2013 ANNUAL REPORT
well versed well timed well considered
well versed well timed well considered
CONTENTS
04 Financial Highlights
06 Chairman’s Report
08 CEO’s Report
16 Annual Financial Report
18 Directors’ Report
37 Auditor’s Independence Declaration
38 Consolidated Statements of Comprehensive Income
39 Consolidated Statements of Financial Position
40 Consolidated Statements of Changes in Equity
42 Notes to the Consolidated Financial Statements
93 Directors’ Declaration
96 Corporate Governance Statement
103 Securityholder Information
41 Consolidated Statements of Cash Flows
94 Independent Auditor’s Report
2
Cromwell Property Group | Annual Report 2013
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Cromwell Property Group
Cromwell Property Group (“Cromwell” or “the
Group”) is an internally managed Australian Real
Estate Investment Trust (A-REIT) which owns a quality
property portfolio and operates a funds management
business that creates and manages unlisted property
investments.
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
Listed on the Australian Securities Exchange (ASX:
CMW) as a stapled security, the Group has over
$3 billion in assets under management (including
unlisted funds) and manages 33 commercial
properties throughout Australia.
The Group delivered operating earnings of over
$100 million in the 2013 financial year (FY13) from
the Group’s property portfolio and funds
management business.
Cromwell achieves a large proportion of earnings from
a core investment portfolio leased predominately to
Government and blue chip corporate tenants.
Cromwell is well placed to continue to deliver the
strong returns historically achieved, whilst being able
to take advantage of current market conditions to
continue to buy quality property at attractive prices.
Level 19, 200 Mary Street
Brisbane QLD 4000 AUSTRALIA
Phone: +61 7 3225 7777
Fax:
+61 7 3225 7788
Web: www.cromwell.com.au
invest@cromwell.com.au
Email:
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
Cromwell Property Group | Annual Report 2013
3
well versed well timed well considered
fiNANCiAL
highLighTS
Another successful yeAr in fy13
Record operating profit of $102.4 million or 7.6 cents per security (cps), up 28%
Distributions up 3.6% to 7.25 cps
Statutory profit of $46.2 million, an increase of 100%
Increase in like-for-like property income of 2.8%
Funds management contribution increased to $5.8 million
External assets under management up 19% to $749 million
financial results summary
Statutory profit ($’000)
Statutory profit (cents per security)
Property Investment
Funds Management
Development
Operating profit ($’000)1
Operating profit (cents per security)
Distributions ($’000)
Distributions (cents per security)
Payout Ratio (%)
FY13
46,156
3.44
97,172
5,754
(515)
102,411
7.63
FY12
23,077
2.16
80,425
223
(638)
80,010
7.48
97,4482
75,019
7.25
95%
7.0
93%
Change
100%
59%
21%
2,480%
19%
28%
2%
30%
4%
2%
1. See page 31 for further details of operating profit and reconciliation to statutory profit
2. Excludes $4.2 million of distributions above pro rata entitlement attributable to equity raisings
4
Cromwell Property Group | Annual Report 2013
finAnciAl Position strengthened
Net tangible assets (NTA) per security increased from $0.67 to $0.70
Issued 544 million new securities at an average price of $0.90
Gearing reduced from 51% to 46%, within target range of 35-55%
Largest debt facility extended to January 2016 at reduced cost
No debt maturities until December 2014
Cash $126 million available
financial Position
Total assets ($’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.
FY13
2,546,110
1,200,852
1,199,018
1,106,787
46%
1,713,721
$0.70
$0.72
FY12
1,837,601
788,989
787,442
905,024
51%
1,169,689
$0.67
$0.71
fy14 guidAnce
Operating earnings expected to be at least 8.3 cps in FY14, an increase of 9%
Distributions expected to be 7.5 cps in FY14, an increase of 3%
Targeting improvement in debt profile and growth in NTA per security
Continued focus on acquiring long-leased office property assets
5
Cromwell Property Group | Annual Report 2013
well versed well timed well considered
ChAiRmAN’S
REPORT
“this year, with the acquisition
of $641 million in assets
and the rapid growth in our
funds management business,
we have moved into a new
league.”
“cromwell’s fund
management business
hit new heights during
the year, more than
tripling its unlisted
fund raisings”
Geoffrey H Levy, AO
in the 2013 financial year, we
continued to grow and enhance our
property portfolio and to further
develop our funds management
business.
This was a landmark year in which
Cromwell made a number of larger
acquisitions that moved us to a new
level in terms of portfolio size and
funds under management.
The key acquisitions on our balance
sheet were the portfolio of seven
office assets purchased from the
NSW Government for $405 million,
and two Brisbane CBD office towers
acquired for $65 million.
Our funds management business
also hit new heights during the year,
more than tripling our unlisted fund
raisings from $61 million in the 2012
financial year to $258 million in 2013.
The business successfully completed
two major property investment
offerings, the Cromwell Ipswich City
Heart Trust and the Box Hill Trust.
The award-winning Cromwell Phoenix
Property Trust also enjoyed record
inflows.
During the financial year, Cromwell’s
market capitalisation more than
doubled, reaching $1.67 billion at
June 2013 and making Cromwell the
105th largest company by market
cap on the ASX. This was partly
achieved through $444 million in
capital raisings which brought many
new institutional investors onto our
register and greatly improved our
liquidity. We also saw a substantial
increase in our security price from
$0.67 at June 2012 to $0.975 at
June 2013 as the market came to
appreciate the value of a company
with the potential to grow both
earnings and distributions in what
have been relatively challenging
economic times.
More importantly, the increased size
and scale of the business, combined
with a larger spread of institutional
securityholders facilitated our
inclusion into the S&P/ASX300 in
March 2013. Subsequent to the end
of the financial year we have also
been included in the benchmark
S&P/ASX 200 Index. Because a
large proportion of capital invested
6
Cromwell Property Group | Annual Report 2013 Qantas Headquarters, Mascot, NSW
Symantec Building: Sydney, NSW
Crown Street: Wollongong, NSW
by professional fund managers and
other large scale investors is directed
towards companies that are part
of these indices, our ability to raise
large amounts of equity capital
when needed has become greatly
enhanced. Inclusion into these
indices has been a long term goal
for Cromwell and one which we are
proud to have achieved.
Most importantly, we continued to
maintain our prudent approach to
acquisitions and capital management
which ensured that Cromwell’s
Earnings and Distribution per
security remains predictable and
attractive.
Distributions paid for the year were
7.25 cents up from 7.00 cents in
2012. This represents a growth in
distributions per security of 3.6% in 2013.
Distributions paid during the
year, combined with the increase
is Security price resulted in a 12
month total return of 54.4% to our
Securityholders. Whilst this is an
impressive increase, we recognise
it has been partly achieved with the
tailwind of an improving market
and anticipation of our inclusion
in the indices previously referred.
However, we remain focussed on
longer term sustainable returns
and we encourage our investors, be
they Cromwell Securityholders or
unitholders in our managed funds, to
do likewise.
In that regard, we are very happy to
have delivered total securityholder
returns of 16.4% per annum over the
past 5 years. This compares pretty
well against the A-REIT average of
just 0.3% per annum and the ASX
All Ordinaries returns of 2.2% per
annum over the same period. It also
represents a pretty descent absolute
return from what we consider to be
a relatively low risk business model.
We will not rest on our laurels nor
simply grow for size sake. We will
continue to actively reposition and
reduce or increase our portfolio
depending on the circumstances and
consistent with our long term goals.
We remain steadfast in our focus to
return sustainable distributions over
the longer term whilst preserving the
capital value of our investment pool.
I would like to thank our CEO, Paul
Weightman and his outstanding and
resourceful team for their tireless
work through the year which has
left us in a very strong position to
continue to grow our earnings and
distributions, and to capitalise on
further opportunities in the future.
I would also like to thank my
fellow board members for their
commitment, insights and continued
efforts.
Finally, I would like to thank all of
our Securityholders for their support
as we continue to reap the benefits
of our discipline in these demanding
times.
Geoffrey H Levy, AO
Chairman
Cromwell Property Group | Annual Report 2013
7
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CEO’S
REPORT
“our consistent and
disciplined approach to growth
has been rewarded through
significant outperformance”
Paul Weightman
2013 was a breakthrough year for
Cromwell. We achieved a 28%
increase in operating earnings to a
record $102.4 million and substantially
improved the size and quality of both
our investment portfolio and our assets
under management.
During the year Cromwell and our
managed funds completed the
acquisition of investment properties to
the value of $641 million,resulting in
an increase in the value of our asset
base by 39%. Cromwell was admitted
to the S&P/ASX300 Index in March
2103 and in September 2013, we were
admitted to the S&P/ASX200 Index.
Our market capitalisation more than
doubled from $801 million at June
2012 to $1.67 billion at June 2013.
Importantly, as we have grown in
size and achieved index inclusion we
have increasedboth earnings and
distributions per Security. We have not
grown just to get bigger.
Our consistent and disciplined
approach has resulted in Cromwell
outperforming the S&P/ASX300
A-REIT Accumulation Index over time,
as shown in the graph below.
cromwell Performance June 2013
(Annualised Total Securityholder Return) 1
60%
50%
40%
30%
20%
10%
0%
54.4%
Cromwell Property
Group
S&P/ASX 300 A-REIT
Accumulation Index
Excess Returns
35.4%
32.7%
30.5%
24.0%
22.9%
16.4%
16.1%
13.4%
9.5%
1 year
3 years
0.3%
5 years
2.7%
10 years
1. Includes distributions
8
Cromwell Property Group | Annual Report 2013
ProPerty Portfolio
Cromwell seeks to obtain the best possible risk
adjusted returns from our property portfolio, and to
maintain a strong bias towards predictable income
streams. Our property investments continued to
provide most of Cromwell’s income during the year
Property income contributed $97.2 million after
debt costs, or 95% of operating earnings for the
year, an increase of 21% over the previous year.
The increase included growth in “like-for-like”
property income of 2.8% over the previous year.
This was a well above average result in what was,
and remains a very difficult leasing environment.
Growth also came via additional rental income
from property acquisitions during the past 2 years
including the NSW Portfolio and Brisbane CBD
properties acquired in May 2013.
Property valuations for the $2.3 billion portfolio
fell a modest 1.8% during the year, as a result of
softening market rentals. The weighted average
capitalisation rate, or property yield, was 8.51%
across the portfolio at June 2013, compared with
8.28% at June 2012. This change was largely a
function of the acquisitions we made during the
year.
The portfolio was 96.1% leased at year-end, with a
6.1 year weighted average lease term. Importantly,
tenant quality remains very high, with 46% of
rental income at balance date underpinned by
Government owned or Government funded entities,
and a further 37% from listed companies or their
subsidiaries.
geographic diversification
1% 1%
19%
18%
28%
33%
ACT
NSW
QLD
VIC
TAS
SA
sector diversification by gross income
4%
3%
Commercial
Retail
Industrial
93%
tenant classification by gross income
17%
Listed Company/Subsidiary
37%
Government Authority
Private Company
46%
207 Kent Street
Sydney, NSW
McKell Building
Sydney, NSW
Bligh House
Sydney, NSW
seven nsW
Portfolio Assets
Station Street
Penrith, NSW
Crown Street
Wollongong, NSW
Farrer Place
Queanbeyan, NSW
Bull Street
Newcastle, NSW
9
Property yield vs. 10 year bond rate
Office cap rate (7.6%)
10-year bond (3.8%)
Cromwell cap rate (8.5%)
10%
8%
6%
4%
2%
0%
2001
2003
2005
2007
2009
2011
2013
Source: IRESS; BofA Merrill Lynch Global Research
The biggest change in the portfolio during the year came from
our purchase in May 2013 of seven office assets from the NSW
State Government. The purchase price of the NSW Portfolio was
$405 million, which represented an attractive initial yield of 9.0%.
Approximately 63% of the NSW Portfolio is leased to the NSW
Government, with an overall NSW Portfolio weighted average
lease expiry (WALE) of 9.4 years.
The NSW Portfolio comprised three Sydney CBD assets worth a
total of $316 million and four regional NSW assets valued at $89
million. The transaction enhanced Cromwell’s existing portfolio
quality by increasing Cromwell’s weighted average lease expiry
to 6.1 years and providing additional income from Government
tenants as well as providing additional weighting to the Sydney
and broader NSW office market.
The acquisition of the NSW Portfolio was consistent with our
strategy of providing secure, steadily growing distributions to
investors through the management of a portfolio of high quality
assets with a long weighted average lease expiry.
In another significant acquisition during the period, Cromwell
entered into an agreement to purchase two Brisbane office
buildings for a combined purchase price of $65 million. The
buildings, known as Health House and Forestry House are
adjoining properties situated at 147-163 Charlotte Street and
146-160 Mary Street in the Brisbane CBD. Both buildings are
of a similar size and design and are leased to the Queensland
State Government for an average of 3.2 years, with the lease over
100% of Health House expiring in July 2015 and Forestry House
in November 2017.
The passing income of both buildings is approximately $13.5
million per annum which represents a yield of approximately
20% on the purchase price. This acquisition delivered to
Cromwell well-located assets that will provide significant cash
flow in coming years. We believe that there is also substantial
upside potential which can be realised in many ways on expiry
of the current leases. The acquisition was funded from existing
cash reserves.
Cromwell also continued its ongoing portfolio recycling strategy.
In January 2013, we sold an office tower at 101 Grenfell
Street, Adelaide for $43.1 million, in line with the most recent
independent valuation. Approximately half the proceeds from
the sale were used for debt repayment, with the balance held for
future investment opportunities.
Cromwell intends to continue to seek acquisition opportunities
which complement our investment strategy and existing
portfolio. We target assets that show an initial acquisition yield
of at least 8% pa, and a total return of at least 12% pa. Cromwell
will continue to look for properties that we consider will
outperform and are undervalued by the wider market.
Over the medium term, we believe there is significant opportunity
for capital upside. In our current low interest rate environment
buyers of property are increasingly prepared to accept lower
property yields, particularly where a property has strong future
cash flows. If interest rates remain low, as we expect them to
do for a number of years, this continuing trend will result in
increasing property valuations. Cromwell can be a significant
beneficiary of this trend in coming years.
10
Cromwell Property Group | Annual Report 2013
well versed well timed well considered funds MAnAgeMent
Cromwell provides investors with two points of entry to
commercial property investments that it manages – through
owning the listed securities of Cromwell itself, and through
investing in the unlisted managed funds. Each has a slightly
different risk and return profile.
Earnings from the Funds Management business increased
to $5.8 million in 2013 from $0.2 million in 2012, reflecting
Cromwell’s continuing success in delivering new products
to the market and a resulting increase in recurring revenue
from assets under management.
The significant growth in earnings from funds management
activities reinforced the value and future potential of this
management platform. We believe the funds management
business is a valuable asset which provides the group with
additional growth potential to complement Cromwell’s
strong property income stream. The business has built
a considerable record of success in recent years with
an attractive range of products and we anticipate continued
significant growth in earnings from Funds Management in FY14.
The funds management business had a busy year, starting
with its promotion of the Cromwell Ipswich City Heart
Trust which closed early and oversubscribed in October
2012 having raised $52.5 million. Inflows to the Trust were
aided by the announcement of an increase in forecast Trust
distributions combined with falling official interest rates.
The Cromwell Ipswich City Heart Trust is a 7-year single
property trust which owns an office asset which is the
first stage of the $1 billion ICON Ipswich Masterplanned
redevelopment. Many of the 860 investors in the Trust
invested in a Cromwell managed fund for the first time and
the average investment size was approximately $60,000.
Like the successful Cromwell Riverpark Trust before it,
the Ipswich Trust’s income is underpinned by a long term
pre-commitment from a blue chip tenant (in this case the
Queensland Government) which signed a 15-year lease over
91% of the net lettable area.
Cromwell launched the Cromwell Box Hill Trust in
December 2012 and closed it oversubscribed in April
2013. The single asset unlisted property trust managed by
Cromwell Funds Management Limited raised approximately
$66.5 million to fund construction of an eco-friendly,
20-storey office building in Box Hill in Melbourne.
The building is 97% leased to the Commonwealth
Government for 15 years from completion and will house the
Australian Taxation Office. Construction commenced in early
2013 and is due for completion in March 2015.
The success of these two fund raisings further demonstrated
the attractiveness of Cromwell’s back-to-basics investment
offerings and the strength of its distribution network. From
our perspective, the strong response from investors proved
the continuing appeal of simple, transparent, yield-based
products underpinned by quality Australian commercial
property assets.
Assets under Management ($m)
Property Securities
External Direct
Internal
$4,000 M
$3,500 M
$3,000 M
$2,500 M
$2,000 M
$1,500 M
$1,000 M
$ 500 M
$ M
Jun-01
Jun-03
Jun-05
Jun-07
Jun-09
Jun-11
Jun-13
Jun-13
Pro Forma1
1. Includes expected on-completion properties under construction
11
Cromwell Property Group | Annual Report 2013
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...from page 11
The success of these two fund raisings further demonstrated
the attractiveness of Cromwell’s back-to-basics investment
offerings and the strength of its distribution network. The
strong response from investors to these offerings reinforced
in our minds the continuing appeal of simple, transparent,
yield-based products underpinned by quality Australian
commercial property assets.
