ANNUAL
REPORT
2018
CONTENTS
17
Annual Financial Report
127
Corporate Governance Statement
141
Securityholder Information
18 Directors’ Report
57 Auditor’s Independence Declaration
58 Consolidated Income Statements
59 Consolidated Statements of
Comprehensive Income
60 Consolidated Balance Sheets
61
Consolidated Statements of Changes in
Equity
63 Consolidated Statements of Cash Flows
64 Notes to the Financial Statements
120 Directors’ Declaration
121 Independent Auditor’s
Report
04
Financial Highlights
06
Chairman’s Report
08
CEO’s Report
Soward Way, Greenway,
ACT
Cromwell Property Group
Cromwell Property Group (ASX:CMW) is a Real Estate
Investor and Manager with operations on three continents
and a global investor base. As at 30 June 2018, Cromwell
had a market capitalisation of $2.2 billion, a direct
property investment portfolio in Australia valued at $2.5
billion and total assets under management of $11.5 billion
across Australia, New Zealand and Europe.
Cromwell is included in the S&P/ASX 200 and the FTSE
EPRA/NAREIT Global Real Estate Index.
Cromwell offers securityholders an attractive combination
of stable long-term cash flows, demonstrated asset
enhancement capabilities and transactional profits, and
low risk exposure to Asian capital flows and European
economic growth.
Cromwell maintains a strong and secure balance sheet
and long-dated Australian property portfolio which
enable it to recycle assets and reinvest into its property
investment and funds management businesses.
THIS DOCUMENT IS ISSUED BY
Cromwell Property Group
consisting of
Cromwell Corporation Limited ABN 44 001 056 980 and
Cromwell Diversified Property Trust
ARSN 102 982 598 ABN 30 074 537 051
(the responsible entity of which is
Cromwell Property Securities Limited
AFSL 238052 ABN 11 079 147 809)
Level 19, 200 Mary Street, Brisbane QLD 4000
Phone: +61 7 3225 7777
Fax:
+61 7 3225 7788
Web: www.cromwellpropertygroup.com
invest@cromwell.com.au
Email:
SECURITYHOLDER ENQUIRIES
All enquiries and correspondence regarding your
securityholding should be directed to Cromwell’s
Investor Services Team on 1300 268 078.
3
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT FINANCIAL HIGHLIGHTS
Guidance exceeded
CEREIT IPO
Distributable earnings
FY18 EPS
€1.4 billion
up 7.1%
Gearing reduced to
WALE of
Debt tenor extended to
37%
7.2 years
5.2 years
AUM up 14% to
Cromwell Annualised Performance Returns
to 30 June 2018
27.7
26.8
$11.5
billion
NTA per unit up 7.9% to
6.2
6.1
13.7
13.2
11.8
9.5
10.0
12.2
11.3
10.3
13.8
9.6
5.8
(1)
Cromwell Total
Return
All Ordinaries
Accumulation Index
S&P / ASX 300 A-REIT
Accumulation Index
(1) 15 year return includes period prior to stapling in December 2006.
$0.96
4
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Financial Results Summary
FY18
FY17
Change
Statutory profit ($m)
$204.1
$277.5
(26.5%)
Statutory profit (cents per security)
Property Investment
Asset Services
Funds Management Internal
Funds Management Retail
Funds Management Wholesale
10.89
115.0
2.2
19.4
3.8
16.4
Operating profit ($m)
$156.8
$152.2
Operating profit (cents per security)
8.36
8.65
Distributions ($m)1
$157.1
$146.7
Distributions (cents per security)
8.34
8.34
Payout Ratio (%)
100.2%
96.4%
15.78
124.7
(31%)
(7.8%)
(0.2)
(1,200%)
2.6
8.2
16.9
646.2%
(53.7%)
(3%)
3.0%
(3.4%)
7.1%
0.0%
3.9%
Financial Position
Total Assets
Total Liabilities
Net assets
Securities on issue (‘000)
NTA per security
(excluding interest rate swaps)
NTA per security
(including interest rate swaps)
Gearing2
Gearing (look-through)2
Jun-18
(Actual) ($M)
Jun-17
(Actual) ($M)
3,466.3
(1,564.8)
1,901.5
1,985.3
$0.96
$0.96
37%
43%
3,410.9
(1,771.0)
1,639.9
1,762.4
$0.89
$0.89
45%
46%
(1)
Includes an amount of $392,000 for both Cromwell and the Trust in excess of the pro-rata
entitlement for the quarterly distribution paid to those securityholders who acquired securities in
February 2018 as part of the Security Purchase Plan
(2) Gearing calculated as (total borrowings less cash)/(total tangible assets less cash). Look through
gearing adjusts for the 50% interest in Northpoint Tower and 35% of CEREIT
Objective
To provide securityholders with
an attractive combination of
stable long-term cash flows,
demonstrated asset enhancement
capabilities and transactional
profits, and low risk exposure to
Asian capital flows and European
economic growth.
FY19 Guidance
FY19 operating profit guidance of not
less than 8.00 cents per security
FY19 distribution guidance of not less
than 7.25 cents per security
5
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT CHAIRMAN’S REPORT
This also includes consciously looking to contribute back
to the general community via causes or initiatives that
matter, and the great work of the Cromwell Property
Group Foundation, alongside other initiatives throughout
the business, reflects this.
This year we have explicitly recognised and re-affirmed
both our purpose, that we exist to look after people, and
our vision to be ‘globally recognised as the value driven
real estate investor and manager of choice.’
The Board recently agreed on a new ‘Invest to Manage’
strategy, which CEO Paul Weightman details in his report.
This strategy represents an exciting new growth stage in
Cromwell’s journey and the key to its successful delivery
is that we remain true to our roots and continue to
recognise that we’re here to do the right thing by people.
Having been involved with Cromwell for one decade of
the two, I am proud of its track record and the positive
difference it has made to so many people.
On behalf of the Non-executive Directors, I would like
to thank our tireless CEO Paul Weightman, who has
been the mainstay of this incredible journey so far, as
well as everyone else who has contributed to making
Cromwell what it is over the last 20 years. We are
extremely fortunate to have a very talented and hard-
working executive team and we are well positioned for a
prosperous future.
Geoffrey H Levy, AO
Chairman
Cromwell Property Group
This year is an auspicious year for us as it marks
Cromwell’s 20th anniversary. It has been a remarkable
journey from a small Brisbane start-up to one of the top
100 real estate fund managers globally with more than
380 people in 30 offices across 15 countries.
The original team (Paul Weightman, Jim Creagh, Greg
Poole, Ross Stiles and Richard Foster) came together
in the early months of 1998 with the idea of establishing
a real estate business that would put people first and
understand the responsibility of investing other people’s
money and the privilege of being entrusted to do so.
The fact that the initial capital raised for starting
the company came from cajoling family and friends,
mortgaging houses and emptying savings accounts meant
they were always very conscious of who their first investors
were, and the dependence that was placed on them.
This awareness remains at the core of the business
today and everything, from our corporate governance
policies and decision making continues to defer back
to it. It is combined with a genuine care for people - be
it an investor, securityholder or employee - and a clear
understanding of what matters to each of them.
Balancing the interests of all these stakeholders is, and
remains, of paramount importance.
66
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Cromwell Property Group Foundation donates $148,000 in
FY18 to four worthy recipients
Neuroscience Research Australia (NeuRA)
Black Dog Ride
Black Dog Ride was provided with $37,420 to support
a number of initiatives, most notably their THRIVE
programme, which aims to instil emotional wellbeing
amongst those affected by depression in regional and
rural NSW.
Donations to the Cromwell Property Group Foundation
of more than $2 are tax deductible. To donate,
or seek more information about the Foundation or any
of the beneficiaries please visit at
www.cromwellfoundation.org.au.
Neuroscience Research Australia (NeuRA), a leading
independent medical and clinical research institute
focusing on diseases of the brain and nervous system
received a $40,000 donation. This donation will allow
NeuRA to undertake a study which will contribute to
reducing the impact that falls have on older Australians.
Live Well, Age Well
Live Well, Age Well is a 12-month health and wellbeing
pilot programme from the University of Newcastle
targeting residents in independent living retirement
villages. The programme has been provided with $50,580
to gather data and develop evidence-based health and
wellbeing initiatives.
Trigeminal Neuralgia Association Australia (TNAA)
Trigeminal Neuralgia Association Australia (TNAA)
received a $20,000 donation, which will allow the
organisation to redevelop its website to provide access
to the latest research, member communications, advice
and information. TNAA provides support for sufferers of
trigeminal neuralgia, a rare neurological disease that
causes chronic physical pain to those affected, through
support groups, news and research.
C ROMWE LL P ROPE RTY GROU P I 2 0 18 ANN UA L REPORT
7
CEO’S REPORT
Funds Management Share of Operating Profit
Paul Weightman
CEO
Cromwell Property Group
Cromwell Property Group reported full-year, FY18
statutory profit of $204.1 million.
Operating profit, considered by the Directors to best
reflect underlying earnings was $156.8 million, up
3.0% from the prior year result of $152.2 million. Post
Cromwell’s institutional and retail capital raisings,
distributions met guidance at 8.34 cents per security.
Total assets under management, post the successful IPO
of the Cromwell European REIT (CEREIT) in Singapore,
increased by 14% to $11.5 billion. The success of CEREIT,
the growth in our Funds Management platform, the
support we have from a range of new capital partners
and the opportunities we have identified, give us the
confidence to invest further in the future growth of the
platform.
We started investing in building the Funds Management
platform in 2014 and set ourselves a target of generating
20% of earnings from that source.
8
Having now achieved 25%, and eclipsing our previous
target, the Board has set new targets and we have
adopted a new strategy of increased investment to drive
further growth.
Our new strategy is to invest where we can leverage
returns from additional management revenues and create
value.
We are well positioned to deliver this new, ‘Invest To
Manage’, strategy by utilising existing balance sheet
liquidity and asset recycling to fund a range of initiatives
that are intended to build enterprise value, add to medium
term earnings and generate higher total shareholder
return.
Our distribution policy has also been reviewed and we
will look to reinvest some distributable cash back into the
business to accelerate growth.
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Invest To Manage Strategy: Connecting Capital to Opportunity
CAPITAL
PRIVATE EQUITY
Building on existing relationships
for deployment into Europe,
Australia or New Zealand
1
BALANCE SHEET
RETAIL
INSTITUTIONAL
PUBLIC MARKETS
Connecting
Capital to
Opportunity
OPPORTUNITIES
CORPORATE TRANSACTIONS
Where Cromwell can identify
and unlock value
VALUE DRIVEN ASSET OPPORTUNITIES
e.g. Northpoint
THEMATICS
Identifying thematic product led initiatives
e.g. Aged care or logistics sectors
INVESTOR LED ACQUISITIONS
Acquisition of specific assets/portfolios with
capital partners
CEREIT AND OTHER LISTED MANAGEMENT
VEHICLES
Net Tangible Assets are up, gearing is at the bottom
of our target range, our Weighted Average Lease
Expiry is over seven years and our debt tenor over five.
Our future lease expiry profile is favourable and we
have low upcoming incentive and maintenance capex
requirements. Overall, we have a strong, secure balance
sheet with liquidity and optionality.
We now have a much wider range of capital sources and
our new strategy will look to connect them to investment
opportunities across our platform, for deployment into
Europe, Australia and New Zealand.
Where appropriate, we will look to fund the seeding and
warehousing of some of these upcoming opportunities,
and co-investment into funds, to accelerate our AUM
growth. We have already demonstrated our ability to
execute this concept with the warehousing of Dutch
assets to seed the successful IPO of CEREIT.
During the year we continued our recycling and
reinvestment strategy and capital management initiatives.
More than $154 million of balance sheet property assets
were sold, $205 million in new capital was raised,
€230 million in convertible bonds issued and all debt
refinanced.
9
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 10
CROMWELL PROPERT Y G R OU P I 2 0 1 8 A NNU A L R E P OR T
Lobby, Northpoint, North Sydney, NSW
58%
CORE
WALE: 11.1yrs
Occupancy: 99.9%
NOI: 4.6%
36%
CORE+
WALE: 3.8yrs
Occupancy: 96.2%
NOI: 1.6%
6%
ACTIVE
WALE: 2.9yrs
Occupancy: 79.8%
NOI: (14.8%)
Property Segments Update And Lease Renewal Programme
Turning to our property investment segment we report
operating profit of $115.0 million, a 7.8% decrease on the
prior year due in part to $154 million in asset sales. The
property portfolio is valued at $2.4 billion and has three
components.
There were strong leasing outcomes during the year
in the portfolio with a total of 100 transactions over
75,000 sqm. Our WALE is 7.2 years due in part to the
commencement of the new Department of Social Services
lease at Soward Way.
Firstly, the Core portfolio comprises nine assets
representing 58% of the portfolio by value or $1.4 billion. It
has a WALE of more than 11 years, full occupancy and Net
Operating Income (NOI) growth of 4.6%.
Secondly, the Core+ portfolio comprises seven assets
worth 36% of the portfolio or $0.9 billion. It has a WALE of
3.8 years and NOI growth of 1.6%.
Lastly, the Active portfolio consists of seven assets with a
WALE of 2.9 years and occupancy of 79.8%. As you might
expect for assets to be repositioned, the NOI decreased
14.8%.
The lease expiry profile is also favourable. There are
only four individual expiries which represent more than
1% of income over the next three years. We are in active
negotiations with three of the four and the fourth is in an
Active portfolio asset for which we are examining other
options.
Both Soward Way and Northpoint Tower, representing a
combined investment of $300 million in value add activity,
reached practical completion, on budget and on time, during
the year. We have talked a lot about both these assets over
the last couple of years but they are a great testament to
our ability to reposition and add value to properties.
11
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Piazza Affari 2, 20123 Milan, Italy
Kaisaniemenkatu 13,
Helsinki, Finland
Central Park Corporate Centre, New Zealand
555 Blaak, Rotterdam, The Netherlands
12
Artist Impression - Victoria Avenue, Chatswood, NSW
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT We have two new value add projects to keep us busy in
FY19. A development application (DA) was submitted
in April to add a new four storey office building, hotel,
retail and other amenity to Victoria Avenue, Chatswood.
The result of the DA is expected in November, with
construction, subject to Council approval, starting in early
2019.
At the half-year we flagged that the office buildings at
Tuggeranong Office Park were vacant. They are now
being repositioned to aged care. We have invested in a
50% ownership interest in LDK Healthcare, led by LDK
Managing Director and industry veteran Paul Browne.
LDK will be the operator of a planned 350-apartment,
500 resident, aged care and retirement community at
Tuggeranong which is planned to be the seed asset for a
new aged care fund.
Activity has commenced on site and the first sales suite is
due to open next year. This is an investment theme which
we believe has great potential and it has attracted strong
interest from potential capital partners.
We are actively looking for further development sites and
conversion opportunities.
Funds Management
Segments
Total funds management operating profit was $39.6
million up 43% on the prior year.
In Singapore, CEREIT has now announced two quarters
of results to the Singapore Exchange Securities Trading
Limited and a maiden distribution of €0.253 cents per unit
will be paid next month.
CEREIT debuted at €0.55 per unit, valuing our stake
at €303 million and, even though it is early days, it is
pleasing to see it trading at a premium to its IPO price and
ahead of the S&P Singapore REIT Index.
The CEREIT IPO has increased our exposure to
institutional investors from that region and allowed us to
identify new capital providers interested in both Australian
and European opportunities. CEREIT is just beginning to
transform our business and I expect there will be more
substantive transactions in FY19.
Our wholesale funds management business deploys
institutional capital into Europe, Australia and New
Zealand. It had operating profit of $16.4 million. Over one
third of the capital deployed into Europe is now longer
dated and it is our desire, and stated strategy, to see this
proportion continue to increase.
Two large mandates in Europe, representing €1.1 billion
of AUM are in the process of being wound down. One fund
is expected to settle before the end of the calendar year
while the other will continue into 2019. Further progress
updates will be provided at the appropriate time.
Retail funds management contributed operating profit of
$3.8 million. Patience is everything in property. There is
demand from retail investors to support acquisitions by
our Cromwell Direct Property Fund and new syndicates
but we always put the interests of our retail unitholders
first.
We must be satisfied with the fundamentals and long-term
performance of any acquisition. Asset pricing in the current
market does not give us that confidence. We are happy to
wait for the right opportunities to present themselves and
be more active when we see value for investors.
In New Zealand, Oyster Group AUM reached NZ $1.4
billion with the settlement of the 6.2-hectare Central Park
Corporate Centre for NZ $209 million. The purchase with
global investment firm KKR is a good example of how we are
able to connect capital to opportunity across our platform.
Artist Impression - Victoria Avenue, Chatswood, NSW
13
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Vibe Hotel, Northpoint, North Sydney, NSW
Northpoint, North Sydney, NSW
Outlook and Guidance
The Australian economy remains broadly neutral though
commercial real estate markets are close to their peaks.
Our strategy remains to seek diversification and some
measured, low risk exposure to Asian capital flows and
European economic growth.
Having a local, on the ground presence in Singapore and
twelve different European countries means we are well
placed to provide capital partners with valuable insight
and identify the right investment opportunities. We are in
a very favourable position and are very positive about the
future.
The balance sheet is strong with low gearing and an
extended debt tenor coupled with long WALE and low
future incentive and maintenance capex requirements.
The Core portfolio will drive NOI, there is leasing upside
on the Core+ assets and the Active portfolio will provide
future value add opportunities.
We are excited about our ‘Invest To Manage’ strategy. Our
new capital partners are encouraging us to grow and we
have a pipeline of accretive opportunities.
Our FY19 guidance assumes maintainable transactional
and funds management revenues consistent with
historical performance. It does not include the potential
impact of investments into the platform, the ‘Invest to
Manage’ strategy or application of existing balance sheet
liquidity. Updates will be provided on these items when
they occur.
Guidance does assume reinvestment of some
distributable cash back into the business for further
growth with a distribution payout ratio of approximately
90% of operating earnings to be targeted in FY19.
In setting this ratio we are very conscious that this
represents dollars and cents that would otherwise be
sitting in the bank accounts of our securityholders.
We take our responsibilities as stewards of our
securityholders capital very seriously and will work very
hard to use the funds re-invested back into the business
to drive future operating earnings growth and overall total
securityholder return.
FY19 operating profit is expected to be no less than
8.00 cps and distributions no less than 7.25 cps.
This represents an operating profit per security and
distributions per security yield of 6.96% and 6.30%
respectively based on closing price of $1.15 on 22 August
2018.
I would like to thank all of Cromwell’s employees who
have contributed to this result and to my fellow Directors
for their support and counsel during the year.
Paul Weightman
CEO
Cromwell Property Group
15
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT CONTENTS
18
Directors’ Report
57
Auditor’s Independence Declaration
Statements
Financial Statements
58
58 Consolidated Income
59 Consolidated Statements of
60 Consolidated
61 Consolidated Statements of
63 Consolidated Statements of
Comprehensive Income
Changes in Equity
Balance Sheets
Cash Flows
64
Notes to the Financial Statements
120
Directors’ Declaration
121
Independent Auditor’s Report
127
Corporate Governance Statement
141
Securityholder Information
DIRECTORY
Board of Directors:
Geoffrey Levy, AO
Michelle McKellar
Jane Tongs
Marc Wainer
Leon Blitz
David Blight
Paul Weightman
Company Secretary:
Lucy Laakso
All ASX and media releases as well as
company news can be found on our webpage
www.cromwellpropertygroup.com
Registered Office:
Level 19, 200 Mary Street
Brisbane QLD 4000
TEL: +61 7 3225 7777
FAX: +61 7 3225 7788
WEB: www.cromwellpropertygroup.com
Securities Registry:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane QLD 4000
TEL: +61 1300 554 474
FAX: +61 2 9287 0303
WEB: www.linkmarketservices.com.au
Listing:
Cromwell Property Group
is listed on the Australian
Securities Exchange
(ASX code: CMW)
Auditor:
Pitcher Partners
Level 38, Central Plaza One
345 Queen Street
Brisbane QLD 4000
TEL: +61 7 3222 8444
FAX: +61 7 3221 7779
WEB: www.pitcher.com.au
16
CROMWELL PROPERT Y G R OU P I 2 0 1 8 A NNU A L R E P OR T
FINANCIALS
Cromwell Property Group
Annual Financial Report
30 June 2018
Consisting of the combined consolidated Financial Reports of
Cromwell Corporation Limited (ABN 44 001 056 980) and
Cromwell Diversified Property Trust (ARSN 102 982 598)
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
17
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 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 2018 for both:
• the Cromwell Property Group
(“Cromwell”) consisting of
Cromwell Corporation Limited
(“the Company”) and its controlled
entities and the 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 Cromwell.
The shares of the Company and units
of CDPT cannot be traded separately
and can only be traded as stapled
securities.
Directors
The Directors of Cromwell Corporation
Limited and Cromwell Property
Securities Limited as responsible
entity of the CDPT (“responsible
entity”) during the year and up to the
date of this report were:
Directors and officers
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) - Non-executive Chairman
Director and
Chairman since:
Board Committee
membership:
17 April 2008
Chairman of the Nomination
and Remuneration Committee,
Member of the Investment
Committee
Independent:
Yes
Listed Company Directorships (held within the last three years):
Non-executive Chairman – Specialty Fashion Group Limited (2005 – 2015)
Other listed Company Directorships (held more than three years ago):
Mirvac Limited, Mirvac Funds Limited, Ten Network Holdings Limited, STW
Communications Group Limited, Investec Property Limited, Freedom Furniture
Limited, Rebel Sport Limited
Skills and Experience:
Mr Levy has extensive public company executive and directorship experience
and is the former Chief Executive Officer of Investec Bank (Australia) Ltd
and former Chairman and non-executive director of a number of ASX listed
entities and has chaired various Federal and State Governments entities,
taskforces and panels. He is the current Chairman of Monash Private Capital
and its groups of companies and funds. He was appointed an Officer in the
Order of Australia in the Queen’s Birthday Honours List in June 2005. Mr Levy
is Chairman of Cromwell’s Nomination and Remuneration Committee and a
member of Cromwell’s Investment Committee.
Ms Michelle McKellar - Non-executive Director
Director since:
1 March 2007
Board Committee
membership:
Member of the Audit and Risk
Committee
Member of the Nomination and
Remuneration Committee
Chairman of the Investment
Committee
Independent:
Yes
Skills and Experience
Ms McKellar has over 30 years of property and portfolio management experience
throughout the Asia-Pacific. Ms McKellar was responsible for establishing the
CBRE business in New Zealand and served as the Hong Kong-based Managing
Director of the company’s Greater China operations. She subsequently served as
the CEO of Jen Group of Companies and is a founding Director of China-based
Dash Brands. She is a senior member of the Property Institute of New Zealand,
and a Fellow of the Australian Institute of Company Directors. Ms McKellar
is also a Director of Oyster Property Group, Cromwell’s joint venture Funds
Management company in New Zealand.
18
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Ms Jane Tongs – Non-executive Director
Director since:
26 November 2014
Board Committee membership:
Chairman of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Independent:
Yes
Listed Company Directorships (held within the last three years):
Non-executive Director – Netwealth Group Limited (2008 – current)
Skills and Experience
Ms Tongs BBus (RMIT), MBA (Melb) has over 30 years of management expertise, serving on the
boards of insurance, funds management and other financial services entities; prior to 2000 she
was a Partner at PwC. She is currently Chairman of the ASX listed Netwealth Group, Chairman
of the Lend Lease Australian Prime Property Fund Investors Committee and a Non-Executive
Director of Catholic Church Insurances Ltd and Warakirri Asset Management Ltd. Ms Tongs also
served as director of Run Corp Limited from 2005 until her resignation in 2014. Ms Tongs is a
Fellow of Chartered Accountants Australia and New Zealand and of CPA Australia and a member
of the Australian Institute of Company Directors.
Mr Marc Wainer – Non–executive Director
Director since:
Independent:
29 January 2010
No
Skills and Experience
Mr Wainer has more than 40 years of experience in the property industry in South Africa. Marc is
the Executive Chairman and an Executive Director of listed South African property group Redefine
Properties Limited, which he founded. He is a Non-executive Director of Redefine International
P.L.C., a listed property investment company in the United Kingdom, and also serves as a Non-
executive Director of Redefine BDL Hotel Group which owns and manages a portfolio of hotels in
the United Kingdom. Mr Wainer is a Non-Executive Director of Echo Polska Properties.
Mr Leon Blitz - Non-executive Director
Director since:
28 June 2017
Board Committee membership: Member of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Independent:
Yes
Skills and Experience
Mr Blitz is the co-founder and CEO of Grovepoint, a London-based pan European investment
firm specialising in private equity, investment management, and specialist debt and financing
activities. His experience includes property, banking, risk management and fundraising, and he
is the former Head of Principal Investments, Private Banking and Property Lending at Investec
Bank. Mr Blitz has acted as a non-executive director of a number of operating, financial and
investment companies throughout Europe. Mr Blitz is the chairman of a London-based chamber
of commerce and plays a leadership role in a number of charitable and communal organisations.
Mr Blitz is a Chartered Accountant and holds an honours degree in finance.
19
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Mr David Blight - Non-executive Director
Director since:
1 June 2018
Independent:
Listed Company Directorships (held within the last three years):
Non-executive Director – Japara Healthcare Limited (2014 – current)
Non-executive Director – Lifestyle Communities Limited (2018 – current)
No
Skills and Experience
Mr Blight is currently Director and CEO of ARA Australia, the Australian business of the
Singapore based ARA Group, which is a substantial securityholder of Cromwell Property
Group. He is also Non-Executive Director and Chairman of the Remuneration and Nomination
Committee for Japara Healthcare Limited, an ASX listed residential aged care business and
Non-Executive Director of Lifestyle Communities Limited. David has been in the real estate
investment and development industry for nearly 35 years both in Australia and globally. He was
previously Chairman & CEO of the global ING Real Estate Investment Management business and
Vice Chairman of ING Real Estate, overseeing real estate assets of circa $150 billion while based
in The Netherlands.
Mr Paul Weightman – Managing Director/Chief Executive Officer
Director since:
6 August 1998
Board Committee membership: Member of the Investment Committee
Independent:
No
Skills and Experience
Mr Weightman has been the key driver of Cromwell’s success since inception in 1998. 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 – 2008 and has acted as a director of companies in the
property, energy and retail sectors. He practised as a solicitor for more than 20 years and holds
degrees in commerce and law and is a Fellow of the Royal Institute of Chartered Surveyors.
Mr Richard Foster (retired) - Non-executive Director
Director since:
18 July 2005. Retired 29 November 2017.
Board Committee membership: Member of the Audit and Risk Committee
Member of the Nomination and Remuneration
Committee
Member of the Investment Committee
Independent:
Yes
Skills and Experience
Mr Foster has been 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
Cromwell’s investment products.
20
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Mr Andrew Konig (retired) - Non-executive Director
Director since:
Independent:
26 November 2014. Retired 1 June 2018.
No
Skills and Experience
Mr Konig was appointed as Financial Director and to the board of listed South African property
group Redefine Properties Limited in January 2011 and elected as Chief Executive Officer in
August 2014. He is Chairman of the Executive Committee and a member of the Investment
Committee and holds external appointments, including as Non-executive Director of Echo
Polska Properties and an alternate Director to Marc Wainer on the Redefine International P.L.C
Board. Mr Konig is a qualified Chartered Accountant with 25 years of commercial and financial
experience, and was previously Group Financial Director of Independent News and Media.
He is responsible for the management of Redefine and for ensuring the Board’s strategy is
implemented as well as all aspects of regulatory compliance, corporate activity and reputation
management.
Ms Lucy Laakso – Company Secretary
Appointed since:
10 August 2015
Skills and Experience
Ms Laakso GAICD has over 18 years’ experience in the financial services industry, having worked
as a legal practitioner and in the areas of company secretariat, corporate governance, compliance
and business banking. Prior to joining Cromwell, Lucy was an in-house lawyer at a fund manager
and a manager in the company secretariat/compliance team at a private investment advisory
firm. Before that, she worked at a Top 20 ASX-listed financial services company in areas
including corporate secretariat, compliance and business banking. Lucy also has private practice
experience at a top tier firm. She holds a Juris Doctor (First Class Honours), an MBA (specialising
in Corporate Governance) and a Bachelor of Business.
DIRECTORS MEETINGS
Directors
Board of Directors
Nomination &
Remuneration
Committee
Audit & Risk Committee
Investment Committee
Meetings
attended
Meetings
eligible to
attend
Meetings
attended
Meetings
eligible to
attend
Meetings
attended
Meetings
eligible to
attend
Meetings
attended
Meetings
eligible to
attend
16
15
8
16
10
8
17
17
1
17
17
8
17
17
15
17
17
2
7
7
2
6
-
-
3
-
-
7
7
2
7
-
-
5
-
-
-
7
3
7
-
-
4
-
-
-
7
3
7
-
-
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
G Levy
M McKellar
R Foster
J Tongs
M Wainer
A Konig
L Blitz
P Weightman
D Blight
21
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Principal activities
The principal activities of Cromwell during the financial year consisted of property investment, funds management,
property management and property development. The Trust’s principal activity during the financial year was property
investment.
There were no significant changes in the nature of Cromwell’s or the Trust’s principal activities during the financial year.
Dividends / distributions
The table below shows details of Cromwell’s and the Trust’s quarterly dividends and distributions paid during the year:
Dividend
per security
Distribution
per security
Total per
security
Total
$M
Franked
amount per
security
Record
date
Payment
date
2018
Interim distribution
Interim distribution
Interim distribution
Final distribution
-
-
-
-
-
2.085¢
2.085¢
2.085¢
2.085¢
8.340¢
2.085¢
2.085¢
2.085¢
2.085¢
8.340¢
36.8
37.6
41.3(1)
41.4
157.1
-
-
-
-
-
29-Sep-17
17-Nov-17
29-Dec-17
23-Feb-18
29-Mar-18
25-May-18
29-Jun-18
24-Aug-18
(1)
Includes an amount of $392,000 for both Cromwell and the Trust in excess of the pro-rata entitlement for the quarterly distribution paid to those
securityholders who acquired securities in February 2018 as part of the Security Purchase Plan.
2017
Interim distribution
Interim distribution
Interim distribution
Final distribution
-
-
-
-
-
2.085¢
2.085¢
2.085¢
2.085¢
8.340¢
2.085¢
2.085¢
2.085¢
2.085¢
8.340¢
36.6
36.7
36.7
36.7
146.7
-
-
-
-
-
30-Sep-16
16-Nov-16
31-Dec-16
15-Feb-17
31-Mar-17
17-May-17
30-Jun-17
18-Aug-17
Review of operations and results
FINANCIAL PERFORMANCE
Cromwell recorded a profit of $204.1 million for the year ended 30 June 2018 (2017: $277.5 million). The Trust recorded a
profit of $288.4 million for the year ended 30 June 2018 (2017: $261.1 million).
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 Cromwell’s underlying operating profit.
The most significant of these items impacting the profit of Cromwell for the year and not considered part of the underlying
operating profit were:
• An increase in the fair value of investment properties of $77.4 million (2017: increase of $125.0 million);
• Gain on disposal of listed securities of $15.7 million (2017: $nil);
• Decrease of $76.1 million in the recoverable amount of goodwill and other assets (2017: $0.7m);
• Net non-operating gains in relation to equity accounted investments of $94.8 million (2017: loss of $1.7 million); and
• Net non-operating finance costs of $21.2 million (2017: $7.7 million).
Cromwell recorded an operating profit of $156.8 million for the year ended 30 June 2018 compared with an operating
profit of $152.2 million for the previous corresponding period. Operating profit is considered by the Directors to reflect
the underlying earnings of Cromwell. It is a key metric taken into account in determining distributions for Cromwell but
is a measure which is not calculated in accordance with International Financial Reporting Standards (“IFRS”) and has not
been reviewed by Cromwell’s auditor.
22
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT A reconciliation of operating profit, as assessed by the Directors, to statutory profit is as follows:
Cromwell
Operating profit
Reconciliation to profit for the year
Loss on sale of investment properties
Gain on sale of listed securities
Finance costs attributable to disposal group / other assets
Other transaction costs
Fair value net gain / (losses)
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Non-cash property investment income / (expense):
Straight-line lease income
Lease incentive amortisation
Lease cost amortisation
Other non-cash expenses or non-recurring items:
Amortisation of finance costs
Net exchange (loss) / gain on foreign currency borrowings
Net (decrease) / increase in recoverable amounts
Amortisation and depreciation, net of deferred tax expense (1)
Relating to equity accounted investments (2)
Net foreign exchange gains / (losses)
Net profit from discontinued operations
Restructure costs (3)
Net tax losses incurred / (utilised)(4)
2018
$M
156.8
(5.0)
15.7
(2.1)
(5.7)
77.4
(13.7)
(3.5)
27.8
(17.8)
(1.7)
(21.2)
(10.3)
(76.1)
(4.4)
94.8
(3.2)
1.5
(4.7)
(0.5)
2017
$M
152.2
(0.9)
-
-
-
125.0
17.1
14.2
3.6
(18.0)
(1.9)
(7.7)
1.0
0.7
(6.8)
(1.7)
(0.7)
0.3
-
1.1
Profit for the year
204.1
277.5
(1) Comprises depreciation of plant and equipment and amortisation of intangible assets, including management rights and associated deferred tax
liability.
(Comprises fair value adjustments included in share of profit of equity accounted entities.
(2)
(3) Relates to the transition of funds management responsibilities for the CEREIT portfolio from Europe to Singapore.
(4) Comprises tax expense attributable to changes in deferred tax assets recognised as a result of carried forward tax losses.
Operating profit on a per security basis is considered by the Directors to be the most important measure of underlying
financial performance for Cromwell as it reflects the underlying earnings of Cromwell as well as the impact of changes in
the number of securities on issue. Operating profit and distributions on a per security basis are shown below.
Profit per stapled security
Operating profit per stapled security
Distributions per security
2018
Cents
10.89
8.36
8.34
2017
Cents
15.78
8.65
8.34
Operating profit per security for the year was 8.36 cents (2017: 8.65 cents). This represents a decrease of approximately
3% over the prior year but was 0.11 cents (1%) above our expectations. The change in operating profit per security has
arisen as a result of a number of key factors, mainly:
• An increase in the number of securities on issue following the 175 million new securities issued in December 2017
under the strategic placement to SingHaiyi Group Ltd and Haiyi Holdings Pte Ltd and 37 million new securities issued
in February 2018 under the Security Purchase Plan;
• A decrease in earnings from Cromwell’s property investment segment mainly as a result of the sale investment
properties located in Queensland (147-163 Charlotte Street, 146-160 Mary Street, and Musk Avenue, Kelvin Grove
“Synergy”) and the vacancy at Tuggeranong Office Park in the ACT;
• A decrease in earnings from Cromwell’s retail funds management segment. In the prior year a $4.1 million one-off
performance fee was earned from Cromwell’s Riverpark Trust compared with none in the current period; and
23
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT • Increase in earnings from Cromwell’s funds management segment. The successful listing of the Cromwell European
Real Estate Investment Trust on the Singapore stock exchange saw approximately €1.0 billion of real estate assets
managed by the European business and a further €400 million of new real estate assets be acquired by the newly listed
vehicle. Cromwell received a $10.1 million acquisition fee as a result of the transaction and remains the Manager of
the resulting €1.4 billion real estate portfolio.
SEGMENT CONTRIBUTIONS
The contribution to operating profit of each of the 5 segments of Cromwell was:
Property investment (i)
Asset service (ii)
Funds management - internal (iii)
Funds management - retail (iv)
Funds management - wholesale (v)
Total operating profit
2018
$M
115.0
2.2
19.4
3.8
16.4
156.8
2018
%
73.3%
1.5
12.3%
2.4%
10.5%
100.0%
2017
$M
124.7
(0.2)
2.6
8.2
16.9
152.2
2017
%
81.9%
(0.1%)
1.7%
5.4%
11.1%
100.0%
(i) Property investment
Summary information at 30 June 2018 about the property portfolio is included below:
Portfolio (1)
Portfolio
%
Value
($M)
Like for Like
NOI Growth
WALE
Occupancy
2018
Core
Core+
Active
Total
2017
Core
Core+
Active
Total
58%
36%
6%
100%
54%
35%
11%
100%
1,413.3
888.5
149.2
2,452.0
1.320.8
846.3
260.2
2,427.3
4.6%
1.6%
(14.8%)
1.4%
8.8%
1.9%
(23.5%)
(4.7%)
11.1 yrs
3.8 yrs
2.9 yrs
7.4 yrs
12.1 yrs
3.7 yrs
1.1 yrs
7.2 yrs
99.9%
96.1%
79.8%
94.5%
99.4%
94.2%
79.2%
91.4%
(1)
Includes 100% owned assets and assets classified as held for sale
CORE PORTFOLIO
Construction of the property at Soward Way, ACT was completed in September for a second and fully leased commercial
office building on the surplus land of the Tuggeranong Office Park investment property. Total cost of construction was
$170 million and was funded from cash reserves and a $159.5 million loan facility. The building is leased for 15 years to
the Commonwealth of Australia.
