CONTENTS
Letter from the Chairman
Letter from the Managing Director and CEO
Directors’ Report
Operating and Financial Review
Directors
Corporate Governance
Remuneration Report – Audited
Lead Auditor’s Independence Declaration under Section 307C
of the Corporations Act 2001
Consolidated Statements of Profit or Loss and Other Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Equity
Consolidated Cash Flow Statements
Consolidated Notes
Directors’ Declaration
Independent Auditor’s Report
Security Information and key dates
1
3
5
5
17
21
34
57
58
59
60
62
63
130
131
133
STREAMLINED FINANCIAL
STATEMENTS
These financial statements have
been organised into the following six
sections to make them less complex
and more relevant to unitholders/
securityholders:
• Basis of preparation
• Results for the year
• Operating assets and liabilities
• Capital structure and financing
costs
• Group structure and
• Other items.
Each section sets out the accounting
policies applied in producing the
relevant notes, along with details of
any key judgements and estimates
used or information required to
understand the note. The purpose of
this format is to provide readers with
a clearer understanding of what
drives the financial performance and
position of the Group.
KEEPING IT SIMPLE ….
The aim of the text in ‘Keeping
it simple’ boxes is to provide
commentary on more complex
sections, or notes, in plain English.
Notes to the financial statements
provide information required by
statute, accounting standards or
ASX Listing Rules to explain a
particular feature of the financial
statements. The notes to the
financial statements which follow
will also provide explanations and
additional disclosure to assist
readers' understanding and
interpretation of the financial report.
Letter
from the
Chairman
We have been
disciplined in
implementing our
strategy to ensure
that the decisions we
make today serve
our business well
through the business
cycle.
__
GRAHAM BRADLEY AM
CHAIRMAN
Dear Securityholders,
It is a great pleasure to report another
year of strong profit growth as we realise
the benefits of our strategy and capitalise
on supportive market conditions.
Underlying profit grew by 9.4% to $608
million and underlying earnings per
security was up 7.8% on FY14. Funds
from operations was up 14.7% and
statutory profit was $903 million, more
than 70 percent higher than the prior
year.
Our good results reflect solid increases
in earnings across all three businesses –
Commercial Property, Residential and
Retirement Living. We have been
disciplined in implementing our strategy
to ensure that the decisions we make
today will serve our business well
through the business cycle.
Examples of progress on our strategic
priorities include nearly $600 million in
acquisitions across Retail, Logistics and
Business Parks, Residential and
Retirement Living, expanded investment
in medium density residential product,
our strong balance sheet, high customer
satisfaction across all areas of our
business, and significant cost savings
from efficiency improvements.
Stockland Financial Report 2015 — 1
For the next three years, the Foundation
will support two outstanding organisations:
Touched by Olivia which provides an
expanding national network of inclusive
play spaces and social enterprises that
provide training and employment for
people with disabilities, and Redkite,
which provides essential support to
children and young people with cancer
and to their families.
As Chair of the Foundation, I am proud
to lead this initiative, which will ensure
we continue to support the communities
in which we operate.
CONCLUSION
In conclusion, I would like to thank my
Board colleagues and Stockland’s
talented employees for their commitment
and discipline in advancing the Group’s
strategy and delivering a strong result
for securityholders in FY15. While
remaining cautious about the uneven
market conditions we face over the next
12 months, I am confident that the
operating platform we have established
will allow Stockland to sustain solid
growth in the year ahead.
GRAHAM BRADLEY AM
CHAIRMAN
We have also maintained our leadership
position in sustainability, and were
named one of the most sustainable real
estate companies globally in the Dow
Jones Sustainability Index for the eighth
consecutive year.
DISTRIBUTION
As promised, our full year distribution
was 24 cents per security, representing a
payout ratio of 93% of underlying profit.
Looking forward, we have updated our
distribution policy to pay the higher of
100% of Trust taxable income or 80-90%
of underlying profit. We believe that this
is the appropriate level to provide
growing returns for securityholders while
allowing for investment in future growth.
In line with our new payout policy, and in
recognition of consistent profit growth
over the last two years, in FY16 we are
targeting a distribution of 24.5 cents per
security, assuming there is no material
change in market conditions.
GOVERNANCE
Following many years of service,
two long standing directors Terry
Williamson and Duncan Boyle will
retire at the Annual General Meeting
on 27 October 2015.
Terry and Duncan have been highly
valued members of the Stockland
Board for many years. They have both
contributed greatly to the success of the
business through their strategic insights,
critical thinking and professionalism. I
thank them sincerely for their long and
dedicated service.
The Board’s succession planning is in
place for the impending retirement of
these two senior directors, with Tom
Pockett to succeed Terry Williamson as
chair of the Audit Committee. Tom’s
deep experience as a Chief Financial
Officer ideally qualifies him for this role.
At Stockland, we recognise the
advantages of having a mix of relevant
business, executive and professional
experience on the Board, the importance
of cultural and ethical values, and the
benefits of diversity, including gender
diversity. I am, therefore, delighted to
welcome our new director, Dr Nora
Scheinkestel. Nora’s experience as a
company director across a range of
sectors including property, financial
services, utilities and infrastructure will
strongly complement our Board. As
required by the Stockland Constitution,
Nora will offer herself for election by
securityholders at the 2015 Annual
General Meeting on 27 October 2015.
To strengthen the alignment of director
and securityholder interests, the Board
has revised our policy on ownership of
securities by directors. The minimum
number of securities each Non-Executive
Director is now required to acquire,
within a reasonable time of joining the
Board, has been increased from 10,000
to 40,000. This increase reflects our
belief that Directors should hold a
meaningful number of Stockland
securities. The new minimum equates
roughly to one year’s base board fees.
STOCKLAND CARE FOUNDATION
Stockland has a proud history of making
a positive contribution to the community
through our development activity and
employee giving and volunteering.
Earlier this year I was delighted to launch
the Stockland CARE Foundation with a
capital contribution of $8 million to
secure our ongoing commitment to
continue this important legacy.
Our contribution represents about 10
percent of the one-off gross profit
realised from the sale of our
shareholding in Australand during the
year. Income from the Foundation will be
donated to community partners focused
on the areas of health, wellbeing and
education. The Foundation also boosts
our employee giving and volunteering
opportunities.
Stockland Financial Report 2015 — 2
Letter
from the
Managing
Director
and CEO
I am pleased to
report that we are
on track, with all of
our key metrics
showing significant
improvement in
FY15.
__
MARK STEINERT
MANAGING DIRECTOR AND CEO
Dear Securityholders,
When I joined Stockland in 2013 we set
out a strategy to make the business
more resilient and profitable to ensure
sustainable earnings growth for our
securityholders into the future. I am
pleased to report that we are on track,
with all of our key metrics showing
significant improvement in FY15,
underpinned by strong growth in our core
businesses and we are well placed to
achieve continued growth.
We remain focused on growing returns
for securityholders through a disciplined
approach to our strategic priorities of
growing asset returns and our customer
base, maintaining our capital strength,
and delivering operational excellence.
We made good progress in each of
these areas in FY15.
GROW ASSET RETURNS AND
CUSTOMER BASE
Commercial Property remains a key
driver of our Group’s success. On a
comparable basis we achieved operating
profit growth of 4.3% across the portfolio,
with 4.2% in Retail, 3.1% in Logistics and
Business Parks and 6.4% in Office,
reflecting our strong focus on property
fundamentals.
Stockland Financial Report 2015 — 3
Sustainability remains a key focus for
Stockland. We are proud to have been
named one of the most sustainable real
estate companies in the world in the
Dow Jones Sustainability Index for the
eighth consecutive year. Since FY06 we
have saved over $60 million through
carbon intensity reductions. This year we
were the first Australian company to
issue a green bond which, among other
things, has been used to fund the largest
single rooftop solar system in Australia at
our Shellharbour shopping centre.
OUTLOOK
While the outlook for specific markets
remains uneven, with some caution
among businesses and consumers, we
expect conditions to remain reasonably
supportive in FY16. Interest rates are
anticipated to be stable and we expect
the economy to continue to grow, albeit
at below trend levels.
We have commenced FY16 with a high
level of residential contracts in hand and
retirement living net reservations, and
with good momentum in retail sales.
I am confident in the strategy we are
executing and that Stockland is well
placed to continue to deliver profitable
growth from our core businesses in FY16
and beyond.
MARK STEINERT
MANAGING DIRECTOR AND CEO
During the year we also continued
to replenish our land bank with the
acquisition of 4,000 lots. We have been
quick to activate many of these with the
majority of new projects on track to deliver
profit within two years of acquisition.
Our Retirement Living operating profit
was up 19.9% on FY14 reflecting strong
sales, active management and improved
efficiency. The business is now two
years into our five year plan to achieve a
7% cash return on assets, which is
marked by taking a much more active
approach to how we manage our village
portfolio.
During FY15 we made good progress
reshaping our portfolio via capital
recycling with the sale of two non-core
villages and acquisition of eight villages in
South Australia which has a particularly
strong Retirement Living market.
CAPITAL STRENGTH
We have maintained our strong balance
sheet and A-/stable credit rating,
supporting cost effective financing of
our future growth.
Our active capital management has
improved our weighted average cost of
debt and maintained our average debt
maturity. Gearing at the end of FY15 was
23.4%, at the lower end of the target
range of 20 – 30%, but is expected to
move up within our target range over the
FY16 year.
OPERATIONAL EXCELLENCE
We maintained a proactive focus on
operating efficiency. In FY15 we
commenced a project to outsource some
functions in finance and IT to provide
more flexible and scalable support. This
initiative will build on the significant
reduction in overheads we achieved
following our restructuring in FY14.
Our retail portfolio performed strongly
with high occupancy, positive leasing
spreads on new leases and renewals
and lower incentives (which are only
paid on new leases). Total Moving
Annual Turnover in our shopping centres
grew 4.5%, with 7.0% growth from
specialty stores. This is the strongest
specialty sales growth we have recorded
in four years.
We are starting to see the benefit of the
major redevelopments we have
undertaken over recent years as these
assets progressively stabilise. In FY15
we opened major redevelopments at
Hervey Bay in Queensland, Baldivis in
Perth, and the first stage of Wetherill
Park in Sydney. The final stages of
Wetherill Park, Point Cook in Melbourne,
Glasshouse in the Sydney CBD and
stage one of Harrisdale in Perth are all
underway and will complete in FY16.
These developments represent a
combined investment of $550 million
with an expected stabilised average
yield of 7-8%.
In our Logistics and Business Parks
business we are steadily building up a
strong portfolio of assets that delivers
solid returns and presents opportunities
for future growth. In FY15 we acquired
three new sites in Sydney and
Melbourne and made good progress
repositioning our portfolio with asset
improvements under way at a number
of key sites.
Our exposure to the Office sector
remains tactically overweight in Sydney,
reflecting our view on the challenging
state of the other office markets.
Our Residential business achieved a
substantial 73.5% uplift in profit and
ended the year with a record 3,742
contracts on hand, up 17% on last year.
This strong result reflected generally
positive market conditions in the
corridors where we operate and the
progress we have made launching six
key projects in two years and broadening
our customer reach with diverse product
offerings. Providing our customers with
more choices is proving to be successful
and we are now ramping up production
for FY16 at selected projects.
Stockland Financial Report 2015 — 4
Directors’
Report
Year ended 30 June 2015
The Directors of Stockland Corporation Limited (ACN 000 181 733) and the Directors of Stockland Trust
Management Limited (ACN 001 900 741, AFSL 241190), the Responsible Entity of Stockland Trust (ARSN
092 897 348), present their report together with the Financial Report of Stockland and the Financial Report
of Stockland Trust Group for the year ended 30 June 2015 and the Independent Auditor’s Report thereon.
The Financial Report of Stockland comprises the consolidated Financial Report of Stockland Corporation
Limited (‘the Company’) and its controlled entities, including Stockland Trust (‘the Trust’) and its controlled
entities, (‘Stockland’). The Financial Report of Stockland Trust Group comprises the consolidated Financial
Report of the Trust and its controlled entities (‘Stockland Trust Group’).
Operating and Financial Review1
About Stockland
Stockland is one of the largest diversified property groups in Australia with more than $14.8 billion of real estate
assets. Stockland owns, manages and develops shopping centres, logistics centres and business parks, office
assets, residential communities, and retirement living villages.
The company was founded in 1952 with a vision to “not merely achieve growth and profits but to make a worthwhile
contribution to the development of our cities and great country”. Today Stockland leverages its diversified model, to
help create thriving communities where people live, shop and work.
This is an approach that is underpinned by the Group’s purpose “we believe there is a better way to live”. This is
brought to life by our employees who are guided by Stockland’s values of community, accountability, respect, and
excellence (CARE).
Stockland’s primary objective is to deliver earnings per security growth and total risk-adjusted securityholder returns
above the Australian Real Estate Investment Trust index average, by creating quality property assets and delivering
value for its customers.
To provide the greatest value to securityholders Stockland is structured as a stapled security; a combination of a
unit in a trust and a share in a company that are traded together on the Australian Securities Exchange. This allows
the Group to undertake both property investment (via Stockland Trust) and property management and development
(via Stockland Corporation).
Stockland strategy
1 All measures of revenue and profit throughout this section are calculated based on underlying profit unless otherwise stated
Stockland Financial Report 2015 — 5
Directors’
Report
Year ended 30 June 2015
Our strategy has three pillars:
• Growing asset returns and customer base - driving returns in our core businesses
• Operational excellence - improving the way we operate across the Group to drive efficiencies and effectiveness
• Capital strength - actively managing our balance sheet to maintain diverse funding sources and an efficient cost
of capital
Stockland strategic priorities
FY15 Progress
Grow our assets
and customer base
• $425 million Retail development under construction and a pipeline of $1.1 billion
• Acquired $125 million of Retail and Logistics and Business Parks assets
delivering 7.6% incremental FFO yield
• Activated14,000 residential lots at target margins
• Acquired 4,000 residential lots in eastern seaboard metropolitan locations
• Broadened our customer reach in Residential with the introduction of medium
density homes and completed homes
• Record Residential contracts on hand up 17% on FY14
• Record Retirement Living development activity with 500 homes under
construction or completed at 16% IRR
• High customer satisfaction across all business units
Operational excellence
• Internalised the management of our NSW and Vic Logistics and Business
Parks assets
• Commenced a project to outsource some functions in finance and IT to provide
more flexible and scalable support
• Achieved procurement savings ahead of time and budget
• Named one of the most sustainable real estate companies in the world in the
Dow Jones Sustainability Index for the eighth consecutive year
• Since FY06 saved over $60 million through carbon intensity reductions of our
retail and office assets
• Most Green Star rated shopping centres nationally
• Highest retail NABERS energy portfolio average at 4.27 stars
• Launched Stockland CARE Foundation with a capital commitment of $8 million
• Achieved 85% employee engagement score, above the Towers Watson Global
High Performance Norm
• Maintained strong balance sheet and A-/stable credit rating for over 10 years
• Gearing at the end of FY15 was 23.4%, at the lower end of the target range
of 20 – 30%
• Improved our weighted average cost of debt and maintained our average
debt maturity
• First Australian corporate to issue a green bond
• Hedged rates reduced by 1.8% over the next 5 years
Capital strength
Stockland Financial Report 2015 — 6
Directors’
Report
Year ended 30 June 2015
Risks and opportunities
Stockland adopts a rigorous approach to understanding and proactively managing the risks it faces in its business.
Stockland recognises that making business decisions that involve calculated risks, and managing these risks within
sensible tolerances, is fundamental to creating long-term value for securityholders and meeting commitments to its
employees, tenants, customers, business partners, consultants and the communities in which it does business.
More information on Stockland’s risk management policy is available at stockland.com.au.
There are various risks that could impact our business and the nature and potential impact of these risks change
over time. These include, but are not limited to:
Risk
Response and opportunities
Short
term –
strategy
execution
Economic downturn
creates challenging
operating conditions
Continue to:
• focus on retaining a strong balance sheet with low gearing
• concentrate on efficiency and cost management
• use diverse funding sources
Downturn in
residential market
impacts revenue
Increased competition
in the Australian
property market limits
opportunities for
growth
Ability to attract and
retain talented
employees impacts
strategy delivery
Longer
term –
changing
marketplace
Timing of
infrastructure and
amenity delivery
affects project delivery
and customer
satisfaction
Enhancements to
digital technology
affects customer
behaviour and
business process
efficiency
Regulatory changes
impact our business
model
Ability to develop
products that meet
anticipated future
customer and societal
demands
As part of our Residential Strategy we have:
• broadened our market reach by expanding our residential product offering including
diverse house and land packages, completed housing, medium density and
apartments
• sought to balance the demand from home owners and investors to ensure
our residential communities remain attractive to future buyers
Continue to engage with government to seek effective solutions on land
supply issues
Continue to:
• take advantage of organic development opportunities within our existing portfolio
• ensure discipline and agility in our investment decision making so we can take
advantage of opportunities that will deliver the appropriate risk-adjusted returns
• maintain a strong balance sheet to provide funding flexibility
Established an in-house recruitment team, Careers@Stockland, and referral program
to improve our recruitment capability and assist in the selection of the right talent.
Significantly reduced first year employee turnover through improved on boarding
and induction.
Continue to focus on providing learning and development opportunities and building a
strong employment brand.
The staging of our projects can sometimes be impacted by the pace of approvals,
sales and construction. Prioritisation of effective stakeholder engagement on our
projects with suppliers, customers and government has resulted in positive outcomes
across several projects.
Continue to:
• use our Liveability research to understand priorities of residents in our communities.
• ensure all projects have stakeholder engagement plans that minimise obstacles to
infrastructure and amenity delivery and ensure appropriate communication with all
stakeholders about these matters
Continue to:
• recognise and integrate technical enhancements across the business
• ensure Stockland retail centres are thriving community hubs by delivering quality
services retail and community spaces
• invest in process and system upgrades to improve the efficiency of our operations
Continue to:
• engage with industry and government on policy areas including taxation and
planning reform
• develop in areas where governments support growth
• focus on good practice to remain well positioned in the market and set best
practice standards
Continue to:
• evolve our market leading product innovation and customer insights using
platforms such as Stockland Exchange (Stockland’s online research community)
• foster a culture of innovation to ensure we identify and take advantage of
new opportunities
• remain flexible and open to opportunities to leverage movements in
stakeholder preferences
• focus on the creation of sustainable and liveable communities and assets
• enhance our design excellence providing greater functionality and value for money
Stockland Financial Report 2015 — 7
Directors’
Report
Year ended 30 June 2015
Stockland results and outlook
Key metrics:
• Full year distribution was 24.0 cents per security, representing a payout ratio of 93% of underlying profit
• Statutory profit was $903 million, up significantly on FY14
• Statutory earnings per security (EPS) was 38.5 cents, up 71.4% on FY14
• Underlying profit was $608 million, up 9.4% on FY14
• Underlying earnings per security was 25.9 cents, up 7.8% on FY14
• Funds from operations was $657 million, up 14.7% on FY14
• Funds from operations per security was 28.0 cents, up 13.0% on FY14
Stockland has lifted underlying profit 9.4% to deliver $608 million for the full year ended 30 June 2015, reflecting the
disciplined implementation of our group strategy and supportive market conditions. Funds from operations (‘FFO’),
which is a consistent measure of underlying and recurring earnings defined by the PCA, was up 14.7%.
This result demonstrates our significant success implementing our strategy to deliver sustainable growth, now and
through the cycle. All core business areas contributed with Residential, Retirement Living and Logistics and
Business Parks each up more than 15%. Retail, which reliably provides around 60% of our group’s earnings, was
up 4.2% on a comparable basis.
Statutory profit for the year grew significantly to $903 million and statutory EPS was 38.5 cents. This included $297
million in revaluation uplift on Commercial Property assets and $80 million gross profit from the sale of our
securityholding in Australand. Return on equity increased 110 basis points to 9.9%, excluding workout assets.
We are pleased to report that all business units delivered solid growth in earnings and are well placed to achieve
continued growth. We have been disciplined in implementing our strategy to deliver strong returns in FY15 while
setting up our business for future success. We have capitalised on supportive market conditions through the year,
while ensuring the decisions we make now will serve our business well through the cycle.
We have three clear strategic priorities: growing asset returns and customer base; capital strength; and operational
excellence. We made good progress in each of these areas in FY15 with key examples including $591 million in
strategic acquisitions across Retail, Logistics and Business Parks, Residential and Retirement Living; broadening
our customer reach with medium density residential products; maintaining a strong balance sheet; high customer
satisfaction across all areas of our business; and significant cost savings through ongoing procurement improvements.
Our Residential business achieved a substantial 73.5% uplift in profit and ended the year with a record 3,742
contracts on hand. This result reflected generally positive market conditions in the corridors where we operate, and
the progress we’ve made launching six key projects in two years and broadening our customer reach with diverse
and targeted product offerings.
Commercial Property remains a key driver of our success. On a comparable basis we achieved operating profit2
growth of 4.3% across the portfolio, with 4.2% in Retail, 3.1% in Logistics and Business Parks and 6.4% in Office,
reflecting our strong focus on property fundamentals.
Our Retirement Living business continues its steady growth recording record profit and improved ROA3. We are
confident we will continue this trend with our active portfolio management approach and focus on development.
Stockland has maintained a strong balance sheet and A-/stable credit rating, supporting investment in the future
growth of the business. Gearing at the end of FY15 was 23.4%, at the lower end of the target range of 20 – 30%,
due to disciplined capital management, but is expected to increase within the range over the FY16 year.
Our active debt management program has seen us improve our weighted average cost of debt and maintain our
average debt maturity. Debt maturity on a pro forma basis at 30 June 2015 was 5.3 years following the settlement of
our new US private placement debt and repayment of our Yen bond in August.
We maintain a proactive focus on operating efficiency. In FY15, we commenced a project to outsource some
activities in finance and IT to provide more flexible and scalable functional support. This will build on the significant
reduction in overheads we achieved in FY14. Our FY15 underlying profit was $4.2 million (net of tax) lower due to a
provision taken to facilitate this project.
Sustainability remains a key focus for Stockland and we are proud to have been named one of the most sustainable
real estate companies in the world in the Dow Jones Sustainability Index for the eighth consecutive year. Since
FY06 we’ve saved over $60 million through carbon intensity reductions. This year we were the first Australian
corporate to issue a green bond which, among other things, has been used to fund the largest single rooftop solar
system in the country at our Shellharbour shopping centre.
2 Refer to Note (B2) for reconciliation of segment earnings before Interest and tax (‘EBIT’) and operating profit.
3 ROA (Return on Assets) is calculated as the earnings before interest and tax, impairments and other non-cash items divided by the average cash invested.
Stockland Financial Report 2015 — 8
Directors’
Report
Year ended 30 June 2015
Outlook
Stockland is well placed to continue to deliver profitable growth from its core businesses in FY16 and beyond.
While the outlook for specific markets remains uneven, with some caution among businesses and consumers, we
expect conditions to remain reasonably supportive. We have commenced the new year with a high level of
residential contracts in hand and retirement living net reservations, and with good momentum in retail sales. Interest
rates are anticipated to be stable and we expect the economy to continue to grow, albeit at below trend levels.
We are targeting growth in earnings per security in FY16 by 6–7.5% and FFO per security by 8.5–10%, assuming
there is no material change in market conditions. Commercial Property is expected to maintain moderate growth in
returns with comparable NOI growth of 2–3% and comparable FFO growth of 3–4%. We expect to achieve around
6,000 residential lot settlements, allowing for some production constraints in Victoria and NSW and continued
slowing in the WA market.
We have updated our distribution policy to pay the higher of 100% of Trust taxable income or 80–90% of underlying
profit. In line with this, FY16 distribution is targeted at 24.5 cents per security, assuming no material change in
market conditions.
Group results summary
Underlying profit is determined following the principles of AICD/Finsia for reporting underlying profit, having regard
to the guidance from ASIC’s RG 230 “Disclosing non-IFRS information” (“RG 230”). The reconciliation between
underlying profit and statutory profit is provided below for Stockland. The group has reported consistently on this
basis for more than seven years to help investors understand the performance of its business.
Stockland underlying profit and statutory profit reconciliation
Year ended 30 June
2015
2014
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Revenue
2,087
27
2,114
1,924
11
1,935
Cost of property developments sold:
• Land and development
• Capitalised interest
• Utilisation of provision for write-
down of inventories
Investment property expenses
Share of profits of equity-accounted
investments
Management, administration,
marketing and selling expenses
Net change in fair value of
investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of Retirement
Living resident obligations
Impairment of intangibles
Net gain on sale
of other financial assets
Net loss on sale
of other non-current assets
Finance income
Finance expense
Profit before income tax benefit
Income tax benefit/(expense)
Profit for the year attributable
to securityholders
Earnings per share (cents)
(983)
(126)
113
(226)
44
(258)
–
18
–
–
–
–
8
(73)
604
4
608
25.9
–
–
–
44
–
253
50
(70)
(43)
73
(2)
1
(40)
293
2
295
(983)
(126)
113
(226)
88
(926)
(156)
180
(224)
36
(258)
(248)
253
68
(70)
(43)
73
(2)
9
(113)
897
6
903
–
16
–
–
–
–
5
(79)
528
27
555
–
–
–
–
26
–
93
(94)
33
(23)
35
(6)
–
(69)
6
(34)
(28)
(926)
(156)
180
(224)
62
(248)
93
(78)
33
(23)
35
(6)
5
(148)
534
(7)
527
–
38.5
24.0
–
22.8
Stockland Financial Report 2015 — 9
Directors’
Report
Year ended 30 June 2015
Underlying profit is a non-IFRS measure that is designed to present, in the opinion of the Directors, the results from
ongoing operating activities of Stockland in a way that appropriately reflects the group’s underlying performance.
Underlying profit excludes items such as unrealised fair value gains/(losses), unrealised provision gains/(losses)
and adjustments arising from the effect of revaluing assets/liabilities (such as derivatives, financial instruments and
investment properties). These items are required to be included in the statutory profit in accordance with Australian
Accounting Standards.
Other statutory profit adjustments are made for realised transactions occurring infrequently and those that are
outside the course of Stockland’s core ongoing business activities. Underlying profit is the basis on which
distributions are determined.
The increase in our statutory profit in FY15 was primarily driven by strong growth in underlying profit, together with
favourable increases in the fair values of the Commercial Property investment properties. Valuation movements in
Commercial Property, including equity-accounted investments, contributed $297 million (FY14: $119 million) to
statutory profit, primarily due to valuation uplift recognised at Rockhampton, Baulkham Hills, Nowra and Forster
retail sites. All of these assets delivered income growth and benefited from capitalisation rate compression. Our
Office and Logistics and Business Park assets delivered revaluation gains of $47 million and $25 million
respectively.
A core system project review is underway aiming to simplify the business, reduce costs and take advantage of rapid
developments in technology to improve customer outcomes. As a result of this technology focus we have impaired
the value of our software assets by $25 million (FY14: nil) which were assessed to have no future economic benefit.
In addition, a goodwill impairment of $18 million (FY14: $23 million) arose from adopting more conservative
assumptions associated with the development pipeline.
The net profit on sale of other financial assets reflects the $73 million pre-tax profit on sale of Australand shares
following the sale of our interest to Frasers Centrepoint in August 2014.
Other movements which affected the statutory profit included a $40 million loss from changes in the market value of
the group’s financial instruments.
We also recognised an income tax benefit of $6 million.
Funds from operations reconciliation
$ million
Group funds from operations (‘FFO’)
Adjust for:
Amortisation of fit out incentives
Amortisation of rent-free incentives
Straight-line rent
Tax benefit on underlying profit
Underlying profit
Commercial Property revaluations (including equity investments)
Change in fair value of Retirement Living investment properties
Impairment of intangibles
Mark to market loss on financial instruments
Net gain on sale of other financial assets
Net loss on sale of other non-current assets
Tax benefit/(expense) on statutory profit adjustments
Statutory profit
FY15
657
FY14
573
Change
↑14.7%
(45)
(16)
8
4
608
297
7
(43)
(39)
73
(2)
2
903
(37)
(15)
7
27
555
119
(50)
(23)
(69)
35
(6)
(34)
527
↑9.4%
↑71.4%
FFO has been determined with reference to the Property Council of Australia’s voluntary disclosure guidelines to
help investors and analysts compare Australian real estate organisations. Underlying profit has been adjusted for:
amortisation of fitout incentives, amortisation of rent-free incentives, straight-line rent and non-cash income tax
expense/benefit included in underlying profit. Apart from Stockland’s Commercial Property business, underlying
profit and FFO reported for the other business units remain the same.
Stockland Financial Report 2015 — 10
Directors’
Report
Year ended 30 June 2015
Business unit performance and priorities
Commercial Property
Our Commercial Property business comprises retail centres, logistics and business parks, and office assets.
We are one of the largest retail property owners, developers and managers in Australia. Our 42 retail centres
accommodate more than 3,200 tenants, realising over $6 billion of retail sales per annum. The logistics and
business parks portfolio comprises 24 properties with over 1.2 million square metres of building area. These
properties are strategically positioned in key locations for logistics, infrastructure and employment. The office
portfolio comprises 10 assets in key locations.
Portfolio at 30 June 2015
42 retail centres
24 logistics and business parks
10 office buildings
76 Commercial Property assets
*Stockland’s ownership interest
Performance
Approximate value*
$6.1 billion
$1.7 billion
$1.0 billion
$8.8 billion
Commercial Property
($m, unless otherwise stated)
FY15
FY14 Change
Comparable
growth
FY15
FY14 Change
Comparable
growth
Funds from operations
Underlying profit
Net operating income:
• Retails
• Logistics and Business Parks
• Office
Total net operating income (NOI)
Net operating costs
Total Commercial Property
ROA
379
131
78
588
(18)
570
369
108
85
562
(20)
542
↑2.6%
↑21.0%
↓8.9%
↑4.6%
↓13.2%
↑5.1%
↑4.8%
↑5.1%
↑4.2%
↑4.8%
351
120
64
535
(18)
517
347
100
70
517
(20)
497
↑1.3%
↑20.1%
↓8.8%
↑ 4.5%
↓13.2%
↑4.0%
8.4%
8.4%
↑4.2%
↑3.1%
↑6.4%
↑4.3%
Commercial Property remains a key driver of our success. On a comparable basis we achieved NOI growth of 4.3%
across the portfolio, with 4.2% in Retail, 3.1% in Logistics and Business Parks and 6.4% in Office, reflecting our
strong focus on property fundamentals.
Retail
Stockland’s retail portfolio performed strongly in FY15 with NOI up 1.3% to $351 million and FFO up 2.6% to $379
million. These results reflect the portfolio’s high occupancy, positive leasing spreads on new leases and renewals
and lower incentives (which are only paid on new leases).
The portfolio recorded the strongest specialty sales growth in four years of 7% with 4.5% Total Moving Annual
Turnover. The best performing categories were food catering and fast casual dining, communication technology,
services, homewares and apparel.
In FY15 we achieved comparable specialty sales per square metre 12.6% above the Urbis average. This reflects
the success of our active management approach which has seen us undertake small projects and remixing in a
number of centres to meet the specific needs of their customer base.
We are also starting to see the benefit of the major redevelopments we have undertaken over recent years as these
assets progressively stabilise. In FY15 we opened major redevelopments at Hervey Bay in Queensland, Baldivis in
Perth and the first stage of Wetherill Park in Sydney. The final stages at Wetherill Park, Point Cook in Melbourne,
Glasshouse in the Sydney CBD and Harrisdale stage one in Perth are all underway and will complete in FY16.
These developments represent a combined investment of $550 million with an expected stabilised average yield of
7-8%.
Stockland Financial Report 2015 — 11
Directors’
Report
Year ended 30 June 2015
Retail strategic priorities
The Retail business maintains its focus on creating market leading or differentiated centres, redeveloping its most
productive assets to create community and entertainment hubs and maximise trade area share. With $425 million of
retail development under construction and a pipeline of $1.1 billion targeting incremental internal rates of return
(IRR) of 11-14 per cent4.
Stockland’s retail mix, underpinned by supermarkets, mini majors, food catering and fast casual dining and
speciality food and retail services, is proving to be resilient to online leakage. The business will continue to focus on
tailoring its offering to the specific trade area, cultivating retailer relationships and long-term sustainable rent, and
invest in industry research to adapt to an evolving retail landscape.
Logistics and Business Parks
Our Logistics and Business Parks portfolio delivered strong profit growth with comparable NOI up 3.1% and
comparable FFO up 5.1%, reflecting positive leasing momentum.
We are steadily building up a strong portfolio of assets that delivers solid returns and presents opportunities for
future growth. In FY15 we acquired three new sites in Sydney and Melbourne and made good progress
repositioning our portfolio with asset improvements under way at a number of key sites.
In FY15 we also internalised management of all business parks and our industrial portfolios in Victoria and NSW
and have identified a growing development. We are well positioned to continue to grow returns in this portfolio.
Logistics and Business Parks strategic priorities
Our focus is on growing a quality portfolio of logistics centres and business parks. We will leverage our existing
assets and land, strong tenant relationship and asset management skills to become a scale player in this market.
Office
Comparable NOI and FFO improved 6.4% and 4.2%, respectively, following good leasing activity in all Sydney
office markets.
Our exposure to the office sector remains tactical, reflecting our view on the state of the market. The majority of our
portfolio is located in the improving Sydney market. Brisbane, Perth and ACT markets remain challenging and in
late FY15 we entered into a conditional put and call option to sell our half share of Waterfront Place and Eagle
Street Pier in Brisbane.
Office strategic priorities
We continue to focus on optimising returns from the portfolio while managing our exposure tactically. We will also
consider joint-ventures (or part sales) as appropriate.
4 Unlevered 10 year IRR on incremental development from completion
Stockland Financial Report 2015 — 12
Directors’
Report
Year ended 30 June 2015
Residential
Stockland is the largest residential developer in Australia. The business has 63 communities across New South
Wales, Queensland, Victoria and Western Australia. The business is focused on delivering a range of
masterplanned communities and medium density housing in growth areas across the country with over 81,900 lots
remaining in our portfolio, with a total end value of approximately $20.7 billion5.
Residential as at 30 June 2015
Approximate portfolio - active
Approximate portfolio - inactive
Approximate total end value
30,000 lots
48,500 lots
$20.7 billion
Performance
Residential Communities
($m, unless otherwise stated)
Lots settled (no. of lots)
Revenue
EBIT (before interest in COGS)
EBIT margin
Operating profit
Operating profit margin
ROA – core projects only5
ROA – total portfolio
FY15
5,876
1,245
290
23.3%
166
13.3%
17.0%
12.7%
FY14
5,219
1,042
244
23.4%
95
9.1%
12.2%
5.8%
Change
↑12.6%
↑16.3%
↑19.0%
↑73.5%
↑
↑
Our Residential business, which settled 5,876 lots during FY15, achieved significant profit growth and lifted ROA to
17% on the core portfolio. This reflected supportive market conditions, the positive impact of new projects, efficiency
initiatives and our broader and more diverse product mix.
Over the last two years we have launched six new projects and these have contributed strongly to our result. We
are on track to launch a further five new projects in FY16.
We’ve also broadened our market reach with the introduction of medium density homes and completed homes at a
number of our projects. Providing our customers with these offerings is proving very successful and we are now
ramping up production for FY16 at selected projects. We are set to start construction on more than 500 town homes
this year, reflecting margins in line with our operating profit margins.
During FY15 we continued to replenish our pipeline with the acquisition of 4,000 lots. In line with our strategy these
sites are in priority metropolitan growth corridors, close to transport and in many cases leverage our existing brand
presence. We have also been quick to activate many of these with the majority of new projects on track to deliver
profit within two years of acquisition. The Address in Melbourne already contributed sales in FY15 and construction
is underway at Schofields in Sydney.
Residential strategic priorities
The Residential business is making good progress on its plans to make the portfolio more resilient and profitable in
the future by continuing to focus on:
(1) Reshaping the portfolio - actively manage the portfolio to improve returns; achieve and maintain an optimal
land bank; and preference to acquire land on capital efficient terms. We continue to make good progress
working through low margin and impaired stock.
(2) Improving efficiency – continue to tightly manage costs. Project management has been embedded into the
business driving cost savings.
(3) Delivering revenue growth – increase revenue by creating a better community value proposition that drives high
customer referrals; and broaden market reach through a medium density/built form offering.
5 Excluding properties identified for disposal or workout
Stockland Financial Report 2015 — 13
Directors’
Report
Year ended 30 June 2015
Retirement Living
Stockland is a top three retirement living operator within Australia, with a deep development pipeline and over 9,300
established units in 69 villages across five states and the Australian Capital Territory.
Retirement Living as at 30 June 2015
Portfolio
Short-medium term
development pipeline
Estimated development pipeline
end value
9,343 established units
Approximately 3,400 units
$2.1 billion
Performance
Retirement Living
($m, unless otherwise stated)
EBIT
Operating profit
Transaction value6
ROA
Established
Established settlements
Average re-sale price
Turnover cash per unit
Turnover cash margin (shown in pre-overheads)
Reservations on hand (no. of units)
Established occupancy
Development
Development settlements
Average price
Average margin6
Reservations on hand (no. of units)
FY15
54
48
333
5.3%
663
$329k
$84k
25.4%
132
94.4%
282
$413k
15.9%
119
FY14
45
40
321
4.5%
647
$314k
$75k
24.0%
115
94.9%
262
$389k
15.8%
85
Change
↑19.8%
↑19.9%
↑3.7%
↑
↑2.5%
↑4.8%
↑11.1%
↑
↑14.8%
↓
↑7.6%
↑6.1%
↑0.1%
↑40.0%
Operating profit in Retirement Living was up 19.9% on FY14 reflecting strong sales, active management and
improved efficiency. ROA increased to 5.3%.
Our Retirement Living business continue to mature. We are now two years into our five year plan to achieve a 7%
ROA, which is marked by taking a much more active approach to how we manage the portfolio. By optimising the
use and mix of our assets, recycling capital, driving our development pipeline and maintaining disciplined operating
practices, we continue to improve our returns and growth prospects.
During FY15 we made good progress reshaping our portfolio via capital recycling with the sale of two non-core
villages and the acquisition of eight villages in South Australia, which is a particularly strong market for retirement
living. This acquisition also provides development opportunities, further enhancing our development pipeline which
is a key to growing returns.
Our flagship apartment development at Cardinal Freeman in Sydney’s inner west is progressing very well and
contributes to the 500 homes we have under construction or available for sale around the country.
Retirement Living strategic priorities
The Retirement Living business remains focused on being a preferred operator and developer of Retirement Living
villages. The business has a clear strategy to continue to improve returns on assets by more actively managing the
portfolio, growing development volumes and differentiating the customer experience.
6 Includes established villages and new developments
Stockland Financial Report 2015 — 14
Directors’
Report
Year ended 30 June 2015
Capital management
Financial position
The group retained its A-/ stable credit rating through its ongoing focus on prudent balance sheet management.
Gearing decreased to 23.4% at 30 June 2015 (2014: 25.0%) due to improved net cash inflows from development
activities and an increase in our total tangible asset levels. The group’s gearing level remains within Stockland’s
target range of 20-30%.
The group continues to focus on diversifying funding sources as part of Stockland’s ongoing commitment to active
capital and prudent risk management. The fixed/hedged ratio has increased to 72% at 30 June 2015 (2014: 59%)
as the group takes advantage of available future fixed interest rates, and the weighted average cost of debt at 30
June 2015 has decreased to 6.2% (2014: 6.3%).
Interest cover has increased to 4.0:1 (2014: 3.9:1) due to stronger earnings across the business and a decrease in
interest expense.
Stockland Balance Sheet
$ million
Cash
Real estate assets7:
• Commercial Property
• Residential
• Retirement Living
• Other
Other assets
Total assets
Interest bearing loans and borrowings
Resident loan obligations
Other liabilities
Total liabilities
Net assets/total equity
June 2015
June 2014
170
231
8,942
2,552
3,335
7
723
8,363
2,325
2,860
127
994
15,729
14,900
3,283
2,211
1,448
6,942
8,787
3,118
1,865
1,619
6,602
8,298
Change
↓ 26.4%
↑ 6.9%
↑ 9.8%
↑ 16.6%
↓94.5%
↓27.3%
↑5.3%
↑ 18.6%
↓ 10.6%
The Commercial Property investment portfolio has increased by $579 million to $8,942 million primarily due to
capital expenditure on the retail development pipeline, the acquisition Stockland Bundaberg, the acquisition of three
Logistics and Business Park assets (Laverton North, Botany and Warwick Farm) and continued valuation uplift
across all three asset classes. This is partly offset by the disposal of a 50% share in the Townsville Shopping
Centre to further progress Stockland’s capital recycling and capital partnering program.
Residential assets (mainly land under development) increased by $227 million to $2,552 million at 30 June 2015.
This reflects further acquisitions of new greenfield community projects, together with initial development expenditure
for our medium density business. Finished goods levels continue to be managed downwards below prior year levels
due to strong demand conditions.
The value of the Retirement Living property, net of resident loan obligations, was $1,124 million, an increase of
$129 million from the 30 June 2014 balance. This primarily reflects the acquisition of eight villages in South
Australia and capital expenditure on the development pipeline. This is partly offset by an increase in resident loan
obligations created on first sales of development units.
Total debt increased by $165 million to $3,283 million at 30 June 2015 as a result of increased activity executed by
the issuance of a green bond and US Private Placement notes, partly offset by the repayment of bank facilities used
to fund the group’s Australand investment which was realised during the year. Movements in other assets and
liabilities mainly reflect the changes in value of the group’s strategic investments, financial instruments and
intangibles.
7 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
Stockland Financial Report 2015 — 15
Directors’
Report
Year ended 30 June 2015
Cash flows
Stockland Cash Flows
$ million
Operating cash flows
Investing cash flows
Financing cash flows, including FX on cash
Net change in cash and cash equivalents
Cash at the end of the period
FY15
401
184
(646)
(61)
170
FY14
752
(693)
(55)
4
231
Change %
↓46.7%
Nm
Nm
Nm
↓26.4%
Operating cash flows were down on the prior year, primarily as a result of further Residential acquisitions and
increased development expenditure to support the growth in settlement volumes.
Net cash inflows from investing activities includes proceeds from the disposal of the group’s investment in
Australand. Proceeds generated from the sale of Commercial Properties were broadly in line with the prior year,
whilst spend on acquisitions reduced. Retirement Living cash flows reflect the acquisition of eight villages in South
Australia together with increased spend on the development pipeline.
Net financing cash flows include proceeds from the issuance of the green bond and US Private Placement notes
These proceeds were used to repay short term bank facilities, which had been used earlier to finance the strategic
stake in Australand. Net financing cash flows also include payments on termination and maturity of derivatives
together with distributions paid to securityholders during the period.
