2008 annual financial reports

Transcription

ABACUS HOSPITALITY FUND
ABN 62 116 839 304
ANNUAL FINANCIAL REPORT
For the year ended 30 June 2008
ANNUAL FINANCIAL REPORT
30 JUNE 2008
Directory
Responsible Entity:
Abacus Funds Management Limited
Level 34, Australia Square
264-278 George Street
SYDNEY NSW 2000
Tel: (02) 9253 8600
Fax: (02) 9253 8616
Website: www.abacusproperty.com.au
Directors of Responsible Entity and Abacus
Hospitality Limited:
John Thame, Chairman
Frank Wolf, Managing Director
William J Bartlett, Non-executive Director
David Bastian, Non-executive Director
Dennis Bluth, Non-executive Director
Malcolm Irving, Non-executive Director
Len Lloyd, Executive Director
Company Secretary:
Ellis Varejes
Contents
Contents
Custodian:
Perpetual Trustee Company Limited
Level 12 Angel Place
123 Pitt Street
SYDNEY NSW 2000
Share Registry:
Computershare Fund Services Pty Limited
GPO Box 804
MELBOURNE VIC 3001
Tel: 1800 213 154 Toll free
Auditor:
Ernst & Young
Ernst & Young Centre
680 George Street
SYDNEY NSW 2000
Compliance Plan Auditor:
Ernst & Young
Ernst & Young Centre
680 George Street
SYDNEY NSW 2000
Page
Directors’ Report
2
Auditor’s Independence Declaration
9
Income Statement
10
Balance Sheet
11
Statement of Changes in Equity
13
Cash Flow Statement
15
Notes to the Financial Statements
16
Directors’ Declaration
58
Independent Audit Report
59
It is recommended that this Annual Financial Report should be read in conjunction with the Annual Financial Reports of Abacus Hospitality Trust for
the year ended 30 June 2008. It is also recommended that the report be considered together with any public announcements made by the Abacus
Hospitality Fund in accordance with its continuous disclosure obligations arising under the Corporations Act 2001.
1
DIRECTORS’ REPORT
30 JUNE 2008
The Directors present their report together with the consolidated financial reports of Abacus Hospitality Limited and
the auditor’s report thereon.
Abacus Hospitality Limited (“AHL” or the “Company”) has been identified as the parent entity of the group referred to
as the Abacus Hospitality Fund (“AHF” or the “Fund”). The consolidated financial reports of AHF comprise the
consolidated financial reports of AHL and its controlled entities and Abacus Hospitality Trust and its controlled
entities (“AHT”).
DIRECTORS
The Directors of AHL in office during the financial year and until the date of this report are as follows. Directors were
in office for this entire period unless otherwise stated.
John Thame
Frank Wolf
William Bartlett
David Bastian
Dennis Bluth
Malcolm Irving
Len Lloyd
Chairman (Non-executive)
Managing Director
Non-executive Director
Executive Director
Appointed on 27/09/2007
PRINCIPAL ACTIVITIES
The principal activity of the Fund during the year ended 30 June 2008 was the ownership and operation of hotels in
Australia and New Zealand.
FUND STRUCTURE
The Fund represents the consolidation of AHL and its subsidiaries and AHT and its subsidiaries. Units in AHT and
shares in AHL have been stapled together so that neither can be dealt without the other. An AHF security consists of
one unit in AHT and one share in AHL. A transfer, issue or reorganisation of a unit or share in any of the component
parts is accompanied by a transfer, issue or reorganisation of a unit or share in each of the other component parts.
AHL is a company incorporated and domiciled in Australia. AHT is an Australian registered managed investment
scheme. Abacus Funds Management Limited (AFML), the Responsible Entity of AHT, is incorporated and domiciled in
Australia and is a wholly owned subsidiary of Abacus Group Holdings Limited (AGHL) which is the parent of the
Abacus Property Group (Abacus or APG).
The registered office and principal place of business of AGHL and of AFML is located at Level 34 Australia Square,
264-278 George Street, Sydney NSW 2000.
2
DIRECTORS’ REPORT
30 JUNE 2008
OPERATING PROFIT
While the Fund incurred a net loss attributable to stapled security holders of $3.1 million for the year ended 30 June
2008 (30 June 2007: net profit of $14.8 million including gain on sale of investment property), the earnings before
interest, taxes, depreciation and amortisation (EBITDA) for the year was $25.7 million (30 June 2007: $16.7 million).