Cromwell, through boutique fund manager Phoenix
Portfolios, now also manages over $400 million in property
securities funds, including the Cromwell Phoenix Property
Securities Fund, on behalf of retail and selected institutional
investors. Phoenix Portfolios is jointly owned by Phoenix
staff and Cromwell.
The Cromwell Phoenix Property Securities Fund, which
invests in listed A-REITs and infrastructure funds,
substantially increased its funds under management during
the year. The Fund also won the Money Management/
Lonsec Fund Manager of the Year Award for Australian
property securities for the third year in a row.
With a distribution network of more than 20,000 retail
investors, more than 5,000 of whom are current fund
investors, continuing support from many of Cromwell’s
13,000 plus securityholders, and relationships with
thousands of financial planners, we believe we can continue
to grow the funds management business into the future.
Initiatives are currently in place to add 5,000 plus new
prequalified investors in next 12 months.
As at December 2012, there were more than 496,000 self-
managed superannuation funds in Australia, holding $136
billion in cash and term deposits.
Investors are currently at an inflection point with cash
returns having been reduced significantly over the past
18 months. Over time, investors will seek to move cash
into more attractive and higher yielding investments. We
have seen a significant increase in investment inflows and
enquiries. Our experience tells us that reputation, product
quality and structure are the key factors in attracting retail
investor demand.
Cromwell is well positioned to take advantage of the
opportunities in the market We have maintained a strong
reputation and network through the years since the GFC,
we have a limited number of competitors, and we are able
to secure quality properties because of our track record and
balance sheet.
12
“the strong demand which saw the
early closure of cromwell ipswich
city heart trust fund raising last year
continued to gain momentum with the
cromwell Box hill trust and in March
cromwell experienced some of the
largest weekly inflows in the history of
its funds management business.”
Cromwell Property Group | Annual Report 2013 Direct retail investor
Direct retail investor
base growing fast
base growing fast
• over 5,000 current fund investors
• over 5,000 current fund investors
• over 13,000 retail cromwell securityholders
• over 13,000 retail cromwell securityholders
• over 23,000 potential investors
• over 23,000 potential investors
13
Cromwell Property Group | Annual Report 2013 well versed well timed well considered
14
cAPitAl MAnAgeMent
NTA per security increased during the year from $0.67 to
$0.70, primarily as a result of the issue of new equity to fund
acquisitions.
In December 2012 we successfully raised $143 million from
institutional placements which were exceptionally well
supported by a number of new and existing international and
domestic institutional investors. That raising was followed
up by a share purchase plan in February 2013, which raised
a further $39 million from our retail securityholders. We
raised a further $250 million in May and June 2013 through
a placement and institutional offer. We were delighted
by the strong support we received from our existing
securityholders and we were happy to welcome a number of
new institutional securityholders to the register.
debt expiry Profile
551 million
228 million
227 million
232 million
$600 M
$500 M
$400 M
$300 M
$200 M
$100 M
$ M
1H14
2H14
1H15
2H15
1H16
2H16
We have now raised $761.4 million of new equity since July
2009, at an average issue price of $0.82.
Debt increased during the year due to the additional
borrowings drawn down to fund acquisitions. Gearing,
however, decreased from 51% to 46% as a result of new
equity raised and remains well within the preferred range of
35-55%.
As well as lower gearing, our debt profile also continued
to improve with our largest debt facility extended from May
2014 to January 2016. We were also able to negotiate a
reduced interest cost for this facility. Our weighted average
debt maturity at the end of the year was 2.2 years.
Cromwell’s average interest cost fell during the year from
6.9% to 6.4% reflecting lower variable interest rates as the
Reserve Bank reduced the cash rate.
Cromwell Property Group | Annual Report 2013
outlook
Looking forward, we will continue to seek long-term value
for Cromwell Securityholders and for investors in our
unlisted funds by buying well, managing our assets through
the property market’s cycles and adjusting the portfolio
ahead of changing conditions to maximise return and
minimise risk.
The outlook for Cromwell remains positive despite the
continuing sluggish pace of economic growth. Cromwell’s
property portfolio is expected to continue to deliver
consistent earnings in the 2014 financial year and operating
earnings per security are forecast to rise to at least 8.3
cents, an increase of 9.2% over 2013.
Property income remains resilient in the current soft
market. Approximately 60% of the portfolio has a fixed
rent increase built into the lease in FY14, with an average
fixed increase amount of 3.9%. Additionally, the Cromwell
portfolio has minimal vacancy and very low lease expiries in
the next 2 years.
We also expect growth in earnings from our funds
management business and there is future upside potential
from lower base interest rates which will reduce debt
repayments. There is also growth potential through accretive
acquisitions.
We anticipate good growth in both operating earnings and
distributions per security in 2014, underpinned by ourstrong
property portfolio and the funds management business,
which we believe can continue to deliver significant growth in
future years.
lease expiry Profile % gross income
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
42.8%
24.8%
16.8%
7.3%
3.9%
4.4%
Vacant
FY14
FY15
FY16
FY17
Thereafter
15
Cromwell Property Group | Annual Report 2013
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
16
Cromwell Property Group | Annual Report 2013
FINANCIALS
Cromwell Property Group
Annual Financial Report 30 June 2013
CoNteNtS
Directors’ Report
Auditor’s Independence Declaration
18
37
Consolidated Statements of Comprehensive Income 38
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
39
40
41
42
93
94
Cromwell Property Group | Annual Report 2013
17
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 2013 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 a mid-
tier chartered accounting firm, 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 a partner with
PricewaterhouseCoopers and has been involved in merger
and acquisition advice, accounting and financial consultancy,
specialising in corporate reorganisations. He is a director
of Queensland Investment 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 J Watters – Non-Executive Director
Mr Watters was appointed in April 2011, is a qualified
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
18
Cromwell Property Group | Annual Report 2013 Geoffrey H Levy, AO
NON-EXECUTIVE
CHAIRMAN
Paul Weightman
MANAGING DIRECTOR /
CEO
Daryl Wilson
DIRECTOR – FINANCE &
FUNDS MANAGEMENT
Robert Pullar
NON-EXECUTIVE
DIRECTOR
6/29*
15/29*
14/22*
11/27*
Michelle Mckellar
NON-EXECUTIVE
DIRECTOR
7/29*
Michael J Watters
NON-EXECUTIVE
DIRECTOR
Richard Foster
NON-EXECUTIVE
DIRECTOR
Marc Wainer
NON-EXECUTIVE
DIRECTOR
4/27*
15/44*
4/37*
David Usasz
NON-EXECUTIVE
DIRECTOR
7/35*
* YEARS wITH CROMwEll
/ YEARS EXpERIENCE
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.
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 led 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 Geoffrey Cannings – Alternate Director
Mr Cannings is an alternate director to Mr Michael J 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 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 Usasz was a director of Queensland Mining Corporation
Limited from 15 June 2007 until his resignation on 28
February 2013.
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.
19
Cromwell Property Group | Annual Report 2013
(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
15
14
15
14
15
11
16
16
16
B
16
16
16
16
16
16
16
16
16
A
–
5
5
5
5
–
–
–
–
B
–
5
5
5
5
–
–
–
–
A
–
5
7
7
–
–
–
–
–
B
–
7
7
7
–
–
–
–
–
A
–
7
9
–
9
–
–
9
8
B
–
9
9
–
9
–
–
9
9
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 include funds management, property management 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
2013
Interim distribution
Interim distribution
Interim distribution
Final distribution
2012
Interim distribution
Interim distribution
Interim distribution
Final distribution
Trust
2013
Interim distribution
Interim distribution
Interim distribution
Final distribution
2012
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
–
–
–
–
–
–
–
–
–
–
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
1.7500¢
1.7500¢
1.7500¢
1.7500¢
7.0000¢
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
1.7500¢
1.7500¢
1.7500¢
1.7500¢
7.0000¢
21,243
22,874
26,481(1)
31,061(2)
101,659
16,920
17,602
20,027
20,470
75,019
–
–
–
–
–
–
–
–
–
–
05/10/12
31/12/12
28/03/13
28/06/13
04/10/11
30/12/11
30/03/12
29/06/12
14/11/12
13/02/13
15/05/13
15/08/13
16/11/11
15/02/12
16/05/12
16/08/12
Dividend
per Security
Distribution
per Security
Total per
Security
Total
$’000
Franked amt
per Security
Record
Date
Payment
Date
–
–
–
–
–
–
–
–
–
–
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
1.7500¢
1.7500¢
1.7500¢
1.7500¢
7.0000¢
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
1.7500¢
1.7500¢
1.7500¢
1.7500¢
7.0000¢
21,248
22,879
26,486(1)
31,066(2)
101,679
16,925
17,607
20,032
20,474
75,038
–
–
–
–
–
–
–
–
–
–
05/10/12
31/12/12
28/03/13
28/06/13
04/10/11
30/12/11
30/03/12
29/06/12
14/11/12
13/02/13
15/05/13
15/08/13
16/11/11
15/02/12
16/05/12
16/08/12
(1) Includes an amount of $453,000 for both the Group and Trust in excess of the pro-rata entitlement for the quarterly distribution paid to those securityholders who acquired
securities in February 2013 as part of the Security Purchase Plan.
(2) Includes an amount of $3,758,000 for both the Group and Trust in excess of the pro-rata entitlement for the quarterly distribution paid to those securityholders who acquired
securities in June 2013 as part of the placement and entitlement offer.
.
20
Cromwell Property Group | Annual Report 2013 4. Review of Operations and Results
(a) Financial performance
The Group recorded a profit of $46,156,000 for the year ended 30 June 2013 compared with a profit of $23,077,000 for
the previous year. The Trust recorded a profit of $43,291,000 for the year ended 30 June 2013 compared with a profit of
$24,359,000 for the previous year.
Net earnings from the property portfolio, after property outgoings costs but before interest expense was $172,660,000, an
increase of 15% on the previous year. The increase was primarily as a result of additional rental income generated due to the
acquisition of the balance of the Cromwell Property Fund (“CPF”), increased rental income from Qantas Headquarters (due to
expansion of the property), the HQ North property (acquired December 2011), the Bundall Corporate Centre property (acquired
January 2012), the Brisbane CBD properties (acquired May 2013) and the NSW Portfolio (acquired June 2013).
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 3% in 2013. 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.
Interest expense for the year increased to $67,715,000 (2012: $61,963,000). This increase occurred as a result of the additional
borrowings for properties acquired during the year. The average interest cost fell during the year from 6.93% to 6.43%. This fall in
average rate reflected lower variable interest rates as the Reserve Bank reduced the cash rate during the year.
Funds management earnings increased from $223,000 in 2012 to $5,754,000 in 2013, reflecting the continuing success of
the Group in delivering new products to the market and an increase in recurring revenue from assets under management.
This highlights the attractiveness of having the funds management business, which can provide the Group with additional
growth to compliment the strong property income stream.
Development activity for this year continued to be limited, with a small amount of industrial land held for development or re-
sale when the opportunity arises. The Group does not seek to undertake any material amount of speculative development.
The profit for the year includes a number of items which are non-cash in nature or 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 2013 and not considered part of the underlying
profit from operations were:
• A decrease in the fair value of investment properties of $55,747,000 (2012: $12,353,000); and
• An increase in the fair value of interest rate derivatives of $7,326,000 (2012: decrease of $38,483,000).
The decrease in fair value of investment properties had two significant components. Underlying valuations for investment
properties decreased by $32,830,000 during the year, net of property improvements, leasing incentives and lease costs.
This is equivalent to a decrease in value of approximately 1.8% or 2.3 cents per stapled security from June 2012 valuations.
These decreases were generally concentrated in properties with short to medium-term lease expiries or current vacancies
such as Waymouth Street in Adelaide, Mary Street in Brisbane and Tuggeranong Office Park and Keltie Street in Canberra.
This is reflective of the current soft economic conditions and a more difficult leasing market which the Group will face over
the next 1-2 years. In contrast, properties with longer leases such as the Qantas Headquarters in Sydney and Exhibition
Street in Melbourne have increased in value as demand for assets with secure cash flows increases.
The Group also recognised $26,372,000 in costs related to the acquisition of properties during the year, primarily a portfolio
of seven properties acquired from the NSW Government in June 2013 for $405 million. The majority of these costs relate
to stamp duty payable on acquisition. The NSW Government portfolio has a weighted average lease expiry of 10 years and
provides an initial yield of approximately 9% on the purchase price. The Group is confident these assets will be seen as a
valuable addition to the portfolio in coming years.
Change in valuations, net of property improvements, lease costs and incentives
Non-cash adjustments for straight-lining of rentals and lease amortisation
Acquisition transaction costs (properties acquired during the year)
Decrease in fair value of investment properties
Group
2013
$’000
(32,830)
3,455
(26,372)
(55,747)
2012
$’000
773
813
(13,939)
(12,353)
21
Cromwell Property Group | Annual Report 2013 The increase in fair value of interest rate derivatives arose as a result of the Group’s policy to hedge a portion of future interest
expense. The Group had hedged future interest rates through contracts over 86% of its debt at 30 June 2013 to minimise the
risk of changes in interest rates in the future. These contracts expire between November 2013 and December 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 contracts and what the market forward interest rates are at the date of
the valuation until maturity of the hedge contract. The financial result included an increase in fair value of these interest rate
derivatives (contracts) held by the Trust of $7,326,000 or 0.5 cents per stapled security. Market rates, and hence valuations,
change daily, but the value at the end of an interest rate contract will always be nil and therefore the amounts recognised in
the income statements are expected to reverse over time as the interest rate contracts expire.
(b) Profit from operations
Profit from operations for the year was $102,411,000 (2012: $80,010,000).
Profit from operations is considered by the Directors to reflect the underlying earnings of the Group and Trust. It 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’s
auditor.
Profit from operations has been calculated consistently since stapling of the Group in December 2006.
A reconciliation of profit from operations of the Group, as assessed by the Directors, to the reported profit for the year is as
follows:
Profit from operations
Reconciliation to profit for the year
Gain/(loss) on sale of investment properties
Loss on sale of other assets
Merger transaction costs
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 amortisation
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 for the year
(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.
Group
2012
$’000
80,010
(331)
(44)
–
(12,353)
(38,483)
(173)
200
6,892
(6,332)
(1,373)
(2,560)
(601)
(604)
(993)
(178)
23,077
2013
$’000
102,411
132
(146)
(631)
(55,747)
7,326
47
–
6,071
(8,042)
(1,484)
(2,581)
(669)
(643)
481
(369)
46,156
22
Cromwell Property Group | Annual Report 2013
The contribution to profit from operation of each of the 3 segments of the Group was:
Property Investment
Funds Management
Property Development
Profit from operations
2013
%
94.9%
5.6%
(0.5%)
2012
$’000
97,172
5,754
(515)
102,411
Property Investment contributed $97,172,000 or 95% of profit from operations for the year.
(c) earnings and Distributions per stapled security
Profit per security (per statutory accounts)
Profit from operations per security (see section 4(b))
Distributions per security
2013
%
100.5%
0.3%
(0.8%)
2013
Cents
3.44
7.63
7.25
2012
$’000
80,425
223
(638)
80,010
2012
Cents
2.16
7.48
7.00
Profit from operations on a per security basis is considered by the Directors to be the most important measure of
underlying financial performance as it excludes certain volatile and non-cash items but includes the impact of changes in
the number of securities on issue.
Profit from operations per security was 7.60 cents (2012: 7.48 cents). This represents an increase of approximately 1.6%
which is considered satisfactory given the current market conditions. Importantly, the property assets acquired during the
year are expected to enable the Group to grow profit from operations per security by a much greater amount in the 2014
financial year.
Distributions paid for the year were 7.25 cents (2012: 7.00 cents), including a June 2013 quarter distribution of 1.8125 cents
per stapled security paid on 15 August 2013. This represents a growth in distributions per security of 3.6% in 2013. Growing
distributions per security in a sustainable way remains a key priority in the future.
(d) Financial Position
Total assets ($’000)
Net assets ($’000)
Net tangible assets ($’000) (1)
Net debt ($’000) (2)
Gearing (%) (3)
Securities issued (’000)
NTA per security (1)
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
2013
2,546,110
1,200,852
1,199,018
1,106,787
46%
1,713,721
$0.70
$0.72
2012
1,837,601
788,989
787,442
905,024
51%
1,169,689
$0.67
$0.71
2013
2,487,254
1,145,462
1,145,462
1,157,594
48%
1,713,996
$0.67
$0.69
2012
1,820,045
774,720
774,720
913,156
52%
1,169,964
$0.66
$0.70
A total of 11 property assets were externally revalued at June 2013, representing approximately 48% of the property portfolio
by value. The balance of the portfolio is subject to internal valuations having regard to previous external valuations and
comparable sales evidence. The weighted average capitalisation rate (WACR) was 8.51% across the portfolio, compared with
8.28% at June 2012.