Equity
Dividend/Distribution Reinvestment Plan
Stockland’s Distribution Reinvestment Plan (‘DRP’) has been active since December 2013, enabling investors to
reinvest distributions in the group’s securities. On 6 February 2015 the issue price was determined to be $4.33 for
each stapled security and 12,971,118 securities were issued on 27 February 2015.
On 22 July 2015, Stockland announced that the DRP would operate for the second half year distribution to 30 June
2015 and that investors participating in the DRP will be entitled to receive a full distribution.
The DRP security price was determined to be $4.15 based on the volume weighted average price over the 15-day
trading period from 1 July to 21 July 2015, inclusive, and applying a 1 per cent discount.
Distributions
The dividend and distribution payable for the year ended 30 June 2015 is 24.0 cents per stapled security, consistent
with 24.0 cents paid for the year ended 30 June 2014. We have updated our distribution policy to pay the higher of
100% of Trust taxable income or 80-90% of underlying profit. We believe this is the appropriate level to provide
growing returns for securityholders while allowing for investment in future growth.
In line with our new distribution policy, in FY16 we are targeting a distribution of 24.5 cents per security assuming no
material change in market conditions.
The distribution comprises:
Stockland Consolidated Group
Trust distribution
Corporation dividend, fully franked
Total dividend and distribution
FY15
Cents
24.0
–
24.0
FY14
Cents
24.0
–
24.0
Registers closed at 5.00pm on 30 June 2015 to determine entitlement to the year-end dividend and distribution, which
will be paid on 31 August 2015.
Stockland Financial Report 2015 — 16
Directors’
Report
Year ended 30 June 2015
Directors
The Directors of the Company and the Responsible Entity at any time during or since the end of the financial year
(‘the Directors’) were:
Graham Bradley
BA, LLB (Hons 1),
LLM, FAICD
Chairman
(Non-Executive)
Duncan Boyle
BA (Hons), FCII,
FAICD
(Non-Executive)
Carolyn Hewson
BEc (Hons), MA (Ec),
FAICD
(Non-Executive)
Barry Neil
BEng (Civil)
(Non-Executive)
Mr Bradley was appointed to the Board on 9 February 2004 and was appointed Non-
Executive Chairman on 25 October 2005. He is Non-Executive Chairman of HSBC Bank
Australia Limited (appointed December 2004), Virgin Australia International Holdings Limited
(appointed March 2012), Energy Australia Holdings Limited (appointed June 2012) and Po
Valley Energy Limited (appointed September 2004). He is a Non-Executive Director of GI
Dynamics Inc. (appointed June 2011) and The Hongkong and Shanghai Banking
Corporation Limited (appointed November 2012) and is Chairman of Infrastructure NSW
(appointed July 2013). He was formerly Chairman of the Film Finance Corporation of
Australia Limited (January 2004-June 2008) and a Director of MBF Australia Limited
(November 2003-November 2007), and Singapore Telecommunications Limited (May 2004-
July 2011). Mr Bradley is the chair of the Sustainability Committee and a member of the
Human Resources Committee.
Former Directorships of listed entities in last three years
Mr Bradley was a Director of Singapore Telecommunications Limited from May 2004 to
July 2011.
Mr Boyle was appointed to the Board on 7 August 2007. He has over forty years’ experience
within the insurance industry in Australia, New Zealand, the United Kingdom and Europe.
Mr Boyle is a Director of TAL Dai Ichi Life Australia Pty Ltd and TAL Life Limited (appointed
May 2014) and formerly a Director of QBE Insurance Group Limited (September 2006-
December 2014). He was a Director of O’Connell Street Associates Pty Limited (until
30 June 2013) and Clayton Utz (until June 2014). Mr Boyle is a member of the Human
Resources and Sustainability Committees and was a member of the Stockland Audit
Committee until 1 October 2014.
Former Directorships of listed entities in last three years
Mr Boyle was a Director of QBE Insurance Group Limited from September 2006 to
31 December 2014.
Ms Hewson was appointed to the Board on 1 March 2009. She has over thirty years’
experience in the financial sector, with extensive financial markets, risk management and
investment management expertise. Ms Hewson is a Non-Executive Director of BHP Billiton
(appointed March 2010), and previously served as a Director on the Boards of the Australian
Gas Light Company, AGL Energy Limited, AMP, CSR Limited, BT Investment Management,
South Australia Water, the Economic Development Board of South Australia and Westpac
Banking Corporation. Ms Hewson is Chair of the Human Resources Committee and a
member of the Sustainability Committee and was Chair of the Risk Committee until 1
October 2014.
Former Directorships of listed entities in last three years
Ms Hewson was a Director of Westpac Banking Corporation from February 2003 to June
2012 and BT Investment Management Limited from December 2007 to December 2013.
Mr Neil was appointed to the Board on 23 October 2007 and has over forty years’
experience in property, both in Australia and overseas. He is Chairman of Keneco Pty
Limited and Bitumen Importers Australia Pty Limited, a Director of Terrace Tower Group Pty
Ltd and was previously Director of Property for Woolworths Limited. He also served as Chief
Executive Officer, Investment Division (1999 to 2004), and Executive Director (1987 to
2004) of Mirvac Limited. Mr Neil is Chair of Stockland Capital Partners Limited, the
Responsible Entity for Stockland’s unlisted funds and a member of the Stockland Audit and
Sustainability Committees.
Former Directorships of listed entities in last three years
None.
Stockland Financial Report 2015 — 17
Directors’
Report
Year ended 30 June 2015
Tom Pockett
BComm, ACA
(Non-Executive)
Mr Pockett was appointed to the Board on 1 September 2014. He is a Director of Insurance
Australia Group Limited (Appointed 1 January 2015), O’Connell Street Associates Limited,
ALH Group Pty Ltd, Hydrox Holdings Pty Ltd, The Quantium Group Holdings Pty Limited
(Chairman) and Sunnyfield, a not for profit disability services provider in New South Wales.
Mr Pockett was Chief Financial Officer of Woolworths Limited from August 2002 until
February 2014. He was an Executive Director of Woolworths Limited from November 2006
to 1 July 2014. He previously held the position of Deputy Chief Financial Officer at the
Commonwealth Bank of Australia (CBA) and prior to that held several senior finance roles
within the Lend Lease Group following a successful career with Deloitte. Mr Pockett was a
member of the Financial Reporting Council from March 2003 to March 2006, National
President of G100 from August 2000 to January 2003. He is a member of the Stockland
Audit, Risk and Sustainability Committees. Mr Pockett is a Chartered Accountant.
Former Directorships of listed entities in last three years
Mr Pockett was a Director of Woolworths Limited November 2006 to 1 July 2014.
Carol Schwartz
BA, LLB, MBA, FAICD
(Non-Executive)
Ms Schwartz was appointed to the Board on 1 July 2010. She has extensive experience
in business, property and community organisations. Ms Schwartz is on the Board of a
number of organisations including the Sydney Institute, Bank of Melbourne and Qualitas
Property Partners. Her other appointments include Chair of Our Community and Creative
Partnerships, Australia. Ms Schwartz serves on the Risk and Sustainability Committees and
served on the Stockland Audit Committee until June 2012.
Peter Scott
BE (Hons), MEng Sc,
FIE. Aust, CPEng,
MICE
(Non-Executive)
Mark Steinert
BAppSc, G Dip App
Fin & Inv (Sec Inst),
F Fin, AAPI
Managing Director
Former Directorships of listed entities in last three years
None.
Mr Scott was appointed to the Board on 9 August 2005. He is Chairman of Perpetual
Limited, where he was appointed a Director on 31 July 2005 and Perpetual Equity
Investment Company Limited (appointed 18 December 2014). Mr Scott is a Director of
Igniting Change, a not-for-profit making organisation and O’Connell Street Associates Pty
Limited. He was Chairman of Sinclair Knight Mertz Holdings until December 2013, and a
member of the Advisory Board of Laing O’Rourke Australia from August 2008 to August
2011. Mr Scott was the Chief Executive Officer of MLC and Executive General Manager,
Wealth Management of National Australia Bank until January 2005. Prior to this, he held a
number of senior positions with Lend Lease, following a successful career as a consulting
engineer in Australia and overseas. Mr Scott is Chair of the Risk Committee and a member
of the Sustainability Committee. He also served as Chair of the Human Resources
Committee until October 2014.
Former Directorships of listed entities in last three years
None.
Mr Steinert was appointed Managing Director & CEO of Stockland on 29 January 2013. He
has twenty-six years of experience in property and financial services including eight years in
direct property primarily with Jones Lang LaSalle and ten years in listed real estate with
UBS. Mr Steinert was appointed as Head of Australasian Equities at UBS in 2004 and as
Global Head of Research in New York in late 2005. In 2012 he was appointed as Global
Head of Product Development and Management for Global Asset Management at UBS, a
$559 billion Global Fund Manager. Mr Steinert is President of the Property Council of
Australia, a Director of The Green Building Council of Australia, the Shopping Centre
Council of Australia and Stockland Capital Partners Limited, the Responsible Entity for
Stockland’s unlisted property funds. He is a member of the Sustainability Committee.
Former Directorships of listed entities in last three years
None.
Stockland Financial Report 2015 — 18
Directors’
Report
Year ended 30 June 2015
Terry Williamson
BEc, MBA, FCA,
FCIS, MACS
(Non-Executive)
Mr Williamson was appointed to the Board in April 2003. He is a Director of Avant Insurance
Limited, The Doctors Health Fund, Chairman of OnePath Life Limited, Chairman of OnePath
General Insurance Pty Limited, Chairman of ANZ Lenders Mortgage Insurance Limited, a
member of the Audit Committee of the Reserve Bank of Australia and member of the
University of Sydney School of Business Advisory Board. Mr Williamson was previously the
Chief Financial Officer of Bankers Trust Australia Limited/BT Financial Group Pty Limited
from 1997 to 2002 and prior to that was a partner of Pricewaterhouse for seventeen years.
Mr Williamson is Chair of the Stockland Audit Committee, the Stockland Capital Partners
Audit Committee, the Stockland Financial Services Compliance Committee, the Stockland
Capital Partners Financial Services Compliance Committee and a member of the
Sustainability Committee.
Former Directorships of listed entities in last three years
None.
External Independent Committee Members and
Independent Directors of Stockland
Anthony Sherlock
BEc, FCA, MAICD
Mr Sherlock was appointed as a Director of Stockland Capital Partners Limited, the
Responsible Entity for Stockland’s unlisted funds, in August 2004. He is a former Senior
Partner of Coopers & Lybrand having national responsibility for credit risk management. In
that capacity, he obtained experience in the banking and finance, mining, agriculture,
building, construction and development sectors. Mr Sherlock is a non-executive Director of
Equatorial Mining Limited and Kerrygold Limited. He is the former Chairman of Australian
Wool Corporation Limited and The Woolmark Company Pty Ltd, a former Non-Executive
Director of Austral Coal Limited, Sydney Attractions Group Limited, IBA Health Limited and
Export Finance Insurance Corporation Limited and has acted on a number of committees
for both Federal and State Governments. He is a member of the Stockland Capital
Partners Audit Committee, the Stockland and the Stockland Capital Partners Financial
Services Compliance Committees and the Stockland Residential Estates Equity Fund
No. 1 Investment Committee.
Company Secretaries
Katherine Grace
BA (Hons), LLB (Hons
1st Class), MPP,
MAICD
Company Secretary
Phillip Hepburn
BEc, LLM, Grad Dip
CSP, FCIS, FCSA,
MAICD
Company Secretary
(resigned 16
September 2014)
Ms Grace was appointed as General Counsel and Company Secretary in August 2014. Ms
Grace has over 15 years experience specialising in the property sector. Most recently Ms
Grace was General Counsel and Company Secretary for Westfield Retail Trust. She has
extensive experience in corporate, property, debt and capital market transactions. Prior to
Westfield Retail Trust, Ms Grace was General Counsel at Valad Property Group. She has
previously held positions in legal private practice (where she acted for a variety of
corporations and financial institutions in relation to landmark developments across
Australia and overseas) and at Multiplex Limited and Pacific Capital Partners.
Ms Grace reports directly to the Managing Director and also has accountability directly to
the Board of Directors, through the Chairman, on all matters regarding the proper
functioning of the Board.
Mr Hepburn joined Stockland as General Counsel and Group Secretary in 2001 and held
this position until September 2014. He has over eighteen years’ experience as a Company
Secretary and General Counsel. Prior to joining Stockland, he was General Counsel and
Company Secretary of IAMA Limited, an Australian Securities Exchange (‘ASX’) listed
company. He has also held a number of senior management and legal positions in the
finance sector. Mr Hepburn was an Executive Member of the Stockland and the Stockland
Capital Partners Financial Services Compliance Committees.
Stockland Financial Report 2015 — 19
Directors’
Report
Year ended 30 June 2015
Derwyn Williams
BComm, CPA, FCIS,
FCSA, MAICD
Company Secretary
Mr Williams has over twenty years experience as a Company Secretary, joining Stockland
in December 2004 and appointed as Deputy Group Secretary in May 2005. Prior to joining
Stockland he was General Manager of Corporate Governance & Group Secretary at Credit
Union Services Corporation (Australia) Limited and Deputy Group Secretary at St. George
Bank Limited. He has held a number of senior management, accountancy, risk
management and internal audit positions across the property, finance, heavy industry and
public sectors.
Directors’ meetings
The number of meetings of the Board of Directors (‘the Board’) and of the Board Committees and the number of
meetings attended by each of the Directors during the financial year were:
Stockland (Stockland Corporation Limited and Stockland Trust Management Limited)
Scheduled
Board
Audit
Committee
Financial
Services
Compliance
Committee
Human
Resources
Committee
Sustainability
Committee
Risk
Committee
A
B
A
B
A
B
A
B
A
B
A
B
15
14
13
15
12
12
15
15
15
–
–
–
15
15
15
15
12
15
15
15
15
–
–
–
–
2
–
5
4
–
–
–
6
–
–
–
–
2
–
6
4
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
4
3
1
4
–
–
–
–
–
–
–
–
4
3
1
4
4
2
4
–
–
–
2
–
–
–
–
–
4
2
4
–
–
–
2
–
–
–
–
–
3
3
3
2
3
3
3
3
3
–
–
–
3
3
3
3
3
3
3
3
3
–
–
–
–
–
1
–
3
4
4
–
–
–
–
–
–
–
1
–
3
4
4
–
–
–
–
–
Director
Mr G Bradley
Mr D Boyle
Ms C Hewson
Mr B Neil
Mr T Pockett
Ms C Schwartz
Mr P Scott
Mr M Steinert
Mr T Williamson
Other members
Ms K Grace
Mr P Hepburn
Mr A Sherlock
Stockland Capital Partners
Scheduled
Board
Audit
Committee
Financial
Services
Compliance
Committee
A
B
A
B
A
B
6
6
5
–
–
–
6
6
6
–
–
–
–
3
–
–
–
3
–
3
–
–
–
3
–
4
–
3
1
4
–
4
–
3
1
4
Director
Mr B Neil
Mr A Sherlock
Mr M Steinert
Other members
Ms K Grace
Mr P Hepburn
Mr T Williamson
A - Meetings attended / B – Meetings eligible to attend
Stockland Financial Report 2015 — 20
Directors’
Report
Year ended 30 June 2015
Corporate Governance
The Board takes its governance responsibilities very seriously and believes it has the necessary mix of experience
and skills to oversee the high standard of corporate governance, integrity and accountability required of a
professional and ethical organisation. The Board believes that Stockland’s governance accords fully with the
principles and recommendations of the ASX Corporate Governance Council as summarised in the table at the end
of this corporate governance statement.
Role of the Board
The Board has overall responsibility for the good governance of Stockland. The Board:
• oversees the development and implementation of Stockland’s corporate strategy, operational performance
objectives and management policies with a view to creating sustainable long-term value for security holders;
• establishes Stockland’s overall framework of governance, risk management, internal control and compliance
which underpins the integrity of management information systems and fosters high ethical standards throughout
the organisation;
• appoints the Managing Director, approves the appointment of the Company Secretaries and Senior Executives
reporting to the Managing Director and determines the level of authority delegated to the Managing Director;
• sets Executive remuneration policy, monitors Senior Executive performance and approves the performance
objectives and remuneration of the Managing Director and his direct reports;
• approves the annual budget and monitors financial and operating performance;
•
reviews and approves financial and other reports to securityholders and approves dividends from Stockland
Corporation and distributions from the Trust;
reviews Executive and Board succession planning and Board performance;
• approves major capital expenditure, acquisitions and divestitures;
•
• monitors compliance with laws and regulations which apply to Stockland and its business; and
• appoints and monitors the independence of Stockland’s external auditors.
The Board has delegated responsibility to the Managing Director to manage Stockland’s business and to its various
Board Committees to oversee specific areas of governance. Delegated responsibilities are regularly reviewed and
the Managing Director regularly consults with the Board on Stockland’s performance. Matters which are not
specifically delegated to the Managing Director require Board approval, including capital expenditure decisions
above delegated levels, expenditure outside the ordinary course of business, major acquisitions and sales, changes
to corporate strategy, the issue of equity or debt by Stockland and key risk management and accounting policies.
The Company Secretary is directly accountable to the Board through the Chairman on all matters to do with the
proper functioning of the Board.
The Board aims to ensure that its securityholders are kept well-informed of all major developments and business
events that are likely to materially affect Stockland’s operations and financial standing and the market price of its
securities. Further information in relation to communication with Stockland’s securityholders is located on the
Stockland website at stockland.com.au/corporate-governance.
Stockland’s Directors, management and employees are required to maintain high ethical standards of conduct.
Stockland’s Code of Conduct and Ethical Behaviour (the ‘Code’) is periodically reviewed and endorsed by the Board
and covers dealings with both external parties and internal operations. Further information in relation to the Code is
located on the Stockland website at stockland.com.au/corporate-governance.
Role of Stockland Trust Management Limited as Responsible Entity for Stockland Trust
Stockland Trust Management Limited, as Responsible Entity for Stockland Trust, is responsible for the operation of
the Trust. The Responsible Entity must exercise its powers and perform its obligations under the Stockland Trust
Constitution and the Corporations Act 2001 in the best interests of unitholders to ensure that the activities of the
Trust are conducted in a proper and efficient manner. The major activities of the Responsible Entity include:
• ongoing selection and management of property investments;
• management of the Trust’s property portfolio;
• maintenance of the accounting and statutory records of the Trust;
• management of equity and debt raisings and making distributions to unitholders; and
• preparation of notices and reports issued to unitholders.
Stockland Financial Report 2015 — 21
Directors’
Report
Year ended 30 June 2015
Composition and diversity of the Board
Stockland is committed to having a Board whose members have the capacity to act independently of management,
and have the collective skills and diversity of experience necessary to optimise the long-term financial performance
of Stockland so as to sustain superior returns to securityholders.
At the date of this report, the Board comprised one Executive Director and eight Non-Executive Directors. The
Boards of Stockland Corporation Limited and Stockland Trust Management Limited have the same Directors.
Directors’ details are listed on pages 17 to 19, including details of their other listed and unlisted company
Directorships and experience.
The Board recognises the advantage of having a mix of relevant business, executive and professional experience
on the Board, the importance of cultural and ethical values, and the benefits of diversity, including gender diversity.
The Board has identified a range of core skills and experience that will assist the Board collectively to fulfil its
oversight role effectively. These include experience with property investment and management, property
development, construction and project management, retailing and consumer marketing, industrial supply chain
logistics, funds management, banking and finance and government and regulatory relations. It is also advantageous
for some Board members to have experience in the audit and risk management field, people management and
executive remuneration. The Board believes that the core skills of importance to Stockland are well represented
among the current Directors. In addition, most Directors have occupied senior executive management positions in
large corporations both in Australia and globally, including CEO and CFO positions, covering a wide range of
industry sectors or have held senior positions in relevant finance and accounting disciplines.
Board skills and experience in 2015
The Board also believes that it is important to maintain a range of director tenures to facilitate orderly Board renewal
while maintaining valuable continuity and corporate knowledge among Directors. As at 30 June 2015, of the nine
Directors, including the Managing Director, three had tenure of less than six years, three had tenure of between six
and nine years and three had served for more than nine years. The Board also values the importance of diversity,
currently two of the eight Non-Executive Directors are women.
On 5 August 2015 Stockland announced that Dr Nora Scheinkestel would join the Board effective 19 August 2015
and that Mr Duncan Boyle and Mr Terry Williamson would retire from the Board in October 2015. These changes
will significantly change the Board’s tenure and gender diversity profile. Three of the seven Non-Executive Directors
(47%) will be women and three of the last five director appointments have been women. The number of Directors
with tenure of less than six years will increase from three to four, the number with tenure between six and nine
years will reduce from three to two and the number with tenure greater than nine years will reduce from three to two.
Dr Scheinkestel brings the Board a valuable range of skills and experience relevant to Stockland’s business
operations including her experience in the property, infrastructure, banking and finance sectors, as well as her
extensive experience as a public company director and her experience in government and regulatory affairs and
Stockland Financial Report 2015 — 22
Directors’
Report
Year ended 30 June 2015
executive remuneration. The Board’s succession planning is in place for the impending retirement of two senior
directors, with Mr Tom Pockett to succeed Mr Williamson as chair of the Audit Committee. Mr Pockett’s deep
experience as a CFO and his professional qualifications ideally qualify him for this role
Where a Board vacancy occurs or whenever it is considered that the Board would benefit from the services of an
additional director the Board identifies the skills and experience it seeks to complement the competencies of
continuing Directors. In defining the Board’s requirements for a new director, consideration is given to the skills,
professional experience and educational backgrounds of continuing members of the Board, including any identified
skills gaps. Criteria used also include consideration of the value of gender diversity on the Board.
The Human Resources Committee oversees the Director nomination process, and will from time-to-time engage
external search firms to ensure that a wide range of candidates are considered. Ultimately, the full Board
determines who is invited to fill a casual vacancy after extensive one-on-one and collective interviews with
candidates and thorough due diligence and reference checking. Directors coming up for re-election are also
reviewed by the Human Resources Committee and, in their absence, the Board considers whether to support their
re-election. It is the Board’s policy that Directors offer themselves for re-election only with the agreement of the
Board and continue to serve only so long as they have the confidence of their fellow Board members.
Stockland has for many years had a focus on actively encouraging gender diversity at all levels within the
organisation and a culture that supports workplace diversity and inclusion. As part of this focus, gender diversity
targets are set by management and regularly reviewed and endorsed by the Human Resources Committee. In
2014, we reached our revised 2017 target of having at least 45% women in our management levels (approximately
220 individuals) and we have now revised this target to 50% by 2020.
In addition, we have a formal Diversity and Inclusion Policy which is available on the Stockland website at
stockland.com.au/corporate-governance. Further details of this policy and our achievements, including measurable
objectives for achieving gender diversity, are set out in the 2015 Remuneration Report on page 34 within the
Directors’ Report as well as on the Stockland website at stockland.com.au/sustainability.
Board Independence
Stockland recognises that having a majority of independent Non-Executive Directors provides assurance that the
Board is structured properly to fulfil its role in holding management accountable for Stockland’s performance. The
Board has resolved that it should continue to have a majority of independent Non-Executive Directors, that the
positions of Chairman and Managing Director must be separate, and that the Chairman should be an independent
Non-Executive Director.
Stockland has developed criteria for determining the independence of its Board members. A Director is considered
to be independent if he or she:
•
is not a substantial securityholder of Stockland or of a company holding more than 5% of Stockland’s voting
securities, or an officer of or directly or indirectly associated with a securityholder holding more than 5% of
Stockland’s voting securities;
is not and has not within the last three years been an employee of Stockland;
is not a principal of a material professional advisor to Stockland;
is not a material supplier or customer of Stockland or an officer of, or directly or indirectly associated with a
significant supplier or customer;
•
•
•
• has no material contractual relationship with Stockland or any of its associates other than as a Director of
Stockland; and
• has no other interest or relationship that could interfere with the Director’s ability to act in the best interests of
Stockland and independently of management.
In this context, the Board considers that any Director-related business relationship that is or is likely in the future to
be more than 10% of the Director-related business’s revenue to be material. All Directors are expected to act in the
best interests of Stockland at all times.
Having considered carefully the above criteria, the Board has determined that all of Stockland’s Non-Executive
Directors are independent Directors for the 2015 financial year.
In making this determination, the Board considered the transactions between Stockland and entities with which
Stockland Directors are associated as Directors or advisors. The Board concluded that none of these transactions
rendered these entities significant suppliers to, or customers of, Stockland when the relative size of the transactions
was compared to the total revenues or business of those entities. Further, in none of these transactions did
Stockland Directors receive direct financial benefits as principals, partners, or substantial shareholders of the
entities concerned.
Stockland Financial Report 2015 — 23
Directors’
Report
Year ended 30 June 2015
Board meetings
The Board currently holds 10 scheduled meetings each financial year. Additional meetings are convened as
required. During the 2015 financial year, the Board held 15 meetings.
The Board’s practice is for Non-Executive Directors to meet prior to the full Board meeting in the absence of
management and the Non-Executive Directors meet privately on other occasions from time-to-time when necessary.
Board and Director performance
The Board has instituted a formal annual process to review the performance and effectiveness of the Board, the
Board Committees and individual Directors. The Human Resources Committee oversees this process.
As part of the review, each Director completes a questionnaire relating to the Board’s role, composition, procedures,
practices and behaviour. The questionnaires are confidential. The Chairman leads a discussion of the questionnaire
results with the Board as a whole. The Chairman also meets one-on-one with each Director annually to discuss their
individual contribution, their views on the Board’s performance and their suggestions for improvement in Board
processes or procedures. Following these sessions, the Chairman provides feedback to individual Directors as
necessary. The Chairman of the Human Resources Committee follows a similar process of one-on-one discussions
with each Director annually to provide feedback to the Chairman on his performance and effectiveness. In 2015 the
Board has engaged an external consultant to facilitate a review of Board performance.
The Company has adopted a process requiring each Committee Chairman to lead a discussion on a regular basis
on their Committee’s performance and effectiveness.
Director remuneration and securities ownership
Non-Executive Directors receive fees for their services, being an all-inclusive fee including statutory and elected
superannuation contributions.
To underpin the alignment of Directors and securityholder interests, the Board believes that Directors should hold a
meaningful number of Stockland securities. In August 2015 the Board revised its existing policy to increase the
minimum number of securities each Non-Executive Director is required to acquire from 10,000 to 40,000 securities
within a reasonable time of becoming a Director. The increased minimum roughly equates to one year’s base Board
fees. All new directors will have a period of three years to comply with this policy and any existing directors that hold
less than 40,000 securities will have until 30 June 2018 to comply. Stockland also has a policy regarding the
minimum securityholdings for Senior Executives as set out in the Remuneration Report. Both these policies are
intended to align the personal financial interests of Directors and Senior Executives with those of securityholders.
Board Committees
Five permanent Board Committees have been established to assist in the execution of the Board’s responsibilities
as described below. These are the:
(1) Human Resources Committee;
(2) Audit Committee;
(3) Risk Committee;
(4) Sustainability Committee; and
(5) Financial Services Compliance Committee.
The Board’s policy is that a majority of the members of each Board Committee should be independent Directors.
The Audit Committee, Risk Committee and the Human Resources Committee comprise only independent Directors.
The Financial Services Compliance Committee and the Sustainability Committee are chaired by an independent
Director and have a majority of independent Directors, or external independent persons as Members.
The Board reviews the composition of each Committee periodically, balancing the benefits of rotation with those of
maintaining continuity of experience and knowledge, and to ensure Committee members have skills appropriate to
their roles. Each Committee has its own written charter which it reviews annually and recommends any appropriate
changes to the Board.
All Non-Executive Directors may attend any Board Committee meeting. Committees may meet with external
advisors in the absence of management. Each Board Committee works in conjunction with other Board Committees
to assist the Board in fulfilling its responsibilities for ensuring Stockland has adopted and maintains appropriate
corporate governance procedures. The membership and the procedures for the Committee meetings are set out in
the Board Committee Charter located, together with the charters for each Board Committee (except the Financial
Services Compliance Committee) on the Stockland website at stockland.com.au/corporate-governance.
Stockland Financial Report 2015 — 24
Directors’
Report
Year ended 30 June 2015
Human Resources Committee
The Human Resources Committee incorporates the functions of two Board Committees recommended by the
ASX Guidelines: a Nominations Committee and a Remuneration Committee.
A copy of the charter for the Human Resources Committee is located at the Stockland website at
stockland.com.au/corporate-governance. The Human Resources Committee seeks to ensure that there is
a strong link between employee reward, Stockland’s performance and ultimately securityholder returns. The
Human Resources Committee also seeks to ensure that remuneration for Non-Executive Directors is designed to
attract and retain talented and experienced individuals. Refer to the Remuneration Report on pages 52 to 53 for
further information.
Members of the Human Resources Committee during or since the end of the financial year were:
(1) Ms C Hewson (Chair) – Non-Executive Director
(2) Mr G Bradley – Non-Executive Director
(3) Mr D Boyle – Non-Executive Director
The Human Resources Committee meets as frequently as required and held 4 meetings during the 2015
financial year.
Audit Committee
The Board has delegated oversight for the preparation of Stockland’s Financial Reports and the maintenance of a
sound financial reporting control environment to the Audit Committee.
The purpose of the Audit Committee is to assist the Board to discharge its responsibilities for:
•
•
•
•
• compliance with relevant laws and regulations including any prudential supervision procedures to the extent that
the integrity of Stockland’s Financial Reports and external audit;
the appropriateness of Stockland’s accounting policies and processes;
the effectiveness of Stockland’s financial reporting controls and procedures;
the effectiveness of Stockland’s internal control environment; and
they impact the integrity of Stockland’s financial statements.
The Audit Committee works in conjunction with the Sustainability Committee, Financial Services Compliance
Committee, Human Resources Committee and Risk Committee to assist the Board in fulfilling its responsibilities for
ensuring Stockland has adopted and maintains appropriate corporate governance procedures.
A copy of the charter for the Audit Committee is located on the Stockland website at stockland.com.au/corporate-
governance.
In order to appropriately discharge its responsibilities, the Audit Committee is specifically authorised to amend
Stockland’s accounting policies which the Audit Committee determines do not require Board approval; and review
and approve any NGER’s or emissions reporting by the group.
The external auditor provides a declaration of independence each reporting period, consistent with the
requirements of the Corporations Act 2001. The Audit Committee also adopts safeguards to maintain audit
independence as follows:
• designating the types of services that may be and may not be performed by the external auditor;
• ensuring management retains responsibility for decision-making on all Non-Audit Services provided by the
•
external auditor; and
reviewing and approving the external auditor’s process for the rotation and succession of audit and review
partners including the approach to managing the transition.
Audit Committee meetings are held at least quarterly and are attended, where appropriate, by the Managing
Director, the Chief Financial Officer, Stockland’s external auditor and, as required, other Stockland Executives and
external advisors. The Committee meets privately with the external auditor and internal auditor in the absence of
management at least once a year.
The Committee has at least three independent Non-Executive members with the majority being independent
Directors. The Chairman of the Audit Committee will not also be the Chairman of the Board.
At least one member of the Audit Committee has relevant accounting qualifications and experience and all
Members have a good understanding of financial reporting.
Stockland Financial Report 2015 — 25
Directors’
Report
Year ended 30 June 2015
The members of the Audit Committee during or since the end of the financial year were:
(1) Mr T Williamson (Chair) – Non-Executive Director
(2) Mr B Neil – Non-Executive Director
(3) Mr T Pockett – Non-Executive Director
The Audit Committee met 6 times during the 2015 financial year.
Tax Control and Governance Policy Framework
Stockland maintains a Tax Control and Governance Framework, reviewed and approved by the Audit Committee,
which outlines the principles governing Stockland’s tax strategy and risk management policy.
Stockland’s Tax Control and Governance Framework is consistent with the guidelines published by the Australian
Taxation Office regarding tax risk management and governance processes for large business taxpayers.
Stockland undertakes periodic review of the Tax Control and Governance Framework to test the robustness of the
design of the framework against ATO benchmarks and to demonstrate the operating effectiveness of internal
controls to stakeholders.
The key principles of the Stockland Tax Control and Governance Framework are summarised as follows:
• A tax strategy that ensures all tax affairs are conducted in a transparent, equitable and commercially responsible
manner, whilst having full regard to all relevant tax laws, regulations and tax governance processes, to
demonstrate good corporate citizenship;
• A balanced tax risk appetite which is consistent with the Board approved risk appetite, to ensure Stockland
remains a sustainable business and a reputable and attractive investment proposition;
• A commitment to engage and maintain relationships with tax authorities which are open, transparent and co-
operative, consistent with Stockland’s Code of Conduct and Ethical Behaviour policy; and
• An operating and trading business based in Australia, with no strategic intentions of engaging in any tax
planning involving the use of offshore entities or low tax jurisdictions.
Risk Committee
The Board as a whole is ultimately responsible for the sound management of risk and compliance across the
organisation.
The purpose of the Risk Committee is to assist the Board to fulfil its risk governance responsibilities. The
Risk Committee provides a board level forum to oversee Stockland’s risk culture and review the effectiveness
of risk identification and management including the structures, processes and management systems within
Stockland’s overall risk management framework. The Risk Committee reviews Stockland’s risk management
framework on an annual basis including in the 2015 financial year to satisfy itself that it continues to be sound and
any material changes are reviewed and resolved at Board level. In addition, Stockland has an internal audit function
which also regularly reviews and independently assesses the effectiveness and efficiency of the risk management
framework and periodic reporting. Further information risk management at Stockland is available at
stockland.com.au/corporate-governance.
The members of the Risk Committee during or since the end of the financial year were:
(1) Mr P Scott (Chair) – Non-Executive Director
(2) Mr T Pockett – Non-Executive Director
(3) Ms C Schwartz – Non-Executive Director
A copy of the charter for the Risk Committee is located on the Stockland website at stockland.com.au/corporate-
governance.
The Risk Committee met 4 times during the 2015 financial year.
Sustainability Committee
Stockland recognises that a sustainable future for its business depends upon the sustainability of the communities,
economy and society in which it operates.
The purpose of the Sustainability Committee is to consider the social, environmental and ethical impact of
Stockland’s business activities; major corporate responsibility and sustainability initiatives and changes in policy;
and Stakeholder communication about Stockland’s corporate and sustainability policies.
A copy of the charter for the Sustainability Committee is located on the Stockland website under the heading
Corporate Governance at stockland.com.au/corporate-governance.
Stockland Financial Report 2015 — 26
Directors’
Report
Year ended 30 June 2015
The Board has charged Executive management with responsibility for managing Stockland’s business operations to
a high standard of ethical business practice, corporate citizenship and environmental responsibility.
With regard to environmental regulation, Stockland is committed to achieving high standards of environmental
performance. The Sustainability Committee regularly considers issues associated with the environmental impact of
Stockland’s operations and, together with management, monitors Stockland’s compliance with relevant statutory
requirements as well as published policies and guidelines.
Stockland’s operations are subject to various environmental regulations under both Commonwealth and State
legislation, particularly in relation to its property development activities. Stockland undertakes an environmental due
diligence and risk assessment of all properties it acquires. The Sustainability Committee monitors environmental
performance by setting objectives, monitoring progress against these objectives and identifying remedial action
where required.
The Committee comprises the whole Board, and met 3 times during the 2015 financial year.
Financial Services Compliance Committee
The Financial Services Compliance Committee is responsible for monitoring and reviewing the effectiveness of the
Compliance Plans in respect of Stockland Trust and its controlled entities, and Macquarie Park Trust and in
ensuring adherence to applicable laws and regulations.
The Compliance Plans are designed to protect the interests of securityholders.
The Compliance Plans for Stockland Trust and its controlled entities and for Macquarie Park Trust have been
approved by the Australian Securities and Investments Commission (‘ASIC’). The Financial Services Compliance
Committee meets regularly and must report breaches of the law and Constitution to the Board which is required to
report any material breach of the Compliance Plan to ASIC.
The members of the Committee during or since the end of the financial year were:
(1) Mr T Williamson (Chair) – Non-Executive Director
(2) Mr A Sherlock – External Independent Non-Executive Director
(3) Ms K Grace – Executive Member
The Committee met 4 times during the 2015 financial year.
Stockland Capital Partners
Stockland Capital Partners (‘Capital Partners’) was established in 2005 to offer unlisted property investment
opportunities for both small and large investors, provide new sources of capital, facilitate asset growth and generate
additional sustainable income. A wholly-owned entity, Stockland Capital Partners Limited (‘SCPL’) operates this
business, with a separate Board of Directors (‘SCPL Board’).
SCPL acts as the Responsible Entity or Manager of Stockland’s unlisted funds, except for Macquarie Park Trust.
Stockland Trust Management Limited is the Responsible Entity of Macquarie Park Trust.
Since the Capital Partners business has dealings with and may acquire assets from Stockland, the SCPL Board has
one external independent Non-Executive Director who is not a member of the Stockland Board. The independent
Director must approve each transaction SCPL enters into with Stockland and must be satisfied that such
transactions are on arm’s length commercial terms.
In order to protect the unitholders in the event there is a dispute or default by Stockland under the terms of any
agreement, the SCPL Board has resolved that the consent of the independent Director must be obtained as to any
related party contract with Stockland.
The members of the SCPL Board during or since the end of the financial year were:
(1) Mr B Neil (Chair) – Non-Executive Director
(2) Mr A Sherlock – External Independent Non-Executive Director
(3) Mr M Steinert – Managing Director
The SCPL Board met 6 times during the 2015 financial year.
The Stockland Capital Partners Audit and Risk Committee mirror the Audit Committee and the Risk Committee of
Stockland but covers SCPL and the unlisted funds for which SCPL is the Responsible Entity or Manager. In addition
a Financial Services Compliance Committee oversees the Compliance Plan approved by SCPL for Stockland Direct
Office Trust No. 2 (‘SDOT No. 2’), and Stockland Direct Retail Trust No. 1 (‘SDRT No. 1’). Further information these
committees and SCPL generally is located on the Stockland website at stockland.com.au/investor-centre/unlisted-
property-funds.htm.
Stockland Financial Report 2015 — 27
Directors’
Report
Year ended 30 June 2015
Executive confirmations
In accordance with Stockland’s legal obligations, the Managing Director and the Chief Financial Officer have
declared in writing to the Board that, for the year ended 30 June 2015, to the best of their knowledge and belief:
With regard to Stockland’s Financial Reports:
(1) Stockland’s financial records have been properly maintained in accordance with section 286 of the
Corporations Act 2001; and
(2) Stockland’s financial statements present a true and fair view of the Stockland’s financial condition and
operational results and are prepared in accordance with relevant Australian Accounting Standards.
With regard to risk management and internal compliance and control systems of Stockland:
(1) the statements made with respect to the integrity of Stockland’s Financial Reports are founded on a sound
system of risk management and internal compliance and control systems which implement the policies adopted
by the Board; and
(2) the risk management and internal compliance and control systems, to the extent they relate to financial
reporting, were operating effectively and efficiently in all material respects throughout the period.
Since 30 June 2015, nothing has come to the attention of the Managing Director and the Chief Financial Officer that
would indicate any material change to any of the statements made above.
Associates and joint ventures, which Stockland does not control, are not covered for the purposes of this statement
or declaration given under S295A of the Corporations Act 2001.
Whilst these statements are comprehensive in nature, they provide a reasonable but not absolute level of
assurance about risk management, internal compliance and control systems. They do not imply a guarantee against
adverse events or more volatile outcomes occurring in the future.
Stockland Financial Report 2015 — 28
Directors’
Report
Year ended 30 June 2015
Corporate Governance Principles and Recommendations
ASX Principles and Recommendations
Recommendation
Followed
Reference
Principle 1: Lay solid foundations for management and oversight
1.1 A listed entity should disclose:
Yes
a) the respective roles and responsibilities of its board and
management; and
b) those matters expressly reserved to the board and those
delegated to management.
1.2 A listed entity should:
a) undertake appropriate checks before appointing a person,
Yes
or putting forward to security holders a candidate for
election, as a director; and
b) provide security holders with all material information in its
Yes
possession relevant to a decision on whether or not to elect
or re-elect a director.
Annual Report p. 21, and at
stockland.com.au/corporate-
governance
Annual Report, p. 22-23, and at
stockland.com.au/corporate-
governance
See notice of annual general
meeting and announcements to
securityholders as required from
time to time
1.3 A listed entity should have a written agreement with each
director and senior executive setting out the terms of their
appointment.
1.4 The company secretary of a listed entity should be accountable
directly to the board, through the chair, on all matters to do with
the proper functioning of the board.
1.5 A listed entity should:
a) have a diversity policy which includes requirements for the
board or a relevant committee of the board to set
measurable objectives for achieving gender diversity and to
assess annually both the objectives and the entity’s
progress in achieving them;
b) disclose that policy or a summary of it; and
c) disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity set by
the board or a relevant committee of the board in
accordance with the entity’s diversity policy and its progress
towards achieving them, and either:
(1) the respective proportions of men and women on the
board, in senior executive positions and across the
whole organisation (including how the entity has defined
‘senior executive’ for these purposes); or
(2) if the entity is a ‘relevant employer’ under the Workplace
Gender Equality Act, the entity’s most recent ‘Gender
Equality Indicators’, as defined in and published under
that Act.
1.6 A listed entity should:
a) have and disclose a process for periodically evaluating the
performance of the board, its committees and individual
directors; and
b) disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
1.7 A listed entity should:
a) have and disclose a process for periodically evaluating the
performance of its senior executives; and
b) disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
Yes
stockland.com.au/corporate-
governance
Yes
Annual Report p. 21.
Yes
Yes
Yes
Annual Report, p. 23 and at
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
Annual Report, p. 23 and 35, and at
stockland.com.au/corporate-
governance
N/A
See 1.5(c)(2) below.
Yes
See WGEA Report at
stockland.com.au/corporate-
governance
Yes
Annual Report p. 24
Yes
Annual Report p. 24
Yes
Yes
Remuneration report.
Remuneration report.
Stockland Financial Report 2015 — 29
Directors’
Report
Year ended 30 June 2015
ASX Principles and Recommendations
Principle 2: Structure the Board to add value
2.1 The board of a listed entity should:
a) have a nomination committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and the
individual attendances of the members at those
meetings; or
b) if it does not have a nomination committee, disclose that fact
and the processes it employs to address board succession
issues and to ensure that the board has the appropriate
balance of skills, knowledge, experience, independence and
diversity to enable it to discharge its duties and
responsibilities effectively.
