914
–
–
–
–
–
–
–
–
–
35,601
–
(1) The percentage of total remuneration consisting of performance rights, based on the value of performance rights expensed during the year.
(2) The value of performance rights granted during the year as part of remuneration calculated at grant date in accordance with AASB 2 Share-based Payment.
(3) The value at exercise date of performance rights that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the performance
rights at that date.
(4) The value at lapse date of performance rights that were granted as part of remuneration and were forfeited during the year because a vesting condition was not satisfied.
(e) Employment contracts and termination provisions
(i)
Employment contracts
PL Weightman
Remuneration and other terms of employment for the Chief Executive Officer are formalised in an employment
agreement. The Company may terminate the agreement without notice for gross misconduct; otherwise, the Company
may terminate the agreement on six months notice, or payment of entitlements for this period in lieu of notice.
Mr Weightman may terminate the agreement at any time with six months notice. Other major provisions of the agreement
are as follows:
Term of agreement – commencing 1 July 2006, no fixed termination date.
Base salary, inclusive of superannuation, for the 2012 year of $950,000, to be reviewed annually by the remuneration
committee. Since balance date it has been agreed the base salary will remain unchanged for the 2013 year.
Performance cash bonus of up to $250,000 with targets to be reviewed annually by the remuneration committee.
The performance bonus payable to Mr Weightman for the 2012 year depended on performance criteria being met.
The criteria were assessed as being met in part during the financial year, with 80% of the performance bonus amount
being paid.
p | 32
well versed well timed well considered DJ Wilson
Remuneration and other terms of employment for the Director – Finance & Funds Management are formalised
in an employment agreement. The Company may terminate the agreement without notice for gross misconduct;
otherwise, the Company may terminate the agreement on six months notice, or payment of entitlements for this period
in lieu of notice. Mr Wilson may terminate the agreement at any time with six months notice. Other major provisions of
the agreement are as follows:
Term of agreement – commencing 1 July 2006, no fixed termination date.
Base salary, inclusive of superannuation, for the 2012 year of $450,000, to be reviewed annually by the remuneration
Committee. Since balance date it has been agreed the base salary will remain unchanged for the 2013 year.
Performance cash bonus of up to $150,000 with targets to be reviewed annually by the remuneration committee.
The performance bonus payable to Mr Wilson for the 2012 year depended on certain criteria being met. The criteria were
assessed as being met in part during the financial year, with 80% of the performance bonus amount being paid.
All other executives
Remuneration and other terms of employment for other executives are contained under standard employment contracts.
There are no termination payments due under the contracts other than statutory entitlements for accrued leave.
Remuneration is reviewed annually.
Termination provisions
(ii)
There are no fixed term conditions in executive employment contracts. Minimum termination periods for executives are
outlined below and adhered to in all cases except in the case of serious breaches of the employment contract.
Managing Director/CEO, Director – Finance & Funds Management
Group Treasurer
All other key management personnel
Notice Period
Employee
6 months
3 months
1-2 months
Notice Period
Group
6 months
6 months
1-2 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.
12. Trust Disclosures
Fees to Responsible Entity
Total amounts paid/payable to the Responsible Entity or its associates during the year were $15,113,342 (2011:
$14,107,206).
Units held by Responsible Entity
Cromwell Corporation Limited, the parent company of the Responsible Entity, held 275,106 (2011: 275,106) units in
the Trust throughout the year. Pursuant to Australian Securities & Investments Commission relief, the units are not
stapled to shares in Cromwell Corporation Limited.
The Responsible Entity held 1,517,000 (2011: 1,517,000) units in the Cromwell Mary Street Planned Investment, a subsidiary
of the Trust, throughout the year. The holding represents approximately 8% (2011: 8%) of the issued units in the Cromwell
Mary Street Planned Investment.
Issued Units
Units issued in the Trust during the year are set out in note 23 in the accompanying financial report. There were
1,169,964,049 (2011: 965,012,421) issued units in the Trust at balance date.
Value of Scheme Assets
The total carrying value of the Trust’s assets as at balance date was approximately $1,820,045,000 (2011: $1,531,741,000).
Net assets attributable to unitholders of the Trust were $769,400,000 (2011: $694,180,000) equating to $0.66 per unit (2011:
$0.73 per unit).
The Trust’s assets are valued in accordance with policies stated in note 1 of the financial statements.
p | 33
Indemnifying Officers or Auditor
13.
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.
14. Rounding of Amounts to Nearest Thousand Dollars
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments
Commission, relating to the “rounding off” of amounts in the Directors’ report and financial report. Amounts in
the Directors’ report and financial report have been rounded off to the nearest thousand dollars, or in certain cases to
the nearest dollar, in accordance with that Class Order.
15. 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 provided to the Group are set out
below:
Non-audit Services
Other – review of pro forma balance sheets and forecasts
Total remuneration for non-audit services
2012
$
70,000
70,000
2011
$
76,000
76,000
The auditor receives remuneration for audit and other services relating to other entities for which Cromwell Property Securities
Limited and Cromwell Funds Management Limited, both controlled entities, act as responsible entity. The remuneration is
disclosed in the relevant entity’s financial reports and totalled $112,500 (2011: $78,000).
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 22nd day of August 2012
p | 34
well versed well timed well considered
The Directors
Cromwell Corporation Limited and
Cromwell Property Securities Limited as Responsible Entity for Cromwell Diversified Property Trust
Level 19
200 Mary Street
BRISBANE QLD 4000
Dear Sirs,
Auditor’s Independence Declaration
As lead auditor for the audit of the financial reports of Cromwell Corporation Limited and Cromwell Diversified
Property Trust for the year ended 30 June 2012, 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 both Cromwell Corporation Limited and the entities it controlled during the year
and Cromwell Diversified Property Trust and the entities it controlled during the year.
JOHNSTON RORKE
Chartered Accountants
R.C.N. WALKER
Partner
Brisbane, Queensland
22 August 2012
p | 35
Consolidated statements of Comprehensive Income
for the year ended 30 June 2012
Group
Revenue and other income
Rental income and recoverable outgoings
Funds management fees
Distributions
Interest
Other revenue
Increase in recoverable amount:
Property development inventories/provision
Fair value net gain from:
Investment properties
Investments at fair value through profit or loss
Total revenue and other income
Expenses
Property expenses and outgoings
Property development costs
Responsible entity fees
Administration and overhead costs
Funds management costs
Employee benefits expense
Finance costs
Amortisation and depreciation
Share of losses of equity accounted entities
Loss on sale of investment properties
Loss on sale of other assets
Fair value net loss from:
Interest rate derivatives
Investment properties
Investments at fair value through profit or loss
Decrease in recoverable amount:
Property development inventories/provision
Total expenses
Profit before income tax
Income tax expense
Profit
Other comprehensive income, net of tax
Total comprehensive income
Profit/(loss) is attributable to:
Company shareholders
Trust unitholders
Non-controlling interests
Profit
Total comprehensive income/(loss) is attributable to
Company shareholders
Trust unitholders
Non-controlling interests
Total comprehensive income
Basic earnings/(loss) per company share/trust unit (cents)
Diluted earnings/(loss) per company share/trust unit (cents)
Basic/diluted earnings/(loss) per stapled security (cents)
Notes
2012
$’000
177,245
4,567
37
4,713
141
2011
$’000
138,494
3,964
255
4,984
16
Trust
2012
$’000
176,673
–
37
4,452
18
2011
$’000
138,499
–
255
5,192
4
200
–
–
–
12
–
–
186,903
33,659
604
181,976
–
–
181,180
33,659
604
178,213
27,087
638
–
5,496
487
13,347
64,523
604
140
331
44
38,483
12,353
173
–
163,706
23,197
120
23,077
–
23,077
(1,282)
24,359
–
23,077
(1,282)
24,359
–
23,077
(0.1¢)
(0.1¢)
2.2¢
21,198
819
–
5,115
480
11,680
47,439
542
713
195
–
1,920
–
–
3,695
93,796
88,180
78
88,102
–
88,102
(4,259)
92,361
–
88,102
(4,259)
92,361
–
88,102
(0.5¢)
(0.5¢)
9.6¢
30,530
–
8,497
1,113
–
–
64,796
–
131
331
–
38,483
12,353
173
–
156,407
24,773
–
24,773
–
24,773
–
24,359
414
24,773
–
24,359
414
24,773
2.3¢
2.3¢
24,241
–
8,674
1,268
–
–
48,167
–
742
195
–
1,920
–
–
–
85,207
93,006
–
93,006
–
93,006
–
92,361
645
93,006
–
92,361
645
93,006
10.1¢
10.0¢
5
5
5
14 (d)
5
5
12
6
28
28
28
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
p | 36
well versed well timed well considered Consolidated statements of Financial Position
as at 30 June 2012
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
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
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings/(accumulated losses)
Equity attributable to shareholders/unitholders
Non-controlling interests
Trust unitholders
Non-controlling interests
Total equity
Notes
7
8
9
11
8
10
12
13
14
15
16
17
18
19
20
9
21
22
19
9
21
23
24
25
26
26
Group
Trust
2012
$’000
59,153
21,505
60
–
1,791
82,509
19,800
3,000
1,724,400
266
4,752
1,327
914
633
1,755,092
1,837,601
14,472
21,533
20,470
15,127
1,368
6,735
79,705
942,644
25,501
762
968,907
1,048,612
788,989
66,344
4,529
(51,562)
19,311
769,678
–
788,989
2011
$’000
46,572
9,918
240
1,285
1,437
59,452
19,800
3,000
1,444,850
4,177
5,492
1,133
921
603
1,479,976
1,539,428
21,431
3,321
16,883
3,430
1,253
7,085
53,403
780,288
–
577
780,865
834,268
705,160
57,073
3,928
(50,280)
10,721
694,439
–
705,160
2012
$’000
51,021
15,618
–
–
1,047
67,686
22,988
–
1,724,400
266
4,705
–
–
–
1,752,359
1,820,045
13,311
21,533
20,474
15,127
–
6,735
77,180
942,644
25,501
–
968,145
1,045,325
774,720
827,989
–
(58,589)
769,400
–
5,320
774,720
2011
$’000
40,805
4,411
–
1,285
789
47,290
29,988
–
1,444,850
4,177
5,436
–
–
–
1,484,451
1,531,741
21,358
3,321
16,888
3,430
–
7,085
52,082
780,016
–
–
780,016
832,098
699,643
702,090
–
(7,910)
694,180
–
5,463
699,643
The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
p | 37
Consolidated statements of Changes in equity
for the year ended 30 June 2012
Attributable to Equity Holders of the Company
Group
Notes Contributed
Equity
Accumu-
lated
Losses
Available
for Sale
Reserve
Share
Based
Payments
Reserve
$’000
1,588
–
Total
$’000
10,721
(1,282)
Non-
controlling
Interest
(Trust)
$’000
694,439
24,359
Total
Equity
$’000
705,160
23,077
$’000
57,073
–
$’000
(50,280)
(1,282)
$’000
2,340
–
Balance at 1 July 2011
Total comprehensive income/(loss)
Transactions with equity holders in
their capacity as equity holders:
Contributions of equity,
net of transaction costs
Dividends/distributions paid/payable
Employee share options
Total transactions with equity holders
Balance at 30 June 2012
Balance at 1 July 2010
Total comprehensive income/(loss)
Transactions with equity holders in
their capacity as equity holders:
Contributions of equity,
net of transaction costs
Dividends/distributions paid/payable
Employee share options
Total transactions with equity holders
Balance at 30 June 2011
23
9,271
–
27
23/24
–
–
9,271
66,344
49,197
–
–
–
–
(51,562)
(46,021)
(4,259)
23
7,876
–
27
23/24
–
–
7,876
57,073
–
–
–
(50,280)
–
–
–
–
2,340
2,340
–
–
–
–
–
2,340
–
9,271
125,899
135,170
–
601
601
2,189
1,255
–
–
601
9,872
19,311
(75,019)
–
50,880
769,678
(75,019)
601
60,752
788,989
6,771
(4,259)
564,636
92,361
571,407
88,102
–
7,876
102,430
110,306
–
333
333
1,588
–
333
8,209
10,721
(64,988)
–
37,442
694,439
(64,988)
333
45,651
705,160
Attributable to Equity Holders of CDPT
Trust
Notes
Contributed
Equity
Balance at 1 July 2011
Total comprehensive income for the year
Transactions with equity holders in their capacity as
equity holders:
Contributions of equity, net of transaction costs
Distributions paid/declared
Total transactions with equity holders
Balance at 30 June 2012
Balance at 1 July 2010
Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Contributions of equity, net of transaction costs
Distributions paid/declared
De-recognition on deconsolidation
Total transactions with equity holders
Balance at 30 June 2011
23
27
23
27
$’000
702,090
–
125,899
–
125,899
827,989
599,660
–
102,430
–
–
102,430
702,090
Accumu-
lated
Losses
$’000
(7,910)
24,359
Total
(CDPT)
$’000
694,180
24,359
Non-
controlling
Interest
$’000
5,463
414
Total
Equity
$’000
699,643
24,773
–
(75,038)
(75,038)
(58,589)
125,899
(75,038)
50,861
769,400
(35,264)
92,361
564,396
92,361
–
(65,007)
–
(65,007)
(7,910)
102,430
(65,007)
–
37,423
694,180
–
(557)
(557)
5,320
6,068
645
2,520
(519)
(3,251)
(1,250)
5,463
125,899
(75,595)
50,304
774,720
570,464
93,006
104,950
(65,526)
(3,251)
36,173
699,643
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
p | 38
well versed well timed well considered Consolidated statements of Cash Flows
for the year ended 30 June 2012
Notes
Group
2012
$’000
2011
$’000
Trust
2012
$’000
2011
$’000
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 controlled entity, net of cash acquired
Payments of property development provision
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
Repayment of loans by other persons
Net cash used in investing activities
Cash Flows From Financing Activities
Proceeds from borrowings
Repayment of borrowings
Payment of loan transaction costs
Proceeds from issue of units – controlled entity
Proceeds from issue of stapled securities/units
Equity issue transaction costs
Payment of dividends/distributions
Payment for derivative financial instruments
Net cash provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
29
37
7
197,506
(58,484)
637
5,243
(61,528)
67
83,441
(339,985)
38,998
(464)
–
–
(577)
4,315
(408)
(19,786)
7,000
–
(310,907)
364,509
(183,450)
(3,052)
–
133,695
(3,828)
(66,129)
(1,698)
240,047
12,581
46,572
59,153
160,303
(53,682)
989
4,142
(43,516)
(60)
68,176
(298,889)
33,540
(127)
(12,132)
(6,435)
(4,593)
1,757
(393)
(500)
17,724
270
(269,778)
142,400
(36,398)
(3,994)
2,519
110,844
(4,114)
(60,684)
(868)
149,705
(51,897)
98,469
46,572
193,533
(54,808)
637
5,219
(61,528)
–
83,053
(339,985)
38,998
–
–
–
(577)
4,315
–
(19,786)
14,000
–
(303,035)
364,509
(183,450)
(3,052)
–
124,615
(3,648)
(67,078)
(1,698)
230,198
10,216
40,805
51,021
151,553
(44,714)
989
4,116
(43,516)
–
68,428
(298,889)
33,540
–
(12,132)
–
(4,593)
1,757
–
–
18,372
–
(261,945)
142,400
(36,398)
(3,994)
2,519
102,504
(3,653)
(61,221)
(868)
141,289
(52,228)
93,033
40,805
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
p | 39
notes to the Financial statements
for the year ended 30 June 2012
1. Summary of Significant Accounting Policies
Cromwell Property Group (“the Group”) was formed by the stapling of Cromwell Corporation Limited (“the Company”)
and its controlled entities, and Cromwell Diversified Property Trust (“CDPT”) and its controlled entities (“the Trust”).