Net debt has increased due to the additional borrowings of $353,171,000, including $200,000,000 drawn down to acquire
the NSW Portfolio, $112,250,000 assumed as part of the CPF acquisition and $42,921,000 from further draw downs to fund
capital expenditure in relation to the Mascot property. Gearing, however, decreased from 51% to 46% during the year as a
result of new equity raised to fund property acquisitions and remains within the preferred range of 35-55%.
23
Cromwell Property Group | Annual Report 2013
An additional 544,033,000 stapled securities were issued during the year, at an average issue price of $0.88, comprising
32,339,000 securities issued to CPF investors in exchange for their CPF units in October 2012 and placements to new and
existing investors of 182,166,000 securities in December 2012 and 250,000,000 securities in June 2013. The continuing
operation of the distribution reinvestment plan also resulted in the issue of 12,362,000 securities during the year.
NTA per security has increased during the year from $0.67 to $0.70, primarily as a result of the issue of new equity at an
average premium to NTA of 24%. NTA per security excluding the value of interest rate contracts increased slightly to $0.72
per security.
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 2013 that has
significantly affected or may significantly affect:
•
•
•
the Group’s operations in future financial years; or
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
7. Likely Developments
The outlook remains positive for the Group, despite the continuing sluggish pace of economic growth.
The Group’s 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 96.0% leased at year-end, with a 6.1 year weighted average lease term. Importantly, tenant quality is
also exceptional, with 45.8% of rental income at balance date underpinned by Government or Government owned/funded
entities, and a further 37.1% from listed companies or their subsidiaries.
The Group expects to achieve good growth in both operating earnings and distributions per security in 2014, 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 gave guidance for 2014 of expected profits from operations per security of 8.3
cents in 2014, an increase of 9% over 2013. This, if it can be achieved, will be an exceptional result in the current climate
and demonstrates the continuing resilience of our business model. Distributions are also expected to increase to 7.5 cents
per security (annualised) from the September 2013 quarter, an increase of 3.4% on 2013 levels.
The Group also aims to grow net tangible assets per security in 2014, to maintain gearing below 50% and to continue to
outperform the S&P/ASX 300 A-REIT accumulation index over rolling 3 and 5 year periods.
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.
24
Cromwell Property Group | Annual Report 2013 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 J Watters
Geoffrey Cannings
Paul L Weightman
Daryl J Wilson
Stapled
Securities
2,777,630
6,500,000
514,646
2,405,000
3,811,765
–
–
80,000
15,921,167
1,622,200
33,632,408
Performance
Rights
–
–
–
–
–
–
–
–
4,000,000
1,740,000
5,740,000
Options over
Securities
–
–
–
–
–
–
–
–
–
–
–
10. Options and Performance Rights
(a) Securities under option through the Performance Rights Plan
The Group issues 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
07/03/11
26/05/11
26/05/11
26/05/11
05/09/11
05/09/11
05/09/11
24/08/12
24/08/12
12/10/12
12/10/12
19/10/12
19/10/12
19/10/12
19/10/12
19/10/12
19/10/12
Performance rights on issue
Exercise date
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
24/08/15 – 24/09/15
24/08/15 – 24/09/15
12/10/15 – 12/11/15
12/10/15 – 12/11/15
01/07/13 – 01/08/13
01/07/14 – 01/08/14
01/07/15 – 01/08/15
01/07/13 – 01/08/13
01/07/14 – 01/08/14
01/07/15 – 01/08/15
Exercise price
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
$0.20
$0.00
$0.10
$0.00
$0.20
$0.00
$0.20
$0.00
$0.00
$0.00
$0.20
$0.20
$0.20
Expiry date
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
24/09/15
24/09/15
12/11/15
12/11/15
01/08/13
01/08/14
01/08/15
01/08/13
01/08/14
01/08/15
Number
101,378
47,433
95,894
97,633
1,913,333
1,913,333
1,913,334
393,679
590,622
52,851
81,581
82,142
150,018
229,110
55,561
55,563
55,563
60,292
60,292
60,292
8,009,904
Performance rights on issue at 30 June 2013 represent 0.47% of total issued securities. 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 effectively 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 2013 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
23 August 2010
23 August 2010
Issue Price of Securities
$0.00
$0.10
No. of Securities Issued
170,287
123,459
293,746
25
Cromwell Property Group | Annual Report 2013 11. Remuneration Report
The remuneration report is presented for the financial year ending 30 June 2013. 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.
(ii) Remuneration policy
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 whilst maintaining gearing at an appropriate level, having regard to the environment, property cycle and
quality of forward cash flows from the portfolio. 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 employee’s 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 Group expects to
introduce a security loan plan during the 2014 year to provide an alternative long term incentive for employees and to
assist in enabling employees to retain a long-term ownership of stapled securities.
The number of Key Management Personnel participating in the PRP during the year was 7 (2012: 8). The number of
performance rights allocated to Key Management Personnel at balance date was 7,058,629 (2012: 6,663,935).
26
Cromwell Property Group | Annual Report 2013 External environment
(iii)
The unemployment rate during the year remained low by historical standards, but has been steadily increasing, in line
with the softer economy generally. Whilst this has resulted in an easing labour market, demand for quality employees,
particularly in the property and financial services sectors, remains high.
(iv) Non-executive directors remuneration
Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the
Directors. The Board determines remuneration of Non-Executive Directors within the maximum amount approved by
security holders 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
2013
$
185,000
85,000
18,000
12,000
7,500
5,000
–
2012
$
185,000
85,000
18,000
12,000
7,500
5,000
–
The Non-Executive Directors’ fees were unchanged in 2013 and were last increased in November 2011. The current and
previous year rates are shown above.
(v) Use of remuneration consultant
In April 2013, to assist with the review of Senior executives remuneration, the Remuneration Committee employed the
services of the Avdiev Group to undertake a market review covering the composition and market competitiveness of senior
executives remuneration. Under the terms of the engagement, Avdiev Group provided remuneration comparisons and
recommendations and was paid $38,000 for these services.
The following arrangements were made to ensure the remuneration recommendations were free from undue influence:
• Avdiev Group was engaged by and reported directly to the Chairman of the Committee;
• The report containing the remuneration recommendations was provided by Avdiev Group directly to the Chairman of
the Committee; and
• Avdiev Group was given access to senior executives and Committee members throughout the engagement to
understand roles and responsibilities.
Based on the above arrangements the Board is satisfied the recommendations were made free from undue influence.
The recommendations of the Avdiev Group did not impact on remuneration in 2013, but were used by the Committee
in reviewing and setting remuneration levels for the 2014 financial year.
Voting and comments made at the company’s 2012 Annual General Meeting
vi)
The Group and Trust’s remuneration report for the 2012 financial year was passed on a ‘show of hands’. Proxies received
before the meeting were approximately 93% in favour of the remuneration report.
27
Cromwell Property Group | Annual Report 2013 (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 MJ 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
Ms NE Riethmuller
Chairman
Director
Director
Director
Director
Director
Director
Director (Alternate to Mr Watters)
Managing Director/Chief Executive Officer
Director – Finance & Funds Management
National Leasing Manager
National Head of Sales, Director of controlled entity
Transactions Manager, Property Licensee, Director of controlled entity
Associate Director Transactions, Director of controlled entity
Group Treasurer, Director of controlled entity
General Counsel/Company Secretary
28
Cromwell Property Group | Annual Report 2013 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
$
$
169,725
95,872
102,000
99,083
82,569
85,000
65,000
18,349
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15,275
8,628
–
8,917
7,431
–
–
1,789
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
185,000
104,500
102,000
108,000
90,000
85,000
65,000
20,138
775,630
433,530
10,456
(17,779)
250,000
150,000
157,900
-
16,470
16,470
23,511
8,264
179,699
78,169
1,413,666
668,654
300,000
270,890
192,324
308,700
283,250
283,250
3,565,172
1,893
1,935
892
4,052
(4,108)
(9,066)
(11,725)
100,000
166,546
25,500
50,000
100,000
50,000
892,046
–
–
6,665
–
25,551
8,232
198,348
16,470
16,470
16,470
16,470
16,470
16,470
173,800
8,154
9,823
5,461
9,483
4,809
4,386
73,891
72,742
38,473
–
69,761
56,411
18,849
514,104
499,259
504,137
247,312
458,466
482,383
372,121
5,405,636
–
–
–
–
–
–
–
–
30%
34%
35%
41%
10%
26%
32%
19%
2013
Non-Executive
Directors
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
MJ Watters
G Cannings
Executive
Directors
PL Weightman
DJ Wilson
Other key
management
personnel
B Binning
M Blake
JA Clark
P Cowling
D Gippel
NE 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.
29
Cromwell Property Group | Annual Report 2013 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
79,511
81,667
43,333
12,232
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,312
8,353
–
8,642
7,156
–
–
963
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
173,333
101,166
98,667
104,666
86,667
81,667
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
29%
31%
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
17%
15%
–
5%
34%
–
11%
2012
Non-Executive
Directors
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
M Watters(2)
G Cannings(3)
Executive
Directors
PL Weightman
DJ Wilson
Other key
management
personnel
B Binning
MJ Blake
JA Clark
P Cowling
DA Gippel
PW Howard(4)
NE 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.
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 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.
30
Cromwell Property Group | Annual Report 2013 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 2013 there were no non-financial performance conditions in existing short term (cash) incentive plans. All short term
conditions related to financial metrics occurring within the 2013 financial year. 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
2013
102,411
+ 28%
7.6 cents
1%
7.3 cents
4%
$0.70
5%
$0.72
1%
2012
80,010
+ 23%
2011
65,297
+ 1%
2010
64,630
+ 1%
2009
63,761
(10%)
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%)
9.0 cents
0%
$0.76
(25%)
$0.77
(21%)
In addition to existing short-term incentive plans, discretionary bonuses of $250,000 in total were also paid to certain
Key Management Personnel and other staff who would not normally qualify for short-term incentives, in recognition
of a number of significant transactions during the year which the Directors believe will add long-term value. These
achievements include negotiation and acquisition of the NSW Government Portfolio, completion of a number of equity
raisings with broad support from many existing and new securityholders and inclusion in the S&P/ASX 300 Index.
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 against the S&P/ASX 300 A-REIT accumulation index.
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
54.4%
24.0%
30.4%
20.7%
33.7%
3 Year
22.9%
13.4%
9.5%
8.0%
14.9%
5 Year
16.4%
0.3%
16.1%
2.2%
14.2%
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.
31
Cromwell Property Group | Annual Report 2013 Cash Bonus
Paid
%
100%
100%
100%
100%
100%
100%
100%
100%
Financial
Year Options
Granted
Cash Bonus
Forfeited
%
–
–
–
–
–
–
–
–
2011
2011
2012/13
2011/12/13
–
2012/13
2012/13
2011/12/13
Options
Vested
in 2012
%
–
–
–
–
–
–
–
100%(1)
Options
Forfeited in
2012
%
Financial
Years Options
may vest
– 2014/15/16
– 2014/15/16
– 2014/15/16
– 2014/15/16
–
–
– 2014/15/16
– 2014/15/16
2015/16
–
Maximum
value of grant
to vest
$
128,914
56,080
60,462
57,137
–
59,443
59,058
31,380
Name
PL Weightman
DJ Wilson
B Binning
MJ Blake
JA Clark
P Cowling
DA Gippel
NE Riethmuller
(1) Relates to performance rights issued in 2011.
(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
23/08/2010
23/08/2010
26/05/2011
26/05/2011
26/05/2011
05/09/2011
05/09/2011
05/09/2011
12/10/2012
12/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
Expiry Date
Exercise Price
21/09/2013
21/09/2013
01/10/2013
01/10/2014
01/10/2015
05/10/2014
05/10/2014
05/10/2014
12/11/2015
12/11/2015
01/08/2013
01/08/2014
01/08/2015
01/08/2013
01/08/2014
01/08/2015
$0.10
$0.20
$0.50
$0.50
$0.50
$0.20
$0.10
–
–
$0.20
–
–
–
$0.20
$0.20
$0.20
No of Performance
Rights Granted
123,459
95,894
1,913,333
1,913,333
1,913,334
308,097
52,851
343,634
50,006
120,584
55,561
55,563
55,563
60,292
60,292
60,292
Assessed Value
per Right at Grant Date
50.6¢
37.0¢
13.9¢
12.6¢
11.5¢
32.3¢
41.1¢
50.0¢
60.0¢
41.5¢
77.6¢
71.1¢
65.1¢
57.9¢
51.9¢
46.4¢
32
Cromwell Property Group | Annual Report 2013 Details of changes during the 2013 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
2013
PL Weightman
DJ Wilson
DA Gippel
B Binning
M J Blake
JA Clark
P Cowling
NE Riethmuller
4,000,000
1,740,000
236,248
107,386
232,826
–
171,165
176,310
6,663,935
–
–
41,672
180,876
120,584
–
125,015
50,006
518,153
–
–
–
–
–
–
–
(123,459)
(123,459)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000,000
1,740,000
277,920
288,262
353,410
–
296,180
102,857
7,058,629
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 890,414 performance rights were granted during 2013 (2012: 1,037,152) of which 518,153 (2012: 704,582) were
issued to Key Management Personnel. The model inputs for performance rights granted during the 2013 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 2013 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
NE Riethmuller
Remuneration
consisting of
performance
rights (1)
Value
at grant date (2)
$
Value
at exercise date (3)
$
Value
at forfeit date (4)
$
13%
12%
15%
8%
–
15%
12%
5%
–
–
94,212
50,000
–
89,063
29,688
30,000
–
–
–
–
–
–
–
62,495
–
–
–
–
–
–
–
–
(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.
33
Cromwell Property Group | Annual Report 2013 (e) employment contracts and termination provisions
Employment contracts
(i)
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 2013 year of $950,000, to be reviewed annually by the remuneration
committee. Since balance date it has been agreed the base salary will increase to $1,050,000 for the 2014 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 2013 year depended on performance criteria being met. The
criteria were assessed as being met in full during the financial year, with 100% of the performance bonus amount being
paid.
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 2013 year of $450,000, to be reviewed annually by the remuneration
committee. Since balance date it has been agreed the base salary will increase to $500,000 for the 2014 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 2013 year depended on certain criteria being met. The criteria were
assessed as being met in full during the financial year, with 100% of the performance bonus amount being paid.
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.
34
Cromwell Property Group | Annual Report 2013 12. Trust Disclosures
Fees to Responsible Entity
Total amounts paid/payable to the Responsible Entity or its associates during the year were $18,594,286 (2012: $15,113,342).
Units held by Responsible Entity
Cromwell Corporation Limited, the parent company of the Responsible Entity, held 275,106 (2012: 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 (2012: 1,517,000) units in the Cromwell Mary Street Planned Investment, a subsidiary
of the Trust, throughout the year. The holding represents approximately 8% (2012: 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
1,713,996,562 (2012: 1,169,964,049) 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 $2,487,254,000 (2012: $1,820,045,000).
Net assets attributable to unitholders of the Trust were $1,140,730,000 (2012: $769,400,000) equating to $0.67 per unit
(2012: $0.66 per unit).
The Trust’s assets are valued in accordance with policies stated in note 1 of the financial statements.
13. Indemnifying Officers or Auditor
Subject to the following, no indemnity or insurance premium was paid during the financial year for a person who is or has
been an officer of the Group.
The constitution of the Company provides that to the extent permitted by law, a person who is or has been an officer of the
Company is indemnified against certain liabilities and costs incurred by them in their capacity as an officer of the Company.
Further, the Company has entered into a Deed of access, insurance and indemnity with each of the Directors and the
company secretary. Under the deed, the Company agrees to, amongst other things:
•
indemnify the officer to the extent permitted by law against certain liabilities and legal costs incurred by the officer as
an officer of the Company and its subsidiaries;
• maintain and pay the premium on an insurance policy in respect of the officer; and
• provide the officer with access to board papers and other documents provided or available to the officer as an officer of
the Company and its subsidiaries.
The Group has paid premiums for Directors and officers’ liability insurance with respect to the Directors, company secretary
and senior management as permitted under the Corporations Act 2001. The terms of the policy prohibit disclosure of the
nature of the liabilities covered and the premiums payable under the policy.
No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person
who is or has been an auditor of the Company or any of its controlled entities.
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.
35
Cromwell Property Group | Annual Report 2013 15. Auditor
Pitcher Partners (formerly known as Johnston Rorke) continues in office in accordance with section 327 of the Corporations
Act 2001.
The Company may decide to employ Pitcher Partners 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
2013
$
131,200
131,200
2012
$
70,000
70,000
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 $68,500 (2012: $112,500).