As well as providing like for like NOI growth there was also a 6% increase in valuations across the core portfolio.
CORE + PORTFOLIO
The remaining portfolio is divided between assets which are vacant or have short WALE’s but have repositioning potential
(“active”) and assets with medium term WALE’s with leasing up potential (“core+”). Included in the core+ portfolio is 207
Kent Street, NSW, which increased in value during the year by $26.0 million as a result of positive leasing outcomes.
During the year, Cromwell also saw positive leasing outcomes at the 19 National Circuit, ACT and HQ North, QLD
investment properties. Leasing outcomes at 19 National Circuit, ACT has seen the property’s WALE improve from 1.2
years at the end of last year to now being 8.9 years.
ACTIVE PORTFOLIO
Active assets include Tuggeranong Office Park, ACT, 13 Keltie Street, ACT, the Oracle Building, ACT and Wakefield Street,
SA.
24
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 13 Keltie Street, ACT is currently 44% occupied with a WALE of 0.6 years. Cromwell is in the process of identifying
repositioning opportunities for the property. The Oracle Building, ACT is currently 70% occupied with a WALE of 3.6 years.
Cromwell will continue to lease the building with a view to have it stabilised in the near term. Wakefield Street, SA is
currently 100% occupied with a WALE of 1 year. Cromwell is in the process of identifying a repurpose opportunity for the
property.
Cromwell obtained vacant possession of the buildings at Tuggeranong Office Park after the Department of Social Services
decanted from the buildings into their newly constructed and Cromwell owned offices at Soward Way. Gaining possession
of the buildings has allowed Cromwell to progress with its planned transformation of the buildings into 330 to 350 aged
care and independent living units and associated facilities. Cromwell is partnering on the project with an aged care
provider with over 20 years’ experience and a solid track record of providing quality care and services to residents. The
project will increase the value of the original buildings at Tuggeranong Office Park and provide another potential area of
growth for Cromwell.
Valuations for investment properties increased by $85.7 million during the year (2017: $108.7 million), net of property
improvements, leasing incentives and lease costs. This is equivalent to an increase in value of approximately 3.6% or 4.6
cents per stapled security from June 2017 valuations.
Change in valuations, net of property improvements, lease costs and incentives
Non-cash adjustments for straight-lining of rentals and lease amortisation
Increase in fair value of investment properties
2018
$M
85.7
(8.3)
77.4
2017
$M
108.7
16.3
125.0
Increases were concentrated in properties in the Sydney and Melbourne metropolitan areas with long weighted average
lease expiries and reducing vacancy rates. The single largest increase was for 207 Kent Street, Sydney which had
successful leasing outcomes leading up to 30 June 2018. The other largest increase was recorded at 700 Collins Street,
Melbourne, which is now 99.7% occupied with a WALE of 7.1 years.
NORTHPOINT
Cromwell owns 50% of the investment property located at 100 Miller Street, North Sydney (Northpoint) via a 50%
ownership in the Cromwell Partners Trust. The investment property has just completed a major redevelopment of its
retail space and development of a 187-room hotel resulting in an increase in value of Cromwell’s 50% share of $91.5
million. This has seen an increase in operating profit of Cromwell Partners Trust, of which, Cromwell receives a share,
increasing Cromwell’s return to $5.4 million from $4.2 million in the prior year.
INTEREST EXPENSE
Interest expense for the year decreased to $37.1million (2017: $41.5 million). The average interest rate fell from 3.96% for
the year ended 30 June 2017 to 3.28% for the year ended 30 June 2018.
The fair value loss of interest rate derivatives of $3.3 million (2017: gain of $10.2 million) arose as a result of Cromwell’s
policy to hedge a portion of future interest expense. Cromwell has hedged future interest rates through various types
of interest rate swaps and caps with 81% of its debt at 30 June 2018 (2017: nil%) hedged or fixed to minimise the risk of
changes in interest rates in the future. All hedging contracts expire between September 2018 and July 2021. Cromwell
maintains its $1.0 billion, 3.39% interest rate cap which expires in May 2019 and represented 48% of Cromwell’s total
drawn loan facilities at 30 June 2017.
(ii) Asset services
Asset services recorded an operating profit for the year of $2.2 million (2017: loss of $0.2 million). The increase in
operating profit is due to the level of project management and leasing activity being done, particularly in relation to the
Northpoint property.
Development activity during the year continued to be extremely limited.
(iii) Funds management – internal
Internal funds management recorded an operating profit for the year of $19.4 million (2017: $2.6 million). In October
2017, Cromwell disposed of its 9.83% stake in Investa Office Fund, achieving an internal rate of return of 18%. Cromwell
25
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT received distribution income of $nil from its investment during the 2018 year (2017: $12.2 million). On 30 November
2017, the Cromwell European Real Estate Investment Trust (“CEREIT”) was successfully listed on the Singapore Stock
Exchange. The CEREIT was established to invest, directly or indirectly, in a diversified portfolio of income-producing real
estate assets in Europe. The investment was funded by a combination of borrowings, including a Euro bridging facility of
$214.4 million maturing in July 2019, and cash. The Euro bridging facility was repaid in full following the issue in March
2018 of the €230 million new convertible bond maturing in 2025. Cromwell owns 35% of CEREIT at the end of the year.
Cromwell accounts for its holding in CEREIT as an equity accounted investment. The share of operating profit recorded for
the year was $22.0 million (2017: $nil).
(iv) Funds management – retail
External retail funds management profit decreased to $3.8 million for the year ended 30 June 2018 from $8.2 million
for the year ended 30 June 2017. In July of the previous year Cromwell earned a performance fee of $4.1 million from
Cromwell’s unlisted fund, the Cromwell Riverpark Trust, following unitholders voting to extend the term of the Trust for a
further 5 years. No equivalent performance fee was earned in the current year.
Total external retail funds under management increased to $2.0 billion (2017: $1.8 billion).
Cromwell remains committed to increasing the size and diversification of its funds management business, which it
believes is highly complementary to its internally managed property portfolio and property and facilities management
activities. We continue to invest in a number of initiatives across our retail funds management business which will allow
us to continually improve our service offering to investors in both Cromwell and our unlisted funds.
DIRECT PROPERTY FUNDS
The Cromwell Direct Property Fund continued to receive support from investors during the year with a further 42.7 million
units issued. In December 2017, the Fund acquired a property at 433 Boundary Street, Spring Hill on the fringe of the
Brisbane CBD for $42.0 million. Cromwell received a fee of $840,000 as a result of the acquisition. The Fund now has
a portfolio of 4 investment properties valued at $119.2 million and investments in other Cromwell unlisted investment
schemes valued at $57.2 million. At 30 June 2018 the Fund was ungeared with access to a $35 million loan facility.
Cromwell will continue to identify quality assets that fit into the Fund’s target asset size and risk portfolio.
Cromwell’s other three direct property funds, Cromwell Riverpark Trust, Cromwell Ipswich City Heart Trust and Cromwell
Property Trust 12, continued to perform as expected and delivered distributions to their investors at annualised rates of
11.25cpu, 9.25cpu and 8.50cpu respectively.
The term of the Cromwell Ipswich City Heart Trust is set to expire in December 2018. Prior to expiry of the Trust,
unitholders will be asked to vote on a proposal to extend the life of the Trust.
PROPERTY SECURITIES FUNDS
Cromwell has two property securities funds, the Cromwell Phoenix Property Securities Fund and the Cromwell Phoenix
Core Listed Property Fund. Cromwell also has a fund that is mostly invested in microcap securities, the Cromwell Phoenix
Opportunities Fund.
The Cromwell Phoenix Property Securities Fund was launched in 2008 and since inception has delivered excess returns
(after fees and costs) of 5.2% against its benchmark. The Fund currently has $252.4 million (30 June 2017: $222.0 million)
assets under management.
The Cromwell Phoenix Opportunities Fund was launched in 2011 and since inception has delivered excess returns (after
fees and costs) of 13.6% excluding franking credits. The Fund currently has $39.4 million (30 June 2017: $32.7 million)
assets under management.
The Cromwell Phoenix Core Listed Property Fund was launched in 2015. The fund invests in ASX listed property and
property related securities and had assets under management of $20.0 million at 30 June 2018 (30 June 2017: $16.8
million).
OYSTER
Oyster Property Group’s assets under management increased to NZD$1.5 billion at 30 June 2018 (2017: NZD$1.2 billion)
an increase of 25%. Cromwell’s share of profit from Oyster for 2018 was $1.0 million (2017: $1.7 million).
26
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (v) Funds management – wholesale
External wholesale funds management profit remained steady at $16.4 million (2017: $16.9 million).
The European funds management business contributed $15.5 million (2017: $15.1 million) after convertible bond finance
costs and tax, for the year. As previously described, this year saw the launch of CEREIT. This marks a significant shift
in the focus and nature of the European business and a major step forward in securing a stable revenue base for the
business. The CEREIT acquired three of the European business’s Funds as well as the CECIF fund which was launched in
the previous year. The management rights associated with the three Funds, included in intangible assets and recognised
at the time of acquiring the European business, have been written off in full.
During the year the European business traded over €3.9 billion (2017: €1.8 billion) of real estate assets (including the
assets rolled into CEREIT). The resulting acquisition and disposal fees amounted to $20.3 million (2017: $12.7 million) out
of total funds management fees of $80.5 million (2017: $78.1 million). Acquisition fees included $10.1 million for CEREIT.
The European funds management business also received performance fees (promotes) during the year of $8.3 million
(2017: $17.5 million).
As at 30 June 2018 the European funds management business had €3.86 billion ($6.1 billion) assets under management
(30 June 2017: €3.37 billion ($5.01 billion)).
The investors of the European business’s two largest remaining mandates, representing €1.1 billion of the €3.9 billion
assets under management, have decided to take advantage of the current strong demand for stabilised assets in Europe.
Accordingly, the assets in both these funds are being sold as complete portfolios within the next 12 months.
The movement in AUM for the European business for 2018 was as follows:
Balance at 30 June 2017
CEREIT IPO
Acquisitions
Disposals
Revaluations
Balance at 30 June 2018
CEREIT
€’000
-
913
427
-
51
1,391
Mandate 1
(to be sold)
€’000
Mandate 2
(to be sold)
€’000
Other
Mandates
€’000
Other AUM
€’000
667
-
-
(147)
50
570
487
-
-
-
8
495
2,215
(913)
725
(788)
173
1,412
3,369
-
1,152
(935)
282
3,868
The European business will continue to broaden its focus from Private Equity Funds and Mandates and towards longer
term and more secure revenue sources. During the year the successful listing of the CEREIT provided a stable mandate
of €1.0 billion of existing AUM and €0.4 billion of new AUM. Despite the strong result for the year and the securing of
more permanent and stable revenue, the transformation of the European business will see the assets under management
underpinning the goodwill recognised on acquiring the business being recycled from the business much quicker than
expected. Similarly, the value of revenues from new funds or mandates promoted or secured by Cromwell is not able to
be recognised as goodwill under current accounting standards. These factors have resulted in all remaining goodwill
recognised on the acquisition of the business being written off during the year.
Cromwell’s Australian wholesale fund, Cromwell Partners Trust (“CPA”) continued with its management of the Northpoint
property. The property has undergone a major redevelopment of its retail space and development of a 187-room hotel on
site. Construction has completed and the hotel has been trading strongly since opening.
During 2017, via an income assignment deed, Cromwell acquired an effective 49% interest in an investment property in
Campbell, ACT for $15.2 million. The investment was valued at $11.7 million at 30 June 2018. The property is leased to
the Commonwealth of Australia. Cromwell receives 49% of the net cash flows from the property with the net cash flows
representing the net rental income less interest expense on the borrowings secured against the property and less any
required capital spending. Cromwell has the option to acquire a direct 49% interest in the property as well as an option to
acquire the remaining 51%. Cromwell will work with the current owner of the property to negotiate a new lease with the
Commonwealth of Australia that would also involve a major redevelopment of the existing building. Cromwell received
distributions in the year of $2.6 million (2017: $nil) via the income assignment deed.
27
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT FINANCIAL POSITION
Total assets ($M)
Net assets ($M)
Net tangible assets ($M) (1)
Net debt ($M) (2)
Gearing (%) (3)
Stapled securities issued (M)
NTA per stapled security
NTA per stapled security (excluding interest rate derivatives)
Cromwell
As at
Trust
As at
2018
3,466.3
1,901.5
1,907.2
1,207.4
37
1,985.3
$0.96
$0.96
2017
3,410.9
1,639.9
1,565.1
1,375.5
45
1,762.4
$0.89
$0.89
2018
3,447.6
1,923.4
1,933.0
1,262.4
38
1,985.3
$0.98
$1.00
2017
3,345.2
1,595.6
1,595.3
1,441.7
46
1,762.4
$0.91
$0.91
(1) Net assets less deferred tax assets, intangible assets and deferred tax liabilities.
(2) Borrowings less cash and cash equivalents and restricted cash.
(3) Net debt divided by total tangible assets less cash and cash equivalents, restricted cash and disposal group liabilities.
A total of 8 property assets were externally revalued at June 2018, representing approximately 49% 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 6.13% across the
portfolio, compared with 6.47% at June 2017. All properties are externally valued on an annual basis.
Net debt decreased by $168.1 million following the proceeds from the issue of new securities being used to repay the
short-term bridging loans used to fund CECIF, the seed portfolio of CEREIT. Gearing decreased from 45% to 37% during
the year as a result of the decrease in net debt combined with the increase in property valuations and asset acquisitions.
On 29 June 2018, Cromwell successfully restructured all its Australian debt into bilateral loan facilities with a total
limit of $1.3 billion, drawn to $1.0 billion at 30 June 2018. The facilities have evergreen extension rights with an initial
expiry profile of five years. This refinance, along with the new €230 million convertible bond issued in March 2018 which
matures in 2025 means Cromwell has a weighted average debt maturity of 5.2 years. At 30 June 2018, Cromwell held
cash reserves of $204.6 million and undrawn loan facilities of $300 million. The earliest debt expiry is the initial €150
million convertible bond, now repaid down to €54.8 million, which matures in February 2020.
An additional 223.0 million stapled securities were issued during the year at an average issue price of $0.96, comprising
the 175.1 million securities issued under the placement to SingHaiyi Group Ltd and Haiyi Holdings Pte. Ltd., the 37.1
million securities issued under the Security Purchase Plan, the continuing operation of the distribution reinvestment plan
which resulted in the issue of 8.0 million securities during the year, and a further 2.8 million securities issued following
the exercise of performance rights.
NTA per security has increased during the year from $0.89 to $0.96, primarily as a result of an increase in property
valuations which contributed 4.6 cents to the increase in NTA.
Cash flows from operations for the year were $120.9 million versus operating profit of $156.8 million, a difference of $35.9
million. This is largely owing to the following:
• The timing difference between the recognition of Cromwell’s share of profit of CEREIT and the receipt of distributions
from CEREIT. The share of profit recognised by Cromwell will reflect the distribution to be received. CEREIT pays
distributions every 6 months with the first distribution for the period to 30 June 2018 expected to be received in
September 2018; and
• Cromwell received a $10.1 million acquisition fee for the successful IPO of CEREIT. The fee was reinvested by
Cromwell as units in the CEREIT rather than taken as cash.
OUTLOOK
Distribution and operating profit
Cromwell’s strategy is to invest in the growth of our fund management business and in value creation opportunities in
our existing portfolio. To that end Cromwell has raised capital, made long term investments, and carries balance sheet
liquidity to make further investments. We have also assumed that some cash will be invested rather than paid out in
28
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT distributions. Whilst these initiatives will have a short-term impact on Earnings and Distributions, they are likely to be
accretive to portfolio value and enterprise value in the medium to long-term.
We have adopted assumptions for transactional and funds management revenue in 2019 that are consistent with
performance in prior years. This includes assumptions that Cromwell will earn performance fees where we have a
high degree of certainty of earning those fees. We have assumed conservative downtime assumptions for the property
portfolio. The distribution amount is at the lower end of Cromwell’s policy of distributing 85% - 95% of operating profit but
will allow Cromwell to reinvest earnings for future growth.
We have not made any assumptions on revenues that may come from investment activities and have assumed that we
maintain existing cash reserves for the full Financial year. Based on this conservative view we expect that Earnings
will be not less than 8.0c per security, and Distributions will be not less than 7.25c per security. The distribution is at
the middle of the range in Cromwell’s Distribution policy of distributing 85-95% of operating profit. In the event that
investments are made we will revise guidance.
Strategy
2018 saw Cromwell achieve operating earnings of 8.36 cents per security, 0.11 cents per security above our expected
result of 8.25 cents per security. This was the result of better than expected transactional revenue and despite increasing
the number of securities on issue during the year via the strategic placement and security purchase plan. The issuing of
new securities positioned Cromwell to make further investments in both its funds management platform and the value
add opportunities within the portfolio. Further to the capital raising, Cromwell successfully secured the refinancing of
all its Australian borrowings for a further 5 years with the ability to call undrawn facilities of $300 million. Cromwell also
successfully issued a new €230 million convertible bond to support its investment in CEREIT. All short-term borrowings
and €95.2 million of the February 2020 convertible bond were repaid during the year. All these factors see Cromwell well
positioned to execute on a longer-term strategy focused on:
• Maintaining a strong, secure and resilient cash flow from the core portfolio of assets which have a WALE over 11 years
and which should deliver year on year growth in net operating property income of 3%;
• Using the core + portfolio of assets to ensure Cromwell maximises returns in leasing markets and creates additional
value;
• Leveraging our well-developed asset repositioning skills for value creation from the active portfolio;
• Maintaining our retail funds management platform by ensuring we only offer quality products to our retail investors
based on a disciplined approach to asset acquisitions; and
• Maximising our European platform at a time when certain European real estate markets are improving and attracting
Asian capital. This may see Cromwell co-investing more into European funds and mandates.
Cromwell aims to maintain a sustainable business model through investment and market cycles. This will be achieved
by maintaining our capacity to derive transactional revenue where possible, growing funds management revenues in a
sustainable way and continuously improving the capacity of our property portfolio to deliver above average returns over
the medium and long term from active management of our assets and our portfolio. We will continue to manage the risk
and cost of our debt, maintaining appropriate protection to the downside with the opportunity to benefit from the trend of
lower global interest rates.
Significant changes in the state of affairs
Changes in the state of affairs of Cromwell during the financial year are set out within the financial report. There were no
significant changes in the state of affairs of Cromwell during the financial year other than as disclosed in this report and
the accompanying financial report.
Subsequent events
No matter or circumstance has arisen since 30 June 2018 that has significantly affected or may significantly affect:
• Cromwell’s operations in future financial years; or
• the results of those operations in future financial years; or
• Cromwell’s state of affairs in future financial years.
29
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 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 Cromwell.
Trust Disclosures
ISSUED UNITS
Units issued in the Trust during the year are set out in note 10 in the accompanying financial report. There were
1,985,324,674 (2017: 1,762,361,339) issued units in the Trust at balance date.
VALUE OF SCHEME ASSETS
The total carrying value of the Trust’s assets as at year end was $3,447.6 million (2017: $3,345.2 million). Net assets
attributable to unitholders of the Trust were $1,923.4 million (2017: $1,589.8 million) equating to $0.98 per unit (2017:
$0.91 per unit).
The Trust’s assets are valued in accordance with policies stated in notes 5, 6, 7 and 12 of the financial statements.
AIFMD REMUNERATION DISCLOSURE
The senior management and staff of Cromwell whose actions have a material impact on the risk profile of the Trust
are considered to be the key management personnel identified in the Remuneration Report which is included in this
Directors’ Report.
The amount of the aggregate remuneration paid by Cromwell to those key management personnel in respect of the
financial year ending 30 June 2018 was $6,186,971. This amount is comprised of fixed remuneration of $4,719,693 and
variable remuneration of $1,467,278.
This remuneration disclosure is being made to satisfy Cromwell Property Securities Limited’s obligations under AIFMD.
References to “remuneration”, “staff” and “senior management” should be construed accordingly.
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 Cromwell. 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.
Cromwell 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.
30
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Rounding of amounts
Cromwell is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument amounts in the Directors’ report have been rounded off to the nearest
one hundred thousand dollars, or in certain cases to the nearest dollar, unless otherwise indicated.
Auditor
Pitcher Partners 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 Cromwell 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 Cromwell
are set out below:
Non-audit services
Due diligence services
Total remuneration for non-audit services
2018
$
2017
$
63,000
63,000
127.000
127,000
The auditor receives remuneration for audit and other services relating to other entities for which Cromwell Funds
Management Limited and Cromwell Real Estate Partners Pty Ltd, both controlled entities, act as responsible entity. The
remuneration is disclosed in the relevant entity’s financial reports and totalled $146,500 (2017: $129,750).
Amounts paid to PwC, who acted as the component auditor for an overseas component of Cromwell in the current year,
and its network firms for non-audit services were as follows:
Non-audit services
Tax compliance services - Australia
Tax compliance and other services - overseas
Total remuneration for non-audit services
2018
$
2017
$
287,900
41,148
329,048
197,790
61.413
259,203
Audit tender process
During the 2018 year, Cromwell commenced a tender process for the financial and compliance audits of Cromwell
and other Cromwell reporting entities. The tender process provided the opportunity to review the group-wide audit and
reporting process, including the significant international reporting following the acquisition of the European business and
further expansion into other markets. The tender process is ongoing and the outcome is subject to approval at the Annual
General Meeting.
31
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 accompanies
this report.
Remuneration report
Message from the Chairman
Dear Securityholder
On behalf of the Board, I am pleased to present Cromwell’s Remuneration Report for the year ended 30 June 2018 (FY18).
At the Annual General Meeting (AGM) we will seek your support of this report.
Year in review
FY18 has been a very successful one for Cromwell following the realisation of initiatives that have enabled the company to
achieve the key elements of its strategy to transform from a more passive typical AREIT into an International Real Estate
Investor and Manager. Total Shareholder return in FY18 was 28% (FY17 2%), compared with 13% for both the S&P/ASX
200 A-REIT accumulation index and the S&P/ASX 300 A-REIT accumulation index. Distribution guidance was met and
profit guidance was exceeded.
The successful November IPO of the Cromwell European REIT in Singapore was an important first step in the
transformation of Cromwell’s European business from one that was characterised by one off transactional earnings to
a business underpinned by long term recurring revenues. We have moved from being an Australian REIT with limited
strategic opportunities and completely dependent on the continuing strength of the Australian economy to a Group
that can now leverage capital flows from Asia into investment or management vehicles in 12 European countries,
Australia, New Zealand and Singapore. This now provides Cromwell with the ability to enhance shareholder value by
taking advantage of opportunities in the International markets in which we operate. Over the last 3 years the Group has
significantly enhanced and honed its skills in International property acquisitions and sales, developed and listed new
property investment vehicles, developed global debt and equity fund raising capabilities and invested in International
governance and reporting processes.
Our strong growth in assets under management (AUM) in the countries in which we operate presents an ongoing
opportunity for Cromwell to create increased value for securityholders. Management are delivering on this potential by
executing to a high standard across all areas including development of existing product, leasing, property management,
acquisitions and disposals, property repositioning, capital management, people management and risk management.
These actions are not only driving strong results today but creating securityholder value for the long-term.
Key transformational achievements in 2018 included:
• The successful IPO and listing of the Cromwell European Real Estate Investment Trust on the Singapore stock
exchange, which saw approximately €1.0 billion of real estate assets managed by our European business and a
further €400 million of new real estate assets acquired by the newly listed vehicle. Cromwell received a $10.1 million
acquisition fee and remains manager of the €1.4 billion real estate portfolio. Most importantly this enables the
European business to manage long term stable AUM with more certainty of stable recurring annual revenue and
enables resources to be devoted to the development of longer term property products;
• Completion of the major redevelopment of the Northpoint property, including redevelopment of its retail space and
development of a 187-room hotel on site, this has improved the value of this asset by $183 million or 25%;
• Commencement of the Cromwell aged care project, partnering with an aged care operator to utilise the investment
property at Tuggeranong Office Park in the ACT, transforming the current buildings into more than 350 independent or
assisted living units plus communal areas;
• The successful completion of the €230 million convertible bond offer, which was used to settle debt and repurchase
existing bonds;
• The extension of the term of our debt facilities to 5.2 years; and
• The profitable sale of the IOF stake delivering an IRR of 18%.
Response to first strike
This year, the primary focus of the Nomination and Remuneration Committee has been to address the concerns of
shareholders and their advisers that led to the first strike we received at our AGM in November 2017. 30.92% of the
shares voted against the remuneration report presented to that meeting, The Board has taken this outcome very seriously
32
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT and has acted on the concerns raised in a considered manner, as set out in section (a) of this report. Key actions have
included retaining KPMG to advise the Board on remuneration practices in general and to assist the Board in developing a
new long-term LTI scheme that will provide best practice long-term remuneration for our key management team.
The Nomination and Remuneration Committee has also undertaken a detailed benchmarking review of the CEO’s
remuneration. This occurred against a back drop of continuing enlargement of the role following the listing of the CEREIT
business and additional expansion of the European Platform and development of additional European and Australian
Investment Products for release in future periods. The results of the review were as follows:
• The disclosure on the establishment and setting of fixed remuneration (FR) for the CEO has been improved;
• The comparator set of listed entities against which the CEO’s remuneration has been benchmarked has been changed
to address concerns expressed by securityholders and their advisors;
• The Board and the CEO have agreed to reduce the FR by $100,000 to reset the FR to a level the Board considers to be
market when benchmarked against the revised peer group;
• The CEO’s FR and maximum Total Remuneration (TR) will be fixed at the 2018 level for 2019;
• The ratio of FR, maximum STI and maximum LTI to the CEO’s TR are proposed to remain fixed after 2019;
• The maximum 2018 short-term incentive (STI) for the CEO has been reduced by $700,000 to $900,000 to re-allocate
that amount to LTI;
• More detail has been provided of the KPI to be achieved for the STI award;
• The maximum 2018 long-term incentive (LTI) for the CEO has been increased by $700,00 to better align the CEO’s total
remuneration with the Group’s long-term performance. The method by which the increase in LTI will be implemented
will be referred to the shareholders at the AGM in November. The options to reallocate part of the STI to an increased
LTI include (1) the grant of additional performance rights, (2) the acquisition by Cromwell of securities on market to
effect the grant, and (3) a cash award. Until the preferred method is determined by the Board, the CEO has agreed to
defer that proportion of his STI to give effect to the reallocation of his remuneration; and
• The existing LTI scheme allocation metrics have been aligned to market standards by adding a requirement that
performance hurdles for equity-based compensation must now be met in each year (previously two out of three).
The Nomination and Remuneration Committee also reviewed and restructured the Remuneration Report to increase
general transparency, readability and clarity.
Other measures taken by the Nomination and Remuneration Committee include:
• The Nomination and Remuneration Committee recognises that it is appropriate that the collective skills and experience
of the Committee and the Board in relation to remuneration matters be improved. The Board also recognises that
it is not best practice for the Chairman of the Board to also act as Chairman of the Nomination and Remuneration
Committee. To those ends it has undertaken a search for an appropriate Director to be appointed to the Board to fill
the casual vacancy left by the retirement of Mr Richard Foster at the 2017 AGM. The Committee has concluded that
search and made recommendations for the appointment of a suitably qualified person to the Board, who will also
assume the role of Chairman of the Nomination and Remuneration Committee. It is expected that an announcement
of the appointment will be made prior to the issue of the Notice of Meeting for the 2018 Annual General Meeting of the
Group.
• The Nomination and Remuneration Committee retained KPMG to provide advice on the structure of incentive plans
for KMP of the Group for 2019 and beyond. Whilst that advice is incomplete, the Nomination and Remuneration
Committee has recommended that the following principles should form part of the new scheme to be adopted from the
2019 financial year:
• KPIs/conditions for vesting of LTIs to have different criteria from KPIs/conditions for the grant of STIs.
• STIs are to be awarded against a balanced score card that reflects a weighting between financial and non-financial
metrics appropriate to each role;
• Vesting of LTIs is to be linked to a combination of relative TSR against Domestic peers, achievement of goals set
within the Cromwell 5 year strategic plan adopted by the Board at its meeting in July 2018 and the achievement of
segmental earnings targets. Details of the 5 year strategy plan will be released to the market with Cromwell’s 2018
results;
• Cliff vesting will be avoided by payout against each KPI commencing at a threshold level rising to a stretch target
after a gateway is met;
• LTIs are to continue to be awarded as Performance Rights, with a performance period of 3 years commencing on 1
July 2018;
33
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT • Performance rights would be forfeited if an employee ceases employment subject to Board discretion in the case of
“good leavers”; and
• Board to have discretion to vest LTIs on change of control.
As previously reported, The Board is confident that Cromwell executive pay is reflective of performance and the value
delivered to securityholders in a way that does not unduly increase the risk profile of Cromwell. I invite you to read this
report and trust you will find this report helpful in understanding Cromwell’s approach to remuneration. On behalf of the
Directors, we look forward to welcoming you and your feedback at and before the 2018 AGM.
Thank you for your continued support.
Yours Sincerely
€
Geoff Levy
Chairman, Remuneration Committee
34
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT REMUNERATION REPORT
The remuneration report is presented for the financial year ending 30 June 2018. 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 is where we explain how performance has been linked to reward outcomes that forge a clear alignment between
Cromwell staff and securityholders.
36
Remuneration Snapshot
45
Executive KMP for FY 2018
53
Remuneration and conditions of
employment of the KMP
from the 2017 AM
36 Addressing shareholder feedback
38 Remuneration overview / key
40 Key Management personnel
questions
42
Remuneration Governance
Consultants
Remuneration Committee
42 Role of the Nomination and
42 Services from Remuneration
42 Objective of Remuneration
43
2018 Performance
elements for the CEO and other
KMP
principals and applications
(existing and proposed)
45 Summary of remuneration
47 LTI Equity based compensation
49 Total CEO Remuneration
50 LTI performance measures for
52
package - possible and actual
achievement
KMP other than the CEO
Non-Executive Director remuneration
52 Board remuneration Structure
52 Total remuneration for
Non-Executive Directors
the CEO and other KMP
expensed or accrued in 2018
remuneration: at risk bonuses
for the CEO and other Executives
KMP
53 Cash and at-risk bonuses
54 Summary details of
54 Equity based compensation for
55 Employment contracts and
56 Security Holdings
56 Loans to Key Management
56 Other Transactions with Key
Management Personnel
termination provisions
Personnel
35
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
1. Remuneration Snapshot
1.1 ADDRESSING SHAREHOLDER FEEDBACK FROM THE 2017 AGM
Following the 30.98% vote against the Remuneration Report resolution at the 2017 AGM, Cromwell Directors have actively
engaged with stakeholders and experts to deepen their understanding of shareholder and advisor concerns and to
address those concerns
Details of the shareholder concerns and the responses to the concerns are set out below:
Feedback received
Key actions taken
Cromwell’s response
Executive Director
and CEO’s (CEO)
remuneration:
Fixed pay perceived
above market fixed
remuneration for
CEO.
Comparator group
has been revised.
Fixed pay has been
reduced by $100,000.
The CEO’s fixed pay component is set at an amount to reflect the
demands, responsibilities, and skill levels required of the role, with
appropriate recognition of market. To address the concerns that the
CEO remuneration did not reflect market remuneration the committee
has used several sources for benchmarking the CEO remuneration for
2018 including:
• The Nomination and Remuneration Committee retained KPMG, to
provide advice on market standards and market rates;
• Other external remuneration benchmarking sources such as Aon
Hewitt market surveys;
• A detailed benchmarking exercise of the CEO’s remuneration
against a revised peer group, of Vicinity, Dexus, GPT, Charter Hall,
Growthpoint, Abacus, SCA property Group, Aveo Group and United
Overseas Australia. This group was selected because of its focus on
property, with a mix of wholesale, development and REIT business.
Only one member of the group has international operations. The
Board has responded to criticisms of the prior year comparator set
by removing 2 large and 2 non-property companies. Of this group
based on market capitalisation, 4 are within a similar range, 2 are
50% smaller and 3 are 500% bigger.
• As a reasonableness check the CEO’s remuneration was also
benchmarked to companies of similar size on the ASX;
Because of this exercise, the board now considers the fixed component
of the CEO’s remuneration to be at market. In 2018, the CEO’s fixed pay
decreased 6% from $1,600,000 to $1,500,000 the 80th percentile of the
comparator group based on 2017 FR for this group.
The Board believes that it is appropriate to pay the CEO at the 80th
percentile given his experience, skills, drive, and vision in repositioning
the group from an AREIT with limited growth prospects to an
International property business. The CEO has developed substantial
Asian and International experience that is enabling the group to
attract securityholders and investors from Asia and Europe. The CEO
is building an international property business that can provide value to
security holders through the global property cycle. The Board believes
that a property group should not over reward risk taking and therefore
the FR should not be set to a low level which may over emphasise risk
taking. The Board believes that if a replacement was required for the
CEO, an International search would be required to find the right mix
of Australian and International property and capital raising experience
and that the FR set, reflects what would need to be paid to attract an
applicant for this role. The CEO’s total remuneration package (FR,
STI and LTI) is at the median of the peer group and there has been
substantial change to the portion of the pay at risk. The at-risk portion,
which was seen as too low in 2017, is now in line with the peer group.
The deferred component now represents 38.4% of total remuneration.
36
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT CEO’s
remuneration:
Short term incentive
(STI) pay increase and
perceived limited ‘at
risk’ component.
$700,000 of
remuneration at risk
has been reallocated
from the STI to the
LTI.
CEO’s
remuneration:
Enhanced
disclosure.
Perceived insufficient
disclosure of
STI targets and
achievement of those
targets.
The Board has agreed with the CEO to reduce the CEO’s maximum STI
from $1,600,000 to $900,000, placing more remuneration at risk for a
longer period of time.
The Board believes that though there are STI initiatives that the CEO
can deliver to improve outcomes for security holders, the focus of an
International property group should still be on long term value. The
STI has been reduced and the LTI has been increased (subject to
securityholder approval) by an equivalent amount to lengthen the risk
outcome period.
The purpose of the STI bonus is to focus the CEO’s efforts on those key
marginal drivers and outcomes that are priorities for Cromwell for the
relevant financial year and to motivate the CEO to strive and reward
him to achieve stretch performance objectives.
We have provided greater transparency in relation to STI performance
metrics and outcomes, including showing how the performance
measures are both stretching and quantifiable. Some specific project
KPIs will only have general statements around performance to avoid
disclosing strategic or commercially sensitive information. Refer
section 4.3. In summary the 2018 performance measures for the CEO
are:
• 20% linked to outperformance of the operating profit per stapled
security
• 10% to property specific value enhancing strategies as agreed with
the Board
• 60% for the successful IPO and listing of the CEREIT on the
Singapore stock exchange, which was the key and essential
initiative necessary to enable the European business to manage
long term stable assets under management (AUM) with more
certainty of stable recurring annual revenue and give us the ability
to devote resources to the development of longer term property
products.
• 10% for achieving employee cultural and succession strategies as
agreed with the Board
The weighting of the performance metrics to the successful IPO
and listing of the CEREIT reflects the relative importance placed by
the Board on achieving this objective to the enterprise value of the
Cromwell Funds Management Business. The €10.1m acquisition fee
and the €13m in recurring annual management fees that Cromwell
will earn in managing the CEREIT have had a material impact on
Cromwell’s intangible value. Although for accounting reasons that
value cannot be reflected in the value of assets on Cromwell’s balance
sheet, the Board believes that it together with the resultant change in
the European business from being transactional fee dependent to an
annual recurring revenue fund manager, is recognised by the market
and reflected in Cromwell’s improved security price since the IPO.
37
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT CEO’s Long-term
incentive (LTI):
Perceived to be not
enough of the CEO’s
package to be at long
term risk, targets
not linked to long
term securityholder
outcomes and limited
disclosure of how
performance targets
were achieved.
$700,000 of
remuneration at risk
has been reallocated
from the STI to the
LTI.
Vesting to be linked
to KPIs focused
on delivering
Cromwell’s long-
term strategy.
Disclosures and
transparency:
Enhanced
disclosure.
General appetite for
further disclosures
on relevant
matters, increasing
transparency of
remuneration
practices.
Proposed New Scheme
The Board have increased the CEO maximum LTI from 50% of the FR
to 100% of the FR $1,500,000, thus increasing the portion of the CEO’s
at risk pay from 20% to 39% of his package, by re-weighting a large
portion of his short-term incentive towards a long-term incentive.
The Board believes that the focus of an International Property Group
and its CEO should be to improve the long-term value outcomes for
security holders. To enhance this focus, the STI has been reduced by
$700,000 and the LTI has been increased by an equivalent amount. As
the existing scheme does not provide for an increase in performance
benefits the Board at the AGM will be seeking shareholder approval
of a new LTI scheme which can be applied from 1 July 2018. If this
scheme is not approved the $700,000 will be paid in cash and be
subject to the same awarding and vesting conditions as the proposed
new scheme.