The Financial Reports of the Group and the Trust have been presented jointly in accordance with ASIC Class Order
05/642 relating to combining accounts under stapling and for the purpose of fulfilling the requirements of the Australian
Securities Exchange.
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 require 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 arrangement.
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 and the Trust as defined above. As a result of changes to the Corporations
Act 2001 separate financial statements of Cromwell Corporation Limited and Cromwell Diversified Property Trust as
individual entities (parent entities) are no longer presented. Limited financial information for Cromwell Corporation
Limited and Cromwell Diversified Property Trust, as individual entities, is disclosed in note 33 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. The Group and Trust are for-profit entities for the purpose of preparing
the financial statements.
Compliance with IFRS
The financial report complies with the International Financial Reporting Standards (IFRS) and interpretations adopted by
the International Accounting Standards Board.
New and amended standards adopted by the Group and Trust
None of the new standards and amendments to standards that are mandatory for the first time for the financial year
beginning 1 July 2011 affected any of the amounts recognised in the current period or any prior period and are not likely to
affect future periods.
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
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 functional currency of the Group and Trust.
(b) Principles of consolidation
Stapling
The stapling of the Company and CDPT 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.
p | 40
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 CDPT, the Company is identified as having acquired control over the assets of
CDPT. To recognise the in-substance acquisition, the following accounting principles have been applied:
well versed well timed well considered
(1) no goodwill is recognised on acquisition of the Trust because no direct ownership interest was acquired by
the Company in the Trust;
(2) 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
(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.
The Trust’s contributed equity and retained earnings/accumulated losses are shown as a non-controlling interest in
this Financial Report in accordance with AASB Interpretation 1002 Post-Date-of-Transition Stapling Arrangements and
AASB 3 Business Combinations. Even though the interests of the equity holders of the identified acquiree (the Trust)
are treated as non-controlling interests the equity holders of the acquiree are also equity holders in the acquirer
(the Company) by virtue of the stapling arrangement.
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries as at 30 June 2012 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 34 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.
p | 41
(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.
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.
p | 42
well versed well timed well considered The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent
that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be
utilised. Any subsequent period adjustment to deferred tax assets arising from unused tax losses, as a result of revised
assessments of the probability of recoverability, is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding
arrangement, which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts.
The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed
by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising
an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed. The inter-entity receivable
(payable) are at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of
the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing
agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities
between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in
the financial statements in respect of this agreement, as payment of any amounts under the tax sharing agreement is
considered remote.
(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.
(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 knowledgeably, 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.
p | 43
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.
Investments and other financial assets
(i)
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
p | 44
Rate
10-67%
18%
8-37%
well versed well timed well considered
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.
Intangible assets
(k)
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.
Impairment of assets
(l)
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.
p | 45
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.
(o) Lease incentives
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. 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.
p | 46
well versed well timed well considered (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.
(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.
The obligations for long service leave and annual leave are presented as current liabilities in the balance sheet if the entity
does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of
when the actual settlement is expected to occur.
Superannuation
Contributions are made by the Group to defined contribution superannuation funds. Contributions are charged as
expenses as they become payable.
Security-based payments
The fair value of options and performance rights 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 or performance rights.
The fair value at grant date is determined using a pricing model that takes into account the exercise price, the term,
the security price at grant date and expected price volatility of the underlying security, the expected distribution yield
and the risk-free interest rate for the term.
The fair value of the options or performance rights granted is adjusted to reflect the probability of market vesting
conditions being met, 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 or performance
rights that are expected to become exercisable. At each balance date, the entity revises its estimate of the number of
options or performance rights 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.
p | 47
(y) Leasehold improvements
The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or
the estimated useful life of the improvement to the Group, whichever is the shorter. The amortisation rate for leasehold
improvements is set out in note 1(j).
(z) Contributed equity
Ordinary shares and units are classified as equity. Incremental costs directly attributable to the issue of new shares, units
or options are shown in equity as a deduction, net of tax, from the proceeds.
Where any group company purchases the company’s equity instruments, for example as the result of a share buy-back
or a share-based payment plan, the consideration paid, including any directly attributable incremental costs (net of
income taxes) is deducted from equity attributable to the securityholders as treasury shares until the securities are
cancelled or reissued. Where such ordinary securities are subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to
securityholders.
(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/CDPT,
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/CDPT 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.
p | 48
well versed well timed well considered
(af) New accounting standards and interpretations
Relevant accounting standards and interpretations that have been issued or amended during the current reporting period
but are not yet effective and have not been adopted for the year are as follows:
Standard/Interpretation
AASB 119 Employee Benefits – revised and consequential amendments to other accounting standards
resulting from its issue
AASB 127 Separate Financial Statements – revised
AASB 128 Investments in Associates and Joint Ventures – revised
AASB 2011-4 - Amendments to Australian Accounting Standards to Remove Individual Key
Management Personnel Disclosure Requirements
AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other
Comprehensive Income
AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial
Assets and Financial Liabilities
AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and
Financial Liabilities
AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements
2009-2011 Cycle
Application
date of
standard
Application
date for
the Group
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jan 2013
1 Jul 2013
1 Jul 2012
1 Jul 2012
1 Jan 2013
1 Jul 2013
1 Jan 2014
1 Jul 2014
1 Jan 2013
1 Jul 2013
The Directors anticipate that the adoption of these Standards and Interpretations in future years may have the following
impacts:
AASB 119 – The amendments apply to the calculation of provisions for employee benefits, including sick, annual and
long service leave and payments upon termination. The amendments are expected to impact most significantly upon
the calculation of employee provisions in respect of annual leave, with amounts not expected to be settled wholly within
the subsequent 12 months being defined as being ‘long-term employee benefits’ and classified as non-current in nature.
Further, these amounts will be discounted allowing for expected salary levels in the future period in which the leave is
expected to be taken. The Group intends to adopt the new standard from 1 July 2013.
AASB 127 – This is an amended version of the former AASB 127, which now only deals with the requirements for
separate financial statements, which have been carried over largely unamended from the former AASB 127 Consolidated
and Separate Financial Statements. Requirements for consolidated financial statements are now contained in
AASB 10 Consolidated Financial Statements. The Standard requires that when an entity prepares separate financial
statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in
accordance with AASB 9 Financial Instruments. The Standard also deals with the recognition of dividends, certain group
reorganisations and includes a number of disclosure requirements. The Directors believe the adoption of this standard
from 1 July 2013 will not result in any material changes to the Group’s financial statements.
AASB 128 – This standard supersedes former AASB 128 Investments in Associates and prescribes the accounting for
investments in associates and sets out the requirements for the application of the equity method when accounting for
investments in associates and joint ventures. The Standard defines ‘significant influence’ and provides guidance on how
the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It
also prescribes how investments in associates and joint ventures should be tested for impairment. The Directors believe
the adoption of this standard from 1 July 2013 will not result in any material changes to the Group’s financial statements.
AASB 2011-4 – Amends AASB 124 Related Party Disclosures to remove the individual key management personnel
(KMP) disclosures required by Australian specific paragraphs and removes a duplication of the requirements with
the Corporations Act 2001. While this will reduce the disclosures that are currently required in the notes to the financial
statements, it will not affect any of the amounts recognised in the financial statements. The amendments apply from
1 July 2013. Early adoption of this amendment is not permitted. The Corporations Act requirements in relation to
remuneration reports remain unchanged at present, however these requirements are currently subject to review and may
also be revised in the future. The Group intends to adopt the new standard from 1 July 2013.
AASB 2011-9 – This amendment to AASB 101 Presentation of Financial Statements requires entities to separate items
presented in other comprehensive income into two groups, based upon whether they might be recycled to profit and loss
in the future. The Directors anticipate this will not affect the measurement of any items recognised in the statement of
financial position or profit and loss as the Group does not have other comprehensive income. The Group intends to adopt
the new standard from 1 July 2012.
p | 49
AASB 2012-2 and AASB 2012-3 – The amendments to AASB 132 clarify when an entity has a legally enforceable right
to set-off financial assets and financial liabilities permitting entities to present balances net on the balance sheet.
The amendments to AASB 7 increase the disclosure about offset positions, including the gross position and the nature of
the arrangements. The Directors have not yet assessed the impact of the amendments, if any.
AASB 2012-5 – These amendments introduce various changes to AASBs. The Directors have not yet assessed the impact
of the amendments, if any.
The Group’s assessment of certain other relevant accounting standards and interpretations, published during the previous
financial period, but which are not yet effective and have not yet been adopted, remains unchanged from the previous year.
These include:
Standard/Interpretation
AASB 9 Financial Instruments – revised and consequential amendments to other
accounting standards resulting from its issue
AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax:
Recovery of Underlying Assets
AASB 10 Consolidated Financial Statements
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
Application
date of
standard
Application
date for
the Group
1 Jan 2013
1 Jul 2013
1 Jan 2012
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jul 2012
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
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 $1,724,400,000 (2011: $1,444,850,000)
representing estimated fair value at balance date. In addition, the carrying amount of the Group’s investments in jointly
controlled entity/associate of approximately $4,705,000 (2011: $5,492,000) and the Trust’s investments in jointly controlled
entity/associate of approximately $4,705,000 (2011: $5,436,000) 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 and Trust.
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 in recent years 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 in recent times there has been more stability in pricing and 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 for that property or other
similar properties, a capitalisation rate taking into account market evidence for similar properties and adjustment for
any differences between market rents and contracted rents over the term of existing leases and deductions 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.
p | 50
well versed well timed well considered 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.
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
2012
94%
4%
2%
100%
2011
90%
8%
2%
100%
2012
8.22%
9.36%
9.12%
8.28%
2011
8.09%
8.97%
8.98%
8.18%
2012
6.4yrs
3.3yrs
3.5yrs
6.2yrs
2011
7.1yrs
4.9yrs
4.5yrs
6.8yrs
2012
96.2%
100.0%
98.5%
96.4%
2011
99.6%
100.0%
98.0%
99.6%
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.
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.
Certain entities within the Group hold Australian Financial Services Licences (AFSL) and act as responsible entities for
managed investment schemes managed by the Group. The AFSL require these entities to maintain net tangible assets
of approximately $6 million in aggregate. As such these entities are restricted from paying dividends to the parent entity
that would breach their licence conditions and hold cash as part of their required minimum net tangible assets (see Note
29(c)). The entities monitor their net tangible assets on an ongoing basis to ensure they continue to meet their licence
requirements. The entities complied with their AFSL requirements during 2012 and 2011.
p | 51
One of the key ways the Group monitors capital adequacy is 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 for both the Group and the Trust 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
Group
Trust
2012
$’000
964,177
59,153
905,024
1,837,601
1,547
59,153
1,776,901
51%
2011
$’000
783,609
46,572
737,037
1,539,428
1,524
46,572
1,491,332
49%
2012
$’000
964,177
51,021
913,156
1,820,045
–
51,021
1,769,024
52%
2011
$’000
783,337
40,805
742,532
1,531,741
–
40,805
1,490,936
50%
Financial Risk Management
4.
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 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 and the Trust hold the following financial instruments:
Group
Trust
2012
$’000
59,153
41,305
–
–
100,458
14,472
40,628
964,177
20,470
1,039,747
2011
$’000
46,572
29,718
1,285
4,177
81,752
21,431
3,430
783,609
16,883
825,353
2012
$’000
51,021
38,606
–
–
89,627
13,311
40,628
964,177
20,474
1,038,590
2011
$’000
40,805
34,399
1,285
4,177
80,666
21,358
3,430
783,337
16,888
825,013
Financial Assets
Cash and cash equivalents (1)
Trade and other receivables (1)
Derivative financial instruments (2)
Investments at fair value through profit and 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
p | 52
well versed well timed well considered
(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 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 to 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*
Group
Trust
2012
$’000
767
452
1,369
2,588
2011
$’000
2,139
266
2,147
4,552
2012
$’000
505
–
1,369
1,874
2011
$’000
2,439
266
2,147
4,852
* Of the amounts above $2,269,000 (2011: $3,114,000) for the Group and $1,578,000 (2011: $2,133,000) for the Trust relates to the Cromwell Property Fund (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 and Trust is 2.4 years (2011: 2.9 years).