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 23rd day of August 2013
36
Cromwell Property Group | Annual Report 2013 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 2013, 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.
PITCHER PARTNERS
R.C.N. WALKER
Partner
Brisbane, Queensland
23 August 2013
37
Cromwell Property Group | Annual Report 2013
Consolidated Statements of Comprehensive Income
for the year ended 30 June 2013
Revenue and other income
Rental income and recoverable outgoings
Funds management fees
Interest
Distributions
Gain on sale of investment property
Other revenue
Share of profits of equity accounted entities
Increase in recoverable amount:
Property development inventories/provision
Fair value net gain from:
Interest rate derivatives
Investments at fair value through profit or loss
Total revenue and other income
Expenses
Property expenses and outgoings
Funds management costs
Property development costs
Finance costs
Employee benefits expense
Administration and overhead costs
Responsible entity fees
Amortisation and depreciation
Share of losses of equity accounted entities
Loss on sale of investment properties
Loss on disposal of other assets
Fair value net loss from:
Interest rate derivatives
Investment properties
Investments at fair value through profit or loss
Merger transaction costs
Total expenses
Profit before income tax
Income tax expense
Profit
Other comprehensive income, net of tax
Total comprehensive income
Profit and Total comprehensive income/(loss) is attributable to
Company shareholders
Trust unitholders
Non-controlling interests
Profit and 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
5
13(b)
Group
Trust
2013
$’000
206,665
9,797
5,262
222
132
418
646
2012
$’000
177,245
4,567
4,713
37
–
141
–
2013
$’000
206,478
–
4,604
222
132
192
593
2012
$’000
176,673
–
4,452
37
–
18
–
–
200
225
–
7,326
47
230,515
–
–
186,903
7,326
47
219,819
34,005
592
359
70,296
14,859
6,398
–
643
–
–
146
–
55,747
–
631
183,676
46,839
683
46,156
–
46,156
2,865
43,291
–
46,156
0.21¢
0.21¢
3.44¢
27,087
487
638
64,523
13,347
5,496
-
604
140
331
44
38,483
12,353
173
–
163,706
23,197
120
23,077
–
23,077
(1,282)
24,359
–
23,077
(0.12¢)
(0.12¢)
2.16¢
38,753
–
–
70,355
–
1,102
9,959
–
–
–
–
–
55,747
–
631
176,547
43,272
–
43,272
–
43,272
–
43,291
(19)
43,272
3.23¢
3.23¢
–
–
181,180
30,530
–
–
64,796
–
1,113
8,497
–
131
331
–
38,483
12,353
173
–
156,407
24,773
–
24,773
–
24,773
–
24,359
414
24,773
2.28¢
2.28¢
5
5
5
13 (b)
5
5
11
37(ii)
6
28
28
28
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
38
Cromwell Property Group | Annual Report 2013 Consolidated Statements of Financial Position
as at 30 June 2013
Current Assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
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 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
Current tax liability
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
8
10
11
12
13
14
15
16
17
18
19
20
21
22
18
20
21
23
24
25
26
26
Group
Trust
2013
$’000
125,933
7,940
–
2,527
136,400
–
3,000
2,396,000
7,468
100
1,308
804
1,030
2,409,710
2,546,110
28,014
–
31,061
17,638
1,215
329
15,468
93,725
1,232,720
17,870
943
1,251,533
1,345,258
1,200,852
103,323
5,198
(48,697)
59,824
1,141,028
–
1,200,852
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
2013
$’000
75,126
6,816
–
1,844
83,786
–
–
2,396,000
7,468
–
–
–
–
2,403,468
2,487,254
27,030
–
31,066
17,638
–
–
15,468
91,202
1,232,720
17,870
–
1,250,590
1,341,792
1,145,462
1,257,707
–
(116,977)
1,140,730
–
4,732
1,145,462
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
The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
39
Cromwell Property Group | Annual Report 2013 Consolidated Statements of Changes in equity
for the year ended 30 June 2013
Attributable to Equity Holders of the Company
Group
Notes Contributed
Equity
Accumu-
lated
Losses
Available
for Sale
Reserve
$’000
66,344
–
$’000
(51,562)
2,865
$’000
2,340
–
23
27
24
23
27
24
36,979
–
–
36,979
103,323
57,073
–
9,271
–
–
9,271
66,344
–
–
–
–
(48,697)
(50,280)
(1,282)
–
–
–
–
(51,562)
–
–
–
–
2,340
2,340
–
–
–
–
–
2,340
Share
Based
Payments
Reserve
$’000
2,189
–
Total
$’000
19,311
2,865
Non-
controlling
Interest
(Trust)
$’000
769,678
43,291
Total
Equity
$’000
788,989
46,156
–
–
669
669
2,858
1,588
–
36,979
–
669
37,648
59,824
429,718
466,697
(101,659)
–
328,059
1,141,028
(101,659)
669
365,707
1,200,852
10,721
(1,282)
694,439
24,359
705,160
23,077
–
9,271
125,899
135,170
–
601
601
2,189
–
601
9,872
19,311
(75,019)
–
50,880
769,678
(75,019)
601
60,752
788,989
Balance at 1 July 2012
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 2013
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
Trust
Balance at 1 July 2012
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 2013
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
Attributable to Equity Holders of CDPT
Notes
Contributed
Equity
$’000
827,989
–
Accumu-
lated
Losses
$’000
(58,589)
43,291
Total
(CDPT)
$’000
769,400
43,291
Non-
controlling
Interest
$’000
5,320
(19)
Total
Equity
$’000
774,720
43,272
23
27
23
27
429,718
–
429,718
1,257,707
–
(101,679)
(101,679)
(116,977)
429,718
(101,679)
328,039
1,140,730
702,090
–
(7,910)
24,359
694,180
24,359
125,899
–
125,899
827,989
–
(75,038)
(75,038)
(58,589)
125,899
(75,038)
50,861
769,400
–
(569)
(569)
4,732
5,463
414
–
(557)
(557)
5,320
429,718
(102,248)
327,470
1,145,462
699,643
24,773
125,899
(75,595)
50,304
774,720
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
40
Cromwell Property Group | Annual Report 2013 Consolidated Statements of Cash Flows
for the year ended 30 June 2013
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)/refunded
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
Net inflow of cash on acquisition of controlled entity
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
Payment of merger transaction costs
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 stapled securities/units
Equity issue transaction costs
Payment of dividends/distributions
Payment for derivative financial instruments
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
Notes
Group
Trust
2013
$’000
2012
$’000
2013
$’000
2012
$’000
245,581
(78,461)
204
7,110
(68,715)
(184)
105,535
(591,962)
42,571
(304)
2,560
(7,720)
565
(863)
(19,606)
32,391
(631)
(542,999)
240,921
(84,144)
(2,661)
443,731
(11,590)
(80,780)
(1,233)
504,244
66,780
59,153
125,933
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
231,798
(71,371)
204
6,448
(68,773)
–
98,306
(591,962)
42,571
–
2,560
(7,720)
565
–
(23,668)
35,580
(631)
(542,705)
240,921
(84,144)
(2,661)
408,723
(10,939)
(82,163)
(1,233)
468,504
24,105
51,021
75,126
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
29
37
7
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
41
Cromwell Property Group | Annual Report 2013 Notes to the Financial Statements
for the year ended 30 June 2013
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 non-controlling 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 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 2012 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; and
•
investments at fair value through profit or loss are measured at fair value.
The methods used to measure fair values are discussed further below.
Functional and presentation currency
The financial report is presented in Australian dollars, which is the 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.
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:
42
Cromwell Property Group | Annual Report 2013 (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 2013 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.
43
Cromwell Property Group | Annual Report 2013 (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.
Interest
Interest revenue is recognised as it accrues using the effective interest method.
Income tax
(d)
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 in other comprehensive income or directly in equity
are also recognised in other comprehensive income or directly in equity.
Tax consolidation
The Company and its wholly-owned entities (this excludes the Trust and its controlled entities) have formed a tax-
consolidated group with effect from 1 July 2003 and are, therefore, taxed as a single entity from that date. The head entity
within the tax-consolidated group is Cromwell Corporation Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-
consolidated group, using the ‘separate taxpayer within group’ approach by reference to the carrying amounts of assets and
liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities or assets and deferred tax assets arising from unused tax losses of the subsidiaries are assumed
by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from) other entities
in the tax-consolidated group in conjunction with any tax funding arrangement amounts referred to in the following section.
Any difference between these amounts is recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent
that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be
utilised. Any subsequent period adjustment to deferred tax assets arising from unused tax losses, as a result of revised
assessments of the probability of recoverability, is recognised by the head entity only.
44
Cromwell Property Group | Annual Report 2013 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 and 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.
trade and other receivables
(f)
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.
Inventories
(g)
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.
Investment properties
(h)
Investment property is property which is held either to earn income or for capital appreciation or both. Investment property
also includes properties that are under construction for future use as investment properties. Initially, investment property
is measured at cost including transaction costs. The investment property is subsequently measured at fair value, with
any change therein recognised in profit or loss. As part of the process of determining fair value, an external, independent
valuer, having an appropriate recognised professional qualification and recent experience in the location and category of
property being valued, values individual properties at least every two years on a rotation basis or on a more regular basis if
considered appropriate and as determined by management in accordance with the valuation policy of the Group. In addition,
the Group has utilised internal valuation processes for determining fair value at balance date.
These valuation processes are taken into consideration when determining the fair value of the investment properties. The
fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of
valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the
parties had each acted knowledgably, prudently and without compulsion.
The valuations are prepared by considering the capitalisation of net income and the discounting of future cash flows to their
present value. These methods incorporate assumptions of future rental income and costs, appropriate capitalisation and
discount rates and also consider market evidence of transaction prices for similar investment properties.
Valuations reflect, where appropriate:
•
•
•
the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation
after letting of vacant accommodation and the market’s general perception of their credit-worthiness;
the allocation of maintenance and other operating cost responsibilities between lessor and lessee; and
the remaining economic life of the property.
Further information on assumptions underlying management’s assessment of fair value is contained in note 2.
45
Cromwell Property Group | Annual Report 2013 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.
Property, plant and equipment
(j)
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
Rate
10-67%
18%
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.
46
Cromwell Property Group | Annual Report 2013 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 life 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) is based on quoted
market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current
bid price; the appropriate quoted market price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on
market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used
for long term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair
value for the remaining financial instruments.
The carrying value less impairment provision of trade and other receivables and payables are assumed to approximate
their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar
financial instruments.
(n) Business combinations
The acquisition method of accounting is used to account for all business combinations regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the
fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing
equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at
their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling
interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net
identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable
assets acquired are recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit
or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
47
Cromwell Property Group | Annual Report 2013 (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.
Initial direct leasing costs
(p)
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.
48
Cromwell Property Group | Annual Report 2013 (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 balance 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 balance 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.
49
Cromwell Property Group | Annual Report 2013 Leasehold improvements
(y)
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.
(af) New accounting standards and interpretations
Relevant accounting standards and interpretations that have been issued or amended but are not yet effective and have not
been adopted for the year are as follows:
50
Cromwell Property Group | Annual Report 2013 Standard/Interpretation
AASB 9 Financial Instruments – revised and consequential amendments to other accounting standards
resulting from its issue
AASB 10 Consolidated Financial Statements – revised and consequential amendments to other accounting
standards resulting from its issue
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
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 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
AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of
Hedge Accounting
Application
date of
standard
Application
date for
the Group
1 Jan 2015
1 Jul 2015
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jan 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jul 2013
1 Jan 2013
1 Jul 2013
1 Jan 2013
1 Jul 2013
1 Jan 2014
1 Jul 2014
1 Jan 2013
1 Jan 2014
1 Jul 2013
1 Jul 2014
1 Jan 2014
1 Jul 2014
The Directors anticipate that the adoption of these Standards and Interpretations in future years may have the following
impacts:
AASB 9 – This revised standard provides guidance on the classification and measurement of financial assets, which is the
first phase of a multi-phase project to replace AASB 139 Financial Instruments: Recognition and Measurement. Under
the new guidance, a financial asset is to be measured at amortised cost only if it is held within a business model whose
objective is to collect contractual cash flows and the contractual terms of the asset give rise on specified dates to cash
flows that are payments solely of principal and interest (on the principal amount outstanding). All other financial assets
are to be measured at fair value. Changes in the fair value of investments in equity securities that are not part of a trading
activity may be reported directly in equity, but upon realisation those accumulated changes in value are not recycled to profit
or loss. Changes in the fair value of all other financial assets carried at fair value are reported in profit or loss. The Directors
do not expect the new standard to have a significant impact on the financial statements and related disclosures. In the
second phase of the replacement project, the revised standard incorporates amended requirements for the classification
and measurement of financial liabilities. The new requirements pertain to liabilities at fair value through profit or loss,
whereby the portion of the change in fair value related to changes in the entity’s own credit risk is presented in other
comprehensive income rather than profit or loss. The Directors believe there will be no impact on the Group’s accounting
for financial liabilities, as the Group does not currently have any liabilities at fair value through profit or loss. The Group
intends to adopt the new standard from 1 July 2015.
AASB 10, AASB 11, AASB 12, AASB 127 and AASB 128 – These new and revised standards are a suite of five standards
dealing with consolidation, joint venture arrangements and related disclosures. The main features are:
•
AASB 10 – Introduces a new control model and replaces parts of AASB 127 Consolidated and Separate Financial
Statements. The new model broadens the situations when an entity is considered to be controlled and is likely to lead
to more entities being consolidated.
• AASB 11 – Replaces AASB131 Interests in Joint Ventures and uses the principle of control from AASB 10 to define joint
control. It also removes the option to account for jointly controlled entities using proportionate consolidation.
• AASB 12 – Requires disclosure of information pertaining to an entity’s interests in subsidiaries, joint arrangement,
associates and structures entities, including significant judgements and assumptions.
• AASB 127 – This amended standard deals only with separate financial statements, with the consolidated financial
statement requirements having moved to AASB 10. It carries forward the existing accounting and disclosure
requirements for separate financial statements, with some minor clarifications.
• AASB 128 – Only limited amendments have been made to this standard including accounting for associates and joint
ventures held for sale and changes in interests held in associates and joint ventures.
The Directors believe the adoption of the standards from 1 July 2013 will not result in any material changes to the Group’s
financial statements.
51
Cromwell Property Group | Annual Report 2013 AASB 13 – The new standard replaces the fair value measurement guidance contained in the various standards. It provides
guidance on how to determine fair value by defining fair value and providing a framework for measurement, but does not
change when an entity is required to determine fair value. It also expands the disclosures required when fair value is used.
The Directors do not believe current measurement techniques will require revision due to the new guidance, however, it is
anticipated that disclosures may be more extensive. The Group intends to adopt the new standard from 1 July 2013.
AASB 119 – The relevant 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 primarily upon the
calculation and classification of employee provisions in respect of annual leave, however the Directors believe the resultant
impact upon the financial statements will be immaterial. The Group intends to adopt the new standard from 1 July 2013.
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 Group intends to adopt the new standard from 1 July 2013.
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 believe the adoption of the standards will not result in any material changes to the Group’s
financial statements.
AASB 2012-5 – These amendments introduce various changes to AASBs. The Directors believe the adoption of the
amendments will not result in any material changes to the Group’s financial statements.
AASB 2013-3 – These amendments introduce changes to AASB 136 to require the disclosure of additional information about
the fair value measurement when the recoverable amount of impaired assets is based on fair value less costs of disposal. This
includes further disclosures about the discount rates used in current and previous measurements if the recoverable amount
of impaired assets based on fair value less costs of disposal was measured using a present value technique. The Directors
believe the adoption of the amendments will not result in any material changes to the Group’s financial statements.
AASB 2013-4 – These amendments introduce changes to AASB 139 to permit the continuation of hedge accounting in
circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to
a central counterparty as a consequence of laws or regulations. The Directors believe the adoption of the amendments will
not result in any material changes to the Group’s financial statements as the Group and Trust currently do not engage in
hedge accounting.
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 $2,396,000,000 (2012: $1,724,400,000)
representing estimated fair value at balance date. 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 conditions in recent years have 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 led to falls in asset values, although in recent times there has
been 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;
52
Cromwell Property Group | Annual Report 2013 • 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.
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
2013
93%
4%
3%
100%
2012
94%
4%
2%
100%
2013
8.44%
9.27%
10.04%
8.51%
2012
8.22%
9.36%
9.12%
8.28%
2013
6.2yrs
5.4yrs
5.3yrs
6.1yrs
2012
6.4yrs
3.3yrs
3.5yrs
6.2yrs
2013
96.0%
97.5%
93.3%
96.1%
2012
96.2%
100.0%
98.5%
96.4%
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.
53
Cromwell Property Group | Annual Report 2013 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 $7 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 2013 and 2012.