Existing Scheme
For details on the existing scheme refer to section 4.2.
For details on Performance Rights granted to the CEO under the
existing scheme refer to section 4.3
Throughout this Remuneration report, Cromwell has provided
additional commentary around matters on which shareholders
indicated a desire for more transparency.
This includes commentary around application of Board discretion,
explanation of the link between performance and remuneration,
and further disclosure of performance targets and assessment of
achievement of these.
1.2 REMUNERATION OVERVIEW / KEY QUESTIONS
Key questions
Cromwell’s response
Further information
Remuneration in 2018
1. What key changes were
CEO Remuneration
made to the remuneration
structure in 2018?
As noted in Section 1.1 substantial changes have
been made to the weightings and measurement
of the CEO’s remuneration package, please refer
Section 1.1
Change in KMP
Mr L. S. Blitz was appointed a Non-executive Director
on 28 June 2017 and approved by shareholders at the
2017 AGM
Mr R. Foster retired as a Non-executive Director on
29 November 2017.
Mr S. Garing joined the Group on19 December 2017
as Chief Capital Officer.
Mr D. Horton ceased employment following his
resignation on 2 February 2018.
Board and Committee fees
From 1 July 2017, fees and payments to non-
executive Directors have increased by CPI which was
2.1%
Shareholder feedback
-Section 1.0
KMP – Section 3.0
Non- Executive Director
remuneration – Section 5.0
38
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
2. How is the Group’s
performance reflected in
this year’s remuneration
outcomes?
Total Shareholder return in FY18 was 28% (FY17
2%), compared with 13% for both the S&P/ASX 200
A-REIT accumulation index and the S&P/ASX 300
A-REIT accumulation index. Distribution guidance
was met and profit guidance was exceeded. 2018
fixed and total remuneration for the CEO was lower
than 2017, and a significantly greater proportion
of total remuneration was deferred at risk. KMP
remuneration has remained at a level of less than 5%
of operating earnings
3. How do the board set the
performance hurdle for
the STI and LTI?
The performance hurdles for Mr Weighman’s at risk
STI and LTI are set and reviewed by the board.
For the KMP, other than the CEO they are set by the
CEO and reported to the Board.
4. For PRPs that vest, does
Cromwell buy securities
or issue new securities?
Remuneration Framework
5. What is the remuneration
structure for KMP?
Cromwell issues new securities and transfers the
securities to executives.
KMP remuneration comprises fixed pay based
on market conditions, an at-risk cash bonus
(STI) generally paid as cash bonuses and Equity
based compensation (LTI). However, the Board
has determined that apart from the CEO no STI is
currently available for other KMP’s in 2018. This is
under review for FY19.
Link between remuneration
and performance - Section
2.0
Refer Section 4.3
Refer Section 4.4
Refer Section 4.2
Refer Section 2.0 and 4.1
6. Are performance hurdles
required to be achieved for
STI and LTI’s?
Yes, both STI and LTI are subject to performance
hurdles as set by the board and assessed annually.
Refer Section 4.0
7. What portion of the CEO’s
remuneration is at risk?
In 2018 the at-risk portion (STI and LTI) of the CEO’s
remuneration was 61% (In 2017 it was 43%)
Refer Section 4.3
8. Were there any changes
made to total Non-
executive Directors
remuneration pool in
2018?
Short-term incentives (STIs)
No. The maximum amount approved by
securityholders currently stands at $1,000,000, which
has not changed from 2017.
Refer Section 5.0
9. What is the STI for the
CEO?
In 2018, the STI Performance pool available to Mr
Weightman was $900,000 (2017: $1,600,000).
Refer Section 4.3
10. What are the STI
performance measures
that determine if an STI
will vest?
Refer Section 4.3
Mr Weightman achieved or exceeded the
performance targets in 2018 resulting in an award of
94% (2017: 87.5%) or $846,000 (2017: $1,400,000) of
the at-risk cash bonus.
The 2018 performance measures for the CEO’s
STI were:
• 20% linked to outperformance of the forecast
operating profit per stapled security
• 10% to property specific value enhancing
strategies as agreed with the Board
• 60% for the successful development and listing
of the CEREIT
• 10% for achieving employee values and
succession strategies as agreed with the Board
These performance measures are designed to
align behaviours with Cromwell’s key short-term
objectives.
39
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
11. Were any other KMP
eligible for an at risk STI?
No, the STI at risk cash bonus was only available
to the CEO. Performance hurdles are set and
assessed by the board.
Refer Section 4.4
Long-term incentives (LTIs)
12. Did any LTI awards vest in
2018?
Refer Sections 4.3 and 4.4
and summary 6.1
Performance hurdles for equity-based
compensation was in 2017 changed so that
hurdles must now be met in each year (previously
two out of three). The performance period for the
2015 awards vested during 2018. This was based
on the PRPs approved by security holders and
issued in 2015, the performance hurdles of which
are tested annually for 3 years, refer section 4.3.
2,286,364 LTI performance rights were granted to
KMP in 2018.
1,754,947 LTI performance rights vested and were
exercised by KMP in 2018
141,991 LTI performance rights were forfeited by
KMP in 2018
13. What are the performance
measures for the LTI?
The LTI hurdles are based on performance
hurdles tested annually over the 3-year vesting
period.
Refer Section 4.2 and 4.3
Changes to the coming year (FY19)
14. CEO Remuneration
The Remuneration Committee has engaged KPMG
to provide detailed benchmarking of the CEO’s
role and remuneration.
15. Executive Short and Long-
Term incentive scheme
The Remuneration Committee has engaged KPMG
to assist in the redevelopment of the Short and
Long-Term Executive incentive scheme.
16. Board base fees and
committee fees
From 1 July 2018, fees and payments to non-
executive Directors have increased by CPI which
was 1.9%.
1.3 KEY MANAGEMENT PERSONAL
In this report, key management personnel (KMP) are those individuals having the authority and responsibility for planning,
directing and controlling the activities of the Group, either directly or indirectly.
They comprise:
• Non-Executive Directors
• The Executive Director – who is the CEO Paul Weightman
• Other Executives considered KMP
40
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Name
Position / Title
Independent Non-Executive Directors
Geoff Levy
Michelle McKellar
Jane Tongs
Leon Blitz
Marc Wainer
Richard Foster
Non-Independent non-executive Director
Marc Wainer
Andrew Konig
David Blight
Executive Director
Paul Weightman
Other Executives
Michael Wilde
Jodie Clark
Simon Garing
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Full year
Full year
Full year
Full year
Non-executive Director
From 1 June 2018
Non-executive Director
Retired 29 November 2017
Non-executive Director (now
deemed independent)
Full year
Non-executive Director (retired)
Ceased employment 1 June
2018
Non-executive Director
Commenced 1 June 2018
Chief Executive Officer
Full year
Chief Financial Officer
Chief Operations Officer, Property
Licensee
Full year
Full year
Chief Capital Officer
Damian Horton
Head of Property
Commenced 19 December
2017
Ceased employment 2
February 2018
41
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 2. Remuneration Governance
2.1 ROLE OF THE NOMINATION AND REMUNERATION COMMITTEE
The Board has appointed a Nomination and Remuneration Committee (“Committee”). The Committee oversees the
remuneration framework and monitors remuneration outcomes. In doing so it takes account the interests of security
holders and the behaviours that the Group wish to promote.
The Board approves and reviews, on an annual basis the remuneration of Cromwell’s KMP on the recommendation of the
Committee.
During the financial year the members of the Committee were:
Mr G Levy
Ms M McKellar
Mr R Foster
Ms J Tongs
Mr L Blitz
Non-executive Director and Chairman
Non-executive Director
Non-executive Director - retired 29 November 2017
Non-executive Director
Non-executive Director
The Committee operates independently of Cromwell Management and may engage remuneration advisers directly.
Management makes recommendations to the Remuneration Committee in relation to the development and
implementation of reward strategy and structure. The CEO provides his recommendation to the Committee on fixed pay
and incentive outcomes for his direct reports.
Further information on the role and activities of the Committee is available on Cromwell’s website and the Corporate
Governance Statement to be released with the Annual Report.
2.2 SERVICES FROM REMUNERATION CONSULTANTS
During the year the Committee engaged KPMG to provide general advice in relation to the CEO’s remuneration. KPMG did
not provide a remuneration recommendation as defined by Section 9B of the Corporations Act 2001. The Committee has
retained KPMG to advise in the redevelopment of the Short and Long-Term Executive incentive scheme that will be applied
in 2019. KPMG in 2018 has assisted the Board in reviewing the market competitiveness of its remuneration package for
the CEO. The Committee also received information from various professional and industry publications. The Chairman
of the Committee who is also the Chairman of the Board, has consulted directly with a range of proxy advisors and
institutional investors to understand their viewpoint on issues relating to remuneration generally and has discussed with
them the nature and circumstances of Cromwell’s business operations and economic environments in which it operates.
2.3 OBJECTIVE OF REMUNERATION
The objective of the Cromwell remuneration strategy is to support and drive the execution of the Cromwell Strategy which
is to utilise our unique Australian and International Platform to grow value for our Security holders in a sustainable
manner. Cromwell’s remuneration strategy is designed to align behaviours with Cromwell’s strategic objectives.
Cromwell’s remuneration framework makes provision for:
• Fixed remuneration (FR) which is benchmarked to market and which is used as a tool to attract and retain executives
with the skills and experience needed to respond to the challenges of achieving Cromwell’s strategic objectives and
observing Cromwell behaviours and values.
• Short term incentives, where deemed appropriate by the Board, to drive short term objectives such as operational
improvement, cultural transformation and the pursuit of new growth opportunities to position the group to achieve
its strategic objectives. Currently the only KMP to receive a STI is the CEO. We are reviewing applying STI’s to the
broader group of executives together with our remuneration consultant KPMG given the current and changing strategic
objectives of the Group.
• Long-term incentives that are used as both a retention tool and to create alignment between employees and the
objectives of security holders in securing sustainable returns.
Cromwell strives to create an executive remuneration framework that drives a performance culture, ensuring there is a
strong link between executive pay and the achievement of company strategies and value to security holders.
42
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
3. 2018 Performance
Cromwell aims to provide sustainable distributions and to drive growth in the Cromwell security price
This will be achieved by:
• Leveraging our unique International property management platform to grow revenue from funds we manage
• Maintaining and enhancing our Australian secured cash flow generating platform
• Generating value in Australia and the other markets in which we operate from selective asset enhancement initiatives
The IPO and listing of CEREIT marked a significant broadening of the focus and nature of the European business and a
major step forward in securing a stable revenue base for the business.
The success of this strategy is best demonstrated by the change in Assets under Management and a better balance
between short-term mandates and long term stable property management in the European business, as shown in the
table below.
Assets Under Management
Australia
Europe – Short Term
Europe - Stable
New Zealand
$’M
4,705
4,516
4,303
3,922
3,700
$’M
3,905
5,006
5,506
5,884
-
$’M
2,193
-
-
-
-
$’M
681
572
469
325
-
Financial Year
2018
2017
2016
2015
2014
Total
$’M
11,484
10,094
10,278
10,130
3,700
Cromwell’s key financial measures for the last five years are set out below:
2018
2017
2016
2015
2014
Operating earnings per security
8.4 cents
8.7 cents
9.4 cents
8.3 cents
8.5 cents
Change over previous year
(3%)
(8%)
13%
(2%)
12%
Distribution per security
8.3 cents
8.3 cents
8.2 cents
7.9 cents
7.6 cents
Change over previous year
Gearing
Change over previous year
KMP remuneration as % of
operating earnings
Change over previous year
-%
37%
(18%)
3.9%
(13%)
2%
45%
5%
4.5%
50%
4%
43%
(4%)
3.0%
11%
4%
45%
7%
2.7%
(29%)
4%
42%
(9%)
3.8%
(28%)
2016 operating earnings exceeded expectations because of transactional revenue from the one-off performance fees
from Cromwell Box Hill Trust and the opportunistic acquisition of the investment in the Investa Office Fund. When these
items are considered, Cromwell has seen sustained consistent earnings levels from 2014 through to the current financial
year. At the same time, KMP remuneration has remained at a level of less than 5% of operating earnings, which reflects
Cromwell's adherence to a disciplined approach to managing the business for the benefit of securityholders.
43
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Total return of Cromwell securities
The chart below illustrates Cromwell’s performance against the S&P/ASX300 A-REIT Accumulation Index since stapling
in 2006.
Total Securityholder Returns (Annualised)
Cromwell’s Total Securityholder Return (TSR) over the last 1, 3, 5, 10 and 15 years relative to benchmark indices is shown
below.
Other than the 5-year return, Cromwell has consistently outperformed against both indices.
44
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 4. Executive KMP for FY 2018
4.1 SUMMARY OF REMUNERATION ELEMENTS FOR THE CEO AND OTHER KMP
Component
Input
FY 18 - Strategy and Performance Link
•
•
•
To attract, retain and motivate
executives with the right capability and
experience to achieve results in the
geographic regions in which Cromwell
operates or has set strategic objectives.
Reviewed annually by the Board, who
consider performance during the year,
relevant external market data, tenure
and experience.
Cromwell’s approach is to initially set
FR at a level that allows progressive
increases to apply as the individual
performs in their role and becomes
more experienced. This would normally
be benchmarked to the level for
the KMP role the Board considers
appropriate given the experience and
skills of the CEO and the experience and
skills of peers in the comparator set.
Limited to a maximum of $900,000. The 2018
performance measures for the CEO’s STI
were:
20% linked to outperformance of the
operating forecast profit per stapled security
10% to property specific value enhancing
strategies as agreed with the Board
60% for the successful development and
listing of the CEREIT
10% for achieving employee values and
succession strategies as agreed with the
Board
None
A. Fixed
CEO and Other KMP
remuneration
All employees receive a remuneration
package that includes a fixed pay component.
The fixed remuneration comprises cash
salary, superannuation and other salary
sacrificed benefits.
The fixed pay is a set amount to reflect the
role complexity, responsibilities and skill
levels required, with cognisance to the
market.
External input has been obtained from salary
bench marking groups such as Aon Hewitt
and KPMG has been retained to assist the
Remuneration Committee and the Board.
B. At-risk cash
CEO
bonus (short term
incentives)
Short term incentives are generally included
as part of the remuneration package as the
CEO can have a material impact on the key
marginal drivers of operating earnings in any
given financial year.
The Board has determined that currently
this only applies to the CEO. The purpose of
the STI bonus is to focus the CEO’s efforts
on those key marginal drivers and outcomes
that are priorities for Cromwell for the
relevant financial year and to motivate the
CEO to strive and reward him to achieve
stretch performance objectives that assist
the achievement of Cromwell’s strategic
agenda.
Short term incentives are currently paid as
cash bonuses, and once paid there are no
forfeiture provisions.
Other KMP
The Board has determined that no other KMP
other than the CEO should be awarded an STI
as the Board does not wish to encourage risk
taking behaviour.
Review of STI
However, given the growth in geography
and diversity of roles the Board is reviewing
broadening the STI tool to a larger cohort.
The Board has retained KPMG to provide
advice as to whether and how this portion of
remuneration for KMP should be changed in
future years.
45
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT C. At-risk equity
element
CEO
A long-term equity payment aimed at
alignment and retention.
LTI’s are to reward KMP for long-term
performance, encourage security holding
retention and to deliver long-term value
creation for security holders.
Other KMP
Granting of equity-based compensation
to employees considered important to the
longer-term success of Cromwell is to
ensure alignment between these employees
and securityholders and to encourage staff
retention.
D. Total
Remuneration
pay mix
The remuneration mix is designed to reward
KMP for the achievement of both short and
longer-term objectives.
It is important to note the Board via the
Committee retains the discretion to award
equity-based remuneration to employees,
based on the recommendation of the CEO.
This element of remuneration is seen as an
alignment and retention tool by the Board.
46
As Cromwell transitions from a pure yield
producing A-REIT to a more growth aligned
International Property Group the board
believes its CEO should be more aligned to
the long-term value outcomes for security
holders. To enhance this focus, the STI has
been reduced by $700,000 and the LTI has
been increased by an equivalent amount. As
the existing scheme does not provide for an
increase in performance benefits the Board
at the AGM will be seeking shareholder
approval of a new LTI scheme which can be
applied from 1 July 2017.
For further information on the CEO’s current
and proposed LTI refer to sections 1.1 and
4.2.
Two equally weighted measure are used:
1. Achievement of Cromwell Employee
Values - 50%.
Cromwell sees its culture and values as an
essential element to its success, especially
considering it is integrating a large European
business and spreading its geographical
reach. Ensuring cultural alignment with
Cromwell’s deeply ingrained values is critical
to ensure behaviour and processes across
Cromwell are appropriate and consistent.
Measurement:
All staff are reviewed on how well they
demonstrate Cromwell’s Employee Values as
part of their annual performance review.
2. Meeting key performance indicators
(KPIs) - 50%.
KPIs for each KMP consider their role
within Cromwell generally as well as their
expected contribution to the achievement
of Cromwell’s objectives. The KPIs are
designed to best incentivise each KMP to
meet Cromwell’s objectives and therefore
best serve the interests of securityholders.
Section 4.4 details the 2018 KPI’s.
Measurement:
Although the specific KPIs for each of the
KMP is different each KMP’s performance is
assessed according to a traditional balanced
scorecard methodology. The balanced
scorecard methodology assigns performance
and responsibility criteria across four broad
categories. Weightings and details of each
of these categories are detailed in the next
section.
Section 4.2 provides details on the current
rights scheme.
This aligns executive and securityholder
experiences through achievement of strategic
objectives and securityholder ownership.
As shown in the diagrams below a significant
component of the Executive Remuneration
is linked to short and long-term company
performance to assist in aligning executive’s
interest with those of securityholders. The
relative weighting of the fixed and at-risk
components of the total target remuneration
for executive KMP’s are detailed below. A
higher portion of the CEO remuneration is at
risk as he has the greatest scope to influence
Cromwell’s long-term performance.
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Total Target Remuneration Mix
CEO PROPOSED REMUMERATION
OTHER KMP REMUMERATION
4.2
LTI EQUITY BASED COMPENSATION PRINCIPALS AND APPLICATION – EXISTING AND PROPOSED
Component
Details of the Equity scheme operating in FY2018
Overview
Participating employees are offered performance rights issued under Cromwell’s performance
rights plan (PRP) to fund the acquisition of stapled securities in Cromwell.
Under the PRP, if performance rights vest they allow eligible employees to obtain stapled
securities at a discount to market value. The discount is taken into account when determining
the value to be issued to a participating employee.
As stated earlier, the Board, together with KPMG remuneration specialists, is reviewing details
for a proposed new Equity Scheme to apply from 1 July 2018.
General criteria that
must be met before
any PRP can be
awarded
The following general criteria must be met by any employee before they can be considered
eligible for the exercise of any performance rights:
• Must remain in employment with Cromwell from the date of issue until the commencement
of the exercise period;
Meet any prescribed Cromwell Employee values;
•
• Meet key performance indicators – these are described separately below under the
headings:
•
•
Granted in 2018 to the CEO; and
Application to Cromwell other KMP and employees
Granting
Granted in 2018
to the CEO
Each year the Board (on recommendation from the Committee) considers whether to grant
equity-based compensation to the CEO and, if so, to what value.
Each year the Committee delegates authority to the CEO to determine which employees will
receive equity-based compensation at the end of each financial year and, if so, to what value. The
Committee considers and, if appropriate, ratifies the Chief Executive Officer’s determination.
In determining the total value of equity-based compensation to be granted in any one year the
performance of Cromwell is considered. This involves an assessment of whether Cromwell has
met its objectives, including a review of Cromwell’s key financial measures.
As a result of his performance in 2017, the CEO was granted 1,832,200 performance rights
during 2018 under the existing PRP scheme.
For the CEO, the Long-Term Incentive (LTI) (whether paid as performance rights or under the
proposed new LTI performance scheme) is set by the board and approved by securityholders.
For the CEO, the annual grant of performance rights all have three-year vesting terms. For the
CEO, the grant requires the passing of annual performance hurdles set by the Board.
47
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Application to other
Cromwell KMP and
employees
For other KMP, the grant of performance rights requires the passing of tailored annual
performance hurdles set by the CEO. All performance rights have a three-year vesting period.
Once a value had been allocated, the participating employee is given the option of participation in
the PRP.
The actual number of performance rights granted to the participating employee is determined by
dividing the total value awarded to that employee by the fair value of each performance right at
grant date.
Once performance rights are granted, the participating employees will need to meet
performance hurdles before they vest and remain employed by Cromwell through to the end of
the vesting period. The general vesting criteria is summarised below:
•
•
If granted prior to 30 June 2016, performance rights will vest if an employee achieves 70%
or greater of their KPIs in two out of the three years comprising the vesting period.;
If granted after 1 July 2016, performance rights will vest if an employee achieves 70% or
greater of their KPIs in each of the three years comprising the vesting period. If a KMP fails
to meet the required hurdle in any given year then not only will they not be awarded any
equity-based compensation for that year, but all unvested equity-based compensation will
be forfeited.
The maximum value of performance rights to be allocated to any employee in any given year,
other than the CEO, is generally limited to 25% of their fixed pay
Fair Value
The fair value at grant date for performance rights is determined using a Black-Scholes option
pricing model that considers the following:
•
•
•
•
•
•
•
the exercise price (including the discount to market value at grant date);
the term of the performance right;
the security price at grant date;
the 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.
Since grants under the PRP are made in value terms, the lower the exercise price the
lower the number of performance rights granted and, therefore, the lower the number of
securities that may be issued
•
The valuation of performance rights is discussed in more detail in section (G) below
Award Process
The process to determine if an actual award will be made to a participating employee is
summarised below:
Year 0 Annual Performance review. If annual review score >70%, review next year. If <70%, No
equity awarded.
Year 0 Equity Award. Annual Review score x 25% x Year 0 Fixed Pay.
Year 1 Annual Performance review. If annual review score >70%, review next year. If <70%, equity
award forfeited.
Year 2 Annual Performance review. If annual review score >70%, review next year. If <70%, equity
award forfeited.
Year 3 Annual Performance review. If annual review score >70%, Equity Awards vest. If <70%,
equity award forfeited.
48
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 4.3 TOTAL CEO REMUNERATION PACKAGE POSSIBLE AND ACTUAL ACHIEVEMENT
The total remuneration packages of the Chief Executive Officer for the last three years comprised the following
components:
Financial year
Fixed pay
$
$
Mr P Weightman
2018 – achieved
2018 – min
Possible
2018 - max
possible
2017 – achieved
2017 – min possible
2017 – max possible
2016 – achieved
2016 – min possible
2016 – max possible
1,500,000
(53%)
1,500,000
(100%)
1,500,000
(38%)
1,600,000
(46%)
1,600,000
(100%)
1,600,000
(40%)
1,350,000
(55%)
1,350,000
(100%)
1,350,000
(46%)
STI At-risk cash
bonus
LTI – Cash and
Equity based
compensation
$
846,000
(30%)
0
(0%)
900,000
(23%)
1,400,000
(40%)
0
(0%)
1,600,000
(40%)
700,000
(29%)
0
(0%)
800,000
(27%)
$
471,532
(17%)
0
(0%)
1,500,000
(39%)
481,166
(14%)
0
(0%)
800,000
(20%)
385,063
(16%)
0
(0%)
800,000
(27%)
Total
$
2,817,532
1,500,000
3,900,000
3,481,166
1,600,000
4,000,000
2,435,063
1,350,000
2,950,000
For a detailed discussion on the changes to the CEO’s remuneration refer to section 1.1.
The Board’s assessment of CEO STI performance against key marginal drivers and outcomes for 2018 is provided in the
following table:
Key Marginal Driver – 2018
Commentary
Earnings per security
Value enhancing specific
property strategies as agreed
with the Board
Successful development and
listing of CEREIT
Achieving employee value
and succession strategies as
agreed with the Board
Actual operating EPS of 8.35 cps
versus guidance of 8.25cps
Determined by the release of value
achieved by the agreed strategies
Overall
Rating
Exceeded
70%
Achieved on 29 November 2017
Achieved
Listing of the CEREIT fundamental
to the international strategy of
Cromwell
Successfully implemented leadership
and restructuring changes in Europe.
70%
Achieved internal management
restructure.
Succession planning still under
development.
Total %
Total $
The Board assessment of the CEO LTI performance against success drivers
%
Possible
%
Achieved
20
10
60
10
100
70
100
70
100
94
$900,000
$846,000
49
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Year of
Performance
LTI vesting
period
2017
16 Feb 2018 -
30 Sep 2020
2016
16 Dec 2016 -
1 Jan 2020
2015
11 Dec 2015 -
10 Oct 2018
Performance measures and hurdles
KPI %
Maximum
Possible
Grant
Actual
Number
Granted
75%
2,442,933
1,832,200
87.5%
3,186,886
2,788,525
100%
1,254,530
1,254,530
In FY17 LTI’s were awarded on the
same basis of assessment against KPIs
as the KPIs for STI’s. In the year the
CEO achieved 75% of his KPIs and was
allocated performance rights on this
basis.
To vest the annual hurdles in each year
of the option period must met. The
hurdles were met in 2018. Results for
2019 and 2020 are still to occur.
In FY16 LTI’s were awarded on the same
basis as STI’s. In this year the CEO
achieved 87.5% of the STI’s and was
awarded LTI performance rights on this
basis.
To vest must meet 70% of annual
hurdles in two out of the three years
comprising the vesting period. Has met
hurdles in 2017 and 2018 – therefore
these will vest if the CEO meets standard
vesting conditions as at the final vesting
date on the 30 June 2019.
In FY 2015 LTI’s were awarded on the
same basis as STI’s. In this year the
CEO achieved 100% of the STI’s and was
awarded LTI performance rights on this
basis.
To vest must meet 70% of annual hurdles
in two out of the three years comprising
the vesting period. This hurdle has been
achieved.
4.4 LTI PERFORMANCE MEASURES FOR KMP OTHER THAN THE CEO
The weightings of each of the four balanced scorecard categories for any individual are set and assessed in consideration
of their role, qualifications and experience. However, generally the weightings will be within the bands set out below:
Measure
Weighting
Measure
1) Financial measures
40% - 70%
Includes both the performance of Cromwell and the employees’
business unit. Cromwell focuses on maintaining individual
securityholder alignment by using operating earnings per security
as the major financial metric. Other financial metrics, and the 2018
outcome are included in the Financial Measures table below.
2)
Internal Business
measures
10% - 30%
Concentrate on improvement of people, systems and processes to
create efficiency and accuracy to support long term business growth.
The processes emphasise adherence to governance requirements.
3) Customer measures
10% - 30%
Cromwell 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.
4)
Innovation and learning
measures
10% - 30%
Focuses on the growth of individuals, departments and corporate
culture to innovate and extend current capabilities throughout
Cromwell.
50
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Other Financial Measures:
Other financial metrics for 2017 and 2018 included but are not limited to the following:
Metric
Required outcome
FY18 Outcome
Distribution per security
Sustainable growth in distributions per security.
Distributions per security remained
steady at 8.34cps
Gearing
2018 target of between 40% - 50%.
Gearing at 37%
Look through gearing at 42%
Debt terms
Mitigate debt risks by maintaining 12 months
minimum expiry profile of debt.
Debt terms successfully extended out to
5.2 years.
Earliest expiry is 2020
Interest rates
Long term net
operating income
growth
Maintain interest rate hedging profile
that provides a high degree of certainty of
distributions for 2 years.
Successful execution of 3-year hedging
programme with $690 million of swaps
and caps
Achieve like for like net operating income
growth that supports earnings and distribution
targets, noting in some years investment is
required at the expense of short term growth to
secure long term growth.
Entire like for like net operating income
growth of 1.4%. Core portfolio growth
of 4.6%
Lease expiries
Focus on lease expiries in core portfolio and
maintain vacancy rates at set targets.
Core portfolio occupancy level at 99.9%
Portfolio management
Meet agreed maintenance / lifecycle capex
targets.
Active portfolio
Execute asset management plans for active
portfolio.
Funds management
Successfully promote and launch new funds and
maintain performance of current open retail
funds.
Achieved
Achieved
Achieved
Cash reserves
Maximise returns from cash reserves.
Achieved
LTI performance rights issued for KMP other than the CEO
Year of Performance
LTI vesting period
Michael Wilde - Chief Financial Officer
KPI %
Achieved
Maximum
Possible
Grant
Actual
Number
Granted
2017
2016
2015
Jodie Clark – Chief Operations Officer
2017
2016
2015
16 Feb 2018 – 30 Sep 2020
19 Oct 2016 – 30 Nov 2019
2 Nov 2015 – 2 Dec 2018
100%
88%
100%
16 Feb 2018 – 30 Sep 2020
100%
19 Oct 2016 – 30 Nov 2019
2 Nov 2015 – 2 Dec 2018
96%
94%
218,852
147,907
95,908
235,312
152,803
116,135
218,852
130,158
95,908
235,312
146,996
108,696
Damian Horton – Head of Property till 2 Feb 2018
2017
16 Feb 2018 – 30 Sep 2020
80%
177,515
141,991
Simon Garing (Chief Capital Officer) has not met the minimum term of employment to be eligible for a LTI.
51
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 5. Non-executive Directors remuneration
5.1 BOARD REMUNERATION STRUCTURE
Fees and payments to Non-Executive Directors reflect the market in line with 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 to be divided among the Non-Executive Directors in such a proportion and manner as they agree. Fees are set so
that:
• Cromwell non-executive Directors are remunerated fairly for their services, recognising the workload, and level of
skills and experience required for the role;
• Cromwell can attract and retain talented non-executive Directors; and
• Fees are in line with market practice.
5.2 TOTAL REMUNERATION FOR NON-EXECUTIVE DIRECTORS
Non-Executive Directors are paid a fixed remuneration, comprising base and committee 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 (1)
Nomination & Remuneration Committee – Member
Investment Committee
2018
$
2017
$
216,084
211,640
99,282
20,216
13,476
N/A
5,615
-
97,240
19,800
13,200
N/A
5,500
-
(1) Mr G Levy has never received a fee or salary for being the Chairman of the Nomination & Remuneration Committee.
In accordance with the Board policy to maintain Directors fees by CPI and consistent with prior years, from 1 July 2018,
fees and payments to Non-Executive Directors have been increased by CPI which was 1.9%.
52
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 6. Remuneration and Conditions of employment of the KMP
6.1 CASH AND AT-RISK BONUSES EXPENSED OR ACCRUED IN 2018
The table below outlines the cash remuneration and at-risk cash bonus received as well as the value of equity-based
compensation that were expensed during the year in accordance with applicable statutory accounting rules.
Short-term
Post-
employment
Long-term
Security based
payments
Salary (7) and
fees
Non-
monetary
benefits
At-risk
cash
bonus
Total short
term
Super-
annuation
Long service
leave
Equity based
compensation
$
$
$
$
$
Non-executive directors:
G Levy
M McKeller
R Foster (1)
J Tongs
M Wainer
A Konig (2)
L Blitz (3)
D Blight (4)
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
197,259
193,164
118,326
115,882
47,396
105,828
114,214
111,856
99,243
97,182
93,515
97,182
109,362
-
5,580
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
197,259
193,164
118,326
115,882
47,396
105,828
114,214
111,856
99.243
97,182
93,515
97,182
109,362
-
5,580
-
Executive management group (EMG):
P Weightman
M Wilde
J Clark
S Garing (5)
D Horton (6)
Total
remuneration
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
1,567,888
29,994
846,000
2,443,882
1,792,418
15,600
1,400,000
3,208,018
704,471
704,021
705,333
736,297
389,441
-
322.424
490,272
4,474,452
22,148
15,600
29,105
15,600
-
-
14,568
18,500
95,815
-
-
-
-
-
-
-
726,619
719,621
734,438
751,897
389.441
-
336,992
508,772
846,000
5,416,267
4,444,102
65,300
1,400,000
5,909,402
(1) Mr Foster resigned on 29 November 2017.
(2) Mr Konig resigned on 1 June 2018.
(3) Mr Blitz was appointed on 28 June 2017.
(4) Mr Blight was appointed on 1 June 2018.
(5) Mr Garing was appointed on 19 December 2017
(6) Mr Horton resigned on 2 February 2018.
(7)
Includes any change in accruals for annual leave.
18,677
18,351
-
-
4,504
10,054
10,850
10,626
-
-
-
-
-
-
530
-
20,049
19,616
20,049
19,616
20,049
19,616
10,024
-
15,037
19,616
119.769
117.495
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
220
84,188
14,904
59,914
15,243
54,979
6,401
-
(7,111)
4,292
29,657
203,373
471.532
481,166
80,359
61,076
91,481
80,366
-
-
(22,094)
22,094
621,278
644,702
Total
Total
performance
related
$
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
45%
50%
10%
7%
11%
9%
0%
-
-
4%
215,936
211,515
118,326
115,882
51,900
115,882
125,064
122,482
99,243
97,182
93,515
97,182
109,362
-
6,110
-
2,935.683
3,792,988
841,931
860,227
861,211
906,858
405,866
-
322,824
554,774
6.186,971
6,874,972
During 2017 the remuneration of Ms Clark and Mr Wilde was increased to bring them in line with industry norms. The
board has determined that neither the COO or CFO will be eligible for STI’s, as their roles are not transactional in nature
and the Board did not want to encourage risk taking in these roles. When setting remuneration levels for both Ms Clark
and Mr Wilde a discount was applied to the STI’s in the peer group to reflect the non-deferred or risk contingent nature of
the payments versus peers.
53
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 6.2 SUMMARY DETAILS OF REMUNERATION: AT RISK BONUSES FOR THE CEO AND OTHER EXECUTIVES KMP
For each at-risk cash bonus and grant of performance rights options (equity-based compensation) included in the tables
above, the percentage of the available at-risk cash bonus paid, or equity-based compensation that vested, during the year
and the percentage that was forfeited because the person did not meet the service and performance criteria is set out
below.
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.
At-risk cash bonus
Equity based compensation
Cash bonus
paid
Cash bonus
forfeited
Years options
granted
Options vested
in 2018
%
%
P Weightman
94.0%
12.5%
2016/17/18
M Wilde
J Clark
-
-
-
-
2016/17/18
2016/17/18
(1) Related to performance rights issued in 2014.
%
100%(1)
100%(1)
100%(1)
Options
forfeited in
2018
%
Years options
may vest
Maximum
value of grant
to vest
-
-
-
2019/20/21
2019/20/21
2019/20/21
$
776,874
189,349
206,186
In 2017, the CEO had 12.5% ($200,000) of his STI deferred into 2018 pending the successful conclusion of transactions still
ongoing at 30 June 2017. These were successfully completed in 2018 and the amount was paid in full.
6.3 EQUITY BASED COMPENSATION FOR THE CEO AND OTHER KMP
Details of the PRP are set out in part 4.2 of the remuneration report.
All Executive Directors and employees of Cromwell 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
Expiry date
Exercise price
No of performance
rights granted
Assessed value per right
at grant date
02-Nov-2015
02-Dec-2018
11-Dec-2015
10-Oct-2018
19-Oct-2016
30-Nov-2019
16-Dec-2016
01-Jan-2020
16-Feb-2018
16-Feb-2018
30-Sep-2020
30-Sep-2020
-
$0.50
-
$0.50
-
$0.50
204,604
1,254,530
419,145
2,788,525
454,164
1,832,200
78.2¢
35.9¢
67.6¢
22.0¢
75.9¢
28.8¢
Details of changes during the 2018 year in performance rights on issue to Key Management Personnel under the PRP are
set out below.
54
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Opening
balance
Granted
Exercised
Forfeited
Lapsed
P Weightman
5,483,832
1,832,200 (1)
(1,440,777) (4)
M Wilde
J Clark
D Horton
276,893
519,035
141,991
218,852 (2)
(50,827) (5)
235,312 (3)
(263,343) (6)
-
-
(141,991) (7)
-
-
-
6,421,751
2,286,364
(1,754,947)
(141,991)
(1) The value at grant date was $526,941
(2) The value at grant date was $166,196.
(3) The value at grant date was $178,696.
(4) The value at grant date was $410,344. The value at exercise date was $662,757. Exercise price was fully paid.
(5) The value at grant date was $37,799. The value at exercise date was $48,793. Exercise price was fully paid.
(6) The value at grant date was $75,002. The value at exercise date was $121,138. Exercise price was fully paid
(7) All performance rights forfeited were granted in 2017
-
-
-
-
-
Closing
balance
5,875,255
444,918
491,004
-
6,811,177
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 section 6.1 of the remuneration report.
A total of 3,961,001 performance rights were granted during 2018 (2017: 5,062,046) of which 2,286,364 (2017: 3,207,670)
were issued to Key Management Personnel. The model inputs for performance rights granted during the 2018 year are
disclosed in note 19.
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 2018 no performance rights on issue had vested.