Contractual maturity of financial liabilities (borrowings and payables) of the Group and the Trust, including interest
thereon, are as follows:
Due within one year
Due between one and five years
Due after five years
Group
Trust
2012
$’000
122,147
1,042,481
357
1,164,985
2011
$’000
97,409
893,119
1,066
991,594
2012
$’000
120,954
1,042,481
357
1,163,792
2011
$’000
97,340
892,832
1,066
991,238
p | 53
(c) Market Risk
Price risk
(i)
The Group and Trust are exposed to equity securities price risk. This arises from investments held by the Group and Trust
classified on the balance sheet as investments at fair value through profit and loss. The Group and Trust are not exposed
to commodity price risk. The majority of the Group’s and Trust’s equity investments are publicly traded and are included in
the ASX All Ordinaries index.
Group and Trust sensitivity
Based on the financial instruments held at balance date, had the ASX All Ordinaries index increased/decreased by 20%
(2011: 20%) with all other variables held constant and all the Group’s and Trust’s equity instruments moved in correlation
with the index, the impact on the Group’s and Trust’s profit and equity for the year would have been $53,000 (2011:
$835,000) higher/lower.
Interest rate risk
(ii)
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 97% (2011:
97%) 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 3.18% and 5.95% (2011: 4.75% and 5.95%) and the variable rates are
generally based on the 30 day bank bill swap bid rate which at balance date was 3.63% (2011: 4.96%). At balance date,
the notional principal amounts and periods of expiry of the interest rate swap contracts are detailed as follows:
Group and Trust
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
Greater than 5 years
2012
$’000
226,600
380,000
216,700
31,730
–
86,450
941,480
2011
$’000
–
500,000
144,200
–
31,730
86,450
762,380
Because 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 and the maturity profile of borrowings including interest thereon is set out in Note 19.
Group sensitivity
At balance date, if interest rates for all relevant time periods had changed by +/- 100 basis points (1%) from the year end
rates with all other variables held constant, profit would have been $25,097,000 higher/lower (2011 – change of 100 bps:
$21,096,000 higher/lower), mainly as a result of increase/decrease in the fair value of interest rate derivatives. Equity
would have been $25,097,000 higher/lower (2011: $21,096,000 higher/lower) mainly as a result of an increase/decrease in
the fair value of interest rate derivates.
Trust sensitivity
At balance date, if interest rates for all relevant time periods had changed by +/- 100 basis points (1%) from the year end
rates with all other variables held constant, profit would have been $25,016,000 higher/lower (2011 – change of 100 bps:
$21,038,000 higher/lower), mainly as a result of increase/decrease in the fair value of interest rate derivatives. Equity
would have been $25,016,000 higher/lower (2011: $21,038,000 higher/lower) mainly as a result of an increase/decrease in
the fair value of interest rate derivates.
p | 54
well versed well timed well considered (d) Fair Value Estimation
The table below analyses financial instruments carried at fair value, by the source of measurement inputs. The results are
the same for both the Group and the Trust. 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).
Group and Trust
Financial Assets
Derivative financial instruments
Investments at fair value through profit or loss
Financial Liabilities
Derivative financial instruments
2012
2011
Level 1
$’000
Level 2
$’000
Level 1
$’000
Level 2
$’000
–
266
266
–
–
–
–
–
40,628
40,628
–
–
–
–
–
1,285
4,177
5,462
3,430
3,430
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.
5.
Expenses
Group
Trust
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/(decrease) 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
Depreciation/Amortisation:
Depreciation of plant and equipment
Amortisation of intangibles
Depreciation/Amortisation
Loss on disposal of other assets:
Net loss on disposal of property, plant and equipment
Net loss on disposal of intangible assets
Loss on disposal of other assets
2012
$’000
367
38,998
(39,329)
(331)
11,515
731
601
500
13,347
62,855
(892)
61,963
2,560
64,523
249
355
604
21
23
44
2011
$’000
170
33,540
(33,735)
(195)
10,746
623
333
(22)
11,680
50,725
(5,328)
45,397
2,042
47,439
256
286
542
–
–
–
2012
$’000
–
38,998
(39,329)
(331)
–
–
–
–
–
2011
$’000
–
33,540
(33,735)
(195)
–
–
–
–
–
62,855
(892)
61,963
2,833
64,796
50,725
(5,328)
45,397
2,770
48,167
–
–
–
–
–
–
–
–
–
–
–
–
p | 55
6.
Income Tax
Income tax expense
(a)
Current tax
Deferred tax
Prior year tax losses written off
Adjustment in relation to prior periods
Income tax expense
Group
Trust
2012
$’000
2011
$’000
2012
$’000
2011
$’000
58
(121)
178
5
120
–
(156)
247
(13)
78
(b) Numerical reconciliation of income tax expense to prima facie tax
Profit/(loss) before income tax
Tax at the Australian tax rate of 30% (2011: 30%)
Tax effect of amounts which are not deductible/ (taxable)
in calculating taxable income:
Non-taxable trust income
Non-deductible expenses
Loan write off
Non-deductible property development costs/impairment
Assessable income for tax
Losses written off (note 16)
Adjustment in relation to prior periods
Income tax expense
23,197
6,959
88,180
26,454
(7,308)
189
–
(92)
189
178
5
120
(27,708)
117
(932)
2,083
(170)
247
(13)
78
(c) Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Tax losses
18,702
18,518
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of
certain 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 (2011: $nil) as tax consolidation contributions by, or distributions to, equity
participants.
p | 56
well versed well timed well considered 7. Cash and Cash Equivalents
Cash at bank
Cash and cash equivalents
8.
Trade and Other Receivables
Current Assets
Trade debtors
Provision for impairment of trade debtors
Other receivables – associates
Loans:
Associate – CPF
Related party - Cromwell Ipswich City Heart Trust
Trade and other receivables – current
Non-Current Assets
Loans:
Amounts due from Cromwell Corporation Limited
Associate – CPF
Trade and other receivables – non-current
Group
Trust
2012
$’000
59,153
59,153
2011
$’000
46,572
46,572
2012
$’000
51,021
51,021
2011
$’000
40,805
40,805
3,093
(127)
1,691
4,062
12,786
21,505
–
19,800
19,800
2,396
–
3,460
4,062
–
9,918
–
19,800
19,800
1,288
(127)
1,671
–
12,786
15,618
3,188
19,800
22,988
2,108
–
2,303
–
–
4,411
10,188
19,800
29,988
Trade debtors mainly comprises of amounts owing by tenants of the Group’s and Trust’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 – associates mainly comprises interest owing by the Cromwell Property Fund (“CPF”) on its loan
facilities (refer below).
Refer to note 32(d) for details on the loan to Cromwell Corporation Limited.
(a) Loans – associates and related parties
Cromwell Property Fund
In 2008 the Group and Trust provided CPF with a loan facility which was subsequently reduced to $19,800,000. During
the current year the Group and Trust received repayments of $nil (2011: $10,200,000) from CPF under the facility. The loan
is unsecured, repayable in cash on 30 September 2012 and earns interest at a floating rate plus margin of 2.40% (2011:
2.30%), which was 6.00% (2011: 7.17%) at balance date.
A subsidiary of the Company also provided loans to CPF during the 2008 year which have subsequently reduced to
$4,062,000. During the current year the Group received repayments of $nil (2011: $7,462,000) and made further advances
of $nil (2011: $500,000). 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 5.10% (2011: 6.37%) at balance date.
Loan to Cromwell Ipswich City Heart Trust
On 8 December 2011 the Cromwell Ipswich City Heart Trust ARSN 154 498 923 (“ICH”) an unlisted single property trust,
for which Cromwell Funds Management Limited (“CFM”), a subsidiary of the Company, acts as responsible entity, settled
the acquisition of land at 117 Brisbane Street, Ipswich, Queensland. A commercial building is currently being constructed
on the land for the Queensland Government’s Department of Public Works, who will occupy 91% of the property on
completion under a 15 year agreement for lease.
CFM issued a product disclosure document (“PDS”) on 16 December 2011 to raise $49,250,000 from investors for ICH.
p | 57
The Group and Trust have provided a loan facility of $20,000,000 to ICH, which is unsecured, to enable settlement of
the land and funding for initial construction. During the year, ICH received advances of $19,786,000 and made repayments
of $7,000,000 under the facility. The loan is repayable by 31 December 2012. Funds raised under the PDS will be used
to repay the advance to the extent they are not required to fund construction of the building. The Group and Trust earn
interest equivalent to the ICH distribution rate (7.75% at balance date).
The Group and Trust have also entered into a unit subscription agreement with ICH. Under the terms of the loan facility
and the subscription agreement any loan principal outstanding at 31 December 2012 will be effectively converted into
units in ICH. The terms of the subscription agreement allow for ICH to call on the Group and Trust to subscribe for any
remaining unissued units in ICH at 31 December 2012.
(b) Past due but not impaired receivables
At balance date, the Group had $2,588,000 (2011: $4,552,000) and the Trust had $1,874,000 (2011: $4,852,000) of trade and
other receivables which were past due but not impaired. These consist of $296,000 (2011: $1,437,000) for the Group and
$296,000 (2011: $1,501,000) for the Trust which relate to a number of tenants for whom there is no recent history of default
and of $2,269,000 (2011: $3,144,000) for the Group and $1,578,000 (2011: $2,133,000) for the Trust relating to CPF.
Impaired receivables
(c)
At at 30 June 2012 trade receivables of the Group and Trust with a nominal value of $127,000 (2011: $nil) were impaired.
The amount of the provision was $127,000 (2011: $nil). The individually impaired receivable relates to a tenant which is in
a difficult economic situation.
The ageing analysis of this receivable is as follows:
1 to 3 months
3 to 6 months
Over 6 months
Movements in the provision for impairment of receivables are as follows:
Balance at 1 July
Provision for impairment recognised during the year
Balance at 30 June
2012
$’000
78
49
–
127
–
127
127
2011
$’000
–
–
–
–
–
–
–
The creation of the provision has been included in property expenses and outgoings in the statement of comprehensive
income.
9. Derivative Financial Instruments
Current assets
Interest rate derivatives – at fair value
Current liabilities
Interest rate derivatives – at fair value
Non-current liabilities
Interest rate derivatives – at fair value
Group
2012
$’000
2011
$’000
Trust
2012
$’000
2011
$’000
–
1,285
–
1,285
15,127
3,430
15,127
3,430
25,501
–
25,501
–
p | 58
well versed well timed well considered
10.
Inventories
Non-current
Land held for development and resale
Inventories
Movement in inventories
Balance at 1 July
Write down to net realisable value
Balance at 30 June
Group
2012
$’000
3,000
3,000
3,000
–
3,000
2011
$’000
3,000
3,000
4,925
(1,925)
3,000
Trust
2012
$’000
2011
$’000
–
–
–
–
–
–
–
–
–
–
During the 2010 financial year the Group acquired land located at Maidstone Street, Altona, VIC from CPF and
terminated the related development agreement. The Group’s property development obligation in respect of
the remaining development agreement with CPF is set out in note 21.
11. Other Current Assets
Prepayments
1,791
1,437
1,047
789
12.
Investment Properties
Investment properties at fair value
1,724,400
1,444,850
1,724,400
1,444,850
(a) Movement in investment properties
Balance at 1 July
Additions at cost
Purchase price of investment property
Acquisition of TGA Complex (refer note 37)
Acquisition transaction costs
Property improvements
Disposals
Straight-lining of rental income
Lease costs and incentives
Amortisation of lease costs and incentives
Net gain/(loss) from fair value adjustments
Balance at 30 June
1,444,850
1,064,100
1,444,850
1,064,100
249,483
–
13,939
52,813
(39,329)
6,892
15,810
(7,705)
(12,353)
1,724,400
234,090
75,000
13,315
43,432
(33,735)
4,883
15,879
(5,773)
33,659
1,444,850
249,483
–
13,939
52,813
(39,329)
6,892
15,810
(7,705)
(12,353)
1,724,400
234,090
75,000
13,315
43,432
(33,735)
4,883
15,879
(5,773)
33,659
1,444,850
(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
177,245
138,494
176,673
138,499
(27,087)
(21,198)
(30,530)
(24,241)
150,158
117,296
146,143
114,258
(c) Assets pledged as security
Borrowings (refer Note 19) 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.
p | 59
(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
Group
Trust
2012
$’000
157,012
510,596
226,143
893,751
2011
$’000
134,100
476,507
257,750
868,357
2012
$’000
157,818
510,692
226,143
894,653
2011
$’000
137,392
479,799
257,750
874,941
(e) Valuation basis
Independent valuations of properties were carried out by qualified valuers with relevant experience in the types of
property being valued. Independent valuations are 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.