Recommendation
Followed
Reference
Annual Report p. 25 and at
stockland.com.au/corporate-
governance
Note that the Human Resources
Committee carries out the role of
the Nomination Committee, see
details for this Committee in
Section 8.1.
Yes
N/A
2.2 A listed entity should have and disclose a board skills matrix
Yes
Annual Report p. 22-23
setting out the mix of skills and diversity that the board currently
has or is looking to achieve in its membership.
2.3 A listed entity should disclose:
Yes
Annual Report p. 17-19 and 23
a) the names of the directors considered by the board to be
independent directors;
b)
if a director has an interest, position, association or
relationship of the type described in Box 2.3 but the board
is of the opinion that it does not compromise the
independence of the director, the nature of the interest,
position, association or relationship in question and an
explanation of why the board is of that opinion; and
c)
the length of service of each director.
2.4 A majority of the board of a listed entity should be independent
directors.
2.5 The chair of the board of a listed entity should be an
independent director and, in particular, should not be the same
person as the CEO of the entity.
2.6 A listed entity should have a program for inducting new
directors and provide appropriate professional development
opportunities for directors to develop and maintain the skills
and knowledge needed to perform their role as directors
effectively.
Principle 3: Act ethically and responsibly
3.1 A listed entity should:
N/A
N/A
Yes
Yes
Yes
Yes
Annual Report p. 17-19
Annual Report p. 23
Annual Report p. 23
stockland.com.au/corporate-
governance
a) have a code of conduct for its directors, senior executives
Yes
and employees; and
b) disclose that code or a summary of it.
Yes
Annual Report p.21 and at
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
Stockland Financial Report 2015 — 30
Directors’
Report
Year ended 30 June 2015
ASX Principles and Recommendations
Principle 4: Safeguard integrity in corporate reporting
4.1 The board of a listed entity should:
a) have an audit committee which:
(1) has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
Recommendation
Followed
Reference
Yes
Annual Report p.25
(2) is chaired by an independent director, who is not the
Yes
Annual Report p.25
chair of the board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the
members of the committee; and
(5) in relation to each reporting period, the number of times
the committee met throughout the period and the
individual attendances of the members at those
meetings; or
Yes
Yes
Yes
stockland.com.au/corporate-
governance
Annual Report p.17-19 and 25-26
Annual Report p.20 and 26
b) if it does not have an audit committee, disclose that fact and
N/A
N/A
the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including
the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement
partner.
4.2 The board of a listed entity should, before it approves the
Yes
Annual Report p.28
entity’s financial statements for a financial period, receive from
its CEO and CFO a declaration that, in their opinion, the
financial records of the entity have been properly maintained
and that 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.
4.3 A listed entity that has an AGM should ensure that its external
Yes
auditor attends its AGM and is available to answer questions
from security holders relevant to the audit.
stockland.com.au/corporate-
governance
Principle 5: Make timely and balanced disclosure
5.1 A listed entity should:
a) have a written policy for complying with its continuous
disclosure obligations under the Listing Rules; and
b) disclose that policy or a summary of it.
Principle 6: Respect the rights of security holders
6.1 A listed entity should provide information about itself and its
governance to investors via its website.
6.2 A listed entity should design and implement an investor
relations program to facilitate effective two-way communication
with investors.
6.3 A listed entity should disclose the policies and processes it has
in place to facilitate and encourage participation at meetings of
security holders.
6.4 A listed entity should give security holders the option to receive
communications from, and send communications to, the entity
and its security registry electronically.
Yes
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
Yes
Yes
Yes
Yes
Stockland Financial Report 2015 — 31
Directors’
Report
Year ended 30 June 2015
ASX Principles and Recommendations
Principle 7: Recognise and manage risk
7.1 The board of a listed entity should:
a) have a committee or committees to oversee risk, each of
which:
(1) has at least three members, a majority of whom are
independent directors; and
Recommendation
Followed
Reference
Yes
Annual Report, p.26
(2) is chaired by an independent director,
Yes
Annual Report. p.26
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and the
individual attendances of the members at those
meetings; or
Yes
Yes
Yes
stockland.com.au/corporate-
governance
Annual Report. p.26
Annual Report. p.20 and 26
b) if it does not have a risk committee or committees that
N/A
N/A
satisfy (a) above, disclose that fact and the processes it
employs for overseeing the entity’s risk management
framework.
7.2 The board or a committee of the board should:
Yes
a) review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound; and
Annual Report. p.26
and at stockland.com.au/corporate-
governance
b) disclose, in relation to each reporting period, whether such a
Yes
Annual Report. p.26
review has taken place.
7.3 A listed entity should disclose:
Yes
a) if it has an internal audit function, how the function is
structured and what role it performs; or
Annual Report. p.26 and at
stockland.com.au/corporate-
governance
b) if it does not have an internal audit function, that fact and the
N/A
N/A
processes it employs for evaluating and continually
improving the effectiveness of its risk management and
internal control processes.
7.4 A listed entity should disclose whether it has any material
Yes
exposure to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage
those risks.
stockland.com.au/about/sustainabili
ty.htm
Principle 8: Remunerate fairly and responsibly
8.1 The board of a listed entity should:
a) have a remuneration committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the
number of times the committee met throughout
the period and the individual attendances of the
members at those meetings; or
Yes
Annual Report. p.25
Yes
Yes
Yes
Yes
Annual Report. p.25
stockland.com.au/corporate-
governance
Annual Report. p.25
Annual Report. p.20 and 25.
b)
if it does not have a remuneration committee, disclose that
fact and the processes it employs for setting the level and
composition of remuneration for directors and senior
executives and ensuring that such remuneration is
appropriate and not excessive.
N/A
N/A
Stockland Financial Report 2015 — 32
Directors’
Report
Year ended 30 June 2015
ASX Principles and Recommendations
Recommendation
Followed
Reference
8.2 A listed entity should separately disclose its policies and
Yes
Remuneration Report
practices regarding the remuneration of non-executive directors
and the remuneration of executive directors and other senior
executives.
8.3 A listed entity which has an equity-based remuneration scheme
Yes
should:
a) have a policy on whether participants are permitted to enter
into transactions (whether through the use of derivatives or
otherwise) which limit the economic risk of participating in
the scheme; and
b) disclose that policy or a summary of it.
Remuneration Report and at
stockland.com.au/corporate-
governance
stockland.com.au/corporate-
governance
Stockland Financial Report 2015 — 33
Directors’
Report
Year ended 30 June 2015
Remuneration Report – Audited
The Board is pleased to present the Remuneration Report (‘Report’) for Stockland for the year ended 30 June 2015
(‘FY15’), which forms part of the Directors’ Report and has been audited in accordance with section 308(3C) of the
Corporations Act 2001. The Remuneration Report covers Stockland and the Stockland Trust Group.
Our Report follows the format we have used for the past four years.
Remuneration policies
The Board is committed to ensuring that Stockland’s remuneration policies are fair, responsible and competitive and
that we communicate our remuneration arrangements with full transparency. On an ongoing basis, the Board
monitors these policies and practices to ensure that they remain in line with current best practice, are consistent
with anticipated regulatory changes and market trends, and continue to be effective to meet Stockland’s changing
business priorities and market challenges.
Since 2011, we have made a number of significant adjustments to our remuneration policies including:
•
Introducing deferral for part of Short Term Incentive (‘STI’) awards so that at least one-third of any STI awarded
to our Senior Executives (and 50% for the Managing Director) is deferred into Stockland securities which vest
over two years;
• Extending the vesting period of our Long Term Incentives (‘LTI’) to four years; and
•
Introducing clawback provisions on all unvested equity awards.
There was no change to the remuneration arrangements for our Managing Director for FY15 nor to the
remuneration framework for the Senior Executives who are Key Management Personnel (‘KMP’).
In FY15, no increases were made in Fixed Pay for the Managing Director and our Senior Executives and no
increases were made in base fees paid to Non-Executive Directors (‘NEDs’). We did make some adjustment to
some of the Board committee fees to reflect the additional workload for these committees as well as market
relativities. Our prudent approach to remuneration will continue in FY16 with no changes being made to the Fixed
Pay of the Managing Director and the majority of our Senior Executives. Our policy is to review Executives Fixed
Pay and NED fees each year ensuring that we remain competitive with companies of comparable size and
complexity in our industry. Our prudent approach to remuneration will continue in FY16 with no changes being
made to the Fixed Pay of the Managing Director and the majority of our Senior Executives.
We have increased Fixed Remuneration for three Senior Executives for FY16 to reflect their market relativities but
there is no change to the framework for their STI or LTI awards.
We have made a small increase in NED base fees for FY16 as set out on page 52; the first increase in such fees
since July 2011.
Remuneration Outcomes
The Short Term Incentive pool awarded to all employees, including those awarded to our Senior Executives totalled
$33.0 million in FY15 ($27.4 million in FY14). The increase reflected our improved profit performance in FY15 and
the Board’s assessment of performance against the measures outlined in our Corporate Balanced Scorecard set
out in this Report. Due to the changes introduced in FY13, over half of the increased STI awarded in FY15
comprised Stockland securities with vesting deferred to future financial years and subject to continued service.
Remuneration Governance
Human Resources Committee
The Human Resources (‘HR’) Committee assists the Board to exercise sound governance of its responsibility for
the appointment, performance and remuneration of the Managing Director and Senior Executives.
The HR Committee also oversees all employment and remuneration policies to ensure that, at all levels in the
organisation, fairness and balance are maintained between reward, cost and value to the Company.
The HR Committee approves the remuneration framework for all employees, including risk and financial control
personnel and employees whose total remuneration includes a significant variable component.
In FY15, following a realignment of the membership of a number of the Board sub-committees in October 2014,
Carolyn Hewson replaced Peter Scott as Chair of the HR Committee with Mr Scott replacing Ms Hewson as Chair of
the Risk Committee and Duncan Boyle joined the HR Committee. The HR Committee now comprises the following
three independent Non-Executive Directors: Carolyn Hewson (Chair), Graham Bradley and Duncan Boyle.
Stockland Financial Report 2015 — 34
Directors’
Report
Year ended 30 June 2015
The roles and responsibilities of the HR Committee are outlined in the Human Resources Committee charter which
is available on Stockland’s website.
Use of remuneration consultants
Stockland seeks relevant benchmarking and commentary on a number of remuneration issues from a variety of
consultants including Ernst & Young. Stockland also subscribes to a number of independent salary and
remuneration surveys, including property sector specific surveys run by AON Hewitt and Mercer. During FY15, no
remuneration recommendations in relation to Key Management Personnel, as defined by Division 1 of Part 1.2 of
Chapter 1 of the Corporations Act 2001 (the ‘Act’), were made by these or other consultants.
Diversity and Inclusion
At Stockland we value diversity and aim to create a vibrant and inclusive workplace which is reflective of the
communities in which we operate. Building a more inclusive workplace enables greater diversity of thought, more
informed decision making and ultimately better business outcomes.
Diversity, including gender diversity, forms an integral part of our People Strategy, as reflected in our Diversity and
Inclusion policies – spanning appropriate gender balance, flexible working, parental leave, and other support, in
addition to focusing on the employment of people from a range of ethnic backgrounds and people with disabilities.
At a management level, the Diversity and Inclusion Steering Committee is chaired by the Managing Director, Mark
Steinert, and oversees the implementation of our diversity and inclusion strategy. Our Diversity and Inclusion Policy
is available on our website, with a detailed update against initiatives provided in our Annual Review. A summary of
our progress is outlined below:
Focus Area
Key Outcomes
Gender balance and
Inclusion
• At the end of FY15, 45% of our managers were women which was broadly in line with our
FY15 Target
• Our recruitment approach was reviewed and includes specific requirements around the gender
mix of both candidates and Stockland interviewers
• During FY15 we were successful in achieving the citation as one of the Workplace Gender
Equality Agency’s (‘WGEA’) Employer of Choice for Gender Equality
Inclusive Culture
• The favourable Diversity and Inclusion score in our annual employee engagement survey was
maintained at 87%
Reflecting the
Communities in which we
operate
• Our disability recruitment partnerships continue with a number of candidates with disabilities
employed during FY15
• Our Reconciliation Action Plan is progressing well with all commitments on track
Flexibility and Work Life
Quality
• The return to work rate for employees who took parental leave continued to be approximately 90%
• Over 20% of all employees now work part-time or are casual and the number of employees
working remotely continues to increase
Industry Advocacy and
Thought Leadership
Gender Pay
• We continued to be actively involved in both industry and broader corporate groups through direct
participation and sponsorship
• Pay equity is a key part of the annual remuneration review across all roles with particular analysis
focusing on pay ratios for men and women occupying similar roles within Stockland compared to
market benchmarks. Overall, female fixed pay for similar roles was broadly aligned and, although
for a number of roles females were paid above males, there was an overall slightly lower fixed pay
for females than males in similar roles.
Key Management Personnel (‘KMP’)
KMP are those people who have the authority and responsibility for planning, directing and controlling Stockland’s
activities, directly or indirectly. They include Non-Executive Directors, the Managing Director and those of the
Managing Director’s direct reports who are members of the Executive Committee, and who are heads of business
units or functional areas (‘Senior Executives’). Individuals who were KMP of the Stockland Consolidated Group at
any time during the financial year are listed on page 55.
Stockland has defined the term ‘Executive’ to include the Managing Director and Senior Executives. All Executives
are employed by Stockland Development Pty Limited, a subsidiary of Stockland Corporation Limited.
The term ‘remuneration’ has been used in this Report as having the same meaning as the alternative term
‘compensation’ as defined in AASB 124 Related Party Disclosures (‘AASB 124’). The Report contains disclosures
required by the Corporations Act 2001 and the Corporations Regulations 2001.
Stockland Financial Report 2015 — 35
Directors’
Report
Year ended 30 June 2015
Remuneration Philosophy and Principles
Stockland’s remuneration policies are framed around several key principles:
• Fixed Pay should be fair, competitive and regularly benchmarked against relevant market evidence;
• A significant portion of Executive remuneration should be ‘at risk’ and awarded only if pre-set objectives and/or
•
hurdles are achieved;
‘At risk’ or variable pay should be aligned to securityholder interests and individuals should have clear
performance criteria set in advance;
• The level of variable pay increases as a portion of total remuneration as responsibility increases;
• Performance-based pay or Short-Term Incentives (‘STIs’) must be affordable and funded from annual underlying
profit;
• STI awards depend on individual and company performance against measures reflecting progress against a
Balanced Scorecard of Key Performance Indicators (‘KPIs’). A portion of performance-based pay for Executives
is awarded as Stockland equity with deferred vesting;
• Long-Term Incentives (‘LTIs’) with vesting dependent on achievement of long-term goals not only help motivate
and retain key Executives but also build a sense of ownership of business performance that benefits all
securityholders;
• Remuneration policies, framework and decisions take account of risk management and capital management
considerations; and
• Unvested incentive awards are forfeited if employees resign during the applicable vesting period and are subject
to broadly framed clawback provisions which give the Board discretion to adjust or forfeit these awards in certain
circumstances.
Link between remuneration and performance for FY15
Key financial performance measures
Underlying profit, EPS and other key financial performance measures over the last five years are set out below.
Underlying profit1 ($M)
Net tangible assets per security ($)
Security price as at 30 June ($)
Dividends/Distributions per security (¢)
Underlying earnings per security (¢)
Stockland TSR – 1 year (%)
A-REIT 200 TSR (exc SGP) – 1 year (%)
FY11
FY12
FY13
FY14
FY15
726
3.65
3.41
23.7
30.5
(5.3)
4.4
676
3.68
3.08
24.0
29.3
0.5
9.9
495
3.50
3.48
24.0
22.4
17.5
24.8
555
3.53
3.88
24.0
24.0
20.5
11.3
608
3.68
4.10
24.0
25.9
12.3
24.2
1 The reconciliation of underlying profit to statutory profit is provided in Note (B2b) to the financial statements of the Annual Report and on page 9 of
the Operating and Financial Review.
Short-Term Incentive (‘STI’)
STI is awarded only when an agreed level of performance is achieved by individual employees against a
combination of objectives set at the beginning of each financial year. For Stockland, the Board uses a Corporate
Balanced Scorecard to set financial and non-financial Key Performance Indicators (‘KPIs’) that are aligned to
overall business strategy. The Board’s assessment of the company’s performance against these KPIs informs
the quantum of the annual STI pool.
The Board’s assessment of performance against the Corporate Balanced Scorecard is provided in the
following table.
Stockland Financial Report 2015 — 36
Directors’
Report
Year ended 30 June 2015
Corporate Balanced Scorecard
Key Performance Indicators
Commentary
Overall Rating
Business and Financial Performance (75%)
Underlying profit performance
• Earnings per security (‘EPS’) growth target of 5% to 6%
• Actual underlying EPS growth was 7.8%
Above Target
(25.5-25.7 cps); and
• Return on Equity1 (‘RoE’) of 8.5%.
to 25.9 cps.
• RoE was 9.9%.
Above Target
Business Performance
• Operating Business performance in line with plan;
• Maintain conservative debt profile and remain within
policy limits for gearing, interest cover, asset mix, credit
rating and debt profile;
• Credit Rating Maintain A- rating
• Debt Maturity profile >5 Years
• Liquidity Buffer $500m
• Gearing within range 20-30%
Business unit profitability were all above plan:
• Commercial Property profit of $513m was up on
Above Target
FY14 and above plan.
• Residential profit of $166m was well up on FY14
and significantly above plan.
• Retirement Living profit of $48m was up on
FY14 and above plan.
• Average Debt Maturity was over 5 years and
Credit Rating maintained, with liquidity buffer,
gearing and interest cover all within guidelines
At Target
• Deliver against Key Business Priorities
• Generally good progress made especially
Above Target
embedding a disciplined approach to investment
decisions
Customer, Stakeholder and Sustainability Performance
• Achieve independent customer satisfaction ratings
goals for each business unit.
• The customer satisfaction scores were above or
at target for Commercial and Retirement Living
but below target for Residential
At Target
• Embed sustainable business practices across Stockland
• Second ranked Global Real Estate firm in DJSI
At Target
and make good progress towards environment
improvement goals
Sustainability Survey. Continued progress
across our GHG measures and other
sustainability targets
Organisational Performance (25%)
People Management
• Reduce Employee-Initiated turnover (employees rated
good and above) to 12% or less;
• Achieve Employee Engagement target – 80%; and
• Maintain women as percentage of total management
45.5%
• Turnover was 12%;
• Employee engagement score of 85%;
• Women in management was 45%.
• Good progress made including citation as
At Target
Above Target
At Target
At Target
• Progress longer term diversity and inclusiveness
WGEA Employer of Choice for Gender Equality
objectives
Operational Excellence & Operational Risk/WH&S
• Continued Process Improvement and enhanced
innovation
• Good progress with quantified benefits due to
At Target
embedded group functions
• Embed strong risk compliance and safety management
• Excellent safety record with no major
At Target
practices.
preventable injuries with continued embedding
of the compliance framework
1 Excluding Residential workout projects. ROE was 8.8% including these projects.
Short-Term Incentives (‘STI’)
The approved STI pool for all employees in FY15 was $33.0 million of which $9.0 million (or 27% of the pool) being
deferred into Stockland securities and which remains subject to the risk of forfeiture until vesting dates at the end of
FY16 and FY17.
Details of the FY15 and previous years’ STI pools for all employees are provided below. The approved STI pool
includes Cash STI awards as well as Deferred STI awards subject to vesting in future years subject to service
conditions being met.
Stockland Financial Report 2015 — 37
Directors’
Report
Year ended 30 June 2015
Underlying profit ($M)
Cash STI ($M)1
Deferred STI ($M)2
Total STI pool ($M)2
FY11
FY12
FY13
FY14
FY15
726
27.2
6.3
33.5
676
21.6
4.2
25.8
495
17.9
3.6
21.5
555
21.4
6.0
27.4
608
24.0
9.0
33.0
1 Includes applicable superannuation.
2 The STI pools for FY11 to FY12 have been restated using the STI/LTI mix including deferred STI that applied for employees in FY13 to ensure
comparison on a like with like basis.
Until FY15, our total STI pool has not exceeded 5.0% of underlying profit. We have reviewed this self-imposed target
in light of several changes in our business and now consider that this limit is no longer appropriate. The changes
include the changing mix of executive roles within our company, resulting from our strategy to upskill our executive
team, the adoption of more conservative interest and cost capitalisation policies, and the changes to our reward mix
we made from FY12 which included introducing deferral of STI awards for all Executives. We now seek to manage
the total STI pool so it will not exceed 7.5% of underlying profit and only reach this level in a year of exceptional
performance. In FY15, a year of strong performance, the pool was approximately 5.4% of underlying profit.
Long-Term Incentives (‘LTI’)
Our LTI awards are linked to two measures: target underlying EPS growth and relative TSR performance. Despite
strong EPS growth over the last two years and three year cumulative TSR of 59%, there was no LTI vesting in
FY15 as neither of these two hurdles measured over the period from 1 July 2012 to 30 June 2015 were achieved
or exceeded.
Half of the LTI allocated to employees is linked to Stockland’s performance against underlying EPS Growth Targets.
The group exceeded the target in FY14 and FY15 but fell short in FY13. Accordingly, there was no vesting for the
EPS portion of the 2012 (FY13) LTI awards to any employee.
The other half of the LTI award is linked to the TSR performance hurdle. From 1 July 2012 to 30 June 2015,
Stockland’s TSR returned a positive absolute return of 59.0% but underperformed over the period against its peer
group benchmark of 72.4% (as measured by the A-REIT Accumulation Index excluding Stockland) so there was no
vesting of the TSR portion of the 2012 LTI awards to any employee.
The total LTI value that lapsed due to no vesting for the KMP in FY15 was $5.6 million.
Details on the performance against each hurdle for FY13 grants whose performance period ended as at 30 June
2015 are outlined in the table below:
Hurdle
EPS
FY13 Underlying EPS Growth
FY14 Underlying EPS Growth
FY15 Underlying EPS Growth
Aggregate Underlying EPS Growth
TSR
Relative TSR FY12-FY15
Total Vesting
Target/
benchmark
performance
Actual
performance
(Under)/Out
performance
%
vested
Weight
Vesting
outcome
(10.0%)
(23.5%)
(13.5%)
5.0%
4.5%
(0.5%)
7.1%
7.8%
(8.6%)
2.1%
3.3%
(8.1%)
0%
50%
72.4%
59.0%
(13.4%)
0%
50%
0%
0%
0%
FY15 and FY16 LTI awards – Underlying EPS Growth Target
As advised at the October 2014 AGM, the maximum vesting hurdle based on the Compound Annual Growth Rate
(‘CAGR’) for Underlying EPS for LTI awards granted during FY15 was 6.25% for the three years from 1 July 2014 to
30 June 2017, with the threshold vesting hurdle being 4.5% CAGR.
The maximum and threshold hurdles for FY16 LTI will be the same CAGR targets as FY15, being 6.25% (31.1 cps)
and 4.5% (29.6 cps) respectively.
Stockland Financial Report 2015 — 38
Directors’
Report
Year ended 30 June 2015
Executive Remuneration for FY15 (non statutory)
Executives received a mix of remuneration during FY15 including Fixed Pay, STI awarded as cash and as deferred securities which may vest one or two
years later subject to continued employment, and a LTI which may vest three and four years later subject to performance hurdles and continued employment.
The table below outlines the cash remuneration that was received in relation to FY15 which includes Fixed Pay and the non-deferred portion of any FY15
STI. The table also includes the value of a portion of the deferred STI award from FY14 which vested during FY15. No previous years’ LTI vested during
FY15. This information differs from that provided in the statutory remuneration of Executives set out in the table on page 40 which was calculated in
accordance with statutory rules and applicable Accounting Standards.
Executive Director
Mark Steinert
Managing Director and CEO
Senior Executives
Stephen Bull
Group Executive and CEO, Retirement Living
Katherine Grace6
General Counsel and Company Secretary
Tiernan O’Rourke7
Chief Financial Officer
Darren Rehn5
Group Executive and Chief Investment Officer
Michael Rosmarin
Chief Operating Officer
John Schroder
Group Executive and CEO, Commercial Property
Simon Shakesheff8
Group Executive, Strategy and Stakeholder Relations
Andrew Whitson
Group Executive and CEO, Residential
Former Executives
Tim Foster
Former Chief Financial Officer
David Pitman
Former Group Executive and CEO, Retirement Living
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Fixed pay1
$
1,500,000
1,500,000
650,000
650,000
430,138
–
850,000
619,452
700,000
–
600,000
600,000
1,050,000
1,050,000
600,000
518,356
700,000
700,000
–
294,863
–
151,507
STI awarded
and received
as cash
$
Total Cash
payments in relation to
financial year
$
Previous years’
Deferred STI which
were realised3
$
Previous years’ LTI
which were realised
LTI
$
Awards which
lapsed or were
forfeited4
$
750,0002
750,0002
390,000
373,333
229,407
–
453,333
330,374
420,000
–
320,000
320,000
630,000
620,000
320,000
276,457
420,000
420,000
–
–
–
–
2,250,000
2,250,000
1,040,000
1,023,333
659,545
–
1,303,333
949,826
1,120,000
–
920,000
920,000
1,680,000
1,670,000
920,000
794,813
1,120,000
1,120,000
–
294,863
–
151,507
590,486
113,393
132,267
–
–
–
96,552
–
306,802
–
139,913
104,752
278,574
211,063
301,294
–
190,446
–
–
152,797
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,164,800
–
358,570
529,822
–
–
–
–
–
–
953,250
884,640
1,783,500
1,652,880
–
–
351,329
519,121
–
1,404,560
–
–
1 Fixed Pay includes salary, superannuation and salary sacrificed items.
2 For Mark Steinert this is 50% (two-thirds for Senior Executives) of his STI awards. The remaining 50% of his STI (one-third for Senior Executives) was deferred in Stockland securities which vests over
two years following the performance year, 50% after year 1 and 50% after year 2 subject to continued employment.
3 This represents the value of all prior years’ deferred STI which vested during FY15 using the 30 June 2015 closing security price of $4.10. No LTI vested during FY15 or in FY14.
4 The value shown represents the value of any previous years’ equity awards which lapsed or were forfeited during the financial year. The FY15 values are based on the closing 30 June 2015 security
price of $4.10 (FY14: $3.88).
5 Darren Rehn was appointed to the Executive Committee on 13 August 2014 with his remuneration arrangements effective from 1 July 2014.
6 Katherine Grace commenced employment on 21 August 2014.
7 Tiernan O’Rourke commenced employment on 8 October 2013.
8 Simon Shakesheff commenced employment on 22 July 2013.
Stockland Financial Report 2015 — 39
Directors’
Report
Year ended 30 June 2015
FY15 Statutory Remuneration
Executive Director
Mark Steinert
Managing Director
Senior Executives
Stephen Bull
CEO Retirement Living
Katherine Grace6
General Counsel & Company
Secretary
Tiernan O’Rourke
Chief Financial officer
Darren Rehn5
Chief Investment Officer
Michael Rosmarin
Chief Operating Officer
John Schroder
CEO Commercial Property
Simon Shakesheff
Group Executive, Strategy &
Stakeholder Relations
Andrew Whitson
CEO Residential
Former Executives
Tim Foster7
Chief Financial Officer
David Pitman8
CEO Retirement Living
Total consolidated
remuneration
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Salary1
$
1,424,182
1,553,202
634,390
645,575
418,032
–
847,145
638,639
714,801
–
575,520
591,002
1,022,946
1,001,194
577,461
511,334
676,635
720,435
–
276,925
–
135,414
6,891,112
6,073,720
Short-term
Post-employment
Other
long-term
Shared-based payments
Total
Non-
monetary
benefits2
$
Other
payments
$
STI3
cash
$
Total
short-term
$
Super-
annuation
benefits
$
Termination
benefits
$
Long
service
leave4
$
Deferred
STI
(‘DSTI’)
$
LTI
$
Total
$
Performance
related
(STI +
LTI)
Percent
of Total
%
(DSTI+L
TI)
Percent
of Total
%
–
–
12,126
11,128
–
–
–
–
–
–
12,127
6,936
12,127
11,128
–
–
12,127
6,169
–
–
–
507
48,507
35,868
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
750,000
750,000
2,174,182
2,303,202
390,000
373,333
229,407
–
453,333
330,374
420,000
–
320,000
320,000
630,000
620,000
320,000
276,457
420,000
420,000
1,036,516
1,030,036
647,439
–
1,300,478
969,013
1,134,801
–
907,647
917,938
1,665,073
1,632,322
897,461
787,791
1,108,762
1,146,604
18,783
17,775
18,783
17,775
18,783
–
18,783
12,648
18,783
–
18,783
17,775
18,783
17,775
18,783
17,091
18,783
17,775
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,911
535
24,920
30,257
–
–
1,708
–
3,091
–
4,550
4,347
40,257
40,888
1,206
–
22,889
19,036
885,250
485,667
1,200,321
558,370
4,284,447
3,365,549
196,528
77,778
68,997
–
213,039
76,927
153,333
–
177,222
123,194
350,278
240,972
283,227
709,322
286,667
133,333
203,325
100,758
79,395
–
266,249
132,087
111,055
–
246,546
135,853
438,424
242,805
180,322
85,518
1,480,072
1,256,604
814,614
–
1,800,257
1,190,675
1,421,063
–
1,354,748
1,199,107
2,512,815
2,174,762
1,380,999
1,599,722
219,632
108,802
1,656,733
1,425,550
–
–
–
–
3,932,740
3,090,164
–
276,925
–
135,921
10,872,359
9,199,752
–
8,546
–
4,704
169,047
131,864
–
82,734
–
59,006
–
141,740
–
(8,863)
–
(29,092)
104,532
57,108
–
65,139
–
–
2,614,541
1,912,332
–
65,160
–
–
2,945,269
1,429,353
–
489,641
–
170,539
16,705,748
12,872,149
66.2
53.3
53.4
43.9
46.4
–
51.8
45.3
48.2
–
54.9
48.3
56.5
50.8
56.7
67.0
55.9
46.4
–
26.6
–
–
56.8
50.0
48.7
31.0
27.0
14.2
18.2
–
26.6
17.6
18.6
–
31.3
21.6
31.4
22.2
33.6
49.7
30.6
17.0
–
26.6
–
–
33.3
26.0
1 Includes any change in accruals for annual leave.
2 Comprises salary packaged benefits, including motor vehicle costs, car parking, other salary sacrificed items and FBT payable on these items.
3 STIs (in cash) are earned in the financial year to which they relate and are paid in August of the following financial year.
4 Includes any change in accruals for long service leave.
5 Mr Darren Rehn was appointed to the Executive Committee on 13 August 2014.
6 Ms Katherine Grace commenced employment on 21 August 2014.
7 Mr Tim Foster ceased employment on 31 October 2013.
8 Mr David Pitman ceased employment on 17 September 2013.
Stockland Financial Report 2015 — 40
Directors’
Report
Year ended 30 June 2015
Short-Term Incentives for Executives
STIs are directly linked to group, business unit and individual performance measures based on a Balanced
Scorecard approach. The objectives for the Executive Committee are approved by the Managing Director, after
review by the HR Committee. The actual performance against the objectives is assessed by the Managing Director
and approved by the HR Committee. The STI awarded for FY15 is outlined below with the amounts paid as cash
and/or awarded and deferred into Stockland securities shown in the last two columns.
A minimum of one-half of any STI awarded for the current Managing Director and one-third for Senior Executives is
deferred into Stockland securities which will vest over two years, subject to continued service. The maximum STI
that can be awarded to Executives is 125% of Target STI.
Target STI
(as % of Fixed Pay)
STI awarded
(as % of Maximum)
STI
paid in cash1
$
%
STI deferred
into equity2
$
%
%
Managing Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace3
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
%
100
90
80
80
90
80
90
80
90
100
750,000
40
1,125,000
60
92
92
92
100
90
91
94
100
390,000
229,407
453,333
420,000
320,000
630,000
320,000
420,000
58
58
58
53
59
58
57
53
285,000
165,593
326,667
368,000
220,000
450,000
245,000
368,000
42
42
42
47
41
42
43
47
1 The portion of STI awarded for the FY15 performance year which is paid as cash.
2 The portion of STI awarded for FY15 performance that is deferred into Stockland securities which will vest over the next two years.
3 Calculations are based on Katherine Grace’s commencement of employment which was 21 August 2014.
Stockland Financial Report 2015 — 41
Directors’
Report
Year ended 30 June 2015
Equity Awards received by Executives
The table below outlines for the Managing Director and Senior Executives the number of vested and
unvested equity units as at the end of FY15 as well as ordinary holdings held. This table is intended to reflect
the direct exposure that each executive has to the Stockland security price. Further detail on current equity
incentives then follows.
Employee
Holding
Executive Director
Mark Steinert
Vested/Personal
Deferred STI Securities
(unvested)
Balance
1 July 2014
Acquired/
(Disposed)
or Granted
Equity
Incentives
which
lapsed
Equity
Incentives
which
vested
Balance
30 June
2015
287,120
258,818
25,079
270,432
–
–
144,021
(144,021)
456,220
385,229
PRP rights (unvested)
1,443,000
811,000
(528,000)
–
1,726,000
Senior Executives
Stephen Bull
Vested/Personal
Deferred STI Securities
(unvested)
8,451
56,070
–
68,510
–
–
32,260
(32,260)
PRP rights (unvested)
325,456
211,000
(87,456)
Katherine Grace
Vested/Personal
Deferred STI Securities
(unvested)
PRP rights (unvested)
Tiernan O’Rourke
Vested/Personal
–
–
–
–
–
39,806
163,000
–
Deferred STI Securities
(unvested)
47,098
78,526
PRP rights (unvested)
312,000
276,000
Darren Rehn
Vested/Personal
–
–
Deferred STI Securities
(unvested)
149,660
84,462
PRP rights (unvested)
228,000
228,000
Michael Rosmarin
Vested/Personal
Deferred STI Securities
(unvested)
PRP rights (unvested)
John Schroder
Vested/Personal
Deferred STI Securities
(unvested)
PRP rights (unvested)
Simon Shakesheff
Vested/Personal
Deferred STI Securities
(unvested)
43,333
55,809
452,500
299,359
107,485
820,000
145,104
108,539
3,716
52,886
195,000
(232,500)
21,584
108,174
–
–
341,000
(435,000)
–
58,894
PRP rights (unvested)
202,000
195,000
Andrew Whitson
Vested/Personal
Deferred STI Securities
(unvested)
5,634
87,266
–
88,462
40,711
92,320
449,000
–
39,806
163,000
23,549
102,075
588,000
74,830
159,292
–
–
–
–
23,549
(23,549)
–
74,830
(74,830)
–
456,000
34,125
(34,125)
–
67,945
(67,945)
–
73,486
(73,486)
–
46,450
(46,450)
81,174
74,570
415,000
388,888
147,714
726,000
218,590
93,947
397,000
52,084
129,278
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
PRP rights (unvested)
342,690
228,000
(85,690)
–
485,000
Stockland Financial Report 2015 — 42
Directors’
Report
Year ended 30 June 2015
Vesting profile of deferred STI
A minimum of one-third of any STI awarded for the KMP is deferred into Stockland securities which will vest over
two years, subject to continued service. The vesting profile of current deferred STI awards and Fair Value (‘FV’) is
shown below:
Deferred STI plan
Securities
Granted1
Total FV
deferred
FV
expensed
FV
expensed
in prior
years
FY13 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
29,225
114,796
114,796
$103,749
$450,000
$450,000
$41,500
$225,000
$150,000
$62,249
$225,000
$150,000
FY15 – Tranche 1
135,216
$562,500
$281,250
FY15 – Tranche 2
135,216
$562,500
$187,500
–
–
Executive Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
FY13 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY13 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY13 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY14 – Sign On
Tranche 2
FY14 – Sign On
Tranche 3
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
FY13 – Tranche 2
FY14 – Tranche 1
FY14 – Tranche 2
FY15 – Tranche 1
FY15 – Tranche 2
Maximum
value to be
recognised
in future
years
–
–
$150,000
$281,250
$375,000
–
–
$31,111
$71,250
$95,000
$41,399
$55,198
–
$30,771
$81,666
$108,889
–
$97,777
$92,000
$122,667
–
–
$28,334
$55,000
$73,333
–
–
$51,666
$112,500
$150,000
–
Vesting
date2
30/06/2015
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2015
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2016
30/06/2017
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2015
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2015
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2015
8,451
23,810
23,810
34,225
34,225
19,903
19,903
23,549
23,549
39,263
39,263
74,830
74,830
42,231
42,231
12,442
21,684
21,684
26,442
26,442
28,404
39,541
39,541
54,087
54,087
52,626
$30,000
$93,333
$93,333
$142,500
$142,500
$82,797
$82,797
$92,313
$92,313
$163,333
$163,333
$293,333
$293,333
$184,000
$184,000
$44,167
$85,000
$85,000
$110,000
$110,000
$100,834
$155,000
$155,000
$225,000
$225,000
$191,559
$10,000
$46,667
$31,111
$71,250
$47,500
$41,398
$27,599
$46,157
$30,771
$81,667
$54,444
$146,667
$97,778
$92,000
$61,333
$14,722
$42,500
$28,333
$55,000
$36,667
$67,222
$77,500
$51,667
$112,500
$75,000
$95,780
$20,000
$46,666
$31,111
–
–
–
–
$46,156
$30,771
–
–
$146,666
$97,778
–
–
$29,445
$42,500
$28,333
–
–
$33,612
$77,500
$51,667
–
–
$95,779
14,193
$51,663
$17,221
$17,221
30/06/2016
$17,221
20,860
20,860
29,447
29,447
5,634
40,816
40,816
44,231
44,231
$81,772
$81,772
$122,500
$122,500
$20,000
$160,000
$160,000
$184,000
$184,000
$40,886
$27,257
$61,250
$40,833
$6,667
$80,000
$53,333
$92,000
$61,333
$40,886
$27,257
–
–
$13,333
$80,000
$53,333
–
–
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2015
30/06/2015
30/06/2016
30/06/2016
30/06/2017
–
$27,258
$61,250
$81,667
–
–
$53,334
$92,000
$122,667
1 Securities granted are based on the 10 day volume weighted average price following 30 June of the applicable performance year.
2 Vesting dates refer to when service conditions are met. The Human Resources Committee then confirms vesting during July in the following year
considering whether clawback provisions will apply.
Stockland Financial Report 2015 — 43
Directors’
Report
Year ended 30 June 2015
Vesting profile of long-term incentives
Rights
previously
granted
Rights
granted
during
the year
Executive Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
264,000
264,000
457,500
457,500
–
–
43,728
43,728
119,000
119,000
–
–
–
–
156,000
156,000
–
–
114,000
114,000
–
–
116,250
116,250
110,000
110,000
–
–
217,500
217,500
192,500
192,500
–
–
101,000
101,000
–
–
42,845
42,845
128,500
128,500
–
–
–
–
–
–
405,500
405,500
–
–
–
–
105,500
105,500
81,500
81,500
–
–
138,000
138,000
–
–
114,000
114,000
–
–
–
–
97,500
97,500
–
–
–
–
170,500
170,500
–
–
97,500
97,500
–
–
–
–
114,000
114,000
Fair
value
per right
at grant
date1
$1.20
$1.20
$2.08
$2.08
$1.84
$1.84
$1.20
$1.20
$1.45
$1.45
$1.67
$1.67
$1.67
$1.67
$1.45
$1.45
$1.67
$1.67
$1.45
$1.45
$1.67
$1.67
$1.20
$1.20
$1.45
$1.45
$1.67
$1.67
$1.20
$1.20
$1.45
$1.45
$1.67
$1.67
$1.45
$1.45
$1.67
$1.67
$1.20
$1.20
$1.45
$1.45
$1.67
$1.67
Grant
date
14/01/2013
14/01/2013
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2012
31/08/2012
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2014
31/08/2014
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2012
31/08/2012
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2012
31/08/2012
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2013
31/08/2013
31/08/2014
31/08/2014
31/08/2012
31/08/2012
31/08/2013
31/08/2013
31/08/2014
31/08/2014
Vesting
date2
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2017
30/06/2018
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2016
30/06/2017
30/06/2017
30/06/2018
30/06/2015
30/06/2016
30/06/2016
30/06/2017
30/06/2017
30/06/2018
No.
Vested
during
the
year3
No.
lapsed
during
the year4
Maximum
value to be
recognised
in future
years5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
264,000
264,000
–
–
–
–
43,728
43,728
–
–
–
–
–
–
–
–
–
–
–
–
–
–
116,250
116,250
–
–
–
–
217,500
217,500
–
–
–
–
–
–
–
–
42,845
42,845
–
–
–
–
–
–
$317,200
$475,800
$497,413
$559,590
–
–
$57,517
$86,275
$117,457
$132,139
$90,737
$102,079
$75,400
$113,100
$153,640
$172,845
$55,100
$82,650
$126,920
$142,785
–
–
$53,167
$79,750
$108,550
$122,119
–
–
$93,042
$139,563
$189,823
$213,551
$48,817
$73,225
$108,550
$122,119
–
–
$62,108
$93,163
$126,920
$142,785
1 Fair value is determined using a Monte Carlo simulation (TSR hurdle) and the Black-Scholes option pricing model (EPS hurdle). Details of the
assumptions made in determining fair value are discussed in Note (D7c) of the financial statements.
2 Vesting date refers to the date at which the performance and service conditions are met. The rights convert to securities in July after the vesting
date of 30 June. The securities remain in holding lock until the 10th anniversary of the grant date except at Board discretion.
3 There was no vesting reflecting no meeting of performance conditions (see page 38). The full balance of the original grant will lapse.
4 This includes the rights which lapsed due to not meeting performance conditions as well as rights which were forfeited due to termination
of employment.
5 The minimum future value of unvested securities is $Nil as future performance and service criteria may not be met.
Stockland Financial Report 2015 — 44
Directors’
Report
Year ended 30 June 2015
Remuneration Framework
fixed remuneration (‘Fixed Pay’);
Stockland’s remuneration structure has three components:
•
• performance-based pay, or short-term incentives (‘STI’); and
•
long-term incentives (‘LTI’).
Remuneration and variable pay mix
Variable pay (STI and LTI) is a key component of Executives’ remuneration packages. Stockland’s remuneration
mix has historically had a greater proportion of the remuneration package ‘at risk’ than is typical of comparable
companies. There was no change in FY15 to the total remuneration mix at target for Executives (as a percentage of
Fixed Pay) or the weighting of equity-based awards (Deferred STI and LTI) to cash-based awards (Fixed Pay and
Cash STI).