EARNINGS PER STAPLED SECURITY
CONSOLIDATED
Basic and diluted earnings per security
2008
2007
$
$
(0.09)
1.86
DISTRIBUTIONS
Distributions paid to security holders for the year ended 30 June 2008 were as follows (2007: $14.8 million):
Cents
$’000
Interim distribution paid 13 November 2007
2.0000
494
Interim distribution paid 6 February 2008
2.0000
636
Interim distribution paid 6 May 2008
2.0000
788
Final distribution payable 7 August 2008
2.0625
927
Total
8.0625
2,845
AHT funded all distributions to AHF stapled security holders for the year ended 30 June 2008.
REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Fund Overview
The Fund operates within Australia and New Zealand and as at the date of this report the Fund held a hotel portfolio
of eight hotels.
Operating results
The Fund’s total revenue for the year grew by 93.2% and like for like EBITDA, excluding net gain on sale of investment
property increased by 57.3%, which reflects the growth in size of the Fund from four to eight hotels during the year.
3
DIRECTORS’ REPORT
30 JUNE 2008
REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS continued
The Fund’s revenues and EBITDA during the year ended 30 June 2008 were as follows:
Total Revenue1
EBITDA1
“Normalised” EBITDA1,2
Distributions per security (cents)
CONSOLIDATED
2007
2008
$’000
$’000
87,152
45,119
25,675
16,722
22,220
14,124
8.0625
8.0000
Change
%
93.2%
53.5%
57.3%
0.8%
1. Excluding net gain on sale of investment property, namely the Rendezvous Hotel in Auckland NZ (a transaction that pre-dated the launch of this
fund).
2. Normalised EBITDA is net EBITDA adjusted for AIFRS fair value adjustments (namely property revaluations, revaluations of derivatives and other
financial instruments).
The Fund’s gross assets and financial condition strengthened from increased portfolio of hotel assets, operational
activities and increased securities inflows during the year ended 30 June 2008:
Total Assets ($ million)
Total Bank Debt ($ million)
Bank Gearing - net of cash (%)
Securities on issue (‘000)
Weighted average securities on issue (‘000)
CONSOLIDATED
2007
2008
340.4
173.7
182.0
89.6
50.7
49.6
45,492
20,494
34,378
7,962
Change %
96.0%
102.9%
0.9%
122.0%
331.8%
Hotel Portfolio
The Fund acquired the Rydges Southbank Townsville hotel ($18.8m), Swissôtel Sydney ($85m), Rydges
Esplanade Resort in Cairns ($35.1m) and the investment hotel property of the Diplomat Hotel in Canberra
($13.3m) during the year.
At 30 June 2008, the Fund owned 8 hotels - Rydges Tradewinds in Cairns, Rydges Esplanade in Cairns, Novotel
Twin Waters Resort on the Sunshine Coast, Rydges Gladstone, Rydges Southbank Townsville in Queensland,
Chateau on the Park in Christchurch, Swissôtel Sydney and the Diplomat Hotel in Canberra with an aggregate
value of approximately $340.4 million.
Review of Financial condition
Revaluations of $7.8m were recorded for Rydges Tradewinds ($2.3m), Novotel Twin Waters ($1.7m), Chateau ($0.7m)
and Rydges Esplanade ($3.1m) for the year ended 30 June 2008. These revaluations are reflected in the Asset
Revaluation Reserve.
AHF stapled securities under the public offer (dated 4 April 2008) are being issued at $1.03 per security, with 97.85
cent cost base allocated to an AHT unit and 5.15 cent cost base allocated to an AHL share.
A total of approximately $45.5 million of stapled securities in AHF were on issue at 30 June 2008 (June 2007: $20.5
million), with approximately $2.3 million allocated to contributed equity of the AHL and approximately $43.2 million
allocated to contributed equity of the AHT.
4
DIRECTORS’ REPORT
30 JUNE 2008
REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES IN THE STATE
STATE OF AFFAIRS continued
At 30 June 2008, existing bank loan facilities totalled approximately $154.3 million in Australian dollar denominated
loans, of which $154.2 million was drawn, and a fully drawn facility of NZ$35 million (A$27.8 million) in New Zealand
dollar denominated loans. A further $96.7 million of the existing $150 million Abacus working capital facility was
drawn as at 30 June 2008.