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
2013
$’000
1,232,720
125,933
1,106,787
2,546,110
1,834
125,933
2,418,343
46%
2012
$’000
964,177
59,153
905,024
1,837,601
1,547
59,153
1,776,901
51%
2013
$’000
1,232,720
75,126
1,157,594
2,487,254
–
75,126
2,412,128
48%
2012
$’000
964,177
51,021
913,156
1,820,045
–
51,021
1,769,024
52%
4. Financial Risk Management
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:
125,933
7,940
7,468
141,341
28,014
35,508
1,232,720
31,061
1,327,303
59,153
41,305
266
100,724
14,472
40,628
964,177
20,470
1,039,747
75,126
6,816
7,468
89,410
27,030
35,508
1,232,720
31,066
1,326,324
51,021
38,606
266
89,893
13,311
40,628
964,177
20,474
1,038,590
Financial Assets
Cash and cash equivalents (1)
Trade and other receivables (1)
Investments at fair value through profit and loss (2)
Total financial assets
Financial Liabilities
Trade and other payables (3)
Derivative financial instruments (2)
Borrowings (3)
Dividends/distributions payable (3)
Total financial liabilities
(1) Loans and receivables
(2) At fair value – designated
(3) At amortised cost
54
Cromwell Property Group | Annual Report 2013 (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
2013
$’000
3,269
223
345
3,837
2012
$’000
767
452
1,369
2,588
2013
$’000
3,269
223
345
3,837
2012
$’000
505
–
1,369
1,874
(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 2.2 years (2012: 2.4 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
133,850
1,342,138
–
1,475,988
122,147
1,042,481
357
1,164,985
132,869
1,342,138
–
1,475,007
120,954
1,042,481
357
1,163,792
55
Cromwell Property Group | Annual Report 2013 (c) Market Risk
Price risk – Listed equity securities
(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 (refer note 12). The Group and Trust are
not exposed to commodity price risk. A small proportion 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%
(2012: 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 $63,000 (2012: $53,000)
higher/lower.
Price risk – Unlisted equity securities
(ii)
The Group and Trust is exposed to price risk in relation to its unlisted equity securities (refer note 12) acquired during the
year. The Group and Trust uses the fair value of the net assets of the unlisted equity securities to determine the fair value
of its investments in the same. The fair value of the net assets of the unlisted equity securities is predominantly dependent
on the market value of the investment property they hold. Any movement in the market value of the investment property will
impact on the fair value of the Group and Trust’s investment.
Sensitivity
Based on its investment held at 30 June 2013, had the market values of the investment property’s held by unlisted equity
investments increased/decreased by 5% with all other variables held constant the impact on the company’s equity for the
year would have been $612,000 higher/lower (2012 - nil).
(iii)
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 86% (2012:
97%) of the Group’s borrowings were effectively hedged.
Interest rate risk
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 2.98% and 5.95% (2012: 3.18% and 5.95%) and the variable rates are
generally based on the 30 day bank bill swap bid rate which at balance date was 2.87% (2012: 3.63%). 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
2013
$’000
262,400
216,700
31,730
270,000
286,450
–
1,067,280
2012
$’000
226,600
380,000
216,700
31,730
–
86,450
941,480
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 18.
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 $33,281,000 higher/lower (2012 – change of 100 bps:
$25,097,000 higher/lower), mainly as a result of increase/decrease in the fair value of interest rate derivatives. Equity would
have been $33,281,000 higher/lower (2012: $25,097,000 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 $32,773,000 higher/lower (2012 – change of 100 bps:
$25,016,000 higher/lower), mainly as a result of increase/decrease in the fair value of interest rate derivatives. Equity would
have been $32,773,000 higher/lower (2012: $25,016,000 higher/lower) mainly as a result of an increase/decrease in the fair
value of interest rate derivates.
56
Cromwell Property Group | Annual Report 2013 (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
Investments at fair value through profit or loss
Financial Liabilities
Derivative financial instruments
2013
2012
Level 1
$’000
Level 2
$’000
Level 1
$’000
Level 2
$’000
315
315
–
–
7,153
7,153
35,508
35,508
266
266
–
–
–
–
40,628
40,628
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
Gain/(loss) on Sale of Investment Properties:
Net proceeds from sale of investment properties
Carrying value of investment properties sold and other costs of sale
Gain/(loss) on sale of investment properties
Finance Costs:
Total interest
Less: interest capitalised
Interest expense
Amortisation of loan transaction costs
Finance Costs
Employee Benefits Expense:
Wages and salaries including on costs
Contributions to defined contribution superannuation plans
Equity settled share-based payments
Increase in liability for long service and annual leave
Less: employee benegits capitalised
Employee benefits expense
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
2013
$’000
456
42,571
(42,439)
132
67,715
–
67,715
2,581
70,296
13,279
833
669
256
15,037
(178)
14,859
320
323
643
3
143
146
2012
$’000
367
38,998
(39,329)
(331)
62,855
(892)
61,963
2,560
64,523
11,515
731
601
500
13,347
–
13,347
249
355
604
21
23
44
2013
$’000
–
42,571
(42,439)
132
67,774
–
67,774
2,581
70,355
2012
$’000
–
38,998
(39,329)
(331)
62,855
(892)
61,963
2,833
64,796
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57
Cromwell Property Group | Annual Report 2013 6.
Income Tax
(a)
Income tax expense
Current tax
Deferred tax
Change in tax losses recognised
Adjustment in relation to prior periods
Income tax expense
Group
2013
$’000
1,519
137
(933)
(40)
683
2012
$’000
58
(121)
178
5
120
(b) Numerical reconciliation of income tax expense to prima facie tax
Profit before income tax
Tax at the Australian tax rate of 30% (2012: 30%)
Tax effect of amounts which are not deductible/ (taxable) in calculating
taxable income:
Non-taxable trust income
Non-deductible expenses
Non-deductible property development costs/impairment
Assessable for income tax
Change in tax losses recognised (note 15)
Adjustment in relation to prior periods
Income tax expense
46,839
14,052
23,197
6,959
(12,987)
215
278
98
(933)
(40)
683
(7,308)
189
(92)
189
178
5
120
(c) Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Tax losses
17,792
18,702
Trust
2013
$’000
2012
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
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 (2012: $nil) as tax consolidation contributions by, or distributions to, equity
participants.
7. Cash and Cash Equivalents
Cash at bank
Cash and cash equivalents
125,933
125,933
59,153
59,153
75,126
75,126
51,021
51,021
58
Cromwell Property Group | Annual Report 2013 8. Trade and Other Receivables
Current Assets
Trade debtors
Provision for impairment of trade debtors
Other receivables – associates
Loans:
Associate
Related party
Trade and other receivables – current
Non-Current Assets
Loans:
Associate
Related party
Trade and other receivables – non-current
Group
Trust
2013
$’000
7,940
–
–
–
–
7,940
–
–
–
2012
$’000
3,093
(127)
1,691
4,062
12,786
21,505
19,800
–
19,800
2013
$’000
6,816
–
–
–
–
6,816
–
–
–
2012
$’000
1,288
(127)
1,671
–
12,786
15,618
19,800
3,188
22,988
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.
(a) Loans – associates and related parties
Cromwell Property Fund
On 4 October 2012 the Group and Trust acquired the remaining units they did not already own of CPF. As a result, the Group
and Trust’s equity interest in CPF increased from 18% to 100% (refer notes 13 and 37) and the loan from the Group to CPF,
previously classified as a loan to associate, is now eliminated upon consolidation..
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, who will occupy 91% of the property on completion under a 15 year agreement for
lease.
The Group and Trust provided an initial loan facility of $20,000,000 to ICH, which was unsecured, to enable settlement of the
land and funding for initial construction. CFM issued a product disclosure document (“PDS”) on 16 December 2011 to raise
funds from investors for ICH, which was ultimately fully subscribed and completed in October 2012. The loan was repaid in
full between March 2012 and October 2012 using funds raised under the PDS. While the loan was drawn down, the Group
and Trust earned a return equivalent to the ICH distribution rate of 7.75% to 30 June 2012 and 8.00% from 1 July 2012.
(b) Past due but not impaired receivables
At balance date, the Group had $3,837,000 (2012: $2,588,000) and the Trust had $3,837,000 (2012: $1,874,000) of trade and
other receivables which were past due but not impaired. These consist of $3,837,000 (2012: $296,000) for the Group and
$3,837,000 (2012: $296,000) for the Trust which relate to a number of tenants for whom there is no recent history of default.
Impaired receivables
(c)
As at 30 June 2013 no trade receivables of the Group and Trust were impaired (2012: $127,000). The provision as at 30 June
2012 was in respect of an individually impaired receivable relating to a financially distressed tenant. This provision was fully
utilised during the current year as the relevant receivable was not recovered.
The ageing analysis of this receivable is as follows:
1 to 3 months
3 to 6 months
Over 6 months
2013
$’000
–
–
–
–
2012
$’000
78
49
–
127
59
Cromwell Property Group | Annual Report 2013 Movements in the provision for impairment of receivables are as follows:
Balance at 1 July
Provision for impairment recognised during the year
Provision for impairment utilised in respect of non-recovered amount
Balance at 30 June
2013
$’000
127
–
(127)
–
2012
$’000
–
127
–
127
The creation of the provision has been included in property expenses and outgoings in the statement of comprehensive
income.
9. Other Current Assets
Group
2013
$’000
2012
$’000
Trust
2013
$’000
2012
$’000
Prepayments
2,527
1,791
1,844
1,047
10. Inventories
Non-current
Land held for development and resale (net realisable value)
Inventories
11. Investment Properties
3,000
3,000
3,000
3,000
–
–
–
–
Investment properties at fair value
2,396,000
1,724,400
2,396,000
1,724,400
(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
Capital Works
Property improvements
Lifecycle
Disposals
Straight-lining of rental income
Lease costs and incentives
Amortisation of lease costs and incentives
Net loss from fair value adjustments
Balance at 30 June
1,724,400
1,444,850
1,724,400
1,444,850
171,372
463,602
26,372
76,319
6,301
(42,439)
6,071
29,275
(9,526)
(55,747)
2,396,000
–
249,483
13,939
50,199
2,614
(39,329)
6,892
15,810
(7,705)
(12,353)
1,724,400
171,372
463,602
26,372
76,319
6,301
(42,439)
6,071
29,275
(9,526)
(55,747)
2,396,000
–
249,483
13,939
50,199
2,614
(39,329)
6,892
15,810
(7,705)
(12,353)
1,724,400
60
Cromwell Property Group | Annual Report 2013
(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
Group
Trust
2013
$’000
206,665
(34,005)
172,660
2012
$’000
177,245
(27,087)
150,158
2013
$’000
206,478
(38,753)
167,725
2012
$’000
176,673
(30,530)
146,143
(c) Assets pledged as security
Borrowings (refer Note 18) are secured by fixed and floating charges over each investment property plus charges over any
building document, lease document, performance bond and bank guarantee in addition to a real property mortgage over
each property.
(d) Leases as a lessor
The investment properties are generally leased to tenants on long term operating leases with rentals payable monthly.
Minimum lease payments under the non-cancellable operating leases of the investment properties not recognised in the
financial statements are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
217,749
624,900
741,200
1,583,849
157,012
510,596
226,143
893,751
217,869
624,900
741,200
1,583,969
157,818
510,692
226,143
894,653
(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.
61
Cromwell Property Group | Annual Report 2013 (f) Details of investment properties
Title
Acquisition
Date (1)
Acquisition
Price (1)
Independent
valuation
date
$’000
200 Mary St, QLD
Oracle Building, ACT
Village Cinemas, VIC
Brooklyn Woolstore, VIC
Terrace Office Park, QLD
Vodafone Call Centre, TAS
Henry Waymouth Centre, SA
Regent Cinema Centre, NSW
NQX Distribution Centre, QLD
Freehold
Jun 2001
29,250
Jun 2013
Jun 1999
Freehold
13,600 Dec 2012
Leasehold Nov 2001
23,550
Jun 2013
Feb 2003
Freehold
17,778 Dec 2012
Apr 2003
Freehold
30,420 Dec 2012
Jun 2004
Freehold
34,000 Dec 2012
Jun 2004
Freehold
8,900 Dec 2012
Jun 2004
Freehold
15,900 Dec 2012
Jun 2004
Freehold
9,900 Dec 2012
10,900 Dec 2012
Jun 2004
Freehold
Dec 2004 133,000 Dec 2012
Freehold
700 Collins Street, VIC
41,000
Feb 2005
Masters Distribution Centre, VIC Freehold
SOLD
35,530 Jun 2013
Leasehold July 2005
19 National Circuit, ACT
Jun 2013
88,000
Dec 2005
Freehold
SOLD
Freehold
30,375
Jan 2006
Freehold Mar 2006 102,650
Jun 2013
85,727 Dec 2012
Freehold
Nov 2008
Jun 2013
Leasehold Jun 2008 166,025
Jun 2013
75,000
Leasehold Jul 2010
Tuggeranong Office Park, ACT
475 Victoria Av, NSW
Elders Woolstore, SA
380 La Trobe St, VIC
101 Grenfell St, SA
Synergy, QLD
Independent
valuation
Carrying
amount
Fair value
adjustment
2013
$’000
81,000
26,500
29,100
25,375
40,000
35,450
12,800
15,000
13,500
16,200
172,000
–
31,000
114,500
–
135,000
73,500
155,000
69,000
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
2013
$’000
81,000
26,500
29,100
25,375
42,300
36,100
13,900
15,000
13,500
16,700
172,000
–
31,000
114,500
–
135,000
73,500
155,000
69,000
2012
$’000
2013
$’000
2012
$’000
87,000
(7,139)
26,500
(314)
28,500
(934)
26,500
(1,078)
32,000
(6,735)
34,400
1,718
12,100
465
15,300
(244)
13,400
87
15,000
656
172,400
(613)
–
–
32,000
(918)
107,000
27
43,200
(701)
135,000
1,638
73,000
1,618
173,000 (18,130)
70,000
(1,109)
(2,485)
(1,807)
(4,645)
547
(2,691)
(1,659)
400
(858)
–
1,243
(913)
230
(4,062)
3,977
2,155
6,861
589
243
(3,937)
Leasehold Jul 2010
90,200 Dec 2012
175,000
170,000
180,500
170,000
8,836
970
Freehold
Freehold
Freehold
Oct 2012
20,279 Jun 2013
34,975 Dec 2012
Jun 2013
74,206
Leasehold Aug 2010 143,891 Dec 2012
Dec 2011 186,000
Jun 2013
Freehold
HQ North, QLD
63,483 Dec 2012
Jan 2012
Bundall Corporate Centre, QLD Freehold
Jun 2013
39,212
Oct 2012
Freehold
HomeBase, Prospect, NSW(2)
43 Bridge Street,
Oct 2012
Hurstville, NSW(2)
13 Keltie Street, Woden, ACT(2) Leasehold Oct 2012
28-54 Percival Rd,
Smithfield, NSW(2)
Sturton Road,
Oct 2012
Edinburgh Park, SA(2)
147-163 Charlotte Street, QLD Freehold May 2013
Freehold May 2013
146-160 Mary Street, QLD
Jun 2013
4-6 Bligh Street, Sydney, NSW Freehold
117 Bull Street, Newcastle, NSW Freehold
Jun 2013
11 Farrer Street,
Freehold
Queanbeyan, NSW
207 Kent Street, Sydney, NSW Freehold
84 Crown Street,
Wollongong, NSW
2-24 Rawson Place,
Freehold
Haymarket, NSW
2-6 Station Street, Penrith, NSW Freehold
Total investment properties
2,700 Dec 2012
30,000 May 2013
35,000 May 2013
53,000 May 2013
13,800 May 2013
Jun 2013
22,600 May 2013
Jun 2013 133,025 May 2013
Jun 2013 130,000 May 2013
28,700 May 2013
Jun 2013
23,900 May 2013
1,606,451
Jun 2013
Freehold
232,000
200,000
68,000
36,800
172,400
194,000
65,300
–
275,000
200,000
68,500
36,800
198,800
194,000
65,300
–
8,901
3,673
577
(2,377)
(830)
(3,484)
(2,197)
–
31,750
62,500
19,000
2,475
29,000
36,000
53,000
13,800
22,600
133,000
23,900
–
–
–
–
–
–
–
–
–
–
–
31,750
62,500
19,000
2,475
30,000
35,000
53,000
13,800
22,600
133,000
23,900
–
(3,349)
– (11,831)
–
–
–
–
–
–
–
–
–
(2,538)
(225)
(1,743)
(2,164)
(2,941)
(766)
(1,254)
(6,707)
(1,326)
130,000
28,700
(7,214)
(1,593)
2,342,450 1,698,000 2,396,000 1,724,400 (55,747)
130,000
28,700
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,353)
TGA Complex, ACT
321 Exhibition Street,
Melbourne, VIC
203 Coward Street,
Mascot, NSW
(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) Buildings acquired in a business combination transaction, through the acquisition of the Cromwell Property Fund (see notes 13 and 37.)