Managing Director
Business Unit CEOS
Other Senior Executives
50%
33%
17%
17%
50%
33%
36%
64%
64%
40%
42%
24%
12%
24%
22%
11%
25%
36%
LTI – Performance Rights Plan – Three year performance period. Portion of vesting is based on Stockland’s performance against performance
hurdles for relative TSR and EPS growth.
Deferred STI – Stockland Securities – At least one-third of STI award for Managing Director and Senior Executives. Vesting over a maximum of
two years following performance year.
STI paid as cash – Maximum of two-thirds of any STI award (less for outperformance) for Managing Director and Senior Executives. Paid in
August following performance year.
Fixed Pay – Includes salary, superannuation and salary sacrifice items.
Total Cash-based awards – STI paid as cash plus Fixed Pay.
Total Equity-based award – Deferred STI plus LTI.
Stockland Financial Report 2015 — 45
Directors’
Report
Year ended 30 June 2015
Fixed Pay
Fixed Pay includes salary, superannuation and other employee benefits. Fixed Pay is set individually taking into
account external benchmarking by independent firms.
How and when is Fixed
Pay determined?
Fixed Pay at Stockland is reviewed annually with changes effective from 1 July.
When reviewing Fixed Pay a number of factors are considered including individuals’
skills and experience relevant to their roles, internal and external relativities and a
prudent approach to cost.
We use external benchmarking surveys sourced by a number of organisations including
Ernst & Young and AON Hewitt.
What comparator
groups are used to
benchmark Fixed Pay?
Fixed Pay for the Executives is reviewed against appropriate market benchmarks from
the ASX50 group of companies and larger property firms.
Short-Term Incentives
Performance-based pay, or short-term incentive (‘STI’) rewards annual progress towards long-term objectives.
Who participates?
All permanent Stockland employees employed at 30 June of the applicable financial
year and who have greater than three months service are eligible.
What is the STI
opportunity?
An individual’s STI opportunity is based on a percentage of Fixed Pay and varies by job
level as defined by employees’ ‘job band’.
Job Band
Managing Director
Senior Executives
General Managers
Senior Managers
Other Employees
Target STI
(as percentage
of Fixed Pay)
100%
80% – 90%
45%
30%
5% – 15%
Maximum STI
(as percentage
of Fixed Pay)
125%
100% – 112.5%
90%
60%
30%
How is the size of the
STI pool determined?
The size of the STI pool is based on the Board’s assessment of
Stockland’s performance against its Balance Scorecard objectives as set
out on page 37.
Is there a limit on the
overall STI poolsize?
The Board expects that the STI pool will not exceed 7.5% of Stockland’s
underlying profit and would only approve a STI pool up to that limit in a
year of exceptional performance.
Stockland Financial Report 2015 — 46
Directors’
Report
Year ended 30 June 2015
When and how are
individual STI
outcomes decided?
How is STI delivered?
Employees’ objectives are established at the start of the performance year by their
manager with reference to Stockland’s Balanced Scorecard.
STI is awarded on an annual basis with any cash STI paid in August. STI outcomes are
recommended by the employee’s manager after consideration of their performance
against objectives and the size of the relevant year’s STI pool.
Recommendations are calibrated across businesses to ensure consistency and are
subject to review and approval by the Executive Committee and Human Resources
Committee, and for the Managing Director by the Board.
Job Band
Managing Director
Senior Executives
General Managers
Senior Managers
Percentage of STI awarded as Deferred STI
Up to and
including target STI
Above target STI
50%
33%
33%
33%
100%
100%
50%
33%
Stockland awards STI as a combination of cash and Stockland securities.
The balance of STI not deferred is awarded in cash. The Board retains discretion to
award STI entirely in cash in certain circumstances.
How are the number of
deferred STI securities
determined?
The number of securities awarded is based on the dollar value of the deferred STI
award divided by the volume weighted average price for Stockland securities for the 10
working days following 30 June for the applicable year of award.
When does the
deferred STI vest?
Deferred STI vests in two equal annual tranches over two years (50% 12 months after
award and 50% 24 months after award). Vesting is subject to continued employment
with Stockland at the applicable vesting dates.
What happens if an
Executive leaves
Stockland?
Any unvested deferred STI will lapse. The Board retains discretion to review this in
certain circumstances where termination is Stockland initiated, such as redundancy or
mutually agreed resignation.
Do participants receive
distributions/dividends
on Stockland’s
securities during the
vesting period?
Do clawback provisions
apply to the deferred
STI?
Yes. Unlike LTI awards, deferred STI awards are not subject to additional performance
hurdles other than continued employment until vesting. Consistent with LTI awards,
distributions are only payable once performance has been assessed against applicable
objectives and/or hurdles.
Yes, the Board may at its absolute discretion determine that some or all of an
employee’s deferred STI award be forfeited if, in the Board’s reasonable opinion,
adverse circumstances affecting the performance or reputation of the Company have
come to their attention.
Stockland Financial Report 2015 — 47
Directors’
Report
Year ended 30 June 2015
Long-Term Incentives
Long-term incentive (‘LTI’) aligns Executive remuneration with securityholder returns and helps retain key talent.
Who participates?
The Managing Director, Senior Executives, General Managers and Senior Managers
participate in LTI. This group represents approximately 13% of all employees.
Annual participation is reviewed and approved by the Board.
What is the LTI
opportunity?
An individual’s LTI participation is based on their Fixed Pay and Job Band
as follows:
Job Band
Managing Director
Senior Executives
General Managers
Senior Managers
LTI participation (as % of Fixed Pay)
100%
60%
25%
10%
How is LTI delivered?
Employees are granted a number of rights in the Performance Rights Plan (‘PRP’). Each
right is granted over an ordinary security at no cost to the employee.
What are the
performance hurdles?
Grants are made as either Hurdled Rights (subject to performance hurdles) or Restricted
Rights (subject to service only). Grants to the Managing Director and Senior Executives
are made fully as Hurdled Rights.
Each Hurdled Rights grant is divided into two equal tranches, with the following
performance hurdles:
• Stockland’s Total Securityholder Return (‘TSR’) measured against the ASX
Australian Real Estate Investment Trusts (‘A-REIT’) Accumulation Index (excluding
Stockland); and
• Growth in Stockland’s Underlying Earnings Per Security (‘EPS’) measured against a
three year target set by the Board.
Restricted Rights which are granted to General and Senior Managers are subject to
continued service only.
How are the number of
rights determined for
each LTI grant?
The number of rights granted is determined by dividing the dollar value of LTI
participation by a grant value which includes assumptions for the expected vesting for
the EPS growth target.
The grant value of the TSR component is determined based on an accounting valuation
methodology using assumptions for expected life of the right, volatility, risk-free interest
rate, market price of the Stockland securities at the time of grant and dividend yield.
The grant value for the EPS performance hurdle will be based on the volume weighted
average price for Stockland securities over the 10 working days after 30 June 2015 and
adjusted for the probability of vesting.
The valuation of both hurdles is calculated by an independent external consultant.
Stockland Financial Report 2015 — 48
Directors’
Report
Year ended 30 June 2015
When does the LTI
vest?
The number of rights which convert to Stockland securities is determined at the
end of the three year performance period based on the Board’s assessment of
actual performance against the applicable performance hurdles, as advised by an
independent external consultant. Half of any rights which convert to securities at the
end of the performance period then vest with the remaining securities being subject
to an additional twelve month vesting requirement subject to continued employment
with Stockland.
Vested securities are also subject to a seven year holding lock following vesting so that
they may only be traded subject to approval of the Board or its delegated authority.
What happens if an
Executive leaves
Stockland?
Any unvested rights lapse. The Board retains discretion to review this in certain
circumstances where termination is Stockland initiated such as redundancy or mutually
agreed resignation.
Are rights which
convert to securities
purchased on-market?
At the Board’s discretion, securities which convert are either purchased on-market
or issued.
No rights vested in FY15. However, in previous years where vesting did occur,
securities have been purchased on-market to avoid dilution.
Do participants receive
distributions or
dividends on LTI
grants?
Is performance
retested if performance
hurdles are not
exceeded?
Are there any minimum
securityholding
requirements for
Executives?
Participants do not receive distributions on any rights during the three year performance
period. If any rights convert to securities post the performance period, distributions will
be paid as per other Stockland securities.
There is no retesting with any rights which do not exceed the applicable performance
hurdles lapsed at the end of the performance period.
Stockland requires that minimum securityholdings for the Managing Director (equal to
two times Fixed Pay) and Executive Committee members (equal to one times Fixed
Pay) must be maintained if the Executive wishes to sell any Stockland securities which
were granted after 1 July 2010 other than to meet any tax obligations of the applicable
securities.
Do clawback
provisions apply to
LTI?
The Board may at its absolute discretion determine that some or all of an employee’s
LTI award be forfeited if, in the Board’s reasonable opinion, adverse circumstances
affecting the performance or reputation of the Company have come to their attention.
How is performance
assessed and
rewarded against
these hurdles?
The number of performance rights which convert to Stockland securities are based on
the following schedule:
Relative TSR Growth over
three years
Compound Annual Growth
in EPS over three years
Proportion of TSR/EPS
related rights vesting
Less than or equal to
TSR Target
Less than or equal to
EPS Target
Greater than TSR Target
Greater than EPS Target
Up to 10% greater than
TSR Target
Up to 5% greater than
EPS Target
10% or more greater than
TSR Target
5% (or more) greater than
EPS Target
0%
50%
Straight-line between
50% and 100%
100%
Stockland Financial Report 2015 — 49
Directors’
Report
Year ended 30 June 2015
How is TSR defined
and how is it
calculated?
TSR is defined as security price growth plus the value of dividends and distributions
reinvested on the ex-dividend date, adjusted for rights, bonus issues and any capital
reconstructions and measured over the three year vesting period.
Stockland and A-REIT TSRs are measured using a volume weighted average
price (‘VWAP’) for the 30 days before the start and up to and including the end
of the three year measurement period.
Actual TSR for both Stockland and A-REIT is calculated by an independent
external consultant.
Why was TSR chosen
as a hurdle?
Relative TSR was chosen as a performance hurdle because it reflects Stockland’s
success in generating returns for securityholders relative to its peers in both rising
and falling markets. The A-REIT Accumulation Index was adopted as the most
appropriate comparative group because it represents the listed property companies
with whom Stockland competes for capital. Stockland is excluded from the comparator
group because Stockland is a large part of the Index and comparison with itself distorts
the result.
Why was Underlying
EPS growth chosen as
a hurdle?
EPS is used as it is a key indicator of Stockland’s financial performance. It is calculated
using Stockland’s underlying profit which the Board believes is the appropriate way to
view Stockland’s true operating performance from year to year.
How is the Underlying
EPS Growth target
set?
A three year compound annual growth rate for EPS is set and advised prospectively
for the performance period. The Board believes this approach provides a transparent
basis for communicating the EPS performance hurdle to both securityholders and
LTI participants.
Other equity-based benefit programs
Are there any other
equity-based benefits
granted to employees?
Who participates?
Stockland also offers the Tax Exempt Employee Security Plan (‘$1,000 Plan’) to eligible
permanent employees.
Annual participation is reviewed and approved by the Board.
Permanent employees who have completed their probation period as at the time of
grant excluding those who participate in the LTI plan. This group represents
approximately 87% of all permanent employees.
What is the value of
Tax Exempt Employee
Security Plan?
Eligible employees receive up to $1,000 worth of Stockland securities. Securities may
be either issued or purchased on-market, at the Board’s discretion. Stockland typically
purchases securities on-market.
What are the other key
terms and conditions of
the plan?
Dealing in securities
Securities cannot be sold or transferred until the earlier of three years after allocation
date or the time the participant ceases to be a Stockland employee.
Securities acquired under this plan are not subject to performance hurdles.
All employees and Directors are expected to behave responsibly and ethically when dealing with Stockland
securities, as outlined in the Company’s Security Trading Policy (available on Stockland’s website).
Are there any
restrictions on
employees or Directors
entering into hedging
arrangements?
Yes. All employees and Directors are prohibited from entering into hedging
arrangements in relation to Stockland securities. They cannot trade in financial products
issued over Stockland securities by third parties or trade in any associated products
which limit the economic risk of holding Stockland securities.
Stockland Financial Report 2015 — 50
Directors’
Report
Year ended 30 June 2015
Employment and termination arrangements for Managing Director and Senior Executives
Do any Senior
Executives have fixed
term contracts?
What notice period is
required under these
contracts?
Senior Executives are on rolling contracts until notice is given by either Stockland or the
Executive.
Job Band
Managing Director
Senior Executives
Notice period
Six months
Three months
In appropriate circumstances, payment may be made in lieu of notice.
Where the termination occurs as a result of misconduct or a serious or persistent breach
of contract (termination for cause), Stockland may terminate employment immediately
without notice or payment in lieu of notice.
Does the Executive
receive a termination
payment if Stockland
initiates termination?
Where Stockland initiates termination, including mutually agreed resignation, the
Managing Director or Senior Executive would receive a termination of twelve months
Fixed Pay (including applicable notice).
Where termination is made for cause, the Executive is terminated with no payment in
lieu of notice or any other termination payment.
On termination (other
than for cause or non-
mutual resignation) is
the Executive eligible
for STI?
On termination, how
are unvested equity
awards (LTI and
Deferred STI) treated?
STI is determined in line with the annual assessment process with any STI awarded.
In cases of termination for cause or resignation, all unvested securities or rights lapse. In
other circumstances, the Board has the discretion to adjust the vesting conditions.
Typically, this discretion is applied as outlined below.
Death or Total and
Permanent Disablement
For termination other than
for cause or resignation
Full vesting of any unvested equity awards.
For unvested Deferred STI, full vesting on 30 June in the year
of termination.
For LTI, unvested Hurdled and/or Restricted rights are pro
rated based on service to the date of termination. Any
applicable prorated Hurdled rights remain subject to the
applicable performance hurdles over the full performance
period. Any applicable Restricted Rights vest on 30 June in the
year of termination. Other unvested LTI awards forfeited.
Stockland Financial Report 2015 — 51
Directors’
Report
Year ended 30 June 2015
Non-Executive Director Remuneration
Remuneration policy
Stockland’s remuneration policy for Non-Executive Directors (‘NED’) aims to ensure Stockland can attract and retain
suitably skilled, experienced and committed individuals to serve on the Board and remunerate them appropriately
for their time and expertise and for their responsibilities and liabilities as public company Directors.
The HR Committee is responsible for reviewing and recommending to the Board any changes to Board Committees’
remuneration, taking into account the size and scope of Stockland’s activities, the responsibilities and liabilities of
Directors and the demands placed upon them. In developing its recommendations, the HR Committee may take
advice from external consultants.
With the exception of the Chairman, Non-Executive Directors receive additional fees for their work on Board
Committees. Where a special purpose Board Committee is established by the Board, a special committee may be
payable in line with fees paid for existing Board Committees. Non-Executive Directors do not receive performance-
related remuneration or termination benefits other than accumulated superannuation.
The Board decided to continue to take a prudent approach to Board remuneration with no increases in base Board
or Committee fees in FY15, the fourth consecutive year without an increase in base fees. Selected Committee fees
were, however, increased in FY15 in line with market benchmarks and to reflect the increasing demands placed on
directors who serve on committees over recent years.
In FY16, the Board has decided to increase the annual base fees for Non-Executive Directors by $5,000 to
$175,000 (an increase of 2.9%). This is the first increase in NED base fees since July 2011. Board committee fees
will remain unchanged in FY16 except for a reduction in the fees paid to the independent Director on the SCPL
Board (reduced to $30,000 from $45,000) reflecting the reduced number of managed funds and workload expected
in FY16. The annual fees paid for the Board and Board Committees are shown in the table below. The amounts
shown are inclusive of applicable statutory superannuation contributions.
In all, the net increases in full year annualised director fees resulting from these changes in FY16 is $20,000 and
the expected fees in FY16 will be well within the approved remuneration pool for NED as approved in 2007.
Board fees
Stockland Board
Chairman
Non-Executive Director
Stockland Board Committees
Audit
Risk
Financial Services Compliance
Human Resources
SCPL Board
Chairman
Non-Executive Director
Independent Non-Executive Director1
SCPL Board Committees
Audit
Financial Services Compliance
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
1 Independent Non-Executive Directors of SCPL are those who are not on the Stockland Board.
FY16
$500,000
$175,000
$40,000
$20,000
$35,000
$17,500
$10,900
$6,540
$35,000
$17,500
$32,700
$32,700
$30,000
$15,260
$8,720
$10,900
$6,540
FY15
$500,000
$170,000
$40,000
$20,000
$35,000
$17,500
$10,900
$6,540
$35,000
$17,500
$32,700
$32,700
$45,000
$15,260
$8,720
$10,900
$6,540
Stockland Financial Report 2015 — 52
Directors’
Report
Year ended 30 June 2015
Approved Remuneration pool
Total remuneration available to Non-Executive Directors is approved by securityholders and is currently $2,500,000
(including superannuation payments) as approved at the 2007 Annual General Meeting. No increase in the total fee
pool is proposed for FY16.
Total fees of $1,933,927 (77% of the approved limit) were paid to Non-Executive Directors in FY15 which was
higher than the total fees for FY14 and was due to the appointment of Mr Tom Pockett as an additional director to
the Board during FY15 and was well below the NED remuneration pool approved by securityholders. The nature
and amount of each element of remuneration for each Non-Executive Director of Stockland are detailed below:
Remuneration paid in FY15
Short-term
Post-employment
Board and
Committee
Fees
$
Non-
monetary
benefits
$
Superannuation
contributions
$
Non-Executive Directors
G Bradley (Chairman)
D Boyle
C Hewson
B Neil
T Pockett
C Schwartz
P Scott
T Williamson
Total consolidated remuneration
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
495,304
495,556
183,429
185,556
204,679
205,556
218,004
218,256
165,096
–
182,804
178,056
204,679
208,056
242,364
242,616
1,896,359
1,733,652
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total1
$
500,000
500,000
188,125
190,000
209,375
210,000
222,700
222,700
169,792
–
187,500
182,500
209,375
212,500
247,060
247,060
4,696
4,444
4,696
4,444
4,696
4,444
4,696
4,444
4,696
–
4,696
4,444
4,696
4,444
4,696
4,444
37,568
1,933,927
31,108
1,764,760
1 The fees for each Director are paid on a total cost basis which includes any applicable compulsory superannuation. The amount of superannuation
included in the total fees will vary depending on the timing of payments and in line with applicable legislation.
Stockland Financial Report 2015 — 53
Directors’
Report
Year ended 30 June 2015
Directors’ security holdings
The relevant interest of each Director in the securities issued by Stockland and related entities, as notified by the
Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this Report are as
follows:
Stockland
Securities
Units in SDOT
No. 21
Units in SDRT
No. 12
Non-Executive Directors
G Bradley
D Boyle
C Hewson
B Neil
T Pockett
C Schwartz
P Scott
T Williamson
Executive Director
M Steinert
Total
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
194,571
183,705
–
750,000
61,169
61,169
19,482
18,395
55,200
52,119
10,000
–
10,000
10,000
30,415
28,973
101,178
95,528
571,017
287,120
1,053,032
737,009
–
–
–
–
–
–
–
–
–
–
–
25,000
–
100,000
–
–
–
875,000
–
–
–
–
–
–
–
–
–
–
–
–
20,000
20,000
–
–
–
–
20,000
20,000
1 On 30 June 2015, Stockland Direct Office Trust No. 2 (‘SDOT No. 2’) was resolved to be wound up.
2 Stockland Direct Retail Trust No.1 (‘SDRT No.1’).
The above holdings of Executive Directors include vested securities acquired under LTI plans but do not include
unvested performance rights or FY15 Deferred STI securities detailed on page 43 of this Report.
To underpin the alignment of Directors and securityholder interests, the Board believes that Directors should hold a
meaningful number of Stockland securities. In August 2015 the Board revised its existing policy to increase the
minimum number of securities each Non-Executive Director is required to acquire from 10,000 to 40,000 securities
within a reasonable time of becoming a Director. The increased minimum roughly equates to one year’s base Board
fees. All new directors will have a period of three years to comply with this policy and any existing directors that hold
less than 40,000 securities will have until 30 June 2018 to comply. Stockland also has a policy regarding the
minimum securityholdings for Senior Executives as set out in the Remuneration Report. Both these policies are
intended to align the personal financial interests of Directors and Senior Executives with those of securityholders.
Stockland Financial Report 2015 — 54
Directors’
Report
Year ended 30 June 2015
Key Management Personnel
Non-Executive Directors
Mr Graham Bradley
Chairman
Mr Duncan Boyle
Ms Carolyn Hewson
Mr Barry Neil
Mr Tom Pockett
(appointed 1 September 2014)
Ms Carol Schwartz
Mr Peter Scott
Mr Terry Williamson
Executive Director
Mr Mark Steinert
Senior Executives
Mr Stephen Bull
Managing Director and Chief Executive Officer (‘CEO’)
Group Executive, CEO, Retirement Living
Ms Katherine Grace
General Counsel & Company Secretary (commenced employment 13 August 2014)
Mr Tiernan O’Rourke
Chief Financial Officer (‘CFO’)
Mr Darren Rehn
Group Executive, Chief Investment Officer (appointed to Group Executive on 13
August 2014)
Mr Michael Rosmarin
Group Executive, Chief Operating Officer
Mr John Schroder
Group Executive, CEO, Commercial Property
Mr Simon Shakesheff
Group Executive, Strategy & Stakeholder Relations
Mr Andrew Whitson
Group Executive, CEO, Residential
Stockland Financial Report 2015 — 55
Directors’
Report
Year ended 30 June 2015
Indemnities and insurance of officers and auditor
Since the end of the prior year, Stockland has not indemnified or agreed to indemnify any person who is or has
been an officer or an auditor of Stockland against any liability.
Since the end of the prior year, Stockland has paid insurance premiums in respect of Directors’ and Officers’ liability
insurance contracts, for Directors, Executive Directors, Company Secretaries and Officers. Such insurance
contracts insure against certain liabilities (subject to specified exclusions) for persons who are or have been
Directors and Officers of Stockland.
Premiums are also paid for Fidelity insurance and Professional Indemnity insurance policies to cover certain risks
for a broad range of employees, including Directors and Executives.
Non-audit services
During the financial year Stockland’s auditor, PwC provided certain other services to Stockland in addition to their
statutory duties as auditor.
The Board has considered the non-audit services provided during the financial year by the auditor and is satisfied
that the provision of those services is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
•
the non-audit services were for taxation, regulatory and assurance-related work closely linked to the group’s
audit, and none of this work created any conflicts with the auditor’s statutory responsibilities;
the Audit Committee resolved that the provision of non-audit services during the financial year by PwC as
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations
Act 2001;
the Board’s own review conducted in conjunction with the Audit Committee, having regard to the Board policy
set out in this Report, concluded that it is satisfied the non-audit services did not impact the integrity and
objectivity of the auditor; and
•
•
• The declaration of independence provided by PwC, as auditor of Stockland.
Details of the amounts paid to the auditor of Stockland, PwC, and its related practices for audit and non-audit
services provided during the financial year are set out in Note (F9) of the accompanying financial statements.
Lead Auditor’s Independence Declaration under section 307C of the
Corporations Act 2001
The external auditor’s independence declaration is set out on page 57 and forms part of the Directors’ Report for the
year ended 30 June 2015.
Rounding off
Stockland is an entity of the kind referred to in ASIC Class Order 98/100 (as amended) and in accordance with that
Class Order, amounts in the Financial Report and Directors’ Report have been rounded to the million dollars, unless
otherwise stated.
Signed in accordance with a resolution of the Directors:
Graham Bradley
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 19 August 2015
Stockland Financial Report 2015 — 56
ead Au
Le
ection
S
ear ended
Ye
uditor’s
307C
30 June 2
s Indep
of the
2015
penden
Corpo
nce De
oration
eclarat
ns Act 2
tion un
2001
nder
Au
uditor’s
Indepen
ndence
Declara
ation
As l
to th
lead auditor fo
he best of my
or the audit of
knowledge an
Stockland Co
nd belief, there
orporation Limi
e have been:
ited and Stock
kland Trust for
r the year end
ded 30 June 20
015, I declare
that
a)
b)
no contraven
ntions of the a
uditor indepen
ndence require
ements of the
e Corporations
s Act 2001 in re
relation to the
audit; and
no contraven
ntions of any a
applicable cod
e of professio
onal conduct in
n relation to th
he audit.
This
and
s declaration i
d the entities it
s in respect o
t controlled du
f Stockland C
ring the period
orporation Lim
d.
mited and the e
entities it cont
trolled during t
the period and
d Stockland Tr
rust
S J
Par
Pric
Hadfield
tner
cewaterhouseC
Coopers
Sydn
19 August 20
ey
15
Stock
kland Financial
l Report 2015 —
— 57
Consolidated Statements of Profit or Loss
and Other Comprehensive Income
Year ended 30 June 2015
Year ended 30 June
Revenue
Cost of property developments sold:
• Land and development
• Capitalised interest
Notes
(B1)
• Utilisation of provision for write-down of inventories
Investment property expenses
Share of profits of equity-accounted investments
(E1)
Stockland
2015
$M
2014
$M
2,114
1,935
(983)
(126)
113
(226)
88
(926)
(156)
180
(224)
62
Management, administration, marketing and selling expenses
(258)
(248)
Net change in fair value of investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of Retirement Living resident obligations
Impairment of intangibles
Net gain on sale of other financial assets
Net loss on sale of other non-current assets
Finance income
Finance expense
Profit before income tax benefit/(expense)
Income tax benefit/(expense)
Profit for the year attributable to securityholders/unitholders
Items that are or may be reclassified to profit or loss, net of tax
Available for sale financial assets – net change in fair value
Available for sale financial asset – reclassified to profit and loss
Cash flow hedges – net change in fair value of effective portion
Cash flow hedges – reclassified to profit or loss
Foreign operations – foreign currency translation differences
Foreign operations – reclassified to profit and loss
Other comprehensive income/(expense), net of tax
Total comprehensive income attributable to
securityholders/unitholders
Basic earnings per security/unit (cents)
Diluted earnings per security/unit (cents)
(C1b)
(B2d)
(B2d)
(C3a)
(D4)
(D1)
(D1)
(B3a)
(D4)
(D4)
(F2)
(F2)
253
68
(70)
(43)
73
(2)
9
(113)
897
6
903
13
(51)
36
(2)
5
–
1
93
(78)
33
(23)
35
(6)
5
(148)
534
(7)
527
52
(1)
(13)
4
11
1
54
904
581
38.5
38.5
22.8
22.7
Stockland
Trust Group
2015
$M
707
2014
$M
694
–
–
–
–
–
–
(218)
(217)
86
(25)
56
(38)
247
82
–
–
–
–
(1)
301
(230)
867
–
867
–
–
36
(2)
–
–
34
901
36.9
36.9
–
–
–
1
(8)
331
(260)
641
–
641
–
–
(14)
5
–
–
(9)
632
27.7
27.7
The above consolidated Statements of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the accompanying notes.
Stockland Financial Report 2015 — 58
Consolidated
Balance Sheets
As at 30 June 2015
As at 30 June
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Inventories
Investment properties – Commercial Property
Investment properties – Retirement Living
Equity-accounted investments
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Development provisions
Other financial liabilities
Other liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Development provisions
Other financial liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Securityholders’/unitholders’ funds
Issued capital
Reserves
Retained earnings/undistributed income
Total Securityholders’/unitholders’ funds
Notes
0
(C2a)
(C1a)
(D4)
(C3b)
(C2a)
(C1a)
(C1b)
(C1c)
(E1)
(D4)
(C3a)
(B3b)
(C2b)
(D3)
(C1c)
(C1a)
(D4)
(C2b)
(D3)
(C1c)
(C1a)
(D4)
(D7)
Stockland
Stockland Trust Group
2015
$M
170
103
549
2
84
908
246
1,154
92
1,991
7,917
3,335
518
366
58
98
59
141
14,575
15,729
595
286
1,992
300
33
87
2014
$M
231
119
570
508
58
1,486
120
1,606
77
1,746
7,489
2,852
650
126
73
125
33
123
13,294
14,900
554
356
1,666
213
69
95
2015
$M
2014
$M
89
33
–
2
66
190
222
412
131
34
–
7
49
221
–
221
3,435
3,709
–
–
7,840
7,412
–
506
347
–
–
–
–
608
126
–
–
–
144
12,272
12,684
127
11,982
12,203
379
286
–
–
33
54
372
356
–
–
16
64
3,293
2,953
752
808
33
2,997
219
98
284
18
3,649
6,942
8,787
8,560
84
143
8,787
53
2,762
199
162
465
8
3,649
6,602
8,298
8,420
73
(195)
8,298
–
–
2,997
2,762
–
–
284
–
3,281
4,033
8,651
7,255
68
1,328
8,651
–
–
465
–
3,227
4,035
8,168
7,116
26
1,026
8,168
The above consolidated Balance Sheets should be read in conjunction with the accompanying notes.
Stockland Financial Report 2015 — 59
Consolidated Statements
of Changes in Equity
Year ended 30 June 2015
Attributable to securityholders of Stockland
Notes
Balance as at 1 July 2013
Profit for the year
Other comprehensive income,
net of tax
Total comprehensive income
Securities issued under
Distribution/Dividend
Reinvestment Plan
Acquisition of treasury
securities
Dividends and distributions
Expense relating to rights and
securities granted under
securities plans, net of tax
Securities vested under
securities plans
Total of other movements
through reserves
(D7a)
(D7b)
(D8)
(F7)
(D7b)
Issued
capital
$M
8,348
–
–
–
77
(6)
–
–
1
72
Balance as at 30 June 2014
8,420
Profit for the year
Other comprehensive income,
net of tax
Total comprehensive income
Securities issued under
Distribution/Dividend
Reinvestment Plan
Acquisition of treasury
securities
Dividends and distributions
Expense relating to rights and
securities granted under
securities plans, net of tax
Securities vested under
securities plans
Total of other movements
through reserves
Balance as at 30 June 2015
–
–
–
(D7a)
141
(D7b)
(4)
(D8)
(F7)
(D7b)
–
–
3
140
8,560
Executive
remuneration
reserve
$M
Cash
flow
hedge
reserve
$M
Fair
value
reserve
$M
Foreign
currency
translation
reserve
$M
Retained
earnings
$M
Total
equity
$M
19
–
–
–
–
–
–
7
(1)
6
25
–
–
–
–
–
–
13
(3)
10
35
11
–
(9)
(9)
–
–
–
–
–
–
2
–
34
34
–
–
–
–
–
–
–
–
51
51
–
–
–
–
–
–
51
–
(38)
(38)
–
–
–
–
–
–
36
13
(17)
(166)
8,195
–
12
12
–
–
–
–
–
–
527
–
527
–
527
54
581
77
–
(6)
(556)
(556)
–
–
7
–
(556)
(478)
(5)
(195)
8,298
–
5
5
–
–
–
–
–
–
–
903
–
903
–
903
1
904
141
–
(4)
(565)
(565)
–
–
13
–
(565)
(415)
143
8,787
The above consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
Stockland Financial Report 2015 — 60
Consolidated Statements
of Changes in Equity
Year ended 30 June 2015
Attributable to unitholders of the Stockland Trust Group
Balance as at 1 July 2013
Profit for the year
Other comprehensive income
Total comprehensive income
Securities issued under
Distribution/Dividend
Reinvestment Plan
Notes
(D7a)
Acquisition of treasury securities
(D7b)
Distributions
Expense relating to rights and
securities granted under
securities plans, net of tax
Securities vested under
securities plans
Transfer of capital
Total of other movements
through reserves
Balance as at 30 June 2014
Profit for the year
Other comprehensive income
Total comprehensive income
Securities issued under
Distribution/Dividend
Reinvestment Plan
(D8)
(F7)
(D7b)
(D7a)
(D7a)
Acquisition of treasury securities
(D7b)
(D8)
(F7)
(D7b)
Distributions
Expense relating to rights and
securities granted under
securities plans, net of tax
Securities vested under
securities plans
Total of other movements
through reserves
Balance as at 30 June 2015
Issued
capital
$M
7,554
–
–
–
74
(6)
–
–
1
(507)
(438)
7,116
–
–
–
140
(4)
–
–
3
139
7,255
Executive
remuneration
reserve
$M
Cash flow
hedge
reserve
$M
Undistributed
income
$M
Total equity
$M
17
–
–
–
–
–
–
8
(1)
–
7
24
–
–
–
–
–
–
11
(3)
8
32
11
–
(9)
(9)
–
–
–
–
–
–
–
2
–
34
34
–
–
–
–
–
–
941
641
–
641
–
–
(556)
–
–
–
(556)
8,523
641
(9)
632
74
(6)
(556)
8
–
(507)
(987)
1,026
8,168
867
–
867
–
–
(565)
–
–
867
34
901
140
(4)
(565)
11
–
(565)
(418)
36
1,328
8,651
The above consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
Stockland Financial Report 2015 — 61
Consolidated Cash
Flow Statements
Year ended 30 June 2015
Stockland
Stockland Trust Group
Year ended 30 June
Notes
2015
$M
2014
$M
Cash flows from operating activities
Cash receipts in the course of operations (including GST)
Cash payments in the course of operations (including GST)
Payments for land
Distributions received from equity-accounted investments
Distributions received from managed funds
Receipts from Retirement Living residents
Payments to Retirement Living residents, net of Deferred
Management Fees (‘DMF’)
Interest received
Interest paid
Net cash flow from operating activities
(F3)
Cash flows from investing activities
Proceeds from sale of investment properties
Payments for and development of investment properties
Commercial Property
Retirement Living
Payments for plant and equipment and software
Proceeds from sale/capital returns from investments
Payments for investments, including equity-accounted
investments
Distributions received from other entities
Net cash flow from / (used in) investing activities
Cash flows from financing activities
Reallocation of capital
Payment for securities/units under employee securities
plans
Proceeds from borrowings
Repayment of borrowings
Loans to related entities
(D7a)
(D7b)
Payments for termination and restructuring of derivatives
(D1)
Dividends and distributions paid (excluding DRP allocation)
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2015
$M
797
(395)
–
34
1
–
–
301
(198)
540
2014
$M
788
(359)
–
30
–
–
–
331
(196)
594
2,243
2,052
(1,457)
(1,140)
(380)
(160)
38
1
299
(152)
7
(198)
401
31
–
292
(131)
5
(197)
752
322
321
233
277
(386)
(199)
(15)
508
(63)
17
184
–
(4)
(512)
(399)
(488)
(86)
(19)
139
(539)
3
(693)
–
(6)
–
–
1
(65)
–
(230)
–
(4)
–
–
14
(75)
–
(272)
(507)
(6)
4,118
(4,300)
4,380
(3,697)
4,118
(4,300)
4,380
(3,697)
–
(41)
(419)
(646)
(61)
231
170
–
(257)
(475)
(55)
4
227
231
292
(39)
(419)
(352)
(42)
131
89
236
(258)
(477)
(329)
(7)
138
131
The above consolidated Cash Flow Statements should be read in conjunction with the accompanying notes.
Stockland Financial Report 2015 — 62
Consolidated Notes
Year ended 30 June 2015
(A) Basis of Preparation
(B) Results for the year
(B1) Revenue
(B2) Operating segments
(B3) Taxation
(C) Operating assets and liabilities
(C1) Real Estate assets and liabilities
(C2) Financial assets and liabilities
(C3) Other non-financial assets and liabilities
(D) Capital Structure and Financing Costs
(D1) Net financing costs
(D2) Cash and cash equivalents
(D3) Interest-bearing loans and borrowings
(D4) Other financial assets and liabilities
(D5) Fair value hierarchy
(D6) Financial risk factors
(D7) Issued capital
(D8) Dividends and distributions
(E) Group Structure
(E1) Equity-accounted investments
(E2) Investments in unconsolidated structured entities
(E3) Controlled entities
(E4) Deed of Cross Guarantee
(E5) Parent entity disclosures
(F) Other items
(F1) Accounting Policies
(F2) Earnings per security/unit
(F3) Notes to Cash Flow Statements
(F4) Contingent liabilities
(F5) Commitments
(F6) Related party disclosures
(F7) Personnel expenses
(F8) Key Management Personnel disclosures
(F9) Auditor’s remuneration
(F10) Events subsequent to the end of the year
64
66
66
67
72
76
76
88
89
92
92
94
94
97
102
104
109
113
114
114
116
116
119
120
122
122
124
125
126
126
126
128
129
129
129
Stockland Financial Report 2015 — 63
Consolidated
Notes
Year ended 30 June 2015
(A) Basis of Preparation
IN THIS SECTION
This section sets out the basis upon which the Group’s financial statements are prepared as a whole.
Specific accounting policies are described in the note to which they relate.
Stockland represents the combination or stapling of Stockland Corporation Limited (‘the Company’) and its
controlled entities (‘the Stockland Corporation Group’) and Stockland Trust (‘the Trust’) and its controlled entities
(‘the Stockland Trust Group’). Both the Company and the Trust (collectively referred to as ‘Stockland’ or ‘the Group’)
are for profit entities that were both incorporated, formed and domiciled in Australia.
The constitutions of the Company and the Trust ensure that, for so long as the two entities remain jointly quoted, the
number of shares in the Company and the number of units in the Trust shall be equal and that the shareholders and
unitholders be identical. Both the Company and the Responsible Entity of the Trust must at all times act in the best
interest of Stockland. The stapling arrangement will cease upon the earliest of either the winding up of the Company
or the Trust or either entity terminating the stapling arrangement.
The financial statements as at and for the year ended 30 June 2015 were authorised for issue by the Directors on
19 August 2015.
(i) Statement of compliance
The financial statements are general purpose financial reports which have been prepared in accordance with
Australian Accounting Standards (‘AASBs’) (including Australian Interpretations adopted by the Australian
Accounting Standards Board (‘AASB’)) and the Corporations Act 2001. The financial statements of Stockland and
the Stockland Trust Group comply with the International Financial Reporting Standards (‘IFRSs’) and interpretations
adopted by the International Accounting Standard Board (‘IASB’).
(ii) Basis of preparation
As permitted by Class Order 13/1050, issued by the Australian Securities and Investments Commission (‘ASIC’),
these financial statements are combined financial statements that present the financial statements and
accompanying notes of both Stockland and the Stockland Trust Group.
The financial statements are presented in Australian dollars, which is the Company’s and Trust’s functional
currency and the functional currency of the majority of Stockland and the Stockland Trust Group.
The financial statements have been prepared on a going concern basis, using historical cost conventions except for:
investment properties, derivative financial instruments, certain financial assets and liabilities which are stated at
•
their fair value; and
• non-current assets classified as held for sale which are stated at the lower of carrying amount and fair value less
costs to sell.
In accordance with ASIC Class Order 98/100, amounts in the Financial Report have been rounded to the nearest
million dollars, unless otherwise stated.
Certain comparative amounts have been restated to conform with the current year’s presentation.
Change in presentation of software
In the current year, software with a carrying value of $39 million was reclassified from property, plant and
equipment to intangibles to better reflect the nature of these assets. The adjustment resulted in an increase in
intangibles due to the inclusion of this software, as disclosed in note (C3a), with a corresponding reduction in
property, plant and equipment.
Comparative disclosures have been restated to ensure consistency between the periods.
The change did not result in any other changes to accounting policies for software.
Stockland Financial Report 2015 — 64
Consolidated
Notes
Year ended 30 June 2015
(A) BASIS OF PREPARATION (CONTINUED)
Stockland and Stockland Trust Group net current asset deficiency position
Stockland and the Stockland Trust Group have a net current asset deficiency at 30 June 2015.
Based on the profits and net operating cash inflows in the period and forecast for the next 12 months Stockland
and the Stockland Trust Group will be able to pay their debts as and when they become due and payable. Undrawn
bank facilities of $640 million (refer to Note (D3c)) are also available should they need to be drawn down.
The deficiency in the Stockland Trust Group primarily arises due to the requirement under Accounting Standards
to classify the ‘at call’ intercompany loan receivable from the Company or Stockland Corporation Group as a non-
current asset. In relation to Stockland, a number of liabilities are classified as current under Accounting Standards
that are not expected to actually result in net cash outflows within the next 12 months (in particular Retirement
Living Resident Obligations). Similarly, some assets held as non-current will generate cash income in the next
12 months (including Retirement Living DMF included within Investment Properties – Retirement Living,
development work in progress and vacant stock).
In addition, current inventory is held on the balance sheet at the lower of cost and net realisable value, whereas this
is expected to generate cash inflows above the carrying value.
In relation to Retirement Living resident obligations for existing residents (June 2015: $1,989 million; June 2014:
$1,661 million), in the short term 8% of residents are estimated to leave each year and therefore it is not expected
that the majority of the obligations to residents will fall due within one year. In the vast majority of transactions
involving the turnover of units the resident obligations will be repaid from receipts from incoming residents.
However, resident obligations are classified as current under the definitions in the Accounting Standards as
there is no unconditional contractual right to defer settlement for at least 12 months (residents may give notice
of their intention to vacate their unit with immediate effect). In contrast, the corresponding Retirement Living assets
are classified as non-current under Accounting Standards as the majority are not expected to be realised within
12 months.
(iii) Critical accounting estimates and judgements
Stockland makes estimates and assumptions concerning the future. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next
financial year are discussed below.
Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current
market conditions and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
Assumptions underlying management’s estimates of fair value and recoverability can be found in the following notes
to the financial statements:
Area of Estimation
Tax losses – assumptions underlying recoverability
Inventories – assumptions underlying net realisable value
Commercial properties – assumptions underlying fair value
Retirement Living – assumptions underlying fair value
Goodwill – assumptions underlying recoverable value
Software – assumptions underlying recoverable value
Fair value of investment in other entities – assumptions underlying fair value
Fair value of derivatives – assumptions underlying fair value
Valuation of share based payments – assumptions underlying fair value
Note
(B3b)
(C1a)
(C1b)
(C1c)
(C3a)
(C3a)
(D4)
(D4)
(D7c)
Stockland Financial Report 2015 — 65
Consolidated
Notes
Year ended 30 June 2015
(B) Results for the year
IN THIS SECTION
This section explains the results and performance of Stockland and the Stockland Trust Group.
This section provides additional information about those individual line items in the financial statements that
the Directors consider most relevant in the context of the operations of the entity, including:
(a) Accounting policies that are relevant for understanding the items recognised in the financial
statements; and
(b) Analysis of the Group’s result for the year by reference to key areas, including: revenue, results
by operating segment and income tax.
(B1) Revenue
Revenue is recognised at the fair value of the consideration received or receivable, net of the amount of goods and
services tax (‘GST’) levied.
Property development sales
Revenue from land and property sales is recognised when Stockland has transferred significant risks and rewards
of ownership to the buyer and the amount of revenue can be reliably measured.