The Fund manages interest rate exposure on bank debt facilities through the use of interest rate swap contracts. At
30 June 2008, approximately $156.7 million or 84.9% of total bank debt facilities were covered by interest rate swap
arrangements at an average effective fixed interest rate (including bank margin) of 7.43% with an average term to
maturity of 3.4 years in relation to Australian dollar facilities and 7.54% with an average term to maturity of 2.9 years
in relation to New Zealand dollar facilities. The Abacus working capital facility is fixed at an interest rate of 8.0% with
a remaining term to maturity of 7.75 years.
The Fund’s net debt gearing ratio (calculated as total interest bearing liabilities less cash assets divided by total
assets) excluding the Abacus working capital was 50.7% at 30 June 2008 (2007: 49.6%). The Fund’s net debt gearing
ratio including the Abacus working capital was 79.1% at 30 June 2007 (2007: 83.1%).
STAPLED SECURITIES ON ISSUE
At 30 June 2008, 45,492,066 stapled securities in AHF were on issue.
INFORMATION ON DIRECTORS AND OFFICERS
The Directors and Company Secretary of AHL and AFML (the Responsible Entity of the AHT) in office during the
financial year and until the date of this report are as set out below, with qualifications, experience and special
responsibilities.
John Thame AIBF, FCPA
Chairman (non-executive)
Mr Thame has over 30 years’ experience in the retail financial services industry in senior management positions.
His 26-year career with Advance Bank included 10 years as Managing Director until the Bank’s merger with St
George Bank Limited in 1997. Mr Thame was Chairman (2004 to 2008) and a director (1997 to 2008) of St George
Bank Limited and St George Life Limited. He is also a director of Reckon Limited and The Village Building Co
Limited (Group).
Frank Wolf PhD, BA Hons
Managing Director
Dr Wolf has over 20 years’ experience in the property and financial services industries, including involvement in
retail, commercial, industrial and hospitality-related assets in Australia, New Zealand and the United States. Dr
Wolf has been instrumental in over $2 billion worth of property related transactions, corporate acquisitions and
divestments and has financed specialist property-based assets in retirement and hospitality sectors. Dr Wolf is
the Chairman of FSP Group Pty Limited and a Director of Kingston Capital Limited (financial planning groups). He is
also a director of HGL Limited, a diversified publicly listed investment company.
5
DIRECTORS’ REPORT
30 JUNE 2008
INFORMATION ON DIRECTORS AND OFFICERS continued
William J Bartlett
FCA, CPA, FCMA, CA(SA)
Mr Bartlett has strong accounting, financial and corporate credentials. During his 23 years’ career with Ernst &
Young, he held the roles of Chairman of Worldwide Insurance Practice, National Director of Australian Financial
Services Practice and Chairman of the Client Service Board. Mr Bartlett is a director of Suncorp-Metway Limited,
GWA Limited, Reinsurance Group of America Inc and RGA Reinsurance Company of Australia Limited. Mr Bartlett
was a director of Retail Cube Limited (2004 to 2006) and Arana Therapeutics Limited (2004 to 2007). He is also a
director of the Bradman Foundation and Museum.
David Bastian CPA
Mr Bastian has almost 40 years’ experience in the financial services industry, in particular in the packaging of
commercial, retail and residential property projects and was the Managing Director of the Group until September
2006. He was Managing Director of the Canberra Building Society for 20 years and an Executive Director of
Godfrey Pembroke Financial Services Pty Limited for 7 years.
Dennis Bluth
LLM, LLB, BA, FAPI
Mr Bluth holds Bachelor of Arts, Bachelor of Law and Masters of Law degrees and has practised as a solicitor for
over 25 years, principally in the area of property law. Mr Bluth is a partner of HWL Ebsworth, Lawyers and is a
member of a number of Law Society and Law Council Committees. He is also a member of the Australian Valuation
& Professional Standards Board.
Malcolm Irving AM
FCPA, SF Fin, BCom,
Hon DLitt
Mr Irving has over 40 years’ experience in company management, including 12 years as Managing Director of
CIBC Australia Limited. He was a director of Keycorp Limited (2001 to 2007). He is also a director of O’Connell
Street Associates Pty Ltd and Thales Australia Limited.
Len Lloyd FAPI, WDA
Executive Director
Mr Lloyd is a licensed Real Estate Agent and a registered Real Estate Valuer. He has 40 years experience in the
development, management and funding of commercial, retail and residential property. Mr Lloyd joined the Abacus
Group in October 2000 and now holds the position of Managing Director of Abacus Property Services Pty Limited
responsible for property administration and development opportunities in the Abacus portfolio. In previous
positions Mr Lloyd held responsibility for the property portfolios of the Advance Bank and St George Bank and
provided valuation and lending advice while with the Commonwealth Development Bank for 21 years.