6.4 EMPLOYMENT CONTRACTS AND TERMINATION PROVISIONS
Paul Weightman (CEO)
Remuneration and other terms of employment for the Chief Executive Officer are formalised in an employment
agreement. Cromwell may terminate the agreement without notice for gross misconduct; otherwise, Cromwell
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, of $1,520,049, to be reviewed annually by the remuneration committee. The
Remuneration Committee has commissioned KPMG to review the STI package for the CEO.
• Performance cash bonus of up to $900,000 with KPI targets to be reviewed annually by the remuneration committee.
• The Remuneration Committee has commissioned KPMG to review the LTI scheme with the view of recommending a
new scheme for approval at the 2018 AGM.
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
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
All other key management personnel
Notice period
employee
Notice period
Cromwell
6 months
6 months
1–3 months
1– 3 months
55
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 6.5 SECURITY HOLDINGS
The number of stapled securities in Cromwell held during the year by key management personnel of Cromwell, including
their personally related parties are as follows:
Balance at 1
July
Performance
rights
exercised
Net purchases
(sales)
Balance at 30 June
Non-executive directors:
Mr G Levy (AO)
Ms M McKellar
Mr M Wainer (1)
Ms J Tongs
Mr L Blitz
Mr D Blight (2)
3,250,000
850,965
-
172,000
-
-
-
-
-
-
-
-
Executive Management Group (EMG):
Mr Paul Weightman
21,119,821
1,440,777
Mr M Wilde
Ms J Clark
Mr S Garing
Mr D Horton
177,801
236,961
-
-
50,827
263,343
-
-
79,195
31,678
-
85,678
-
-
31,678
-
(258,064)
-
-
3,329,195
882,643
-
257,678
-
-
22,592,276
228,628
242,240
-
-
25,807,548
1,754,947
(29,835)
27,532,660
(1) Mr Wainer is a Director of Redefine Properties Limited which indirectly owns Redefine Australia Investments Limited, which owns 60,000,000 (2017:
446,538,850) stapled securities in Cromwell.
(2) Mr Blight is a Director of ARA Australia which is an associate of ARA Real Estate Investors Pte Ltd, which owns 386,538,850 (2017: nil) stapled securities
in Cromwell.
6.6 LOANS TO KEY MANAGEMENT PERSONNEL
Cromwell has provided loans to Mr P Weightman, a Director of the Company, for the exercise of his employee options
under Cromwell’s Performance Rights Plan. Each loan term is three years, limited recourse and interest free. The
outstanding balance at balance date was $1,825,152 (2017: $1,545,024).
6.7 OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Cromwell rents an apartment, located at 185 Macquarie Street, Sydney, which is owned by Mr P Weightman, a Director
of the Company. Total rent paid during 2018 was $114,396 (2017: $99,840). At balance date an amount of $9,533 (2017:
$8,320) was payable. The payment of rent is on normal commercial terms and conditions and at market rates.
End of Remuneration Report
The Directors’ Report, including the Remuneration Report, is signed in accordance with a resolution of the Directors.
PL Weightman
Director
Dated this 22nd day of August 2018
56
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
The Directors
Cromwell Corporation Limited and
Cromwell Property Securities as Responsible
Entity for Cromwell Diversified Property Trust
Level 19
200 Mary Street
BRISBANE QLD 4000
Auditor’s Independence Declaration
As lead auditor for the audit of Cromwell Corporation Limited and Cromwell Diversified
Property Trust for the year ended 30 June 2018, I declare that, to the best of my
knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of APES 110 Code of Ethics for Professional Accountants.
This declaration is in respect of 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
N BATTERS
Partner
Brisbane, Queensland
22 August 2018
57
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Consolidated Income Statements
FOR THE YEAR ENDED 30 JUNE 2018
Continuing operations
Revenue
Rental income and recoverable outgoings
Funds management fees
Share of profit of equity accounted investments
Interest
Distributions
Other revenue
Total revenue
Other income
Fair value net gain from:
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Gain on sale of listed securities
Gain on sale of other assets
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
Amortisation and depreciation
Loss on sale of investment properties
Fair value net loss from:
Derivative financial instruments
Investments at fair value through profit or loss
Other transaction costs
Decrease in recoverable amounts
Net foreign currency losses
Total expenses
Profit before income tax
Income tax expense
Profit for the year from continuing operations
Discontinued operations
Net profit after tax from discontinued operation
Profit for the year
Profit for the year is attributable to:
Company shareholders
Trust unitholders
Non-controlling interests
Profit for the year
Earnings per security
Basic earnings per company share/trust unit (cents)
Diluted earnings per company share/trust unit (cents)
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
Cromwell
Trust
Notes
2018
$M
2017
$M
2018
$M
2017
$M
209.6
99.1
125.1
6.5
5.5
0.9
446.7
77.4
-
-
15.7
-
539.8
34.6
2.8
0.6
79.5
69.7
33.4
4.4
5.0
13.7
3.5
5.7
76.1
3.2
332.2
207.6
5.0
202.6
1.5
204.1
204.1
(83.9)
288.0
-
204.1
5(b)
8(b)
21
5(c)
4(a)
15
199.8
97.3
7.8
1.5
14.2
0.2
320.8
125.0
17.1
14.2
-
0.9
478.0
36.2
4.5
0.2
57.3
64.8
27.7
6.8
0.9
-
-
-
0.2
0.7
199.3
278.7
1.5
277.2
0.3
277.5
277.5
16.5
261.0
-
277.5
210.0
-
121.5
9.6
0.1
0.1
341.3
77.4
-
0.1
15.7
-
434.5
39.8
-
-
61.2
-
18.1
-
5.0
16.1
-
3.1
-
1.9
145.2
289.3
2.6
286.7
1.7
288.4
288.4
-
288.0
0.4
288.4
200.1
-
2.4
4.2
12.3
-
219.0
125.0
10.2
6.6
-
10.6
371.4
41.8
-
-
54.4
-
13.1
-
0.9
-
-
-
-
0.1
110.3
261.1
0.3
260.8
0.3
261.1
261.1
-
261.0
0.1
261.1
3(a)
3(a)
3(b)
3(b)
(4.47¢)
(4.47¢)
10.89¢
10.85¢
0.94¢
0.93¢
15.78¢
15.74¢
15.38¢
15.34¢
14.86¢
14.81¢
The above consolidated income statements should be read in conjunction with the accompanying notes.
58
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Consolidated Statements of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2018
Cromwell
Trust
2018
$M
2017
$M
2018
$M
2017
$M
Profit for the year
204.1
277.5
288.4
261.1
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Income tax relating to this item
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income is attributable to:
Company shareholders
Trust unitholders
Non-controlling interests
Total comprehensive income
0.3
-
0.3
204.4
(79.0)
283.4
-
204.4
(0.3)
-
(0.3)
277.2
15.7
261.5
-
277.2
(4.6)
-
(4.6)
283.8
-
283.3
0.5
283.8
1.1
-
1.1
262.2
-
261.6
0.6
262.2
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
59
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Consolidated Balance Sheets
AS AT 30 JUNE 2018
Current assets
Cash and cash equivalents
Receivables
Other financial assets
Derivative financial instruments
Inventories
Current tax assets
Other current assets
Investment property classified as held for sale
Assets of disposal group held for sale
Total current assets
Non-current assets
Investment property
Equity accounted investments
Investments at fair value through profit or loss
Derivative financial instruments
Receivables
Intangible assets
Property, plant and equipment
Inventories
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Dividends/distributions payable
Borrowings
Derivative financial instruments
Provisions
Current tax liability
Unearned income
Liabilities of disposal group held for sale
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other reserves
Retained earnings / (accumulated losses)
Equity attributable to shareholders / unitholders
Non-controlling interests
Trust unitholders
Non-controlling interests
Total equity
Notes
16(a)
16(b)
9
5
15
5
6
7
9
16(a)
17
4(c)
16(c)
8
9
15
8
9
4(c)
10
11
Cromwell
2018
$M
2017
$M
Trust
2018
$M
204.6
38.1
-
0.1
5.8
2.4
5.4
256.4
0.9
-
257.3
2,451.1
702.4
33.0
1.7
5.9
2.3
3.5
7.4
1.7
3,209.0
3,466.3
52.3
41.4
-
37.0
4.6
0.9
5.8
142.0
-
142.0
1,412.0
0.7
0.4
9.7
1,422.8
1,564.8
1,901.5
118.9
24.3
(196.8)
(53.6)
1,955.1
-
1,901.5
66.9
35.0
20.0
-
-
1.2
4.5
127.6
69.5
354.0
551.1
2,357.8
101.5
315.8
0.1
2.4
72.3
3.5
3.0
3.4
2,859.8
3,410.9
46.4
36.7
188.2
3.2
4.0
1.7
8.1
288.3
207.2
495.5
1,274.2
-
0.4
0.9
1,275.5
1,771.0
1,639.9
106.9
18.2
(112.9)
12.2
1,627.7
-
1,639.9
137.6
13.8
-
0.1
-
-
1.7
153.2
0.9
-
154.1
2,451.1
669.3
1.3
1.7
170.1
-
-
-
-
3,293.5
3,447.6
17.3
41.4
-
37.0
-
-
5.7
101.4
-
101.4
1,412.4
0.7
-
9.7
1,422.8
1,524.2
1,923.4
1,496.3
(2.4)
423.2
1,917.1
-
6.3
1,923.4
2017
$M
32.1
18.8
-
-
-
-
1.6
52.5
69.5
354.0
476.0
2,357.8
85.3
266.3
0.1
159.4
-
-
-
0.3
2,869.2
3,345.2
23.4
36.8
188.2
0.8
-
0.5
7.1
256.8
207.2
464.0
1,285.6
-
-
-
1,285.6
1,749.6
1,595.6
1,295.2
2.3
292.3
1,589.8
-
5.8
1,595.6
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
60
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2018
Cromwell
Attributable to Equity Holders of the Company
Contributed
equity
Other
reserves
Accumulated
losses
30 June 2018
Notes
Balance at 1 July 2017
(Loss) / profit for the year
Other comprehensive income
Total comprehensive income
$M
106.9
-
-
-
$M
18.2
-
4.9
4.9
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of
transaction costs
Dividends / distributions paid /
payable
12.0
10
2
-
-
-
Employee performance rights
Total transactions with equity
holders
Balance as at 30 June 2018
-
12.0
118.9
1.2
1.2
30 June 2017
Notes
Balance at 1 July 2016
Profit for the year
Other comprehensive income
Total comprehensive income
$M
106.5
-
-
-
$M
17.9
-
(0.8)
(0.8)
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of
transaction costs
Dividends / distributions paid /
payable
10
2
Employee performance rights
Total transactions with equity
holders
Balance as at 30 June 2017
0.4
-
-
0.4
106.9
-
-
1.1
1.1
18.2
Non-
controlling
interests
(Trust)
$M
Total
equity
$M
1,627.7
1,639.9
Total
$M
12.2
$M
(112.9)
(83.9)
(83.9)
288.0
204.1
-
4.9
(4.6)
0.3
(83.9)
(79.0)
283.4
204.4
-
-
-
-
12.0
201.1
213.1
-
1.2
13.2
(157.1)
(157.1)
-
44.0
1.2
57.2
Non-
controlling
interests
(Trust)
Total equity
$M
$M
1,505.2
1,500.2
261.0
277.5
0.5
(0.3)
261.5
277.2
7.7
8.1
(146.7)
(146.7)
-
1.1
(139.0)
(137.5)
$M
(129.4)
16.5
-
16.5
-
-
-
-
$M
(5.0)
16.5
(0.8)
15.7
0.4
-
1.1
1.5
(112.9)
12.2
1,627.7
1,639.9
24.3
(196.8)
(53.6)
1,955.1
1,901.5
Attributable to Equity Holders of the Company
Contributed
equity
Other
reserves
Accumulated
losses
Total
The above consolidated statements of changes in equity should be read in conjunction with accompanying notes.
61
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Consolidated Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2018
Trust
Attributable to Equity Holders of the CDPT
Contributed
equity
Other
reserves
Retained
earnings
Total
Non-
controlling
interests
30 June 2018
Notes
$M
Balance at 1 July 2017
1,295.2
Profit for the year
Other comprehensive income
Total comprehensive income
-
-
-
$M
2.3
-
(4.7)
(4.7)
$M
$M
292.3
1,589.8
288.0
288.0
-
(4.7)
288.0
283.3
$M
5.8
0.4
0.1
0.5
Total
equity
$M
1,595.6
288.4
(4.6)
283.8
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net
of transaction costs
Distributions paid / payable
Total transactions with
equity holders
Balance as at 30 June 2018
10
2
201.1
-
201.1
1,496.3
-
-
-
-
201.1
(157.1)
(157.1)
(157.1)
44.0
-
-
-
201.1
(157.1)
44.0
(2.4)
423.2
1,917.1
6.3
1,923.4
Attributable to Equity Holders of the CDPT
Contributed
equity
Other
reserves
Accumulated
losses
30 June 2017
Notes
Balance at 1 July 2016
Profit for the year
Other comprehensive
income
Total comprehensive
income
Transactions with
equity holders in their
capacity as equity
holders:
Contributions
of equity, net of
transaction costs
Distributions paid /
payable
Total transactions with
equity holders
Balance as at 30 June
2017
10
2
$M
1,287.5
-
-
-
7.7
-
7.7
$M
1.7
-
0.6
0.6
-
-
-
Total
$M
$M
178.0
1,467.2
261.0
261.0
-
0.6
261.0
261.6
-
7.7
(146.7)
(146.7)
(146.7)
(139.0)
Non-
controlling
interests
Total equity
$M
5.2
0.1
0.5
0.6
-
-
-
$M
1,472.4
261.1
1.1
262.2
7.7
(146.7)
(139.0)
1,295.2
2.3
292.3
1,589.8
5.8
1,595.6
The above consolidated statements of changes in equity should be read in conjunction with accompanying notes.
62
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Consolidated Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2018
Cromwell
Trust
Cash flows from operating activities
Receipts in the course of operations
Payments in the course of operations
Interest received
Distributions received
Finance costs paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for investment properties
Proceeds from sale of investment properties
Payments for equity accounted investments
Payments for investments at fair value through profit or
loss
Proceeds from sale of investments at fair value through
profit or loss
Receipt of capital return distributions from investments
at fair value through profit or loss
Payments for intangible assets
Payments for property, plant and equipment
Loans to related entities and directors
Proceeds from repayment of related party loans
Transfer from restricted funds
Payment for acquisition of disposal group
Finance costs paid attributable to disposal group / other
assets
Payments for other transaction costs
Net cash provided by / (used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of other borrowings
Payment of loan transaction costs
Proceeds from issue of stapled securities
Payment of dividends / distributions
Payment of equity issue transaction costs
Payments for settlement of derivative financial
instruments
Net cash (used in) / provided by financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate changes on cash and cash
equivalents
Cash and cash equivalents at 30 June
Note
18
2018
$M
320.6
(168.3)
6.3
12.7
(46.6)
(3.8)
120.9
(104.1)
153.7
(343.4)
-
292.8
6.8
(1.8)
(1.2)
(3.4)
-
20.0
-
(2.1)
(5.7)
11.6
1,719.4
(1,765.0)
-
(17.0)
206.1
(144.3)
(1.1)
(3.9)
(5.8)
126.7
66.9
11.0
204.6
2017
$M
342.0
(154.4)
2.1
24.6
(55.4)
(4.6)
154.3
(139.3)
89.0
(17.9)
(16.3)
-
9.0
(0.4)
(1.3)
(1.3)
1.2
34.0
(145.6)
-
(0.8)
(189.7)
302.7
(95.6)
(5.5)
(0.3)
1.1
(139.9)
-
(2.6)
59.9
24.5
41.6
0.8
66.9
2018
$M
235.8
(79.9)
7.3
7.3
(46.5)
(0.5)
123.5
(104.1)
153.7
(334.9)
-
280.8
-
-
-
(10.7)
-
-
-
(2.1)
(3.0)
(20.3)
1,719.4
(1,765.0)
-
(17.0)
194.3
(144.7)
(1.0)
(3.9)
(17.9)
85.3
32.1
20.2
137.6
2017
$M
235.1
(79.1)
1.9
19.8
(51.9)
(0.1)
125.7
(139.3)
89.0
(16.5)
-
-
-
-
-
(16.7)
32.4
-
(145.6)
-
(0.8)
(197.5)
302.7
(95.6)
-
(0.3)
1.0
(140.6)
-
(2.6)
64.6
(7.2)
39.2
0.1
32.1
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
63
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2018
About this report
Cromwell Property Group (“Cromwell”) 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 Cromwell and the Trust have been presented jointly in accordance with ASIC Corporations (Stapled
Group Reports) Instrument 2015/838 relating to combining accounts under stapling and for the purpose of fulfilling the
requirements of the Australian Securities Exchange.
Cromwell’s annual financial report has been prepared in a format designed to provide users of the financial report with
a clearer understanding of relevant balances and transactions that drive Cromwell’s financial performance and financial
position free of immaterial and superfluous information. Plain English is used in commentary or explanatory sections
of the notes to the financial statements to also improve readability of the financial report. Additionally, amounts in the
consolidated financial statements have now been rounded off to the nearest one hundred thousand dollars, unless
otherwise indicated, in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191.
The notes have been organised into the following five sections for reduced complexity and ease of navigation:
Results
1. Operating segment information
2. Distributions
3. Earnings per security
4.
Income tax
Operating Assets
5.
Investment properties
6. Equity accounted investments
7.
Investments at fair value through profit or loss
Finance and Capital Structure
8. Borrowings
9. Derivative financial instruments
10. Contributed equity
11. Reserves
12. Financial risk management
Group Structure
13. Parent entity disclosures
14. Controlled entities
15. Details of disposal group
Other Items
16. Other financial assets and liabilities
17.
Intangible assets
18. Cash flow information
19. Security based payments
20. Related parties
21. Employee benefits expense
22. Auditors’ remuneration
23. Unrecognised items
24. Subsequent events
25. Accounting policies
64
Page
65
70
71
72
76
80
83
85
89
91
92
93
100
101
103
104
106
108
109
110
112
114
114
115
115
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Results
This section of the annual financial report provides further information on Cromwell’s and the Trust’s financial
performance, including the performance of each of Cromwell’s five segments, details of quarterly distributions the
earnings per security calculation as well as details about Cromwell’s income tax items.
1. Operating segment information
OVERVIEW
Operating segments are distinct business activities from which an entity earns revenues and incurs expenses and the
results of which are regularly reviewed by the chief operating decision maker (CODM). Cromwell has five operating
segments which are regularly reviewed by the Chief Executive Officer (CEO), Cromwell’s CODM, in order to make
decisions about resource allocation and to assess the performance of Cromwell. Segment profit / (loss), also referred to
as operating profit, is considered to reflect the underlying earnings of Cromwell and is a key metric taken into account in
determining distributions for Cromwell.
Operating segments below are reported in a manner consistent with the internal reporting provided to the CEO.
Cromwell’s operating segments:
Business activity
Property investment
Asset services
The ownership of investment properties located throughout Australia. This includes
investment properties held by the Trust and Cromwell’s equity accounted joint
venture investment in Cromwell Partners Trust. Property investment is the Trust’s
only reportable segment.
Asset services includes property and facility management, leasing and project
management for the Trust and all Cromwell managed investment schemes. Asset
services also includes property development, including development management
and development finance.
Funds management – internal
Internal funds management includes the management of the Trust and its indirect
property investments including CEREIT.
Funds management – retail
Funds management - wholesale
The establishment and management of external funds for retail investors is
considered external retail funds management. Cromwell currently manages eight
external retail funds with combined assets under management of $2.0 billion as at 30
June 2018 (30 June 2017: $1.8 billion).
The establishment and management of external funds for wholesale investors is
considered external wholesale funds management. Cromwell’s main activities in
this segment currently comprise Cromwell’s European business, the management
of the Cromwell Partners Trust and the management of CEREIT. The segment has
combined assets under management of $6.1 billion as at 30 June 2018 (June 2017:
$5.0 billion).
ACCOUNTING POLICIES
Revenue
Rental revenue
Rental revenue from investment property is recognised on a straight-line basis over the lease term. 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.
Funds management revenue
Funds management revenue includes equity raising fees, loan establishment fees, acquisition fees as well as property
management fees and fund administration fees. Revenue is recognised proportionally to the rendering of the respective
service provided. Performance fees are only recognised when the outcome can be reliably measured.
Interest revenue
Interest revenue is recognised as it accrues using the effective interest method.
65
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Dividend and distribution revenue
Revenue from dividends and distributions is recognised when declared.
Expenses
Property expenses and outgoings which include rates, taxes and other property outgoings and other expenses are
recognised on an accruals basis.
Segment allocation
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. 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 revenues, expenses and results include transfers between segments. Such transfers are priced on an “arms-
length” basis and are eliminated on consolidation.
Segment profit / (loss)
Segment profit / (loss), internally referred to as profit from operations, is based on income and expenses excluding
adjustments for unrealised fair value adjustments and write downs, gains or losses on all sale of investment properties
and certain other non-cash income and expense items.
A reconciliation of total segment profit to statutory profit as per income statement is provided in section (c) below.
(A) SEGMENT RESULTS
The table below shows segment results as presented to the Chief Executive Officer. For further commentary on individual
segment results refer to the Directors’ Report.
Property
investment
Asset
services
Funds Management
Internal
Retail
Wholesale
Cromwell
30 June 2018
Segment revenue
Sales – external customers
Sales – intersegmental
Operating profit of equity accounted
investments
Distributions
Interest
Other revenue
Total segment revenue
Segment expenses
$M
199.6
1.1
5.4
-
-
0.9
207.0
Property expenses and outgoings
32.9
Funds management costs
Property development costs
Finance costs
Expenses - intersegmental
Employee benefits expense
Administration and overhead costs
Total segment expenses
Segment profit before income tax
Income tax expense
Segment profit
-
-
37.1
20.6
-
1.4
92.0
115.0
-
115.0
$M
8.6
6.4
-
-
-
-
$M
0.2
14.2
22.0
0.1
5.8
-
$M
8.6
-
1.7
-
0.2
-
$M
$M
81.7
298.7
-
1.2
5.4
0.5
-
21.7
30.3
5.5
6.5
0.9
15.0
42.3
10.5
88.8
363.6
-
-
0.6
-
0.4
7.7
3.1
11.8
3.2
1.0
2.2
-
0.2
-
5.0
0.6
11.8
4.3
21.9
20.4
1.0
19.4
-
2.6
-
-
0.1
1.6
0.5
4.8
5.7
1.9
3.8
-
-
-
3.8
-
43.9
24.1
71.8
17.0
0.6
16.4
32.9
2.8
0.6
45.9
21.7
65.0
33.4
202.3
161.3
4.5
156.8
66
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Property
investment
Asset
services
Funds Management
Internal
Retail
Wholesale
Cromwell
30 June 2017
$M
Segment revenue
Sales – external customers
214.3
Sales – intersegmental
Operating profit of equity accounted
investments
Distributions
Interest
Other revenue
1.1
4.2
-
0.5
-
$M
5.3
6.6
-
-
-
-
Total segment revenue
220.1
11.9
Segment expenses
Property expenses and outgoings
34.3
Funds management costs
Property development costs
Finance costs
Expenses - intersegmental
Employee benefits expense
Administration and overhead costs
Total segment expenses
Segment profit before income tax
Income tax (benefit) / expense
Segment profit / (loss)
-
-
41.5
19.0
-
0.7
95.5
124.6
(0.1)
124.7
-
-
0.2
-
0.4
7.9
3.6
12.1
(0.2)
-
(0.2)
$M
$M
$M
$M
0.2
12.4
-
12.2
0.5
0.2
25.5
-
-
-
4.8
0.6
12.5
5.0
22.9
2.6
-
2.6
11.7
80.1
311.6
-
2.4
0.1
0.2
-
-
2.8
1.9
0.3
-
20.1
9.4
14.2
1.5
0.2
14.4
85.1
357.0
-
4.5
-
-
0.1
1.7
0.4
6.7
7.7
(0.5)
8.2
-
-
-
4.3
-
42.7
18.0
65.0
20.1
3.2
16.9
34.3
4.5
0.2
50.6
20.1
64.8
27.7
202.2
154.8
2.6
152.2
67
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (B) SEGMENT ASSETS AND LIABILITIES
Property
investment
Asset
services
Funds Management
Internal
Retail Wholesale
Cromwell
30 June 2018
$M
$M
$M
$M
$M
$M
Segment assets
Segment liabilities
Segment net assets
2,646.2
(1,060.4)
1,585.8
6.4
(0.7)
5.7
671.7
(384.8)
286.9
Other segment information
Decrease in recoverable amount - goodwill
Equity accounted investments
Acquisition of non-current segment assets1:
Investments in associates
Investments at fair value through profit or loss
Intangible assets
-
184.5
14.0
-
-
-
-
-
-
-
-
495.6
464.4
-
0.6
(1) For additions to investment property, forming part of the property investment segment, refer to note 5.
25.0
(0.1)
24.9
-
13.4
-
-
0.6
117.0
3,466.3
(118.8)
(1,564.8)
(1.8)
1,901.5
(69.5)
(69.5)
8.9
702.4
1.5
3.0
0.6
479.9
3.0
1.8
Property
investment
Asset
services
Funds Management
Internal
Retail Wholesale
Cromwell
30 June 2017
$M
$M
$M
$M
$M
$M
Segment assets
Segment liabilities
Segment net assets
Other segment information
Equity accounted investments
Acquisition of non-current segment assets1:
Investments in associates
Investments at fair value through profit or loss
Intangible assets
2,880.1
(1,412.2)
1,467.9
85.3
16.4
-
-
3.6
(1.0)
2.6
-
-
-
0.2
323.2
(126.5)
196.7
20.2
-
20.2
183.8
3,410.9
(231.3)
(1,771.0)
(47.5)
1,639.9
-
-
-
-
12.1
4.1
101.5
1.5
-
-
-
15.2
0.2
17.9
15.2
0.4
(1) For additions to investment property, forming part of the property investment segment, refer to note 5.
68
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (C) RECONCILIATIONS TO CONSOLIDATED INCOME STATEMENT
Segment profit reconciles to profit as shown in the consolidated income statement as follows:
Cromwell
Operating profit
Reconciliation to profit for the year
Loss on sale of investment properties
Gain on sale of listed securities
Finance costs attributable to disposal group / other assets
Other transaction costs
Fair value net gain / (losses)
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Non-cash property investment income / (expense):
Straight-line lease income
Lease incentive amortisation
Lease cost amortisation
Other non-cash expenses or non-recurring items
Amortisation of finance costs
Net exchange (loss) / gain on foreign currency borrowings
Net (decrease) / increase in recoverable amounts
Amortisation and depreciation, net of deferred tax expense (1)
Relating to equity accounted investments (2)
Net foreign exchange gains / (losses)
Net profit from discontinued operations
Restructure costs (3)
Net tax losses incurred / (utilised)(4)
Profit for the year
2018
$M
156.8
(5.0)
15.7
(2.1)
(5.7)
77.4
(13.7)
(3.5)
27.8
(17.8)
(1.7)
(21.2)
(10.3)
(76.1)
(4.4)
94.8
(3.2)
1.5
(4.7)
(0.5)
204.1
2017
$M
152.2
(0.9)
-
-
-
125.0
17.1
14.2
3.6
(18.0)
(1.9)
(7.7)
1.0
0.7
(6.8)
(1.7)
(0.7)
0.3
-
1.1
277.5
(1) Comprises depreciation of plant and equipment and amortisation of intangible assets, including management rights and associated deferred tax liability.
(2) Comprises fair value adjustments included in share of profit of equity accounted entities.
(3) Relates to the transition of funds management responsibilities for the CEREIT portfolio from Europe to Singapore.
(4) Comprises tax expense attributable to changes in deferred tax assets recognised as a result of carried forward tax losses.
Total segment revenue reconciles to total revenue and other income as shown in the consolidated income statement as
follows:
Total segment revenue
Reconciliation to total revenue and other income:
Straight-line lease income
Lease incentive amortisation
Gain on sale of investment properties
Gain on sale of listed securities
Fair value net gain from investment properties
Fair value net (loss) / gain on investments at fair value through profit or loss
Fair value net (loss) / gain on derivative financial instruments
Operating profit / (loss) from equity accounted investments
Intersegmental sales
Total revenue and other income
2018
$M
363.6
27.8
(17.8)
-
15.7
77.4
-
-
94.8
(21.7)
539.8
2017
$M
357.0
3.6
(18.0)
0.9
-
125.0
14.2
17.1
(1.7)
(20.1)
478.0
(D) OTHER SEGMENT INFORMATION
Geographic information
Cromwell has operations in four distinct geographical markets. These are Australia, through the Cromwell Property
Group and the Australian funds it manages, United Kingdom and Europe through its European business, Asia through its
investment in the Singapore-listed CEREIT and New Zealand through its Oyster Property Funds Limited joint venture.
Non-current assets for the purpose of the disclosure below include inventories, investment property, property, plant and
equipment and intangible assets.
69
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Geographic location
Australia
United Kingdom and Europe
Asia
New Zealand
Revenue from external customers Non-current operating assets
2018
$M
255.8
72.0
13.1
1.0
341.9
2017
$M
254.8
80.4
-
1.7
336.9
2018
$M
2,462.3
1.9
0.1
-
2,464.3
2017
$M
2,364.3
72.3
-
-
2,436.6
Major customers
Major customers of Cromwell that account for more than 10% of Cromwell’s revenue are listed below. All of these
customers form part of the Property investment and Funds management - wholesale segment.
Major customer
Commonwealth of Australia
Qantas Airways Limited
New South Wales State Government
Cromwell European Real Estate Investment Trust
Queensland State Government
2018
$M
47.3
29.7
26.6
13.1
-
116.7
2017
$M
34.6
28.7
26.4
-
19.1
108.8
2. Distributions
OVERVIEW
Cromwell’s aim is to provide investors with superior risk adjusted returns, including stable annual distributions. When
determining distribution rates Cromwell’s board considers a number of factors, including forecast earnings, anticipated
capital and lease incentive expenditure requirements over the next three to five years and expected economic conditions.
Cromwell aims to return 85 – 95% of profit of Cromwell’s five segments (operating profit) which excludes unrealised fair
value adjustments and other non-cash income and expenses (refer note 1).
(A) DISTRIBUTIONS FOR THE YEAR
Distributions paid / payable by Cromwell and the Trust during the year were as follows:
2018
17 November 2017
23 February 2018
25 May 2018
24 August 2018
2017
16 November 2016
15 February 2017
17 May 2017
18 August 2017
2018
cents
2.085¢
2.085¢
2.085¢
2.085¢
8.340¢
2017
cents
2.085¢
2.085¢
2.085¢
2.085¢
8.340¢
2018
$M
36.8
37.6
41.3(1)
41.4
157.1
2017
$M
36.6
36.7
36.7
36.7
146.7
(1)
Includes an amount of $392,000 for both Cromwell and the Trust in excess of the pro-rata entitlement for the quarterly distribution paid to those
securityholders who acquired securities in February 2018 as part of the Security Purchase Plan.
There were no dividends paid or payable by the Company in respect of the 2018 and 2017 financial years. All of Cromwell’s
and the Trust’s distributions are unfranked.
(B) FRANKING CREDITS
Currently, Cromwell’s distributions are paid from the Trust. Currently, franking credits are only available for future
dividends paid by the Company. The Company’s franking account balance as at 30 June 2018 is $7,100,000 (2017:
$5,500,000).
70
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 3. Earnings per security
OVERVIEW
This note provides information about Cromwell’s earnings on a per security basis. Earnings per security (EPS) is a
measure that makes it easier for users of Cromwell’s financial report to compare Cromwell’s performance between
different reporting periods. Accounting standards require the disclosure of two EPS measures, basic EPS and diluted
EPS. Basic EPS information provides a measure of interests of each ordinary issued security of the parent entity in the
performance of the entity over the reporting period while diluted EPS information provides the same information but
takes into account the effect of all dilutive potential ordinary securities outstanding during the period, such as Cromwell’s
performance rights.
Below in (a) earnings per share of the Company, the parent entity of Cromwell, and its controlled entities (“CCL”) and
earnings per unit of the Trust are presented as required by accounting standards. As both measures do not provide an EPS
measure for the Cromwell group as a whole (b) provides earnings per stapled security information.
(A) EARNINGS PER SHARE / UNIT
CCL
Trust
Basic earnings per company share / trust unit (cents)
Diluted earnings per company share / trust unit
(cents)
Earnings used to calculate basic and diluted earnings
per company share / trust unit:
Profit for the year ($M)
Less: Profit attributable to non-controlling interests
($M)
Profit / (loss) attributable to ordinary equity holders
of the Company / Trust ($’000)
(B) EARNINGS PER STAPLED SECURITY
Basic earnings per stapled security (cents)
Diluted earnings per stapled security (cents)
2018
(4.47)
(4.47)
204.1
(288.0)
(83.9)
2017
0.94
0.93
277.5
(261.0)
16.5
2018
15.38
15.34
288.0
0.4
288.4
2018
10.89
10.85
Cromwell
2017
14.86
14.81
261.0
0.1
261.1
2017
15.78
15.74
Earnings used to calculate basic and diluted earnings per stapled security:
Profit for the year attributable to ordinary stapled security holders of Cromwell ($M)
204.1
277.5
Weighted average number of stapled securities used in calculating earnings per company
share / trust unit / stapled security:
Weighted average number of securities used in calculating basic earnings per company
share / trust unit / stapled security (number)
Adjustment for calculation of diluted earnings per company share / trust unit:
Performance rights (number)
Weighted average number of ordinary securities and potential ordinary securities used
in calculating earnings per company share / trust unit / stapled security
1,876,401,510
1,757,840,143
5,621,379
5,212,175
1,882,022,889
1,763,052,318
71
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICY
Basic earnings per security
Basic earnings per security is calculated by dividing profit / (loss) attributable to equity holders of the Company / CDPT /
Cromwell, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
securities outstanding during the financial year, adjusted for bonus elements in ordinary securities issued during the year.
Diluted earnings per security
Diluted earnings per security adjusts the figures used in the determination of basic earnings per security to take into
account the after income tax effect of interest and other financing costs associated with potentially ordinary securities
and the weighted average number of securities assumed to have been issued for no consideration in relation to dilutive
potential ordinary securities.
(C) INFORMATION CONCERNING THE CLASSIFICATION OF SECURITIES
Performance rights
Performance rights granted under Cromwell’s Performance Rights Plan are considered to be potential ordinary stapled
securities and have been included in the determination of diluted earnings per stapled security to the extent to which they
are dilutive. The performance rights have not been included in the determination of basic earnings per stapled security.
Details relating to Cromwell’s performance rights are set out in note 19.
Convertible bonds
Convertible bonds issued during the current and prior years are considered to be potential ordinary stapled securities,
however have not been included in the determination of diluted earnings. The ASX market price of the Cromwell stapled
security had been below the convertible bond conversion prices of $1.1771 and $1.1431 throughout the year. Additionally,
the actual Euro currency translation rate at balance date was more favourable to bondholders than the fixed conversion
rate. Therefore, the convertible bonds are currently considered to be antidilutive.
4. Income tax
Overview
This note provides detailed information about Cromwell’s income tax items and accounting policies. This includes a
reconciliation of income tax expense if Australia’s company income tax rate of 30% was applied to Cromwell’s profit
before income tax as shown in the income statement to the actual income tax expense / benefit as well as an analysis of
Cromwell deferred tax balances.
Accounting standards require the application of the “balance sheet method” to account for Cromwell’s income tax.
Accounting profit does not always equal taxable income. There are a number of timing differences between the recognition
of accounting expenses and the availability of tax deductions or when revenue is recognised for accounting purposes and
tax purposes. These timing differences reverse over time but they are recognised as deferred tax assets and deferred tax
liabilities in the balance sheet until they are fully reversed. This is referred to as the “balance sheet method”.
Taxation of the Trust
Under current Australian income tax legislation, the Trust and its sub-Trusts are not liable for income tax on their taxable
income (including assessable realised capital gains) provided that the unitholders are presently entitled to the income of
the Trust. During the prior year the Trust acquired controlling interests in a number of corporate entities that are subject
to income tax. The income tax applicable to these corporate entities is represented below.