62
Cromwell Property Group | Annual Report 2013 12. Investments at Fair Value Through Profit or Loss
Group
Unlisted equity securities at fair value
Listed equity securities at fair value
Investments at fair value through profit or loss
2013
$’000
7,153
315
7,468
2012
$’000
–
266
266
2013
$’000
7,153
315
7,468
Trust
2012
$’000
–
266
266
These investments are designated at fair value through profit or loss. Gains and losses are shown in profit or loss.
13. Investments in Associates
At balance date the Group had an investment in one associate, Phoenix Portfolios Pty Ltd (“Phoenix”). This entity was
formed in Australia and it’s principal activity is investment management. The reporting date of Phoenix is the same as for
the Group. During the year additional non-voting equity was issued to a third party which reduced the Group’s ownership
interest from 50% to 45% whilst preserving the Group’s 50% ownership of issued capital to which voting rights attach.
The Group and Trust previously held an investment in an associate, CPF. The remaining units of CPF not previously owned
by the Group and Trust were acquired during the year (refer note 37).
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
2013
%
2012
%
–
45
18
50
2013
$’000
–
100
100
2012
$’000
4,705
47
4,752
–
18
–
4,705
63
Cromwell Property Group | Annual Report 2013
(b) Movement in carrying amount of investments in jointly controlled entity and associates
Group
Phoenix
$’000
CPF
$’000
2013
Balance at 1 July 2012
Share of profit/(loss)
Carrying value consolidated (2)
Balance at 30 June 2013
2012
Balance at 1 July 2011
Share of profit/(loss) (1)
Distributions received
Balance at 30 June 2012
Trust
2013
Balance at 1 July 2012
Share of profit/(loss) (1)
Carrying value consolidated (2)
Balance at 30 June 2013
2012
Balance at 1 July 2011
Share of profit/(loss) (1)
Distributions received
Balance at 30 June 2012
47
53
–
100
56
(9)
–
47
4,705
593
(5,298)
–
5,436
(131)
(600)
4,705
CPF
$’000
4,705
593
(5,298)
–
5,436
(131)
(600)
4,705
Total
$’000
4,752
646
(5,298)
100
5,492
(140)
(600)
4,752
Total
$’000
4,705
593
(5,298)
–
5,436
(131)
(600)
4,705
(1) Share of profit/(loss) includes fair value gain/(loss) on investment properties and interest rate derivatives where applicable.
(2) The carrying amount of CPF was derecognised following the acquisition of the remaining units of CPF in October 2012, resulting in CPF being fully consolidated by the Group
and Trust.
(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
2013
2012
Phoenix
$’000
CPF
$’000
Phoenix
$’000
CPF
$’000
239
–
3
242
242
–
(142)
(142)
(142)
100
–
–
–
–
–
–
–
–
–
–
162
–
4
4
166
–
(119)
(119)
(119)
47
532
29,537
–
29,537
30,069
(23,802)
(1,562)
(25,364)
(25,364)
4,705
(d) Share of revenues, expenses and results of jointly controlled entity and associates
Revenue (1)
Expenses (1)
Share of profit/(loss)
437
(384)
53
1,409
(816)
593
269
(278)
(9)
3,560
(3,691)
(131)
(1) Includes share of fair value adjustment to investment properties and interest rate derivatives where applicable (share of revenue, expenses and result of CPF in 2013 relates
to the period from 1 July 2013 until consolidation of CPF).
64
Cromwell Property Group | Annual Report 2013 14. Property, Plant and Equipment
Furniture and fittings at cost
Accumulated depreciation
Plant and equipment at cost
Accumulated depreciation
Property, plant and equipment
Group
Trust
2013
$’000
1,612
(871)
741
2,033
(1,466)
567
1,308
2012
$’000
1,588
(792)
796
1,764
(1,233)
531
1,327
2013
$’000
–
–
–
–
–
–
–
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 2012
Additions
Disposals
Depreciation
Balance at 30 June 2013
Balance at 1 July 2011
Additions
Additions
Depreciation
Balance at 30 June 2012
15. Deferred Tax Assets
Deferred tax assets
Deferred tax assets and liabilities are attributable to the following:
Interests in managed investment schemes
Payables
Employee benefits
Provisions
Other accruals and sundry items
Tax losses recognised
Movements
Balance at 1 July
Reduction in current tax liability on use of tax losses previously recognised
(Debit)/credit to profit or loss
Change in tax losses recognised
Adjustments in relation to prior periods
Balance at 30 June
Furniture and
fittings
$’000
Plant and
Equipment
Owned
$’000
Total
$’000
1,327
304
(3)
(320)
1,308
1,133
464
(21)
(249)
1,327
531
279
(3)
(240)
567
394
329
(21)
(171)
531
2012
$’000
914
(1,917)
84
540
278
212
1,717
914
921
(23)
121
(178)
73
914
Trust
2013
$’000
–
2012
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
796
25
–
(80)
741
739
135
–
(78)
796
Group
2013
$’000
804
(1,918)
–
718
17
527
1,460
804
914
(1,189)
(137)
933
283
804
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).
65
Cromwell Property Group | Annual Report 2013 16. Intangible Assets
Software – at cost
Accumulated amortisation
Intangible assets
Group
Trust
2013
$’000
2,737
(1,707)
1,030
2012
$’000
2,405
(1,772)
633
2013
$’000
–
–
–
2012
$’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
17. Trade and Other Payables
Trade payables and accruals
Lease incentives payable
Tenant security deposits
Amounts payable to related entities (refer note 32(d))
Other payables
Trade and other payables
633
863
(143)
(323)
1,030
11,662
12,782
1,020
–
2,550
28,014
603
408
(23)
(355)
633
–
–
–
–
–
–
–
–
–
–
9,575
2,875
106
–
1,916
14,472
11,818
12,782
1,020
–
1,410
27,030
8,625
2,875
106
540
1,165
13,311
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 or by way of a rental rebate within
6 months of recognition according to the terms of the underlying lease.
18. 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
–
–
21,533
21,533
1,237,578
(4,858)
1,232,720
947,018
(4,374)
942,644
1,237,578
(4,858)
1,232,720
947,018
(4,374)
942,644
1,237,578
(4,858)
1,232,720
968,551
(4,374)
964,177
1,237,578
(4,858)
1,232,720
968,551
(4,374)
964,177
Loans shown above are net of transaction costs which are amortised over the term of the loan.
66
Cromwell Property Group | Annual Report 2013 (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
Cromwell Property Fund
NSW Portfolio
Total facilities
(i)
(ii)
(ii)
(iii)
(iii)
(iii)
(iv)
(iv)
(iv)
(v)
(v)
(vi)
(vii)
(viii)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Maturity
Date
Jan 2016
June 2015
June 2013
July 2015
July 2015
Dec 2012
Dec 2014
Dec 2014
Dec 2014
Dec 2014
June 2013
Jan 2015
June 2015
June 2016
Facility
2012
$’000
Utilised
2012
$’000
352,467
100,595
–
132,719
100,000
–
62,400
83,750
47,720
106,506
–
34,916
90,560
200,000
1,311,633
352,467
100,595
–
132,719
98,653
–
62,400
58,762
–
106,506
–
34,916
90,560
200,000
1,237,578
Facility
2012
$’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
Utilised
2012
$’000
376,172
107,917
3,321
132,719
98,653
13,913
62,400
17,840
–
116,400
4,300
34,916
–
–
968,551
(i) Syndicated Facility
The Syndicated finance facility was renegotiated and extended during the 2013 financial year. The Syndicated 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 2.87% at balance date plus a loan margin. Repayments of $23,705,000 (2012: $21,643,000) were made during
the year from proceeds of the sale of the 101 Grenfell St, SA investment property.
(ii) Tuggeranong
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 matured in June 2013. The loan bears interest at a variable rate based on the 30 day BBSY
rate plus a loan margin. Repayments of $10,643,000 (2012: $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 $232,719,000 (2012: $272,719,000) and has 2 remaining tranches (previously three).
Tranche 1 relates to the TGA Complex in Canberra and the 200 Mary Street and Synergy properties in Brisbane and is fully
drawn.
Tranche 2 relates to the Exhibition Street property. The facility is for $100,000,000, and is drawn to $98,653,000 with the
remainder of the facility being available to be drawn down to fund further capital commitments if required.
Tranche 3 was fully repaid ($13,913,000) during 2013.
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 consists of
3 tranches.
Tranche 1, $62,400,000, was fully drawn at balance date. Tranche 2, $83,750,000, will provide funding for additional
committed capital expenditure. This facility was drawn down to $58,762,000 at balance date (June 2012: $17,840,000).
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.
(v) HQ North
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. Repayments of $14,194,000 (2012: $nil) were made during the year.
67
Cromwell Property Group | Annual Report 2013 (vi) Bundall Corporate Centre
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.
(vii) Cromwell Property Fund
CPF became a consolidated entity of the Group during the period (see notes 13 and 37) and as a result the Group and Trust
assumed a $112,250,000 loan. The loan is secured by first registered mortgages over the investment properties of CPF
(refer note 11) and a registered floating charge over the assets of CPF. The loan bears interest at a variable rate based on a
margin over the 30 day BBSY. Repayments of $21,690,000 were made during the year
(viii) NSW Portfolio
The facility is $200,000,000 and was fully drawn down during June 2013 in order to partly fund the acquisition of the NSW
Property Portfolio. The loan bears interest at a variable rate based on a margin over the 30 day BBSY rate.
(b) Maturity Profile
Maturity profile of the principal amounts of current and non-current borrowings together with estimated interest thereon:
Due within one year
Due between one and five years
Due after five years
Group
Trust
2013
$’000
60,209
1,312,065
–
1,372,274
2012
$’000
75,610
1,023,554
–
1,099,164
2013
$’000
60,209
1,312,065
–
1,372,274
2012
$’000
75,610
1,023,554
–
1,099,164
(c) Unused Finance Facilities
At balance date the Group had unused finance facilities totalling $74,055,000 (2012: $141,064,000).
(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.
Information regarding the Group’s exposure to interest rates is provided in note 4.
19. Distributions Payable
Distributions payable
31,061
20,470
31,066
20,474
Distributions payable relate to June quarter distributions declared in June and payable in August of each year.
20. Derivative Financial Instruments
Current liabilities
Interest rate derivatives – at fair value
Non-current liabilities
Interest rate derivatives – at fair value
17,638
15,127
17,638
15,127
17,638
15,127
17,638
15,127
Details of principal amounts, expiry dates and interest ranges of interest rate derivative (hedging) contracts are set out in
note 4(c)(iii).
68
Cromwell Property Group | Annual Report 2013 21. Provisions
Current
Employee benefits
Property development
Provisions
Non-Current
Employee benefits
Make good
Provisions
Movement in provisions
Balance at 1 July
Provision reversed
Impact of consolidation
Balance at 30 June
22. Other Current Liabilities
Unearned income
Group
2013
$’000
1,215
–
1,215
843
100
943
2012
$’000
1,140
228
1,368
662
100
762
Trust
2013
$’000
2012
$’000
–
–
–
–
–
–
–
–
–
–
–
–
Property Development
2012
2013
$’000
$’000
428
228
(200)
–
–
(228)
228
–
Make Good
2013
$’000
100
–
–
100
2012
$’000
100
–
–
100
Group
Trust
2013
$’000
15,468
2012
$’000
6,735
2013
$’000
15,468
2012
$’000
6,735
Unearned income primarily comprises rent paid in advance by tenants.
69
Cromwell Property Group | Annual Report 2013
23. Contributed Equity
(a) equity attributable to shareholders/unitholders
Contributed equity
Group
Company
CDPT
2013
$’000
1,360,755
2012
$’000
894,058
2013
$’000
103,323
2012
$’000
66,344
2013
$’000
1,257,707
2012
$’000
827,989
Movements in ordinary shares/ordinary units
Date
Details
1 Jul 11
19 Aug 11
16 Nov 11
16 Nov 11
16 Dec 11
19 Dec 11
20 Dec 11
21 Dec 11
9 Feb 12
15 Feb 12
23 Feb 12
Opening balance
Dividend reinvestment plan
Dividend reinvestment plan
Placement
Placement
Entitlement offer
Entitlement offer
Exercise of performance
rights
Entitlement offer
Dividend reinvestment plan
Exercise of performance
rights
Entitlement offer
9 Mar 12
16 May 12 Dividend reinvestment plan
Transaction costs
16 Aug 12
20 Sep 12
20 Sep 12
Dividend reinvestment plan
Exercise of performance
rights
Exercise of performance
rights
CPF acquisition
Placement
Dividend reinvestment plan
Placement
Dividend reinvestment plan
Security purchase plan
4 Oct 12
8 Oct 12
14 Nov 12
14 Dec 12
13 Feb 13
14 Feb 13
15 May 13 Dividend reinvestment plan
Placement
11 Jun 13
Entitlement offer
11 Jun 13
11 Jun 13
Entitlement offer
24 June 13 Entitlement offer
Transaction costs
Number of
Securities
964,737,315
2,108,544
2,058,172
40,591,780
45,588,235
5,846,802
51,470,588
Group
Issue
Price
68.0¢
66.0¢
68.0¢
68.0¢
68.0¢
68.0¢
659,600
20.0¢
51,449,138
1,978,895
68.0¢
70.0¢
126,859
–
1,470,588
1,602,427
–
1,169,688,943
2,880,765
68.0¢
71.0¢
–
69.9¢
170,287
–
123,459
10.0¢
32,339,260
16,911,765
3,424,554
182,165,605
3,317,803
49,959,701
2,739,314
128,023,212
64,570,891
2,424,768
54,981,129
–
1,713,721,456
75.0¢
68.0¢
80.0¢
78.5¢
83.5¢
78.5¢
101.4¢
100.0¢
100.0¢
100.0¢
100.0¢
–
$’000
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
2,013
–
12
24,255
11,500
2,741
143,000
2,771
39,218
2,777
128,023
64,571
2,425
54,981
(11,590)
1,360,755
Company
CDPT
Issue
Price
4.9¢
4.3¢
4.5¢
4.5¢
4.5¢
4.5¢
1.3¢
5.0¢
5.2¢
–
5.0¢
5.3¢
–
5.3¢
–
0.8¢
5.7¢
5.1¢
6.0¢
5.9¢
6.3¢
5.9¢
8.3¢
8.2¢
8.2¢
8.2¢
8.2¢
–
$’000
57,073
95
89
1,811
2,033
261
2,296
9
2,596
102
–
74
85
(180)
66,344
152
–
1
1,829
867
207
10,782
209
2,957
227
10,446
5,269
198
4,486
(651)
103,323
Issue
Price
63.1¢
61.7¢
63.5¢
63.5¢
63.5¢
63.5¢
18.7¢
63.0¢
64.8¢
–
63.0¢
65.7¢
–
64.6¢
–
9.2¢
69.3¢
62.9¢
74.0¢
72.6¢
77.2¢
72.6¢
93.1¢
91.8¢
91.8¢
91.8¢
91.8¢
–
$’000
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
1,861
–
11
22,426
10,633
2,534
132,218
2,562
36,261
2,550
117,577
59,302
2,227
50,495
(10,939)
1,257,707
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 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 may be issued under the plan at a discount to the market price as determined by
the Directors before each dividend/distribution. During 2013 and 2012 all securities were issued at market price, with no
discount.
70
Cromwell Property Group | Annual Report 2013
(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
2013
Company
Number
1,713,721,456
–
1,713,721,456
2013
CDPT
Number
2012
Company
Number
1,713,996,562 1,169,688,943 1,169,964,049
(275,106)
1,713,721,456 1,169,688,943 1,169,688,943
2012
CDPT
Number
(275,106)
–
Group
Trust
2013
$’000
2,858
2,340
5,198
2,189
669
2,858
2012
$’000
2,189
2,340
4,529
1,588
601
2,189
2013
$’000
–
–
–
–
–
–
2012
$’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 trust
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)
(48,697)
(51,562)
(116,977)
(58,589)
Movements in retained earnings/(accumulated losses)
Balance at 1 July
Profit/(loss) for the year
Distributions
Balance at 30 June
(51,562)
2,865
–
(48,697)
(50,280)
(1,282)
–
(51,562)
(58,589)
43,291
(101,679)
(116,977)
(7,910)
24,359
(75,038)
(58,589)
71
Cromwell Property Group | Annual Report 2013 26. Non-Controlling Interests
Non-controlling interests
Movements in non-controlling interests
Balance at 1 July
Units issued by CDPT
Profit for the year
Distributions paid/payable
Balance at 30 June
27. Dividends/Distributions
Franking credits
Group
2013
$’000
1,141,028
2012
$’000
769,678
Trust
2013
$’000
4,732
769,678
429,718
43,291
(101,659)
1,141,028
694,439
125,899
24,359
(75,019)
769,678
5,320
–
(19)
(569)
4,732
2012
$’000
5,320
5,463
–
414
(557)
5,320
Franking credits available for subsequent years based on a tax rate of 30% (2012 – 30%)
Group
2013
$’000
1,315
2012
$’000
1,410
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 2013 and 2012 financial years.