Ellis Varejes BCom, LLB
Company Secretary and Chief Operating Officer
Mr Varejes has been the Company Secretary since September 2006. He has over 25 years’ experience as a
corporate lawyer in private practice.
6
DIRECTORS’ REPORT
30 JUNE 2008
INFORMATION ON DIRECTORS AND OFFICERS continued
continued
The Directors and Officers were in office from the beginning of the financial year until the date of this report unless
otherwise stated.
Directors’ Benefits
Since the end of the previous financial year, no director has received or become entitled to receive a benefit, other
than any benefit disclosed in the financial statements as compensation or the fixed salary of key management
personnel of the Group or a related company by reason of a contract made by the Group or a related body corporate
with the director or a with a firm of which he is a member, or with an entity in which he has a substantial financial
interest.
Indemnification and Insurance of Directors and Officers
The manager of the Fund, Abacus Funds Management Limited, has paid an insurance premium in respect of a
contract insuring all directors and full time executive officers and secretary. The terms of this policy prohibit
disclosure of the nature of the risks insured or the premium paid.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Fund’s environmental responsibilities, such as waste removal and water treatment, have been managed in
compliance with all applicable regulations and licence requirements and in accordance with industry standards. No
breaches of requirements or any environmental issues have been discovered and brought to the board’s attention.
There has been no known significant breaches of any environmental requirements applicable to the Fund.
STAPLED SECURITY OPTIONS
No options were granted over any stapled securities in the Fund during the financial year and there are no options
outstanding as at the date of this report.
REGISTER OF SECURITY HOLDERS
The register of security holders has, during the year ended 30 June 2008, been properly drawn up and maintained so
as to give a true account of the security holders of the Fund.
AUDITORS INDEPENDENCE DECLARATION
We have obtained an independence declaration from our auditor, Ernst & Young, and such declaration is shown on
page 9.
SIGNIFICANT EVENTS AFTER BALANCE DATE
Other than as disclosed in this report and to the knowledge of directors, there has been no matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may affect, the Fund’s operations
in future financial years, the results of those operations or the Fund’s state of affairs in future financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
In the opinion of the Directors, disclosure of any further information on future developments and results than is
already disclosed in this report or the financial statements would be unreasonably prejudicial to the interests of the
Fund.
7
DIRECTORS’ REPORT
30 JUNE 2008
ROUNDING
The amounts contained in this report and in the annual financial report have been rounded to the nearest $1,000
(where rounding is applicable) under the option available to the group under ASIC Class Order 98/0100. The group is
an entity to which the Class Order applies.
Signed in accordance with a resolution of the directors.
Abacus Hospitality Limited (ABN 62 116 839 304)
_____________________________
_______________________________
John Thame
Chairman
Sydney, 23 September 2008
Frank Wolf
Managing Director
8
INCOME STATEMENT
STATEMENT
YEAR ENDED 30 JUNE 2008
Notes
REVENUE
Hotel income
Rental income
Finance income
Other income
Net gain on sale of investment property
Foreign currency exchange gain
TOTAL REVENUE AND OTHER INCOME
Employee benefits expense
Depreciation and amortisation expenses
Other hotel expenses
Other expenses
Finance costs
Unrealised loss on revaluation of Property,
Plant and Equipment
PROFIT/(LOSS) BEFORE INCOME TAX
Income tax benefit/(expense)