Rent from investment properties
Rent is recognised on a straight-line basis over the lease term, net of any incentives.
Rent from investment properties includes $5 million (2014: $9 million) contingent rent billed to tenants. Contingent
rent represents 1% (2014: 1%) of gross lease income.
Deferred Management Fees (‘DMF’)
DMF are recognised over the tenancy period and includes both fixed fees recognised on a straight line basis and
contingent fees recognised when earned.
DMF calculated on the entry price of the unit are recognised each period, however fees are only realised in cash at
the end of the residents tenure.
DMF calculated on the exit price of the unit are recognised and realised in cash at the end of the resident’s tenure.
Accounting for DMF is further explained in Note (B2d).
Dividends and distributions
Revenue from dividends and distributions are recognised in profit or loss on the date they are declared by the
relevant entity.
Revenue recognised during the year is set out below:
Property development sales
Rent from investment properties
Deferred Management Fees from Retirement Living
Dividend and distribution income
Other revenue
Total revenue
Stockland
Stockland
Trust Group
2015
$M
1,288
698
94
5
29
2014
$M
1,109
679
70
19
58
2015
$M
–
698
–
2
7
2,114
1,935
707
2014
$M
–
681
–
–
13
694
Stockland Financial Report 2015 — 66
Consolidated
Notes
Year ended 30 June 2015
(B2) Operating segments
KEEPING IT SIMPLE…
This section shows a reconciliation from underlying profit to the Group’s statutory profit. Underlying profit
remains the Group’s key profit indicator. This reflects the way the business is managed and how the
Directors and Executive Committee assess the performance of the Group.
Both underlying profit and segment operating profit are presented on a proportionate consolidation basis,
whereby earnings from equity accounted investments are grossed up and included in segment EBIT based
on Stockland’s proportionate ownership interest.
Operating segments are reported in a manner that is consistent with the internal reporting provided to the Managing
Director and the Executive Committee, whom are the chief operating decision makers (‘CODM’).
Stockland has four reportable segments, as listed below.
• Residential – delivers a range of master planned and mixed use residential communities in growth areas;
• Retirement Living – designs, develops and manages communities for retirees;
• Commercial Property – invests in, develops and manages retail, office and logistic & business park properties;
• Other – includes the results from the remaining assets in the UK, the former apartments and aged care
businesses, dividends/distributions from strategic investments and other items which are not able to be
classified within any of the other defined segments.
The Stockland Trust Group has one reportable segment in which it operates, being Commercial Property,
therefore no separate segment note has been prepared.
There is no customer who accounts for more than 10% of the gross revenues of Stockland or the Stockland
Trust Group.
(B2a) Underlying profit
The following table shows the contribution to underlying profit by each reportable segment:
Stockland
Year ended 30 June 2015
External segment revenue
Total external segment revenue
Segment EBIT
Interest expense in cost of sales
Share of interest expense in joint ventures
Segment operating profit1
Interest income
Interest expense
Unallocated corporate and other expenses
Underlying profit before tax benefit
Income tax benefit on underlying profit
Underlying profit after tax benefit
Residential
$M
1,239
1,239
290
(124)
–
166
1 Included within segment operating profits are the following:
• Straight line rent adjustments
–
• Amortisation of lease incentives
• Share of profits of equity-accounted
investments (excluding fair value
gains/(losses))
Total share of profits of equity-accounted
investments (including statutory
adjustments)
–
2
2
Retirement
Living
$M
732
73
54
(6)
–
48
–
–
–
–
Commercial
Property
$M
Other
$M
Consolidated
$M
715
715
517
–
(4)
513
8
(61)
42
86
60
60
4
(2)
–
2
–
–
–
–
2,087
2,087
865
(132)
(4)
729
8
(73)
(60)
604
4
608
8
(61)
44
88
Stockland Financial Report 2015 — 67
Consolidated
Notes
Year ended 30 June 2015
(B2A) UNDERLYING PROFIT (CONTINUED)
Residential
$M
1,040
1,040
244
(149)
–
95
Year ended 30 June 2014
External segment revenue
Total external segment revenue
Segment EBIT
Interest expense in cost of sales
Share of interest expense in joint ventures
Segment operating profit1
Interest income
Interest expense
Unallocated corporate other expenses
Underlying profit before tax benefit
Income tax benefit on underlying profit
Underlying profit after tax benefit
1 Included within segment operating profits are the following:
• Straight line rent adjustments
• Amortisation of lease incentives
• Share of profits of equity-accounted
investments (excluding fair value
gains/(losses))
Total share of profits of equity-accounted
investments (including statutory
adjustments)
–
–
1
1
Retirement
Living
$M
592
59
45
(5)
–
40
–
–
–
–
Commercial
Property
$M
Other
$M
Consolidated
$M
696
696
497
–
(5)
492
7
(52)
36
61
129
129
34
(7)
–
27
–
–
–
–
1,924
1,924
820
(161)
(5)
654
5
(79)
(52)
528
27
555
7
(52)
37
62
2 $27 million (2014: $11 million) of unrealised DMF revenue is excluded from segment revenues. Refer to the reconciliation of underlying profit to
statutory profit below.
(B2b) Reconciliation of underlying profit to statutory profit
Underlying profit is determined following the principles of Australian Institute of Company Directors (‘AICD’) and the
Financial Services Institute of Australasia (‘Finsia’) for reporting underlying profit having regard to the guidance from
ASIC’s RG 230 Disclosing Non-IFRS Financial Information. These principles include providing a clear reconciliation
between statutory profit and underlying profit in the Directors’ Report and financial statements, including both
positive and negative adjustments and taking into consideration property industry practices. The Group has reported
consistently on this basis for more than seven years to help investors understand the performance of the business.
Underlying profit is a non-IFRS measure that is designed to present, in the opinion of the CODM, the results from
ongoing operating activities of Stockland in a way that appropriately reflects the Group’s underlying performance.
Underlying profit is the basis on which distributions and dividends are determined and reflects the way the business
is managed and how the CODM assess the performance of the Group. It excludes costs of a capital nature and
profit or loss made from realised transactions occurring infrequently and those that are outside the course of
Stockland’s core ongoing business activities.
Underlying profit excludes items such as unrealised fair value gains/losses (such as revaluing derivatives, financial
instruments and investment properties) and unrealised provision gains/losses. These items are required to be
included in statutory profit in accordance with Accounting Standards.
Stockland Financial Report 2015 — 68
Consolidated
Notes
Year ended 30 June 2015
(B2B) RECONCILIATION OF UNDERLYING PROFIT TO STATUTORY PROFIT (CONTINUED)
Stockland
Year ended 30 June
2015
2014
Note Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Revenue
A
2,087
27
2,114
1,924
11
1,935
Cost of property developments sold:
• Land and development
• Capitalised interest
• Utilisation of provision for write-
down of inventories
Investment property expenses
Share of profits of equity-accounted
investments
B
Management, administration,
marketing and selling expenses
Net change in fair value of
investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of
Retirement Living resident
obligations
Impairment of intangibles
Net gain on sale of other financial
assets
Net loss on sale of other non-
current assets
Finance income
Finance expense
Profit before income tax benefit
Income tax benefit/(expense)
Profit for the year attributable
to securityholders
B
B
B
C
D
E
F
(983)
(126)
113
(226)
44
(258)
–
18
–
–
–
–
8
(73)
604
4
608
–
–
–
44
–
253
50
(70)
(43)
73
(2)
1
(40)
293
2
295
(983)
(126)
113
(226)
88
(926)
(156)
180
(224)
36
(258)
(248)
253
68
(70)
(43)
73
(2)
9
(113)
897
6
903
–
16
–
–
–
–
5
(79)
528
27
555
–
–
–
–
26
–
93
(94)
33
(23)
35
(6)
–
(69)
6
(34)
(28)
(926)
(156)
180
(224)
62
(248)
93
(78)
33
(23)
35
(6)
5
(148)
534
(7)
527
Stockland Financial Report 2015 — 69
Consolidated
Notes
Year ended 30 June 2015
(B2B) RECONCILIATION OF UNDERLYING PROFIT TO STATUTORY PROFIT (CONTINUED)
Stockland Trust Group
Year ended 30 June
2015
2014
Note Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Revenue
Investment property expenses
Share of profits of equity-
accounted investments
Management, administration,
marketing and selling expenses
Net change in fair value of
Commercial Property
Net gain on sale of other financial
assets
Net loss on sale of other non-
current assets
Finance income
Finance expense
Profit before income tax benefit
Income tax benefit/(expense)
Profit for the year attributable to
securityholders
B
B
E
F
707
(218)
41
(25)
–
–
–
301
(190)
616
–
616
–
–
45
–
247
–
(1)
–
(40)
251
–
251
707
(218)
86
(25)
247
–
(1)
301
(230)
867
–
867
694
(217)
36
(38)
–
–
–
331
(192)
614
–
614
–
–
20
–
82
1
(8)
–
(68)
27
–
27
694
(217)
56
(38)
82
1
(8)
331
(260)
641
–
641
Explanation of statutory adjustments
A DMF revenue is excluded from underlying profit until it is realised in cash. Refer to Note (B2d).
B Underlying profit excludes the net change in fair value of investment properties for properties held by Stockland both directly and indirectly through
equity-accounted investments. Similarly, the net change in fair value of Retirement Living Resident Obligations are excluded from underlying profit.
Refer to Section C for further information on fair value adjustments for the Residential (C1a), Commercial Properties (C1b) and Retirement Living
(C1c) businesses.
C Underlying profit excludes impairment of intangibles, which comprise write-downs to goodwill (2015: $18 million; 2014: $23 million) and software
($25 million; 2014: nil). Refer to Note (C3a).
D Net gain on sale of other financial assets for the year ended 30 June 2015 includes the realised profit on the sale of securities in Australand, net of
transaction costs. For the year ended 30 June 2014, the gain primarily comprised the realised profit on the sale of securities in AVEO Group
(formerly FKP Property Group).
E Net loss on sale of other non-current assets predominantly relate to the loss on the sale of investment properties.
F Net change in fair value of financial instruments and foreign exchange movements, classified as finance expense, are excluded from underlying
profit. Refer to Note (D1).
(B2c) Balance Sheet by Operating Segment
Stockland
30 June 2015
Assets
Cash
Real estate related assets1
Intangibles
Other financial assets
Other assets
Total assets
Liabilities
Interest-bearing liabilities
Retirement Living resident
obligations
Other financial liabilities
Other liabilities
Total liabilities
Net assets/(liabilities)
Other items
Acquisition of investment properties
Residential
$M
Retirement
Living
$M
Commercial
Property
$M
Other
$M
Unallocated
$M
Consolidated
$M
–
2,552
–
–
120
2,672
–
–
–
569
569
2,103
–
3,335
76
–
18
3,429
–
2,211
–
18
2,229
1,200
–
8,902
–
–
67
8,969
–
–
–
121
121
8,848
–
81
72
–
7
–
–
–
7
–
–
–
15
15
(8)
–
170
40
22
368
52
652
3,283
–
317
408
4,008
(3,356)
170
14,836
98
368
257
15,729
3,283
2,211
317
1,131
6,942
8,787
–
153
Stockland Financial Report 2015 — 70
Consolidated
Notes
Year ended 30 June 2015
(B2C) BALANCE SHEET BY OPERATING SEGMENTS (CONTINUED)
30 June 2014
Assets
Cash
Real estate related assets1
Intangibles
Other financial assets
Other assets
Total assets
Liabilities
Interest-bearing liabilities
Retirement Living resident
obligations
Other financial liabilities
Other liabilities
Total liabilities
Net assets/(liabilities)
Other items
Acquisition of investment properties
Residential
$M
Retirement
Living
$M
Commercial
Property
$M
Other
$M
Unallocated
$M
Consolidated
$M
–
2,325
–
–
135
2,460
–
–
–
528
528
1,932
–
2,860
94
–
2
–
8,321
–
–
71
–
127
–
–
2
2,956
8,392
129
–
1,865
–
17
1,882
1,074
–
–
–
296
296
8,096
–
–
224
–
–
–
63
63
66
–
231
42
31
634
25
963
3,118
–
534
181
3,833
(2,870)
–
231
13,675
125
634
235
14,900
3,118
1,865
534
1,085
6,602
8,298
224
1 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
(B2d) Retirement Living segment result
KEEPING IT SIMPLE …
As accounting for Retirement Living assets is not straight forward we have included a section specifically
in relation to it.
Retirement Living residents generally lend Stockland an amount equivalent to the value of the unit in
exchange for a lease to live in the unit and access to community facilities. This loan is recorded as a
resident obligation liability.
During the resident’s tenure, Stockland earns Deferred Management Fees (‘DMF’) which are calculated
based on the individual resident contract (‘DMF contract’). There are various contractual arrangements,
however a standard contract will typically provide for DMF to be earned at a rate of 8% in the first year and
3% in subsequent years, capped at 35%, with Stockland and the resident sharing in any net capital gain
when the unit is re-leased to the next resident. The DMF on an individual unit covers, to a significant extent,
the resident’s share of up-front capital costs of building the common infrastructure of the village, which
includes amenities such as a pool, bowling green and community hall, and allow the resident to pay for
these at the end of their tenancy, instead of the start. The DMF revenue is included in the Retirement Living
segment results when Stockland receives the accumulated DMF in cash when a resident leaves and a new
resident enters the unit.
The Retirement Living segment result also includes the development margin realised on settlement of
newly developed units (‘settled development margin’). This settled development margin represents the unit
price realised on first lease less the cost of development. Refer to Note (C1c) for further information on the
fair value measurement and valuation technique used for Retirement Living Investment Properties and
Resident Obligations.
Stockland Financial Report 2015 — 71
Consolidated
Notes
Year ended 30 June 2015
(B2D) RETIREMENT LIVING SEGMENT RESULT (CONTINUED)
Reconciliation of Retirement Living statutory profit to segment results
Year ended 30 June
Note Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
2015
2014
Total realised revenue
DMF base fees earned,
unrealised
DMF Revenue
Net change in fair value of
investment properties:
• settled development margin
A
• operating villages and villages
B
under development
Total net change in fair value of
investment properties
B
C
Net change in fair value of
Retirement Living resident
obligations
Impairment of intangibles
Management, administration,
marketing and selling expenses
Other income/(expenses)
Retirement Living profit/(loss)
67
–
67
18
–
18
–
–
(33)
(4)
48
–
27
27
–
50
50
67
27
94
18
50
68
(70)
(70)
(18)
–
–
(11)
(18)
(33)
(4)
37
59
–
59
16
–
16
–
–
(29)
(6)
40
–
11
11
–
(94)
(94)
33
(23)
–
–
(73)
59
11
70
16
(94)
(78)
33
(23)
(29)
(6)
(33)
Explanation of statutory adjustments
A DMF base fees earned comprise DMF which is calculated on the entry price of a unit. For statutory profit these fees are accrued progressively as
Stockland becomes entitled to the fee but is not recognised in underlying profit until the DMF accrued is realised in cash.
The prior year was restated by $4 million to correct the presentation of accrued DMF on entry price contracts not earned in the prior year.
B Underlying profit excludes the net change in fair value for both investment properties and Retirement Living Resident Obligations. Refer
to Note (C1c).
C Underlying profit excludes the write-down of goodwill related to the Retirement Living business (2015: $18 million; 2014: $23 million). Refer to
Note (C3a).
(B3) Taxation
KEEPING IT SIMPLE…
This note sets out the Group tax accounting policies and provides an analysis of the Group’s income tax
expense/benefit and deferred tax balances, including a reconciliation of tax expense to accounting profit.
Income tax is accounted for using the balance sheet method. Accounting income is not always the same
as taxable income, creating timing differences. These differences usually reverse over time. Until they
reverse a deferred asset or liability must be recognised on the balance sheet. This is known as the balance
sheet method.
Stockland
Accounting for income tax
Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. Income tax expense is calculated at the applicable corporate tax rate of
30%, and is comprised of current and deferred tax expense.
Current tax expense represents the expense relating to the expected taxable income at the applicable tax rate for
the financial year. Deferred tax expense represents the tax expense in respect of the future tax consequences of
recovering or settling the carrying amount of an asset or liability.
Stockland Financial Report 2015 — 72
Consolidated
Notes
Year ended 30 June 2015
(B3) TAXATION (CONTINUED)
Tax consolidation
The Company and its wholly owned Australian resident subsidiaries are part of a tax consolidated group (‘TCG’). As
a consequence, all members of the TCG are taxed as a single entity. The head entity in the TCG is the Company.
The Company, in conjunction with other members of the TCG, has entered into a tax funding arrangement. The
arrangement requires that the Company assumes the current tax liabilities and deferred tax assets arising from
unused tax losses, with payments to or from subsidiaries settled via intercompany loan. Any subsequent period
adjustments are recognised by the Company only and do not result in further amounts being payable or receivable
under the tax funding arrangement. The tax liabilities of the entities included in the TCG will be governed by the tax
sharing agreement should the Company default on its tax obligations.
Stockland Trust Group
Under current Australian income tax legislation, the Trust and its sub-trusts are not liable for income tax on their
taxable income (including any assessable component of capital gains) provided that the unitholders are presently
entitled to the income of the Trust.
(B3a) Income tax benefit/(expense)
Year ended 30 June
Current tax benefit/(expense)
Current year
Adjustments for prior years
Deferred tax benefit/(expense)
Origination and reversal of temporary differences
Derecognition of tax losses and temporary differences
Total income tax benefit/(expense)
2015
$M
2014
$M
35
(1)
34
(28)
6
–
6
100
-
100
(74)
26
(33)
(7)
Numerical reconciliation between income tax benefit and pre-tax net profit
Year ended 30 June
Profit before income tax benefit
Less: Profit from Trust
Less: Intergroup eliminations
Profit/(Loss) before income tax
Prima facie income tax benefit/(expense) calculated at 30%
Increase/(decrease) in income tax expense due to:
Other assessable income
Other non-assessable income
Other non-deductible expenses
Tax effect of FX loss transferred from Foreign Currency Translation Reserve
Underprovided in prior years
Non-recognition of Australian tax losses
Temporary differences recognised on future RL gain on turnover deductions1
Income tax benefit/(expense)
Effective tax rate
Stockland
2015
2014
Statutory
profit
$M
Underlying
profit
$M
Statutory
profit
$M
Underlying
profit
$M
897
(867)
7
37
(11)
(7)
2
(5)
(3)
(1)
–
31
6
604
(616)
–
(12)
4
–
2
–
(1)
(1)
–
–
4
30%
534
(641)
(13)
(120)
36
–
1
(7)
(4)
–
(33)
–
(7)
528
(614)
–
(86)
26
–
1
–
–
–
–
–
27
31%
1 Tax benefit relates to the temporary difference on future deductions of Retirement Living Gain on Turnover (‘GOT’) liabilities assumed on prior
period RL village acquisitions which, following an amended ATO tax ruling, are now treated as tax deductible.
Stockland Financial Report 2015 — 73
Consolidated
Notes
Year ended 30 June 2015
(B3A) INCOME TAX EXPENSE/(BENEFIT) (CONTINUED)
Tax benefit/(expense) relating to items of other comprehensive income (‘OCI’)
Year ended 30 June
Fair value reserve
Tax benefit/(expense) relating to items of other comprehensive income
Stockland
2015
$M
16
16
2014
$M
(22)
(22)
(B3b) Deferred tax
Stockland
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against
which the temporary differences can be utilised. Deferred tax assets are reviewed at each balance date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is based upon the expected manner of realisation or settlement of the carrying amount of assets and
liabilities using the applicable tax rates.
Deferred tax arises due to temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following
temporary differences:
initial recognition of goodwill;
(i)
(ii)
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
(iii) differences relating to investments in subsidiaries to the extent that they are unlikely to reverse in the
foreseeable future.
Deferred tax assets and liabilities are attributable to the following:
As at 30 June
Inventories
Investment properties
Other financial assets
Property, plant and equipment
Trade and other payables
Retirement Living resident obligations
Provisions
Reserves
Tax losses carried forward
Tax assets/(liabilities)
Less: Tax losses not recognised
Recognised tax assets/(liabilities)
Set-off of deferred tax liabilities
Net tax asset
Assets
Liabilities
Net
2015
$M
118
12
–
9
17
33
5
7
404
605
(139)
466
(407)
59
2014
$M
137
15
–
3
14
9
4
5
397
584
(173)
411
(378)
33
2015
$M
(152)
(249)
(6)
–
–
–
–
–
–
2014
$M
(156)
(200)
(22)
–
–
–
–
–
–
(407)
(378)
2015
$M
(34)
(237)
(6)
9
17
33
5
7
404
198
2014
$M
(19)
(185)
(22)
3
14
9
4
5
397
206
–
(407)
407
–
–
(139)
(173)
(378)
378
–
59
–
59
33
–
33
Stockland Financial Report 2015 — 74
Consolidated
Notes
Year ended 30 June 2015
(B3B) DEFERRED TAX (CONTINUED)
Movement in temporary differences during the financial year
Balance
1 July
2013
$M
Recognised
in profit
or loss
$M
Recognised
in OCI
$M
Balance
30 June
2014
$M
Recognised
in profit
or loss
$M
Recognised
in OCI
$M
Inventories
Investment properties
Other financial assets
Property, plant and
equipment
Trade and other payables
Interest-bearing loans and
borrowings
Retirement Living resident
obligations
Provisions
Reserves
Recognised tax losses
carried forward
4
(174)
32
–
11
(1)
13
4
4
166
59
(23)
(11)
(32)
3
3
1
(4)
–
1
58
(4)
–
–
(22)
–
–
–
–
–
–
–
(22)
(19)
(185)
(22)
3
14
–
9
4
5
224
33
(15)
(52)
–
6
3
–
24
1
2
41
10
–
–
16
–
–
–
–
–
–
–
16
Balance
30 June
2015
$M
(34)
(237)
(6)
9
17
–
33
5
7
265
59
Recoverability of deferred tax assets (‘DTA’)
An assessment of the recoverability of the net DTA has been made to determine if the carrying value should be
reduced or more tax losses should be recognised with reference to the latest available profit forecasts, to determine
the availability of suitable taxable profits or taxable temporary differences. The assessment for the period
determined that the current DTA was considered to be recoverable with sufficient certainty and accordingly no
additional DTA write off required.
At each reporting period, the net DTA and unrecognised tax losses will be assessed for recoverability and
recognition, respectively. This may lead to the partial or full recognition of this unrecognised tax benefit in future
reporting periods.
The Group has $139 million (2014: $173 million) of unrecognised deferred tax assets. This balance consists of $133
million (2014: $128 million) Australian income tax losses, $6 million (2014: $15 million) Australian capital losses; nil
(2014: $10 million) UK capital losses and nil (2014: $20 million) UK trading losses. Following the liquidation of the
UK investment for tax purposes, the UK capital and trading tax losses are no longer available.
Stockland Trust Group
There are no deferred tax assets or liabilities in the Stockland Trust Group.
Stockland Financial Report 2015 — 75
Consolidated
Notes
Year ended 30 June 2015
(C) Operating assets and liabilities
IN THIS SECTION
This section shows the real estate assets used to generate Stockland’s and Stockland Trust Group’s trading
performance and the liabilities incurred as a result. Information on other assets and liabilities are in the
following sections:
• Section B – Deferred tax assets and liabilities
• Section D – Financing activities
• Section E – Equity-accounted investments
(C1) Real Estate assets and liabilities
(C1a) Inventories
Properties held for development and resale are stated at the lower of cost and net realisable value. Cost includes
the costs of acquisition, development and holding costs such as borrowing costs, rates and taxes. Holding costs
incurred after completion of development activities are expensed.
Cost of acquisition
The cost of acquisition comprises the purchase price of the land, including land under option, along with any direct
costs incurred as part of the acquisition including legal, valuation and stamp duty costs.
Land under options
Stockland has a number of arrangements with third parties primarily relating to the purchase of land on capital
efficient terms, through call or put and call option arrangements.
Where the arrangement uses call options only, the decision to proceed with a purchase is controlled by Stockland.
A future obligation under a call option is only triggered if Stockland exercises the option. No asset or liability for the
land under option is recognised on the balance sheet until the option has been exercised. The call option is not
disclosed as a capital commitment as there is no commitment to purchase until the option is exercised.
Where Stockland enters into put and call options it is with a fixed exercise price. Where such an arrangement exists,
the put option requires Stockland to purchase the land at the discretion of the seller, creating a present obligation
once the option is exercised by the holder. If Stockland also presently exhibits control over the future economic
benefits of the asset such as via a presently exercisable call option or physical control of the asset, the land is
recognised in inventory with a corresponding liability recognised in provisions for development costs at the exercise
price of the option.
For both put and call options, any costs incurred in relation to the options including option fees are included
in inventory.
Development and other costs
Cost includes variable and fixed costs directly related to specific contracts, costs related to general contract activity
which can be allocated to specific projects on a reasonable basis, and other costs specifically chargeable under the
contract including under rectification provisions.
Interest capitalised
Financing costs on qualifying assets are also included in the cost of inventory. Finance costs were capitalised at
interest rates ranging from 6.1% to 6.7% during the financial year (2014: 6.1% to 7.1%). Capitalised finance costs
are further explained in Note (D1).
Impairment provision
The net realisable value (‘NRV’) of inventories is the estimated selling price in the ordinary course of business less
estimated costs of completion and costs to sell. NRV is based on the most reliable evidence available at the time of
the amount the inventories are expected to realise (using estimates such as revenue escalations) and the estimate
of total costs (including costs to complete). These estimates take into consideration fluctuations of price or cost
directly relating to events occurring after the end of the period to the extent that such events confirm conditions
existing at the end of the period.
Each reporting period, key estimates are reviewed including the costs of completion, dates of completion and
revenue escalations. As a result of this review, no net impairment provisions have been recognised in the profit or
loss for the year ended 30 June 2015 (2014: Nil).
Stockland Financial Report 2015 — 76
Consolidated
Notes
Year ended 30 June 2015
(C1A) INVENTORIES (CONTINUED)
Development provisions
The provision for development costs relates to obligated future costs including land acquired on capital efficient
deferred terms. The development provision is recorded as a separate liability in the balance sheet, however, a
corresponding asset will be recognised in inventory as either a cost of acquisition or development and other costs.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the liability. This
includes present obligations that are recognised in relation to put options.
The composition of inventory is presented in the table below:
As at 30 June
Finished development stock held for sale1
• cost of acquisition
• development and other costs
• interest capitalised
• impairment provision
Total finished stock held for sale
Development work in progress
Residential communities under development
• cost of acquisition
• development and other costs
• interest capitalised
• impairment provision
Total residential communities under development
Apartments
• cost of acquisition
• development and other costs
• interest capitalised
• impairment provision
Total apartments
Logistics & business parks projects
• cost of acquisition
• development and other costs
• interest capitalised
• impairment provision
Total logistics & business parks projects
Total inventory
Current
$M
2015
Non-
current
$M
Total
$M
Current
$M
–
–
–
–
–
59
149
29
(1)
236
1,389
1,571
449
376
(266)
1,948
565
426
(310)
2,252
–
–
–
–
–
30
17
5
(9)
43
15
18
5
(31)
7
39
29
12
(35)
45
73
165
43
(36)
245
245
195
102
(218)
324
14
18
5
(36)
1
–
–
–
–
–
59
149
29
(1)
236
182
116
50
(44)
304
15
18
5
(31)
7
9
12
7
(26)
2
549
2014
Non-
current
$M
–
–
–
–
–
Total
$M
73
165
43
(36)
245
1,223
1,468
288
325
(136)
1,700
483
427
(354)
2,024
–
–
–
–
–
29
16
7
(6)
46
14
18
5
(36)
1
29
16
7
(6)
46
1,991
2,540
570
1,746
2,316
1 Included within current finished development stock held for sale are logistics and business parks of $11 million (2014: $17 million). There are no
apartments included in finished development stock held for sale (2014: $15 million).
Stockland Financial Report 2015 — 77
Consolidated
Notes
Year ended 30 June 2015
(C1A) INVENTORIES (CONTINUED)
The following impairment provisions are included in the inventory balance with movements for the year recognised
in the profit or loss:
Balance as at 1 July 2014
Transfers2
Amounts utilised
Balance as at 30 June 2015
Residential
communities
$M
Apartments
$M
Logistics &
business parks
$M
386
(29)
(46)
311
40
–
(9)
31
6
29
–
35
Total
$M
432
–
(55)1
377
1 The Consolidated Statements of Profit or Loss include an additional $58 million in provisions utilised relating to UK assets that were transferred to
Assets Held for Sale at 30 June 2014. Refer to Note (C3b).
2 In the current year, $30 million of project costs and $29 million of impairment provisions were transferred from residential communities under
development to logistics and business park projects, in line with the highest and best use of the asset.
Development cost provisions
The following development provisions are recorded as a separate liability on the balance sheet and are not netted in
the inventory balance:
As at 30 June
Current
Non-current
Total development cost provision
Movement in development cost provisions
Balance as at 1 July 2014
Additional provisions recognised
Amounts used during the financial year
Balance as at 30 June 2015
(C1b) Commercial properties
2015
$M
300
98
398
2014
$M
213
162
375
$M
375
284
(261)
398
Commercial properties comprise investment interests in land and buildings including integral plant and equipment
held for the purpose of producing rental income, capital appreciation, or both.
Commercial properties are initially recognised at cost including any acquisition costs and subsequently stated at fair
value at each balance date. Fair value is based on the latest independent valuation adjusting for capital expenditure
and capitalisation and amortisation of lease incentives since the date of the independent valuation report. Any gain
or loss arising from a change in fair value is recognised in the profit or loss in the period.
Commercial properties under development are classified as investment properties and stated at fair value at each
balance date. Fair value is assessed with reference to reliable estimates of future cash flows, status of the
development and the associated risk profile. Finance costs incurred on properties undergoing development or
redevelopment are included in the cost of the development.
As at 30 June 2015, fair value for commercial properties in development has been assessed by the Directors after
considering the latest valuations and subsequent capital works-in-progress. An independent valuation of the
property will be undertaken upon completion of the works.
A property interest under an operating lease is classified and accounted for as an investment property on a
property-by-property basis when Stockland holds it to earn rentals or for capital appreciation or both. Any such
property interest under an operating lease classified as an investment property is carried at fair value.
Subsequent costs
Stockland recognises in the carrying amount of an investment property the cost of replacing part of that investment
property if it is probable that the future economic benefits embodied within the item will flow to Stockland and the
cost can be measured reliably. All other costs are recognised in the profit or loss as an expense as incurred.
Stockland Financial Report 2015 — 78
Consolidated
Notes
Year ended 30 June 2015
(C1B) COMMERCIAL PROPERTIES (CONTINUED)
Lease incentives
Lease incentives provided by Stockland to lessees, and rental guarantees which may be received by Stockland
from third parties (arising from the acquisition of investment properties) are included in the measurement of fair
value of investment property and are treated as separate assets. Such assets are amortised over the respective
periods to which the lease incentives and rental guarantees apply using a straight-line basis.
If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment and its fair
value at the date of reclassification becomes its cost for accounting purposes.
Disposal of revalued assets
The gain or loss on disposal of revalued assets is calculated as the difference between the carrying amount of
the asset at the time of disposal and the net proceeds on disposal and is recognised in the profit or loss in the
year of disposal.
During the year, net losses of $2 million were recognised on disposal of 50% of Stockland Townsville.
Commercial properties including Stockland’s share of property held by equity-accounted investments
Retail
Office
Logistics & Business Parks
Capital works in progress and sundry properties
Book value of commercial properties
Less amounts classified as:
• Property, plant and equipment
• Other assets (including lease incentives and lease fees)
• Other assets (including lease incentives and lease fees)
attributable to equity-accounted investments
• Other receivables (straight-lining of operating lease rental income)
• Other receivables (straight-lining of operating lease rental income)
attributable to equity-accounted investments
Total investment properties (including share of investment
property held by equity-accounted investments)
Less: Stockland’s share of investment properties held by equity-
accounted investments
Total investment properties
Investment property reconciliation
Direct investments and controlled entities
Carrying amount at the beginning of the financial year
Acquisitions
Disposals
Expenditure capitalised
Transfers from property, plant and equipment2
Net gain from fair value adjustment of investment properties
Stockland
Stockland Trust Group
2015
$M
6,022
1,102
1,699
195
9,0181
(44)
(185)
(26)
(54)
(18)
2014
$M
5,483
1,043
1,572
341
8,439
(45)
(158)
(22)
(49)
(18)
2015
$M
5,992
1,108
1,699
87
8,886
–
(191)
(25)
(58)
(18)
2014
$M
5,457
1,045
1,570
233
8,305
–
(165)
(21)
(52)
(18)
8,691
8,147
8,594
8,049
(774)1
(658)
(754)
(637)
7,917
7,489
7,840
7,412
7,489
72
(233)
336
–
253
6,991
224
(177)
306
52
93
7,412
72
(233)
342
–
247
6,988
216
(177)
303
–
82
Balance at the end of the financial year
7,917
7,489
7,840
7,412
1 Includes joint ventures holding the Waterfront Place and Eagle Street Pier assets which have been reclassified as an Asset Held for Sale at
30 June 2015. Refer to (C3b) and (E1a).
2 In the year ended 30 June 2014, 50% of Piccadilly Complex was disposed, resulting in a transfer of 50% for the owner-occupied property, plant
& equipment in investment properties.
Stockland Financial Report 2015 — 79
Consolidated
Notes
Year ended 30 June 2015
(C1B) COMMERCIAL PROPERTIES (CONTINUED)
Description
Retail
Directly owned
Stockland Shellharbour, Shellharbour NSW
Stockland Wetherill Park, Western Sydney NSW
Stockland Merrylands, Merrylands NSW
Stockland Rockhampton, Rockhampton QLD
Stockland Green Hills, East Maitland NSW
Stockland Glendale, Newcastle NSW
Stockland Cairns, Cairns QLD
Stockland Townsville, Townsville QLD
(2015: 50%; 2014: 100%)1,2
Stockland Hervey Bay, Hervey Bay QLD
Stockland Point Cook, Point Cook VIC
Stockland Burleigh Heads, Burleigh Heads QLD
Stockland Baldivis, Baldivis WA
Stockland Forster, Forster NSW
Stockland The Pines, Doncaster East VIC
Stockland Gladstone, Gladstone QLD
Stockland Jesmond, Newcastle NSW
Stockland Wendouree, Wendouree VIC
Stockland Baulkham Hills, Baulkham Hills NSW
Stockland Balgowlah, Balgowlah NSW
Stockland Caloundra, Caloundra QLD
Stockland Nowra, Nowra NSW
Stockland Bull Creek, Bull Creek WA
Stockland Traralgon, Traralgon VIC
Stockland Cleveland, Cleveland QLD
Stockland Bathurst, Bathurst NSW
Stockland Corrimal, Corrimal NSW
Stockland Wallsend, Wallsend NSW
Stockland Tooronga, Tooronga VIC
Shellharbour Retail Park, Shellharbour NSW
Stockland Cammeray, Cammeray NSW
Stockland Highlands, Craigieburn VIC4
North Shore Townsville, Townsville QLD
Stockland Jimboomba Village Shopping Centre,
Jimboomba QLD (50%)1
Woolworths Toowong, Toowong QLD5
Stockland Vincentia Shopping Centre, Vincentia NSW
Stockland Merrylands Court, Merrylands NSW
Stockland Townsville Kingsvale Sunvale, QLD
(2015: 50%; 2014: 100%)1,3
Owned through equity-accounted investments
Stockland Bundaberg, QLD (50%)
Stockland Riverton, Riverton WA (50%)
Total Retail7
Independent
valuation
date
Independent
valuation
$M
Independent
Cap rate6
%
Book value
30 June
2015
$M
Book value
30 June
2014
$M
Dec 2013
Dec 2011
Dec 2014
Jun 2015
Jun 2014
Jun 2014
Jun 2015
Jun 2015
Jun 2015
Dec 2013
Dec 2014
Jun 2011
Jun 2015
Dec 2014
Dec 2014
Jun 2015
Dec 2014
Jun 2015
Dec 2014
Dec 2014
Jun 2015
Dec 2014
Dec 2014
Dec 2014
Dec 2014
Dec 2014
Jun 2015
Dec 2014
Dec 2014
Dec 2014
Jun 2015
Jun 2015
Jun 2015
Jun 2013
Dec 2014
Dec 2014
Dec 2012
Jun 2015
Dec 2014
680
358
506
404
308
270
230
227
195
184
180
45
158
156
148
144
136
130
126
117
110
100
98
94
89
70
67
53
52
37
31
22
14
14
13
10
5
67
64
6.00
6.75
6.00
6.00
6.50
6.50
6.25
6.00-7.00
6.25
7.25
7.00-8.25
7.50
6.75
7.00
7.00
7.00
7.00
6.75
6.75
7.00
6.75
6.75
7.00
7.00
7.25
7.25
7.25
6.75
7.75
6.75
7.00
7.00
8.00
n/a
8.00
7.50
n/a
6.75
6.75
688
522
506
404
308
274
230
227
195
185
181
172
158
157
149
144
138
130
126
117
110
101
99
94
92
70
67
53
52
37
31
22
14
14
13
10
2
67
64
683
372
475
367
308
270
221
432
72
185
170
46
149
140
137
127
129
117
116
111
90
93
87
89
81
63
58
51
50
33
26
21
16
14
12
9
6
–
61
1 Stockland’s share of this property is held through a direct interest in the asset.
2 Independent valuation based on 50% ownership.
3 Independent valuation based on 100% ownership.
4 This property is not held by Stockland Trust.
5 This property is valued as land.
6 A range of cap rates are disclosed for a complex comprising of a number of properties.
7 Totals may not add due to rounding.
6,022
5,483
Stockland Financial Report 2015 — 80
Consolidated
Notes
Year ended 30 June 2015
(C1B) COMMERCIAL PROPERTIES (CONTINUED)
Description
Office
Directly owned
Stockland Piccadilly, 133-145 Castlereagh Street,
Sydney NSW (50%)1, 2, 3
Durack Centre, 263 Adelaide Terrace, Perth WA3
601 Pacific Highway, St Leonards NSW
77 Pacific Highway, North Sydney NSW
40 Cameron Avenue, Belconnen ACT3
Garden Square, Mt Gravatt QLD
110 Walker Street, North Sydney NSW
80-88 Jephson Street, Toowong QLD
23 High St, Toowong QLD
27-29 High Street, Toowong QLD
Owned through equity-accounted investments
Waterfront Place, Eagle Street, Brisbane QLD (50%)5
135 King Street, Sydney NSW (50%)2
Total Office7
Logistics & Business Parks
Directly owned
Yennora Distribution Centre, Yennora NSW
Triniti Business Campus, North Ryde NSW
Port Adelaide Distribution Centre, Port Adelaide SA
Hendra Distribution Centre, Brisbane QLD
Brooklyn Estate, Brooklyn VIC
60-66 Waterloo Road, Macquarie Park NSW
Forrester Distribution Centre, St Marys NSW
Ingleburn Distribution Centre, Ingleburn, NSW6
Balcatta Distribution Centre, Balcatta WA
9-11a Ferndell Street, Granville NSW
Macquarie Technology Centre, Macquarie Park NSW
16 Giffnock Avenue, Macquarie Park NSW
20-50 Fillo Drive & 10 Stubb Street, Somerton VIC
1090-1124 Centre Road, Oakleigh VIC6
Cherry Lane, Laverton North VIC
Altona Distribution Centre, Altona VIC
Baker Street, Botany NSW6
2 Davis Road, Wetherill Park NSW
Coopers Paddock, Warwick Farm NSW6
56-60 Toll Drive, Altona North VIC
11-25 Toll Drive, Altona North VIC
32-54 Toll Drive, Altona VIC
76-82 Fillo Drive, Somerton VIC
Export Park, 9-13 Viola Place, Brisbane Airport QLD3
M1 Yatala Enterprise Park, Yatala QLD
40 Scanlon Drive, Epping VIC
Owned through equity-accounted investments
Optus Centre, Macquarie Park NSW (51%)
Total Logistics & Business Parks7
Independent
valuation
date
Independent
valuation
$M
Independent
Cap rate4
%
Book value
30 June 2015
$M
Book value
30 June 2014
$M
Dec 2014
206
6.63-7.75
Jun 2014
Jun 2015
Jun 2015
Jun 2014
Jun 2014
Jun 2015
Jun 2013
Jun 2013
Jun 2013
Jun 2015
Dec 2014
Dec 2013
Jun 2014
Jun 2015
Jun 2015
Dec 2012
Jun 2015
Dec 2014
–
Jun 2015
Dec 2014
Jun 2015
Jun 2014
Jun 2014
Dec 2012
–
Dec 2014
–
Dec 2014
–
Jun 2013
Dec 2012
Dec 2012
Jun 2014
Jun 2013
Jun 2013
Dec 2014
Dec 2014
157
87
59
43
37
28
19
4
3
296
162
351
168
95
85
80
80
77
–
57
46
43
37
32
32
–
29
–
19
–
15
16
15
15
12
9
9
203
8.25-8.75
7.75
7.75
10.50
9.25
7.75
9.00
8.25
8.50
6.75
5.75-6.50
7.75
7.75
9.25
8.75
9.25
7.25-7.50
7.75
–
7.25
8.50-9.75
7.25-8.50
8.75
8.75
9.25
–
8.75
–
8.00
–
8.25
8.25
8.25
9.00
9.75
n/a
8.00
7.25
206
158
87
59
42
38
28
19
4
4
296
161
1,102
369
170
95
85
83
80
78
77
57
47
43
38
32
32
31
29
22
19
19
17
16
15
14
12
10
8
195
157
80
56
43
36
27
19
4
3
287
135
1,043
360
168
85
84
83
73
78
77
57
45
34
37
32
32
–
28
–
17
–
15
16
15
15
12
10
8
204
1,699
192
1,572
1 Stockland’s share of this property is held through a direct interest in the asset.
2 Book value includes the retail component of the property.
3 This property is a leasehold property.
4 A range of cap rates are disclosed for a complex comprising of a number of properties.
5 At 30 June 2015, the trust holding Waterfront Place, has been reclassified as an Asset Held for sale. Refer to (C3b) and (E1a).
6 Ingleburn Distribution Centre, Ingleburn NSW, Cherry Lane, Laverton North VIC, Baker Street, Botany NSW and Coopers Paddock, Warwick Farm
NSW were acquired on 20 June 2014, 6 February 2015, 27 March 2015, and 7 April 2015, respectively. The values adopted above are a result of
a Directors’ valuation as at 30 June 2015.