72
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (A) INCOME TAX EXPENSE
Current tax expense
Deferred tax expense
Adjustment in relation to prior periods
Income tax expense
Deferred tax expense
Decrease / (increase) in deferred tax assets
Increase / (decrease) in deferred tax liabilities
Total deferred tax expense
Cromwell
Trust
2018
2017
2018
$M
1.5
3.1
0.4
5.0
1.7
1.4
3.1
$M
4.7
(3.5)
0.3
1.5
(2.5)
(1.0)
(3.5)
$M
-
2.6
-
2.6
0.3
2.3
2.6
(B) NUMERICAL RECONCILIATION BETWEEN INCOME TAX EXPENSE / (BENEFIT) AND PRE-TAX PROFIT
Cromwell
Trust
Profit before income tax
Tax at Australian tax rate of 30% (2017: 30%)
Tax effect of amounts which are not deductible /
(taxable) in calculating taxable income:
Trust income – refer above for Taxation of the Trust
Fair value impairment not deductible
Non-deductible expenses
Change in tax losses recognised
Adjustment in relation to prior periods
Difference in overseas tax rate
Income tax expense
(C) DEFERRED TAX
(i) Deferred tax assets
Deferred tax assets are attributable to:
Interests in managed investment schemes
Employee benefits
Transaction costs and sundry items
Unrealised foreign currency (losses) / gains
Tax losses recognised
Total deferred tax assets
Movements:
Balance at 1 July
Credited / (charged) to profit or loss
(Charged) to other comprehensive income
Balance at 30 June
2018
$M
207.6
62.3
(81.2)
13.8
7.9
0.5
0.4
1.3
5.0
2017
$M
278.7
83.6
(75.2)
(2.0)
(3.8)
(0.6)
0.3
(0.8)
1.5
2018
$M
289.3
86.8
(81.2)
(6.6)
3.6
-
-
-
2.6
Cromwell
Trust
2018
$M
(1.9)
1.9
0.6
(0.8)
1.9
1.7
3.4
(1.7)
-
1.7
2017
$M
(1.9)
2.6
0.9
(0.1)
1.9
3.4
1.3
2.5
(0.4)
3.4
2018
$M
-
-
-
-
-
-
0.3
(0.3)
-
-
2017
$M
0.6
(0.3)
-
0.3
(0.3)
-
(0.3)
2017
$M
261.1
78.3
(78.0)
-
-
-
-
-
0.3
2017
$M
-
-
-
0.3
-
0.3
-
0.3
-
0.3
The amount of temporary differences and carried forward tax losses recognised as a deferred tax asset is based on
projected earnings over a limited period that the Directors considered to be probable. Projected earnings are re-assessed
at each reporting date. Unrecognised tax losses at balance date were $28,700,268 (2017: $20,033,000).
73
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
(ii) Deferred tax liabilities
Deferred tax liabilities are attributable to:
Intangible assets – management rights
Interests in managed investment schemes
Unrealised foreign currency (losses) / gains
Total deferred tax liabilities
Movements:
Balance at 1 July
Charged / (credited) to profit or loss
Credited to other comprehensive income
Foreign exchange differences
Balance at 30 June
Cromwell
Trust
2018
$M
-
9.2
0.3
9.5
0.9
1.4
7.4
-
9.7
2017
$M
0.9
-
-
0.9
1.9
(1.0)
-
-
0.9
2018
$M
-
9.2
0.3
9.5
-
2.3
7.4
-
9.7
2017
$M
-
-
-
-
-
-
-
-
-
The deferred tax liability relates to an overseas tax jurisdiction. In accordance with AASB 112 Income Taxes the deferred
tax liability was not offset against the deferred tax assets of the Group, which relate to the Australian tax jurisdiction.
ACCOUNTING POLICY
Income tax
Cromwell’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. Deferred tax is not recognised for the recognition of goodwill on business combination and
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.
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. 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.
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 and foreign entities
controlled by the Company) have formed a tax-consolidated group and are taxed as a single entity. 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.
74
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent
that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be
utilised. Any subsequent period adjustment to deferred tax assets arising from unused tax losses, as a result of revised
assessments of the probability of recoverability, is recognised by the head entity only.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding
arrangement, which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts.
The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed
by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising
an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed. The inter-entity receivable
(payable) is 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.
75
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Operating Assets
This section of the annual financial report provides further information on Cromwell’s and the Trust’s operating assets.
These are assets that individually contribute to Cromwell’s revenue and include investment properties, joint ventures
and investments in listed and unlisted securities.
5. Investment properties
OVERVIEW
Investment properties are properties (land, building or both) held solely for the purpose of earning rental income and /
or for capital appreciation. Cromwell’s investment property portfolio comprises 21 commercial properties of which 18
properties are predominantly office use with the remaining three being retail properties and vacant land.
This note provides further details on Cromwell’s investment property portfolio, including details of individual properties,
details of sales and acquisitions as well as details on the fair value measurement of the properties.
(A) DETAILS OF CROMWELL’S AND THE TRUST’S INVESTMENT PROPERTIES
Independent
valuation
date
Title
(1)
(3)
Dec 2017
Dec 2017
(1)
(2)
(1)
(1)
(1)
(2)
(1)
(1)
(3)
(2)
(2)
(1)
Jun 2018
Dec 2017
Dec 2017
SOLD
Dec 2017
Jun 2018
Dec 2017
SOLD
Jun 2018
Dec 2017
Jun 2018
Dec 2017
200 Mary Street, QLD
Oracle Building, ACT
Village Cinemas, VIC
Vodaphone Call Centre, TAS
Regent Cinema Centre,
NSW
700 Collins Street, VIC
19 National Circuit, ACT
475 Victoria Avenue, NSW
Synergy, QLD
Tuggeranong Office Park,
ACT
Soward Way, ACT
TGA Complex, ACT
203 Coward Street, NSW
HQ North, QLD
Bundall Corporate Centre,
QLD
13 Keltie Street, ACT
Sturton Road, SA
117 Bull Street, NSW
11 Farrer Place, NSW
207 Kent Street, NSW
84 Crown Street, NSW
2-24 Rawson Place, NSW
2-6 Station Street, NSW
Wakefield Street, SA
Investment properties
Investment properties classified as held for sale
Sturton Road, SA
Dec 2015
147-163 Charlotte Street,
QLD
146-160 Mary Street, QLD
Investment properties
classified as held for sale
Total investment properties
Jun 2018
SOLD
Dec 2017
Dec 2017
Dec 2017
Jun 2018
Jun 2018
Jun 2018
N/A
(2)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
(1)
Jun 2016
Jun 2016
SOLD
(1)
(1)
(1)
(1)
Independent valuation
Carrying amount
Fair value adjustment
2018
2017
2018
2017
2018
2017
$M
74.0
25.8
15.8
-
16.1
267.5
34.8
208.0
-
52.5
260.0
61.0
490.0
216.0
-
24.0
-
25.8
29.5
279.0
34.0
245.0
42.8
50.0
2,451.6
0.9
-
-
0.9
$M
69.0
26.5
15.0
5.0
13.8
240.0
28.0
194.5
76.0
57.5
260.0
62.0
455.0
213.0
-
25.1
1.6
24.2
29.2
240.0
33.5
230.0
39.0
N/A
2,337.9
-
37.3
37.3
74.6
$M
74.0
25.5
16.2
-
15.8
271.0
34.8
211.0
-
52.5
260.0
57.0
490.0
217.0
-
24.0
-
25.8
29.5
279.0
34.0
245.0
42.8
46.2
2,451.1
0.9
-
-
0.9
$M
69.0
25.5
15.0
5.0
13.8
250.0
28.0
204.0
76.0
57.5
244.9
62.0
455.0
217.5
-
25.1
1.6
24.2
29.2
252.0
33.5
230.0
39.0
-
2,357.8
-
34.8
34.7
69.5
2,452.5
2,412.5
2,452.0
2,427.3
$M
2.9
(2.0)
0.4
(0.5)
0.7
20.6
6.9
5.8
8.2
(5.7)
(12.3)
(5.4)
16.7
0.8
-
(0.9)
-
1.6
0.3
26.0
0.5
14.9
3.7
(5.9)
77.3
0.1
-
-
0.1
77.4
$M
(1.8)
(1.8)
0.1
-
(0.2)
11.6
2.6
16.4
(1.2)
32.7
-
14.2
18.3
1.3
2.8
(23.8)
-
1.1
1.3
27.0
0.8
29.9
-
-
131.3
-
(3.1)
(3.2)
(6.3)
125.0
Title:
(1) Freehold
(2) Leasehold
(3) Leasehold, on same title
76
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICIES
Investment properties
Investment properties are initially measured at cost including transaction costs and subsequently measured at fair value,
with any change therein recognised in profit or loss.
Fair value is based upon active market prices, given the assets’ highest and best use, adjusted if necessary, for any
difference in the nature, location or condition of the relevant asset. If this information is not available, Cromwell uses
alternative valuation methods such as discounted cash flow projections or the capitalised earnings approach. The highest
and best use of an investment property refers to the use of the investment property by market participants that would
maximise the value of that investment property.
The carrying value of the investment property includes components relating to lease incentives and other items relating to
the maintenance of, or increases in, lease rentals in future periods.
Investment properties under construction are classified as investment property and carried at fair value. Finance costs
incurred on investment properties under construction are included in the construction costs.
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 balance sheet 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
Initial direct leasing costs incurred by Cromwell in negotiating and arranging operating leases are recognised as an asset
in the balance sheet as a component of the carrying amount of investment property and are amortised as an expense on a
straight-line basis over the lease term.
(B) MOVEMENTS IN INVESTMENT PROPERTIES
Balance at 1 July
Additions
Acquisitions
Capital works
Construction costs
Finance costs capitalised
Property improvements
Lifecycle
Disposals
Transferred to held for sale
Straight-line lease income
Lease costs and incentives
Amortisation of lease costs and incentives
Net gain from fair value adjustments
Balance at 30 June
Cromwell
Trust
2018
$M
2,357.8
-
51.8
13.6
1.1
6.7
2.5
(89.3)
(0.9)
27.8
22.1
(19.5)
77.4
2017
$M
2,274.0
-
-
92.3
4.4
9.2
3.0
(87.1)
(69.5)
3.6
22.8
(19.9)
125.0
2018
$M
2,357.8
-
51.8
13.6
1.1
6.7
2.5
(89.3)
(0.9)
27.8
22.1
(19.5)
77.4
2017
$M
2,274.0
-
-
92.3
4.4
9.2
3.0
(87.1)
(69.5)
3.6
22.8
(19.9)
125.0
2,451.1
2,357.8
2,451.1
2,357.8
77
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (C) INVESTMENT PROPERTY SOLD
Details of the investment properties sold during the year are as follows:
Synergy, QLD
Vodafone Call Centre, TAS
Sturton Rd, SA
147-163 Charlotte Street, QLD
146-160 Mary Street, QLD
Gross sale
price
Carrying
amount at 30
June 2017
Last
independent
valuation
Loss on sale
recognised
$M
84.0
4.5
0.7
33.0
33.0
$M
76.0
5.0
0.9
34.8
34.7
$M
76.0
5.0
0.7
37.3
37.3
$M
0.7
0.1
0.2
2.0
2.0
Details of investment property sold during the prior year are as follows:
Bundall Corporate Centre, QLD
Gross sale
price
$M
89.0
Carrying
amount at 30
June 2016
Last
independent
valuation
$M
83.0
$M
83.0
Gain on sale
recognised
$M
0.9
(D) COMPLETION OF INVESTMENT PROPERTY UNDER CONSTRUCTION
In September 2017 construction of a second building on the excess land at Tuggeranong Office Park in the ACT reached
practical completion. This building is known as Soward Way, ACT. The Commonwealth of Australia agreed to a 15 year
lease of the modern 30,700 square metre property which commenced in September 2017.
(E) INVESTMENT PROPERTY CLASSIFIED AS HELD FOR SALE
The property 13-17 Sturton Road, SA. has been classified as held for sale because it is managements intention the
carrying amount of the property will be recovered through a sale transaction and the property is in a saleable condition
and it is being actively marketed.
(F) FAIR VALUE MEASUREMENT
Cromwell’s investment properties, with an aggregate carrying amount of $2,452.0 million, are measured using the
fair value model as described in AASB 140 Investment Property. Fair value is thereby defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
Property valuations
At balance date the adopted valuations for eight of Cromwell’s investment properties are based on independent external
valuations representing 49% of the value of the portfolio. The balance of the portfolio is subject to internal valuations
having regard to previous external valuations and comparable sales evidence. Cromwell’s valuation policy requires
all properties to be valued by an independent professionally qualified valuer with a recognised relevant professional
qualification at least once every two years.
All property valuations utilise a combination of valuation models based on discounted cash flow ("DCF") models and
income capitalisation models supported by recent market sales evidence.
78
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Key inputs used to measure fair value
DCF method
Income capitalisation method
Under the DCF method, a property’s fair value is estimated using explicit
assumptions regarding the benefits and liabilities of ownership over the asset’s
life including an exit terminal value. The DCF method involves the projection of a
series of cash flows on a real property asset. To this projected cash flow series, an
appropriate, market derived discount rate is applied to establish the present value of
the income stream associated with the real property.
This method involves assessing the total net market income receivable from the
property and capitalising this perpetually, using an appropriate, market derived
capitalisation rate, to derive a capital value, with allowances for capital expenditure
reversions such as lease incentives and required capital works payable in the near
future and overs / unders when comparing market rent with passing rent.
Annual net property income
Annual net property income is the contracted amount for which the property space is
leased. In the net property income, the property owner recovers outgoings from the
tenant
Net market rent
A net market rent is the estimated amount for which a property or space within a
property could be leased between a willing lessor and a willing lessee on appropriate
lease terms in an arm’s length transaction, after proper marketing and wherein the
parties have each acted knowledgeably, prudently and without compulsion.
Adopted capitalisation rate
The rate at which net market income is capitalised to determine the value of the
property. The rate is determined with regards to market evidence (and the prior
external valuation for internal valuations).
Adopted discount rate
The rate of return used to convert a monetary sum, payable or receivable in the
future, into present value. It reflects the opportunity cost of capital, that is, the rate
of return the capital can earn if put to other uses having similar risk. The rate is
determined with regards to market evidence (and the prior external valuation for
internal valuations).
Weighted average lease expiry
(“WALE”)
WALE is used to measure the overall tenancy risk of a particular property to assess
the likelihood of a property being vacated. WALE of a property is measured across all
tenants’ remaining lease terms (in years) and is weighted with the tenants’ income
against total combined income.
Occupancy
Property occupancy is used to measure the proportion of the lettable space of a
property that is occupied by tenants under current lease contracts and therefore how
much rent is received from the property as percentage of total rent possible if the
property was fully occupied.
All the significant inputs noted above are not observable market data, hence investment property valuations are
considered level 3 fair value measurements (refer fair value hierarchy described in note 12).
Significant unobservable inputs associated with the valuations of Cromwell’s investment properties are as follows:
Inputs
Capitalisation rate (%)
Discount rate (%)
Annual net property income ($M)
WALE (years)
Occupancy (%)
Range
5.3 – 12.0
6.5 – 12.5
0.0 – 29.7
0.0 – 14.2
0.0 – 100.0
Weighted average
6.1
7.0
16.9
7.1
94.6
79
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Sensitivity information
The relationships between the significant unobservable inputs and the fair value of investment properties are as follows:
Inputs
Capitalisation rate
Discount rate
Annual net property income
WALE
Occupancy
Impact of increase in
input on fair value
Impact of decrease in
input on fair value
Decrease
Decrease
Increase
Increase
Increase
Increase
Increase
Decrease
Decrease
Decrease
(G) AMOUNTS RECOGNISED IN PROFIT AND LOSS FOR INVESTMENT PROPERTIES
Rental income and recoverable outgoings
Property expenses and outgoings
Cromwell
Trust
2018
$M
209.6
(34.6)
175.0
2017
$M
199.8
(36.2)
163.6
2018
$M
210.0
(39.8)
170.2
2017
$M
200.1
(41.8)
158.3
(H) NON-CANCELLABLE OPERATING LEASE RECEIVABLE FROM INVESTMENT PROPERTY TENANTS
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 Cromwell’s 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
Cromwell
Trust
2018
$M
142.5
454.7
711.4
1,308.6
2017
$M
144.9
492.6
725.7
1,363.2
2018
$M
142.5
454.7
711.4
1,308.6
2017
$M
144.9
492.6
725.7
1,363.2
6. Equity accounted investments
OVERVIEW
This note provides an overview and detailed financial information of Cromwell’s and the Trust’s investments that are
accounted for using the equity method of accounting. These include joint ventures where Cromwell or the Trust have
joint control over an investee together with one or more joint venture partners and investments in associates, which are
entities over which Cromwell is presumed to have significant influence but not control or joint control by virtue of holding
20% or more of the associates’ issued capital and voting rights, but less than 50%.
Cromwell’s and the Trust’s equity accounted investments are as follows:
Equity accounted investments
CEREIT
CPA
Others
Total equity accounted investments
Cromwell
Trust
2018
2017
2018
2017
%
35
50
$
495.6
184.5
22.3
702.4
%
-
50
$
%
$
-
85.3
16.2
101.5
34
50
-
669.3
484.8
184.5
-
%
-
50
-
$
-
85.3
-
85.3
80
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICY
Joint arrangements
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on
the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement.
Interests in joint venture entities are accounted for in Cromwell’s financial statements using the equity method.
Cromwell’s share of its joint ventures’ 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 joint ventures are
recognised in Cromwell’s financial statements as a reduction of the carrying amount of the investment.
When Cromwell’s share of losses in a joint venture equals or exceeds its investment in the joint venture, including any
other unsecured receivables, Cromwell does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the joint venture. Unrealised gains on transactions between Cromwell and its joint ventures are
eliminated to the extent of Cromwell’s investment in the joint venture. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.
For joint operations Cromwell recognises its direct right to the assets, liabilities, revenues and expenses and its share
of any jointly held or incurred assets, liabilities, revenues and expenses, and these are incorporated in the financial
statements under the appropriate headings.
(A) DETAILS OF JOINT VENTURES AND EQUITY ACCOUNTED INVESTMENTS
Cromwell European Real Estate Investment Trust
Cromwell European Real Estate Investment Trust (“CEREIT”) is a Singapore-based real estate investment trust
established with the principal investment strategy of investing, directly or indirectly, in a diversified portfolio of income-
producing real estate assets in Europe. Cromwell and the Trust owned 35% and 34% of CEREIT respectively at the end of
the year. CEREIT is managed by a subsidiary of Cromwell, Cromwell EREIT Management Pte. Ltd., which operates strictly
within the listing rules imposed by the Singapore Stock Exchange and which has its own independent Board. As such,
Cromwell and the Trust are considered able to exert significant influence, but not control, over the entity and therefore the
investment has been classified as an equity-accounted investment.
CPA
The Trust holds a 50% interest in the units of CPA which owns the $594.5 million Northpoint Building in the North Sydney
CBD. The remaining 50% of the units in CPA are held by a single investor. A unit holder agreement between the Trust
and the other investor limits the power of the trustee to management of ongoing operations of CPA. All decisions about
relevant activities of CPA require unanimous consent of the two unitholders. The entity is therefore classified as a joint
venture.
LDK Healthcare Pty Ltd
During the year, Cromwell acquired a 50% shareholding in an aged care operation. Cromwell partnered with an aged care
operator to commence a project to repurpose the Cromwell property at Tuggeranong Office Park in the ACT, transforming
the current campus-style buildings into between 330 to 350 retirement or assisted living units plus communal areas.
Cromwell holds a 50% interest in the units in LDK Healthcare Pty Ltd (LDK), with the remaining 50% held by the aged
care operator. All decisions about relevant activities of LDK require unanimous consent of the two unitholders. The
entity is therefore classified as a joint venture. This investment is included in the ‘Other equity accounted investments’
classification due to its current immaterial scale.
81
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (B) SUMMARISED FINANCIAL INFORMATION FOR JOINT VENTURES AND EQUITY ACCOUNTED INVESTMENTS
OWNED BY CROMWELL
As at 30 June 2018
As at 30 June 2017
$M
$M
CEREIT(1)
CPA(2)
Others(3)
CEREIT(1)
CPA(2)
Others(3)
Summarised balance sheets:
Cash and cash equivalents
Other current assets
Total current assets
Investment properties
Other non-current assets
Total non-current assets
Total assets
Financial liabilities
Other current liabilities
Total current liabilities
Financial liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Carrying amount of investment:
Cromwell’s share of equity (%)
Cromwell’s share of net assets
Unpaid investment consideration
Goodwill
Carrying amount
Movement in carrying amounts:
Opening balance at 1 July
Investment
Share of profit / (loss)
Less: dividends / distributions received
Decrease to recoverable amount
Foreign exchange difference
Carrying amount at 30 June
84.4
45.0
129.4
2,185.6
15.8
2,201.4
2,330.8
107.1
-
107.1
777.4
30.9
808.3
915.4
1,415.4
35
495.6
-
-
495.6
-
464.4
27.1
-
-
4.1
495.6
18.7
2.2
20.9
594.5
-
594.5
615.4
12.6
1.5
14.1
232.4
-
232.4
246.5
368.9
50
184.5
-
-
184.5
85.3
14.0
95.0
(9.8)
-
-
184.5
9.4
14.7
24.1
55.2
13.4
68.6
92.7
7.0
3.1
10.1
31.1
30.8
61.9
72.0
20.7
-
18.2
(2.5)
6.6
22.3
16.2
8.0
3.0
(0.4)
(4.2)
(0.3)
22.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7.4
1.9
9.3
337.8
-
337.8
347.1
12.5
0.5
13.0
163.5
-
163.5
176.5
170.6
50
85.3
-
-
85.3
74.5
16.5
2.4
(8.1)
-
-
85.3
8.8
18.1
26.9
70.0
11.5
81.5
108.4
7.0
3.4
10.4
28.7
37.4
66.1
76.5
31.9
-
18.6
(9.0)
6.6
16.2
12.2
1.4
5.4
(2.8)
-
-
16.2
Summarised statements of
comprehensive income:
Revenue
Expenses
Total comprehensive income
Cromwell’s share in %
Share of profit
(1) At year end Cromwell owned 35% of CEREIT, the Trust owned 34%.
(2) At year end Cromwell and the Trust owned 50% of CPA.
(3) At year end Cromwell had various ownership interests in other joint ventures and equity accounted investments. The Trust had none (other than CEREIT
202.0
(12.1)
189.9
50
95.0
163.5
(86.2)
77.3
35
27.1
41.7
(35.8)
5.9
-
3.0
39.1
(26.4)
12.7
-
5.4
18.2
(13.4)
4.8
50
2.4
-
-
-
-
-
and CPA as disclosed immediately above).
(C) 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. The judgements, estimates and assumptions regarding the Cromwell European
Real Estate Investment Trust (CEREIT) are detailed below.
82
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT The CEREIT has been classified as being an associate and accounted for as an equity-accounted investment. The
determination of this was based on an assessment that Cromwell and the Trust are considered to be able to exert
significant influence, but not control, over the entity. This determination is pursuant to the assessment of control
under Accounting Standards and the consideration of key factors regarding the management of CEREIT as governed by
Cromwell’s Capital Markets Service Licence as issued by the Monetary Authority of Singapore (MAS) and the composition
of the Board.
These key factors include:
• A majority of the directors on the Board and Nomination Committee of the CEREIT Management entity (the Manager)
are independent. Under Cromwell’s application for its MAS licence, if a majority of independent directors is not
maintained then all directors of the CEREIT Management entity must be appointed by the unitholders of CEREIT;
• Cromwell’s Licence prevents Cromwell from exercising any decision-making power for matters relating to the CEREIT
in which Cromwell has an interest (whether directly or indirectly). This includes all decisions around the acquisition or
disposal of investment properties; and
• Following the Initial Public Offering (IPO), the Manager now operates as per the section in the prospectus entitled “The
Manager and Corporate Governance”. Specifically, this section of the prospectus may allow the MAS to exercise its
powers and instruct the Trustee to remove Cromwell as the Manager of CEREIT if an inherent conflict of interest is
assumed to arise.
Management will continue to consider the above factors as part of its ongoing assessment of control. Should any of the
above factors change, or an increase in the CEREIT shareholding occur, the determination of the investment in CEREIT as
an equity accounted investment may change. In accordance with Accounting Standards, a change from Cromwell having
‘significant influence’ to ‘control’ would result in consolidation of the investment into the Cromwell Group.
7. Investments at fair value through profit or loss
OVERVIEW
This note provides an overview and detailed financial information of Cromwell’s and the Trust’s investments that are
classified as financial assets at fair value through profit or loss. Below is information about Cromwell’s and the Trust’s
investments in listed and unlisted property related entities whereby Cromwell and the Trust hold less than 20% of the
issued capital in the investee and also any other relevant financial assets of the same classification. Such investments
are classified as investments at fair value through profit or loss which are carried at fair value in the balance sheet with
adjustments to the fair value recorded in profit or loss. Such investments include investments in Cromwell managed
unlisted funds, co-investments in European wholesale funds managed by Cromwell, investments in listed securities and
any other relevant financial assets.
Investment in listed securities
Investment in Cromwell unlisted funds
Investment in wholesale funds
Investment in other financial asset
Total investments at fair value through profit or loss
Cromwell
2018
$M
-
1.3
20.0
11.7
33.0
2017
$M
265.0
1.3
34.3
15.2
315.8
Trust
2018
$M
-
1.3
-
-
1.3
2017
$M
265.0
1.3
-
-
266.3
83
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICY
Investments 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. Financial assets at fair value through
profit or loss also include financial assets which upon initial recognition are designated as such. These include financial
assets that are not held for trading purposes and which may be sold. These are investments in exchange traded equity
instruments and unlisted trusts.
At initial recognition, Cromwell measures a financial asset at its fair value. Transaction costs of financial assets carried at
fair value through profit or loss are expensed in the statement of comprehensive income.
Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Gains
and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in
the statement of comprehensive income within net gains/(losses) on financial instruments held at fair value through profit
or loss in the period in which they arise.
For methods used to measure the fair value measurement of Cromwell’s and the Trust’s investments at fair value through
profit or loss refer to note 12.
84
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Finance and Capital Structure
This section of the annual financial report provides further information on Cromwell’s debt finance and associated
costs, and Cromwell’s capital.
Capital is defined as the combination of securityholders’ equity, reserves and net debt (borrowings less cash). The
Board of Directors is responsible for Cromwell’s capital management strategy. Capital management is an integral part
of Cromwell’s risk management framework and seeks to safeguard Cromwell’s ability to continue as a going concern
while maximising securityholder value through optimising the level and use of capital resources and the mix of debt
and equity funding. Cromwell’s preferred portfolio gearing range is 35% - 55%.
8. Borrowings
OVERVIEW
Cromwell and the Trust borrow funds from financial institutions and investors (the latter in the form of convertible bonds)
to partly fund the acquisition of income producing assets, such as investment properties, securities or the acquisition of
businesses. A significant proportion of these borrowings are generally fixed either directly or through the use of interest
rate swaps/options and have a fixed term. This note provides information about Cromwell’s debt facilities, including
maturity dates, security provided and facility limits.
Current
Secured
Loans – financial institutions
Non-current
Secured
Loans – financial institutions
Unsecured
Convertible bonds
Unamortised transaction costs
Total
Secured loans – financial institutions
Unsecured convertible bond
Unamortised transaction costs
Total borrowings
Cromwell
Trust
2018
$M
2017
$M
2018
$M
-
-
188.2
188.2
-
-
2017
$M
188.2
188.2
1,000.0
1,069.1
1,000.0
1,069.1
426.7
(14.7)
1,412.0
1,000.0
426.7
(14.7)
1,412.0
213.4
(8.3)
1,274.2
1,257.3
213.4
(8.3)
1,462.4
426.7
(14.3)
1,412.4
1,000.0
426.7
(14.3)
1,412.4
222.9
(6.4)
1,285.6
1,257.3
222.9
(6.4)
1,473.8
ACCOUNTING POLICY
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.
The fair value of the borrowing portion of a convertible bond is determined using a market interest rate for an
equivalent non-convertible bond. This amount is recorded as a borrowing liability on an amortised cost basis until
extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the derivative
conversion feature. This is recognised as a financial liability if the convertible bond does not meet the “fixed-for-fixed”
rule contained in AASB 132 Financial Instruments: Presentation, otherwise it is included in shareholders’ equity.
Borrowing costs incurred on funds borrowed for the construction of a property are capitalised, forming part of the
construction cost of the asset. Capitalisation ceases upon practical completion of the property. Other borrowing costs
are expensed.
85
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (A) BORROWING DETAILS
Margin loan facility
Syndicated facility – bridging 1
Syndicated facility – bridging 2
Syndicated facility – tranche 1(a)
Syndicated facility – tranche 1(b)
Syndicated facility – tranche 1(c)
Syndicated facility – tranche 2(a)
Syndicated facility – tranche 2(b)
Tuggeranong – tranche A
Tuggeranong – tranche B
Euro bridging facility
Secured bilateral loan facilities
Convertible bond – 2020
Convertible bond – 2025
Total borrowing facilities
Note Secured
Maturity
Date
(i)
(ii)
(ii)
(iii)
(iii)
(iii)
(iii)
(iii)
(iv)
(iv)
(v)
(vi)
(vii)
(vii)
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Jan-18
Jun-18
Jul-18
May-19
Jan-20
Mar-20
Jan-21
Mar-21
Jul-18
Jul-18
Jul-19
Jun-23
Feb-20
Mar-25
2018
2017
Facility
Utilised
Facility
Utilised
$M
-
-
-
-
-
-
-
-
-
-
-
1,300.0
86.4
340.3
1,726.7
$M
-
-
-
-
-
-
-
-
-
-
-
1,000.0
86.4
340.3
1,426.7
$M
125.0
100.0
140.0
18.0
85.2
185.3
123.5
449.1
30.5
159.5
-
-
222.9
-
1,639.0
$M
123.2
65.0
140.0
18.0
85.2
185.3
123.5
359.0
30.5
127.6
-
-
222.9
-
1,480.2
(i) Margin loan facility
During the year Cromwell and the Trust fully repaid the $125 million short-term margin loan facility. Interest was payable
monthly in arrears at variable rates based on the 30 day BBSW rate plus a loan margin. The facility required Cromwell to
hold cash of at least $20 million (30 June 2017) at all times. This cash amount has been reclassified from restricted cash
as it is effectively now available for use by Cromwell.
(ii) Syndicated facility – bridging 1 and 2
The facility was secured by first registered mortgages over a pool of investment properties held by the Trust and was split
into two tranches, one of $100.0 million, which had an expiry date in June 2018 and one of $140.0 million which had an
expiry date in July 2018. Interest was payable monthly in arrears at variable rates based on the 30 day BBSY rate of 2.07%
(30 June 2017: 1.67%) plus a loan margin. The syndicated facility was refinanced as part of the new debt restructure in
June 2018.
(iii) Syndicated facility – tranche 1 and 2
The facility was secured by first registered mortgages over a pool of investment properties held by the Trust and was
split into two tranches, one of $288.5 million, which was due to expire between May 2019 and March 2020 and one of
$572.6 million which was due to expire between January 2021 and March 2021. Interest was payable monthly in arrears at
variable rates based on the 30 day BBSY rate which was 2.07% (30 June 2017: 1.67%) plus a loan margin. The syndicated
facility was refinanced as part of the new debt restructure in June 2018.
(iv) Tuggeranong facility – tranche A and B
The facility, which had an expiry date in July 2018, was split into two tranches. Tranche A refinanced the existing $30.5
million debt facility and required monthly repayments of $0.6 million for 18 months until April 2017. Tranche B with a total
facility limit of $159.5 million was used as project funding for the construction of the property at Soward Way, ACT. Interest
was payable monthly in arrears at variable rates based on the 30 day BBSY rate which was 2.07% (30 June 2017: 1.67%)
plus a loan margin. The Tuggeranong facility was refinanced as part of the new debt restructure in June 2018.
(v) Euro bridging facility
During the year Cromwell and the Trust took out a new Euro-denominated bridging facility. The original facility limit was
€160.0 million at inception, which was fully repaid during the year with proceeds received on issue of the Convertible Bond
(refer (vii)). The funds were utilised in the acquisition of the investment in CEREIT. Interest was payable monthly in arrears
at variable rates based on the applicable EURIBOR rate plus a loan margin.
86
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
(vi) Secured bilateral loan facilities
In June 2018 Cromwell and the Trust entered into a $1.3 billion restructure of its Australian debt. The restructure included
the refinance of both its syndicated facility and the Tuggeranong development facility formed under a Common Terms
Deed Poll with an initial expiry profile of five years. All facilities are bilateral loans with a total amount drawn of $1.0 billion
at June 2018. The facility is secured by first registered mortgages over a pool of investment properties held by the Trust.
Hence, the nature of the security remains unchanged from the refinanced Syndicated facility and the Tuggeranong facility.
Interest is payable quarterly in arrears at BBSY rate of 2.07% plus a loan margin range of 1.35% to 1.70%.
(vii) Convertible bonds
During the year, Cromwell issued 2,300 convertible bonds with a face value of €100,000 each, amounting to a total gross
face value of €230.0 million ($370.0 million). The bonds bear an interest rate of 2.5%. The bonds are convertible into
stapled securities of Cromwell at the option of the holder from 40 days after issue date up to seven business days prior to
the final maturity date on 29 March 2025 at which point all remaining bonds are mandatorily redeemed by Cromwell. The
conversion price is $1.1771 per stapled security, subject to such adjustments as consolidation or subdivision of stapled
securities, bonus issues or any issues at less than the prevailing market price of Cromwell’s stapled securities other
than issues upon exercise of performance rights issued to Cromwell’s employees. The fixed conversion translation rate is
$1.5936 per Euro. Any conversion may be settled in cash, stapled securities of Cromwell or a combination thereof at the
option of Cromwell.
Proceeds of the bonds issue were used to repurchase 952 convertible bonds with a face value of €100,000 issued in
February 2015. In total, €95.2 million ($153.1 million) of the convertible bonds issued in February 2015 were repurchased
during the year. The remaining proceeds were used to repay the Euro bridging facility (refer note (v)) and for other liquidity
purposes.
As a result of the convertible bond repurchase during the year, at year end, 548 (30 June 2017: 1,500) convertible bonds
with a face value of €100,000 each were on issue with a gross face value of €54.8 million or $86.4 million (30 June 2017:
$222.9 million). The remaining bonds bear an interest rate of 2%. The bonds are convertible into stapled securities of
Cromwell at the option of the holder from 41 days after issue date up to seven business days prior to the final maturity
date on 4 February 2020 at which point all remaining bonds are mandatorily redeemed by Cromwell. Bonds holders
were notified that as of 15 December 2017 that the conversion price change from $1.1492 to $1.1431 per stapled security
due to the announcement of an Extraordinary Distribution in respect of the stapled securities on 24 June 2016. The
conversion price remains subject to such adjustments as consolidation or subdivision of stapled securities, bonus issues
or any issues at less than the prevailing market price of Cromwell’s stapled securities other than issues upon exercise
of performance rights issued to Cromwell’s employees. The fixed conversion translation rate is $1.423 per Euro. Any
conversion may be settled in cash, stapled securities of Cromwell or a combination thereof at the option of Cromwell.
The convertible bonds are presented in the balance sheets as follows:
Convertible bond – issued February 2015
Cromwell
Trust
Face value of bonds issued – beginning of year
Derivative financial instruments – conversion feature
Convertible bond carrying amount at inception
Movements in exchange rate and amortisation of conversion
feature – previous periods
Carrying amount at 1 July
Repurchase of bonds
Amortisation and derecognition of conversion features to account
for effective interest rate and repurchase – current period
Movements in exchange rate – current period
Carrying amount at year end
2018
$M
220.1
(17.9)
202.2
11.2
213.4
(153.1)
9.9
16.2
86.4
2017
$M
220.1
(17.9)
202.2
8.5
210.7
-
3.6
(0.9)
213.4
2018
$M
220.1
-
220.1
2.8
222.9
(153.1)
-
16.6
86.4
2017
$M
220.1
-
220.1
3.8
223.9
-
-
(1.0)
222.9
87
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Convertible bond – issued March 2018
Cromwell
Trust
Face value of bonds issued during the year
Derivative financial instruments – conversion feature
Convertible bond carrying amount at inception
Amortisation to account for effective interest rate
Movements in exchange rate – current period
Carrying amount at year end
Total carrying amount at year end
2018
$M
370.0
(23.5)
346.5
0.8
(7.0)
340.3
426.7
2017
$M
-
-
-
-
-
-
213.4
2018
$M
370.0
(23.5)
346.5
0.8
(7.0)
340.3
426.7
2017
$M
-
-
-
-
-
-
222.9
The conversion feature of the convertible bonds represents an embedded derivative financial instrument in the host
debt contract. The embedded derivatives are measured at fair value and deducted from the carrying amount of the
convertible bond (which is carried at amortised cost) and separately disclosed as a derivative financial liability on the face
of the balance sheet. The conversion feature represents the parent entity’s obligation under the convertible bond terms
and conditions to issue Cromwell stapled securities should bond holders exercise their conversion option. The Trust’s
borrowing obligation in respect of the convertible bond is considered to be the gross amount payable of the convertible
bond.
During the year, as a result of the repurchase, the conversion feature in relation to the corporate bonds issued in February
2015 was fully derecognised as being immaterial.