PROFIT/(LOSS) AFTER INCOME TAX
NET PROFIT/(LOSS) ATTRIBUTABLE TO
STAPLED SECURITY HOLDERS OF THE FUND
6a
6b
6c
6d
6e
6f
7
Represented by:
Abacus Hospitality Limited
Internal minority interests:
Abacus Hospitality Trust
NET PROFIT/(LOSS) ATTRIBUTABLE TO
STAPLED SECURITY HOLDERS OF THE FUND
Basic and diluted earnings per security
8
CONSOLIDATED
2007
2008
$'000
$'000
PARENT ENTITY
2008
2007
$'000
$'000
84,783
1,693
676
87,152
(35,447)
(9,347)
(25,358)
(4,127)
(14,791)
40,381
3,858
781
12,514
99
57,633
(18,374)
(5,024)
(11,587)
(1,026)
(7,037)
166
166
(3)
-
(1)
-
(1,848)
(3,766)
682
(3,084)
14,585
238
14,823
163
(49)
114
(1)
(1)
(3,084)
14,823
114
(1)
(1,326)
(554)
114
(1)
(1,758)
15,377
-
-
(3,084)
14,823
114
(1)
$
(0.09)
$
1.86
10
BALANCE SHEET
AS AT 30 JUNE 2008
Notes
CURRENT ASSETS
ASSETS
Cash and cash equivalents
Trade and other receivables
Other
TOTAL CURRENT ASSETS
NON - CURRENT ASSETS
Other financial assets
Deferred tax assets
Property, plant and equipment
Investment property
Investment in controlled entities
Intangible assets
TOTAL NONNON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
Interest bearing liabilities
Income tax payable
TOTAL CURRENT LIABILITIES
NONNON-CURRENT LIABILITIES
Deferred tax liabilities
Provisions
TOTAL NONNON-CURRENT LIABILITIES
TOTAL LIABILITIES
PARENT ENTITY
2008
2007
$'000
$'000
10
11
12
9,434
7,797
2,105
19,336
6,940
10,462
1,057
18,459
-
1,080
1,080
13
7
14
15
7,556
2,511
295,802
14,391
809
321,069
340,405
2,517
897
151,798
155,212
173,671
1
3,211
3,212
3,212
1,080
13,554
2,517
22,757
42
38,870
7,931
1,215
9,146
725
-
-
725
-
648
769
255,903
257,320
296,190
226
500
145,434
146,160
155,306
50
50
775
-
44,215
18,365
2,437
1,080
42,063
7,782
(5,630)
44,215
18,116
(50)
299
18,365
2,270
167
2,437
1,027
53
1,080
16
17
18
19a
7
18
19b
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings/(accumulated losses)
TOTAL EQUITY
CONSOLIDATED
2008
2007
$'000
$'000
20
11
BALANCE SHEET (continued)
AS AT 30 JUNE 2008
Notes
Represented by:
Total equity attributable to shareholders of AHL:
Contributed equity
Reserves
Accumulated losses
Total equity
equity attributable to unitholders of AHT:
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
CONSOLIDATED
2007
2008
$'000
$'000
PARENT ENTITY
2007
2008
$'000
$'000
2,270
(8)
(2,138)
124
1,027
(36)
(812)
179
2,270
167
2,437
1,027
53
1,080
39,793
7,790
(3,492)
44,091
17,089
(14)
1,111
18,186
-
-
44,215
18,365
2,437
1,080
12
STATEMENT OF CHANGES IN EQUITY
Issued
capital
CONSOLIDATED
At 1 July 2007
Foreign currency translation
Revaluation of hotels
Total income and expense for the year
recognised directly in equity
Net income for the year
Total income /expense for the year
Issue of equity
Issue costs
Distribution to security holders
At 30 June 2008
CONSOLIDATED
At 1 July 2006*
Foreign currency translation
Revaluation of hotels
Total income and expense for the year
recognised directly in equity
Equity split and restructure
Issue of equity
Issue costs
Distribution to security holders
At 30 June 2007
Foreign
currency
translation
$'000
(50)
(19)
-
Retained
earnings
Total
Equity
$'000
18,116
-
Asset
revaluation
reserve
$'000
7,851
$'000
299
-
$'000
18,365
(19)
7,851
24,972
(1,025)
7,851
7,851
-
(19)
(19)
-
42,063
42,063
7,851
(69)
(3,084)
(3,084)
(2,845)
(5,630)
7,832
(3,084)
4,748
24,972
(1,025)
(2,845)
44,215
Issued
capital
Foreign
currency
translation
$'000
(87)
37
-
Retained
earnings
Total
Equity
$'000
-
Asset
revaluation
reserve
$'000
15,768
$'000
(365)
-
$'000
(452)
37
15,768
15,128
5,419
(2,431)
18,116
15,768
15,768
(15,128)
(640)
-
37
37
(50)
14,823
14,823
(14,159)
299
15,805
14,823
30,628
5,419
(2,431)
(14,799)
18,365
* At 1 July 2006, notwithstanding available financing facilities, AGHL, as parent company of the Fund at that date, had
provided a letter of support to the Fund to pay the Fund’s liabilities as and when they fall due, to the time when it
ceased to be the parent company.