7 Totals may not add due to rounding.
Stockland Financial Report 2015 — 81
Consolidated
Notes
Year ended 30 June 2015
(C1B) COMMERCIAL PROPERTIES (CONTINUED)
Fair value measurement, valuation techniques and inputs
The adopted valuations (both internal and external) for investment properties in the Retail, Office and Logistics &
Business Parks portfolios are a combination of the valuations determined using the discounted cash flow (‘DCF’)
method and the income capitalisation method.
The adopted value of properties in the properties under development portfolio is based on an internal tolerance
check performed by the Directors’ at each reporting date. The tolerance check takes into account the expected cost
of completion, the stage of completion, the risk associated with the project, expected underlying income and
applying the income capitalisation method.
The following table shows the valuation techniques used in measuring the fair value of commercial properties, as
well as significant unobservable inputs used.
Class of
property
Retail
Fair value
hierarchy
Level 3
Fair value
30 June 2015
$M
Valuation
technique
6,022 DCF and
income
capitalisation
method
Office
Level 3
1,102 DCF and
income
capitalisation
method
Level 3
1,699 DCF and
income
capitalisation
method
Logistics &
Business
Parks
Properties
under
development
Total
Inputs used to measure fair value
Net market rent (per sqm p.a.)
10 year average specialty market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Range of
unobservable
inputs
30 June 2015
$119 - $794
3.0% - 4.3%
6.0% - 9.5%
6.25% - 9.75%
8.25% - 9.5%
$326 - $695
2.9% - 3.9%
6.5% - 10.5%
6.75% - 10.5%
8.0% - 10.5%
$56 - $434
2.6% - 3.6%
7.0% - 9.75%
7.25% - 11.0%
8.5% - 10.0%
$309 - $1,190
5.5% - 7.0%
Level 3
195
Income
capitalisation
method
Net market rent (per sqm p.a.)
Adopted capitalisation rate
9,018
Both the DCF and income capitalisation methods use inputs which are unobservable frequently, in determining fair
value, as per the table above.
The table below explains the key inputs used to measure fair value for commercial properties:
DCF method
Income capitalisation
method
Net market rent
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 or terminal value. The DCF
method involves the projection of a series of cash flows on a real property interest. 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 in perpetuity to derive a capital value, with allowances for capital expenditure
reversions.
A net market rent is the estimated amount for which a property or space within a property should
lease 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. In a net rent, the owner recovers outgoings from the tenant on a
pro-rata basis (where applicable).
10 year average specialty
market rental growth
An average of a 10 year period of forecast annual percentage growth rates in Retail specialty
tenancy rents. Specialty tenants are those tenancies with a gross lettable area of less than 400
square metres (excludes ATMs and kiosks).
Stockland Financial Report 2015 — 82
Consolidated
Notes
Year ended 30 June 2015
(C1B) COMMERCIAL PROPERTIES (CONTINUED)
10 year average market
rental growth
The expected annual rate of change in market rent over a 10 year forecast period in alignment with
expected market movements.
Adopted capitalisation rate
The rate at which net market income is capitalised to determine the value of a property. The rate is
determined with regards to market evidence and the prior external valuation.
Adopted terminal yield
Adopted discount rate
The capitalisation rate used to convert income into an indication of the anticipated value of the
property at the end of the holding period when carrying out a DCF calculation. The rate is
determined with regards to market evidence and the prior external valuation.
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.
Valuation process
The Commercial Property valuation team are responsible for managing the bi-annual valuation process across
Stockland’s balance sheet investment portfolio. The aim of the valuation process is to ensure that assets are held at
fair value in Stockland’s accounts and that the Group is compliant with applicable regulations (for example the
Corporations Act and ASIC regulations) and the STML RE Constitution and Compliance Plan.
Stockland’s external valuations are performed by independent professionally qualified valuers who hold a
recognised relevant professional qualification and have specialised expertise in the investment properties valued.
Internal tolerance checks have been performed by Stockland’s internal valuers who hold recognised relevant
professional qualifications.
Internal tolerance check
An internal tolerance check is performed every six months with the exception of those properties being
independently valued during the current reporting period. Stockland’s internal valuers perform tolerance checks by
utilising the information from a combination of asset plans and forecasting tools prepared by the asset management
teams. For the Retail, Office and Logistics & Business Parks classes, appropriate capitalisation rates, terminal
yields and discount rates based on comparable market evidence and recent external valuation parameters are used
to produce a capitalisation and DCF valuation. The internal tolerance check is generally weighted more to the
capitalisation value (75% weighting) than the DCF valuation (25% weighting).
The current book value, which is the value per the asset’s most recent external valuation plus any capital
expenditure since the valuation date, is compared to the internal tolerance check.
•
If the internal tolerance check is within 5.0% of the current book value, then the current book value is retained,
and judgement is taken that this remains the fair value of the property.
If the internal tolerance check varies by more than 5.0% to the current book value (higher or lower), then an
external independent valuation will be undertaken and adopted after assessment by the Commercial Property
valuation team to provide an appropriate level of evidence to support fair value.
•
The internal tolerance checks are reviewed by Commercial Property senior management who recommend the
adopted valuation to the Board in accordance with Stockland’s internal valuation protocol above.
A development feasibility is prepared for each commercial property under development. The feasibility includes an
estimated valuation upon project completion based on the income capitalisation method. During the development
period, fair value is assessed by reference to the value of the property when complete, less deductions for costs
required to complete the project and appropriate adjustments for profit and risk. Through this process, we arrive at
fair value. The fair value is compared to the current book value.
•
If the internal tolerance check is within 5.0% of the current book value, then the current book value is retained,
and judgement is taken that this remains the fair value of the property under development.
If the internal tolerance check varies by more than 5.0% to the current book value (higher or lower), then the
Directors’ valuation will be adopted.
•
Stockland Financial Report 2015 — 83
Consolidated
Notes
Year ended 30 June 2015
(C1B) COMMERCIAL PROPERTIES (CONTINUED)
External Valuations
The STML RE Limited Compliance Plan requires that each asset in the portfolio must be valued by an independent
external valuer at least once every three years.
In practice, assets are independently valued more than once every three years primarily as a result of:
• A variation between book value and internal tolerance check. Refer to the internal tolerance check section
above.
• The asset is undergoing major development or significant capital expenditure on a property.
• A period where there is significant market movement.
• An opportunity to undertake a valuation in line with a joint owners’ valuation.
• Ensuring an appropriate cross-section of assets are externally assessed at each reporting period.
Sensitivity information
Significant input
Net market rent
10 year specialty market rental growth
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Impact on fair value
of an increase in input
Impact on fair value
of a decrease in input
Increase
Increase
Increase
Decrease
Decrease
Decrease
Decrease
Decrease
Decrease
Increase
Increase
Increase
Generally, a change in the assumption made for the adopted capitalisation rate is accompanied by a directionally
similar change in the adopted terminal yield. The adopted capitalisation rate forms part of the income capitalisation
approach and the adopted terminal yield forms part of the DCF approach.
When calculating the income capitalisation approach, the net market rent has a strong interrelationship with the
adopted capitalisation rate given the methodology involves assessing the total net market income receivable from
the property and capitalising this in perpetuity to derive a capital value. In theory, an increase in the net market rent
and an increase (softening) in the adopted capitalisation rate could potentially offset the impact to the fair value. The
same can be said for a decrease in the net market rent and a decrease (tightening) in the adopted capitalisation
rate. A directionally opposite change in the net market rent and the adopted capitalisation rate could potentially
magnify the impact to the fair value.
When assessing a DCF, the adopted discount rate and adopted terminal yield have a strong interrelationship in
deriving a fair value given the discount rate will determine the rate in which the terminal value is discounted to the
present value.
In theory, an increase (softening) in the adopted discount rate and a decrease (tightening) in the adopted terminal
yield could potentially offset the impact to the fair value. The same can be said for a decrease (tightening) in the
discount rate and an increase (softening) in the adopted terminal yield. A directionally similar change in the adopted
discount rate and the adopted terminal yield could potentially magnify the impact to the fair value.
Non-cancellable operating lease receivable from investment property tenants
Annual rent receivable by Stockland under current leases from tenants is from property held by the Commercial
Property business.
Non-cancellable operating lease receivable not recognised in the financial statements at balance date:
As at 30 June
Within one year
Later than one year but not later than five years
Later than five years
Total non-cancellable operating lease receivable
Stockland
Stockland Trust Group
2015
$M
566
1,483
948
2,997
2014
$M
556
1,450
889
2,895
2015
$M
564
1,476
935
2,975
2014
$M
532
1,400
877
2,809
Stockland Financial Report 2015 — 84
Consolidated
Notes
Year ended 30 June 2015
(C1c) Retirement Living
For information on results of the Retirement Living business refer to Note (B2d).
Investment properties
Retirement Living investment properties comprise retirement villages (both operating villages and villages under
development) held to earn revenue and capital appreciation over the long-term. Retirement villages comprise
independent living units (‘ILU’s’), serviced apartments, community facilities and integral plant and equipment.
Stockland
As at 30 June
Net investment in Retirement Living
Operating villages
Villages under development
Total Retirement Living investment properties
Existing resident obligations
Net carrying value of Retirement Living villages
2015
$M
3,111
224
3,335
(2,198)
1,137
2014
$M
2,639
213
2,852
(1,849)
1,003
Retirement Living net carrying value movement during the year
Balance at the beginning of the financial year
1,003
1,057
Acquisition
Disposal
Expenditure capitalised
Realised fair value movements
Cash received on first sales
Change in fair value of investment properties
Other movements
Balance at the end of the financial year
81
(20)
130
21
(115)
6
31
1,137
–
–
85
18
(103)
(50)
(4)
1,003
Acquisitions
On 30 June 2015, Stockland purchased eight established Retirement Living villages in South Australia for a total
cost of $81 million. The transaction included the recognition of operating villages ($245 million), development land
($11 million) and the assumption of resident obligations ($175 million).
Disposals
On 5 February 2015, Stockland disposed of two established Retirement Living villages in Victoria for total proceeds
of $20 million. The villages contained units on strata title and did not have an associated resident obligation.
Fair value measurement, valuation techniques and inputs
The fair value of Retirement Living investment properties (including villages under development) is the value of the
Retirement Living assets and the future cash flows associated with the contracts. Changes in fair value of
investment properties are recognised in profit or loss.
The fair value is determined by the Directors’ using a DCF methodology.
Both the investment properties and resident obligations are considered to be level 3 in the Fair Value Hierarchy
Refer to Note (D5).
Stockland Financial Report 2015 — 85
Consolidated
Notes
Year ended 30 June 2015
(C1C) RETIREMENT LIVING (CONTINUED)
The following inputs are used to measure the fair value of the investment properties:
Inputs
Discount rate
Range of unobservable inputs 30 June 2015
12.5% – 14.0% (Average: 13.0%)
Average 20 year growth rate
3.6%
Average length of stay of existing and future residents
10.3 years
Current market value of unit
Renovation/Reinstatement cost
Renovation recoupment
$0.1 million - $1.0 million
$5k - $80k
0% – 100%
The DCF methodology uses unobservable inputs as shown in the table above. These are further explained below:
Item
DCF method
Discount rate
20 year growth rate
Description
Under the DCF method, an asset or liability’s fair value is estimated using explicit
assumptions regarding the benefits and liabilities of ownership over the asset’s life
including an exit or terminal value. The DCF method involves the projection of a series
of cash flows the property asset will generate. 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.
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 external valuations performed.
This is the rate that it is expected the unit will increase in value over 20 years. Growth
rates from the external valuation reports are taken as a base to estimate the 20 year rate
on a semi-annual basis.
Average length of stay of existing and
future residents
Assumptions on future resident gender and entry age based upon analysis of historical
entrant profiles are used to estimate average length of stay.
Current market value
Market values are generally reviewed semi-annually by the sales and operational teams,
and approved by the National Sales Manager and CEO Retirement Living.
Renovation/Reinstatement cost
The cost that is required to maintain the ILUs and serviced apartments to the
appropriate condition.
Renovation recoupment
The percentage of renovation costs that will be recouped from the residents based on
contractual terms.
Valuation process
The Retirement Living finance team are responsible for managing the bi-annual valuation process across
Stockland’s Retirement Living portfolio. The aim of the valuation process is to ensure that assets are held at fair
value on Stockland’s balance sheet.
DMF
Internal valuations are completed every six months using valuation models with reference to external market data.
An independent professionally qualified valuer who holds a recognised relevant professional qualification and has
specialised expertise in the investment properties valued provides assurance on the key assumptions used. The
most recent independent assessment was obtained at 30 June 2015.
Villages under construction
Villages under construction are carried at fair value. There are two elements to the value of villages under
construction – the value of land and other development expenditure and the value of discounted future cash flows
from the DMF asset. The land and other development expenditure is made up of costs incurred to date plus a
development margin. Development margin is recognised on a percentage of completion basis and is based on an
internally certified level of completion of the stage. Development margin recognition is also described in Note (B2d).
The DMF asset is recognised on a percentage completion basis.
Units are transferred from villages under construction to established villages once they have been leased for the
first time. This transfer is at the cost of the unit plus development profit recognised during construction.
Stockland Financial Report 2015 — 86
Consolidated
Notes
Year ended 30 June 2015
(C1C) RETIREMENT LIVING (CONTINUED)
Sensitivity information
Significant input
Discount rate
20 year growth rate
Average length of stay of existing and future residents1
Current market value of unit
Renovation cost
Renovation recoupment
Impact on fair value
of an increase in input
Impact on fair value
of a decrease in input
Decrease
Increase
Decrease
Increase
Decrease
Increase
Increase
Decrease
Increase
Decrease
Increase
Decrease
1 This is dependent on the length of stay as the majority of contracts have maximum DMF periods.
When assessing a DCF, the adopted discount rate and adopted terminal yield have a strong interrelationship in
deriving a fair value given the discount rate will determine the rate in which the terminal value is discounted to the
present value.
In theory, an increase (softening) in the discount rate and a decrease (tightening) in the adopted terminal yield could
potentially offset the impact to the fair value. The same can be said for a decrease (tightening) in the discount rate
and an increase (softening) in the adopted terminal yield. A directionally similar change in the discount rate and the
adopted terminal yield could potentially magnify the impact to the fair value.
Resident obligations
Resident obligations represent the net amount owed by Stockland to current and former residents. Resident
obligations are non-interest bearing and recognised at fair value.
Current resident obligations
Based on actuarial turnover calculations, in the short term 8% of residents are estimated to leave each year and
therefore it is not expected that the full obligation to residents will fall due within one year. In the vast majority of
cases, the resident obligations are able to be repaid from receipts from incoming residents.
Accounting Standards require that resident obligations are classified as current because all residents have the right
to terminate their occupancy contract with immediate effect, and Stockland has no unconditional contractual right to
defer settlement for at least 12 months.
Non-current resident obligations
Certain legacy contracts are classified as non-current as these contracts give Stockland a right to defer settlement
for up to eight years.
30 June 2015
Existing resident obligations
Former resident obligations
Total resident obligations
30 June 2014
Existing resident obligations
Former resident obligations
Total resident obligations
Current
$M
Non-Current
$M
1,989
3
1,992
1,661
5
1,666
209
10
219
188
11
199
Total
$M
2,198
13
2,211
1,849
16
1,865
Fair value measurement, valuation techniques and inputs
The fair value of the resident obligations is the amount payable on demand to residents and comprises the initial
loan amount plus the resident’s share of any capital gains in accordance with their contracts less DMF earned to
date. Changes in fair value of resident obligations are recognised in profit or loss.
Inputs used in relation to the resident obligations are identical to those used for Investment Properties. Refer above
for a detailed description of the inputs used.
Stockland Financial Report 2015 — 87
Consolidated
Notes
Year ended 30 June 2015
(C1C) RETIREMENT LIVING (CONTINUED)
Valuation process
Resident obligations are calculated in the valuation model, as at the measurement date based on the initial loan
amount paid by the resident adjusted for DMF and their share of capital gain or loss arising on the unit.
It is not possible to have the resident obligations valued externally, therefore these are valued every six months by
the Directors as described above.
Sensitivity information
As the resident obligations are a financial liability, a quantitative sensitivity analysis as required by AASB 13 Fair
Value Measurement has been disclosed. Sensitivity of the resident obligations to changes in the weighted
assumptions are shown in the table below.
Increase/(Decrease) in resident obligations
Increase in input
Decrease in input
Significant input
Current market value
Change in
assumption
10%
2015
$M
124
2014
$M
114
2015
$M
(124)
2014
$M
(114)
Current market value is the only input that will significantly impact the fair value of the resident obligation since this
impacts the amount of any capital gain that will be shared between Stockland and the resident upon exit.
(C2) Financial assets and liabilities
KEEPING IT SIMPLE …
This section shows the financial assets and liabilities the Group generates through its trading activity.
Careful management of working capital ensures that the Group can meet its trading and financing
obligations within its ordinary operating cycle. Cash and cash equivalents are disclosed in Note D2.
(C2a) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest rate method, less an allowance for impairment. Collectability of trade
receivables is reviewed on an ongoing basis and at balance date, specific impairment losses are recorded
for any doubtful accounts.
As at 30 June
Current
Trade receivables
Provision for impairment
Net trade receivables
Other receivables
Total current trade and other receivables
Non-current
Straight-lining of rental income
Other receivables
Receivables due from related companies
Total non-current trade and other receivables
Stockland
Stockland Trust Group
2015
$M
2014
$M
2015
$M
2014
$M
40
(1)
39
64
103
54
38
–
92
39
(1)
38
81
119
49
28
–
77
10
–
10
23
33
57
–
8
(1)
7
27
34
52
–
3,378
3,435
3,657
3,709
Stockland Financial Report 2015 — 88
Consolidated
Notes
Year ended 30 June 2015
(C2b) Trade and other payables
Trade and other payables are initially recognised at fair value less transaction costs and subsequently carried at
amortised cost.
As at 30 June
Current
Trade payables and accruals
Land purchases
Distributions payable
Goods and services tax (‘GST’) payable/(receivable)
Total current trade and other payables
Non-current
Land purchases
Other payables
Total non-current trade and other payables
(C3) Other non-financial assets and liabilities
(C3a) Intangible assets
Stockland
Stockland Trust Group
Note
2015
$M
2014
$M
2015
$M
2014
$M
(D8)
243
37
283
32
595
33
–
33
224
27
280
23
554
49
4
53
98
–
283
(2)
379
–
–
–
94
–
280
(2)
372
–
–
–
Intangible assets are an identifiable non-monetary asset without physical substance. Stockland has two types of
intangible assets: goodwill and software. There are no intangible assets held in Stockland Trust Group.
Stockland
Cost
Balance as at 1 July 2013
Additions
Balance as at 30 June 2014
Additions
Balance as at 30 June 2015
Amortisation and impairment losses
Balance as at 1 July 2013
Amortisation
Impairment loss
Balance as at 30 June 2014
Amortisation
Impairment loss
Balance as at 30 June 2015
Carrying amounts
As at 30 June 2014
As at 30 June 2015
Goodwill
$M
Software
$M
117
–
117
–
117
–
–
(23)
(23)
–
(18)
(41)
94
76
40
18
58
22
80
(17)
(10)
–
(27)
(6)
(25)
(58)
31
22
Total
$M
157
18
175
22
197
(17)
(10)
(23)
(50)
(6)
(43)
(99)
125
98
Stockland Financial Report 2015 — 89
Consolidated
Notes
Year ended 30 June 2015
(C3A) INTANGIBLE ASSETS (CONTINUED)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of Stockland’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition.
Goodwill that has an indefinite useful life is not subject to amortisation and is tested annually for impairment, or
more frequently if events or changes in circumstances indicate that they might be impaired. 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 goodwill is monitored
for internal management purposes and allocated to cash-generating units (‘CGU’). The allocation is made to each
CGU or groups of CGU that are expected to benefit from the business combination in which the goodwill arose,
identified according to operating segments.
Goodwill arose on the acquisition of the Retirement Living division of Australian Retirement Communities (‘ARC’) on
28 February 2007, the acquisition of the Rylands Retirement Living business on 17 July 2008 and the acquisition of
Aevum Limited on 31 October 2010.
Impairment Test
An impairment loss of $18 million (2014: $23 million) was fully allocated against goodwill and included in
‘impairment of intangibles’ in the profit or loss in the year. The goodwill impairment test is based upon the value in
use method using cash flow projections for Retirement Living unrecognised development profits. Unrecognised
development profits comprises of cash flows from both the development pipeline and deferred repayment contracts
which are considered to benefit from the acquisitions.
An impairment arose as a result of cash flows related to the development pipeline and deferred repayment
contracts. Changes to the mix and timing of development projects in the pipeline as well as changes in assumptions
in the calculation of the net present value of the future cash flows for the development pipeline and development
repayment contracts were the primary reasons for the impairment.
Deferred Repayment (‘DR’) Contracts
The ARC portfolio acquired in 2007, included a number of DR contracts. These DR contracts were initially sold
prior to the Stockland acquisition at a wholesale price on development, and therefore were expected to result in
higher conversion profit upon next settlement when they are priced at retail value and converted to Stockland
target contracts.
The cash flows are discounted over their forecast maturity at 13.0% (2014: 12.8%) and cash flows beyond the five
year period have been determined by applying a growth rate of 3.8% p.a. (2014: 3.9% p.a.). The growth rate applied
does not exceed the long-term average rate for the Australian retirement living property market.
Development Pipeline
Future development cash flows are based on formal budgets approved by management expected to commence
in the next five year period and future development pipeline assumptions. The cash flows incorporate projections
for development costs, selling price and associated DMF for the Retirement Living Communities in the
development pipeline.
Future cash flows are discounted at 15.0% (2014: 15.0%). Cash flows beyond the five year period have been
determined by applying a growth rate of 3.8% p.a. (2014: 3.9% p.a.). The growth rate applied does not exceed the
long-term average rate for the Australian Retirement Living property market.
Management believe that due to the extended time it takes to develop a village and the general long-term nature of
Retirement Living Communities, where Stockland has the ability to manage assets over that extended period, it is
reasonable to use a cash flow period of greater than five years.
Following the impairment loss recognised in the Retirement Living CGU, the recoverable amount is equal to the
carrying amount. Therefore, any adverse movement in a key assumption would lead to further impairment.
Stockland Financial Report 2015 — 90
Consolidated
Notes
Year ended 30 June 2015
(C3A) INTANGIBLE ASSETS (CONTINUED)
Software
Software is stated at cost less accumulated amortisation and impairment losses. Amounts incurred in design and
testing of software are capitalised including employee costs and an appropriate part of relevant overheads where
the software will generate probable future economic benefits.
Costs associated with maintaining software are recognised as an expense as incurred.
All software is amortised based on the straight-line method and using rates between 20-33% from the point at which
the asset is ready for use. Amortisation is recognised in profit or loss. Rates used are consistent with the prior year.
The residual value, the useful life and the amortisation method applied to an asset are reviewed at least annually.
Impairment Test
An impairment loss of $25 million (2014: $ nil) was fully allocated against software and included in ‘impairment of
intangibles’ in the profit or loss in the year. The impairment test is based upon the value in use method using the
future benefit derived from the internal use of software. A strategic review of the IT systems identified software that
will be abandoned or phased out over the next three years.
(C3b) Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying
amount and fair value less costs to sell. Investment Property held for sale will continue to be carried at fair value.
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through continuing use. This condition is met only when the sale is
highly probable and the asset or disposal group is available for immediate sale in its present condition. Management
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.
Property, plant and equipment are not depreciated once classified as held for sale.
Waterfront Place & Eagle Street Pier joint ventures
Inventory transferred from UK
Investment Properties transferred from Retirement Living
Property, plant & equipment – Aged Care
Total non-current assets held for sale
Stockland
Stockland Trust Group
2015
$M
246
–
–
–
246
2014
$M
–
39
8
73
120
2015
$M
222
–
–
–
222
2014
$M
–
–
–
–
–
At 30 June 2015, Stockland has reclassified the Waterfront Place & Eagle Street Pier joint ventures as held for sale
which are owned by the Trust and the Company, respectively. Refer to Note (E1a).
During the year, Stockland completed the sale of all assets classified as held for sale at 30 June 2014. These
assets were previously written down to their sale value at 30 June 2014.
Stockland Financial Report 2015 — 91
Consolidated
Notes
Year ended 30 June 2015
(D) Capital Structure and Financing Costs
IN THIS SECTION
This section outlines how Stockland and the Stockland Trust Group manages its capital structure and
related financing costs, including its balance sheet liquidity and access to capital markets.
The Board determines the appropriate capital structure of Stockland, specifically, how much is raised from
shareholders (equity) and how much is borrowed from financial institutions and capital markets (debt), in
order to finance Stockland's activities both now and in the future.
The Board considers Stockland’s and the Stockland Trust Group's capital structure and its dividend and
distribution policy at least twice a year ahead of announcing results, in the context of its ability to continue as
a going concern, to execute the strategy and to deliver its business plan. During the year Stockland’s credit
rating remained unchanged at A-/Stable, and the Board continued to focus on improving the efficiency of the
balance sheet.
Stockland and Stockland Trust Group is exposed to changes in interest rates on its net borrowings and
to changes in foreign exchange rates on its foreign currency transactions and net assets. In accordance
with risk management policies, Stockland and Stockland Trust Group uses derivatives to hedge these
underlying exposures.
(D1) Net financing costs
KEEPING IT SIMPLE …
This section details the interest income generated on the Group's cash and other financial assets and the
interest expense incurred on borrowings and other financial assets and liabilities. The presentation of the net
financing costs in this note reflects income and expenses according to the classification of the financial
instruments.
Mark-to-market movements reflect the change in value of our derivative instruments between the later of
inception or 1 July 2014 and 30 June 2015. The value at year end is not necessarily the same as the value
at which they will be settled at maturity.
Finance income includes interest receivable on funds invested, any net gains on fair value movement of effective
and ineffective hedged items, financial instruments and any net foreign exchange gains recognised in profit
or loss.
Interest income is recognised in profit or loss as it accrues using the effective interest method and if not received at
balance date, is reflected in the balance sheet as a receivable.
Finance costs include interest payable on short-term and long-term borrowings calculated using the effective
interest method, payments on derivatives, losses on hedging instruments that are recognised in profit or loss and
amortisation of ancillary costs incurred in connection with arrangement of borrowings.
Finance costs are expensed as incurred except to the extent that they are directly attributable to the acquisition,
construction or production of a qualifying asset such as investment properties or inventories. Qualifying assets are
assets that necessarily take a substantial period of time to reach the stage of their intended use or sale.
In these circumstances, borrowing costs are capitalised to the cost of the assets whilst in active development until
the assets are ready for their intended use or sale. Total interest capitalised must not exceed the net interest
expense in any period. Project carrying values, including all capitalised interest attributable to projects, must
continue to be recoverable based on the latest project feasibilities. In the event that development is suspended for
an extended period of time or the decision is taken to dispose of the asset, the capitalisation of borrowing costs is
also suspended.
The rate at which interest has been capitalised to qualifying assets is disclosed in Note (C1).
Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate
applied to the expenditures on the asset excluding specific borrowings.
The fair value of derivatives is discussed further at Note (D5).
Stockland Financial Report 2015 — 92
Consolidated
Notes
Year ended 30 June 2015
(D1A) NET FINANCING COSTS (CONTINUED)
Net financing costs can be analysed as follows:
Interest income from related parties
Interest income from other parties
Net gain transferred from the foreign currency translation reserve
Finance income
Interest expense relating to interest-bearing financial liabilities
Interest paid or payable on other financial liabilities at amortised cost
Less interest capitalised to inventories
Less interest capitalised to investment properties
Interest expense
Net loss on fair value hedges
Net loss on derivatives – through profit or loss
Net loss transferred from the foreign currency translation reserve
Total loss on debt and derivatives
Total Finance expense
Stockland
Stockland Trust Group
2015
$M
2014
$M
–
8
1
9
198
12
(122)
(15)
73
18
22
–
40
–
5
–
5
196
15
(120)
(12)
79
5
63
1
69
2015
$M
297
4
–
301
198
–
–
(8)
190
18
22
–
40
2014
$M
329
2
–
331
196
–
–
(4)
192
5
63
–
68
113
148
230
260
The interest expense relating to interest-bearing financial liabilities includes $105 million (2014: $113 million)
related to interest on financial liabilities carried at amortised cost.
The table below shows the composition of losses on derivatives, including those eligible and ineligible for
hedge accounting:
Net loss on fair value hedges
Loss/(Gain) on net change in fair value of derivatives
Loss/(Gain) on net change in fair value of interest-bearing liabilities
Net loss on fair value hedges
Net loss on derivatives – through profit or loss
Loss/(Gain) on foreign exchange movement
Loss/(Gain) on fair value movement
Net loss on derivatives – through profit or loss
Stockland
Stockland Trust Group
2015
$M
(178)
196
18
165
(143)
22
2014
$M
13
(8)
5
(13)
76
63
2015
$M
(178)
196
18
164
(142)
22
2014
$M
13
(8)
5
(14)
77
63
During the year financial instruments were closed out by Stockland and the Stockland Trust Group. The following
table shows the cash and profit and loss impact of closing out these instruments:
Cash costs of closing out financial instruments
Cumulative fair value loss previously recognised
Gain realised in the current year
Stockland
Stockland Trust Group
2015
$M
(41)
38
(3)
2014
$M
(257)
252
(5)
2015
$M
(39)
36
(3)
2014
$M
(258)
253
(5)
Stockland Financial Report 2015 — 93
Consolidated
Notes
Year ended 30 June 2015
(D2) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and at call deposits. Bank overdrafts that are repayable on
demand form an integral part of Stockland’s cash management and are included as a component of cash and cash
equivalents for the purpose of the Cash Flow Statement. As at 30 June 2015 Stockland does not have any bank
overdrafts.
Included in the cash and cash equivalents balance is $58 million (2014: $49 million) in cash that is held to satisfy
real estate and financial services licensing requirements and is not immediately available for use by the Group.
(D3) Interest-bearing loans and borrowings
KEEPING IT SIMPLE …
Stockland and the Stockland Trust Group borrow money from financial institutions and debt investors in the
form of bonds and other financial instruments. Stockland and the Stockland Trust Group’s bonds generally
have fixed interest rates and are for a fixed term.
The interest payable and receivable on these instruments are shown in the net financing costs note in (D1).
Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs and
subsequently are stated at amortised cost. Any difference between cost and redemption value are recognised in
profit or loss over the period of the borrowings using the effective interest method. However, where an effective fair
value hedge is in place, borrowings are carried at fair value and changes in the fair value are recognised in profit or
loss. Refer to Note (D5) for further details of measuring fair value of interest-bearing loans and borrowings.
Current
Unsecured
Foreign medium term notes
Domestic medium term notes
Total current debt
Non-current
Unsecured
Foreign medium term notes
Domestic medium term notes
Bank facilities
Total non-current debt
Note
(D3a)
(D3b)
(D3a)
(D3b)
(D3c)
Stockland
Stockland Trust Group
2015
$M
2014
$M
2015
$M
2014
$M
286
–
286
92
264
356
286
–
286
92
264
356
2,259
1,778
2,259
1,778
458
280
458
526
458
280
458
526
2,997
2,762
2,997
2,762
Fair values versus carrying amounts
All financial instruments recognised on the balance sheet are recognised at amounts that represent a reasonable
approximation of fair value, with the exception of the following borrowings:
Foreign medium term notes
Domestic medium term notes
Total medium notes
Stockland and Stockland Trust Group
Carrying
amount
2015
$M
2,545
458
3,003
Fair
value
2015
$M
2,740
510
3,250
Carrying
amount
2014
$M
1,870
722
2,592
Fair
value
2014
$M
2,017
781
2,798
The difference of $247 million (2014: $206 million) between the carrying amount and fair value of the domestic and
foreign medium term notes is due to certain notes being carried at amortised cost under AASB 139 Financial
Instruments: Recognition and Measurement, while the fair value represents the amount required to replicate at
balance date the principal and duration of these notes based on current market interest rates and conditions.
Stockland Financial Report 2015 — 94
Consolidated
Notes
Year ended 30 June 2015
(D3a) Foreign medium term notes
Stockland and Stockland Trust Group
US private placement
During previous financial years, Stockland issued notes in the US private placement market. All notes were issued
at a fixed coupon and all notes that were issued in USD were converted back to AUD principal and AUD floating
coupons through Cross Currency Interest Rate Swaps (‘CCIRS’).
During the year, Stockland repaid USD 85 million (AUD 103 million) of its notes that were issued in the US private
placement market and matured in July 2014 and June 2015.
The fair value of the US private placements as at 30 June 2015 is $1,977 million (2014: $1,742 million). Details of
the foreign medium term notes on issue in the US private placement market are set out below.
In June 2015, Stockland secured new 10, 12 and 15 year notes in the US private placement market to the
equivalent of AUD 359 million. The placement was issued in three tranches; USD 120 million (AUD 157 million) of
10 year notes, USD 100 million (AUD 130 million) of 12 year notes and USD 55 million (AUD 72 million) of 15 year
notes. These three USD tranches were fully hedged into AUD in terms of both principal and interest components
through CCIRS. Although there is a firm commitment from investors, the funding will not be delivered until 24
August 2015 and in accordance with Accounting Standards the debt principal has not been booked in the balance
sheet at 30 June 2015. A total fair value of $6 million has been recognised at 30 June 2015, representing the
difference in fair value of the notes between trade date and balance date.
Fixed rate
coupon
Floating
CCIRS2
2015
$M
2014
$M
2015
$M
2014
$M
Face value1
Carrying amount
Maturity date
July 2014
June 2015
July 2015
October 2015
July 2016
October 2016
June 2017
October 2017
June 2018
October 2018
July 2019
July 2020
September 2021
June 2022
August 2022
August 2024
August 2025
June 2027
August 2027
February 2029
August 2030
Total
4.89%
5.81%
4.99%
5.72%
5.04%
5.87%
5.93%
5.96%
5.98%
6.01%
5.19%
5.24%
4.32%
6.15%
0.71% - 0.70%
0.39%
0.78% - 0.77%
0.70% - 0.60%
0.79% - 0.78%
0.76%
0.48% - 0.76%
0.76%
0.25%
0.73% - 0.65%
0.85% - 0.83%
0.87% - 0.86%
2.44% - 2.48%
1.00%
3.99%/6.80%
2.93% - 3.08%
4.14%
3.75%
6.28%
3.85%
4.67%
4.00%
2.99%
1.62%
0.87%
1.63%
1.52%
1.69%
–
–
64
99
62
27
188
61
250
269
71
90
176
28
105
50
–3
20
–3
28
75
64
99
62
27
179
61
250
269
71
90
176
28
105
50
–
20
–
141
–3
1,701
141
–
1,795
–
–
65
86
63
25
239
57
217
257
73
94
246
40
104
47
2
32
2
180
2
1,831
(2)
1,829
23
69
54
73
52
21
201
48
179
215
60
78
198
34
102
47
–
28
–
142
–
1,624
(3)
1,621
Less: attributable transaction costs
Total Balance Sheet carrying amount
1 Face value of the notes in Australian dollars after the effect of the CCIRS.
2 Variable interest rate margin above the 90 day bank bill rate. The 90 day bank bill rate as at 30 June 2015 was 2.15% (2014: 2.71%).
3 New US private placement notes were transacted in June 2015 and will settle in August 2015. The carrying amount represents the fair value
movement in the notes from trade date to balance date.
Stockland Financial Report 2015 — 95
Consolidated
Notes
Year ended 30 June 2015
(D3A) FOREIGN MEDIUM TERM NOTES (CONTINUED)
Asian and European private placement
Stockland issued medium term notes into the Asian private placement market with a face value of $151 million (JPY
13,000 million) in the 2006 financial year and further placements of $62 million (HKD 470 million) in the 2013
financial year and $55 million (HKD 400 million) in the 2014 financial year.
During the year, Stockland issued a seven year Green Bond with a face value of EUR 300 million (AUD 433 million)
into the European private placement market.
At 30 June 2015, notes outstanding in the Asian private placement market with a face value of $151 million (JPY
13,000 million) have been classified as a current liability based on management’s intent to redeem these notes
within 12 months. On 24 August 2015, Stockland will redeem these notes ahead of the 2035 maturity date, as part
of its ongoing capital management program.
All notes were issued at a fixed coupon payable in USD, HKD or EUR and converted back to AUD floating coupons
through cross currency principal and interest rate swaps.
The fair value of the notes as at 30 June 2015 is $763 million (2014: $275 million). Details of the foreign medium
term notes on issue in the Asian and European private placement market are set out below:
Face value1
Carrying amount
Maturity date
August 20153
November 2021
May 2025
October 2025
Total
Less: attributable transaction costs
Total Balance Sheet carrying amount
Fixed rate
coupon
Floating
CCIRS2
3.99%
1.50%
3.37%
4.00%
0.80%
1.48%
1.63%
1.63%
2015
$M
151
433
62
55
701
2014
$M
151
–
62
55
268
2015
$M
135
435
77
73
720
(4)
716
2014
$M
133
–
60
57
250
(1)
249
1 Face value of the notes in Australian dollars after the effect of the CCIRS.
2 Variable interest rate margin above the 90 day bank bill rate. The 90 day bank bill rate as at 30 June 2015 was 2.15% (2014: 2.71%).
3 Prior to Stockland’s election to early redeem these notes on August 2015, the maturity was August 2035.
(D3b) Domestic medium term notes
Medium term notes have been issued at either face value, or at a discount or premium to face value and are carried
at amortised cost. The discount or premium is amortised to finance costs over the term of the notes. The medium
term notes are issued on either fixed or floating interest rate terms.
During the year, $264 million of maturing medium term notes were repaid in February 2015.
The fair value of the notes as at 30 June 2015 is $510 million (2014: $781 million). Details of unsecured domestic
medium term notes on issue are set out below:
Maturity date
February 2015
July 2016
September 2019
November 2020
Total
Less: attributable transaction costs
Total Balance Sheet carrying amount at amortised cost
Fixed rate
coupon
8.50%
7.50%
5.50%
8.25%
2015
$M
–
150
150
160
460
(2)
458
2014
$M
264
150
150
160
724
(2)
722
Stockland Financial Report 2015 — 96
Consolidated
Notes
Year ended 30 June 2015
(D3c) Bank facilities
Stockland and Stockland Trust Group
The bank facilities are multi-use facilities which may be used partially for bank guarantees. Bank facilities are
unsecured and held at amortised cost. Details of maturity dates and security for facilities, excluding bank guarantee
facilities (refer to Note (F4)), are set out below:
2015
$M
2014
$M
–
–
–
–
100
120
200
–
250
–
–
150
100
920
100
470
100
100
–
–
175
100
–
150
175
–
–
1,370
Maturity date
July 2015
August 2015
September 2015
December 2015
July 2016
August 2016
December 2016
January 2017
January 2018
February 2018
November 2018
February 2019
November 2019
(D4) Other financial assets and liabilities
KEEPING IT SIMPLE …
2015
$M
–
–
–
–
–
–
–
–
30
–
–
150
100
280
2014
$M
–
346
–
–
–
–
–
–
–
140
40
–
–
526
A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over
time in response to underlying variables such as exchange rates or interest rates and is entered into for a
fixed period. A hedge is where a derivative is used to manage an underlying exposure. Stockland uses
derivatives to manage exposure to foreign exchange and interest rate risk.
Investments in other financial assets are managed in accordance with Stockland’s documented risk policy.
Based on the nature of the asset and its purpose, movements in the fair value of other financial assets are
recognised in either through profit or loss or other comprehensive income.
Investments in other entities
The fair value of ‘Securities in listed entities’ is determined by reference to the quoted bid price of the entity at
balance date.
The fair value of ‘Units in unlisted entities’ is determined by reference to the net assets of the underlying
investments at balance date.
These investments are included in ‘Non-current assets – Other financial assets’ unless Stockland intends to dispose
of the investment within 12 months of balance date in which case the investment is classified as ‘Current assets –
Other financial assets’.
An investment is derecognised when Stockland has transferred the contractual rights to receive cash flows
from the investment and substantially all the risks and rewards of ownership of the investment to a third party.
If an investment does not qualify for derecognition, the investment will continue to be recognised and a liability
recognised for the consideration received. If the investment will qualify for derecognition within 12 months of
balance date, the liability is recorded as ‘Current liabilities – Other liabilities’.
Stockland Financial Report 2015 — 97
Consolidated
Notes
Year ended 30 June 2015
(D4) OTHER FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Investment in Australand Property Group (‘Australand’)
During the year to 30 June 2014, Stockland obtained a 19.9% (115,166,597 securities) stake in Australand at an
average price of $3.78. This comprised a 15.7% direct holding in securities of Australand and 4.2% indirect interest
via a cash settled equity swap agreement. The direct holding was included in ‘Securities in listed entities’ while the
indirect holding was included in ‘Other Financial Instruments’.
On 15 August 2014, Stockland accepted an offer from Frasers Centrepoint Limited to acquire Stockland’s
Australand securities for $4.48 per security plus accrued distribution. Based on the closing price of Australand at the
point of sale, this holding resulted in a net gain on sale after transaction costs and before tax of $73 million upon
derecognition of the investment during the year. As this investment was carried at fair value at 30 June 2014, $51
million (net of tax) of realised fair value gains were transferred from Other Comprehensive Income to the Profit and
Loss upon disposal of the investment.
Investment in AVEO Group (formerly FKP Property Group)
During the year ended 30 June 2014, Stockland disposed of its investment in AVEO Group for total proceeds of
$116 million. The disposal resulted in a realised net gain on sale of other financial assets of $31 million.
Investment in BGP Holdings, Plc (‘BGP’)
Stockland holds a 12.4% non-transferrable, non-tradeable, investment in BGP. BGP is a European (predominantly
Euro currency denominated) real estate investment company, which Stockland acquired via an in specie distribution
through its previous investment in The GPT Group (‘GPT’). This investment is held as an available for sale
investment, in non-current Other Financial Assets. Prior to 30 June 2015, the fair value of this investment was
determined to be nil.
BGP is not a listed company and as such there is limited financial information provided to investors. The 31
December 2014 financial statements of BGP indicate the company has net assets of €528 million (A$781 million).
Applying Stockland’s percentage ownership of 12.4%, this equates to a prima facie value of A$97 million. Following
an assessment of available information as at 30 June 2015, including financial information and announcements
published by BGP, a fair value of $19 million has been applied to the value of this investment, with the fair value
movement of $19 million ($13 million after tax) recognised in the Fair Value Reserve.
Valuation process
The fair value of the investment has been determined by the Directors using a DCF methodology. Internal
valuations are completed every six months using DCF models with reference to publicly available information on
BGP as well as external market data. The aim of the valuation process is to ensure the investment is held at fair
value on Stockland’s balance sheet.
Inputs
The investment in BGP is a level 3 in the Fair Value Hierarchy (the Fair Value Hierarchy is explained in Note D5).