(f) Details of investment properties
200 Mary St, QLD
Terrace Office Park, QLD
Oracle Building, ACT
Scrivener Buildings, ACT
NQX Distribution Centre, QLD
Henry Waymouth Centre, SA
Brooklyn Woolstore, VIC
Village Cinemas, VIC
Vodafone Call Centre, TAS
Regent Cinema Centre, NSW
78 Mallard Way, WA
Elders Woolstore, SA
Title
Acquisition
Date (1)
Acquisition
Price (1)
Independent
valuation
date
$’000
29,250
Jun 2012
Freehold Jun 2001
13,600 Dec 2011
Freehold Jun 1999
Jun 2012
23,550
Leasehold Nov 2001
SOLD
10,750
Leasehold Jun 2000
17,778
Jun 2011
Freehold Feb 2003
30,420 Dec 2011
Freehold Apr 2003
34,000 Dec 2011
Freehold Jun 2004
8,900 Dec 2011
Freehold Jun 2004
15,900 Dec 2011
Freehold Jun 2004
9,900 Dec 2011
Freehold Jun 2004
7,600
SOLD
Freehold Jun 2004
Freehold Jun 2004
10,900 Dec 2011
Freehold Dec 2004 133,000 Dec 2011
SOLD
41,000
Jun 2012
35,530
88,000
Jun 2012
30,375 Dec 2011
Jun 2012
85,727 Dec 2011
Jun 2012
Jun 2012
90,200 Dec 2011
101 Grenfell St, SA
380 La Trobe St, VIC
475 Victoria Av, NSW
700 Collins Street, VIC
Masters Distribution Centre, VIC Freehold Feb 2005
Leasehold July 2005
19 National Circuit, ACT
Freehold Dec 2005
Freehold Jan 2006
Freehold Mar 2006 102,650
Freehold Nov 2008
Synergy, QLD
Tuggeranong Office Park, ACT Leasehold Jun 2008 166,025
75,000
TGA Complex, ACT (2)
321 Exhibition Street,
Melbourne, VIC
203 Coward Street, Mascot,
NSW
Leasehold Jul 2010
Leasehold Jul 2010
HQ North, QLD
Bundall Corporate Centre, QLD Freehold Jan 2012
Total investment properties
Leasehold Aug 2010 143,891 Dec 2011
Jun 2012
Freehold Dec 2011 186,000
63,483 Dec 2011
1,453,429
Independent
valuation
Carrying
amount
2012
$’000
87,000
26,500
28,500
–
26,500
32,000
34,400
12,100
15,300
13,400
–
15,000
172,400
–
32,000
107,000
43,200
135,000
73,000
173,000
70,000
2011
$’000
88,000
28,000
33,000
–
26,000
34,250
36,250
11,500
15,850
13,050
–
14,100
168,000
38,800
36,000
103,000
41,000
126,500
68,000
172,750
73,750
2012
$’000
87,000
26,500
28,500
–
26,500
32,000
34,400
12,100
15,300
13,400
–
15,000
172,400
–
32,000
107,000
43,200
135,000
73,000
173,000
70,000
2011
$’000
88,000
28,500
33,000
–
26,000
34,250
36,500
11,700
16,100
13,400
–
14,300
172,000
38,800
36,000
103,000
41,000
126,500
71,500
172,750
73,750
Fair value
adjustment
2012
$’000
2011
$’000
(2,485)
(1,807)
(4,645)
–
547
(2,691)
(1,659)
400
(858)
–
–
1,243
1,190
(314)
(1,860)
(590)
42
633
(290)
677
(564)
713
88
475
(913) 10,629
(2,065)
230
(251)
(4,062)
8,262
3,977
3,425
2,155
(4,961)
6,861
(9,730)
589
5,217
243
(1,256)
(3,937)
170,000
137,800
170,000
137,800
970
7,781
172,400
194,000
65,300
(830) 16,408
–
–
1,698,000 1,409,100 1,724,400 1,444,850 (12,353) 33,659
198,800
194,000
65,300
170,000
–
–
143,500
–
–
(3,484)
(2,197)
(1) Comprises original acquisition date and price for CDPT or the relevant Syndicate which was mostly prior to the merger and stapling transactions in December 2006.
(2) TGA was acquired in a business combination transaction, through the acquisition of a subsidiary of Cromwell Property Fund, when the building was valued at $75m. (See
p | 60
note 37).
well versed well timed well considered 13.
Investments at Fair Value Through Profit or Loss
Unlisted equity securities at fair value
Listed equity securities at fair value
Investments at fair value through profit or loss
Group
Trust
2012
$’000
–
266
266
2011
$’000
4,177
–
4,177
2012
$’000
–
266
266
2011
$’000
4,177
–
4,177
These investments are designated at fair value through profit or loss. Gains and losses are shown in profit or loss.
Investments in Jointly Controlled Entity and Associates
14.
The Group has investments in two associates, Cromwell Property Fund (“CPF”) and Phoenix Portfolios Pty Ltd
(“Phoenix”). The Trust only has an investment in CPF. These entities were formed in Australia and their principal
activities are property investment (CPF) and investment management (Phoenix).
The reporting dates of the associates are the same as for the Group and Trust. The proportion of voting power held
equates to the proportion of ownership interest.
CPF does not recognise income tax expense or liabilities given its nature.
The Group and the Trust previously held an Investment in a jointly controlled entity, Cromwell TGA Planned Investment
(“TGA”). The remaining units of TGA not owned by the Group and Trust were acquired during the prior year.
Investments
(a)
The investments are accounted for using the equity method of accounting. Information relating to the investments is
detailed below:
Group
Investments accounted for using the equity method:
CPF – associate
Phoenix – associate
Trust
Investments accounted for using the equity method:
CPF – associate
Ownership Interest
2012
%
2011
%
18
50
18
50
2012
$’000
4,705
47
4,752
2011
$’000
5,436
56
5,492
18
18
4,705
5,436
TGA
The Group and Trust held a 67% interest in TGA at the beginning of the 2011 year. During the 2011 year the Group
and Trust acquired the remaining 33% holding in TGA through a unit sale deed approved by securityholders.
Details of the purchase consideration for the one-third interest in TGA are set out in note 37. As a result of the purchase
the results, assets and liabilities of TGA are consolidated in the financial statements of the Group and of the Trust
from the date of acquisition of the remaining interest.
CPF
At balance date the Group and Trust held 18% (2011: 18%) of the issued units of CPF. The Group and Trust are
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% (2011: 1.3%) of the issued units of CPF.
p | 61
(b) Movement in carrying amount of investments in jointly controlled entity and associates
Group
Phoenix
$’000
CPF
$’000
TGA
$’000
Total
$’000
2012
Balance at 1 July 2011
Share of profit/(loss)
Distributions received
Balance at 30 June 2012
2011
Balance at 1 July 2010
Share of profit/(loss) (1)
Distributions received
Carrying value derecognised (2)
Balance at 30 June 2011
Trust
56
(9)
–
47
27
29
–
–
56
5,436
(131)
(600)
4,705
6,903
(967)
(500)
–
5,436
CPF
$’000
–
–
–
–
49,872
225
(206)
(49,891)
–
TGA
$’000
5,492
(140)
(600)
4,752
56,802
(713)
(706)
(49,891)
5,492
Total
$’000
2012
Balance at 1 July 2011
Share of profit/(loss) (1)
Distributions received
Balance at 30 June 2012
2011
Balance at 1 July 2010
6,903
Share of profit/(loss) (1)
(967)
Distributions received
(500)
Carrying value derecognised (2)
–
5,436
Balance at 30 June 2011
(1) Share of profit/(loss) includes fair value gain/(loss) on investment properties and interest rate derivatives where applicable.
(2) The carrying amount of TGA was derecognised following the acquisition of the remaining units of TGA, resulting in TGA being fully consolidated by the Group and Trust.
56,775
(742)
(706)
(49,891)
5,436
49,872
225
(206)
(49,891)
–
5,436
(131)
(600)
4,705
5,436
(131)
(600)
4,705
–
–
–
–
(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
162
–
4
4
166
–
(119)
(119)
(119)
47
2012
CPF
$’000
532
29,537
–
29,537
30,069
(23,802)
(1,562)
(25,364)
(25,364)
4,705
TGA
$’000
Phoenix
$’000
–
–
–
–
–
–
–
–
–
–
70
–
3
3
73
–
(17)
(17)
(17)
56
2011
CPF
$’000
656
29,485
–
29,485
30,141
(23,617)
(1,088)
(24,705)
(24,705)
5,436
TGA
$’000
–
–
–
–
–
–
–
–
–
–
(d) Share of revenues, expenses and results of jointly controlled entity and associates
Revenue (1)
Expenses (1)
Share of profit/(loss)
269
(278)
(9)
3,560
(3,691)
(131)
–
–
–
158
(129)
29
4,156
(5,123)
(967)
352
(127)
225
(1) Includes share of fair value adjustment to investment properties and interest rate derivatives where applicable.
p | 62
well versed well timed well considered (e) Assets pledged as security
Borrowings (refer note 19) are secured by a registered floating charge over the investments.
15. Property, Plant and Equipment
Furniture and fittings at cost
Accumulated depreciation
Plant and equipment at cost
Accumulated depreciation
Property, plant and equipment
Group
Trust
2012
$’000
1,588
(792)
796
1,764
(1,233)
531
1,327
2011
$’000
1,453
(714)
739
1,509
(1,115)
394
1,133
2012
$’000
–
–
–
–
–
–
–
(a) Movement in property, plant and equipment
Reconciliations of the carrying amounts of each class of property, plant and equipment are set out below.
Group
Balance at 1 July 2011
Additions
Disposals
Depreciation
Balance at 30 June 2012
Balance at 1 July 2010
Additions
Depreciation
Balance at 30 June 2011
Furniture and
fittings
$’000
Plant and
Equipment
Owned
$’000
739
135
–
(78)
796
816
3
(80)
739
394
329
(21)
(171)
531
446
124
(176)
394
2011
$’000
–
–
–
–
–
–
–
Total
$’000
1,133
464
(21)
(249)
1,327
1,262
127
(256)
1,133
16. Deferred Tax Assets
Group
Trust
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
Tax losses written off
Adjustments in relation to prior periods
Balance at 30 June
2012
$’000
914
(1,917)
84
540
278
212
1,717
914
921
(23)
121
(178)
73
914
2011
$’000
921
(1,895)
34
404
196
265
1,917
921
791
–
156
(247)
221
921
2012
$’000
–
2011
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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).
p | 63
17.
Intangible Assets
Software – at cost
Accumulated amortisation
Intangible assets
Group
Trust
2012
$’000
2,405
(1,772)
633
2011
$’000
2,174
(1,571)
603
2012
$’000
–
–
–
2011
$’000
–
–
–
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
18. Trade and Other Payables
Trade payables and accruals
Lease incentives payable
Tenant security deposits
Amounts payable to Cromwell Corporation Limited and it’s
subsidiaries (refer note 32(d))
Other payables
Trade and other payables
603
408
(23)
(355)
633
9,575
2,875
106
–
1,916
14,472
496
393
–
(286)
603
8,453
10,815
158
–
2,005
21,431
–
–
–
–
–
8,625
2,875
106
540
1,165
13,311
–
–
–
–
–
7,478
10,815
158
1,554
1,353
21,358
Trade and other payables are generally unsecured, non-interest bearing and paid in cash within 30-60 days of recognition.
Lease incentives payable are generally unsecured, non-interest bearing and paid in cash within 6 months of recognition
according to the terms of the underlying lease.
19. Borrowings
Current
Secured
Loans – financial institutions
Borrowings – current
Non-Current
Secured
Loans – financial institutions
Unamortised transaction costs
Borrowings – non-current
Total
Secured
Loans – financial institutions
Unamortised transaction costs
Total borrowings
21,533
21,533
3,321
3,321
21,533
21,533
3,321
3,321
947,018
(4,374)
942,644
784,171
(3,883)
780,288
947,018
(4,374)
942,644
784,171
(4,155)
780,016
968,551
(4,374)
964,177
787,492
(3,883)
783,609
968,551
(4,374)
964,177
787,492
(4,155)
783,337
Loans shown above are net of transaction costs which are amortised over the term of the loan.
p | 64
well versed well timed well considered (a) Borrowing details
Borrowings of the Group and Trust are the same and details at balance date are set out below:
Facility
Note
Secured
Syndicated Facility
Tuggeranong (Tranche 1)
Tuggeranong (Tranche 2)
Multi Property (Tranche 1)
Multi Property (Tranche 2)
Multi Property (Tranche 3)
Mascot (Tranche 1)
Mascot (Tranche 2)
Mascot (Tranche 3)
HQ North (Tranche 1)
HQ North (Tranche 2)
Bundall Corporate Centre
Total facilities
(i)
(ii)
(ii)
(iii)
(iii)
(iii)
(iv)
(iv)
(iv)
(v)
(v)
(vi)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Maturity
Date
May 2014
June 2015
June 2013
July 2015
July 2015
Dec 2012
Dec 2014
Dec 2014
Dec 2014
Dec 2014
June 2013
Jan 2015
Facility
2012
$’000
Utilised
2012
$’000
Facility
2011
$’000
376,172
107,917
3,321
132,719
100,000
40,000
62,400
83,750
47,720
116,400
4,300
34,916
1,109,615
376,172
107,917
3,321
132,719
98,653
13,913
62,400
17,840
-
116,400
4,300
34,916
968,551
397,815
107,917
6,641
132,719
80,000
–
85,000
–
–
–
–
–
810,092
Utilised
2011
$’000
397,815
107,917
6,641
132,719
80,000
–
62,400
–
–
–
–
–
787,492
Syndicated Facility
(i)
The Syndicate finance facility is secured by first registered mortgages over a pool 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 the 30 day BBSY rate which was 3.63% at balance date plus a loan margin. Repayments of $21,643,000
(2011: $33,078,000) were made during the year from proceeds of the sale of investment properties.
Tuggeranong
(ii)
The loan is secured by a first registered mortgage over Tuggeranong Office Park. 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 the 30 day BBSY rate plus a loan margin. An amount of $107,917,000 (Tranche
1) was effectively fixed at balance date through interest rate swap arrangements. Repayments of $3,321,000 (2011:
$3,321,000) were made during the year.
(iii) Multi Property
The loan is secured by first registered mortgage over the Synergy, Mary Street, TGA and Exhibition Street investment
properties. The facility limit is $272,719,000 and has 3 tranches (previously only one).
Tranche 1 relates to the TGA Complex in Canberra and the 200 Mary Street and Synergy properties in Brisbane.
Tranche 2 relates to the Exhibition Street property. The facility is for $100,000,000, and is drawn to $98,653,000 with an
additional $1,347,000 to be drawn down to fund further capital commitments.
Tranche 3 was utilised to $30,000,000 in January 2012 to partly fund the acquisition of the Bundall investment property.
Repayments of $16,087,000 were made during the year and the facility was fully repaid, prior to its maturity date, post
balance date.
All tranches bear interest at a variable rate based on the 30 day BBSY rate plus a loan margin.
(iv) Mascot
The loan is secured by a first registered mortgage over the 203 Coward Street, Mascot property. The loan was refinanced
in December 2011 and consists of 3 tranches.
Tranche 1, $62,400,000, was fully drawn at balance date and replaced a previous facility. Tranche 2, $83,750,000, will
provide funding for additional committed capital expenditure. This facility was drawn down to $17,840,000 at balance date.
Tranche 3 will provide funding for additional committed capital expenditure and was undrawn at balance date.