(B) FINANCE COSTS
Total interest
Amortisation of loan transaction costs
Net exchange losses / (gains) on foreign currency borrowings
Total finance costs
Cromwell
Trust
2018
$M
48.0
21.2
10.3
79.5
2017
$M
50.6
7.7
(1.0)
57.3
2018
$M
47.9
9.7
3.6
61.2
2017
$M
50.6
3.5
0.3
54.4
Information about Cromwell’s exposure to interest rate changes is provided in note 12.
88
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 9. Derivative financial instruments
OVERVIEW
Cromwell’s and the Trust’s derivative financial instruments consist of interest rate swap and interest rate cap contracts,
a cross-currency swap contract and the conversion options on the convertible bonds issued in March 2018 by Cromwell.
Interest rate swap and interest rate cap contracts are used to fix interest on floating rate borrowings. The cross-currency
swap contract was used in the prior year to swap Australian dollars into Euro’s with the funds being used to acquire the
disposal group (note 15). The conversion option amount represents the additional value provided to convertible bond
holders compared to the same corporate bond that would have no feature to convert the bonds into Cromwell stapled
security at the end or during the term of the bond. For accounting purposes such a conversion feature is accounted for
separately from the bond liability and is carried at fair value.
Current asset
Interest rate cap contract
Non-current assets
Interest rate cap contracts
Current liabilities
Interest rate swap contracts
Cross-currency swap contract
Conversion feature – convertible bond
Non-current liabilities
Interest rate swap contracts
Cromwell
Trust
2018
$M
2017
$M
2018
$M
2017
$M
0.1
1.7
0.7
7.8
28.5
37.0
0.7
-
0.1
-
0.8
2.4
3.2
-
0.1
1.7
0.7
7.8
28.5
37.0
0.7
-
0.1
-
0.8
-
0.8
-
ACCOUNTING POLICY
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.
Cromwell enters into interest rate swap and cap 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. Cromwell has also entered into a cross-currency swap agreement with the objective of swapping
Australian dollars into Euro’s. While Cromwell 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.
Cross currency swap contract
A cross currency swap contract is a type of interest rate derivative in which Cromwell enters into an agreement to
exchange interest payments and principal denominated in two different currencies. In a cross-currency swap, interest
payments and principal in one currency are exchanged for equally valued principal and interest payments in a different
currency. In the prior year, as a component of the disposal group acquisition (see note 15) Cromwell entered in a cross
currency swap arrangement to swap Australian dollars into Euro’s. The terms of this swap are shown below:
Effective date:
Fixed rate payer currency amount:
Fixed rate:
Floating rate payer (NAB) currency amount:
Floating rate:
Termination date:
16 June 2017
€81,209,789
0.84%
$119,902,243
AUD-BBR-BBSW 3 month rate plus 1.47%
17 September 2018
89
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Interest rate cap contract – 2015
An interest rate cap is a type of interest rate derivative in which Cromwell receives payments at the end of each period
if the interest rate exceeds the agreed fixed interest rate. In order to manage future interest rate risk, in a prior year,
Cromwell and the Trust entered into an interest rate cap contract that will cap Cromwell’s and the Trust’s interest rate at a
maximum of 3.39% on the notional amount of the cap contract. The notional amount increases as follows:
Date of reset of cap
notional amount
At June 2017
October 2017
December 2017
January 2018
Notional amount
$M
713.6
800.0
900.0
1,000.0
Interest rate cap and swap contracts – 2018
In addition to the cross currency swap and interest rate cap contracts described above, during the year Cromwell
and the Trust entered into a suite of interest rate swap and interest rate cap contracts used to fix interest on floating
rate borrowings. An interest rate swap is a type of interest rate derivative in which Cromwell enters into a number
of agreements to fix interest rates on floating rate borrowings (interest rate cap contracts are described above). The
relevant information pertaining to the new cap and swap portfolio are below:
• Interest rate caps - fix interest on floating rate borrowings of between 1.92 % - 2.25%.
• Interest rate swaps - fix interest on floating rate borrowings of between 2.10% - 2.27%.
The notional amount increases as follows:
Date of reset of cap
notional amount
July 2019
July 2020
July 2021
Notional amount
$M
90.0
180.0
690.0
At balance date, the notional principal amounts and period of expiry of all of Cromwell’s and the Trust’s interest rate swap
and cap contracts is as follows:
Less than 1 year
1 – 2 years
2 – 3 years
3 – 4 years
Cromwell and Trust
2018
$M
1,119.9
90.0
90.0
510.0
2017
$M
-
833.5
-
-
Conversion features – convertible bonds
The movement of the conversion features since recognition upon issue of the convertible bonds is as follows:
Derivative financial liability at 1 July
Derecognised on bonds repurchased
Recognised on bonds issued – March 2018
Fair value loss / (gain)
Foreign exchange difference
Balance at 30 June
Cromwell and Trust
2018
$M
2.4
(2.4)
23.5
5.5
(0.5)
28.5
2017
$M
9.3
-
-
(6.9)
-
2.4
For details about the fair value measurement of Cromwell’s and the Trust’s financial instruments refer to note 12.
90
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 10. Contributed equity
OVERVIEW
The shares of Cromwell Corporation Limited (the “Company”) and the units of Cromwell Diversified Property Trust (the
“CDPT”) are combined and issued as stapled securities. The shares of the Company and units of the CDPT cannot be
traded separately and can only be traded as stapled securities.
Below is a summary of contributed equity of the Company and the CDPT separately and for Cromwell’s combined stapled
securities. The basis of allocation of the issue price of stapled securities to Company shares and CDPT units post stapling
is determined by agreement between the Company and the CDPT as set out in the Stapling Deed.
Contributed equity
Cromwell stapled securities
Company shares
CDPT units
2018
$M
2017
$M
1,615.2
1,402.1
2018
$M
118.9
2017
$M
106.9
2018
$M
2017
$M
1,496.3
1,295.2
(A) MOVEMENTS IN CONTRIBUTED EQUITY
The following reconciliation summarises the movements in contributed equity. Issues of a similar nature have been
grouped and the issue price shown is the weighted average. Detailed information on each issue of stapled securities is
publicly available via the ASX.
Cromwell stapled securities
Company shares
CDPT units
Number of
securities
Issue
price
$M
1,752,331,208
-
1,394.0
2,787,538
7,242,593
39.5¢
98.2¢
1.1
7.0
1,762,361,339
1,402.1
2,839,112
40.1¢
8,005,137
101.7¢
212,119,086
96.5¢
-
-
1,985,324,674
1.2
8.1
204.9
(1.1)
1,615.2
Opening balance 1
July 2016
Exercise of
performance rights
Distribution
reinvestment plan
Balance at 30 June
2017
Exercise of
performance rights
Distribution
reinvestment plan
Security placement
and SPP
Equity issue costs
Balance at 30 June
2018
Issue
price
-
1.7¢
5.9¢
2.3¢
3.9¢
5.5¢
-
$M
106.5
-
0.4
106.9
0.1
0.3
11.7
(0.1)
118.9
Issue
price
$M
-
1,287.5
37.8¢
92.3¢
37.9¢
97.9¢
91.1¢
-
1.0
6.7
1,295.2
1.1
7.8
193.2
(1.0)
1,496.3
The Company and CDPT have established a distribution reinvestment plan under which holders of stapled securities may
elect to have all of their distribution entitlements satisfied by the issue of new stapled ordinary securities rather than
being paid in cash. Stapled securities are issued under the plan at a discount to the market price as determined by the
Directors before each distribution.
During the year, Cromwell offered a Security Purchase Plan (SPP) to eligible securityholders, which resulted in 37,066,571
securities issued, raising approximately $35 million. In December 2017, Cromwell issued 175 million stapled securities
to SingHaiyi Group Ltd. and Haiyi Holdings Pte. Ltd., which are entities associated with Mr Gordon Tang and Mrs Celine
Tang. Mr Gordon Tang and Mrs Celine Tang are cornerstone investors in the Cromwell European REIT (CEREIT), which
listed on the SGX on 30 November 2017. Proceeds from the strategic placement were used to repay short term debt
associated with Cromwell’s investment in CEREIT and for general liquidity and operational purposes.
91
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICY
The ordinary shares of the Company are stapled with the units of the Trust and are together referred to as stapled
securities. Stapled securities 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 Cromwell’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.
(B) STAPLED SECURITIES
Stapled securities 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.
11. Reserves
OVERVIEW
Reserves are balances that form part of equity that record other comprehensive income amounts that are retained in the
business and not distributed until such time the underlying balance sheet item is realised. This note provides information
about movements in the other reserves line item of the balance sheet and a description of the nature and purpose of each
reserve.
Security-based payments
reserve
Available for sale reserve
Foreign currency
translation reserve
Total other reserves
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Cromwell
$M
Trust
$M
Balance at 1 July
2016
Security based
payments
Foreign exchange
differences
recognised
in other
comprehensive
income
Attributable to
non-controlling
interests
Balance at 30
June 2017
Security based
payments
Foreign exchange
differences
recognised
in other
comprehensive
income
Attributable to
non-controlling
interests
Balance at 30
June 2018
5.5
1.1
-
-
6.6
1.2
-
-
7.8
-
-
-
-
-
-
-
-
-
2.3
-
-
-
2.3
-
-
-
2.3
-
-
-
-
-
-
-
-
-
10.1
-
1.7
-
17.9
1.1
1.7
-
(0.3)
1.1
(0.3)
1.1
(0.5)
(0.5)
(0.5)
(0.5)
9.3
-
2.3
-
18.2
1.2
2.3
-
0.3
(4.6)
0.3
(4.6)
4.6
(0.1)
4.6
14.2
(2.4)
24.3
(0.1)
(2.4)
92
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Security-based payments reserve
The share based payments reserve is used to recognise the fair value of equity settled security based payments for
employee services. Refer to note 19 for details of Cromwell’s security based payments.
Available for sale reserve
Changes in the fair value of investments classified as available-for-sale are taken to the available-for-sale financial assets
revaluation reserve. Amounts are recognised in profit or loss when the associated assets are disposed/sold or impaired.
For Cromwell 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 Cromwell there was no movement in the available-for-sale financial assets revaluation
reserve over the last two financial years.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive
income and accumulated in the foreign currency translation reserve. Where applicable, any foreign currency differences
arising from inter-group loans are transferred to the foreign currency translation reserve upon consolidation as such
loans form part of the net investment in the respective controlled entity. The cumulative amount recognised in the foreign
currency translation reserve is reclassified to profit or loss when the net investment is disposed of.
12. Financial risk management
OVERVIEW
Cromwell’s activities expose it to a variety of financial risks which include credit risk, liquidity risk and market risk. This
note provides information about Cromwell’s risk management strategy in relation to each of the above financial risks to
which Cromwell is exposed to.
Cromwell’s overall risk management program focuses on managing these risks and seeks to minimise potential adverse
effects on the financial performance of Cromwell. Cromwell uses derivative financial instruments such as interest rate
derivatives to hedge certain risk exposures. Cromwell seeks to deal only with creditworthy counterparties. Liquidity risk is
monitored through the use of future rolling cash flow forecasts.
Cromwell’s management of treasury activities is centralised and governed by policies approved by the Directors who
monitor the operating compliance and performance as required. Cromwell 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.
Cromwell and the Trust hold the following financial instruments:
Type of financial
instrument
Financial assets
Cash and cash equivalents
Receivables
Other current financial assets
Investments at fair value through profit or loss
Derivative financial instruments
Total financial assets
Financial liabilities
Trade and other payables
Dividends / distributions payable
Borrowings
Derivative financial instruments
Total financial liabilities
(1)
(1)
(1)
(2)
(3)
(4)
(4)
(4)
(3)
Cromwell
Trust
2018
$M
204.6
44.0
-
33.0
1.8
283.4
52.3
41.4
1,412.0
37.7
1,543.4
2017
$M
66.9
37.4
20.0
315.8
0.1
440.2
46.4
36.7
1,462.4
3.2
1,548.7
2018
$M
137.6
183.9
-
1.3
1.8
324.6
17.3
41.4
1,412.4
37.7
1,508.8
2017
$M
32.1
178.2
-
266.3
0.1
476.7
23.4
36.8
1,473.8
0.8
1,534.8
Type of financial instrument as per AASB 139 Financial Instruments: Recognition and Measurement:
(1) Loans and receivables;
(2) At fair value through profit or loss – designated;
(3) At fair value through profit or loss – held for trading;
(4) At amortised cost.
93
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (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 Cromwell. Cromwell has exposure to credit risk on all financial assets included in the balance sheet
except investments at fair value through profit or loss.
Cromwell 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 Cromwell 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 balance
sheet of Cromwell. Cromwell holds no significant collateral as security.
Cash is held with Australian, New Zealand, United Kingdom, Singapore and European financial institutions. Interest rate
derivative counterparties are all Australian financial institutions.
(B) LIQUIDITY RISK
Prudent liquidity risk management implies maintaining sufficient cash reserves and undrawn finance facilities to meet the
ongoing operational requirements of the business. It is Cromwell’s policy to maintain sufficient funds in cash and cash
equivalents to meet expected near term operational requirements. Cromwell prepares and monitors rolling forecasts of
liquidity requirements on the basis of expected cash flow. Cromwell 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 contractual maturity of Cromwell’s and the Trust’s financial liabilities at balance date are shown in the table below.
It shows undiscounted contractual cash flows required to discharge Cromwell’s financial liabilities, including interest at
current market rates.
1 year or
less
$M
52.3
41.4
54.1
13.2
Cromwell
2-3 years
4-5 years
$M
$M
-
-
-
-
Total
$M
52.3
41.4
192.4
1,110.8
1,357.3
22.6
-
35.8
1 year or
less
$M
17.3
41.4
54.1
13.2
Trust
2-3 years
4-5 years
$M
$M
-
-
-
-
Total
$M
17.3
41.4
192.4
1,110.8
1,357.3
22.6
-
35.8
161.0
215.0
1,110.8
1,486.8
126.0
215.0
1,110.8
1,451.8
46.4
36.7
234.7
3.8
-
-
-
-
46.4
36.7
843.7
0.9
506.0
1,584.4
-
4.7
23.4
36.8
234.7
3.8
-
-
-
-
23.4
36.8
843.7
0.9
506.0
1,584.4
-
4.7
321.6
844.6
506.0
1,672.2
298.7
844.6
506.0
1,649.3
2018
Trade and other
payables
Dividends /
distribution
payable
Borrowings
Derivative financial
instruments
Total financial
liabilities
2017
Trade and other
payables
Dividends /
distribution
payable
Borrowings
Derivative financial
instruments
Total financial
liabilities
94
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (C) MARKET RISK
Market risk is the risk that the fair value or future cash flows of Cromwell’s financial instruments fluctuate due to market
price changes. Cromwell is exposed to the following market risks:
• Price risk – equity securities;
• Interest rate risk; and
• Foreign exchange risk.
Price risk – Listed and unlisted equity securities
Cromwell and the Trust are exposed to price risk in relation to its listed and unlisted equity securities (refer note 7).
Cromwell and the Trust use the ASX closing price to determine the fair value of their listed securities. For unlisted
securities Cromwell and the Trust use the fair value of the net assets of the unlisted entity to determine the fair value of
their investments. The fair value of the net assets of unlisted entities is predominantly dependent on the market value of
the investment properties they hold. Any movement in the market value of the investment properties will impact on the
fair value of Cromwell and the Trust’s investment.
Sensitivity analysis – equity securities price risk
The table below details Cromwell’s and the Trust’s sensitivity to movements in the fair value of Cromwell’s financial
assets at fair value through profit or loss:
Fair value increase / (decrease) of:
+10%
-10%
Carrying
amount $M
Profit
$M
Equity
$M
Profit
$M
Equity
$M
2018
Cromwell
Investments at fair value through profit or loss
Trust
Investments at fair value through profit or loss
2017
Cromwell
Investments at fair value through profit or loss
Trust
Investments at fair value through profit or loss
33.0
1.3
315.8
266.3
3.3
0.1
31.6
26.6
3.3
0.1
31.6
26.6
(3.3)
(0.1)
(3.3)
(0.1)
(31.6)
(31.6)
(26.6)
(26.6)
Interest rate risk
Cromwell’s interest rate risk primarily arises from borrowings. Borrowings issued at variable rates expose Cromwell to
cash flow interest rate risk. Borrowings issued at fixed rates expose Cromwell to fair value interest rate risk. Cromwell’s
policy is to effectively maintain hedging arrangements on not less than 50% of its borrowings. At balance date 81% (2017:
nil%) of Cromwell’s variable rate secured bank loan borrowings of $1,000 million (2017: $1,257 million) were effectively
hedged through interest rate swap contracts. The convertible bonds carry a fixed interest rate. Therefore, interest on a
total of 30% (2017: 15%) of Cromwell’s total borrowings is effectively fixed at balance date.
For details about notional amounts and expiries of Cromwell’s and the Trust’s interest rate swap and interest rate cap
contracts and the cross currency swap contract refer to note 9.
Sensitivity analysis – interest rate risk
The table below details Cromwell’s sensitivity to movements in the year end interest rates, based on the borrowings
and interest rate derivatives held at balance date with all other variables held constant and assuming all Cromwell’s
borrowings and interest rate derivatives moved in correlation with the movement in year end interest rates.
95
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Interest rate increase / (decrease) of:
+1%
-1%
2018
Cromwell
Trust
2017
Cromwell
Trust
Profit
$M
(5.3)
(5.9)
(11.9)
(12.3)
Equity
$M
Profit
$M
Equity
$M
(5.3)
(5.9)
(11.9)
(12.3)
5.3
5.9
11.9
12.3
5.3
5.9
11.9
12.3
Foreign exchange risk
Cromwell’s foreign exchange risk primarily arises from its investments in foreign subsidiaries and the investment in
CEREIT. The functional currency of these subsidiaries is Euro. The acquisition of the foreign subsidiaries was financed
through a convertible bond also denominated in Euro effectively providing a natural hedge against foreign exchange
movements between the Australian Dollar and the Euro. No hedge accounting was applied in relation to the net
investment in the foreign subsidiaries.
Cromwell’s and the Trust’s exposure to Euro foreign currency risk at the end of the year, expressed in Australian dollars,
was as follows:
Cash and cash equivalents
Receivables – interest receivable – related parties
Receivables – Trust loans – related parties
Equity accounted investments
Payables – interest payable convertible bond
Borrowings – convertible bond
Derivative financial instruments – cross-currency swap
Derivative financial instruments – conversion feature
Net exposure
Cromwell
Trust
2018
$M
13.1
-
-
507.1
(3.0)
(426.7)
(7.9)
(28.5)
54.1
2017
$M
-
-
-
10.6
(1.8)
(213.4)
(0.8)
(2.4)
(207.8)
2018
$M
13.1
6.9
153.0
484.8
(3.0)
(426.7)
(7.9)
(28.5)
191.7
2017
$M
-
5.0
144.2
-
(1.8)
(222.9)
(0.8)
-
(76.3)
Amounts recognised in profit or loss and other comprehensive income
Cromwell
Trust
Amounts recognised in profit or loss
Net foreign exchange loss
Exchange gains / (losses) on foreign currency borrowings included
in finance costs
Total (expense) / income recognised in profit or loss
Amounts recognised in other comprehensive income
Translation of foreign operations
Translation differences on inter-group loans that form part of the
net investment in the foreign operation
Sensitivity analysis – foreign exchange risk
Euro – Australian Dollar gains 1 cent in exchange
Euro – Australian Dollar loses 1 cent in exchange
2018
$M
(3.2)
(10.3)
(13.5)
4.9
2.5
7.4
Profit
$M
7.0
(7.2)
2017
$M
2018
$M
2017
$M
(0.7)
1.0
0.3
(0.8)
0.5
(0.3)
(1.9)
(3.6)
(5.5)
-
2.6
2.6
(0.1)
(0.3)
(0.4)
-
0.6
0.6
2018
2017
Equity
$M
6.0
(6.2)
Profit
$M
3.2
(3.3)
Equity
$M
(1.1)
1.1
96
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (D) FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Cromwell uses a number of methods to determine the fair value of its financial instruments as described in AASB 13 Fair
Value Measurement. The methods comprise the following:
Level 1:
Level 2:
quoted prices (unadjusted) in active markets for identical assets or liabilities.
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).
The table below presents Cromwell’s and the Trust’s financial assets and liabilities measured and carried at fair value at
30 June 2018 and 30 June 2017:
2018
2017
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Notes
$M
$M
$M
$M
$M
$M
$M
$M
Listed equity securities
Cromwell
Financial assets at fair value
Investments at fair value through profit
or loss
•
• Unlisted equity securities
•
Other financial asset
Derivative financial instruments
•
Total financial assets at fair value
Interest rate cap
Financial liabilities at fair value
Derivative financial instruments
•
•
•
Total financial liabilities at fair value
Interest rate swaps
Interest currency swap
Conversion feature
Trust
Financial assets at fair value
Investments at fair value through profit
or loss
•
•
Derivative financial instruments
•
Total financial assets at fair value
Listed equity securities
Unlisted equity securities
Interest rate cap
Financial liabilities at fair value
Derivative financial instruments
•
•
•
Total financial liabilities at fair value
Interest rate swaps
Cross currency swap
Conversion feature
7
7
7
9
9
9
9
7
7
9
9
9
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.3
-
1.8
3.1
1.4
7.8
28.5
37.7
-
1.3
1.8
3.1
1.4
7.8
28.5
37.7
-
20.0
11.7
-
31.7
-
-
-
-
-
-
-
-
-
-
-
-
-
21.3
11.7
1.8
34.8
1.4
7.8
28.5
37.7
-
1.3
1.8
3.1
1.4
7.8
28.5
37.7
265.0
-
-
-
265.0
-
-
-
-
265.0
-
-
265.0
-
-
-
-
-
1.3
-
0.1
1.4
-
0.8
2.4
3.2
-
1.3
0.1
1.4
-
0.8
-
0.8
-
34.3
15.2
-
49.5
-
-
-
-
-
-
-
-
-
-
-
-
265.0
35.6
15.2
0.1
315.9
-
0.8
2.4
3.2
265.0
1.3
0.1
266.4
-
0.8
-
0.8
There were no transfers between the levels of the fair value hierarchy during the financial year.
Disclosed fair values
The fair values of investments at fair value through profit or loss (Levels 2 and 3) and derivative financial instruments
(Level 2) are disclosed in the balance sheet.
The carrying amounts of receivables, other current assets and payables are assumed to approximate their fair values
due to their short-term nature. The fair value of non-current borrowings (other than the convertible bond) is estimated
97
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
by discounting the future contractual cash flows at the current market interest rates that are available to Cromwell for
similar financial instruments. The fair value of these borrowings is not materially different from the carrying value due to
their relatively short-term nature.
The convertible bonds are traded on the Singapore Exchange (SGX). At balance date the fair value of issued convertible
bonds was €279.8 million ($441.0 million) (2017: €144.3 million ($214.5 million)) compared to a carrying amount of €284.8
million ($426.7 million) (2017: €150.0 million ($222.9 million).
(i) Valuation techniques used to derive Level 1 fair values
Level 1 assets held by Cromwell include listed equity securities. The fair value of financial assets traded in active markets
is based on their quoted market prices at the end of the reporting period without any deduction for estimated future
selling costs. Cromwell values its investments in accordance with the accounting policies set out in note 7 to the financial
statements.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from
an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
(ii) Valuation techniques used to derive Level 2 fair values
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible
on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in Level 2.
Fair value of investments at fair value through profit or loss
Level 2 assets held by Cromwell include unlisted equity securities in Cromwell managed investment schemes. The fair
value of these financial instruments is based upon the net tangible assets as publicly reported by the underlying unlisted
entity, adjusted for inherent risk where appropriate.
Fair value of interest rate swaps and caps
Level 2 financial assets and financial liabilities held by Cromwell include “Vanilla” fixed to floating interest rate swap,
interest rate cap and cross currency swap derivatives (over-the-counter derivatives). The fair value of these derivatives
has been determined using a pricing model based on discounted cash flow analysis which incorporates assumptions
supported by observable market data at balance date including market expectations of future interest rates and discount
rates adjusted for any specific features of the derivatives and counterparty or own credit risk. All counterparties to interest
rate derivatives are Australian financial institutions.
Fair value of conversion feature – convertible bond
The fair value of the convertible bond conversion feature has been determined by comparing the market value of the
convertible bond to the value of a bond with the same terms and conditions but without an equity conversion feature (bond
floor). The difference between the two types of bonds is considered to represent the fair value of the conversion feature of
the convertible bond.
(iii) Valuation techniques used to derive Level 3 fair values
If the fair value of financial instruments is determined using valuation techniques and if one or more of the significant
inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity
securities.
Fair value of investments at fair value through profit or loss
Level 3 assets held by Cromwell include co-investments in Cromwell Europe managed wholesale property funds and
Cromwell’s effective 49% interest in an investment property in Campbell, ACT. The fair value of these investments is
determined based on the value of the underlying assets held by the fund. The assets of the fund are subject to regular
external valuations which are based on discounted net cash inflows from expected future income and/or comparable sales
of similar assets. Appropriate discount rates determined by the independent valuer are used to determine the present
value of the net cash inflows based on a market interest rate adjusted for the risk premium specific to each asset. The
fair value is determined using valuation techniques that are not supported by prices from an observable market. The fair
value of these investments recognised in the statement of financial position could change significantly if the underlying
assumptions made in estimating the fair values were significantly changed.
98
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Reconciliation from the opening balances to the closing balances for fair value
measurements in Level 3 of the fair value hierarchy:
Opening balance as at 1 July
Additions
Disposals
Fair value (gain) / loss
Foreign exchange difference
Balance at 30 June
Cromwell
2018
$M
49.5
0.2
(15.0)
(4.6)
1.6
31.7
2017
$M
36.5
16.3
(9.0)
6.7
(1.0)
49.5
99
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Group Structure
This section will provide information about the Cromwell Property Group structure including parent entity information,
information about controlled entities (subsidiaries), business combination information relating to the acquisition of
controlled entities and details of disposal group held for sale.
13. Parent entity disclosures
OVERVIEW
The financial information below on Cromwell’s parent entity Cromwell Corporation Limited (the “Company”) and the
Trust’s parent entity Cromwell Diversified Property Trust (the “CDPT”) as stand-alone entities has been provided in
accordance with the requirements of the Corporations Act 2001.
(A) SUMMARISED FINANCIAL INFORMATION
Company
CDPT
Results
(Loss) / profit for the year
Total comprehensive income for the year
Financial position
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share based payments reserve
Available for sale reserve
Retained earnings / (accumulated losses)
Total equity
2018
$M
(85.1)
(85.1)
17.9
129.8
8.6
176.8
(47.0)
118.9
7.7
(0.4)
(173.2)
(47.0)
2017
$M
(0.4)
(0.4)
4.5
191.1
16.8
166.5
24.6
106.9
6.6
(0.8)
(88.1)
24.6
2018
$M
183.9
183.9
131.7
2,364.6
54.1
1,034.4
1,330.2
1,496.3
-
-
(166.1)
1,330.2
2017
$M
133.8
133.8
34.2
2,175.9
236.0
1,073.6
1,102.3
1,295.2
-
-
(192.9)
1,102.3
ACCOUNTING POLICY
The financial information of the parent entities of Cromwell and the Trust have been prepared on the same basis as the
consolidated financial statements except for investments in subsidiaries and equity accounted investments.
Investments in subsidiaries and equity accounted investments are accounted for at cost less accumulated impairment
charges in the financial report of the parent entity. Distributions and dividends received from subsidiaries and equity
accounted investments are not eliminated and recognised in profit or loss.
(B) COMMITMENTS
At balance date the Company and CDPT had no commitments (2017: none) in relation to capital expenditure contracted for
but not recognised as liabilities.
(C) GUARANTEES PROVIDED
The Company and CDPT both have provided guarantees in relation to the convertible bond. Both entities unconditionally
and irrevocably guarantee the due and punctual payment of all amounts at any time becoming due and payable in respect
of the convertible bond. These guarantees were provided in the prior year.
(D) CONTINGENT LIABILITIES
At balance date the Company and CDPT had no contingent liabilities (2017: none).
100
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Equity Holding
2018
2017
14. Controlled entities
(A) COMPANY AND ITS CONTROLLED ENTITIES
Name
Country of
registration
%
100
Czech Republic
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Cromwell Aged Care Holdings Pty Ltd Australia
Australia
Cromwell Altona Trust
Australia
Cromwell BT Pty Ltd
Cromwell Capital Limited
Australia
Australia
Cromwell Finance Pty Ltd
Cromwell Funds Management Limited Australia
Australia
Cromwell Holding Trust No 1 Pty Ltd
Australia
Cromwell Holding Trust No 2 Pty Ltd
Australia
Cromwell Infrastructure Pty Ltd
Australia
Cromwell Operations Pty Ltd
Australia
Cromwell Project & Technical
Solutions Pty Ltd
Cromwell Property Securities Limited Australia
Cromwell Property Services Pty Ltd
Australia
Cromwell Real Estate Partners Pty Ltd Australia
Australia
Cromwell Seven Hills Pty Ltd
Australia
Marcoola Developments Pty Ltd
Australia
Valad Australia Pty Ltd
Australia
Votraint No. 662 Pty Ltd
Cyprus
Gateshead Investments Limited
Cyprus
Upperastoria Trading & Investments
Limited
Cromwell Property Group Czech
Republic s.r.o
Denmark
Cromwell Denmark A/S
Finland
Cromwell Finland O/Y
France
Cromwell France SAS
Cromwell Germany GmbH
Germany
Cromwell Property Group Hungary Kft Hungary
Cromwell Property Group Italy SRL
Cromwell CPR Promote S.à r.l.
Cromwell European Cities Income
Fund General Partner S.à r.l.
Cromwell Luxembourg SA
Cromwell REIM Luxembourg S.à r.l
Cromwell Central Europe B.V.
Cromwell Netherlands B.V.
EHI Fund GP (Netherlands) B.V.
Cromwell Norway A/S
Cromwell Poland Sp Zoo
Cromwell Poland No. 2 Sp Zoo
Cromwell Property Group Romania
SRL
Cromwell EREIT Management Pte. Ltd Singapore
Cromwell Sweden A/B
Cromwell Asset Management UK
Limited
Cromwell Capital Ventures UK Limited United Kingdom 100
United Kingdom 100
Cromwell CEE Coinvest LP
United Kingdom 100
Cromwell CEE Promote LP
90
United Kingdom
Cromwell Coinvest CEIF LP
United Kingdom 100
Cromwell Coinvest CEVAF LP
90
United Kingdom
Cromwell Coinvest ECV LP
Luxembourg
Luxembourg
Netherlands
Netherlands
Netherlands
Norway
Poland
Poland
Romania
100
100
Sweden
United Kingdom 100
Italy
Luxembourg
Luxembourg
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Cromwell Corporate Secretarial
Services Limited
United Kingdom 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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
90
100
Name
Country of
registration
United Kingdom
United Kingdom
United Kingdom
Cromwell Corporate Secretarial No.
2 Limited
Cromwell Development Holdings UK
Limited
Cromwell Development Management
UK Limited
United Kingdom
Cromwell Director Limited
Cromwell Europe Limited
United Kingdom
Cromwell European Holdings Limited United Kingdom
United Kingdom
Cromwell European Management
Services Limited
Cromwell GP
Cromwell Holdings Europe Limited
Cromwell Investment Holdings UK
Limited
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Cromwell Investment Management
Services Limited
Cromwell Investment Services Limited United Kingdom
United Kingdom
Cromwell Management Holdings
Limited
Cromwell Poland Retail LLP
Cromwell Poland Retail UK Limited
Cromwell Promote CEIF LP
Cromwell Promote CEVAF LP
Cromwell Promote ECV LP
Cromwell Promote HIG LP
Cromwell Watford Limited
Cromwell WBP Poland LP
Cromwell YCM Coinvest LP
Cromwell YCM Promote LP
D.U.K.E. (Cheetham Hill) Limited
D.U.K.E. Combined GP Limited
Equitis Limited
EHI Carried Interest Partner Limited
EHI CV1 UK Limited
EHI CV3 UK Limited
EHIF Limited
Equity Partnerships Fund Management
(Guernsey) Limited
Equity Partnerships (Osprey) Limited
United Kingdom
German Activ General Partner Limited United Kingdom
Industrial Investment Partnership
(General Partner) Limited
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Guernsey
United Kingdom
Industrial Investment Partnership
United Kingdom
(LP No. 1) Limited
United Kingdom
IO Management Services Limited
Nordic Aktiv General Partner Limited
Guernsey
Nordic Aktiv General Partner 2 Limited Guernsey
Oceanrule Limited
Parc D’Activities 1 GP Limited
PFM Coinvestment Partner Limited
The IO Group Limited
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Equity Holding
2018
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
50
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
100
100
100
100
100
100
100
100
50
100
80
100
100
100
100
100
80
80
100
100
100
100
100
100
100
101
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (B) TRUST AND ITS CONTROLLED ENTITIES
Name
CDPT Finance Pty Ltd
CDPT Finance 2 Pty Ltd
Cromwell Accumulation Fund
Cromwell Bligh House Trust
Cromwell Bundall Corporate Centre
Head Trust
Cromwell Bundall Corporate Centre
Trust
Cromwell CPF No. 1 Fund
Cromwell Diversified Property Trust
No 2
Cromwell Diversified Property Trust
No 3
Cromwell Health and Forestry House
Trust
Cromwell Holding Trust No 1
Cromwell Holding Trust No 2
Cromwell Holding Trust No 4
Cromwell HQ North Head Trust
Cromwell HQ North Trust
Cromwell Mary Street Property Trust
Cromwell Mary Street Planned
Investment
Cromwell McKell Building Trust
Cromwell Newcastle Trust
Cromwell Northbourne Planned
Investment
Cromwell NSW Portfolio Trust
Cromwell Penrith Trust
Cromwell Property Fund
Cromwell Property Fund Trust No 2
Cromwell Property Fund Trust No 3
Cromwell Queanbeyan Trust
Country of
registration
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Equity Holding
2018
2017
%
100
100
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
92
100
100
100
100
100
100
100
100
100
Name
Country of
registration
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Cromwell SWG Trust
Cromwell SPV Finance Pty Ltd
Cromwell Symantec Trust
Cromwell TGA Planned Investment
Cromwell Wakefield Property Trust
Cromwell Wollongong Trust
EXM Head Trust
EXM Trust
Mascot Head Trust
Mascot Trust
Tuggeranong Head Trust
Tuggeranong Trust
CECIF Lux Holdco1 S.à r.l.
CECIF Lux Holdco2 S.à r.l.
CECIF Lux Bidco1 S.à r.l.
Cromwell EREIT Lux 2 S.à r.l.
Cromwell EREIT Lux 4 S.à r.l.
Cromwell EREIT Lux 5 S.à r.l
Cromwell European Cities Income
Fund
Yova Central Plaza B.V.
Netherlands
Yova Koningshade B.V.
Netherlands
Yova Ruyterkade B.V.
Netherlands
Cromwell SG SPV 1 Pte. Ltd.
Singapore
Cromwell SG SPV 2 Pte. Ltd.
Singapore
Cromwell SG SPV 3 Pte. Ltd.
Singapore
Cromwell SG SPV 4 Pte. Ltd
Singapore
Singapore
Cromwell SG SPV 5 Pte. Ltd.
Cromwell Singapore Holdings Pte. Ltd. Singapore
Singapore
Cromwell Real Estate Investment
Trust
Equity Holding
2018
2017
%
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
100
100
100
100
100
100
100
100
100
100
100
100
100
All new entities have been incorporated during the year. There was no business combination during the year. Entities,
which Cromwell or the Trust controlled in the prior year with no equity holding in the current year have either been
deregistered or disposed in the current year.
102
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 15. Details of disposal group
OVERVIEW
(A) Description of disposal group
In June 2017, Cromwell and the Trust incorporated a new entity, Cromwell European Real Estate Investment Trust
(“CEREIT”). This entity is the parent entity of a pan-European real estate investment trust which listed on the Singapore
Stock Exchange (SGX) on 30 November 2017. CEREIT acquired the Cromwell European Cities Income Fund (“CECIF”) as
its initial seed portfolio of assets in June 2017. The assets of CECIF primarily comprised a portfolio of three investment
properties located in the Netherlands with a fair value at 30 June 2017 of €209.7 million ($311.7 million).
(B) Classification of disposal group as held for sale
CEREIT and its subsidiaries were classified as a held for sale disposal group in the prior year because they were in a
saleable condition and the carrying amount would be recovered principally through a sale transaction, being the floatation
on the SGX. During the year the CECIF portfolio was combined with a number of others in a transaction that cumulated
on 30 November 2017 with the entire CEREIT group being listed on the SGX. The outcome of this transaction saw
Cromwell’s and the Trust’s existing interest in CEREIT being significantly diluted and as such it is now accounted for as an
equity accounted investment (see note 6).
(C) Gain recognised in relation to disposal group
During the year Cromwell and the Trust derived a $1.5 million and $1.7 million gain respectively (2017: $0.3 million and
$0.3 million gain) in relation to the CEREIT disposal group. This amount is not considered part of the operating profit of
Cromwell so is not included in any operating segment.