13
STATEMENT OF CHANGES IN EQUITY (continued)
Issued
capital
PARENT
At 1 July 2007
Issue of equity
At 30 June 2008
$'000
1,027
1,243
2,270
Issued
capital
PARENT
At 1 July 2006
Total income /expense
/expense for the year
Equity split and restructure
Issue of equity
At 30 June 2007
$'000
756
271
1,027
Asset
revaluation
reserve
$'000
-
Foreign
currency
translation
$'000
-
Retained
earnings
Total
Equity
$'000
53
114
114
167
$'000
1,080
114
114
1,243
2,437
Asset
revaluation
reserve
$'000
-
Foreign
currency
translation
$'000
-
Retained
Retained
earnings
Total
Equity
$'000
54
(1)
(1)
53
$'000
54
(1)
(1)
756
271
1,080
Nature and purpose of reserves
Asset revaluation reserve:
The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the
extent that they offset previously recognised increases. The reserve can only be used to pay distributions in limited
circumstances.
Foreign currency translation reserve:
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries. It is also used to record the effect of hedging net investments in foreign
operations.
14
CASH FLOW STATEMENT
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Income receipts from hotel business
Other income receipts
Interest received
Advance deposits
Income tax paid
Borrowing costs paid
Operating payments
NET CASH FLOWS FROM OPERATING
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment property
Investment in controlled entities
Purchase of investment property
Purchase of property, plant and equipment
Deposits on acquisition of hotels
Loans from related parties
NET CASH FLOWS USED IN INVESTING
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issue of securities
Proceeds from borrowings
Repayment of borrowings
Distributions paid to security holders
NET CASH FLOWS FROM FINANCING
ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash
equivalents
CASH AND CASH EQUIVALENTS AT END OF YEAR
10
15
9
10
CONSOLIDATED
2008
2007
$'000
$'000
PARENT ENTITY
2008
2007
$'000
$'000
99,211
676
(10)
(20,004)
(70,664)
46,209
1,978
781
1,502
(7,596)
(37,699)
(1)
(1)
9,209
5,175
(1)
(1)
(120,893)
(14,391)
(21,155)
-
99,130
(86,609)
(16,535)
(5,593)
-
(3,045)
1,803
(1,026)
(156,439)
(9,607)
(1,242)
(1,026)
23,605
174,859
(46,617)
(1,969)
5,066
113,249
(94,072)
(14,388)
1,243
-
1,027
-
149,878
9,855
1,243
1,027
2,648
6,940
5,423
1,293
-
-
(154)
9,434
224
6,940
-
-
-
15
NOTES TO THE
THE FINANCIAL STATEMENTS
30 JUNE 2008
1.
CORPORATE INFORMATION
AHF is comprised of Abacus Hospitality Limited and its subsidiaries (AHL) and Abacus Hospitality Trust and its
subsidiaries (AHT).
Shares in AHL and units in AHT have been stapled together so that neither can be dealt without the other. An AHF
security consists of one share in AHL and one unit in AHT. A transfer, issue or reorganisation of a unit or share in
either of the component parts is accompanied by a transfer, issue or reorganisation of a unit or share in the other
component part.
The financial report of the AHF for the year ended 30 June 2008 was authorised for issue in accordance with a
resolution of the directors on 23 September 2008.
The nature of the operations and principal activities of the AHF are described in the Directors’ Report.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has also been
prepared on a historical cost basis, except for investment properties and derivative financial instruments which have
been measured at fair value. The carrying values of recognised assets and liabilities that are covered by fixed rate
arrangements and interest rate swap arrangements, are adjusted to record changes in the fair values attributable to
the risks that are being covered by derivative financial instruments.
It is also recommended that the annual financial report be considered together with any public announcements
made by the AHF in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars
($'000) unless otherwise stated under the option available to the Fund under ASIC Class Order 98/100. The Fund is an
entity to which the class order applies.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards
(IFRS), as issued by the IASB.
(c) New accounting standards and interpretations
Except for the amendments arising from AASB 2007-7: Amendments to Australian Accounting Standards arising from
ED 151 and Other Amendments, which the Fund has early adopted, Australian Accounting Standards and
Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the
Fund for the annual reporting period ended 30 June 2008. These are outlined in the table below.
16
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2008
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Reference
Summary
Application date
of standard*
Impact on Fund financial report
AASB 8 is a disclosure standard
so will have no direct impact on
the amounts included in the
Fund’s financial statements
although, it may directly impact the
level at which goodwill is tested for
impairment. In addition, the
amendments may have an impact
on the Fund’s segment
disclosures.