The loan bears interest at a variable rate based on a margin over the 30 day BBSY rate. The interest rate was partially
fixed at balance date through interest rate swap arrangements.
p | 65
HQ North
(v)
The loan is secured by a first registered mortgage over the HQ North investment property and bears interest at a variable
rate based on the 30 day BBSY rate plus a margin. The interest rate was partially fixed at balance date through interest
rate swap arrangements. Assuming the property does not change in value over the next 12 months, $4,300,000 of
the facility is effectively repayable in June 2013. The remainder of the facility matures in December 2014.
Bundall Corporate Centre
(vi)
The loan is secured by a first registered mortgage over the Bundall Corporate Centre investment property and bears
interest at a variable rate based on the 30 day BBSY rate plus a margin. The interest rate was effectively fixed at balance
date through interest rate swap arrangement.
(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
Group
Trust
2012
$’000
75,610
1,023,554
–
1,099,164
2011
$’000
58,244
888,554
–
946,798
2012
$’000
75,610
1,023,554
–
1,099,164
2011
$’000
58,244
888,266
–
946,510
(c) Unused Finance Facilities
At balance date the Group had unused finance facilities totalling $141,064,000 (2011: $22,600,000).
(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 rates is provided in note 4.
20. Dividends/Distributions Payable
Dividends/distributions payable
Group
Trust
2012
$’000
20,470
2011
$’000
16,883
2012
$’000
20,474
2011
$’000
16,888
Distributions payable relate to June quarter distributions declared in June and payable in August of each year.
p | 66
well versed well timed well considered 21. Provisions
Current
Employee benefits
Property development
Provisions
Non-Current
Employee benefits
Make good
Provisions
Movement in provisions
Balance at 1 July
Provision (reversed)/recognised
Payments during year
Balance at 30 June
Group
2012
$’000
1,140
228
1,368
662
100
762
2011
$’000
825
428
1,253
477
100
577
Trust
2012
$’000
2011
$’000
–
–
–
–
–
–
–
–
–
–
–
–
Property Development
2011
2012
$’000
$’000
5,093
428
1,770
(200)
(6,435)
–
428
228
Make Good
2012
$’000
100
–
–
100
2011
$’000
100
–
–
100
Property development obligations
The Group entered into development agreements with CPF in respect of three properties leased from CPF. Under
the development agreements the Group can develop the land on the basis that CPF would fully recover its cost.
Duringthe current year the Group reversed $200,000 of the provision based on the property held by CPF increasing
in value. During the prior year the Group assessed the recoverable amount of the properties held by CPF at less
than CPF’s cost and provided for the difference through an increase in the provision of $1,770,000. Also during the prior
year the Group paid $6,435,000 to the CPF following the termination of the development agreement over one of
the properties leased from CPF.
Make good
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.
22. Other Current Liabilities
Unearned income
Group
Trust
2012
$’000
6,735
2011
$’000
7,085
2012
$’000
6,735
2011
$’000
7,085
Unearned income primarily comprises rent paid in advance by tenants.
p | 67
23. Contributed Equity
(a) Equity attributable to shareholders/unitholders
Contributed equity
Group
Company
CDPT
2012
$’000
894,058
2011
$’000
758,888
2012
$’000
66,344
2011
$’000
57,073
2012
$’000
827,989
2011
$’000
702,090
Movements in ordinary shares/ordinary units
Date
Details
01 July 10 Opening balance
21 July 10 Placement
21 July 10 Placement
23 Aug 10 Placement
23 Aug 10 Entitlement offer
2 Sept 10
Placement
20 Sept 10 Placement
14 Oct 10
Placement
17 Nov 10 Dividend reinvestment plan
16 Feb 11 Dividend reinvestment plan
04 Mar 11 Placement
04 Mar 11 Placement
08 Mar 11 Placement
14 Mar 11 Exercise of options
18 May 11 Dividend reinvestment plan
Transaction costs
30 June 11 Closing balance
19 Aug 11 Dividend reinvestment plan
16 Nov 11 Dividend reinvestment plan
16 Nov 11 Placement
16 Dec 11 Placement
19 Dec 11 Entitlement offer
20 Dec 11 Entitlement offer
21 Dec 11
Exercise of performance
rights
9 Feb 12
Entitlement offer
15 Feb 12 Dividend reinvestment plan
23 Feb 12
Exercise of performance
rights
9 Mar 12
Entitlement offer
16 May 12 Dividend reinvestment plan
Transaction costs
Number of
Securities
807,834,934
69,333,333
2,666,667
4,750,000
14,301,708
2,581,836
800,000
7,357,762
1,359,711
1,800,054
35,000,000
12,130,000
2,921,000
8,600
1,891,710
–
964,737,315
2,108,544
2,058,172
40,591,780
45,588,235
5,846,802
51,470,588
659,600
51,449,138
1,978,895
126,859
1,470,588
1,602,427
–
1,169,688,943
Group
Issue
Price
75¢
75¢
72¢
72¢
72¢
72¢
72¢
70¢
73¢
71¢
71¢
71¢
–
70¢
–
68¢
66¢
68¢
68¢
68¢
68¢
20¢
68¢
70¢
–
68¢
71¢
–
$’000
648,582
52,000
2,000
3,420
10,297
1,859
576
5,298
949
1,314
24,748
8,578
2,065
–
1,316
(4,114)
758,888
1,424
1,357
27,602
31,000
3,976
35,000
132
34,985
1,381
–
1,000
1,141
(3,828)
894,058
Company
CDPT
Issue
Price
5.6¢
5.6¢
5.4¢
5.4¢
5.4¢
5.4¢
5.1¢
5.1¢
5.1¢
5.2¢
5.2¢
5.2¢
–
5.3¢
–
4.9¢
4.3¢
4.5¢
4.5¢
4.5¢
4.5¢
1.3¢
5.0¢
5.2¢
–
5.0¢
5.3¢
–
$’000
49,197
3,884
149
256
769
139
43
376
67
92
1,727
599
144
–
92
(461)
57,073
95
89
1,811
2,033
261
2,296
9
2,596
102
–
74
85
(180)
66,344
Issue
Price
69.4¢
69.4¢
66.6¢
66.6¢
66.6¢
66.6¢
66.9¢
64.9¢
67.9¢
65.8¢
65.8¢
65.8¢
–
64.7¢
–
63.1¢
61.7¢
63.5¢
63.5¢
63.5¢
63.5¢
18.7¢
63.0¢
64.8¢
–
63.0¢
65.7¢
–
$’000
599,660
48,116
1,851
3,164
9,528
1,720
533
4,922
882
1,222
23,021
7,979
1,921
–
1,224
(3,653)
702,090
1,329
1,268
25,791
28,967
3,715
32,704
123
32,389
1,279
–
926
1,056
(3,648)
827,989
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.
The Company/CDPT has established a dividend/distribution reinvestment plan under which holders of ordinary stapled
securities may elect to have all of their dividend/distribution entitlement satisfied by the issue of new ordinary stapled
securities rather than being paid in cash. Securities are issued under the plan at a discount to the market price as
determined by the Directors before each dividend/distribution. During 2012 all securities were issued at no discount (2011:
all were issued at a discount of 3%).
p | 68
well versed well timed well considered
(b) Stapled Securities
The ordinary shares of the Company are stapled with the units of the Trust. These entitle the holder to participate in
dividends and distributions as declared from time to time and the proceeds on winding up. On a show of hands every
holder of stapled securities present at a meeting in person, or by proxy, is entitled to one vote, and upon a poll each
stapled security is entitled to one vote.
A reconciliation of the stapled number of ordinary shares of the Company and ordinary units of the Trust is as follows:
Ordinary shares / ordinary units
Unstapled units (held by the Company)
24. 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
2012
Company
Number
2012
CDPT
Number
1,169,688,943 1,169,964,049
(275,106)
1,169,688,943 1,169,688,943
–
2011
Company
Number
964,737,315
–
964,737,315
2011
CDPT
Number
965,012,421
(275,106)
964,737,315
Group
Trust
2012
$’000
2,189
2,340
4,529
1,588
601
2,189
2011
$’000
1,588
2,340
3,928
1,255
333
1,588
2012
$’000
–
–
–
–
–
–
2011
$’000
–
–
–
–
–
–
–
–
The share based payments reserve is used to recognise the fair value of options issued for employee services.
Available-for-sale financial assets revaluation reserve
Balance at 1 July
Balance at 30 June
2,340
2,340
2,340
2,340
–
–
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.
For the Group 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. For the Group there was no movement in the available-for-sale financial assets
revaluation reserve over the last two financial years.
25. Retained Earnings/(Accumulated Losses)
Retained Earnings/(Accumulated Losses)
(51,562)
(50,280)
(58,589)
(7,910)
Movements in retained earnings/(accumulated losses)
Balance at 1 July
Profit/(loss) for the year
Distributions
Balance at 30 June
(50,280)
(1,282)
–
(51,562)
(46,021)
(4,259)
–
(50,280)
(7,910)
24,359
(75,038)
(58,589)
(35,264)
92,361
(65,007)
(7,910)
p | 69
26. Non-Controlling Interests
Non-controlling interests
Movements in non-controlling interests
Balance at 1 July
Units issued by subsidiary
Profit for the year
Distributions paid/payable
De-recognition on deconsolidation
Balance at 30 June
Group
2012
$’000
769,678
2011
$’000
694,439
Trust
2012
$’000
5,320
694,439
125,899
24,359
(75,019)
–
769,678
564,636
102,430
92,361
(64,988)
–
694,439
5,463
–
414
(557)
–
5,320
2011
$’000
5,463
6,068
2,520
645
(519)
(3,251)
5,463
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.
27. Dividends/Distributions
Franking credits
Franking credits available for subsequent years based on a tax rate of 30% (2011 – 30%)
Group
2012
$’000
1,410
2011
$’000
1,599
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 2012 and 2011 financial years.
Distributions paid/payable by the Group
2012
Date Paid
16 November 2011
15 February 2012
16 May 2012
16 August 2012
2011
Date Paid
17 November 2010
16 February 2011
18 May 2011
19 August 2011
(1) Cents per stapled security.
2012
Cents (1)
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
2011
Cents (1)
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
2012
$’000
16,920
17,602
20,027
20,470
75,019
2011
$’000
15,919
15,943
16,243
16,883
64,988
p | 70
well versed well timed well considered
Distributions paid/payable by the Trust
2012
Date Paid
16 November 2011
15 February 2012
16 May 2012
16 August 2012
2011
Date Paid
17 November 2010
16 February 2011
18 May 2011
19 August 2011
(1) Cents per unit.
2012
Cents (1)
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
2011
Cents (1)
1.75¢
1.75¢
1.75¢
1.75¢
7.00¢
2012
$’000
16,925
17,607
20,032
20,474
75,038
2011
$’000
15,923
15,947
16,249
16,888
65,007
All distributions from the Group and 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)
Satisfied by the issue of securities (1) (2)
Payable at balance date
(1) Includes June distributions from prior year paid in August.
(2) Pursuant to Distribution Reinvestment Plan.
28. Earnings/(loss) per Share
Earnings/(loss) per share/unit
Basic earnings/(loss) per share/unit
Diluted earnings/(loss) per share/unit
Earnings used to calculate basic and diluted earnings/(loss) per share/unit:
Profit for the year
Profit attributable to non-controlling interests
Profit/(loss) attributable to ordinary equity holders of the company/
trust used in calculating basic/diluted earnings/(loss) per share/unit
Weighted average number of ordinary shares/units used
in calculating basic earnings/(loss) per share/unit
Effect of dilutive securities:
– Director and employee performance rights
Weighted average number of ordinary shares/units and potential
ordinary shares/units used in calculating diluted earnings/(loss)
per share/unit
Group
Trust
2012
$’000
66,129
5,303
20,470
91,902
2011
$’000
60,684
3,579
16,883
81,146
2012
$’000
66,520
4,932
20,474
91,926
2011
$’000
60,702
3,579
16,888
81,169
Group
Trust
2012
(0.1¢)
(0.1¢)
2011
(0.5¢)
(0.5¢)
2012
2.3¢
2.3¢
2011
10.1¢
10.0¢
$’000
$’000
$’000
$’000
23,077
24,359
88,102
92,361
24,773
414
93,006
645
(1,282)
(4,259)
24,359
92,361
Number
of Shares
Number
of Shares
Number
of Shares
Number
of Shares
1,069,526,714
918,318,875 1,069,801,820
918,593,981
3,467,267
1,271,820
3,467,267
1,271,820
1,072,993,981
919,590,695 1,073,269,087
919,865,801
p | 71
Performance rights granted under the Performance Rights Plan are considered to be potential ordinary shares/units and
have been included in the determination of diluted earnings/(loss) per share/unit to the extent to which they are dilutive.
The performance rights have not been included in the determination of basic earnings/(loss) per share/unit. Details
relating to the performance rights are set out in Note 31.
Earnings/(loss) per stapled security
Basic earnings/(loss) per stapled security
Diluted earnings/(loss) per stapled security
Earnings used to calculate basic and diluted earnings/(loss) per stapled security:
Loss for the year attributable to company shareholders
Profit for the year attributable to trust unitholders
Profit attributable to stapled securityholders of the Group used in calculating
basic/diluted earnings/(loss) per stapled security
Weighted average number of stapled securities used in calculating
basic earnings/(loss) per stapled security
Effect of dilutive securities:
– Director and employee performance rights
Weighted average number of ordinary stapled securities and potential ordinary stapled
securities used in calculating diluted earnings/(loss) per stapled security
Group
2011
9.6¢
9.6¢
2012
2.2¢
2.2¢
$’000
$’000
(1,282)
24,359
(4,259)
92,361
23,077
88,102
Number
of Securities
Number
of Securities
1,069,526,714
918,318,875
3,467,267
1,271,820
1,072,993,981
919,590,695
Performance rights granted under the Performance Rights Plan are considered to be potential ordinary stapled securities
and have been included in the determination of diluted earnings/(loss) per stapled security to the extent to which they are
dilutive. The performance rights have not been included in the determination of basic earnings/(loss) per stapled security.