Distributions paid/payable by the Group
2013
Date Paid
14 November 2012
13 February 2013
15 May 2013
15 August 2013
2012
Date Paid
16 November 2011
15 February 2012
16 May 2012
16 August 2012
(1) Cents per stapled security.
Distributions paid/payable by the trust
2013
Date Paid
14 November 2012
13 February 2013
15 May 2013
15 August 2013
2012
Date Paid
16 November 2011
15 February 2012
16 May 2012
16 August 2012
(1) Cents per unit.
2013
Cents (1)
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
2013
Cents (1)
1.8125¢
1.8125¢
1.8125¢
1.8125¢
7.2500¢
2012
Cents (1)
1.7500¢
1.7500¢
1.7500¢
1.7500¢
7.0000¢
2012
Cents (1)
1.7500¢
1.7500¢
1.7500¢
1.7500¢
7.0000¢
2013
$’000
21,243
22,874
26,481
31,061
101,659
2013
$’000
21,248
22,879
26,486
31,066
101,679
2012
$’000
16,920
17,602
20,027
20,470
75,019
2012
$’000
16,925
17,607
20,032
20,474
75,038
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.
72
Cromwell Property Group | Annual Report 2013
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/(loss) 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
2013
0.21¢
0.21¢
2012
(0.12¢)
(0.12¢)
2013
3.23¢
3.23¢
2012
2.28¢
2.28¢
$’000
$’000
$’000
$’000
46,156
43,291
23,077
24,359
43,272
(19)
24,773
414
2,865
(1,282)
43,291
24,359
Number
of Shares
Number
of Shares
Number
of Shares
Number
of Shares
1,341,491,052 1,069,526,714 1,341,766,158 1,069,801,820
4,481,124
3,467,267
4,481,124
3,467,267
1,345,972,176 1,072,993,981 1,346,247,284 1,073,269,087
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.
73
Cromwell Property Group | Annual Report 2013 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 security holders 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
2013
3.44¢
3.44¢
2012
2.16¢
2.16¢
$’000
$’000
2,865
43,291
46,156
(1,282)
24,359
23,077
Number
of Securities
Number
of Securities
1,341,491,052 1,069,526,714
4,481,124
3,467,267
1,345,972,176 1,072,993,981
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.
74
Cromwell Property Group | Annual Report 2013 29. Cash flow Information
(a) Reconciliation of profit/(loss) to net cash provided by operating activities
Net profit
Amortisation and depreciation
Amortisation of loan transaction costs
Amortisation of lease costs and incentives
Share of (profits)/losses 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
Business combination transaction costs
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 18 for details of unused finance facilities.
Group
Trust
2013
$’000
46,156
643
2,581
9,526
(646)
(132)
669
55,747
(7,326)
(47)
–
(6,071)
146
631
(2,774)
(349)
499
(1,264)
28
7,518
105,535
2012
$’000
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
2013
$’000
43,272
–
2,581
9,526
(593)
(132)
–
55,747
(7,326)
(47)
–
(6,071)
–
631
(3,251)
(410)
–
(2,914)
(225)
7,518
98,306
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
(c) Cash held as part of minimum net tangible assets
At balance date cash held by controlled entities of the Company of $9,548,000 (2012: $2,553,000) 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.
(d) Non cash items
Shares/units issued on reinvestment of distributions
Shares/units issued on acquisition of CPF
10,302
24,255
5,303
–
9,508
24,255
4,932
–
75
Cromwell Property Group | Annual Report 2013 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
2013
$
4,643,841
173,800
73,891
514,104
5,405,636
2012
$
4,149,034
171,494
84,431
457,585
4,862,544
(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
–
–
–
–
–
–
–
–
2013
Non-executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
MJ Watters
G Cannings
Executive Directors:
PL Weightman
DJ Wilson
Other key management personnel of the Group:
NE Riethmuller
DA Gippel
JA Clarke
MJ Blake
B Binning
PJ Cowling
176,310
236,248
–
232,826
107,386
171,165
6,663,935
4,000,000
1,740,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50,006
41,672
–
120,584
180,876
125,015
518,153
(123,459)
–
–
–
–
–
(123,459)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000,000
1,740,000
102,857
277,920
–
353,410
288,262
296,180
7,058,629
76
Cromwell Property Group | Annual Report 2013
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)
MJ 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 Clark
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
(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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
77
Cromwell Property Group | Annual Report 2013 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.
Name
2013
Non-executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer (1)
M Watters (2)
G Cannings
Executive Directors:
PL Weightman
DJ Wilson
Other key management personnel of the Group:
NE Riethmuller
DA Gippel
JA Clarke
MJ Blake
B Binning
PJ Cowling
Balance
at 1 July
On exercise
of options
Net purchases
(sales)
Balance at 30
June
2,576,846
14,000,000
454,500
2,320,000
4,061,765
–
–
58,000
15,921,167
1,972,200
–
–
1,206,864
71,032
1,775,612
141,881
46,235,668
–
–
–
–
–
–
–
–
–
–
200,784
(7,500,000)
60,146
85,000
(250,000)
–
–
22,000
2,777,630
6,500,000
514,646
2,405,000
3,811,765
–
–
80,000
–
(350,000)
15,921,167
1,622,200
–
123,459
–
–
–
–
123,459
–
–
–
–
(71,514)
12,791
–
123,459
1,206,864
71,032
1,704,098
154,672
(7,790,793)
38,568,334
(1) M Wainer is a director of Redefine International Plc which indirectly owns Redefine Australia Investments Limited, which at 30 June 2013 owned 235,536,192 (2012:
270,580,778) stapled securities in the Group. M Wainer is also CEO and a director of Redefine Properties Limited which at 30 June 2013 owned 212,336,234 (2012:
45,588,235) stapled securities in the Group.
(2) M Watters is a director of Redefine International Plc which indirectly owns Redefine Australia Investments Limited, which owns 235,535,192 (2012: 270,580,778) stapled
securities in the Group.
No shares or units were received by the above persons as compensation during the 2013 year.
78
Cromwell Property Group | Annual Report 2013 Name
Balance
at 1 July
On exercise
of options
2012
Non-executive Directors:
GH Levy
RJ Pullar
MA McKellar
DE Usasz
WR Foster
M Wainer
M Flax (1)
MJ Watters (2)
G Cannings
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
1,119,430
14,000,000
363,000
2,225,000
5,261,765
–
416,666
–
58,000
15,921,167
1,970,775
–
–
547,264
71,032
1,775,612
10,760
1,675,801
45,358,272
–
–
–
–
–
–
–
–
–
–
–
123,459
–
659,600
–
–
126,859
–
786,459
Net
purchases
(sales)
1,457,416
–
91,500
95,000
(1,200,000)
–
–
–
58,000
–
1,425
–
–
–
–
–
4,262
–
507,603
Ceased to be
KMP
Balance at 30
June
–
–
–
–
–
–
(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 Flax resigned as an alternate director and ceased to be a KMP on 1 August 2011.
(2) G Cannings became an alternate director for M Watters and a KMP on 1 August 2011.
(3) 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.
At balance date the numbers above represent the number of stapled securities of the Group held by the Directors and other
key management personnel.
(c) Loans to key management personnel
No loans were made during the 2013 or 2012 years 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 2013 was $88,400 (2012: $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 Nomination & Remuneration Committee and
based on individual circumstances and performance.
79
Cromwell Property Group | Annual Report 2013 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
of the year
Granted during
the year
Forfeited during
the year
Exercised
during the year
Balance
at year end
2013
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
24/08/2012
24/08/2012
12/10/2012
12/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
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
24/09/2015
24/09/2015
12/11/2015
12/11/2015
01/08/2013
01/08/2014
01/08/2015
01/08/2013
01/08/2014
01/08/2015
Weighted average exercise price
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
$0.00
$0.10
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
$0.20
$0.00
$0.10
$0.00
$0.20
$0.00
$0.20
$0.00
$0.00
$0.00
$0.20
$0.20
$0.20
$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
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
–
–
–
–
–
–
–
–
–
–
–
–
81,581
82,142
150,018
229,110
55,561
55,563
55,563
60,292
60,292
60,292
890,414
$0.11
–
–
–
–
–
–
–
–
–
–
–
393,679
590,622
52,851
1,037,152
$0.08
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(96,324)
–
–
–
–
–
–
–
(96,324)
$0.20
(170,287)
(123,459)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(293,746)
$0.04
(659,600)
(126,859)
–
–
–
–
–
–
–
–
–
–
–
–
(786,459)
$0.17
–
–
101,378
47,433
95,894
97,633
1,913,333
1,913,333
1,913,334
393,679
590,622
52,851
81,581
82,142
150,018
229,110
55,561
55,563
55,563
60,292
60,292
60,292
8,009,904
$0.38
–
–
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
At balance date nil Performance Rights (2012: nil) were vested and exercisable. The weighted average remaining contractual
life of performance rights outstanding at the end of the year was 1.3 years (2012: 2.1 years).
80
Cromwell Property Group | Annual Report 2013
The assessed fair value of performance rights granted is as follows:
Grant Date
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
24/08/2012
24/08/2012
12/10/2012
12/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
19/10/2012
Expiry Date
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
24/09/2015
24/09/2015
12/11/2015
12/11/2015
01/08/2013
01/08/2014
01/08/2015
01/08/2013
01/08/2014
01/08/2015
Exercise price
Non-market based
Market based
Fair value (cents)
$0.00
$0.10
$0.00
$0.10
$0.20
$0.00
$0.50
$0.50
$0.50
$0.00
$0.10
$0.20
$0.00
$0.20
$0.00
$0.20
$0.00
$0.00
$0.00
$0.20
$0.20
$0.20
59.8¢
50.6¢
54.2¢
45.5¢
37.0¢
61.5¢
13.9¢
12.6¢
11.5¢
50.0¢
41.1¢
32.3¢
55.3¢
36.5¢
60.0¢
41.5¢
77.6¢
71.1¢
65.1¢
57.9¢
51.9¢
46.4¢
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair Value of Performance Rights Granted
Performance rights do not have any market-based vesting conditions. The fair values at grant date for performance rights
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 model inputs for performance rights granted during the year ended 30 June 2013 included:
Exercise price
Grant date
Share price at grant date
Expected price volatility
Expected dividend yield
Risk free interest rate
Expiry date
$0.00
$0.20
$0.00
$0.00
$0.00
$0.20
$0.20
24/08/12 24/08/12 12/10/12 12/10/12 19/10/12 19/10/12 19/10/12 19/10/12 19/10/12 19/10/12
$0.79
17%
9.18%
2.55%
24/09/15 24/09/15 12/11/15 12/11/15 01/08/13 01/08/14 01/08/15 01/08/13 01/08/14 01/08/15
$0.79
17%
9.18%
2.55%
$0.79
17%
9.18%
2.55%
$0.79
17%
9.18%
2.55%
$0.79
17%
9.18%
2.55%
$0.79
17%
9.18%
2.55%
$0.79
17%
9.18%
2.55%
$0.79
17%
9.18%
2.55%
$0.74
19%
9.8%
2.35%
$0.74
19%
9.8%
2.35%
$0.00
$0.20
$0.20
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.
81
Cromwell Property Group | Annual Report 2013
The model inputs for Performance Rights granted during the year ended 30 June 2012 included:
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.
(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
Group
Trust
2013
$’000
669
669
2012
$’000
601
601
2013
$’000
–
–
2012
$’000
–
–
82
Cromwell Property Group | Annual Report 2013
32. Other Related Party Transactions
(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 associates
Transactions between the Group and its associates included:
• Loans between the Group and its associates (refer note 8). The Group received interest of $361,895 (2012: $1,622,879)
from Cromwell Property Fund;
• The Group received $nil (2012: $600,401) in distributions from its jointly controlled entity and associate during the year
(refer note 13);
• The Group charged Cromwell Property Fund $339,563 (2012: $1,184,581) acquisition, registry services, accounting
services, property, facility management and project management fees and leasing commissions during the year;
• The Group charged its associates $nil (2012: $241,150) management fees during the year; and
• During the year the Group and Trust acquired the remaining units they did not already own of Cromwell Property Fund
(refer notes 13 and 37).
(c) transactions with managed investment schemes (managed by the consolidated entity)
Cromwell Funds Management Limited (“CFM”) acts as responsible entity for a number of managed investment schemes.
The Group derives a range of benefits from schemes managed by CFM including management and acquisition fees.
Transactions between the Group and schemes managed by CFM also included:
•
•
•
During the 2012 year the Group provided Cromwell Ipswich City Heart Trust (“ICH”), a scheme for which CFM acts as
responsible entity, with a loan facility (refer note 8). The loan was fully repaid in September 2012. The group earned
$178,440 in interest from ICH under the loan facility during the year (2012: $622,959);
During the 2013 year the Group acquired 3,890,122 units in ICH at $1 each and sold 325,000 units in ICH at $1 each.
The Group received $164,606 in distributions;
On 5 December 2012 the Cromwell Box Hill Trust ARSN 161 394 243 (“BHT”) an unlisted single property trust, for
which CFM acts as responsible entity, settled the acquisition of land at 913 Whitehorse Road, Box Hill, Victoria upon
which a commercial building is to be constructed to house a long term tenant. CFM issued a PDS on 18 December 2012
to raise $66,500,000 from investors for BHT. The Group has provided a loan facility of $25,000,000 to BHT, which is
unsecured, to enable settlement of the land and funding of initial construction. During the year the facility was drawn
to $19,606,000 and this amount had been fully repaid by balance date. While the loan was drawn down the Group
earned a return equivalent to the BHT distribution rate of 7.75%. The Group earned $383,115 in interest from BHT
under the loan facility during the year;
• During the 2013 year the Group acquired 14,505 units in BHT at $1 each and received $1,780 in distributions; and,
•
During the 2013 year the Group acquired 3,436,334 units in the Cromwell Riverpark Trust (“CRT”) at $1.04 each and
received distributions of $25,362.
83
Cromwell Property Group | Annual Report 2013 (d)
transactions between the trust and Cromwell Corporation Limited and its subsidiaries
(including the Responsible entity)
Amounts paid/payable
(i)
Expense
Funds management fees
Property management fees
Accounting fees
Investment properties
Project management fees
Leasing commissions
Distributions (1)
Amounts received/receivable
(ii)
Revenue
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
2013
$
2012
$
9,963,069
5,739,700
385,785
855,872
1,649,860
588,555
8,496,578
4,373,277
280,980
369,864
1,592,943
576,835
62,804
4,545,063
460,910
4,249,096
1,196,529
540,371
1,207
3,203,132
The Responsible Entity holds 1,517,000 (2012: 1,517,000) units in a subsidiary of CDPT, Cromwell Mary Street Planned
Investment.
Loan to the Company
(iii)
During the year the Trust received repayments of $3,188,000 (2012: $7,000,000) from the Company. The loan was unsecured,
repayable on 1 July 2014 and earned interest at variable rates being the 30 day BBSW rate plus a margin of 2.20% (2012:
2.20%).
84
Cromwell Property Group | Annual Report 2013 33. Parent Entity Disclosures
As at and throughout the financial year ending 30 June 2013 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
2013
$’000
2012
$’000
2013
$’000
2012
$’000
572
572
47,857
52,458
325
325
52,133
(68)
(68)
14,686
32,022
14,686
32,022
12,495
17,160
59
3,247
13,913
65,144
1,704,894
61,898
1,400,803
57,349
658,848
1,046,046
68,979
697,482
703,321
103,323
2,858
(54,048)
52,133
66,344
2,189
(54,620)
13,913
1,257,707
-
(211,661)
1,046,046
827,989
-
(124,668)
703,321
(b) Commitments for capital expenditure
As at balance date, Cromwell Corporation Limited had no commitments (2012: 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 $40,437,000 (2012: $116,712,000) in relation to
capital expenditure contracted for but not recognised as liabilities.
(c) Guarantees provided
During the years ended 2013 and 2012 neither parent had provided any guarantees to entities it controlled.
(d) Contingent liabilities
Neither parent entity had contingent liabilities at year end (2012: $nil).
85
Cromwell Property Group | Annual Report 2013 34. Investments in Controlled Entities
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
Cromwell Project & Technical Solutions Pty Ltd
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 Northbourne Planned Investment
Tuggeranong Head Trust/Tuggeranong Trust
CDPT Finance Pty Ltd
CDPT Finance 2 Pty Ltd
EXM Head Trust/EXM Trust
Mascot Head Trust/ Mascot Trust
Cromwell Phoenix Opportunities Fund
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/ Cromwell HQ North Trust
Cromwell Bundall Corporate Centre Head Trust/Cromwell Bundall Corporate Centre Trust
Cromwell Property Fund
CPF Loan Note Issuer Pty Ltd
Cromwell Accumulation Fund
Cromwell CPF No. 1 Fund
Cromwell Health and Forestry House Trust
Cromwell NSW Portfolio Trust
Cromwell Bligh House Trust
Cromwell Newcastle Trust
Cromwell Queanbeyan Trust
Cromwell Symantec Trust
Cromwell Wollongong Trust
Cromwell McKell House Trust
Cromwell Penrith Trust
2013
%
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
100
100
100
100
100
100
100
100
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
–
–
–
–
–
–
–
–
–
–
–
–
–
(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.