ACCOUNTING POLICY
Components of the entity are classified as assets held for sale if they are currently in a saleable condition and their
carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is
considered probable. Such assets are disclosed separately and are disclosed as current assets if a co-ordinated plan to
dispose of the assets is in place and it is expected they will be sold in less than one year from balance date.
The results of held for sale assets are presented separately on the face of the income statement.
Held for sale assets are measured at the lower of their carrying amount and fair value less costs to sell. Non-current
assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately
from the other assets in the balance sheet. The liabilities and equity of a disposal group classified as held for sale are
presented separately from other liabilities and equity respectively in the balance sheet.
103
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Other Items
This section of the annual financial report provides information about individually significant items to the balance sheet
or the income statement and items that are required to be disclosed by Australian Accounting Standards, including
unrecognised items and the basis of preparation of the annual financial report.
16. Other financial assets and liabilities
OVERVIEW
This note provides further information about material financial assets and liabilities that are incidental to Cromwell’s and
the Trust’s trading activities, being receivables and trade and other payables, as well as information about restricted cash.
(A) RECEIVABLES
Current
Trade and other receivables
Loans – joint venture
Receivables – current
Non-current
Loans – related parties
Trust loans – related party
Receivables – non-current
Cromwell
Trust
2018
$M
38.1
-
38.1
5.9
-
5.9
2017
$M
34.2
0.8
35.0
2.4
-
2.4
2018
$M
13.8
-
13.8
1.9
168.2
170.1
2017
$M
18.8
-
18.8
-
159.4
159.4
ACCOUNTING POLICY
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less
provision for impairment. Operating lease receivables of investment properties are due on the first day of each month,
payable in advance.
Collectability 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 Cromwell
may 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.
Loans – related parties
Current loans – joint venture
The Trust provided a number of short-term loan facilities to Cromwell’s joint venture Oyster Property Funds Limited
(“Oyster”) for the initial funding of Oyster property syndications. The syndications were successful and at balance date all
loans had been repaid by Oyster and there was nil outstanding (2017: $0.8 million outstanding to Cromwell).
Trust loans – related party
In February 2015 a subsidiary of the Trust issued a €150 million convertible bond. Substantially all of the proceeds were
on-lent to the ultimate parent entity of the Trust, the Company or its subsidiaries (“CCL”). The proceeds of the loans from
the Trust (the “Trust loans”) were used by the Company to acquire Valad Europe (now known as the European business).
The Trust loans to CCL consist of three facilities as follows:
104
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Unsecured loan:
Redeemable preference shares:
In a prior year the Trust provided CCL a loan facility of €107.6 million to CCL. CCL
made no repayments (2017: $8.6 million) of the loan during the year leaving a loan
balance of $168.2 million at balance date. The Euro denominated loan facility is
unsecured and carries an interest rate of 2.5%. The loan expires in February 2020.
In a prior year the Trust subscribed to redeemable preference shares (“RPS”) issued
by a subsidiary of the Company. The total subscription amount was €27.5 million
($41.0 million). The RPS were redeemed at the election of the Trust on 29 June 2017
and the resultant loan transferred from the Trust to the Company.
Senior debt facility:
In a prior year a subsidiary of the Trust provided a loan facility of €14.4 million ($21.5
million) to a subsidiary of CCL. The facility was fully drawn down and the loan was
fully repaid during the prior year.
At balance date, Cromwell and the Trust had $1.7 million receivables which were past due date but not impaired (2017:
$0.9 million). In the prior year the Trust recognised a decrease in the recoverable amount of the redeemable preference
share loan to a CCL subsidiary by $35.3 million, following the decrease in the recoverable amount of goodwill recognised
by the CCL subsidiary in relation to Cromwell’s European business. For further details refer note 17. There were no other
receivables impaired at balance date (2017: none).
(B) OTHER FINANCIAL ASSETS
Restricted cash
Cromwell
Trust
2018
$M
-
2017
$M
20.0
2018
$M
-
2017
$M
-
In the current year Cromwell and the Trust fully repaid the margin loan facility (refer note 8.). As such, Cromwell and the
Trust are no longer required to hold any cash (30 June 2017: $20 million) at any time making the amount unavailable for
any other use during the term of the loan.
(C) TRADE AND OTHER PAYABLES
Trade and other payables
Lease incentives payables
Tenant security deposits
Trade and other payables
Cromwell
Trust
2018
$M
47.3
4.8
0.2
52.3
2017
$M
35.4
10.5
0.5
46.4
2018
$M
12.3
4.8
0.2
17.3
2017
$M
12.4
10.5
0.5
23.4
ACCOUNTING POLICY
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 Cromwell prior to the end of the year and which are
unpaid. The amounts are usually unsecured and paid within 30-60 days of recognition.
105
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 17.
Intangible assets
OVERVIEW
At the commencement of the year Cromwell’s intangible assets consisted of goodwill and management rights relating
to Cromwell’s European business acquired in a prior year and software assets. Goodwill represented the excess of
consideration paid for the acquisition over identifiable net assets of the business acquired. Management rights relate to
contractual rights to fund management fees in place at the date of acquisition.
During the year management assessed the carrying value of the goodwill attributable to the European business and
concluded it was impaired. This is due to the accelerated disposal of two of the largest mandates managed by the
European business along with a third of the assets that underpinned the cash flows and resultant goodwill associated
with the European business being substantially transferred in the CEREIT entity. Hence, no value could be attributed to
the goodwill and it was impaired to $nil. Similarly, related management rights were also impaired to their recoverable
amount during the year.
This note provides information about the movements in intangible assets.
2018
Cost
Accumulated amortisation
Decrease in recoverable amount
Total intangible assets
Balance at 1 July 2017
Additions
Amortisation
Decrease in recoverable amount
Foreign exchange differences
Balance at 30 June 2018
2017
Cost
Accumulated amortisation
Decrease in recoverable amount
Total intangible assets
Balance at 1 July 2016
Additions
Amortisation
Foreign exchange differences
Balance at 30 June 2017
Goodwill
$M
Management
rights
$M
Software
$M
151.1
-
(151.1)
-
66.6
-
-
(69.5)
2.9
-
19.3
(17.2)
(2.1)
-
4.4
-
(2.4)
(2.1)
0.1
-
7.0
(4.7)
-
2.3
1.3
1.8
(0.8)
-
-
2.3
Goodwill
$M
Management
rights
$M
Software
$M
151.1
-
(84.5)
66.6
66.9
-
-
(0.3)
66.6
19.3
(14.9)
-
4.4
9.8
-
(5.2)
(0.2)
4.4
5.2
(3.9)
-
1.3
1.6
0.4
(0.7)
-
1.3
Total
$M
177.4
(21.9)
(153.2)
2.3
72.3
1.8
(3.2)
(71.6)
3.0
2.3
Total
$M
175.6
(18.8)
(84.5)
72.3
78.3
0.4
(5.9)
(0.5)
72.3
106
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICY
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired
in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method
for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the
expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are
considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting
estimates and adjusted on a prospective basis. The amortisation expense on intangible assets with finite lives is
recognised in profit or loss.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the
asset is derecognised.
Cromwell carries the goodwill, management rights and software as intangible assets. Goodwill has an indefinite useful
life and is therefore not amortised. Instead, goodwill is tested annually for impairment. Funds management rights are
amortised over the length of the contractual rights to which they relate in accordance with forecast cash flows from
these rights in the respective period. At balance date the terms of the contracts ranged between six months and 7.5
years. Software is amortised on a straight-line basis over two to five years.
107
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 18. Cash flow information
OVERVIEW
This note provides further information on the consolidated cash flow statements of Cromwell and the Trust. It reconciles
profit for the year to cash flows from operating activities and information about non-cash transactions.
(A) RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Cromwell
Trust
Net profit
Amortisation and depreciation
Amortisation of lease costs and incentives
Straight-line rentals
Security-based payments
Share of (profits) / losses – equity accounted investments (net of
distributions and impairments)
Net foreign exchange loss / (gain)
Amortisation of loan transaction costs
Gain on disposal of listed securities
Loss on sale of investment properties
Decrease / (increase) in recoverable amounts
Fair value net (gain) / loss from:
Investment properties
Derivative financial instruments
Investments at fair value through profit or loss
Payment for other transaction costs
Finance costs attributable to disposal group
Changes in operating assets and liabilities
(Increase) / decrease in:
Receivables
Tax assets / liabilities
Other current assets
Increase / (decrease) in:
Trade and other payables
Provisions
Unearned revenue
Net cash provided by operating activities
2018
$M
204.1
4.4
19.5
(27.8)
1.2
(128.4)
0.1
19.9
(15.7)
5.0
76.1
(77.4)
13.7
3.5
5.7
2.1
(3.1)
8.5
(0.9)
11.6
0.7
(2.3)
120.5
2017
$M
277.5
6.8
19.9
3.6
1.1
3.1
(0.6)
7.8
-
0.9
-
(125.0)
(17.1)
(14.2)
-
-
2.0
(3.1)
(0.5)
(6.7)
0.7
(1.9)
154.3
2018
$M
288.4
-
19.5
(27.8)
-
(111.0)
(0.7)
9.7
(15.7)
5.0
-
(77.4)
16.1
(0.1)
3.0
2.1
5.0
9.3
(0.1)
(0.4)
-
(1.4)
123.5
2017
$M
261.0
-
19.9
3.6
-
5.7
0.1
3.5
-
0.9
(10.6)
(125.0)
(10.2)
(6.6)
-
-
(6.1)
0.2
(0.5)
(8.5)
-
(1.7)
125.7
ACCOUNTING POLICY
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.
(B) NON CASH TRANSACTIONS
Stapled securities / units issued on reinvestment of distributions
CEREIT acquisition fee received in units
Total non cash transactions
Cromwell
Trust
2018
$M
8.1
10.1
18.2
2017
$M
7.0
-
7.0
2018
$M
7.8
-
7.8
2017
$M
6.7
-
6.7
108
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 19. Security based payments
OVERVIEW
Cromwell operates a security based compensation scheme, the Performance Rights Plan (PRP). Under the PRP, eligible
employees, including executive directors, have the right to acquire Cromwell securities at a consideration of between
$0.00 and $0.50 subject to certain vesting conditions. Eligibility is by invitation of the Board of Directors and participation in
the PRP by executive directors is subject to security holder approval. The PRP is designed to provide long-term incentives
for employees to continue employment and deliver long-term securityholder returns.
This note provides information below on the security based compensation schemes Cromwell currently operates.
(A) PRP
Cromwell established a Performance Rights Plan in September 2007. All full-time and part-time employees who meet
minimum service, remuneration and performance requirements, including executive directors, are eligible to participate
in the PRP at the discretion of the Board. Under the PRP, eligible employees are allocated performance rights. Each
performance right enables the participant to acquire a stapled security in Cromwell, 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.
The amount of performance rights that will vest under the PRP depends on a combination of factors which may include
Cromwell’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
three 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
Cromwell 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 is a summary of movements in the number of performance rights outstanding at the end of the financial year:
As at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
As at 30 June
Vested and exercisable
2018
2017
Average
exercise
price
Number of
performance
rights
Average
exercise
price
Number of
performance
rights
$0.38
$0.35
$0.40
$0.00
$0.37
-
10,276,844
3,961,001
(2,839,112)
(141,991)
11,256,742
-
$0.39
$0.39
$0.39
$0.46
$0.38
-
8,593,951
5,062,046
(2,787,538)
(591,615)
10,276,844
-
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2018 was
$0.96 (2017: $0.96). No options expired during the years covered in the table above.
The weighted average remaining contractual life of the 11,256,742 performance rights outstanding at the end of the
financial year (2017: 10,276,844) was 1.5 years (2017: 1.5 years).
Fair value of performance rights granted
The fair value of performance rights granted during the year was between $0.29 per option for PRP with an exercise price
of $0.50 and $0.76 per option for PRP with an exercise price of $nil (2017: fair value between $0.21 and $0.68).
Performance rights do not have any market-based vesting conditions. The fair values at grant date are 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 included:
109
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Exercise price:
Grant date(s):
Share price at grant date(s):
Expected price volatility:
Expected dividend yield(s):
Risk free interest rate(s):
Expiry date(s):
$0.00 to $0.50 (2017: $0.00 to $0.50)
16-Feb-18 (2017: 31-Oct-16 and 19-Dec-16)
$0.95 (2017: $0.90 and $0.91)
13% (2017: 17% and 16%)
8.73% (2017: 9.27% and 9.16%)
2.16% (2017: 1.56% and 1.80%)
1-Nov-20 (2017: 1-Dec-19 and 1-Jan-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.
(B) EXPENSE ARISING FROM SECURITY BASED PAYMENTS
Expenses arising from share based payments recognised during the year as part of employee benefits expense were as
follows:
Performance rights issued under the PRP
20. Related parties
Cromwell
Trust
2018
$M
1.2
2017
$M
1.1
2018
$M
-
2017
$M
-
OVERVIEW
Related parties are persons or entities that are related to Cromwell as defined by AASB 124 Related Party Disclosures.
These include directors and other key management personnel and their close family members and any entities they
control as well as subsidiaries, associates and joint ventures of Cromwell. They also include entities which are considered
to have significant influence over Cromwell, that is securityholders that hold more than 20% of Cromwell’s issued
securities.
This note provides information about transactions with related parties during the year. All of Cromwell’s transactions with
related parties are on normal commercial terms and conditions and at market rates.
(A) KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Security-based payments
Total key management personal compensation
Cromwell
2018
$
5,416,267
119,769
29,657
621,278
6,186,971
2017
$
5,909,402
117,495
203,373
644,702
6,874,972
Loans to key management personnel
Cromwell has provided loans to Mr P Weightman, a Director of the Company, for the exercise of his employee options
under Cromwell’s Performance Rights Plan. Each loan term is three years, limited recourse and interest free. The
outstanding balance at balance date was $1,825,152 (2017: $1,545,024).
Other transactions with key management personnel
Cromwell rents an apartment, located at 185 Macquarie Street, Sydney, which is owned by Mr P Weightman, a Director of
Cromwell. Total rent paid during year was $104,000 (2017: $99,840). The payment of rent is on normal commercial terms
and conditions and at market rates.
110
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (B) OTHER RELATED PARTY TRANSACTIONS
(i) Parent entity and subsidiaries
Cromwell Corporation Limited is the ultimate parent entity in Cromwell. Cromwell Diversified Property Trust is the
ultimate parent entity in the Trust. Details of subsidiaries for both parent entities are set out in note 14.
(ii) Transactions with joint ventures
Cromwell Partners Trust
Cromwell and the Trust hold a 50% interest in the Cromwell Partners Trust joint venture (“CPA”) which holds the
Northpoint property in North Sydney (refer to note 6 for further details). Cromwell received $9.8 million in distributions
from CPA during the year (2017: $8.1 million).
Cromwell Real Estate Partners Pty Ltd (“CRE”), a wholly owned subsidiary of Cromwell, acts as trustee for CPA. Cromwell
Property Services Pty Ltd and Cromwell Project and Technical Solutions Pty Ltd, wholly owned subsidiaries of Cromwell
provide property related services to CPA at normal commercial terms. The following income was earned by Cromwell
from CPA:
Fund management fees
Property management fees
Leasing fees
Project management fees
Balances outstanding with CPA at year end:
Distribution receivable
Cromwell
2018
$M
2017
$M
1.2
0.8
0.4
0.7
2.6
0.8
0.8
0.2
-
2.2
Oyster Property Group Limited
Cromwell holds a 50% interest in the Oyster joint venture, a New Zealand based property syndicator and funds manager.
During the prior year, the Trust provided a number of short-term loan facilities to Cromwell’s joint venture Oyster Property
Funds Limited (“Oyster”) for the initial funding of Oyster property syndications. The syndications were successful and at
balance date all loans had been repaid by Oyster and there was nil outstanding (2017: nil outstanding).
Portgate Estate Unit Trust
Cromwell holds a 28% interest in Portgate Estate Unit Trust (Portgate), which holds the Portgate property located at the
Port of Brisbane. During the year Cromwell paid an additional $6.5 million in consideration for the investment, leaving
$2.5 million of unpaid acquisition consideration outstanding.
During the year Cromwell provided property management services for which Portgate paid $85,000 (2017: $85,000).
Portgate also paid distributions of $107,000 (2017: $946,000).
LDK Healthcare Pty Ltd
Cromwell holds a 50% interest in LDK Healthcare Pty Ltd (LDK), a joint venture operating with an aged care operator to
repurpose the Cromwell property at Tuggeranong Office Park in the ACT into retirement or assisted living units.
During the year, the Trust provided a number of loan facilities to the joint venture for the initial funding of the property
development and fit-out. The loans are part of the longer term strategy of the LDK venture and $1.1 million remain
outstanding at year end (2017: nil). Cromwell also charged LDK property development rent and fees totalling $0.8 million
during the year (2017: nil).
(iii) Transactions between the Trust and the Company and its subsidiaries (including the responsible entity of the
Trust)
Cromwell Property Securities Limited (“CPS”), a wholly owned subsidiary of Cromwell Corporation Limited (“CCL”) acts
as responsible entity for the Trust. For accounting purposes the Trust is considered to be controlled by CCL. CCL and its
subsidiaries provide a range of services to the Trust. A subsidiary of CCL rents commercial property space in a property
owned by the Trust. All transactions are performed on normal commercial terms.
111
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
The Trust made the following payments to and received income from CCL and its subsidiaries:
Paid / payable by the Trust to the Company and its subsidiaries:
Fund management fees
Property management fees
Leasing fees
Project management fees
Accounting fees
Received / receivable by the Trust from the Company and its subsidiaries:
Interest
Rent and recoverable outgoings
Balances outstanding at year-end with the Company and its subsidiaries:
Aggregate amounts payable
Aggregate amounts receivable
Trust
2018
$M
2017
$M
13.3
6.4
2.9
0.3
0.5
7.4
4.2
11.6
6.6
2.3
0.3
0.5
5.1
4.9
2.0
175.1
1.9
164.4
The amount receivable from the Company and its subsidiaries includes loans of $168.2 million (2017: $159.4 million). For
further details regarding these loans refer to note 16(a)
21. Employee benefits expense
OVERVIEW
This note provides further details about Cromwell’s employee benefits expenses and its components, leave balances
outstanding at year end as well as employee benefits expense related accounting policies.
Salaries and wages, including bonuses and on-costs
Directors fees
Contributions to defined contribution superannuation plans
Security-based payments
Other employee benefits expense
Restructure costs
Total employee benefits expense
Cromwell
Trust
2018
$M
51.3
1.2
3.0
1.2
8.3
4.7
69.7
2017
$M
50.7
0.7
2.5
1.1
9.8
-
64.8
2018
$M
2017
$M
-
-
-
-
-
-
-
-
-
-
-
-
-
-
112
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT ACCOUNTING POLICY
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, that are expected to be settled wholly within 12
months after the end of the period in which the employees render the related service are recognised in respect of
employee’s services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. All other short-term employee benefit obligations are presented as payables.
Superannuation
Contributions are made by Cromwell to defined contribution superannuation funds and expensed as they become
payable.
Other long-term employee benefit obligations
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service. They are therefore recognised in the provision for
employee benefits and measured as the present value of expected future payments to be made in respect of services
provided by employees up to the end of the reporting period. Consideration is given to expected future wage and
salary levels, experience of employee departures and periods of service. Expected future payments are discounted
using relevant discount rates at the end of the reporting period that match, as closely as possible, the estimated future
cash outflows. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
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, Cromwell 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
Cromwell recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice
that has created a constructive obligation.
Leave balances outstanding at year-end
Accrued annual leave at year-end of $3.3 million (2017: $2.7 million) is included in current provisions on the balance
sheet. Based on experience, Cromwell expects substantially all employees to take the full amount of accrued annual leave
within the next 12 months.
The portion of accrued long service leave included in current provisions on the balance sheet was $1.3 million (2017: $1.2
million). This is the amount expected to be settled within 12 months where the employee had reached the required service
term to take the long service leave (generally 10 years). The non-current liability for long service leave included within
non-current provisions on the balance sheet was $0.5 million (2017: $0.4 million).
113
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 22. Auditors’ remuneration
OVERVIEW
The independent auditors of Cromwell in Australia (Pitcher Partners) and component auditors of overseas subsidiaries
and their affiliated firms have provided a number of audit and other assurance related services as well as other non-
assurance related services to Cromwell and the Trust during the year.
Below is a summary of fees paid for various services to Pitcher Partners and component audit firms during the year:
Pitcher Partners Brisbane
Audit and other assurance services
Auditing or reviewing of financial reports
Auditing of controlled entities’ AFS licences
Auditing of the Trust’s compliance plan
Other services
Due diligence services
Total remuneration of Pitcher Partners Brisbane
Non Pitcher Partners audit firms
Audit and other assurance services
Auditing of component financial reports
Cromwell
Trust
2018
$
2017
$
2018
$
2017
$
398,000
10,500
34,000
442,500
315,500
5,500
34,000
355,000
245,500
-
34,000
279,500
205,000
-
34,000
239,000
63,000
505,500
127,000
482,000
-
279,500
-
239,000
619,757
619,757
380,207
380,207
-
-
-
-
Other services
Tax compliance services
International tax advice on acquisitions
Total remuneration of non Pitcher Partners audit firms
Total auditors’ remuneration
287,900
41,148
948,805
1,454,305
197,790
61,413
639,410
1,121,410
-
-
-
279,500
-
-
-
239,000
23. Unrecognised items
OVERVIEW
Items that have not been recognised on Cromwell’s and the Trust’s balance sheet include contractual commitments for
future expenditure and contingent liabilities which are not sufficiently certain to qualify for recognition as a liability on the
balance sheet. This note provides details of any such items.
(A) COMMITMENTS
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
Greater than five years
Total operating lease commitments
Cromwell
Trust
2018
$M
2.7
4.4
0.7
7.8
2017
$M
2.1
2.4
-
4.5
2018
$M
2017
$M
-
-
-
-
-
-
-
-
Operating leases primarily comprise the lease of Cromwell’s Sydney and European office 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.
114
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Capital expenditure commitments
Commitments in relation to capital expenditure contracted for at reporting date but not recognised as a liability are as
follows:
Investment property
Capital contributions
Cromwell
Trust
2018
$M
8.1
4.1
12.2
2017
$M
14.0
-
14.0
2018
$M
8.1
-
8.1
2017
$M
14.0
-
14.0
(B) CONTINGENT LIABILITIES
The Directors are not aware of any material contingent liabilities of Cromwell or the Trust (2017: nil).
24. Subsequent events
No matter or circumstance has arisen since 30 June 2018 that has significantly affected or may significantly affect:
• Cromwell’s and the Trust’s operations in future financial years; or
• the results of those operations in future financial years; or
• Cromwell’s and the Trust’s state of affairs in future financial years.
25. Accounting policies
OVERVIEW
This note provides an overview of Cromwell’s accounting policies that relate to the preparation of the financial report as
a whole and do not relate to specific items. Accounting policies for specific items in the balance sheet or statement of
comprehensive income have been included in the respective note.
(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 Financial Reports of Cromwell and the Trust have been presented jointly
in accordance with ASIC Corporations (Stapled Group Reports) Instrument 2015/838 relating to combining accounts under
stapling and for the purpose of fulfilling the requirements of the Australian Securities Exchange. Cromwell and the 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.
Historical cost convention
The financial report is prepared on the historical cost basis except for the following:
• investment properties are measured at fair value;
• derivative financial instruments are measured at fair value;
• investments at fair value through profit or loss are measured at fair value; and,
• disposal group held for sale is measured at carrying value.
Rounding of amounts
Cromwell is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument amounts in the Directors’ report and financial report have been rounded
off to the nearest one hundred thousand dollars, or in certain cases to the nearest dollar, unless otherwise indicated.
Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year
115
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (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:
1.) no goodwill is recognised on acquisition of the Trust because no direct ownership interest was acquired by the
Company in the Trust;
2.)
3.)
the equity issued by the Company to unitholders to give effect to the transaction is recognised at the dollar value of
the consideration payable by the unitholders. This is because the issue of shares by the Company was administrative
in nature rather than for the purposes of the Company acquiring an ownership interest in the Trust; and
the issued units of the Trust are not owned by the Company and are presented as non-controlling interests in
Cromwell 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 the balance sheet.
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 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 2018 and the
results of all subsidiaries for the year then ended. Subsidiaries are entities controlled by Cromwell. Control exists when
Cromwell is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. 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 Cromwell (refer to note 24(c)).
Inter-entity transactions, balances and unrealised gains on transactions between Cromwell 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 Cromwell.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive
income and the balance sheet respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company. A list of
subsidiaries appears in note 14 to the consolidated financial statements.
(C) 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 Cromwell. 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, Cromwell 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 Cromwell’s share of the net
116
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 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.
(D) FOREIGN CURRENCY TRANSLATION
Functional and presentation currency
Items included in the financial statements of each of Cromwell’s entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are
presented in Australian dollars, which is the Company’s and the Trust’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the consolidated statement of comprehensive income, except when they are attributable to part of the net investment in
a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the income statement, within finance costs.
All other foreign exchange gains and losses are presented in the income statement on a net basis.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss.
Foreign operations
Subsidiaries, joint arrangements and associates that have functional currencies different from the presentation currency
translate their income statement items using the average exchange rate for the year. Assets and liabilities are translated
using exchange rates prevailing at balance date. Exchange variations resulting from the retranslation at closing rate of
the net investment in foreign operations, together with their differences between their income statement items translated
at average rates and closing rates, are recognised in the foreign currency translation reserve. For the purpose of foreign
currency translation, the net investment in a foreign operation is determined inclusive of foreign currency intercompany
balances. The balance of the foreign currency translation reserve relating to a foreign operation that is disposed of, or
partially disposed of, is recognised in the statement of comprehensive income at the time of disposal.
The following spot and average rates were used:
Euro
NZ Dollar
Spot rate
Average Rate
2018
0.63
1.09
2017
0.67
1.05
2018
0.65
1.07
2017
0.69
1.05
(E) IMPAIRMENT OF ASSETS
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
At each reporting date, and whenever events or changes in circumstances occur, Cromwell assesses whether there is
any indication that any other asset may be impaired. Where an indicator of impairment exists, Cromwell 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 impairment are reviewed for possible reversal of the impairment
at each reporting date.
117
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT (F) 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 and are based on historical or professional
experience and other factors such as expectations about future events. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future periods affected.
The areas that involved a higher degree of judgement or complexity and may need material adjustment if estimates and
assumptions made in preparation of these financial statements are incorrect are:
Area of Estimation
Fair value of investment property
Equity accounted investments
Investments at fair value through profit or loss
Fair value of derivative financial instruments
Notes
5
6
7
12
(G) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
(i) New and amended standards adopted
During the year no new accounting standards came into effect. Amendments to existing accounting standards that came
into effect have not affected Cromwell’s accounting policies or any of the disclosures.
(ii) New standards and interpretations not yet adopted
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:
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 16 Leases
Application
date of
Standard
1 Jan 2018
1 Jan 2018
1 Jan 2019
Application
date for
Cromwell
1 Jul 2018
1 Jul 2018
1 Jul 2019
AASB 9 Financial Instruments
AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities and
introduces new rules for hedge accounting. In December 2014, the AASB made further changes to the classification and
measurement rules and also introduced a new impairment model. These latest amendments now complete the new
financial instruments standard.
The new classification, measurement and derecognition rules of AASB 9 may only affect financial assets that are classified
as available-for-sale or are designated at fair value through profit or loss and are held both for collecting contractual
cash flows and sales integral to achieving the objective of the business model as well as financial liabilities designated
at fair value through profit or loss. Cromwell does not carry such financial assets or financial liabilities and therefore
the directors do not expect that the new Accounting Standard will have a material impact on Cromwell’s accounting for
financial assets or financial liabilities.
The new hedging rules align hedge accounting more closely with an entity’s risk management practices. As a general
rule it will be easier to apply hedge accounting going forward as the standard introduces a more principles-based
approach. The new standard also introduces expanded disclosure requirements and changes in presentation. Cromwell
currently does not apply hedge accounting and does not currently hold any investments for hedging purposes. Therefore
the Directors do not expect that the new Accounting Standard will have a material impact on the Cromwell’s hedging
arrangements. Cromwell intends to adopt the new standard from 1 July 2018.
AASB 15 Revenue from Contracts with Customers
The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for
goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that
revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the
existing notion of risks and rewards.
The standard introduces a new five-step model to determine when to recognise revenue and at what amount.
118
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT The area that may be affected by the new rules is funds management revenue, in particular the timing and amount of
the recognition of fund management fees, which includes equity raising fees, debt arrangement fees, acquisition fees,
property management fees and fund administration fees.
The Directors do not expect that the new Accounting Standard will have a material impact to the magnitude or timing of
the recognition of revenue, including the primary classes of funds management revenue. Cromwell intends to adopt the
new standard from 1 July 2018.
AASB 16 Leases
The AASB has issued a new standard for leases. This will replace AASB 117 Leases. The accounting standard introduces
a single accounting model for leases by lessees and effectively does away with the operating lease concept. It requires all
operating leases, which are currently not recorded on the balance sheet, to be recognised on the balance sheet together
with a right-of-use asset. Subsequently the lease liability is measured at amortised cost using the effective interest rate
method. The right-to-use asset will be measured at cost less accumulated depreciation with depreciation charged on a
straight-line basis over the lease term.
1. Accounting as lessor
The Directors have performed an initial assessment of the new requirements of AASB 16 in respect of Cromwell as a
lessor and found that there will be no significant impact on Cromwell and its operating lease arrangements except for a
change in the definition of a lease period, which will include renewal options if they are likely to be exercised, which may
affect straight-line rent recognised for such leases.
However, Cromwell’s tenants will be affected (see below).
A schedule of current non-cancellable operating lease receivables from investment property tenants is disclosed in Note
5(h).
2. Accounting as lessee
The new standard applies to a number of lease contracts Cromwell has entered into. Based on the Directors assessment,
it is expected that adoption the “Cumulative catch up method” prescribed by the new standard on 1 July 2019 will have the
following impacts on the financial statements:
• Relevant leases entered into by Cromwell include those for commercial office space and office equipment. For these
assets the balance sheet will be adjusted to recognise an amortised non-financial asset and an associated financial
liability. The financial liability will be measured at the net present value of the future amounts payable under the
relevant lease, including optional renewal periods where the Company assesses that the probability of renewal is
reasonably certain.
• In the income statement, rental/lease expense will be replaced by interest expense and a straight-line amortisation
expense.
The forecast impact of the application of the new standard to Cromwell’s operating lease arrangements in the Balance
sheet has been assessed and is disclosed below:
Forecast Balance sheet value at adoption of standard:
Right of use asset
Non – current assets
Current lease obligation
Non-current lease obligation
Current liabilities
Equity
2020
$M
4.2
4.2
(2.7)
(1.5)
(1.5)
-
The forecast impact of the application of the new standard to Cromwell’s operating lease arrangements in the Income
statement and Equity in the Balance sheet has been assessed as being immaterial.
A schedule of current operating lease commitments is disclosed in Note 23.
119
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 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 Cromwell’s and the Trust’s financial position as at 30 June 2018 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 25(a); and
(c)
there are reasonable grounds to believe that Cromwell 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 2018 required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
PL. Weightman
Director
Dated this the 22nd day of August 2018
120
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Independent Auditor’s Report
To the Security holders of Cromwell Property Group
To the Unit holders of Cromwell Diversified Property Trust
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cromwell Property Group “the Group” which 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 at the end of the
year or from time to time during the year, which comprises the consolidated statement of financial
position as at 30 June 2018, 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,
and notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Group, would be in the same terms if given to the directors as at the time
of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
121
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter
How our audit addressed the matter
Asset Valuation – Investment Property
Refer to Note 5: Investment Property
Assessment of the fair value of investment
properties is a key audit matter.
Our audit procedures included:
Assessing the competence and qualifications
As at 30 June 2018, investment properties of
$2.4 billion made up 70.7% of total assets of
the Group.
of the Trust’s external valuers and the
directors involved in undertaking the
directors’ (i.e. internal) valuation.
Evaluating the property valuations including
an assessment of the appropriateness of the
valuation methodology adopted, being the
capitalisation of income method.
Comparing the valuations obtained to the
alternate discounted cashflow valuation
method prepared by the external valuers
and the directors’ valuations.
Evaluating the movements in capitalisation
rates applied based on our knowledge of the
property portfolio and published reports of
industry commentators.
Testing, on a sample basis, other key inputs
to the valuations including, net income,
occupancy rate and lease term remaining for
consistency with existing lease contracts and
other certain capital adjustments made to
the valuation.
There are judgements required in order to
determine the fair value of investment
properties, including the selection of valuation
methodology, those which relate specifically to
the asset and also the broader economic
environment.
Judgement is required in assessing the
appropriate capitalisation rate due to the
sensitivity. A small percentage movement in
the capitalisation rate across the portfolio
would result in a significant financial impact to
the investment property balance and income
statement.
Judgements also required to assess forecasted
future cash flows, vacancy rates and incentives
and rebates to be granted in future periods.
The Group engages external independent
valuers to undertake valuations of each
investment property every twelve months as
well as performing internal valuations in
intervening periods.
It is due to the size of the balance and use of
key estimates and judgement that this is a key
area of audit focus.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Key audit matter
Impairment of goodwill
Refer to Note 17: Intangible Assets
As at 30 June 2018, the Group has fully
impaired Goodwill relating to the acquisition of
Cromwell European Holdings to the value of
$69.5m.
The assessment of impairment of the Group’s
goodwill balance incorporates significant
judgement and estimates in respect of the
Groups cash flow forecasts supporting
goodwill, incorporating inputs that include the
discount rate, current management contracts,
retention and probability of future contracts, as
well as certain economic assumptions such as
inflation and foreign currency rates.
Management determined that goodwill was
impaired. This was based on the recoverable
amount of the related Cash Generating Unit
“CGU” calculated using a Value in Use method.
A key judgement was whether the Group had
selected an appropriate method with which to
determine the recoverable amount of the CGU
and whether the assumptions used in that cash
flow model included appropriate consideration
of key external and internal inputs and the
impact of these inputs on their significant
estimates and judgements used in the
calculation.
How our audit addressed the matter
Our audit procedures included:
Assessing management’s determination of
the Group’s CGUs based on our
understanding of the nature of the Group’s
business and internal reporting in order to
assess how results were monitored and
reported.
Comparing the cashflow forecasts to board
approved forecasts. We compared the prior
year’s forecasts to assess the accuracy of the
forecasting process.
Assessing the significant judgements and
estimates used for the impairment
assessment, in particular, those judgements
relating to the discount rate and cash flow
forecasts. We developed an acceptable
range of discount rates based on market
data and industry research. We found that
the discount rate used by the Group was
within an acceptable range.
Checking the mathematical accuracy of the
cash flow model and agreed relevant data to
the latest forecasts.
Performing sensitivity analysis by varying key
estimates and including the discount rate
and growth rate inputs for the CGU to which
goodwill relates.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Key audit matter
How our audit addressed the matter
Recognition of equity accounted investments
Refer to Note 6: Equity accounted investments
As at 30 June 2018, the Group held a 35%
interest in the units of Cromwell European Real
Estate Investment Trust (“CEREIT”), a Singapore
based investment trust established and listed
on the Singapore Stock Exchange for the
purpose of investing, directly or indirectly in a
portfolio of income producing real estate assets
in Europe.
CEREIT is managed by a 100% owned subsidiary
of the Group, Cromwell EREIT Management Pte
Ltd.
As at 30 June 2018, the equity accounted
investment applicable to CEREIT has a carrying
value of $495.6 million, 14.3% of the total
assets of the Group.
Judgement is required in assessing whether the
Group exerted control over CEREIT and in
accordance with AASB 10, is required to
consolidate CEREIT into the Group’s financial
statements for the year ended 30 June 2018.
Our audit procedures included:
Considering the composition of the
independent board and nominations
committee of Cromwell EREIT Management
Pte Ltd including the board responsibilities.
Assessing the licence granted by the
Monetary Authority of Singapore (‘MAS’) to
Cromwell EREIT Management Pte Ltd and
restrictions which prevents Cromwell from
exercising any decision-making power for
matters relating to the CEREIT in which the
Group has an interest (whether directly or
indirectly). This includes all decisions around
the acquisition or disposal of investment
properties.
Considering MAS’s authority to remove
Cromwell EREIT Management Pte Ltd as
manager of the CEREIT if an inherent conflict
of interest arose.
Reviewing the management deed which
outlines the responsibilities of Cromwell
EREIT Management Pte Ltd towards CEREIT.
Assessing the level of interaction and
influence exerted by Cromwell over CEREIT
during the period since acquisition of the
investment in CEREIT.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 15 to 36 of the directors’ report for the
year ended 30 June 2018. In our opinion, the Remuneration Report of Cromwell Corporations Limited,
for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Group 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.