These amendments are only
expected to affect the presentation
of the Group’s financial report and
will not have a direct impact on the
measurement and recognition of
amounts disclosed in the financial
report. The Group has not
determined at this stage whether
to present a single statement of
comprehensive income or two
separate statements.
Application
date for
Fund*
1 July 2009
AASB 8 and
AASB 2007-3
New standard replacing
AASB114 Segment Reporting,
which adopts a management
reporting approach to segment
reporting.
1 January
2009
AASB 101 and
AASB 2007-8
Introduces a statement of
comprehensive income, Other
revisions include impacts on the
presentation of items in the
statement of changes in equity,
new presentation requirements
for restatements or
reclassifications of items in the
financial statements, changes in
the presentation requirements for
dividends and changes to the
titles of the financial statements.
1 January
2009
AASB 2008-1
The amendments clarify the
definition of ‘vesting conditions’,
introducing the term ‘non-vesting
conditions’ for conditions other
than vesting conditions as
specifically defined and prescribe
the accounting treatment of an
award that is effectively
cancelled because a non-vesting
condition is not satisfied.
1 January
2009
The Fund has share-based
payment arrangements that may
be affected by these amendments.
However, the Fund has not yet
determined the extent of the
impact, if any.
1 July 2009
AASB 2008-2
The amendments provide a
limited exception to the definition
of a liability so as to allow an
entity that issues puttable
financial instruments with certain
specified features, to classify
those instruments as equity
rather than financial liabilities.
1 January
2009
These amendments are not
expected to have any impact on
the Fund’s financial report as the
Fund does not have on issue or
expect to issue any puttable
financial instruments as defined by
the amendments.
1 July 2009
1 July 2009
17
Reference
Summary
Application date
of standard*
AASB 3 (revised)
The revised standard introduces
a number of changes to the
accounting for business
combinations, the most
significant of which allows
entities a choice for each
business combination entered
into – to measure a noncontrolling interest (formerly a
minority interest) in the acquiree
either at its fair value or at tis
proportionate interest in the
acquiree’s net assets. This
choice will effectively result in
recognising goodwill relating to
100% of the business (applying
the fair value option) or
recognising goodwill relating to
the percentage interest acquired.
The changes apply
prospectively.
1 July 2009
The Fund may enter into some
business combinations during the
next financial year any may
therefore consider early adopting
the revised standard. The Fund
has not yet assessed the impact of
early adoption, including which
accounting policy to adopt.
Application
date for
Fund*
1 July 2009
18
30 JUNE 2008
2.
Reference
Summary
Application date
of standard*
AASB 8-3
Amending standard issued as a
consequence of revisions to
AASB 3 and AASB 127.
1 July 2009
Amendments to
International
Financial
Reporting
Standards
The main amendments of
relevance to Australian entities
are those made to IAS 27
deleting the ‘cost method’ and
requiring all dividends from
subsidiary, jointly controlled
entity or associate to be
recognised in profit or loss in an
entity’s separate financial
statements (i.e. parent company
account). The distinction
between pre- and postacquisition profits is no longer
required. However, the payment
of such dividends requires the
entity to consider whether there
is an indicator of impairment.
1 January
2009
Refer to AASB 3 (revised) and
AASB 127 (revised) above.
Recognising all dividends received
from subsidiaries, jointly controlled
entities and associates as income
will likely give rise to greater
income being recognised by the
parent entity after adoption of
these amendments.
Application
date for
Fund*
1 July 2009
1 July 2009
In addition, if the Fund enters into
any Fund reorganisation
establishing new parent entities,
an assessment will need to be
made to determine if the
reorganisation meets the
conditions imposed to be
effectively accounted for on a
carry-over basis’ rather than at fair
value.
AASB 127 has also been
amended to effectively allow the
cost of an investment in a
subsidiary, in limited
reorganisations, to be based on
the previous carrying amount of
the subsidiary (i.e. share of
equity) rather than its fair value.
Amendments to
International
Financial
Reporting
Standards
The improvements project is an
annual project that provides a
mechanism for making nonurgent, but necessary
amendments to IFRSs. The
IASB has separated the
amendments into two parts: Part
1 deals with changes the IASG
identified resulting in accounting
changes; Part II deals with either
terminology or editorial
amendments that the IASB
believes will have minimal
impact.