The inputs used by Stockland in estimating the fair value of BGP are based on assumptions. These assumptions,
particularly cash flow projections, are based on public information, largely limited to public financial statements.
These financial statements do not specifically provide projections of forward cash flows and as a result these have
been estimated by Stockland using point in time values set out in those statements. These inputs should be read in
that context.
The following inputs are used to measure the fair value of Stockland’s investment in BGP:
Discount rate
DCF period
Unobservable inputs 30 June 2015
30%
5 years
Stockland Financial Report 2015 — 98
Consolidated
Notes
Year ended 30 June 2015
(D4) OTHER FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
These unobservable inputs are further explained below:
Item
DCF method
Discount rate
DCF period
Description
Under the DCF method, an asset or liability’s fair value is estimated using explicit assumptions
regarding the benefits and liabilities of ownership over the asset’s life. The DCF method involves the
assumption of a series of cash flows based on the valuations of BGP’s assets contained within BGP’s
financial statements. To this projected cash flow series, an appropriate, market-derived discount rate
is assumed to estimate the present value of the income stream associated with the asset.
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. In the case of BGP, this includes having regard to public statements by
BGP on the progress of its asset disposal process as well as an assessment of the current European
economic climate and the impact that might have on asset values. BGP is a highly illiquid asset and
the assumed cash flows are highly uncertain, therefore a discount rate of 30% has been used as the
unobservable input.
This represents an assumption of the number of years it will take in order for the shareholders to
receive a distribution following the sale of assets or Initial Public Offering (IPO). Notwithstanding
BGP’s stated intention to divest its investment asset portfolio there is a risk any such disposal process
will be prolonged given the current environment in Europe. Sensitivities around unobservable inputs
are set out below.
Sensitivity information
When assessing the valuation of the BGP investment, a change in the assumed discount rate or DCF period, would
impact the valuation. In theory, a decrease in the discount rate and/or DCF period would increase the fair value of
the investment, and an increase in the discount rate and/or DCF period would decrease the fair value. Sensitivity of
the investment fair value (pre-tax) to changes in the weighted assumptions is shown in the table below.
Significant input
Discount rate
DCF period
Increase / (Decrease) in Fair Value
Increase in input
Decrease in input
Change in
assumption
10%
2 years
2015
$M
(6)
(8)
2015
$M
9
19
Derivative financial instruments
Stockland holds a number of derivative instruments including interest rate swaps, foreign exchange contracts
and CCIRS.
Derivative financial instruments are recognised initially at fair value and remeasured at each balance date.
The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to transfer
the swap at the reporting date, taking into account current interest rates and the current creditworthiness of
swap counterparties.
The fair value of forward foreign exchange contracts is determined by using the difference between the contract
exchange rate and the quoted forward exchange rate at the reporting date.
Third party valuations are used to determine the fair value of the Group's derivatives. The valuation techniques use
inputs such as interest rate yield curves and currency prices/yields, volatilities of underlying instruments and
correlations between inputs.
The gain or loss on re-measurement to fair value is recognised in profit or loss. However, where derivatives qualify
for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged,
refer below.
Stockland enters into ISDA Master Agreements with its derivative counterparties. Under the terms of these
arrangements, where certain credit events occur, the net position owing/receivable to a single counterparty in
relation to all outstanding derivatives with that counterparty, will be taken as owing/receivable and all the relevant
arrangements terminated. As Stockland does not presently have a legally enforceable right of set-off, these
amounts have not been offset in the balance sheet. In the event a credit event occurred, the ISDA Master
Agreement would allow reduction to derivative assets and derivative liabilities of the same amount of $123 million
(2014: $110 million).
Stockland Financial Report 2015 — 99
Consolidated
Notes
Year ended 30 June 2015
(D4) OTHER FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Derivatives that qualify for hedge accounting
Stockland uses a limited number of derivative financial instruments to hedge its exposure to fluctuations in interest
and foreign exchange rates. At the inception of the transaction, Stockland designates and documents these
derivative instruments into a hedging relationship with the hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions.
Stockland also documents its assessment, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting
changes in fair values or cash flows of hedged items.
Fair value hedge
A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability that is attributable to a
particular risk.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in
profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to
the hedged risk.
Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, no
longer qualifies for hedge accounting, or when Stockland revokes designation. Any adjustment between the carrying
amount and the face value of a hedged financial instrument is amortised to profit or loss using the effective interest
rate method. Amortisation begins when the hedged item ceases to be adjusted for changes in its fair value
attributable to the risk being hedged.
Cash flow hedge
A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated
with an asset, liability or highly probable forecast transaction that could affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in equity in the cash flow hedge reserve. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss within finance income or expense.
Amounts in the cash flow hedge reserve are recognised in profit or loss in the periods when the hedged item is
recognised in profit or loss.
When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously in the cash flow hedge reserve are transferred from equity and included in
the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, no
longer qualifies for hedge accounting, or when Stockland revokes designation. Any cumulative gain or loss
recognised in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss
that was recognised in equity is recognised immediately in profit or loss.
Stockland Financial Report 2015 — 100
Consolidated
Notes
Year ended 30 June 2015
(D4) OTHER FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
The following table shows the fair value of financial instruments analysed by type of instrument:
Stockland
Current
Investments in other entities
Other financial instrument
Securities in listed entities
Total current investments in other entities
Fair value hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Foreign exchange contracts – through profit or loss
Aged Care accommodation bonds
Total current other financial instruments
Non-current
Investments in other entities
Units in unlisted entities
Total current investments in other entities
Fair value hedges
Cash flow hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Total non-current other financial instruments
Other financial assets
Other financial liabilities
2015
$M
2014
$M
2015
$M
2014
$M
–
–
–
–
2
–
–
–
2
24
24
133
35
116
58
366
99
404
503
–
–
5
–
–
508
6
6
24
–
47
49
126
–
–
–
(14)
(13)
(6)
–
–
(33)
–
–
(15)
(4)
(7)
(258)
(284)
–
–
–
(4)
(6)
(4)
(2)
(53)
(69)
–
–
(99)
(4)
(79)
(283)
(465)
Included in other financials assets are $23 million in CCIRS containing a right-to-break clause that may be
exercised by the counterparty within the next 12 months. Based on previous experience the right-to-break is not
expected to be exercised. Accordingly, these assets are not expected to be realised in the next 12 months and have
been classified as non-current at 30 June 2015.
Stockland Trust Group
Current
Fair value hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Foreign exchange contracts – through profit or loss
Total current other financial instruments
Non-current
Investments in other entities
Units in unlisted entities
Total non-current investments in other entities
Fair value hedges
Cash flow hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Total non-current other financial instruments
–
2
–
–
2
5
5
133
35
116
58
347
–
–
5
2
7
6
6
24
–
47
49
126
(14)
(13)
(6)
–
(33)
–
–
(15)
(4)
(7)
(258)
(284)
(4)
(6)
(4)
(2)
(16)
–
–
(99)
(4)
(79)
(283)
(465)
Stockland Financial Report 2015 — 101
Consolidated
Notes
Year ended 30 June 2015
(D5) Fair value hierarchy
KEEPING IT SIMPLE …
The financial instruments included on the Balance Sheet are measured at either fair value or amortised cost.
The measurement of this fair value may in some cases be subjective and may depend on the inputs used in
the calculations. Stockland generally uses external valuations based on market inputs or market values (e.g.
external share prices). The different valuation methods are called ‘hierarchies’ and are described below.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data
(‘unobservable inputs’).
Determination of fair value
The fair value of derivative financial instruments, including domestic and foreign medium term notes, interest rate
derivatives and CCIRS, is determined in accordance with generally accepted pricing models by discounting the
expected future cash flows using assumptions supported by observable market rates. Whilst certain derivatives are
not quoted in an active market, Stockland has determined the fair value of these derivatives using quoted market
inputs (e.g. interest rates, volatility, and exchange rates) adjusted for specific features of the instruments and debit
or credit value adjustments based on Stockland or the derivative counterparties current credit worthiness.
The fair value of forward exchange contracts is the quoted market price of the derivative at balance date, being the
present value of the quoted forward price.
The table below sets out the financial instruments included on the Balance Sheet at ‘fair value’.
Quantitative sensitivities required under AASB 13 Fair Value Measurement in relation to the Retirement Living
resident obligations have been disclosed in Note (C1c).
Stockland
2015
Financial assets carried at fair value
Units in unlisted entities
Derivative assets
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Retirement Living resident obligations
Total financial liabilities carried at fair value
Net position
2014
Financial assets carried at fair value
Securities in listed entities
Units in unlisted entities
Derivative assets
Other financial instrument
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Aged care accommodation bonds
Retirement Living resident obligations
Total financial liabilities carried at fair value
Net position
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
–
–
–
–
–
–
–
404
–
–
–
404
–
–
–
–
404
–
344
344
(304)
–
(304)
40
–
–
125
99
224
(470)
–
–
(470)
(246)
24
–
24
(13)
(2,211)
(2,224)
(2,200)
–
6
–
–
6
(11)
(53)
(1,865)
(1,929)
(1,923)
24
344
368
(317)
(2,211)
(2,528)
(2,160)
404
6
125
99
634
(481)
(53)
(1,865)
(2,399)
(1,765)
Stockland Financial Report 2015 — 102
Consolidated
Notes
Year ended 30 June 2015
(D5) FAIR VALUE HIERARCHY (CONTINUED)
Stockland Trust Group
2015
Financial assets carried at fair value
Units in unlisted entities
Derivative assets
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Total financial liabilities carried at fair value
Net position
2014
Financial assets carried at fair value
Units in unlisted entities
Derivative assets
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Total financial liabilities carried at fair value
Net position
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
–
–
–
–
–
–
–
–
–
–
–
–
–
344
344
(304)
(304)
40
–
127
127
(470)
(470)
(343)
5
-
5
(13)
(13)
(8)
6
–
6
(11)
(11)
(5)
5
344
349
(317)
(317)
32
6
127
133
(481)
(481)
(348)
Derivative financial assets and liabilities are not offset in the balance sheet as under agreements held with
derivative counterparties, Stockland and the Stockland Trust Group do not have a legally enforceable right to set-off
the position payable/receivable to a single counterparty.
The following table shows a reconciliation from the opening balances to the closing balances for fair value
measurements in Level 3 of the fair value hierarchy:
Stockland
Balance at 1 July 2013
Total gains and losses recognised in:
• profit or loss
Other transfers
Net cash settled on resident turnover
Capital distributions
Balance at 30 June 2014
Total gains and losses recognised in:
• profit or loss
• other comprehensive income
Net cash settled on resident turnover
Purchased
Disposal of Aged Care bonds
Capital distributions
Balance at 30 June 2015
Units in
unlisted
entities
$M
Derivatives
$M
Aged Care
bonds
$M
Retirement
Living
resident
obligations
$M
Total
$M
20
–
–
–
(14)
6
–
19
–
–
–
(1)
24
1
(56)
(1,774)
(1,809)
(12)
–
–
–
(11)
(2)
–
–
–
–
–
(13)
–
(7)
10
–
72
7
(170)
–
60
–
(160)
(14)
(53)
(1,865)
(1,923)
–
–
–
–
53
–
–
(25)
–
(146)
(175)
–
–
(27)
19
(146)
(175)
53
(1)
(2,211)
(2,200)
Stockland Financial Report 2015 — 103
Consolidated
Notes
Year ended 30 June 2015
(D5) FAIR VALUE HIERARCHY (CONTINUED)
Stockland Trust Group
Balance at 1 July 2013
Total gains and losses recognised in:
• profit or loss
Capital distributions
Balance at 30 June 2014
Total gains and losses recognised in:
• profit or loss
Capital distributions
Balance at 30 June 2015
(D6) Financial risk factors
KEEPING IT SIMPLE …
Units in
unlisted entities
$M
Derivatives
$M
19
–
(13)
6
–
(1)
5
1
(12)
–
(11)
(2)
–
(13)
Total
$M
20
(12)
(13)
(5)
(2)
(1)
(8)
Stockland’s and Stockland Trust Group's activities expose the Group to a variety of financial risks; market
risks (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. Stockland and
Stockland Trust Group's overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on financial performance. Stockland and Stockland
Trust Group uses derivative financial instruments within its policies described below as hedges to manage
certain risk exposures.
Financial risk and capital management is carried out by a central treasury department under policies
approved by the Board. The Board reviews and approves written principles of overall risk management, as
well as written policies covering specific areas such as managing capital, mitigating interest rates, liquidity,
foreign exchange and credit risks, use of derivative financial instruments and investing excess liquidity. The
Risk Committee assists the Board in monitoring the implementation of these treasury policies.
(D6a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect Stockland’s financial performance or the value of its holdings of financial instruments. The objective
of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising returns.
Foreign exchange risk
Foreign exchange risk arises when anticipated transactions or recognised assets and liabilities are denominated in
a currency that is not Stockland’s functional currency, being Australian dollars. Stockland has currency exposures to
the Pound Sterling, US Dollar, Yen, Euro and Hong Kong Dollar.
Stockland manages its foreign exchange exposure by using CCIRS and forward exchange contracts (‘FEC’).
Stockland’s foreign medium term notes create both an interest rate and a foreign currency risk exposure.
Stockland’s policy is to minimise its exposure to both interest rate and exchange rate movements. Accordingly,
Stockland has entered into a series of CCIRS which cover 100% of the US, UK, European and Asian private
placement principals outstanding and are timed to expire when each private placement loan matures. These
swaps also swap the obligation to pay fixed interest to floating interest. When swaps held are no longer effective in
hedging the interest rate and foreign currency risk exposure, management will reassess the value in continuing to
hold the swap.
In accordance with the accounting policy, these CCIRS have been designated as fair value and cash flow hedges
with the movements in fair value recognised whilst they are still in effective hedge relationships.
The following table provides a summary of the face values of Stockland’s foreign exchange risk exposures together
with the derivatives which have been entered into to manage these exposures.
Stockland Financial Report 2015 — 104
Consolidated
Notes
Year ended 30 June 2015
(D6A) MARKET RISK (CONTINUED)
Stockland
Stockland Trust Group
GBP
£M
USD
$M
Yen
¥M
Euro
€M
HKD
$M
GBP
£M
USD
$M
Yen
¥M
Euro
€M
HKD
$M
2015
Borrowings
Other net assets
CCIRS
FEC
Total exposure
2014
Borrowings
Other net assets
CCIRS
FEC
Total exposure
(1,426)
(13,000)
(300)
(870)
(1,426)
(13,000)
(300)
(870)
–
–
–
–
–
–
24
–
–
1,426
13,000
–
–
–
–
(1,511)
(13,000)
–
–
(54)
1,511
13,000
22
(8)
–
–
–
–
–
870
–
–
(870)
–
–
–
–
–
–
–
–
–
–
1,426
13,000
–
300
–
–
–
–
(1,511)
(13,000)
–
–
870
(54)
1,511
13,000
–
–
–
(54)
–
–
–
–
–
870
–
–
(870)
–
870
–
–
–
–
–
–
–
–
–
17
300
(3)
14
–
4
–
(3)
1
Sensitivity analysis – foreign exchange risk
The following sensitivity analysis shows the impact on the profit or loss and equity if there was an increase/decrease
in exchange rates of 10% (2014:10%) at balance date with all other variables held constant.
Stockland
30 June 2015
GBP
USD
YEN
EUR
HKD
Total impact
30 June 2014
GBP
USD
YEN
EUR
HKD
Total impact
Stockland Trust Group
30 June 2015
GBP
USD
YEN
EUR
HKD
Total impact
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
–
–
–
(2)
–
(2)
6
(12)
(3)
1
–
(8)
–
–
–
2
–
2
(6)
7
–
–
–
1
–
(21)
–
(46)
(1)
(68)
(4)
(15)
–
–
(1)
(20)
–
26
–
45
2
73
5
18
–
–
2
25
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
–
–
–
–
–
–
–
–
–
–
–
–
–
(21)
–
(46)
(1)
(68)
–
26
–
45
2
73
Stockland Financial Report 2015 — 105
Consolidated
Notes
Year ended 30 June 2015
(D6A) MARKET RISK (CONTINUED)
30 June 2014
GBP
USD
YEN
HKD
Total impact
Interest rate risk
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
10
(12)
(3)
–
(5)
(10)
7
–
–
(3)
–
(15)
–
(1)
(16)
–
18
–
2
20
Interest rate risk is the risk that the fair value or cash flows of financial instruments will fluctuate due to changes in
market interest rates.
Stockland’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose Stockland to cash
flow interest rate risk. Borrowings issued at fixed rates expose Stockland to fair value interest rate risk. Stockland’s
treasury policy allows Stockland to enter into a variety of approved derivative instruments to manage the risk profile
of the total debt portfolio to achieve an appropriate mix of fixed and floating interest rate exposures. Stockland
manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. Stockland manages its fair value
interest rate risk through CCIRS and fixed-to-floating interest rate swaps.
These derivatives have been recorded on the balance sheet at their fair value in accordance with AASB 139
Financial Instruments: Recognition and Measurement. These derivatives have not been designated as hedges for
accounting purposes, nevertheless management believe the hedges are effective economically. As a result
movements in the fair value of these instruments are recognised in profit or loss.
The table below provides a summary of Stockland’s interest rate risk exposure on interest-bearing loans and
borrowings after the effect of the interest rate derivatives.
Stockland and Stockland Trust Group
As at 30 June
Fixed rate interest-bearing loans and borrowings1
Floating rate interest-bearing loans and borrowings1
Total interest-bearing loans and borrowings
1 Notional principal amounts
Net exposure
(after the effect of derivatives)
2015
$M
2,255
887
3,142
2014
$M
1,969
1,344
3,313
Sensitivity analysis – interest rate risk
The following sensitivity analysis shows the impact on profit or loss and equity if market interest rates at balance
date had been 100 basis points higher/lower (2014: 100 basis points) with all other variables held constant.
Stockland
As at 30 June
Impact on profit or loss
Impact on interest income/expense
Impact on net gain/loss on derivatives – through profit or loss
Total impact on profit or loss
Impact on equity
Total impact on equity
2015
2014
100bp higher
$M
100bp lower
$M
100bp higher
$M
100bp lower
$M
2
130
132
42
(2)
(142)
(144)
(49)
2
47
49
9
(2)
(68)
(70)
(10)
Stockland Financial Report 2015 — 106
Consolidated
Notes
Year ended 30 June 2015
(D6A) MARKET RISK (CONTINUED)
Stockland Trust Group
As at 30 June
Impact on profit or loss
Impact on interest income/expense
Impact on net gain/loss on derivatives – through profit or loss
Total impact of on profit or loss
Impact on equity
Total impact on equity
Equity price risk
2015
2014
100bp higher
$M
100bp lower
$M
100bp higher
$M
100bp lower
$M
35
130
165
(35)
(142)
(177)
42
(49)
38
47
85
9
(38)
(68)
(106)
(10)
Equity price risk is the risk that the fair value of investments in listed/unlisted entities fluctuate due to changes in
the underlying share/unit price. Stockland’s equity price risk arises from investments in listed securities and units
in unlisted funds. These investments are classified as financial assets carried at fair value, with any resultant gain
or loss recognised in other comprehensive income.
Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are
approved by the Risk Committee.
Sensitivity analysis - equity price risk
The following sensitivity analysis shows the impact on profit or loss and equity if the market price of the
underlying equity securities/units at balance date had been 10% higher/lower (2014: 10%) with all other variables
held constant.
As at 30 June
Stockland
Total impact on profit or loss
Total impact on equity
Stockland Trust Group
Total impact on profit or loss
Total impact on equity
(D6b) Credit risk
2015
2014
10% higher
$M
10% lower
$M
10% higher
$M
10% lower
$M
–
–
–
–
–
–
–
–
1
50
1
–
(1)
(50)
(1)
–
Credit risk is the risk that a customer or counterparty to a financial instrument fails to meet its contractual obligations
resulting in a financial loss to Stockland.
Stockland has no significant concentrations of credit risk to any single counterparty and has policies to review the
aggregate exposure of tenancies across its portfolio. Stockland also has policies to ensure that sales of properties
and development services are made to customers with an appropriate credit history.
Derivative counterparties and cash deposits are currently limited to financial institutions approved by the Risk
Committee. There are also policies that limit the amount of credit risk exposure to any one of the approved financial
institutions based on their credit rating and country of origin.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of
financial assets mentioned above.
As at 30 June 2015, these financial institutions had an S&P credit rating of A- or above (2014: A- or above).
Bank guarantees and mortgages over land are held as security over certain trade and other receivables balances.
As at 30 June 2015 and 30 June 2014, there were no significant financial assets that were past due.
Stockland Financial Report 2015 — 107
Consolidated
Notes
Year ended 30 June 2015
(D6c) Liquidity risk
Liquidity risk is the risk that Stockland will not be able to meet its financial obligations as they fall due. Due to the
dynamic nature of the underlying businesses, Stockland aims to maintain flexibility in funding by keeping sufficient
cash and/or committed credit lines available whilst maintaining a low cost of holding these facilities. Management
prepares and monitors rolling forecasts of liquidity requirements on the basis of expected cash flow.
Stockland manages liquidity risk through monitoring the maturity of its debt portfolio. Stockland also manages
liquidity risk by maintaining a liquidity buffer of cash and undrawn credit facilities. The current weighted average
debt maturity is 4.6 years (2014: 5.2 years).
KEEPING IT SIMPLE …
The table below analyses the Group’s financial liabilities including derivatives into relevant maturity
groupings based on the period remaining until the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows (including interest), and therefore may not reconcile with
the amounts disclosed on the Balance Sheet.
As derivative assets have been excluded from this table, refer to Note (D5) for the fair value of the derivative
assets to provide a meaningful analysis of Stockland’s total derivatives.
Stockland
30 June 2015
Non-derivative financial liabilities
Trade and other payables (exc. GST)
Dividends and distributions payable
Interest-bearing loans and borrowings
Retirement Living resident obligations
Derivative financial liabilities
Interest rate derivatives
Cross currency interest rate swaps
• inflow
• outflow
Carrying
amount
$M
Contractual
cash flows
$M
1 year
or less
$M
1 – 2
years
$M
2 – 5
years
$M
Over
5 years
$M
(313)
(283)
(3,283)
(2,211)
(264)
(53)
(316)
(283)
(4,497)
(2,212)
(280)
(283)
(449)
(1,992)
(36)
–
(622)
(1)
–
–
–
–
(1,306)
(2,120)
(11)
(208)
(293)
(80)
(71)
(110)
(32)
266
(278)
68
(58)
571
(651)
458
(502)
(3,096)
(720)
(1,507)
(2,404)
Total financial liabilities
(6,407)
30 June 2014
Non-derivative financial liabilities
Trade and other payables (exc. GST)
Dividends and distributions payable
Interest-bearing loans and borrowings
Aged Care accommodation bonds
Retirement Living resident obligations
Derivative financial liabilities
Interest rate derivatives
Cross currency interest rate swaps
• inflow
• outflow
(304)
(280)
(3,118)
(53)
(1,865)
(287)
(192)
Forward exchange contracts
(2)
1,363
(1,489)
(7,727)
(310)
(280)
(3,898)
(53)
(251)
(280)
(527)
(53)
(23)
–
(36)
–
–
–
(600)
(1,272)
(1,499)
–
(1)
–
(9)
–
(191)
(1,867)
(1,666)
(321)
(77)
(72)
(132)
(40)
1,600
(1,941)
(2)
154
(157)
(2)
312
(362)
–
587
(790)
–
547
(632)
–
Total financial liabilities
(6,101)
(7,072)
(2,859)
(746)
(1,652)
(1,815)
Stockland Financial Report 2015 — 108
Consolidated
Notes
Year ended 30 June 2015
(D6C) LIQUIDITY RISK (CONTINUED)
In most cases settlement of Retirement Living resident obligations occurs simultaneously with receipt of the
incoming resident’s contribution. Of the total Retirement Living resident obligations, $2,198 million (2014: $1,849
million) does not represent an anticipated net cash outflow as it is expected to be covered by receipts from incoming
residents. Refer to Note (C1c) for further details on Retirement Living resident obligations.
Stockland Trust Group
Carrying
amount
$M
Contractual
cash flows
$M
1 year
or less
$M
1 – 2
years
$M
2 – 5
years
$M
Over
5 years
$M
30 June 2015
Non-derivative financial liabilities
Trade and other payables (exc. GST)
Distributions payable
(98)
(283)
(98)
(283)
Interest-bearing loans and borrowings
(3,283)
(4,497)
(98)
(283)
(449)
–
–
–
–
–
–
(622)
(1,306)
(2,120)
Derivative financial liabilities
Interest rate derivatives
Cross currency interest rate swaps
(264)
(53)
• inflow
• outflow
Total financial liabilities
(3,981)
1,363
(1,489)
(5,297)
30 June 2014
Non-derivative financial liabilities
Trade and other payables (exc. GST)
Distributions payable
(94)
(280)
(94)
(280)
Interest-bearing loans and borrowings
(3,118)
(3,898)
(293)
(80)
(71)
(110)
(32)
266
(278)
(922)
(94)
(280)
(527)
68
(58)
(683)
571
(651)
458
(502)
(1,496)
(2,196)
–
–
–
–
–
–
(600)
(1,272)
(1,499)
Derivative financial liabilities
Interest rate derivatives
Cross currency interest rate swaps
• inflow
• outflow
Forward exchange contracts
Total financial liabilities
(D7) Issued capital
KEEPING IT SIMPLE …
(287)
(192)
(2)
(321)
(77)
(72)
(132)
(40)
1,600
(1,941)
(2)
154
(157)
(2)
(983)
312
(362)
–
587
(790)
–
547
(632)
–
(722)
(1,607)
(1,624)
(3,973)
(4,936)
This section explains material movements recorded in issued capital that are not explained elsewhere in the
financial statements. The movements in equity of Stockland and Stockland Trust Group and the balances
are presented in the Statements of Changes in Equity.
Issued capital represents the amount of consideration received for stapled securities issued by Stockland.
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related
income tax benefit.
For so long as Stockland remains jointly quoted, the number of shares in the Company and the number of
units in the Trust shall be equal and the securityholders and unitholders shall be identical. Unitholders of the
Trust are only entitled to distributions and voting rights upon stapling.
Stockland Financial Report 2015 — 109
Consolidated
Notes
Year ended 30 June 2015
(D7) ISSUED CAPITAL (CONTINUED)
Holders of stapled securities are entitled to receive dividends and distributions as declared from time to time and
are entitled to one vote per stapled security at securityholder meetings. The liability of a member is limited to the
amount, if any, remaining unpaid in relation to a member’s subscription for securities. A member is entitled to
receive a distribution following termination of the stapling arrangement (for whatever reason). The net proceeds
of realisation must be distributed to members, after making an allowance for payment of all liabilities (actual and
anticipated) and meeting any actual or anticipated expenses of termination.
The following table provides details of Stockland’s issued securities and Stockland Trust Group’s issued units.
Stockland and
Stockland Trust Group
Number of
securities/
units
Number of
securities/
units
2015
2014
Stockland
Stockland Trust Group
2015
$M
2014
$M
2015
$M
2014
$M
Details
Ordinary securities/units on issue
Issued and fully paid
2,361,717,862
2,326,978,560
8,571
8,430
7,266
7,126
Other equity securities/units
Treasury Shares
(2,621,149)
(2,704,874)
Total Issued Capital
2,359,096,713
2,324,273,686
(11)
8,560
(10)
8,420
(11)
7,255
(10)
7,116
(D7a) Ordinary securities/units
The following table provides details of movements in Stockland’s issued securities and Stockland Trust Group’s
issued units.
Details
Movement of securities/units issued
Balance as at 1 July 2013
Securities/units issued as part of the distribution reinvestment plan
Transfer of capital to Stockland Corporation Limited
Balance as at 30 June 2014
Securities/units issued as part of the distribution reinvestment plan
Balance as at 30 June 2015
Dividend Reinvestment Plan
Stockland and
Stockland Trust Group
Stockland
Stockland
Trust Group
Number of securities/units
$M
$M
2,305,750,747
8,353
21,227,813
–
2,326,978,560
34,739,302
2,361,717,862
77
–
8,430
141
8,571
7,559
74
(507)
7,126
140
7,266
During the year, Stockland issued 34,739,302 securities (2014: 21,227,813) under the Dividend Reinvestment Plan
(‘DRP’). The DRP security price for each period was determined by the average of the daily volume weighted
averages over a 15-day trading period and applying a 1.0 per cent discount.
On 22 June 2015, Stockland announced that the DRP would operate for the final distribution to 30 June 2015.
Securityholders participating in the DRP will be entitled to receive a full distribution. The DRP security price of $4.15
was determined by the average of the daily volume weighted averages of the selling price over a 15-day trading
period immediately preceding 22 July 2015 and applying a 1.0 per cent discount.
Transfer of Capital
In the prior year, Stockland Trust Group reallocated $507 million of issued capital (equivalent to $0.22 per security)
from the Stockland Trust to Stockland Corporation Limited following securityholders approval at the Annual General
Meeting of Stockland Corporation Limited and Meeting of Unitholders of Stockland Trust on 29 October 2013. The
number of units and the number of shares on issue remained unchanged following the reallocation.
Stockland Financial Report 2015 — 110
Consolidated
Notes
Year ended 30 June 2015
(D7b) Other equity securities/units
Treasury Shares
Treasury shares are securities/units in Stockland that are held by the Stockland Employee Securities Plan Trust for
the purpose of issuing shares under the Deferred Short Term Incentive (‘DSTI’) scheme.
The securities/units are held on behalf of Executives and Senior Management eligible under the scheme until the
end of the vesting period. During the vesting period, the Executives and Senior Management are entitled to the
distributions and dividends.
Movement of other equity securities/units
Details
Opening balance as at 1 July 2014
Acquisition of securities/units by the Trust
Transferred to ordinary shares on vesting
Balance as at 30 June 2015
Acquisition of securities by the Trust
Stockland and
Stockland Trust Group
Number of securities/units
2,704,874
870,187
(953,912)
2,621,149
Stockland
Stockland
Trust Group
$M
(10)
(4)
3
(11)
$M
(10)
(4)
3
(11)
During the year, 870,187 securities (2014: 1,508,503) were acquired on market for the purpose of issuing securities
under the Deferred Short Term Incentive (‘DSTI’) scheme.
The securities are held by the Stockland Employee Securities Plan Trust on behalf of Executives and Senior
Management eligible under the scheme until the end of the vesting period affixed to the securities. During the
vesting period, the Executives and Senior Management are entitled to the distributions and dividends.
Transferred to ordinary securities on vesting
During the year, 953,912 securities (2014: 178,390) vested with Executives and Senior Management under the
DSTI scheme.
(D7c) Share based payments
KEEPING IT SIMPLE …
Stockland operates three share based compensation schemes which are described below.
Performance Rights Plan (‘PRP’)
Under the PRP, employees have the right to acquire Stockland securities at nil consideration when certain
performance conditions are met. Each grant will comprise two equal tranches, each of which vest based on
separate performance hurdles (being underlying earnings per security (‘underlying EPS’) growth and relative
Total Securityholder Return (‘TSR’)) and has a three year vesting period. Eligibility is by invitation of the
Board and is reviewed annually.
Deferred Short Term Incentive awards (‘DSTI’)
For Executives and Senior Management there is a compulsory deferral of at least one third of short term
incentives (‘STI’) into Stockland securities to further align remuneration outcomes with securityholders. Half
of the awarded STI securities will vest 12 months after award with the remaining half vesting 24 months after
award, provided employment continues to the applicable vesting date.
$1,000 Plan
Under this plan, eligible employees receive up to $1,000 worth of Stockland securities.
Stockland Financial Report 2015 — 111
Consolidated
Notes
Year ended 30 June 2015
(D7C) SHARE BASED PAYMENTS (CONTINUED)
The number and weighted average fair value of rights/securities under the PRP and DSTI share plans are
as follows:
Details
Rights/securities outstanding at the beginning of the year
Rights granted during the year
Rights/securities forfeited and lapsed during the year
Securities exercised during the year
Rights converted to Stockland stapled securities
Rights/securities outstanding at the end of the year
PRP
Weighted average price
per right/security
2015
$2.19
$2.50
$1.82
–
$3.84
$2.29
2014
$3.14
$2.30
$1.71
–
$3.56
$2.19
Number of
rights/securities
2015
2014
9,981,793
9,328,574
6,446,993
5,633,380
(4,097,446)
(4,208,925)
–
–
(1,341,217)
(771,236)
10,990,123
9,981,793
The fair value of PRP rights is measured at grant date using the Black-Scholes and Monte Carlo Simulation
option pricing models taking into account the terms and conditions upon which the rights were granted. The fair
value is expensed on a straight-line basis over the vesting period, the period over which the rights are subject to
performance and service conditions, with a corresponding increase in reserves.
Where the individual forfeits the rights due to failure to meet a service or performance condition, the cumulative
expense is reversed through profit or loss in the current year. The cumulative expenditure for rights forfeited due
to market conditions are not reversed.
Where amendments are made to the terms and conditions subsequent to the grant, the value of the grant
immediately prior to and following the modification is determined. This occurs upon resignation or termination
where the amendment relates to rights becoming vested in terms of beneficial ownership, which would otherwise
have been forfeited due to the failure to meet future service conditions. In this situation, the value that would have
been recognised in future periods in respect of the rights not forfeited is recognised in the period that the rights vest.
The number of rights granted to employees under the plan for the year ended 30 June 2015 was 4,335,343
(2014: 3,968,989).
Assumptions made in determining the fair value of rights granted under the share plans are detailed below.
Details
Grant date
Fair value of rights granted under plan
Spot price of the Stapled Securities at grant date
Exercise price
Distribution yield
Risk-free rate at grant date
Expected remaining life at grant date
Volatility of Stockland
Volatility of Index price
2015
2014
29 August 2014
31 August 2013
$2.47
$4.25
–
6.5%
2.7%
2.8 years
20.0%
15.0%
$2.15
$3.73
–
7.3%
2.8%
2.8 years
20.0%
15.0%
The PRP rights of 8,158,801 (2014: 7,815,679) are outstanding as at 30 June 2015, which have fair values ranging
from $1.45 to $2.08 (2014: $1.79 to $2.15) per right and a weighted average restricted period remaining of 1.5 years
(2014: 1.5 years).
As at 30 June 2015, no PRP rights vested (2014: Nil). As no PRP rights vested, the weighted average fair value of
vested rights during the financial year was $Nil (2014: $Nil).
During the year, no PRP rights converted to Stockland stapled securities, as vesting conditions determined during
the previous financial year were not met (2014: no rights).
Stockland Financial Report 2015 — 112
Consolidated
Notes
Year ended 30 June 2015
(D7C) SHARE BASED PAYMENTS (CONTINUED)
DSTI
The fair value of securities granted under the DSTI has been calculated based on the 10 day volume weighted
average price post 30 June 2015 of $4.16 (2014: $3.99).
The DSTI rights outstanding as at 30 June 2015, included in the table above, are 2,831,322 (2014: 2,166,114).
The rights outstanding have fair values ranging from $3.55 to $4.16 (2014: $3.55 to $3.99) per right.
$1,000 Plan
Stockland securities issued to eligible employees under the Tax Exempt Employee Security Plan (‘$1,000 Plan’) are
recognised as an expense with a corresponding increase in issued capital. The value recognised is the market price
of the securities granted at grant date.
(D8) Dividends and distributions
Dividends and distributions recognised in the financial year by the Stockland and the Stockland Trust Group are
detailed below.
The tax preferred component represents income of the Stockland Trust which is not included in the trust’s taxable
income. The tax preferred component includes concessional capital gain amount not included in the trust’s taxable
income and tax deferred amounts, being the amount distributed in excess of the trust’s taxable income.
Stockland Corporation Limited
There was no dividend from Stockland Corporation Limited during the current, or previous, financial year.
The dividend franking account balance as at 30 June 2015 is $13 million based on a 30% tax rate
(2014: $13 million).
Stockland Trust
Year ended 30 June 2015
Interim distribution
Final distribution
Total distribution
Year ended 30 June 2014
Interim distribution
Final distribution
Total distribution
Cents per unit
Total amount
$M
Date of payment
Tax preferred
%
12.0
12.0
24.0
12.0
12.0
24.0
27 February 2015
31 August 2015
28 February 2014
29 August 2014
282
283
565
277
279
556
13.3
13.3
16.5
16.5
Stockland Financial Report 2015 — 113
Consolidated
Notes
Year ended 30 June 2015
(E) Group Structure
IN THIS SECTION
This section provides information which will help users understand how the group structure affects the
financial position and performance of the Group as a whole. The Group includes entities that are classified
as joint ventures, joint operations, associates and structured entities.
Joint ventures and associates are accounted for using the equity method, while joint operations are
proportionately consolidated and structured entities are recorded as investments at cost.
In this section of the notes there is information about:
(1) Interests in joint operations;
(2) Transactions with non-controlling interests; and
(3) Changes to the structure that occurred during the year as a result of business combinations or
the disposal of a discontinued operation
(E1) Equity-accounted investments
The following table provides details of the share of profits of equity-accounted investments:
Year ended 30 June
Share of profits from equity-accounted investments:
Investments in joint venture entities
Investments in associates
Total share of profits of equity-accounted investments
Stockland
Stockland
Trust Group
2015
$M
2014
$M
2015
$M
2014
$M
88
–
88
56
6
62
86
–
86
50
6
56
Notes
(E1a)
(E1b)
Stockland and the Stockland Group Trust have interests in a number of individually immaterial associates and joint
ventures that are accounted for using the equity method.
(E1a) Investments in joint venture entities
A joint venture is either a venture or operation over whose activities Stockland has joint control, established by
contractual agreement. Investments in joint venture entities are accounted for on an equity accounted basis.
Investments in joint ventures are assessed for impairment when indicators of impairment are present and if
required, written down to the recoverable amount.
Stockland’s share of the joint venture’s profit or loss and other comprehensive income is from the date joint control
commences until the date joint control ceases.
If Stockland’s share of losses exceeds its interest in a joint venture, the carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that Stockland has incurred legal or constructive
obligations or made payments on behalf of the joint venture.
Transactions with the joint venture are eliminated to the extent of Stockland’s interest in the joint venture until such
time as they are realised by the joint venture on consumption or sale.
The following table analyses, in aggregate, the carrying amount and share of profit or loss and other comprehensive
income of these joint venture entities.
Stockland Financial Report 2015 — 114
Consolidated
Notes
Year ended 30 June 2015
(E1A) INVESTMENTS IN JOINT VENTURE ENTITIES (CONTINUED)
Aggregate carrying amount of individually immaterial joint
venture entities
Aggregate share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Changes to Joint Ventures
Waterfront Place and Eagle Street Pier
Stockland
Stockland
Trust Group
2015
$M
518
88
–
88
2014
$M
650
56
–
56
2015
$M
506
86
–
86
2014
$M
608
50
–
50
On 19 June 2015, Stockland entered into an agreement to sell the Waterfront Place and Eagle Street Pier
properties. The joint venture entities holding these properties have been classified as Assets Held for Sale. Net
assets of $246 million comprises the Waterfront Place and Eagle Street Pier properties, valued at $296 million and
$22 million, respectively, an external loan of $73 million and other net assets of $1 million were reclassified to
Assets Held for Sale at 30 June 2015.
The joint venture entities contributed $15 million (2014: $14 million) of net operating profit with a further $2 million
(2014: $22 million) in net gain from fair value of investment properties for the year ended 30 June 2015.
Stockland Bundaberg
On 10 October 2014, Stockland Trust acquired a 50% interest in Sugarland Shopping Centre Trust which owns
Sugarland Shoppingtown in Bundaberg, Queensland, subsequently re-named to Stockland Bundaberg. The owners
have joint control over the asset with strategic decisions requiring unanimous approval from the Unitholders’
Committee comprising equal representation of the owners. The Group’s share of profits from Stockland Bundaberg
is included in Stockland and the Stockland Trust Group’s investments in joint venture entities for the period 10
October 2014 to 30 June 2015.
At the time of acquiring the 50% interest in Sugarland Shopping Centre Trust, Stockland Trust entered into a Put
and Call option to acquire the remaining 50% interest.
The Put option can be exercised within 12 months from 10 April 2015. The Call option period will commence no
later than 10 October 2015 for a period of six months. When exercised, a liability in the range of $60 million to $62
million will be recognised if the Put or Call options are exercised.
Joint operations
Interests in unincorporated joint operations are consolidated by recognising Stockland’s proportionate share of the
joint operations’ assets, liabilities, revenues and expenses and the joint operation’s revenue from the sale of their
share of goods or services on a line-by-line basis, from the date joint control commences to the date joint control
ceases and are not included in the above table.
Changes to Joint Operations
Stockland Townsville
On 15 October 2014, Stockland Trust sold a direct 50% stake in Stockland Townsville. The owners have joint
control over the asset with strategic decisions requiring unanimous approval from the Management Committee
comprising equal representation of the owners. Therefore, Stockland and the Stockland Trust Group’s share of the
results from Stockland Townsville Shopping Centre are recognised on a proportionately consolidated basis for the
period 16 October 2014 to 30 June 2015. Stockland Townsville Shopping Centre’s results were fully consolidated
until 16 October 2014.
At the time of disposal, a Put and Call Option Deed was established in relation to selected sundry assets located in
Townsville.
Stockland Financial Report 2015 — 115
Consolidated
Notes
Year ended 30 June 2015
(E1b) Investments in associates
Associates are those entities over which Stockland have significant influence, but not control or joint control, over
the financial and operating policies. The financial statements include Stockland’s share of the total recognised gains
and losses of associates on an equity accounted basis, from the date that significant influence commences until the
date that significant influence ceases.
If Stockland’s share of losses exceeds its interest in an associate, their carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that Stockland has incurred legal or constructive
obligations or made payments on behalf of the associate.
Unrealised gains on transactions between Stockland and Stockland Trust Group and their associates are eliminated
to the extent of Stockland’s interest in the associates. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Stockland and the Stockland Group Trust did not have investments in associates at 30 June 2015.
In the prior period, Stockland and Stockland Group Trust’s equity interest in one of its associates, Macquarie Park
Trust, increased from 31% to 51% becoming a joint venture from 7 February 2014. Total comprehensive income
from investments in associates includes $6 million of profits from Macquarie Park Trust for the period from 1 July
2013 to 7 February 2014.
(E2) Investments in unconsolidated structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity. Stockland considers all Retail Funds in which it currently holds an investment, and
from which it currently earns fee income, to be structured entities.
Stockland holds an interest in a number of closed-end, unlisted property funds (the Funds) that invest in real estate
assets in Australia for the purpose of generating investment income and for capital appreciation. These funds have
been determined to meet the definition of a structured entity.