Details relating to the performance rights are set out in Note 31.
p | 72
well versed well timed well considered 29. Cash flow Information
(a) Reconciliation of profit/(loss) to net cash provided by operating activities
Group
2012
$’000
2011
$’000
Net profit/(loss)
Amortisation and depreciation
Amortisation (loan transaction costs)
Amortisation of lease costs and incentives
Share of profits of associates (net of distributions)
(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:
Property development inventories/provisions
Straight-line rentals
Loss on disposal of property, plant and equipment and intangibles
Changes in operating assets and liabilities:
(Increase)/decrease:
Trade and other receivables
Prepayments
Tax assets
Increase/(decrease):
Trade payables and accruals
Provisions (employee benefits/restoration)
Unearned revenue
Net cash provided by operating activities
(b) Finance facilities
Refer to note 19 for details of unused finance facilities.
23,077
604
2,560
7,705
740
331
601
12,353
38,483
173
(200)
(6,892)
44
1,199
(354)
187
2,680
500
(350)
83,441
88,102
542
2,042
5,773
1,419
195
333
(33,659)
1,920
(604)
3,695
(4,883)
–
776
829
19
1,215
(5)
467
68,176
Trust
2012
$’000
24,773
–
2,833
7,705
731
331
–
12,353
38,483
173
–
(6,892)
–
1,579
(258)
–
1,592
–
(350)
83,053
2011
$’000
93,006
–
2,770
5,773
1,448
195
–
(33,659)
1,920
(604)
–
(4,883)
–
(1,903)
624
–
3,274
–
467
68,428
(c) Cash held as part of minimum net tangible assets
At balance date cash held by controlled entities of the Company of $2,553,000 (2011: $1,014,000) was utilised to meet
minimum net tangible asset requirements 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.
(c) Non cash items
Shares/units issued on reinvestment of distributions
5,303
3,579
4,932
3,579
p | 73
30. Key Management Personnel Disclosures
(a) Key management personnel compensation
Group and Trust
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
2012
$
4,149,034
171,494
84,431
457,585
4,862,544
2011
$
4,233,003
171,605
77,112
302,752
4,784,472
(b) Equity instrument disclosures relating to key management personnel
Performance rights
(i)
The numbers of performance rights over ordinary shares in the Company (and units in the CDPT through the stapling
arrangement) held during the financial year by each director of the Company 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
–
–
–
–
–
–
–
–
–
2012
Non-executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
M Flax (1)
M Watters
G Cannings (2)
Executive Directors:
PL Weightman
DJ Wilson
Other key management personnel of the Group:
NE Riethmuller
PW Howard (3)
DA Gippel
JA Clarke
MJ Blake
B Binning
PJ Cowling
123,459
96,324
659,600
–
95,894
126,859
–
6,842,136
4,000,000
1,740,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52,851
–
236,248
–
136,932
107,386
171,165
704,582
–
–
(659,600)
–
–
(126,859)
–
(786,459)
–
(96,324)
–
–
–
–
(96,324)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000,000
1,740,000
176,310
–
236,248
–
232,826
107,386
171,165
6,663,935
(1) M Flax ceased to be a KMP on 1 August 2011
(2) G Cannings became a KMP on 1 August 2011
(3) PW Howard ceased to be a KMP on 26 October 2011
p | 74
well versed well timed well considered
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
–
–
–
–
–
–
–
–
2011
Non–executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
M Flax
M Watters (1)
Executive Directors:
PL Weightman
DJ Wilson
Other key management personnel of the Group:
NE Riethmuller
PW Howard
DA Gippel
JA Clark
MJ Blake
B Binning
PJ Cowling (2)
–
–
915,933
92,100
338,000
326,992
227,800
2,983,758
738,733
344,200
–
–
–
–
–
–
–
–
4,000,000
1,740,000
123,459
96,324
–
–
95,894
–
–
6,055,677
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(738,733)
(344,200)
–
–
(256,333)
(92,100)
(338,000)
(200,133)
(227,800)
(2,197,299)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000,000
1,740,000
123,459
96,324
659,600
–
95,894
126,859
–
6,842,136
(1) M Watters became a KMP on 4 April 2011
(2) PJ Cowling became a KMP on 1 July 2010
Share holdings/unit holdings
(ii)
The numbers of shares in the Company and units in the CDPT 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.
p | 75
Name
2012
Non-executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer (1)
M Flax (2)
M Watters (3)
G Cannings (4)
Executive Directors:
PL Weightman
DJ Wilson
Other key management personnel of the Group:
NE Riethmuller
PW Howard (5)
DA Gippel
JA Clarke
MJ Blake
B Binning
PJ Cowling
Balance
at 1 July
On exercise
of options
Net purchases
(sales)
Ceased
to be KMP
Balance
at 30 June
1,119,430
14,000,000
363,000
2,225,000
5,261,765
–
416,666
–
–
15,921,167
1,970,775
–
–
547,264
71,032
1,775,612
10,760
1,675,801
45,358,272
–
–
–
–
–
–
–
–
–
–
–
–
–
659,600
–
–
126,859
–
786,459
1,457,416
–
91,500
95,000
(1,200,000)
–
–
–
58,000
–
1,425
–
–
–
–
–
4,262
–
507,603
–
–
–
–
–
–
(416,666)
–
–
2,576,846
14,000,000
454,500
2,320,000
4,061,765
–
–
–
58,000
–
–
15,921,167
1,972,200
–
–
–
–
–
–
–
(416,666)
–
–
1,206,864
71,032
1,775,612
141,881
1,675,801
46,235,668
(1) M Wainer is a director of Redefine International Plc which indirectly owns Redefine Australia Investments Limited, which at 30 June 2012 owned 270,580,778 (2011: 213,833,333)
stapled securities in the Group. M Wainer is also CEO and a director of Redefine Properties which at 30 June 2012 owned 45,588,235 (2011: nil) stapled securities in the Group.
(2) M Flax resigned as an alternate director and ceased to be a KMP on 1 August 2011.
(3) M Watters is a director of Redefine International Plc which indirectly owns Redefine Australia Investments Limited, which owns 270,580,778 (2011: 213,833,333) stapled securities in
the Group.
(4) G Cannings became an alternate director for M Watters and a KMP on 1 August 2011.
(5) PW Howard resigned and ceased to be a KMP on 26 October 2011.
No shares or units were received by the above persons as compensation during the 2012 year.
Name
2011
Non-executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
M Flax
M Watters
Executive Directors:
PL Weightman
DJ Wilson
Other key management personnel of the Group:
NE Riethmuller
PW Howard
DA Gippel
JA Clarke
MJ Blake
B Binning
PJ Cowling
Balance
at 1 July
On exercise
of options
Net
purchases
(sales)
Ceased
to be KMP
Balance
at 30 June
370,000
14,000,000
330,000
1,927,580
5,261,765
–
–
–
15,464,167
1,955,744
–
–
547,264
71,032
1,775,612
10,000
1,675,801
43,388,965
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
749,430
–
33,000
297,420
–
–
416,666
–
457,000
15,031
–
–
–
–
–
760
–
1,969,307
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,119,430
14,000,000
363,000
2,225,000
5,261,765
–
416,666
–
15,921,167
1,970,775
–
–
547,264
71,032
1,775,612
10,760
1,675,801
45,358,272
No shares or units were received by the above persons as compensation or on the exercise of options or performance
rights during the 2011 year.
At balance date the numbers above for the Directors and other key management personnel represent the number
of stapled securities of the Group held.
p | 76
well versed well timed well considered
(c) Loans to key management personnel
No loans were made during the 2012 or 2011 year to key management personnel and no loans were outstanding at the reporting date.
(d) Other transactions with key management personnel
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 2012 was $88,400 (2011: $88,400). The payment of rent is on normal commercial terms and
conditions and at market rates.
31. 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 the Company, 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 employees 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 the 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 performance rights 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
2012
16/12/2009
08/02/2010
23/08/2010
23/08/2010
23/08/2010
23/08/2010
23/08/2010
07/03/2011
26/05/2011
26/05/2011
26/05/2011
05/09/2011
05/09/2011
05/09/2011
15/01/2012
07/03/2012
21/09/2012
21/09/2012
21/09/2013
21/09/2013
21/09/2013
01/08/2013
01/10/2013
01/10/2014
01/10/2015
05/10/2014
05/10/2014
05/10/2014
Weighted average exercise price
2011
18/09/2007
18/09/2007
06/12/2007
16/12/2009
08/02/2010
23/08/2010
23/08/2010
23/08/2010
23/08/2010
23/08/2010
07/03/2011
26/05/2011
26/05/2011
26/05/2011
19/01/2011
19/01/2011
07/04/2011
15/01/2012
07/03/2012
21/09/2012
21/09/2012
21/09/2013
21/09/2013
21/09/2013
01/08/2013
01/10/2013
01/10/2014
01/10/2015
Weighted average exercise price
$0.20
$0.00
$0.00
$0.10
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
$0.20
$0.00
$0.10
$1.21
$0.00
$1.21
$0.20
$0.00
$0.00
$0.10
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
of the year
659,600
126,859
170,287
123,459
101,378
47,433
192,218
97,633
1,913,333
1,913,333
1,913,334
–
–
–
7,258,867
$0.42
2,811,434
8,600
1,082,933
659,600
126,859
–
–
–
–
–
–
–
–
–
4,689,426
$1.03
Granted during
the year
Forfeited during
the year
Exercised
during the year
Balance
at year end
–
–
–
–
–
–
–
–
–
–
–
393,679
590,622
52,851
1,037,152
$0.08
–
–
–
–
–
170,287
123,459
158,283
47,433
246,337
97,633
1,913,333
1,913,333
1,913,334
6,583,432
$0.45
–
–
–
–
–
–
(96,324)
–
–
–
–
–
–
–
(96,324)
$0.20
(2,811,434)
–
(1,082,933)
–
–
–
–
(56,905)
–
(54,119)
–
–
–
–
(4,005,391)
$1.18
(659,600)
(126,859)
–
–
–
–
–
–
–
–
–
–
–
–
(786,459)
$0.17
–
(8,600)
–
–
–
–
–
–
–
–
–
–
–
–
(8,600)
–
–
–
170,287
123,459
101,378
47,433
95,894
97,633
1,913,333
1,913,333
1,913,334
393,679
590,622
52,851
7,413,236
$0.40
–
–
–
659,600
126,859
170,287
123,459
101,378
47,433
192,218
97,633
1,913,333
1,913,333
1,913,334
7,258,867
$0.42
p | 77
At balance date nil Performance Rights (2011: nil) were vested and exercisable. The weighted average remaining
contractual life of performance rights outstanding at the end of the year was 2.1 years (2011: 2.6 years).
The assessed fair value of performance rights granted is as follows:
Grant Date
18/09/2007
18/09/2007
06/12/2007
16/12/2009
08/02/2010
23/08/2010
23/08/2010
23/08/2010
23/08/2010
23/08/2010
07/03/2011
26/05/2011
26/05/2011
26/05/2011
05/09/2011
05/09/2011
05/09/2011
Expiry Date
19/01/2011
19/01/2011
07/04/2011
15/01/2012
07/03/2012
21/09/2012
21/09/2012
21/09/2013
21/09/2013
21/09/2013
01/08/2013
01/10/2013
01/10/2014
01/10/2015
05/10/2014
05/10/2014
05/10/2014
Exercise price
Non-market based
Market based
Fair value (cents)
$1.21
$0.00
$1.21
$0.20
$0.00
$0.00
$0.10
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
$0.00
$0.10
$0.20
15.0¢
96.9¢
–
41.5¢
59.1¢
59.8¢
50.6¢
54.2¢
45.5¢
37.0¢
61.5¢
13.9¢
12.6¢
11.5¢
50.0¢
41.1¢
32.3¢
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 2012 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
$0.00
05/09/11
$0.69
27%
10.22%
3.82%
05/10/14
$0.10
05/09/11
$0.69
27%
10.22%
3.82%
05/10/14
$0.20
05/09/11
$0.69
27%
10.22%
3.82%
05/10/14
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 2011 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
$0.00
23/08/10
$0.73
32%
9.66%
4.55%
21/09/12
$0.10
23/08/10
$0.73
32%
9.66%
4.55%
21/09/12
$0.00
23/08/10
$0.73
32%
9.66%
4.59%
21/09/13
$0.10
23/08/10
$0.73
32%
9.66%
4.59%
21/09/13
$0.20
23/08/10
$0.73
32%
9.66%
4.59%
21/09/13
$0.00
07/03/11
$0.74
26%
9.46%
5.12%
01/08/13
$0.50
26/05/11
$0.69
25%
10.14%
4.97%
01/10/13
$0.50
26/05/11
$0.69
25%
10.14%
5.09%
01/10/14
$0.50
26/05/11
$0.69
25%
10.14%
5.19%
01/10/15
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.
p | 78
well versed well timed well considered
(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.
(c) 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:
Performance rights issued under PRP
Expenses arising from share based payments
32. Other Related Party Transactions
2012
$’000
601
601
Group
Trust
2011
$’000
333
333
2012
$’000
–
–
2011
$’000
–
–
(a) Parent entity and subsidiaries
Cromwell Corporation Limited is the ultimate parent entity in the Group. Cromwell Diversified Property Trust is
the ultimate parent entity in the Trust. Details of subsidiaries for both parent entities are set out in Note 34.
(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 $1,622,879 (2011: $1,785,335)
from Cromwell Property Fund;
The Group received $600,401 (2011: $706,000) in distributions from its jointly controlled entity and associate during
the year (refer note 14);
The Group charged Cromwell Property Fund $1,184,581 (2011: $868,824) acquisition, registry services, accounting
services, property, facility management and project management fees and leasing commissions during the year; and
The Group charged its jointly controlled entity and associates $241,150 (2011: $221,910) management fees during
the year;
During the 2011 year the Group and Trust acquired the remaining units in Cromwell TGA Planned Investment from
Cromwell Property Fund (refer notes 14 and 37);
During the 2011 year the Group and Trust acquired the 321 Exhibition Street investment property from Cromwell
Property Fund for $90,200,000. The acquisition was partly funded by way of repayment of $10,200,000 of the loan
receivable from Cromwell Property Fund (refer note 8).