86
Cromwell Property Group | Annual Report 2013
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 funds and the Trust, including property management.
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 investments in two Australian associates (Cromwell Property Fund until its full acquisition on 4 October 2012
– see notes 13 and 37, and Phoenix Portfolios Pty Ltd for the full year). Cromwell Property Fund was accounted for up to the
date of its acquisition using the equity method and included in the property investment segment. Phoenix Portfolios Pty Ltd
is accounted for using the equity method and included in the funds management segment.
(iv) Major customers
Revenue of approximately $41,316,000 (2012: $54,115,000) is derived from a single external customer (Commonwealth of
Australia) and is part of the property investment segment.
87
Cromwell Property Group | Annual Report 2013 (c) operating segments
2013
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
Funds management costs
Property development costs
Finance costs
Intersegmental costs
Employee benefits expense
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
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
Business combination transaction costs
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
208,635
953
111
222
4,483
193
214,597
32,521
–
–
67,715
16,089
–
1,100
117,425
–
97,172
132
–
(55,747)
7,326
47
481
6,071
(9,526)
(2,581)
–
–
–
(631)
(54,428)
42,744
2,479,785
1,341,785
–
743,966
7,720
–
–
751,686
9,797
16,089
54
–
779
225
26,944
–
592
–
–
797
14,189
5,298
20,876
314
5,754
–
(146)
–
–
–
–
–
–
–
(669)
(643)
(369)
–
(1,827)
3,927
63,316
3,426
100
–
–
304
863
1,167
–
–
–
–
–
–
–
–
–
359
–
156
–
–
515
–
(515)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(515)
3,009
47
–
–
–
–
–
–
218,432
17,042
165
222
5,262
418
241,541
32,521
592
359
67,715
17,042
14,189
6,398
138,816
314
102,411
132
(146)
(55,747)
7,326
47
481
6,071
(9,526)
(2,581)
(669)
(643)
(369)
(631)
(56,255)
46,156
2,546,110
1,345,258
100
743,966
7,720
304
863
752,853
(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.
88
Cromwell Property Group | Annual Report 2013 2012
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
Funds management costs
Property development costs
Finance costs
Intersegmental costs
Employee benefits expense
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
–
–
61,963
13,151
–
–
1,113
101,942
–
80,425
(331)
–
(12,353)
(38,483)
(173)
–
(993)
6,892
(7,705)
(2,560)
–
–
–
(55,706)
24,719
4,567
13,151
–
–
722
122
18,562
–
487
–
–
772
12,746
9
4,383
18,397
(58)
223
–
(44)
–
–
–
–
–
–
–
–
(601)
(604)
(178)
(1,427)
(1,204)
–
–
–
–
–
–
–
–
–
638
–
–
–
–
–
638
–
(638)
–
–
–
–
–
200
–
–
–
–
–
–
–
200
(438)
181,253
13,923
863
37
4,713
140
200,929
25,715
487
638
61,963
13,923
12,746
9
5,496
120,977
(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
1,816,591
1,045,322
18,006
3,042
3,004
249
1,837,601
1,048,613
4,705
316,235
266
–
–
316,501
47
–
–
464
408
872
–
–
–
–
–
–
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.
89
Cromwell Property Group | Annual Report 2013 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
Gain on sale of investment property
Fair value net gain from interest rate derivatives
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
Intersegmental sales
Total revenue and other income
36. Commitments for Expenditure
2013
$’000
2012
$’000
241,541
200,929
6,071
(8,042)
132
7,326
47
–
482
(17,042)
230,515
6,892
(6,332)
–
–
–
200
(863)
(13,923)
186,903
Group
2013
$’000
2012
$’000
Trust
2013
$’000
2012
$’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
548
1,032
1,580
410
1,172
1,582
–
–
–
–
–
–
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
40,437
–
40,437
73,848
42,864
116,712
40,437
–
40,437
73,848
42,864
116,712
37. Business Combination
Acquisition of Cromwell Property Fund
On 4 October 2012 the Group and Trust acquired the remaining units they did not already own of Cromwell Property
Fund (“CPF”). As a result, the Group and Trust’s equity interest in CPF increased from 18% to 100% (refer note 13).
The acquisition complemented the Group and Trust’s existing property portfolio and benefits are expected to be generated
from operational synergies and economies of scale.
Following the acquisition, the Group and Trust consolidated the assets and liabilities and performance of CPF, including the
property portfolio which was valued at $171,372,000 (refer note 11). Prior to the acquisition, CPF was accounted for as an
associate of the Group (refer note 13).
The Group and 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:
90
Cromwell Property Group | Annual Report 2013
Investment in associate/controlled entity
Cash and cash equivalents
Trade and other receivables
Other current assets
Investment properties
Trade and other payables
Derivative financial instruments
Other current liabilities
Borrowings
Fair value of net identifiable assets acquired
Recognised on
Acquisition
$’000
24,837
–
–
–
–
–
–
–
–
24,837
Already
Held
$’000
5,298
–
–
–
–
–
–
–
–
5,298
Balance on
Consolidation
$’000
–
3,142
508
387
171,372
(4,897)
(3,440)
(1,230)
(135,707)
30,135
The carrying value of the assets and liabilities acquired was equivalent to their fair value in accordance with Group policies.
Fair value of investment already held
Purchase consideration:
Cash consideration paid
Fair value of equity instruments issued(i)
Total purchase consideration
Total recognised on consolidation
The cash flows on acquisition were as follows:
Cash consideration paid
Cash acquired from business combination
Net inflow of cash – investing activities
5,298
582
24,255
24,837
30,135
(582)
3,142
2,560
equity instruments issued
(i)
The fair value of the stapled securities issued was based upon the adjusted share price of the Group at 4 October 2012 of
$0.75 per stapled security.
(ii) Acquisition-related costs
The Group incurred acquisition-related costs of $631,000 including legal and other professional fees and other transaction
execution costs. These have been included as Merger Transaction costs in the Group’s consolidated statements of
comprehensive income and in investing cash flows in the statement of cash flows.
(iii) Acquired receivables
The fair value of acquired trade receivables is $508,000. The gross contractual amount for trade receivables due is $508,000,
all of which has been recovered.
(iv) Revenue and profit contribution
The acquired business contributed revenues of $14,831,000 and net loss of $14,614,000 to the Group for the period from
4 October 2012 to 30 June 2013 and contributed revenues of $15,056,000 and net loss of $14,904,000 for the Trust for the
same period.
If the acquisition had occurred on 1 July 2012, consolidated revenue and profit for the year ended 30 June 2013 would have
been $247,641,000 and $33,720,000 respectively for the Group and $238,874,000 and $30,836,000 respectively for the Trust.
These amounts have been calculated using the Group’s accounting policies.
91
Cromwell Property Group | Annual Report 2013
38. Contingent Liabilities
The Directors are not aware of any material contingent liabilities of the Group or the Trust (2012: nil).
39. Auditor’s Remuneration
During the year the following fees were paid or payable for services
provided by the auditor of the Group (Pitcher Partners) and its related entities:
Audit Services
Pitcher Partners
Auditing or reviewing financial reports
Auditing of controlled entities’ AFS licences
Auditing of controlled entities’ compliance plans
Other Services
Pitcher Partners
Other – review of pro forma balance sheets and forecasts
Group
Trust
2013
$
2012
$
2013
$
2012
$
261,000
5,000
28,000
294,000
235,000
6,000
30,000
271,000
180,000
–
28,000
208,000
155,000
–
30,000
185,000
131,200
131,200
70,000
70,000
–
–
–
–
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 $68,500 (2012: $112,500).
40. Subsequent Events
On 7 August 2013, the Group created a new unlisted property trust, the Cromwell Property Trust 12 (“C12”). C12 is a 100%
owned subsidiary of the Trust. On 9 August 2013, C12 acquired an investment property located on Dorcas Street, South
Melbourne for $25,543,000. The investment property was acquired for cash. C12 has also contracted to acquire two other
investment properties which are currently being constructed. The combined value of the additional properties, once built,
is expected to be $103,140,000. The Group intends to offer 100% of the units in C12 to external investors under a product
disclosure statement to be issued later this year.
92
Cromwell Property Group | Annual Report 2013
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 2013 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.
The Directors have been given the declarations by the chief executive officer and chief financial officer for the financial
year ended 30 June 2013 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 23rd day of August 2013
93
Cromwell Property Group | Annual Report 2013
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 2013, 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
94
Cromwell Property Group | Annual Report 2013 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 2013 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
2013. 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 2013 complies
with Section 300A of the Corporations Act 2001.
PITCHER PARTNERS
RCN WALKER
Partner
Brisbane, Queensland
23 August 2013
95
Cromwell Property Group | Annual Report 2013
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 generally 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 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
96
Cromwell Property Group | Annual Report 2013 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
97
Cromwell Property Group | Annual Report 2013 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 Whistleblowing 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 to achieve appropriate diversity
in its Board, senior executive and broader workforce.
The table below shows the gender diversity objectives set for the 2013 financial year and the Group’s performance against
those objectives as at 30 June 2013.
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. If existing staff are promoted, at least 50% of
those promoted will be female.
During FY13 four existing staff members were promoted, three of
them were female.
3. At least one female will be interviewed for all
No management positions were advertised during the period.
advertised management positions.
4. All employees 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.
An employee satisfaction survey was undertaken during the period
and it provided an opportunity to give feedback on diversity issues.
All remuneration is benchmarked and reviewed without regard to
gender, age or 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.
Diversity was considered when reviewing, or designing, succession
plans and leadership programs. For example 46% of key staff
identified for the purposes of retention and succession planning are
female.
7. At least one corporate event is held to which
Three events were held where families were encouraged to attend.
staff can bring partners and children.
8. Parents (or carers) are offered flexible work
arrangements.
10% of employees work part time. However, many flexible work
arrangements are informal, such as starting early/finishing early.
Further, from this year, new parents are able to use any personal
leave accrued on top of their unpaid entitlements; an employee has
requested required and had approved a compressed working week
arrangement and Flexible Working Guidelines for Parents have been
developed.
9. All staff undergo annual “equal employment
opportunity” training.
Annual “equal employment opportunity’ training was provided to all
staff during the period.
98
Cromwell Property Group | Annual Report 2013 10. At least 80% of females taking parental leave
return to work.
One female was on parental leave during the period and she returned
to part time work.
11. At least 50% of staff undertaking Cromwell
supported tertiary education and other
professional development programs are
female.
60% of staff being supported through further study are female.
For the 2014 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 employees 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 staff 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.
The Board currently has 1 female director (out of 9 directors), executive management comprised 7 people, including 2
females and management comprises 14 people, 5 of which are female. The Group employs a total of 96 people, 44 of which
are female.
What you can find on our website:
• Code of Conduct
• Securities Trading Policy
• Breach Reporting Policy
• Whistleblowing Policy
• Diversity Policy
• FY2014 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.
99
Cromwell Property Group | Annual Report 2013 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 below.
What you can find on our website:
• Audit and Risk Committee Charter
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 seek to accurately and clearly explain the nature of the business of the meeting.
A copy of the Annual General Meeting’s notice of meeting is sent to the Company’s external auditor as required by law. The
current audit partner attends the Annual General Meeting and is available to answer questions from securityholders about
the audit. The Chairman reminds securityholders of this opportunity at each Annual General Meeting.
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.
100
Cromwell Property Group | Annual Report 2013 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 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;
(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, and Cromwell Funds Management
Limited, in overseeing the risk management framework of the registered managed investment schemes for which
they act 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;
(b) their statement given to the Board on the integrity of the Group’s statements (pursuant to section 295A of the
Corporations Act) is founded on a sound system of risk management and internal compliance and control which
implements the policies adopted by the Board; and
(c) the Group’s risk management and internal compliance and control system is operating effectively in all material
respects in relation to the Group’s material business risks.
It should be noted that the declarations from the 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 Annual
General Meeting; 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.
101
Cromwell Property Group | Annual Report 2013 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.
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
102
Cromwell Property Group | Annual Report 2013 Securityholder Information
The securityholder information set out below was applicable as at 30 September 2013, unless stated otherwise.
Spread of Stapled Securityholders
Category (size of Holding)
Number of Holders
Number of Securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
723
1,592
1,628
8,397
1,227
13,567
216,722
5,062,851
12,547,395
285,699,889
1,415,630,405
1,719,157,262
Unmarketable Parcels
The number of stapled securityholdings held in less than marketable parcels was 509.
Substantial Securityholders
Holder
Stapled Securities
Redefine Properties Limited
447,872,426
Date of Notice
9 October 2013
Voting Rights
On a show of hands every member present at a meeting in person or by show of proxy shall have one vote and upon a poll
every member shall have effectively one vote for every security held.
103
Cromwell Property Group | Annual Report 2013 20 Largest Securityholders
Rank
Investor
Number of Stapled
Securities Held
% Held of Issued
Stapled Securities
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Citicorp Nominees Pty Limited
Redefine Australian Investments Limited
JP Morgan Nominees Australia Ltd
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
RBC Investor Services
Aust Executor Trustees SA Ltd
BNP Paribas Moms Pty Ltd
AMP Life Limited
Stara Investments Pty Ltd
JP Morgan Nominees Australia Ltd
Citicorp Nominees Pty Limited
Redefine Australian Investments Limited
Humgoda investments Pty Ltd
RJP Family Pty Ltd
Kovron Pty Ltd
Panmax Pty Ltd
The Australian National University
UBS Wealth Management Australia Nominees Pty Ltd
Mr Philip John Wallace & Mrs Bernadette Mary Wallace
247,559,017
227,076,125
161,253,264
160,675,224
103,346,106
42,442,624
22,387,277
18,048,799
16,772,665
16,221,167
10,423,174
10,357,446
8,460,067
7,282,126
6,500,000
6,394,825
5,718,993
5,085,528
4,990,541
4,883,450
14.40%
13.21%
9.38%
9.35%
6.01%
2.47%
1.30%
1.05%
0.98%
0.94%
0.61%
0.60%
0.49%
0.42%
0.38%
0.37%
0.33%
0.30%
0.29%
0.28%
1,085,893,704
63.16%
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.
ASX Listing
Cromwell Property Group is listed as a Stapled Security on the ASX (Code: CMW).
Securityholding Details
Securityholders can access information on their holdings and update their details through Cromwell’s share registry
provider:
Link Market Services Limited
Level 15, 324 Queen Street
Brisbane Qld 4000
Telephone: 1300 550 841
Outside Australia: +61 2 8280 7124
Fax: (02) 9287 0309
Web: www.linkmarketservices.com.au
Email: info@linkmarketservices.com.au
104
Cromwell Property Group | Annual Report 2013 Securityholders can change of update details relating to their address, bank account and Tax File Number (TFN), Australian
Business Number (ABN) or exemption in a number of ways:
• Sent written authorisation to the registry quoting your SRN / HIN and signing the request;
• Log on to www.linkmarketservices.com.au; or
• Call the Registry
You will have to verify your identity by providing your personal details. Bank detail changes must be requested in writing or
electronically and cannot be made over the phone.
Securityholders are not obliged to quote their TFN, ABN or exception. 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.
Distributions/Dividends
cromwell Property group Dividends/Distributions
During the year the following distributions/dividends have been paid:
Quarter Ending
Amount per Security
Ex Date
30 June 2013
31 March 2013
31 December 2012
30 September 2012
1.8125 cents
1.8125 cents
1.8125 cents
1.8125 cents
24 June 2013
22 March 2013
Record Date
28 June 2013
28 March 2013
Payment Date
15 August 2013
15 May 2013
21 December 2012
31 December 2012
13 February 2013
28 October 2012
5 October 2012
14 November 2012
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
105
Cromwell Property Group | Annual Report 2013 Board of Directors:
Geoffrey Levy (AO)
Robert Pullar
Michelle McKellar
David Usasz
Richard Foster
Marc Wainer
Michael J Watters
Paul Weightman
Daryl Wilson
Geoffrey Cannings (Alternate for Michael J Watters)
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
Company Secretary:
Nicole Riethmuller
Listing:
The Cromwell Property Group is 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: +61 2 9287 0309
Web: www.linkmarketservices.com.au
Auditor:
Pitcher Partners
Level 30, Central Plaza One
345 Queen Street
Brisbane QLD 4000
Tel: +61 7 3222 8444
Fax: +61 7 3221 7779
Web: www.pitcher.com.au
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Cromwell Property Group | Annual Report 2013