On 30 June 2015, Stockland Direct Office Trust No. 2 (‘SDOT No.2’) was resolved to be wound up. At 30 June
2014, Stockland held a 19.9% interest in SDOT No.2 which was valued at $3 million. Stockland held a 19.9%
interest in Stockland Direct Retail Trust No.1 (‘SDRT No.1’) (2014; 19.9%), valued at $7 million at 30 June 2015
(2014: $6 million). Stockland’s interest in each of these Funds is included in the ‘Other Financial Assets’ line item on
the Balance Sheet. Stockland is also entitled to responsible entity and other fees from these funds and Stockland
Residential Estates Equity Fund No. 1 (‘SREEF No.1’) which are detailed in Note (F6). The amount receivable for
these fees at 30 June 2015 is $3 million (2014: $4 million) which is disclosed within other receivables in Note (C2a).
The Funds finance their operations through unitholder contributions and also through external banking facilities.
Stockland also provides a loan facility offer to SDRT No.1 which is considered in Note (F6). The maximum exposure
to risk for SDOT No.2 is the carrying value of Stockland’s investment in the Fund, and for SDRT No.1 its maximum
exposure to risk is the carrying value of its investment in the Fund and the amount of the loan facility extended to
the Fund.
(E3) Controlled entities
The following entities were 100% controlled during the current and prior years:
Controlled entities of Stockland Trust
9 Castlereagh Street Unit Trust
ADP Trust
Advance Property Fund
Capricornia Property Trust
Endeavour (No. 1) Unit Trust
Flinders Industrial Property Trust
Hervey Bay Holding Trust
Hervey Bay Sub Trust
Industrial Property Trust
SDRT 3 Property # 1 Trust
SDRT 3 Property # 2 Trust
SDRT 3 Property # 3 Trust
Shellharbour Property Trust
Stockland Castlereagh St Trust
Stockland Direct Diversified Fund
Stockland Direct Office Trust No. 4
Stockland Direct Retail Trust No. 3
Stockland Finance Holdings Pty Limited
Jimboomba Village Shopping Centre and Tavern Trust
Stockland Finance Pty Limited
SDOT 4 Property # 1 Trust
SDOT 4 Property # 2 Trust
SDOT 4 Property # 3 Trust
Stockland Industrial No. 1 Property 1 Trust
Stockland Industrial No. 1 Property 4 Trust
Stockland Industrial No. 1 Property 5 Trust
Stockland Financial Report 2015 — 116
Consolidated
Notes
Year ended 30 June 2015
(E3) CONTROLLED ENTITIES (CONTINUED)
Controlled entities of Stockland Trust (continued)
Stockland Industrial No. 1 Property 6 Trust
Stockland Industrial No. 1 Property 7 Trust
Stockland Industrial No. 1 Property 8 Trust
Stockland Industrial No. 1 Property 9 Trust
Stockland Industrial No. 1 Property 11 Trust
Stockland Retail Holding Sub-Trust No. 1
Controlled entities of Stockland Corporation Limited
Albert & Co. Pty Limited1, 2
A.C.N 116 788 713 Pty Limited1, 2
Aevum Limited1, 2
Aevum SPV Finance No. 1 Pty Limited
Affinity Retirement Village Pty Limited
ARC Joint Ventures Pty Limited1, 2
Bayview Road Property Trust
Bellevue Gardens Pty Limited
Bellevue Gardens Trust
Castlehaven Pty Limited
Castleridge Pty Limited
CReAM (GP No. 4) Limited (75%)3, 4
CReAM (GP No. 5) Limited (75%)3, 4
Endeavour (No. 2) Unit Trust
Farrington Grove Retirement Village Pty Limited
Golden Ponds Forster Pty Limited
Greenleaves Management Services Pty Limited
Greenleaves Village Pty Limited
Hibernian Investment Company Pty Limited1, 2
Highlands Retirement Village Pty Limited
IOR Friendly Society Pty Limited1, 2
IOR Group Pty Limited1, 2
Jimboomba Trust
Knowles Property Management Unit Trust
Knox Unit Trust
Knox Village Pty Limited1, 2
Lensworth Glenmore Park Limited1
Lincoln Gardens Pty Limited
Long Island Village Pty Limited1, 2
Maybrook Manor Pty Limited
Mernda Retirement Village Pty Limited
Midlands Terrace Adult Community Pty Limited1, 2
Mount Gravatt Retirement Village Unit Trust
Nowra Property Unit Trust
Oak Grange Pty Limited1, 2
Patterson Lakes Unit Trust
Patterson Village Pty Limited1, 2
Pine Lake Management Services Pty Limited
Pine Lake Management Services Unit Trust
Pine Lake Village Pty Limited
Queenslake Village Pty Limited
Retirement Living Acquisition Trust
Retirement Living Holding Trust No. 1
Retirement Living Holding Trust No. 2
Retirement Living Holding Trust No. 3
Retirement Living Holding Trust No. 4
Retirement Living Holding Trust No. 5
Stockland Retail Holding Trust No. 1
Stockland Wholesale Office Trust No. 1
Stockland Wholesale Office Trust No. 2
SWOT2 Sub Trust No. 1
SWOT2 Sub Trust No. 2
SWOT2 Sub Trust No. 3
Retirement Living Holding Trust No. 6
Retirement Living Unit Trust No. 1
Retirement Living Unit Trust No. 2
Ridgecrest Village Management Services Pty Limited
Ridgecrest Village Pty Limited
Rogan's Hill Retirement Village Trust
Rosebud Village Pty Limited1, 2
RVG (Queensland) Pty Limited
Salford Living Pty Limited1, 2
SDRT 2 Property 1 Trust
SDRT 2 Property 2 Trust
SDRT 2 Property 3 Trust
SDRT 2 Property 4 Trust
Selandra Rise Retirement Village Pty Limited
Stockland (Billingham) Limited3, 4
Stockland (Boardwalk Sub2) Pty Limited
Stockland (IH) No. 1 Pty Limited
Stockland (NSW) No. 1 Pty Limited
Stockland (NSW) No. 2 Pty Limited
Stockland (Queen Street) Limited3, 4
Stockland (Queensland) Pty Limited1, 2
Stockland (Russell Street) Pty Limited1, 2
Stockland (St Andrew) Limited3, 4
Stockland (Stafford) Limited3, 4
Stockland (UK) Limited3, 4
Stockland (Warminster) Limited3, 4
Stockland (William Hunter) Limited3, 4
Stockland Bells Creek Pty Limited1, 2
Stockland Buddina Pty Limited1
Stockland Caboolture Waters Pty Limited1, 2
Stockland Caloundra Downs Pty Limited1, 2
Stockland Capital Partners Limited1, 2
Stockland Catering Pty Limited
Stockland Development (Holdings No. 1) Pty Limited1, 2
Stockland Development (Holdings) Pty Limited1, 2
Stockland Development (NAPA NSW) Pty Limited1, 2
Stockland Development (NAPA QLD) Pty Limited1, 2
Stockland Development (NAPA VIC) Pty Limited1, 2
Stockland Development (PHH) Pty Limited1, 2
Stockland Development (PR1) Pty Limited
Stockland Development (PR2) Pty Limited
Stockland Development (PR3) Pty Limited
Stockland Development (PR4) Pty Limited
Stockland Development (Sub3) Pty Limited
Stockland Development (Sub4) Pty Limited
Stockland Development (Sub5) Pty Limited
Stockland Development (Sub6) Pty Limited
Stockland Financial Report 2015 — 117
Consolidated
Notes
Year ended 30 June 2015
(E3) CONTROLLED ENTITIES (CONTINUED)
Controlled entities of Stockland Corporation Limited (continued)
Stockland Development (Sub7) Pty Limited
Stockland Development Pty Limited1
Stockland Direct Retail Trust No. 2
Stockland Eurofinance Pty Limited1, 2
Stockland Financial Services Pty Limited1, 2
Stockland Highlands Pty Limited1
Stockland Holding Trust No. 3
Stockland Holding Trust No. 4
Stockland Holding Trust No. 5
Stockland Holding Trust No. 6
Stockland Holdings Limited3, 4
Stockland Kawana Waters Pty Limited1
Stockland Lake Doonella Pty Limited1, 2
Stockland Management Limited1, 2
Stockland North Lakes Development Pty Limited1, 2
Stockland North Lakes Pty Limited1
Stockland PR1 Trust
Stockland PR2 Trust
Stockland PR3 Trust
Stockland PR4 Trust
Stockland Property Holdings Limited3, 4
Stockland Property Management Pty Limited1, 2
Stockland Property Services Pty Limited1, 2
Stockland Retirement Pty Limited1, 2
Stockland Scrip Holdings Pty Limited
Stockland Services Pty Limited1, 2
Stockland Singapore Pte Limited
Stockland South Beach Pty Limited1, 2
Stockland Trust Management Limited1, 2
Stockland WA (Estates) Pty Limited1, 2
Stockland WA Development (Realty) Pty Limited1, 2
Stockland WA Development (Sub 6) Pty Limited
Stockland WA Development (VERTU Sub 1) Pty Limited
Stockland WA Development Pty Limited1
Stockland Wallarah Peninsula Management Pty Limited1, 2
Stockland Wallarah Peninsula Pty Limited1, 2
Templestowe Retirement Village Pty Limited1, 2
Templestowe Unit Trust
The Hastings Valley Parklands Village Pty Limited
Vermont Retirement Village Pty Limited1, 2
Vermont Unit Trust
Wantirna Village Pty Limited1, 2
Willows Retirement Village Services Pty Limited
1 These companies are parties to the Deed of Cross Guarantee and members of the Closed Group, as at 30 June 2015.
2 These companies are parties to the Deed of Cross Guarantee but are currently ineligible for relief under the Class Order.
3 These companies are registered in the UK.
4 These companies/trusts are in liquidation as at 30 June 2015.
The following entities were formed/incorporated or acquired during the financial year and are 100% controlled:
Controlled entities of Stockland Trust
Flinders Industrial Property Trust (No. 1)
Stockland Bundaberg Trust
Stockland Harrisdale Trust
Controlled entities of Stockland Corporation Limited
Stockland Retail Services Pty Limited1, 2
Stockland Care Foundation Pty Limited
Willowdale Retirement Village Pty Limited
1 These companies are parties to the Deed of Cross Guarantee and members of the Closed Group, as at 30 June 2015.
2 These companies are parties to the Deed of Cross Guarantee but are currently ineligible for relief under the Class Order.
The following entities are no longer controlled entities and were sold or liquidated during the financial year:
Controlled entities of Stockland Corporation Limited
ARVT1 Trust
ARVT2 Trust
Blue Valley Enterprises Pty Limited
CReAM (GP) Limited
Stockland (CReAM) Limited
Stockland (Cumbernauld) Limited
Stockland (Dalgety Bay) Limited
Stockland (Lowestoft) Limited
Stockland (Rylands) No. 1 Pty Limited
Stockland (Rylands) No. 2 Pty Limited
Stockland (Yeovil) Limited
Stockland Developments (UK) Limited
Stockland Management (UK) Limited
Macquarie Grove Management Pty Limited
Macquarie Waratah Holdings (NSW) Pty Limited
Macquarie Waratah Holdings Pty Limited
Macquarie Waratah Management Pty Limited
Macquarie Waratah Villages Pty Limited
Waratah Highlands Management Pty Limited
All Stockland entities were formed/incorporated in Australia with the exception of Stockland Singapore Pte Limited
which is incorporated in Singapore and all UK subsidiaries identified as being incorporated in the UK.
Stockland owns all the issued units/shares of the respective controlled entities (unless otherwise stated) and such
units/shares carry the voting, dividend and distribution and equitable rights.
Stockland Financial Report 2015 — 118
Consolidated
Notes
Year ended 30 June 2015
(E4) Deed of Cross Guarantee
Stockland Corporation Limited and certain wholly-owned companies (the ‘Closed Group’), identified in Note (E3),
are parties to a Deed of Cross Guarantee (the ‘Deed’). The effect of the Deed is that the members of the Closed
Group guarantee to each creditor, payment in full of any debt, in the event of winding up of any of the members
under certain provisions of the Corporations Act 2001.
ASIC Class Order 98/1418 (as amended) dated 13 August 1998, provides relief to parties to the Deed from the
Corporations Act 2001 requirements for preparation, audit and lodgement of Financial Reports and Directors’
reports, subject to certain conditions as set out therein. This Class Order does not apply to trusts.
Pursuant to the requirements of this Class Order, a summarised consolidated Statement of Comprehensive Income
for the year ended 30 June 2015 and consolidated Balance Sheet as at 30 June 2015, comprising the members of
the Closed Group after eliminating all transactions between members are set out on the following pages.
Balance Sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Inventories
Investment properties
Other financial assets
Equity-accounted investments
Property, plant and equipment
Intangibles
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Provisions
Other liabilities
Other financial liabilities
Total current liabilities
Non-current liabilities
Other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Closed Group
2015
$M
64
69
548
–
8
689
–
689
22
1,991
1,906
1
25
40
10
64
4,059
4,748
291
2,701
1,084
319
6
–
4,401
33
–
38
115
186
4,587
161
2014
$M
80
656
566
502
10
1,814
73
1,887
11
1,746
1,591
30
24
62
10
30
3,504
5,391
166
–
836
226
66
2
1,296
53
3,656
38
170
3,917
5,213
178
1,305
2
(1,146)
161
1,303
50
(1,175)
178
Stockland Financial Report 2015 — 119
Consolidated
Notes
Year ended 30 June 2015
(E4) DEED OF CROSS GUARANTEE (CONTINUED)
Summarised Statement of Comprehensive Income
Profit/(loss) before income tax benefit
Income tax benefit / (expense)
Profit/(Loss) for the year/Total comprehensive income/(expense)
Summary of movements in Closed Group’s accumulated losses
Summary of movements in accumulated losses
Accumulated losses at 1 July
Profit/(Loss) for the year
Accumulated losses at 30 June
Closed Group
2015
$M
23
6
29
Closed Group
2015
$M
(1,175)
29
(1,146)
2014
$M
(166)
(7)
(173)
2014
$M
(1,002)
(173)
(1,175)
(E5) Parent entity disclosures
The financial information of the parent entity of Stockland has been prepared on the same basis as the consolidated
financial report, except as set out below:
Investments in subsidiaries and equity-accounted investments
Investments in subsidiaries and equity-accounted investments are accounted for at cost in the financial report of the
parent. Distributions received from the subsidiaries and equity-accounted investments are recognised in the parent
entity’s profit or loss rather than being deducted from the carrying amount of the investments.
As at and for the year ended 30 June 2015 and 30 June 2014 the parent entity of Stockland was the Company.
The parent entity of the Stockland Trust Group was the Trust.
Results for the year ended 30 June
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the year
Financial position as at 30 June
Current assets
Total assets1
Current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Retained earnings
Total equity
1 No intangible assets are included in total assets (2014: $Nil).
Stockland
Corporation Limited
Stockland
Trust
2015
$M
60
(51)
9
3,802
3,984
3,831
3,831
153
1,305
2
2014
$M
(115)
51
(64)
3,881
3,975
3,832
3,832
143
1,304
53
(1,154)
(1,214)
153
143
2015
$M
876
–
876
251
16,674
6,150
8,106
8,568
7,255
63
1,250
8,568
2014
$M
781
–
781
604
16,914
7,160
8,835
8,079
7,116
24
939
8,079
Stockland Financial Report 2015 — 120
Consolidated
Notes
Year ended 30 June 2015
(E5) PARENT ENTITY DISCLOSURES (CONTINUED)
Stockland Corporation Limited net asset deficiency position
Stockland Corporation Group has a net current asset deficiency as at 30 June 2015.
The net current liabilities includes a $3,831 million related party loan from Stockland Trust Group. The loan is
repayable ‘at call’, however, the Stockland Trust Group does not intend to call the loan within the next 12 months.
Parent Entity contingencies
There are no contingencies within either parent entity as at 30 June 2015 (2014: $Nil).
Parent entity capital commitments
Neither parent entity has entered into any capital commitments as at 30 June 2015 (2014: $Nil).
Parent entity guarantees in respect of debts of its subsidiaries
The Company has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in
respect of its subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed
are disclosed in Note (E4).
Stockland Financial Report 2015 — 121
Consolidated
Notes
Year ended 30 June 2015
(F) Other items
IN THIS SECTION
This section includes information that the Directors do not consider to be significant in understanding the
financial performance and position of the Group, but must be disclosed to comply with the Accounting
Standards, the Corporations Act 2001 or the Corporations Regulations.
(F1) Accounting Policies
KEEPING IT SIMPLE …
To aid the reader, accounting policies that apply to a specific category in the profit and loss or balance sheet
have been included within the relevant notes.
The accounting policies listed below are those that apply across a number of the Group’s profit and loss and
balance sheet categories and are not specific to a single category.
Principles of consolidation
Controlled entities
The consolidated financial statements of Stockland and the Stockland Trust Group incorporate the assets, liabilities
and results of all controlled entities as at 30 June 2015.
Controlled entities are all entities over which the Company or the Trust has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence
and effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Company or Trust controls another entity.
Intercompany transactions, balances and unrealised gains on transactions between controlled entities are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the
asset transferred.
Foreign currency
Transactions
Foreign currency transactions are translated into the entity’s functional currency at the exchange rate on the
transaction date.
Assets and liabilities denominated in foreign currencies are translated to Australian dollars at balance date using the
following applicable exchange rates:
Foreign currency amount
Monetary assets and liabilities
Non-monetary assets and liabilities measured at historical cost
Applicable exchange rate
Balance date
Date of transaction
Non-monetary assets and liabilities measured at fair value
Date fair value is determined
Foreign exchange differences arising on translation are recognised in the profit or loss.
Translation of financial reports of foreign operations
Financial reports of foreign operations are translated to Australian dollars using the following applicable exchange
rates:
Foreign currency amount
Revenues and expenses of foreign operations
Assets and liabilities of foreign operations, including goodwill and fair value adjustments
arising on consolidation
Equity items
Applicable exchange rate
Date of transaction
Balance date
Historical rates
Stockland Financial Report 2015 — 122
Consolidated
Notes
Year ended 30 June 2015
(F1) ACCOUNTING POLICIES (CONTINUED)
The following foreign exchange differences are recognised directly in the Foreign Currency Translation Reserve
(‘FCTR’), a separate component of equity:
• Foreign currency differences arising on translation of foreign operations;
• Exchange differences arising from the translation of the net investment in foreign entities and of related hedges.
They are recycled into the profit or loss upon disposal.
• Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned nor likely in the foreseeable future. These monetary items
are considered to form part of the net investment in a foreign operation.
Reserves
Executive remuneration reserve
The executive remuneration reserve arises due to the rights and deferred shares awarded under the PRP and DSTI
being accounted for as share based payments. The fair value of the rights is recognised as an employee expense in
the profit or loss with a corresponding increase in reserves and decrease upon vesting.
Cash flow hedge reserve
The cash flow hedge reserve is used to record the effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges. Refer to Note (D4).
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets
until the assets are derecognised or impaired.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations and from derivatives used to hedge operations/funding.
New and amended Accounting Standards
Mandatory for the year to 30 June 2015
Stockland has adopted all the mandatory amended accounting standards issued that are relevant to its operations
and effective for the current reporting period. Of the accounting standards that have been amended and published
that are mandatory for this reporting period, the following have been noted for their material impact on Stockland:
• AASB 2013-3 Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets
(effective 1 January 2014). The AASB has made small changes to some of the disclosures that are required
under AASB 136 Impairment of Assets. These may result in additional disclosures when recognising an
impairment loss or the reversal of an impairment loss during the period. They do not affect any of the amounts
recognised in the financial statements. Application of this standard by the Group does not affect any of the
amounts recognised in the financial statements, but impacts the type of information disclosed in
relation to the Group's impairment losses and reversals.
• AASB 2013-4 Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of
Hedge Accounting (effective 1 January 2014). The AASB has made small amendments to AASB 139 Financial
Instruments: Recognition and measurement. The amendments will allow entities to continue hedge accounting,
where a derivative contract that was designated as a hedge has been novated to a central counterparty as a
consequence of laws or regulations. The Group has not novated any hedging contracts in the current or
prior periods, applying the amendments did not affect any of the amounts recognised in the financial
statements.
Mandatory in future years
Certain new accounting standards and interpretations have been published that are not mandatory for the year
ended 30 June 2015. Stockland’s assessment of the impact of these new standards and interpretations is set out
below:
AASB 9 Financial Instruments (effective for annual reporting periods beginning on or after 1 January 2018)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
financial liabilities. The standard is not applicable until 1 January 2018 but is available for early adoption. When
adopted, the standard will affect in particular Stockland’s accounting for its available-for-sale financial assets, but no
impact is expected on Stockland’s financial liabilities. Stockland has not yet decided when to adopt AASB 9.
Stockland Financial Report 2015 — 123
Consolidated
Notes
Year ended 30 June 2015
(F1) ACCOUNTING POLICIES (CONTINUED)
AASB 15 Revenue from Contracts with Customers (effective for annual reporting periods beginning on or after 1
January 2017)
AASB 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including
AASB 118 Revenue, AASB 111 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. AASB 15 is
effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. Stockland
is assessing the potential impact on its consolidated financial statements resulting from the application of AASB 15.
(F2) Earnings per security/unit
KEEPING IT SIMPLE …
Earnings per security (‘EPS’) is the amount of post-tax profit attributable to each security.
Basic EPS is calculated on Stockland’s and the Stockland Trust Group’s statutory profit for the year divided
by the weighted average number of securities outstanding.
Diluted EPS adjusts the Basic EPS for the dilutive effect of any instruments, such as options, that could be
converted into ordinary securities.
Basic underlying earnings per security are disclosed in the Directors’ Report on page 9.
The calculation of basic earnings per security has been based on the following profit attributable to ordinary
securityholders and weighted-average number of ordinary securities outstanding.
Stockland
Stockland Trust Group
Year ended 30 June
Basic and diluted earnings per security/unit
Basic earnings per security/unit
Diluted earnings per security/unit
2015
cents
38.5
38.5
2014
cents
22.8
22.7
2015
cents
2014
cents
36.9
36.9
27.7
27.7
Reconciliations of earnings used in calculating earnings per security/unit
Year ended 30 June
Basic and diluted earnings
Stockland
Stockland Trust Group
2015
$M
2014
$M
2015
$M
2014
$M
Profit attributable to securityholders/unitholders
903
527
867
641
Weighted average number of securities/units used as the denominator
As at 30 June
Weighted average number of securities/units (basic)
Stockland and Stockland Trust Group
2015
No.
2014
No.
Weighted average number of securities/units
2,346,566,571
2,311,367,784
Weighted average number of securities/units (diluted)
Weighted average number of securities/units (basic)
Effect of rights and securities/units granted under share plans
Weighted average number of securities/units (diluted)
2,346,566,571
2,715,233
2,349,281,804
2,311,367,784
7,153,903
2,318,521,687
Rights and securities/units granted under security plans are only included in diluted earnings per security/unit where
Stockland is meeting performance hurdles for contingently issuable share based payment rights.
Stockland Financial Report 2015 — 124
Consolidated
Notes
Year ended 30 June 2015
(F3) Notes to Cash Flow Statements
Reconciliation of profit to net cash flow from operating
activities:
Profit
903
527
867
641
Add/(less) items classified as investing/financing activities:
Stockland
Stockland Trust Group
2015
$M
2014
$M
2015
$M
2014
$M
Net loss on fair value hedges
Net loss on derivatives – through profit and loss
Interest capitalised to investment properties
Net loss on sale of non-current assets
Net gain on sale of other financial assets
Dividends and distributions income
Add/(less) non-cash items:
DMF base fee earned, unrealised
Depreciation
Impairment of intangibles
Straight-line rent adjustment
Net change in fair value of investment properties
(including equity-accounted investments)
Share of profits of equity-accounted investments, net of
distributions received
Equity-settled share based payments
Other items
Net cash flow from operating activities before change in
assets and liabilities
Decrease in receivables
Increase in other assets
Increase in inventories
Increase/(Decrease) in deferred tax assets
Increase/(Decrease) in payables and other liabilities
Increase in resident obligations
Increase/(Decrease) in employee benefits
Increase/(Decrease) in other provisions
Net cash flow from operating activities
18
22
(15)
2
(73)
(5)
(27)
15
43
(8)
(344)
(6)
13
(8)
530
1
(31)
(268)
(9)
20
170
2
(14)
401
5
63
(12)
6
(35)
(19)
(11)
16
23
(7)
(36)
(5)
7
4
526
48
(3)
(41)
3
7
91
(1)
122
752
18
22
(8)
1
–
(2)
–
–
–
(8)
5
63
(4)
8
1
–
–
–
–
(7)
(292)
(102)
(7)
–
(1)
590
8
(34)
–
–
(19)
–
–
(5)
540
(4)
–
–
601
26
(5)
–
–
(28)
–
–
–
594
Stockland Financial Report 2015 — 125
Consolidated
Notes
Year ended 30 June 2015
(F4) Contingent liabilities
KEEPING IT SIMPLE …
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where
uncertainty may exist regarding the outcome of future events.
The only known contingent liabilities at 30 June 2015, other than the Stockland Bundaberg put option disclosed in
note (E1a), are the bank guarantees and insurance bonds.
Guarantees
Bank guarantees and insurance bonds issued to semi and local
government and other authorities against performance contracts,
maximum facility $450 million (2014: $450 million)
Stockland
2015
$M
Stockland
Trust Group
2014
$M
2015
$M
2014
$M
300
262
300
262
No deficiencies of assets exist in relation to any of the companies to which bank guarantees apply.
(F5) Commitments
Capital expenditure commitments
Commitments for the acquisition of land and future development costs not recognised in the financial statements at
balance date:
Inventory commitments
Investment property commitments
Total capital expenditure commitments
Operating lease commitments
183
152
335
240
305
545
–
54
54
Commitments for the operating lease expenditure not recognised in the financial statements at balance date:
Within one year
Later than one year but not later than five years
Later than five years
Total operating lease commitments
4
8
–
12
4
8
1
13
–
–
–
–
–
229
229
–
–
–
–
During the current financial year, $4 million was recognised as an expense in Stockland’s profit or loss in respect of
operating leases (2014: $7 million).
(F6) Related party disclosures
Details of related party dealings with the Stockland and Stockland Trust Group companies are set out below:
Responsible Entity and other management fees
Stockland received Responsible Entity and other Management Fees from the unlisted property funds managed by
Stockland during the financial year.
The Stockland Trust Group paid Responsible Entity fees to Stockland Trust Management Limited, calculated at
0.2% of gross assets of the Stockland Trust Group less intercompany loans (2014: 0.2%).
Property management expenses were paid by Stockland Trust Group to Stockland Trust Management Limited (the
Responsible Entity) or its related parties provided in the normal course of business and on normal terms and
conditions.
Rental income
Rent was paid by Stockland Corporation Limited, a related party of the Responsible Entity to the Stockland Trust
Group in the normal course of business and on normal terms and conditions.
Stockland Financial Report 2015 — 126
Consolidated
Notes
Year ended 30 June 2015
(F6) RELATED PARTY DISCLOSURES (CONTINUED)
Finance income
Stockland Trust Management Limited (a controlled entity of Stockland Corporation Limited) or a nominated
subsidiary of Stockland has provided loan facility offers to two unlisted property funds managed by Stockland on
market terms and conditions available at the date of acceptance of the loan facility offer. The loan facility offers have
not yet been accepted by the related parties. The loan facility offer to Stockland Direct Retail Trust No. 1 (‘SDRT
No. 1’) of $40 million was extinguished on 19 December 2014. SDRT No. 1 was charged a line fee of 30 basis
points on this facility offer. The loan facility offer to Stockland Residential Estates Equity Fund No. 1 (‘SREEF No.1’)
of $11 million expires on 30 September 2017. SREEF No. 1 was charged a line fee of 20 basis points on this facility
offer.
The Stockland Trust Group has an unsecured loan to Stockland Corporation Limited Group repayable at call to the
Stockland Trust Group of $3,378 million (2014: $3,657 million). Interest on the loan is payable monthly in arrears at
interest rates within the range of 8.6% to 9.2% during the year ended 30 June 2015 (2014: 8.6% to 9.6%). The
Stockland Trust Group has not called on this loan at 30 June 2015.
Interest was paid by the Company to the Stockland Trust Group, a related party of the Responsible Entity provided
in the normal course of business and on normal terms and conditions.
Development Management Fee
A development management deed was executed between Stockland Trust and Stockland Development Pty Limited
(a controlled entity of the Company) effective 1 July 2012 in relation to a management fee in respect of Retail
developments. The fee represents remuneration for the Corporation’s property development expertise and is
calculated as 50 per cent of the total valuation gain or loss on the completion of a development. Fees are paid by
Stockland Trust to Stockland Development Pty Limited.
Revenue
Responsible Entity fees
Management and service fee
Property management and leasing fees
Rental income
Finance income
Total revenue from related parties
Expenses
Responsible Entity fees
Property management and leasing fees
Recoupment of expenses
Development management fee capitalised to
investment property
Total expenses to related parties
Stockland
Stockland Trust Group
2015
$’000s
2014
$’000s
2015
$’000s
2014
$’000s
1,003
2,900
2,787
–
195
6,885
–
–
–
–
–
1,789
1,363
2,313
–
408
–
–
–
–
–
–
4,557
9,324
296,991
328,293
5,873
301,548
337,617
–
–
–
–
–
18,043
24,336
70,193
13,260
17,020
24,966
49,746
11,300
125,832
103,032
Stockland has trade receivables of $2,921 thousand (2014: $4,369 thousand) due from the unlisted property funds.
As at 30 June 2015, the carrying amount of Stockland’s investment in the unlisted property funds was $5,237
thousand (2014: $6,029 thousand).
Stockland Financial Report 2015 — 127
Consolidated
Notes
Year ended 30 June 2015
(F7) Personnel expenses
Personnel expenses comprised of the following:
Year ended 30 June
Wages and salaries (including on-costs)
Contributions to defined contribution plans
Equity-settled share based payment transactions
Increase in annual and long service leave provisions
$1,000 Employee Security Plan (including associated costs)
Total personnel expenses
Stockland
Stockland Trust Group
2014
$M
162
11
7
3
1
184
2015
$M
2014
$M
–
–
–
–
–
–
–
–
–
–
–
–
2015
$M
173
12
13
2
1
201
This disclosure note includes the accounting policies for all items related to personnel expenses. This includes the
treatment of balance sheet items that relate to personnel expenses such as provision for employee benefits, which
are included in Other Liabilities on the balance sheet.
Annual leave
Accrued annual leave of $7 million (2014: $7 million) is presented as current, since the Group does not have an
unconditional right to defer settlement for any of these obligations. Based on past experience, the Group expects all
employees to take the full amount of accrued leave within the next 12 months.
Long service leave
The current portion of long service leave includes all unconditional entitlements where employees have completed
the required period of service and also those where employees are entitled to pro-rata payments in certain
circumstances.
The liability for long service leave expected to be settled more than 12 months from the balance date is recognised
in the provision for employee benefits and measured as the present value of expected payments to be made in
respect of services provided by employees up to the balance date.
Consideration is given to expected future wage and salary levels, past experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the balance date on corporate
bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
Bonus entitlements
A liability is recognised in current trade and other payables for employee benefits in the form of employee bonus
entitlements where there is a contractual obligation or where there is a past practice that has created a constructive
obligation. Liabilities for employee bonus entitlements are expected to be settled within 12 months and are
measured at the amounts expected to be paid when they are settled.
Superannuation plan
The Company contributes to several defined contribution superannuation plans. Contributions are recognised as a
personnel expense as they are incurred.
Stockland Financial Report 2015 — 128
Consolidated
Notes
Year ended 30 June 2015
(F8) Key Management Personnel disclosures
Key management personnel compensation comprised of the following:
Year ended 30 June
Short term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share based payments
Total key management personnel compensation
2015
$’000s
12,769
207
104
–
5,560
18,640
2014
$’000s
10,933
167
(66)
305
3,342
14,681
Information regarding individual Directors’ and Executives’ remuneration is provided in the Remuneration Report on
pages 34 to 55 of the Directors’ Report.
Other transactions with KMP
There are transactions between Stockland and entities with which Directors have an association. These
transactions do not meet the definition of related parties since the Directors as individuals are not considered to
have control or significant influence over the financial or operating activities of the respective non-Stockland entities.
Furthermore, the terms and conditions of those transactions were no more favourable than those available, or might
reasonably be available, on similar transactions to non-Director related entities on an arm’s length basis.
(F9) Auditor’s remuneration
Stockland
Stockland
Trust Group
2015
$’000s
2014
$’000s
2015
$’000s
2014
$’000s
Auditor of Stockland – PricewaterhouseCoopers Australia
Audit services
Audit and review of the Financial Report
Audit of Unlisted Property Fund Financial Reports
Regulatory audit and assurance services
Other audit and assurance services
1,524
1,406
189
561
308
233
559
130
Total remuneration in relation to audit services
2,582
2,328
Other non-audit related services
Taxation compliance services
Other taxation and restructuring services
Other non-audit services
Total remuneration in relation to non-audit services
224
–
706
930
232
32
164
428
Total auditor remuneration
3,512
2,756
476
–
417
–
893
490
–
421
–
911
152
152
–
–
152
1,045
–
–
152
1,063
Auditor’s fees are paid by Stockland Development Pty Limited on behalf of Stockland and Stockland Trust Group.
(F10) Events subsequent to the end of the year
Stockland and Stockland Trust Group
Other than disclosed elsewhere in this report, there has not arisen in the interval between the end of the current
financial year and the date of this report any item, transaction or event of a material or unusual nature, likely, in the
opinion of the Directors, to affect significantly the operations, the results of operations, or the state of the affairs in
future years of Stockland and the Stockland Trust Group.
Stockland Financial Report 2015 — 129
Directors’
Declaration
Year ended 30 June 2015
(1) In the opinion of the Directors of Stockland Corporation Limited (‘the Company’), and the Directors of the
Responsible Entity of Stockland Trust (‘the Trust’), Stockland Trust Management Limited (collectively referred
to as ‘the Directors’):
(a) the financial statements and Notes, in the Directors’ Report of Stockland Corporation Limited and its
controlled entities, including Stockland Trust and its controlled entities (‘Stockland’) and Stockland Trust
and its controlled entities (‘Stockland Trust Group’), set out on pages 58 to 129, are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of Stockland’s and Stockland Trust Group’s financial position as at 30 June
2015 and of their performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including Australian Accounting Interpretations) and
the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that both Stockland and Stockland Trust Group will be able to pay
their debts as and when they become due and payable.
(2) There are reasonable grounds to believe that the Company and the Group entities identified in Note (E3) will be
able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of
Cross Guarantee between those Group entities pursuant to ASIC Class Order 98/1418.
(3) The Trust has operated during the year ended 30 June 2015 in accordance with the provisions of the Trust
Constitution of 24 October 2006, as amended.
(4) The Register of Unitholders has, during the year ended 30 June 2015, been properly drawn up and maintained
so as to give a true account of the unitholders of the Trust.
(5) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from
the Managing Director and Chief Financial Officer for the year ended 30 June 2015.
(6) The Directors draw attention to Note A to the financial statements, which includes a Statement of Compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Graham Bradley
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 19 August 2015
Stockland Financial Report 2015 — 130
Independent
Auditor’s Report
Independent auditor’s report to the stapled securityholders of
Stockland Consolidated Group and the unitholders of Stockland
Trust Group
Report on the financial report
We have audited the accompanying financial report which comprises:
the Consolidated Balance Sheet as at 30 June 2015, the Consolidated Statement of Profit or Loss and Other
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement
for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the
directors’ declaration for Stockland Consolidated Group, being the consolidated stapled entity (“Stockland
Consolidated Group”). The consolidated stapled entity, as disclosed in Note A of the financial report, comprises
Stockland Corporation Limited and the entities it controlled at year’s end or from time to time during the financial
year, including Stockland Trust and the entities it controlled at year’s end or from time to time during the financial
year, and
the Consolidated Balance Sheet as at 30 June 2015, the Consolidated Statement of Profit or Loss and Other
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement
for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the
directors’ declaration for Stockland Trust Group, being the consolidated entity (“Stockland Trust Group”). The
consolidated entity comprises Stockland Trust and the entities it controlled at year’s end or from time to time
during the financial year.
Directors’ responsibility for the financial report
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management Limited, the
Responsible Entity of Stockland Trust, (collectively referred to as “the directors”) 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 is free from material misstatement, whether due to fraud or error. In Note A, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Stockland Financial Report 2015 — 131
ndepen
In
uditor’
A
ndent
s Repo
ort
An a
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the
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audit involves
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Stockland Co
sign audit proc
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aluating the ap
ectors, as well
performing p
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whether due to
onsolidated Gr
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he Stockland
ppropriateness
as evaluating
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n the auditor’s
o fraud or erro
roup and Stoc
re appropriate
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s of accounting
g the overall pr
obtain audit ev
s judgement, i
r. In making th
kland Trust G
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resentation of
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tockland Trust
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We
believe that th
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obtained is su
ufficient and a
ppropriate to p
provide a basi
is for our audi
t opinions.
Ind
dependence
In c
conducting our
r audit, we hav
ve complied w
with the indepe
endence requi
rements of the
e Corporations
s Act 2001.
Aud
ditor’s opinio
on
In o
our opinion:
a)
the financial
2001, includi
report of Stoc
ing:
ckland Consoli
idated Group
and Stockland
d Trust Group
is in accordan
nce with the C
Corporations A
Act
i. giving a
June 2
a true and fair
015 and of the
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eir performanc
kland Consolid
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dated Group a
r ended on tha
and Stockland
at date; and
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s financial pos
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sitions as at 30
ii.
comply
Corpor
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rations Regula
ralian Account
ations 2001.
ting Standards
s (including th
he Australian A
Accounting Int
terpretations)
and the
b)
the financial
report also co
omplies with In
nternational Fi
inancial Repo
rting Standard
ds as disclosed
d in Note A.
Re
eport on th
he Remun
neration Re
eport
We
dire
acc
repo
have audited
ectors of Stock
ordance with s
ort, based on
the remunera
kland Consolid
section 300A
our audit cond
ation report inc
dated Group a
of the Corpora
ducted in acco
cluded in page
are responsible
ations Act 200
ordance with A
es 34 to 55 of
e for the prepa
01. Our respon
Australian Aud
the directors’
aration and pr
nsibility is to e
diting Standard
report for the
resentation of
express an opi
ds.
year ended 3
the remunera
inion on the re
30 June 2015.
ation report in
emuneration
The
Aud
ditor’s opinio
on
In o
300
our opinion, the
0A of the Corp
e remuneratio
porations Act 2
on report of Sto
2001.
ockland Cons
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Coopers
olidated Grou
p for the year
ended 30 Jun
ne 2015, comp
plies with sect
tion
S J
Par
Hadfield
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N R McConn
Partner
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Sydn
19 August 20
ney
015
Stockla
and Financial R
Report 2015 —
— 132
Security Information
and key dates
Securityholders
The information set out below was prepared as at 31 July 2015 and applies equally to Stockland Trust and
Stockland Corporation Limited, as members are required to hold equal numbers of units in the Trust and shares in
the Corporation under the terms of the joint quotation on the Australian Securities Exchange. As at 31 July 2015,
there were on issue 2,361,717,862 ordinary units in the Trust and ordinary shares in the Corporation. There is no
current on-market buy back.
Largest Twenty Ordinary Unitholders/Securityholders
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
AMP Life Limited
RBC Investor Services Australia Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
Questor Financial Services Limited
SBN Nominees Pty Limited <10004 Account>
UBS Wealth Management Australia Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
EG Holdings Pty Limited
Bond Street Custodians Limited
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Merrill Lynch (Australia) Nominees Pty Limited
UBS Nominees Pty Ltd
Distribution of securityholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 - 100,000
100,001 - over
Number of
securities
787,666,594
412,161,123
351,323,352
171,125,913
100,465,774
35,307,335
27,692,787
26,196,866
12,696,795
10,818,873
8,000,000
7,839,174
7,478,205
7,091,544
6,411,632
6,279,838
6,274,822
5,122,000
4,497,900
4,497,222
Percentage of
issued securities
33.35
17.45
14.88
7.25
4.25
1.49
1.17
1.11
0.54
0.46
0.34
0.33
0.32
0.30
0.27
0.27
0.27
0.22
0.19
0.19
Number of
securities
4,487,852
61,480,896
66,293,168
125,241,403
2,104,214,543
Percentage of
securityholders
0.19
2.60
2.81
5.30
89.10
There were 1,861 securityholders holding less than a marketable parcel (118) at close of trading on 31 July 2015.
Substantial securityholders
Number of units/shares
Vanguard Investments Australia Limited/Vanguard Group Inc.
BlackRock Group (BlackRock Inc. and subsidiaries)
State Street Corporate and subsidiaries
National Australia Bank Limited and its associated entities
AMP Limited (and its related bodies corporate)
167,110,561
157,018,611
136,943,104
118,198,190
118,142,950
Stockland Financial Report 2015 — 133
Security Information
and key dates
End of Financial Year Tax Statement
After 30 June each year you will receive a comprehensive tax statement. This statement summarises the
distributions and dividends paid to you during the year, and includes information required to complete your
tax return.
Shareholder Review and Financial Report
the Shareholder Review only;
Members have a choice of whether they receive:
•
• a Financial Report;
•
• electronic versions of the Shareholder Review and Financial Report.
the Shareholder Review plus Financial Report; or
Registry
Computershare Investor Services Pty Limited operates a freecall number on behalf of Stockland.
Contact Computershare on 1800 804 985 for:
request to receive communications online;
request to have payments made directly to a bank account;
• change of address details;
•
•
• provision of tax file numbers; or
• general queries about your securityholding.
Distribution Periods
1 July – 31 December
1 January – 30 June
Record Dates
31 December 2015
30 June 2016
Annual General Meeting
To be held at the Radisson Blu Hotel Sydney, 27 O’Connell Street, Sydney, New South Wales
at 2.30pm on Tuesday 27 October 2015.
Stockland Financial Report 2015 — 134
Security Information
and key dates
Key Dates
27 October 2015
Annual General Meeting
Radisson Blu Hotel Sydney, 27 O’Connell Street, Sydney, NSW 2000 at 2.30pm
On or about 17 December 2015
Announcement of estimated dividend/distribution
31 December 2015
Record date
10 February 2016
Half-year result announcement
On or about 20 June 2016
Announcement of estimated dividend/distribution
30 June 2016
Record date
17 August 2016
Full-year result announcement
Stockland Financial Report 2015 — 135