(c) Transactions with managed investment schemes (managed by the consolidated entity)
Cromwell Property Securities Limited (“cps”) and Cromwell Fund’s Management Limited (“CFM”) both act as responsible
entity for a number of managed investment schemes. The Group derives a range of benefits from schemes managed by
cps and CFM including management and acquisition fees. The Group provided Cromwell Ipswich City Heart Trust (“ICH”),
a scheme for which CFM acts as responsible entity, with a loan facility during the current year (refer note 8). The group
earned $622,959 in interest from ICH under the loan facility in 2012.
p | 79
(d) Transactions between the Trust and Cromwell Corporation Limited and its subsidiaries
(including the Responsible Entity)
(i)
Expense
Amounts paid/payable
Funds management fees
Property management fees
Accounting fees
Investment properties
Project management fees
Leasing commissions
Distributions (1)
(ii)
Revenue
Amounts received/receivable
Interest income
Rental income and recoverable outgoings
Aggregate amount payable to responsible entity and associates at balance date
(included in trade and other payables)
Aggregate amount receivable from the responsible entity and associates at balance date
(included in trade and other receivables)
(1) Distributions paid/payable mostly relate to the Responsible Entity’s 8% holding in Cromwell Mary Street Planned Investment.
Trust
2012
$
2011
$
8,496,578
4,373,277
280,980
369,864
1,592,943
576,835
8,674,483
3,085,083
273,909
486,986
1,586,745
481,783
460,910
4,249,096
872,163
5,158,496
540,371
1,553,691
3,203,132
10,789,477
The Responsible Entity holds 1,517,000 (2011: 1,517,000) units in a subsidiary of CDPT, Cromwell Mary Street Planned
Investment.
Loan to the Company
(iii)
During the year the Trust advanced $nil (2011: $nil) to the Company under the loan facility between CDPT and the Company
and received repayments of $7,000,000 (2011: $8,172,000). The loan is unsecured, repayable on 1 July 2014 and earns
interest at variable rates being the 30 day BBSW rate plus a margin of 2.20% (2011: 2.20%).
p | 80
well versed well timed well considered 33. Parent Entity Disclosures
As at and throughout the financial year ending 30 June 2012 the parent entity of the Group was Cromwell Corporation
Limited and the parent entity of the Trust was Cromwell Diversified Property Trust.
(a) Summary financial information
The individual financial statements for the parent entities show the following aggregations.
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
Cromwell
Corporation Limited
Cromwell
Diversified Property Trust
2012
$’000
2011
$’000
2012
$’000
2011
$’000
(68)
(68)
12,495
17,160
59
3,247
13,913
66,344
2,189
(54,620)
13,913
(5,961)
32,022
59,840
(5,961)
32,022
59,840
11,534
14,588
290
10,478
4,110
61,898
1,400,803
40,015
1,303,599
68,979
697,482
703,321
44,845
683,162
620,437
57,073
1,588
(54,551)
4,110
827,989
–
(124,668)
703,321
702,090
–
(81,653)
620,437
(b) Commitments for capital expenditure
As at balance date, Cromwell Corporation Limited had no commitments (2011: no commitments) in relation to capital
expenditure contracted for but not recognised as liabilities.
As at balance date, Cromwell Diversified Property Trust had commitments of $116,712,000 (2011: $54,400,000) in
relation to capital expenditure contracted for but not recognised as liabilities.
(c) Guarantees provided
During the years ended 2012 and 2011 neither parent had provided any guarantees to entities it controlled.
(d) Contingent liabilities
Neither parent entity had contingent liabilities at year end (2011: $nil).
p | 81
Investments in Controlled Entities
34.
The Company’s and CDPT’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 Seven Hills Pty Ltd
Cromwell Holding Trust No 1 Pty Ltd
Cromwell Holding Trust No 2 Pty Ltd
Cromwell Altona Trust
Cromwell Real Estate Partners Pty Ltd (3)
Cromwell Project & Technical Solutions Pty Ltd (3)
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
Tuggeranong Head Trust
Tuggeranong Trust
CDPT Finance Pty Ltd
EXM Head Trust
EXM Trust
Mascot Head Trust
Mascot Trust
Cromwell Phoenix Opportunities Fund (3)
Cromwell Property Fund Trust No 2
Cromwell Property Fund Trust No 3
Cromwell Diversified Property Trust No 2
Cromwell Diversified Property Trust No 3
Cromwell TGA Planned Investment
Cromwell HQ North Head Trust (3)
Cromwell HQ North Trust (3)
Cromwell Bundall Corporate Centre Head Trust (3)
Cromwell Bundall Corporate Centre Trust (3)
2012
%
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
92
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2011
%
100
100
100
100
100
100
100
50
100
100
100
100
100
–
–
100
100
100
100
100
100
92
100
100
100
100
100
100
100
100
100
–
100
100
100
100
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.
(3) Incorporated/formed during the 2012 year.
p | 82
well versed well timed well considered
35. Segment Information
(a) Description of segments
Reportable Group 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 chief operating decision maker has been identified as the chief executive officer. 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.
Trust
The Trust has one reportable segment. It holds properties in Australia. Revenue is derived from rentals and associated
recoverable outgoings. The Trust’s properties are leased on a commercial basis incorporating varying lease terms and
conditions. These include the lease period, renewal options, periodic rent and, where applicable, indexation based on CPI,
fixed and/or market reviews.
(b) Other segment information
Accounting policies
(i)
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.
Inter-segment transactions
(ii)
Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an “arms-
length” basis and are eliminated on consolidation.
Equity-accounted investments
(iii)
The Group had 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.
Major customers
(iv)
Revenue of approximately $54,115,000 (2011: $49,755,000) is derived from a single external customer (Commonwealth of
Australia) and is part of the property investment segment.
p | 83
(c) Operating segments
2012
Segment results
Segment revenue and other income
Sales – external customers
Sales – intersegmental
Profit of equity accounted entity (before adjustments)
Distributions
Interest
Other income
Total segment revenue and other income
Segment expenses
Property expenses and outgoings
Property development costs
Intersegmental costs
Funds management commissions
Employee benefits expense
Finance costs
Loss of equity accounted entity (before adjustments)
Administration and overhead costs
Total segment expenses
Income tax expense/(benefit)
Segment profit/(loss) (1)
Reconciliation to reported profit/(loss)
Loss on sale of investment properties
Loss on sale of other assets
Fair value adjustments/write downs:
Investment properties
Interest rate derivatives
Investments at fair value through profit and loss
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 associates
Acquisitions of non-current segment assets
Investment properties
Investments at fair value through profit or loss
Property, plant and equipment
Intangibles
Property
Investment
Funds
Management
Property
Development
Consolidated
$’000
$’000
$’000
$’000
176,686
772
863
37
3,991
18
182,367
25,715
–
13,151
–
–
61,963
–
1,113
101,942
–
80,425
(331)
–
(12,353)
(38,483)
(173)
–
(993)
6,892
(7,705)
(2,560)
–
–
–
(55,706)
24,719
1,816,591
1,045,322
4,705
316,235
266
–
–
316,501
4,567
13,151
–
–
722
122
18,562
–
–
772
487
12,746
–
9
4,383
18,397
(58)
223
–
(44)
–
–
–
–
–
–
–
–
(601)
(604)
(178)
(1,427)
(1,204)
18,006
3,042
47
–
–
464
408
872
–
–
–
–
–
–
–
–
638
–
–
–
–
–
–
638
–
(638)
–
–
–
–
–
200
–
–
–
–
–
–
–
200
(438)
181,253
–
863
37
4,713
140
187,006
25,715
638
–
487
12,746
61,963
9
5,496
107,054
(58)
80,010
(331)
(44)
(12,353)
(38,483)
(173)
200
(993)
6,892
(7,705)
(2,560)
(601)
(604)
(178)
(56,933)
23,077
3,004
249
1,837,601
1,048,613
–
–
–
–
–
–
4,752
316,235
266
464
408
317,373
(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.
p | 84
well versed well timed well considered 2011
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
Administration and overhead costs
Intersegmental costs
Funds management commissions
Employee benefits expense
Finance costs
Total segment expenses
Income tax expense/benefit
Segment profit/(loss) (1)
Reconciliation to reported profit/(loss)
Loss on sale of investment properties
Fair value adjustments/write downs:
Investment properties
Interest rate derivatives
Investments at fair value through profit and loss
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 associates
Acquisitions of non-current segment assets
Investment properties
Investments at fair value through profit or loss
Property, plant and equipment
Intangibles
Property
Investment
Funds
Management
Property
Development
Consolidated
$’000
$’000
$’000
$’000
138,476
709
852
255
4,320
4
144,616
20,292
–
957
12,034
–
–
45,397
78,680
–
65,936
(195)
33,659
(1,920)
604
–
(1,594)
4,883
(5,773)
(2,042)
–
–
–
27,622
93,558
3,964
12,034
29
–
664
12
16,703
–
–
4,156
709
480
11,347
–
16,692
(169)
180
–
–
–
–
–
–
–
–
–
(333)
(542)
(247)
(1,122)
(942)
1,521,553
832,364
14,860
1,476
5,436
365,837
4,593
–
–
370,430
56
–
–
127
393
520
–
–
–
–
–
–
–
–
819
–
–
–
–
–
819
–
(819)
142,440
–
881
255
4,984
16
148,576
20,292
819
5,113
–
480
11,347
45,397
83,448
(169)
65,297
–
(195)
–
–
–
(3,695)
–
–
–
–
–
–
–
(3,695)
(4,514)
3,015
428
–
–
–
–
–
–
33,659
(1,920)
604
(3,695)
(1,594)
4,883
(5,773)
(2,042)
(333)
(542)
(247)
22,805
88,102
1,539,428
834,268
5,492
365,837
4,593
127
393
370,950
(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.
p | 85
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 amortisation
Fair value net gain from investment properties
Fair value net gain from investments at fair value through profit or loss
Increase in recoverable amount of loans receivable
Share of operating profit of equity accounted entities
Total revenue and other income
36. Commitments for Expenditure
2012
$’000
2011
$’000
187,006
148,576
6,892
(6,332)
–
–
200
(863)
186,903
4,883
(4,865)
33,659
604
–
(881)
181,976
Group
Trust
2012
$’000
2011
$’000
2012
$’000
2011
$’000
(a) 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
410
1,172
1,582
51
101
152
–
–
–
–
–
–
Operating leases primarily comprise 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 not recognised on consolidation. Operating
lease commitments of the Company are paid for and recognised as expenses by a controlled entity.
(b) Capital expenditure commitments
Commitments in relation to capital expenditure contracted for at reporting date but not recognised as a liability are
payable as follows:
Within one year
Later than one year but not later than five years
73,848
42,864
116,712
31,800
22,600
54,400
73,848
42,864
116,712
31,800
22,600
54,400
p | 86
well versed well timed well considered
37. Business Combinations
Acquisition of Cromwell TGA Planned Investment
On 20 July 2010 the Group and Trust acquired the remaining units in Cromwell TGA Planned Investment (“TGA”) from
the Cromwell Property Fund (refer to note 14).
Following the acquisition, the Group and Trust fully consolidate the assets and liabilities and performance of TGA,
including the TGA Complex which has been valued at $75,000,000 (refer note 12) and additional borrowings of
$12,973,000 secured against the TGA Complex (refer note 19). Prior to the acquisition, TGA was a jointly controlled entity
(refer note 14).
The Group and the Trust have recognised the fair values of the identifiable assets and liabilities based upon the best
available information at the acquisition date. The business combination accounting is as follows:
Investment in associate/controlled entity
Other assets
Investment Property
Other liabilities
Borrowings
Net assets
Purchase consideration:
Cash paid
Total purchase consideration
Recognised on
Acquisition
$’000
25,105
–
–
–
(12,973)
12,132
Already
Held
$’000
49,891
–
–
–
(25,946)
23,945
Balance on
Consolidation
$’000
–
22
75,000
(26)
(38,919)
36,077
$’000
12,132
12,132
–
(12,132)
(12,132)
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
Had the acquisition occurred at the beginning of the reporting period, the consolidated statements of comprehensive
income would not have been significantly impacted.
38. Contingent Liabilities
The Directors are not aware of any material contingent liabilities of the Group or the Trust (2011: nil).
p | 87
39. 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
Other – review of pro forma balance sheets and forecasts
Group
Trust
2012
$
2011
$
2012
$
2011
$
235,000
6,000
30,000
271,000
248,500
4,500
32,500
285,500
155,000
–
30,000
185,000
159,000
–
32,000
191,000
70,000
70,000
76,000
76,000
–
–
–
–
The auditor receives remuneration for audit and other services relating to other entities for which Cromwell Property
Securities Limited and Cromwell Funds Management Limited, both controlled entities, act as responsible entity.
The remuneration is disclosed in the relevant entity’s financial reports and totalled $112,500 (2011: $78,000).
40. Subsequent Events
The Group announced on 8 August 2012 that it was in negotiations for the potential acquisition of all the units
in the unlisted Cromwell Property Fund (“CPF”) that it does not already own. CPF has a portfolio of 5 properties
valued at $168 million.
Cromwell Property Securities Limited (“cps”), the responsible entity of CPF and a wholly-owned subsidiary of
the Group, has undertaken an extensive review to determine the most appropriate way to provide unitholders
in CPF with both liquidity and an investment with stable distributions. While final terms are still to be settled
and no decision on the transaction has been made, if Cromwell acquires all of the units in CPF that it does not
already own, unitholders in CPF would receive Cromwell stapled securities in return. It is likely that the number
of stapled securities that would be issued to unitholders in CPF would be calculated taking into account the value
of the underlying net tangible assets (NTA) of the respective entities.
The units in CPF which would be acquired are expected to have a net tangible asset value of approximately $22 million.
The transaction would provide Cromwell with 100% ownership of CPF’s properties, with minimal transaction costs.
The transaction would also effectively eliminate Cromwell’s existing $24 million loans to CPF. If the transaction
proceeds, it is not expected to have a material impact on the earnings per security, distributions per security, NTA or
gearing of the Group for 2013.