PITCHER PARTNERS
NIGEL BATTERS
Partner
Brisbane, Queensland
22 August 2018
126
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
CORPORATE GOVERNANCE STATEMENT
The Board is committed to Cromwell Property Group meeting securityholders’ expectations of good corporate governance,
while seeking to achieve superior financial performance over the medium and long term. The Board is proactive
with respect to corporate governance and actively reviews developments to determine which corporate governance
arrangements are appropriate for Cromwell Property Group and its securityholders.
This Corporate Governance Statement (Statement) reports on how Cromwell Property Group (or Cromwell or Group)
complied with the third edition of the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations (the Recommendations) during the 2018 financial year.
This Statement is current as at 30 June 2018 and has been approved by the Board.
Cromwell Property Group comprises Cromwell Corporation Limited (or the Company) and the Cromwell Diversified
Property Trust (or the CDPT), the Responsible Entity of which is Cromwell Property Securities Limited (or CPS).
Principle 1: Lay solid foundations for management and oversight
RECOMMENDATION 1.1
The Board of Directors of Cromwell Corporation Limited is identical to the Board of Directors of Cromwell Property
Securities Limited (together, the Board; severally, the Directors). The Board’s responsibilities include to provide leadership
to Cromwell Property Group and to set its strategic objectives. The Board has adopted a formal, written Board Charter,
which sets out the Board’s role and responsibilities, including to:
• oversee the process for ensuring timely and balanced disclosure of all ‘price sensitive’ information in accordance with
the Corporations Act 2001 (Cth) (Corporations Act) and the ASX Listing Rules; and
• ensure an appropriate risk management framework is in place and set the risk appetite within which the Board expects
management to operate.
The Board generally holds a scheduled meeting every second calendar month and additional meetings are convened as
required. Management prepares Board papers to inform and focus the Board’s attention on key issues. Standing items
include progress against strategic objectives, corporate governance (including compliance) and financial performance.
The Board has the following long-established Board Committees to assist it in carrying out its responsibilities, to share
detailed work and to consider certain issues and functions in detail:
• Audit and Risk Committee;
• Nomination and Remuneration Committee; and
• Investment Committee.
Details of the role, responsibilities and composition of the Board Committees are contained elsewhere in this Statement.
Day to day management of the Group’s affairs and implementation of agreed strategic objectives are delegated by
the Board to management under the direction of the Managing Director/Chief Executive Officer (CEO). This has been
formalised in the Board Charter and a Board-approved Delegation of Authority Policy. The Board reviews these
documents at least annually to ensure their effectiveness and appropriateness (given the evolving needs of the Group).
What you can find on the Corporate Governance page on our website:
• Board Charter
• Audit and Risk Committee Charter
• Nomination and Remuneration Committee Charter
• Delegation of Authority Policy
• Constitution of Cromwell Corporation Limited
• Constitution of the Cromwell Diversified Property Trust
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
RECOMMENDATION 1.2
Cromwell undertakes appropriate checks before appointing a person, or putting forward to securityholders a candidate for
election or re-election, as a Director. The checks are into matters such as the person’s character, experience, education,
criminal record and bankruptcy history. The Board and Nomination and Remuneration Committee also consider
whether or not the candidate has sufficient time available, given their other roles and activities, to meet expected time
commitments to Cromwell.
When securityholders are asked at the Group’s annual general meeting (AGM)1 to elect, or re-elect, a Director to the
Board, Cromwell will provide them with the following information to enable them to make an informed decision:
• biographical information, including relevant qualifications, experience and the skills the candidate brings to the Board;
• details of any other current material directorships;
• a statement as to whether the Board supports the candidate’s election or re-election; and
• (for a candidate standing for election as a Director for the first time) any material adverse information revealed by
background checks; details of any interest, position, association or relationship that might influence, or reasonably be
perceived to influence, in a material respect the candidate’s capacity to bring an independent judgement to bear on
issues before the Board and to act in the best interests of the Group and its securityholders generally; and a statement
from the Board as to the candidate’s independence; or
• (for a candidate standing for re-election) the term of office currently served and a statement from the Board as to the
candidate’s independence.
The information will be provided in the relevant notice of meeting. Securityholders also have the opportunity to ask
questions of candidates at the AGM.
RECOMMENDATION 1.3
Cromwell has provided each Non-executive Director with a written letter of appointment which details the terms of their
appointment, including remuneration, interest disclosures, expected time commitments and the requirement to comply
with applicable corporate policies.
The CEO (an Executive Director) has a written formal job description, an employment contract (outlining the terms of
appointment as a senior executive) and a letter of appointment for the role as Executive Director.
Other senior executives have written employment contracts that outline the terms of their appointment.
RECOMMENDATION 1.4
The Company Secretary is accountable to the Board (through the Chairman) on all matters to do with the proper
functioning of the Board.
The Company Secretary’s responsibilities include:
• advising the Board and Board Committees on governance matters;
• monitoring that Board and Board Committee policies and procedures are followed;
• coordinating the timely completion and despatch of the Board and Board Committee papers;
• ensuring that the business at the Board and Board Committee meetings is accurately captured in minutes; and
• helping to organise and facilitate the induction and professional development of Directors.
Directors can, and do, communicate directly with the Company Secretary on Board matters. Similarly, the Company
Secretary communicates directly with the Directors on such matters.
The Board Charter states that the Board is responsible for appointing and removing the Company Secretary.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
(1) In this Statement, AGM means (together) the Annual General Meeting of the Company and the General Meeting of the CDPT.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
RECOMMENDATION 1.5
Cromwell recognises the many benefits of diversity and strives, through its recruitment and selection practices,
to ensure that a diverse range of candidates is considered and that conscious and unconscious biases that might
discriminate against candidates are avoided.
Cromwell Property Group has a Board-approved Diversity Policy which sets out the framework the Group has in
place to achieve appropriate diversity in its Board, senior executive and broader workforce. Pursuant to the Diversity
Policy, each financial year the Board (on recommendation from the Nomination and Remuneration Committee) sets
measurable objectives for achieving diversity. An annual assessment of progress against those objectives is also
undertaken.
The table below shows the gender diversity objectives set for the 2018 financial year and the Group’s performance against
those objectives as at 30 June 2018.
FY18 gender diversity objective
1
2
3
4
5
6
7
8
9
The Group has at least two female Directors and at least two female senior executives/
senior managers.
At least one female will be interviewed for all advertised management positions.
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.
Remuneration continues to be benchmarked against market data taking into
consideration experience, qualification and performance and without regard to age,
gender and race.
Succession plans and leadership programmes are designed to assist in the
development of a diverse pool of future senior executives and managers and are
regularly reviewed.
At least one corporate event is held to which staff can bring family members.
Flexible working arrangements are available for staff with caring responsibilities.
All staff receive diversity and related training at least once a year.
At least 80% of females taking parental leave return to work.
10
Training hours undertaken by females are at least equivalent to those undertaken by
male counterparts.
The Group’s performance
as at 30 June 2018
Achieved.
Cannot be rated: no
advertised management
positions.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
As at 30 June 2018, the respective proportions of males and females on the Board, in senior executive positions in
Cromwell and across the Group were as follows:
Body
Board
Senior executive²
Group3
Females
2
1
54
Males
5
3
70
Total
7
4
124
Recommendation 1.5(c)(1) requires the Group to define what it means by ‘senior executive’. In this case, ‘senior executive’ means the key management
(2)
personnel (KMP) other than Non-executive Directors. As at 30 June 2018, the ‘senior executive’ comprised the Chief Executive Officer, the Chief
Operations Officer, the Chief Financial Officer and the Chief Capital Officer. Please refer to the FY18 Remuneration Report for further information about
KMP.
Excludes European business, Singapore business, Phoenix Portfolios and Oyster Group.
(3)
Cromwell is a ‘relevant employer’ under the Workplace Gender Equality Act 2012 (Cth) (WGEA). The Group’s most recent
‘Gender Equality Indicators’, as defined in and published under the WGEA, are as follows:
Gender equality indicator
1 Gender composition of workforce
2 Gender composition of governing bodies
3 Equal remuneration between women and men
4 Flexible working and support for employees with family and caring responsibilities
5 Consultation with employees on issues concerning gender equality in the workplace
6 Sex-based harassment and discrimination
129
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Cromwell’s latest WGEA Report is available on the Corporate Governance page on the Group’s website.
What you can find on the Corporate Governance page on our website:
• Diversity Policy
• Nomination and Remuneration Committee Charter
• FY18 Gender Diversity Objectives
• FY19 Gender Diversity Objectives
• WGEA Report
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
What you can find on the Sustainability page on our website:
• Sustainability Report 2017
www.cromwellpropertygroup.com/sustainability/performance-and-approach
RECOMMENDATION 1.6
The Board undertakes an annual formal performance assessment, which includes an evaluation of the performance of
the Board, Board Committees and individual Directors and also a self-evaluation. Under the annual formal performance
assessment, Directors complete a questionnaire and can make comments or raise any issues they have in relation to the
performance. The results were compiled by the Company Secretary and discussed at a subsequent Board meeting. For
the 2018 financial year, the formal performance assessment was conducted and did not raise any governance issues that
needed to be addressed.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 1.7
The Group has an established, rigorous process for the performance review of all employees, including senior executives.
The performance of senior executives and whether they have met their individual key performance indicators is formally
evaluated annually by the CEO, with regular feedback being provided during the performance period. At the time of the
reviews, the professional development of the senior 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 was completed during the reporting period.
Under its Charter, the Nomination and Remuneration Committee is responsible for facilitating an annual review of the
performance of the CEO (an Executive Director). This annual review was completed during the 2018 financial year.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Principle 2: Structure the board to add value
RECOMMENDATION 2.1
Nomination and Remuneration Committee
The Board has a long-established Nomination and Remuneration Committee, which operates under a Board approved
written Charter. The Charter sets out the Nomination and Remuneration Committee’s various responsibilities, including
reviewing and making recommendations to the Board in relation to:
• Board succession planning generally;
• the appointment, or reappointment, of Directors to the Board. The Charter details the procedure for appointing new
Directors;
• the performance and education of Directors;
• reviewing and recommending remuneration arrangements for the Directors, the CEO and senior executives;
• induction and continuing professional development programmes for Directors; and
• the development and implementation of a process for evaluating the performance of the Board, Board Committees and
Directors.
The Nomination and Remuneration Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at the Group’s cost); and
• may meet with external advisors without management being present.
The minutes of each Nomination and Remuneration Committee meeting are included in the papers for the next Board
meeting after the Committee Chairman has approved those minutes. The Chairman of the Nomination and Remuneration
Committee reports the Committee’s findings to the next Board meeting after each meeting of the Committee. The
Nomination and Remuneration Committee has four members, all of whom are independent Directors.
The Directors’ Report discloses the members of the Nomination and Remuneration Committee, the number of times that
the Committee met during the 2018 financial year and the individual attendances of the members at those meetings.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.2
Board Skills Matrix
The Board has adopted a Board Skills Matrix, which sets out the collective skills and attributes of the Board. In summary,
the Board Skills Matrix includes (but is not limited to) such key skills and experience as strategy, property, investment/
funds management, listed entities (including ASX listed entities), finance and financial performance, risk oversight,
economics, government, debt management and executive management, as well as other characteristics and attributes.
The Board considers that its current members have an appropriate mix of skills, personal attributes and experience that
allows 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.
The Directors’ Report provides the following information about each Director:
• profile, including qualifications and experience; and
• special responsibilities and attendances at Board and Board Committee meetings.
The Nomination and Remuneration Committee refers to the Matrix when considering Board succession planning and
professional development initiatives for the Directors.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
131
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT RECOMMENDATION 2.3
The Board
The Group recognises that independent Directors are important in reassuring securityholders that the Board properly
fulfils its role. The Board comprises seven Directors, with an independent Chairman and a majority of independent Non-
executive Directors:
Director
First appointed
Status
Mr Geoffrey H Levy (AO) (Chairman)
Ms Michelle McKellar
17 April 2008
1 March 2007
Mr Richard Foster (retired 29 November 2017)
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Ms Jane Tongs
Mr Leon Blitz
Mr Marc Wainer
26 November 2014
Independent Non-executive Director
28 June 2017
Independent Non-executive Director
29 January 2010
Non-executive Director
Mr Andrew Konig (retired 1 June 2018)
Non-executive Director
Mr David Blight
Mr Paul Weightman
1 June 2018
Non-executive Director
6 August 1998
Executive Director, Managing Director/CEO
Each year, independence status is assessed using the guidelines and factors set out in the Recommendations and the
independent Non-executive Directors also confirm to the Board, in writing, their continuing status as an independent Director.
In assessing a Director’s independence 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) as disclosed in its last audited financial accounts.
The length of time that each independent Director has served on the Board is shown in the table above.
Mr Levy joined the Group as an independent Non-executive Director and independent Chairman of the Board in 2008
and Ms McKellar joined as an independent Non-executive Director in 2007. Both have been serving on the Board since
that time. The Board is satisfied that the length of Mr Levy’s service as Director and Chairman, and Ms McKellar’s
service as a Director, will not interfere, or will not reasonably be seen to interfere, with their respective capacity to
bring an independent judgement to bear on issues before the Board and to act in the best interests of Cromwell and its
securityholders generally.
The Board is comfortable that no Director has served for a period such that their independence may have been
compromised. The Board also recognises that the interests of Cromwell and its securityholders are well served by having
a mix of Directors, some with a longer tenure with a deep understanding of Cromwell and its business and some with a
shorter tenure with fresh ideas and perspective.
The Group’s independent Non-executive Directors (including the Chairman) are considered by the Board to meet the test
of independence under the Recommendations.
Each independent Non-executive Director has undertaken to inform the Board as soon as practical if they think their
status as an independent Director has or may have changed.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.4
The Board comprises seven Directors, with an independent Chairman and a majority of independent Non-executive
Directors.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
132
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT RECOMMENDATION 2.5
The Chairman of the Board – Mr Geoffrey H Levy, AO – is an independent Non-executive Director. Mr Paul Weightman is an
Executive Director and the CEO of Cromwell Property Group. This is consistent with the Board Charter, which stipulates that
the Chairman of the Board will not be the same person as the CEO and ideally will be an independent Non-executive Director.
The Board Charter sets out the responsibilities of the Chairman, including:
• leading the Board;
• facilitating the effective contribution and ongoing development of all Directors;
• promoting constructive and respectful relations between Board members and between the Board and management; and
• facilitating Board discussions to ensure that core issues facing the Group are addressed.
What you can find on the Corporate Governance page on our website:
• Board Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 2.6
A formal induction programme ensures that new independent Directors can participate fully and actively in decision
making upon their appointment. The Chairman of the Board, with the assistance of the Company Secretary, has developed
the induction programme. The programme includes meeting with fellow Directors (including the CEO) and the senior
executive team, receiving briefings on the Group’s strategy and reviewing corporate governance materials and policies.
Each year, the Nomination and Remuneration Committee also considers and recommends to the Board a professional
development programme for Directors. This includes training on key issues relevant to the Group’s operations, financial
affairs and governance. The professional development programme is compiled in light of recent or potential developments
(internal and external) as well as any skills or knowledge gaps identified by the Nomination and Remuneration Committee.
Directors also have access to the internal training sessions provided by the Group’s Legal and Compliance team. On an
ongoing basis, Directors are provided with briefings on changes to accounting standards as well as updates on legal and
corporate developments relevant to the Group. During the 2018 financial year, Directors undertook site visits at a number
of Group property assets and visited a number of Group offices.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 3: Act ethically and responsibly
RECOMMENDATION 3.1
The Group’s Directors, senior executives and employees are required to maintain high standards of ethical conduct. This is
reinforced by the various practices and policies of the Group. All Directors, senior executives and employees are expected
to act with integrity and strive 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 Directors, senior executives and employees and they are reminded of the
importance of the Code of Conduct on a regular basis. Appropriate standards are also communicated and reinforced to all
employees at induction sessions and team meetings.
The Board has approved a Breach Reporting Policy and a Whistleblower Policy. These policies actively encourage and
support reporting to appropriate management of any actual or potential breaches of the Group’s legal obligations and/or
of the Code of Conduct.
The Board has also approved a Securities Trading Policy under which Directors, senior executives and employees are
restricted in their ability to deal in the Group’s securities. Appropriate closed periods are in place during which Directors,
senior executives and employees are not permitted to trade. Directors, senior executives and employees are made aware
of the policy and receive training annually. The policy is reviewed at least annually.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Compliance with Board approved policies is monitored via monthly checklists completed by key management and
proactive testing programmes and by investigation following any report of a breach. Compliance monitoring is undertaken
by the Legal and Compliance team under the direction of the Company Secretary who reports directly to the Board.
What you can find on the Corporate Governance page on our website:
• Code of Conduct
• Breach Reporting Policy
• Whistleblower Policy
• Securities Trading Policy
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 4: Safeguard integrity in corporate reporting
RECOMMENDATION 4.1
Audit and Risk Committee
The Board is responsible for the integrity of the Group’s corporate reporting. To assist in discharging this function, the
Board has a long-established Audit and Risk Committee. The Audit and Risk Committee operates under a Board approved
written Charter, which sets out the Audit and Risk Committee’s:
• objectives, including to maintain and improve the quality, credibility and objectivity of the financial accountability
process (including financial reporting on a consolidated basis); and
• responsibilities, including reviewing and making recommendations to the Board in relation to:
• whether the Group’s financial statements reflect the understanding of the Audit and Risk Committee members
of, and otherwise provide a true and fair view of, the financial position and performance of the Group;
• the appropriateness of any significant estimates or judgements in the financial reports (including those in any
consolidated financial statements); and
• the appointment or removal, and review of effectiveness and independence, of the external auditor.
The minutes of each Audit and Risk Committee meeting are included in the papers for the next Board meeting after
the Committee Chairman has approved those minutes. The Chairman of the Audit and Risk Committee reports the
Committee’s findings to the next Board meeting after each meeting of the Committee. The Audit and Risk Committee
has three members, all of whom are independent Directors. The Audit and Risk Committee is chaired by an independent
Director who is not the Chairman of the Board.
The Directors’ Report discloses:
• the relevant qualifications and experience of the members of the Audit and Risk Committee; and
• the number of times that the Audit and Risk Committee met during the 2018 financial year and the individual
attendances of the members at those meetings.
The Audit and Risk Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• has access to auditors to seek explanations and information from them (without management being present);
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at the Group’s cost); and
• may meet with external advisors without management being present.
During the 2018 financial year, the external auditor attended a number of meetings of the Audit and Risk Committee, with
part of each of those meetings being for the Committee to meet with the external auditor without management being
present.
The external auditor has declared its independence to the Board and to the Audit and Risk Committee. The Board is
satisfied the standards for auditor independence and associated issues have been met.
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT What you can find on the Corporate Governance page on our website:
• Audit and Risk Committee Charter
• External Auditor – Selection, Appointment and Rotation
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 4.2
Before it approves the Group financial statements for a financial period, the Board receives from the CEO and CFO a
written declaration that, in their opinion, the financial records of the entity have been properly maintained and the financial
statements comply with the appropriate accounting standards and give a true and fair view of the financial position and
performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and
internal control which is operating effectively.
RECOMMENDATION 4.3
The external auditor attends the Group’s AGM and is available to answer securityholders’ questions relevant to the audit.
Principle 5: Make timely and balanced disclosure
RECOMMENDATION 5.1
The Group believes that all stakeholders should be informed in a timely and widely available manner of all the major
business events and risks that influence the Group. 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 reasonably practicable after lodgement with the ASX.
The Group has a Market Disclosure Protocol which includes policies and procedures designed to ensure compliance with
the continuous disclosure obligations under the ASX Listing Rules.
What you can find on the Corporate Governance page on our website:
• Market Disclosure Protocol
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 6: Respect the rights of securityholders
RECOMMENDATION 6.1
Cromwell Property Group aims to keep securityholders informed on an ongoing basis of the Group’s performance and
all major developments. Securityholders receive regular reports and the Group uses its website as its primary means
of providing information to securityholders and the broader investment community about the Group’s business, history,
corporate structure, corporate governance and financial performance.
The Corporate Governance page on the Group’s website provides:
• a link to information about the Board of Directors;
• key corporate governance documents, including constitutions, charters and policies;
• a link to key events in the Corporate Governance calendar;
• a link to a description of the Group’s stapled security dividends/distributions policy and information about the Group’s
dividend/distribution history;
• a link to download relevant securityholder forms; and
• materials referred to in this Statement.
The Group’s website also provides:
• overview of the Group’s current business;
• description of how the Group is structured;
• summary of the Group’s history;
135
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT • documents that the Group releases publicly (such as annual reports, ASX announcements, notices of meeting and
company news items);
• historical information about the market prices of the Group’s securities;
• ahead of the AGM (or any general meeting), information including time and venue;
• contact details for enquiries from securityholders, analysts or the media; and
• contact details for its securities registry.
Our website address:
www.cromwellpropertygroup.com
The Corporate Governance page on our website:
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 6.2
The Group has a Board-approved Investor Relations Policy, which has been designed to facilitate effective two-way
communication with securityholders.
The Policy also sets out the policies and processes that the Group has in place to encourage participation in the AGM. This
is important to the Group because it assists with ensuring a high level of accountability and identification with the Group’s
strategies and goals.
What you can find on the Corporate Governance page on our website:
• Investor Relations Policy
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 6.3
Cromwell Property Group facilitates and encourages participation at meetings of securityholders.
The Chairman and the CEO each address the meeting of securityholders and provide securityholders with an update
on the Group’s business, governance and financial performance and any areas of concern or interest to the Board and
management. The Chairman and CEO take any comments and questions received from securityholders during or after
their address.
The current audit partner attends the AGM and is available to answer securityholders’ questions about the audit. The
notice of meeting for the AGM advises that securityholders entitled to cast their vote at the AGM may submit written
questions to the auditor relevant to the content of the auditor’s report or the conduct of the audit of the annual financial
report being considered at the AGM. A securityholder wishing to submit a question to the auditor is asked to submit the
question in writing to the Company Secretary up to a week before the AGM. A list of the questions submitted to the auditor
is made available to securityholders attending the AGM at or before the start of the AGM. At the AGM, the Chairman
reminds securityholders of the opportunity to ask questions about the audit.
The Chairman provides securityholders with an opportunity to ask questions about and discuss the specific resolutions put to
the meeting. Securityholders have the opportunity to ask questions about or comment on the management of the Group.
Securityholder meetings are held during business hours at the Group’s registered office in Brisbane, which is accessible
by public transport. The notice of meeting invites securityholders to join the Directors for morning tea or afternoon tea (as
applicable) after the meeting.
The Group provides live webcasting of its securityholder meetings so that securityholders can hear proceedings online.
RECOMMENDATION 6.4
Cromwell Property Group gives its securityholders the option to receive communications from the Group and from its
securities registry electronically. Many securityholders have elected to receive all communications electronically, while
other securityholders have elected to receive all communications electronically with payment statements received by post.
Electronic communications sent by the Group and by the securities registry are formatted in a reader friendly and printer
friendly format.
Securityholders can send communications to the Group and to the securities registry electronically. The Contact page on
the Group’s website provides the email address for contacting the Group and the securities registry.
136
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT The Corporate Governance page on our website:
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
Principle 7: Recognise and manage risk
RECOMMENDATION 7.1
Audit and Risk Committee
The Group is exposed to various risks across its business operations and recognises the importance of effectively
identifying and managing those risks so that informed decisions on risk issues can be made. The Board has a long-
established Audit and Risk Committee, which operates under a Board approved written Charter. The Charter sets out the
Committee’s various responsibilities, including:
• assessing the adequacy of the internal risk control system;
• receiving reports from management of any actual or suspected fraud, theft or other breach of internal controls; and
• reviewing the insurance programme.
The Audit and Risk Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• has access to auditors to seek explanations and information from them (without management being present);
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at the Group’s cost); and
• may meet with external advisors without management being present.
The minutes of each Audit and Risk Committee meeting are included in the papers for the next Board meeting after
the Committee Chairman has approved those minutes. The Chairman of the Audit and Risk Committee reports the
Committee’s findings to the next Board meeting after each meeting of the Committee. The Audit and Risk Committee
has three members, all of whom are independent Directors. The Audit and Risk Committee is chaired by an independent
Director who is not the Chairman of the Board.
The Directors’ Report discloses:
• the relevant qualifications and experience of the members of the Audit and Risk Committee; and
• the number of times that the Audit and Risk Committee met during the 2018 financial year and the individual
attendances of the members at those meetings.
What you can find on the Corporate Governance page on our website:
• Audit and Risk Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 7.2
The Board is responsible for:
• ensuring an appropriate risk management framework is in place;
• setting the risk appetite within which the Board expects management to operate; and
• reviewing and ratifying systems of internal compliance and control and legal compliance to ensure appropriate
compliance frameworks and controls are in place.
As outlined in its Board-approved Charter, the Audit and Risk Committee’s responsibilities include:
• overseeing the establishment and implementation of risk management and internal compliance and control systems
and ensuring there is a mechanism for assessing/reviewing the efficiency and effectiveness of those systems at least
annually to satisfy itself that it continues to be sound;
• approving and recommending to the Board for adoption policies and procedures on risk oversight and management to
establish an effective and efficient system for:
• identifying, assessing, monitoring and managing risk;
• disclosing any material change to the risk profile; and
• regularly reviewing and updating the risk profile.
137
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Under the direction of the CEO, management is responsible for ensuring that the Group operates within the risk appetite
set by the Board. It does so by identifying relevant business risks, designing controls to manage those risks and ensuring
those controls are appropriately implemented. The Group has adopted an Enterprise Risk Management Policy, which is a
general statement of the Group’s approach to proactive, enterprise wide risk management. There is also a wide range of
underlying internal policies and procedures, which are designed to mitigate the Group’s material business risks. The risk
management system operates in accordance with AS/NZS ISO 31000:2009 Risk management – Principles and guidelines.
Reviews of the enterprise risk management framework were completed in the 2018 financial year. The Audit and Risk
Committee and the Board were satisfied the framework continues to be sound and that Cromwell operates within the risk
appetite set by the Board.
Compliance Committee
A Compliance Committee – comprised of a majority of independent external members – monitors the extent to which
Cromwell Property Securities Limited (as Responsible Entity for the CDPT) complies with the CDPT’s compliance plan
and the underlying compliance framework. The Board of Cromwell Property Securities Limited receives regular reports
from the Compliance Committee. During the 2018 financial year, the Chairman of the Compliance Committee met with
the Audit and Risk Committee, with part of that meeting conducted without management being present. The roles and
responsibilities of the Compliance Committee are outlined in a Charter, which is reviewed annually by the Compliance
Committee. The Board of the Responsible Entity may change the Charter at any time by resolution.
What you can find on the Corporate Governance page on our website:
• Board Charter
• Audit and Risk Committee Charter
• Enterprise Risk Management Policy
• Compliance Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 7.3
Although the Group does not have a designated internal audit function, throughout the year the Legal and Compliance
team conducts internal audit tests of the effectiveness of the controls and the appropriateness of the monitoring
strategies in place for those risks with an inherent risk rating of Very High or High. Relevant management confirm
(monthly, quarterly or annually as appropriate given the residual risk rating) that the controls remain appropriate and
identify any new risks and any new controls that should be put in place. The Company Secretary reports findings to the
Audit and Risk Committee.
RECOMMENDATION 7.4
The Group’s Sustainability Report discloses the extent to which the Group has material exposure to economic,
environmental and social sustainability risks and explains how such risks are and will be managed.
What you can find on the Sustainability page on our website:
• Sustainability Report 2017
www.cromwellpropertygroup.com/sustainability/performance-and-approach
138
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT
Principle 8: Remunerate fairly and responsibly
RECOMMENDATION 8.1
Nomination and Remuneration Committee
The Board has a long-established Nomination and Remuneration Committee, which operates under a Board approved
written Charter. The Charter sets out the Nomination and Remuneration Committee’s various responsibilities, including
reviewing and making recommendations to the Board in relation to:
• the remuneration framework for Non-executive Directors, including the allocation of the pool of Directors’ fees;
• Executive Director and senior executive total remuneration;
• the design of any equity based incentive plan; and
• whether there is any gender or other inappropriate bias in remuneration policies and practices.
The Nomination and Remuneration Committee:
• may seek any information it considers necessary to fulfil its responsibilities;
• has access to management to seek explanations and information;
• may seek professional advice from employees of the Group and independent professional advice from appropriate
external advisors (at the Group’s cost); and
• may meet with external advisors without management being present.
The minutes of each Nomination and Remuneration Committee meeting are included in the papers for the next Board
meeting after the Committee Chairman has approved those minutes. The Chairman of the Nomination and Remuneration
Committee reports the Committee’s findings to the next Board meeting after each meeting of the Committee. The
Nomination and Remuneration Committee has four members, all of whom are independent Directors.
The Directors’ Report discloses the members of the Nomination and Remuneration Committee, the number of times that
the Committee met during the 2018 financial year and the individual attendances of the members at those meetings.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 8.2
The Directors’ Report (the section titled Remuneration Report) discloses information, including the policies and practices
regarding the remuneration of:
• Non-executive Directors; and
• the Executive Director and other senior executives.
The respective policies and practices reflect the different roles and responsibilities of Non-executive Directors and the
Executive Director and other senior executives.
As disclosed in the Remuneration Report, the Group’s Non-executive Directors are paid a fixed remuneration, comprising
base and committee 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.
The Remuneration Report details the nature and amount of remuneration of the Chief Executive Officer (Executive
Director) and other senior executives (Key Management Personnel or KMP).
Remuneration packages are designed to align the KMP’s interests with those of securityholders. Key performance
indicators (KPIs) for each KMP consider their role within Cromwell generally as well as their expected contribution to the
achievement of Cromwell’s objectives. The KPIs are designed to best incentivise each KMP to meet Cromwell’s objectives
and therefore best serve the interests of securityholders. This is achieved by providing remuneration packages which
consist of the following three elements (or a combination thereof) where appropriate:
1. Fixed component in the form of a cash salary;
2. An at-risk cash bonus that is linked solely to performance of a tailored set of objectives, where appropriate; and
3. At-risk longer-term equity payment. This third element is equity based remuneration aimed at alignment and retention.
139
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT The Group does not have a policy regarding the deferral of performance based remuneration and the reduction,
cancellation or clawback of performance based remuneration in the event of a material misstatement in the Group’s
financial statements. However, performance rights under Cromwell Property Group’s Performance Rights Plan lapse
under certain circumstances including a determination by the Plan Committee that the performance right should lapse
because the participant, in the Plan Committee’s opinion, has committed any act of fraud, defalcation or gross misconduct
in relation to the affairs of a body corporate in the Group.
Other than the CEO, no KMP was awarded a short-term incentive (an at-risk cash bonus) in the 2018 financial year. The
nature of the performance based remuneration is an ‘at risk’ payment rather than a ‘bonus’ payment.
For all KMP except the CEO and Non-executive Directors, the CEO is responsible for setting key performance indicator
(KPI) targets and assessing annually whether those targets have been met. The KPI targets for the CEO are set, revised
and reviewed annually by the Nomination and Remuneration Committee and the Board.
What you can find on the Corporate Governance page on our website:
• Nomination and Remuneration Committee Charter
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
RECOMMENDATION 8.3
In accordance with the remuneration policy, the Group operates a Performance Rights Plan and has issued performance
rights to a number of senior executives, including the CEO (an Executive Director). The Group does not currently pay any
other form of security based remuneration.
The terms of the Group’s Performance Rights Plan do not allow participants, whether Executive Directors or other
employees, to hedge or otherwise limit the economic risk of their participation in the Plan.
Previous participation in the Performance Rights Plan by the CEO (an Executive Director) was approved by securityholders
at an AGM. Pursuant to the ASX Listing Rules, any further participation would also need to be approved by securityholders.
What you can find on the Corporate Governance page on our website:
• Plan Rules for the Cromwell Property Group Performance Rights Plan
www.cromwellpropertygroup.com/securityholder-centre/corporate-governance
140
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT SECURITYHOLDER INFORMATION
The securityholder information set out below was applicable as at 31 August 2018, unless stated otherwise.
Spread of Stapled Securityholders
Category of Holding
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of Securities
Number of Holders
1,673,260,495
295,504,574
13,225,423
6,539,772
338,065
1,988,868,329
1,133
8,587
1,697
2,140
1,067
14,624
Unmarketable Parcels
The number of stapled securityholdings held in a less than marketable parcel was 679.
Substantial Securityholders
Holder
The Vanguard Group, Inc
Haiyi Holdings Pte. Ltd., SingHaiyi Group Ltd
ARA Real Estate Investors XXI Pte. Ltd.
Voting Rights
Stapled Securities
Date of Notice
140,734,048
175,052,515
386,538,850
18/06/2018
19/03/2018
08/03/2018
On a show of hands every securityholder present at a meeting in person or by proxy shall have one vote and, upon a
poll, every securityholder shall have effectively one vote for every security held.
141
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT 20 Largest Securityholders
Rank
Investor
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CITICORP NOMINEES PTY LIMITED
ARA REAL ESTATE INVESTORS XXI PTE LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
ARA REAL ESTATE INVESTORS XXI PTE LTD
NATIONAL NOMINEES LIMITED
REDEFINE GLOBAL (PTY) LTD
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
STARA INVESTMENTS PTY LTD
HUMGODA INVESTMENTS PTY LTD
PANMAX PTY LTD
BNP PARIBAS NOMS PTY LTD
PAUL LOUIS WEIGHTMAN
WALLACE SMSF PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
MR NEAL JOHN AMBROSE & MRS ANNE CHRISTINE AMBROSE
CS THIRD NOMINEES PTY LIMITED
AMP LIFE LIMITED
BOND STREET CUSTODIANS LIMITED
Number
of Stapled
Securities Held
% Held of Issued
Stapled Securities
290,337,178
287,872,078
270,992,618
204,006,581
98,666,772
63,029,668
60,000,000
28,642,008
14,311,823
10,096,525
7,282,126
6,528,243
6,449,667
5,639,098
4,898,736
4,280,283
4,212,404
3,987,348
3,643,394
3,419,583
14.60%
14.47%
13.63%
10.26%
4.96%
3.17%
3.02%
1.44%
0.72%
0.51%
0.37%
0.33%
0.32%
0.28%
0.25%
0.22%
0.21%
0.20%
0.18%
0.17%
Total
1,378,296,133
69.30%
Provision of Information for Securityholders
Cromwell is committed to ensuring its securityholders are fully informed on the financial and operational status of the
Group as well as its future prospects, in accordance with the rules and guidelines of the Australian Securities Exchange
(ASX) and other regulatory bodies. The following information can also be found on the Cromwell website at
www.cromwellpropertygroup.com.
ASX LISTING
Cromwell Property Group is listed on the Australian Securities Exchange (ASX code: CMW).
SECURITYHOLDING DETAILS
Securityholders can access information on their holdings and update their details through Cromwell’s securities registry
provider:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane Qld 4000
Telephone:
Fax:
Web:
Email:
+61 1300 554 474
+61 2 9287 0303
www.linkmarketservices.com.au
info@linkmarketservices.com.au
142
CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT Securityholders can change or update details in a number of ways:
• Send written authorisation to the registry quoting your SRN / HIN and signing the request;
• Log on to www.linkmarketservices.com.au; or
• Call the registry.
You will have to verify your identity by providing your personal details. Bank detail changes must be requested in writing or
electronically and cannot be made over the phone. Address changes must be requested in writing to the registry or your
CHESS Sponsor.
Securityholders are not obliged to quote their TFN, ABN or exemption. However, if these details are not lodged with the
registry, Cromwell is obliged to deduct tax from unfranked portions of dividend payments and distribution payments 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 2018
31 March 2018
31 December 2017
2.0850 cents
2.0850 cents
2.0850 cents
28 June 2018
28 March 2018
Record Date
29 June 2018
Payment Date
24 August 2018
29 March 2018
25 May 2018
28 December 2017
29 December 2017
23 February 2018
30 September 2017
2.0850 cents
28 September 2017
29 September 2017
17 November 2017
Further Information
The Cromwell website provides a comprehensive range of information on the Group, past performance and products.
The website address is www.cromwellpropertygroup.com. 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
TEL: +61 7 3225 7777
FAX: +61 7 3225 7788
EMAIL: invest@cromwell.com.au
LISTING:
Cromwell Property Group is listed on the Australian Securities Exchange (ASX code: CMW).
SECURITIES REGISTRY:
Link Market Services Limited
Level 21, 10 Eagle Street
Brisbane QLD 4000
TEL: +61 1300 554 474
FAX: +61 2 9287 0303
WEB: www.linkmarketservices.com.au
AUDITOR:
Pitcher Partners
Level 38, Central Plaza One
345 Queen Street
Brisbane QLD 4000
TEL:
FAX:
WEB: www.pitcher.com.au
+61 7 3222 8444
+61 7 3221 7779
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CROMWELL PROPERTY GROUP I 2018 ANNUAL REPORT