If a transaction proceeds, it is likely to be structured as a trust scheme and would require certain regulatory relief and
the approval of unitholders in CPF. Details of the transaction, including conditions, would be set out in an explanatory
memorandum accompanying the CPF meeting documents.
p | 88
well versed well timed well considered
Directors’ Declaration
In the opinion of the Directors of Cromwell Corporation Limited and Cromwell Property Securities Limited as
Responsible Entity for the Cromwell Diversified Property Trust (collectively referred to as “the Directors”):
(a) the attached financial statements and notes are in accordance with the Corporations Act 2001, including:
(i) complying with Australian Accounting Standards (including the Australian Accounting Interpretations),
the Corporations Regulations 2001; and
(ii) giving a true and fair view of the Group’s and the Trust’s financial position as at 30 June 2012 and of their
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 and the Trust 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 2012 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 22nd day of August 2012
p | 89
Independent Auditor’s Report
To the Securityholders of Cromwell Property Group
To the Unit holders of
Cromwell Diversified Property Trust
Report on the Financial Report
Cromwell Property Group (“the Group”) comprises Cromwell Corporation Limited and the entities it
controlled at the end of the year or from time to time during the year and Cromwell Diversified Property
Trust and the entities it controlled (“the Trust”) at the end of the year or from time to time during
the year.
We have audited the accompanying financial reports of the Group and the Trust, which comprises
the consolidated statement of financial position as at 30 June 2012, the consolidated statement
of comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’ declaration for both Cromwell
Corporation Limited and Cromwell Property Securities Limited as responsible entity for the Cromwell
Diversified Property Trust.
Directors’ Responsibility for the Financial Report
The directors of Cromwell Corporation Limited and Cromwell Property Securities Limited
as responsible entity for the Cromwell Diversified Property Trust (collectively referred to as
“the directors”) are responsible for the preparation of the financial reports that give a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial
reports that gives a true and fair view and is free from material misstatement, whether due to fraud
or error. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB101
Presentation of Financial Statements, that the financial statements comply with International Financial
Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance 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 of the financial report that gives a true and fair view 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.
p | 90
well versed well timed well considered We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Opinion
In our opinion:
(a) the financial reports of the Group and the Trust are in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group’s and Trust’s financial position as at 30 June 2012 and of
their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial reports also comply with International Financial Reporting Standards as
disclosed in Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in part 11 of the directors’ report for the year ended
30 June 2012. The directors of Cromwell Corporation Limited are responsible for the preparation and
presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Cromwell Corporation Limited for the year ended 30 June
2012 complies with Section 300A of the Corporations Act 2001.
JOHNSTON RORKE
Chartered Accountants
RCN WALKER
Partner
Brisbane, Queensland
22 August 2012
p | 91
Corporate governance
statement
Cromwell Property 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 CEO . 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 Director
– Finance and Funds Management (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 senior
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 the Cromwell Diversified Property Trust. Cromwell
Funds Management Limited acts as responsible entity for the Group’s unlisted 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, if registered, its compliance plan. Day-to-day management
of the schemes has been delegated to management, under the direction of the CEO. 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 registered 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:
Corporate Governance Statement
Board Charter
Compliance Committee Charter
p | 92
well versed well timed well considered Corporate governance
statement
Principle 2 – Structure the board to add value
The Board is comprised of an independent Chairman (Geoff Levy), four other independent directors (David Usasz, Michelle
McKellar, Richard Foster and Robert Pullar) and four non-independent directors (Paul Weightman, Daryl Wilson, Marc
Wainer and Mike Watters). 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 reassuring securityholders that the Board properly
fulfils its role. The Board comprises a majority of independent directors. 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).
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 comprises 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.
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 during the financial year 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. 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 Director – Finance and Funds Management 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.
If the appointment of another independent director was being considered, or should a director vacancy occur, the Board,
through the Nomination and Remuneration Committee, would firstly identify any gaps or weaknesses in the skills and
experience of the existing directors and then identify the particular skills, experience and expertise that would best
complement Board effectiveness. Candidates would be identified using both established professional networks and
professional intermediaries. The extent to which each candidate would address any identified gaps or weaknesses and provide
an appropriate cultural and values fit for the Group would be the main factors taken into account in the selection process. Any
relevant gender diversity objectives set by the Board would also be taken into account when identifying appropriate candidates.
However, selection and appointment would occur on the basis of merit.
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:
Remuneration and Nomination Committee Charter
Board Charter
p | 93
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 staff 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 staff 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 received training with regard to the policies. 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.
The Board has also 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.
The Board has approved a Diversity Policy which sets out the framework the Group has in place and achieve appropriate
diversity in its Board, senior executive and broader workforce.
The table below shows the gender diversity objectives set for the 2012 financial year and the Group’s performance against
those objectives as at 30 June 2012.
1. At least one female director and at least one
female senior executive team member.
The Group has one female director and two female senior
executive team members.
2. Internal promotion of females to 50% of
vacant management positions over the next
three years.
There were no vacant management positions during FY12.
However, four existing staff were promoted into new management
positions and two of them were female.
3. Female staff turnover not to exceed male staff
turnover.
Female staff turnover exceeded male staff turnover. However,
this was largely a result of a difficulty in finding an appropriate
candidate for a particular role rather than a high number of
existing female staff resigning.
4. At least 1 female is interviewed for greater
Females were interviewed for approximately 80% of vacant roles.
than 75% of vacant roles.
5. Female participation in employee surveys
is proportional to the number of female
employees.
The nature of employee surveys undertaken meant that it would
not have been possible to ensure anonymity of participants if they
were asked to specify their gender.
6. The Group will benchmark remuneration
data without reference to gender, age or
employment conditions. All roles will be
benchmarked according to experience,
qualifications and performance.
7. Succession plans and leadership programs
are designed to assist in the development of
a diverse pool of future senior executives and
managers.
8. Each year at least one corporate event is
held to which partners and children are
encouraged to attend.
9. At least 60 full time equivalent flexible
working days are used by Cromwell staff in
any given financial year.
Demographics such as gender, age and race were not considered
when benchmarking and reviewing salaries.
Half of the key staff identified for succession planning purposes
were female. Approximately half of the potential internal
successors to key staff are female. Of the 14 staff being supported
through tertiary education or other professional development, 8
are females.
Staff were able to bring their partners and children to at least two
corporate events.
Most of the Group’s flexible working arrangements are
undocumented so it is difficult to measure the number of full
time equivalent flexible working days used. However, 7 females
work part-time and at least 2 full-time female staff have flexible
working arrangements.
p | 94
well versed well timed well considered For the 2013 financial year, the Group has the following diversity objectives:
1.
The Group has at least 1 female director and at least 2 female senior executives.
2. If existing staff are promoted, at least 50% of those promoted will be females.
3. At least one female will be interviewed for all advertised management positions.
4. All staff regardless of gender, age and race are consulted annually via an engagement survey and are given the
opportunity to provide feedback on issues and potential barriers to diversity.
5. Remuneration continues to be benchmarked against market data taking into consideration experience, qualification
and performance and without regard to age, gender and race.
6. Succession plans and leadership programs are designed to assist in the development of a diverse pool of future
senior executives and managers and are regularly reviewed.
7. At least one corporate event is held to which staff can bring partners and children.
8. Parents (or carers) are offered flexible work arrangements.
9. All employees undergo annual “equal employment opportunity” training.
10. At least 80% of females taking parental leave return to work.
11. At least 50% of staff undertaking Cromwell supported tertiary education and other professional development
programs are female.
As at 30 June 2012, the Board had 1 female director (out of 9 directors), executive management comprised 10 people,
including 3 females, senior management comprised 9 people, including 4 females and management comprised 8 people,
3 of which were female. The Group employs a total of 82 people, 38 of which are female.
What you can find on our website:
Code of Conduct
Securities Trading Policy
Breach Reporting Policy
Whistleblower’s Policy
Diversity Policy
FY2013 Gender Diversity Objectives
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 CEO and the Director – Finance and Funds Management 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 on page 96.
What you can find on our website:
Audit and Risk Committee Charter
p | 95
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:
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 are 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 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 CEO, 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 Property Group. The Company Secretary reports on the risk management system (including
internal audit) to the Audit and Risk Committee at throughout the year. 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.
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;
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well versed well timed well considered (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 CEO and the Director – Finance and Funds Management (Cromwell’s Chief Financial Officer) have provided the
Board with written confirmation that:
(a) in their view, the Group is effectively managing its material business risks;
(a) 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
(b) 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 CEO and Director – Finance and Funds Management 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. Their conclusions are based 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:
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 Performance Rights Plan and has issued performance rights (or options over Group securities)
to a number of executives. The Group does not currently pay any other form of security-based remuneration.
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 CEO 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. The committee has 4 members, all of which are independent directors.
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.
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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 CEO and the Director – Finance and Funds Management participate in the Performance Rights Plan discussed above.
Previous participation was approved by securityholders at an annual general meeting. Pursuant to the ASX Listing Rules,
any further participation would also need to be approved by securityholders.
Managed funds
Cromwell Property Securities Limited and Cromwell Funds Management Limited are entitled to various fees for acting
as responsible entity of Cromwell managed funds. 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.
Cromwell Property Securities Limited and Cromwell Funds Management Limited are also entitled to be reimbursed from
the relevant schemes for expenses incurred in the proper performance of their duties.
What you can find on our website:
Nomination and Remuneration Committee Charter
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well versed well timed well considered Securityholder
information
1.
Securityholder Information
The securityholder information set out below was applicable as at 9 October 2012.
2.
Spread of stapled securityholders
Category (size of Holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
3.
Unmarketable Parcels
The number of stapled securityholdings held in less than marketable parcels was 452.
4.
Substantial Securityholders
Holder
Redefine Properties Limited/Redefine Australian Investments Limited
Coronation Asset Management (Pty) Ltd
5.
Voting Rights
Number
of Holders
601
1,433
1,540
8,083
1,153
12,810
Number
of Securities
183,170
4,535,378
11,714,637
268,681,743
936,999,551
1,222,114,479
Stapled
Securities
316,169,013
58,737,725
Date
of Notice
10 February 2012
10 February 2012
On a show of hands every securityholder present at a meeting in person or by show of proxy shall have one vote and upon
a poll every securityholder shall have effectively one vote for every security held.
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6.
Twenty Largest Securityholders
Rank Investor
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Redefine Australian Investments Limited
National Nominees Limited
Redefine Australian Investments Limited
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Ltd
Hero Nominees Limited
Aust Executor Trustees SA Ltd
Stara Investments Pty Ltd
Citicorp Nominees Pty Limited
RJP Family Pty Ltd
JP Morgan Nominees Australia Ltd
Humgoda Investments Pty Ltd
Panmax Pty Ltd
Kovron Pty Ltd
Mr Philip John Wallace & Mrs Bernadette Mary Wallace
Citicorp Nominees Pty Limited
Trial Developments Pty Ltd
Mr Neal John Ambrose & Mrs Anne Christine Ambrose
Mr Humphrey Firkins & Mr Jamie Dorrington
Number of
Stapled
Securities
Held
177,276,857
133,243,758
93,303,921
46,374,211
43,147,224
23,865,820
16,911,765
16,756,462
15,921,167
12,147,642
10,000,000
7,754,059
7,282,126
5,703,707
5,570,769
4,883,450
4,544,374
4,196,480
3,474,008
3,377,000
635,734,800
% Held
of Issued
Stapled
Securities
14.51%
10.90%
7.63%
3.79%
3.53%
1.95%
1.38%
1.37%
1.30%
0.99%
0.82%
0.63%
0.60%
0.47%
0.46%
0.40%
0.37%
0.34%
0.28%
0.28%
52.02%
7.
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 Securitied
Exchange (ASX) and other regulatory bodies. The following information can also be found on the Cromwell website at
www.cromwell.com.au.
8.
ASX Listing
Cromwell Property Group is listed as a Stapled Security on the ASX (Code: CMW).
9.
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
Telephone: 1300 550 841
Outside Australia: +61 2 8280 7124
Fax: (02) 9287 0309
Web: www.linkmarketservices.com.au
Email: info@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.
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well versed well timed well considered 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 are not obliged to quote their TFN, ABN or exemption details. 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
and up to the highest marginal tax rate, depending on residency.
10. Distributions/Dividends
During the year the following distributions/dividends have been paid:
Quarter Ending
30 June 2012
31 March 2012
31 December 2011
30 September 2011
Amount per Security
1.75 cents
1.75 cents
1.75 cents
1.75 cents
Ex Date
25 June 2012
26 March 2012
22 December 2011
27 October 2011
Record Date
29 June 2012
30 March 2012
30 December 2011
4 October 2011
Payment Date
16 August 2012
16 May 2012
15 February 2012
16 November 2011
11.
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 Property Group
GPO Box 1093
Brisbane QLD 4001
Australia
Telephone: (07) 3225 7777
Facsimile: (07) 3225 7788
Email: invest@cromwell.com.au
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Board of Directors:
Geoffrey Levy (AO)
Robert Pullar
Michelle McKellar
David Usasz
Richard Foster
Marc Wainer
Michael Watters
Paul Weightman
Daryl Wilson
Registered Office:
Level 19
200 Mary Street
BRISBANE QLD 4000
Tel: +61 7 3225 7777
Fax: +61 7 3225 7788
Web: www.cromwell.com.au
Secretary:
Nicole Riethmuller
Listing:
The company and the trust are stapled
and listed on the Australian Securities
Exchange (ASX code: CMW).
Share Registry:
Link Market Services Limited
Level 15, 324 Queen Street
BRISBANE QLD 4000
Tel: 1300 550 841 (+61 2 8280 7124)
Fax: +612 9287 0309
Web: www.linkmarketservices.com.au
Auditor:
Johnston Rorke
Chartered Accountants
Level 30, Central Plaza One
345 Queen Street
BRISBANE QLD 4000
Tel: +61 7 3222 8444
Fax: +61 7 3221 7779
Web: www.jr.com.au
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