1 January
2009 except
for
amendments
to IFRS 5,
which are
effective from
1 July 2009.
The Fund has not yet determined
the extent of the impact of the
amendments, if any.
1 July 2009
*designates the beginning of the applicable annual reporting period
AASB 2007-2, AASB 2007-9, AASB 1004, AASB 1049, AASB 1050, AASB 1051, AASB 1052, IFRIC 15, AASB 2007-5,
AASB 2007-6, AASB 123 and AASB Interpretation 4, 12, 13, 14, 129 and 1038 will have no application to the Fund.
(d) Basis of consolidation
The consolidated financial statements comprise the financial statements of AHL and its subsidiaries and AHT and its
subsidiaries.
The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using
consistent accounting policies with adjustments being made to bring into line any dissimilar accounting policies that
may exist.
19
30 JUNE 2008
2.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have
been eliminated in full and subsidiaries are consolidated from the date on which control is transferred to the Fund
and cease to be consolidated from the date on which control is transferred out of the Fund. Where there is loss of
control of a subsidiary, the consolidated financial statements include the results for the part of the reporting year
during which the Fund has control.
The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of
accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the
liabilities and contingent liabilities assumed at the date of acquisition.
(e) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Fund and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is
recognised:
Hotel income
Revenue from rooms is recognised and accrued on the provision of rooms or on the date of which rooms is to be
provided, in the event of advance deposits by customers, and in accordance with the terms and conditions of the
bookings and deposits. Advance deposits from customers received are not recognised as revenue until such time
when the rooms has been provided or when the customers forfeit the deposits due to failure of attendance.
Finance income
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Rental income
Rental income from investment properties is accounted for on a straight-line basis over the terms of the lease
agreements. Contingent rental income is recognised as income in the years in which it is earned. Lease incentives
granted are recognised as an integral part of the total rental income.
Yield guarantee income
Yield guarantee income is accounted for on a contingent basis and is recognised as income in the periods in which
yield income is attributable on the basis of operating performance in the same periods.
Net realised gains on investments
Revenue from sale of investment properties is recognised on settlement when the significant risks and rewards of
the ownership of the properties have been transferred to the buyer. Risks and rewards are generally considered to
have passed to the buyer at the time of settlement of the sale.
Net unrealised gains/losses on investments
Change in net market value of investments is recognised as revenue or expense in determining the net profit for the
period. Refer note 2(m) for detailed commentary on investment properties.
(f) Expenses
Expenses including rates, taxes and other outgoings, are bought to account on an accrual basis and any related
payables are carried at cost.
20
STATEMENTS
30 JUNE 2008
2.
(g) Finance costs
Finance costs are recognised as an expense when incurred unless they relate to a qualifying asset or to upfront
establishment and arrangement costs, which are deferred and amortised as an expense over the life of the facility or
five years whichever is shorter. A qualifying asset is an asset that generally takes more than 12 months to get ready
for its intended use or sale. In these circumstances, the financing costs are capitalised in to the cost of the asset.
Where funds are borrowed by the Fund for the acquisition or construction of a qualifying asset, the amount of the
finance costs capitalised are those incurred in relation to the borrowing.
(h) Leasing Fees
Fees
Costs that are directly associated with negotiating and executing the ongoing renewal of tenant lease agreements
(including commissions, legal fees and costs of preparing and processing documentation for new leases) are
deferred and amortised over the lease term in proportion to the rental revenue recognised in each financial year.
(i) Leasing Incentives
Lease incentives in the form of up-front payments, contributions to certain lessees’ costs, relocation costs and fitouts
that are offered in relation to the ongoing operation of the property are recognised as an asset and amortised over
the period to which the lease relates.
Incentives provided to lessees in the form of lessor-paid fitouts and improvements that remain assets of the lessor,
for example by becoming part of the structure of the property which is retained beyond the lease term, are
capitalised to the carrying value of the property.
(j) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less that are readily convertible to known amounts of cash which are subject
to an insignificant risk of changes in value.
For the purpose of the Cash Flow Statements, cash and cash equivalents consist of cash and cash equivalents as
defined above.
(k) Trade and other receivables
Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are
written off when identified.
(l) Investments and other financial assets
All investments are initially recognised at cost, being the fair value of the consideration given.
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as
either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, or
available-for-sale financial assets. The Fund determines the classification of its financial assets after initial
recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. At 30 June
2008 the Fund’s investments have been classified as financial assets at fair value through profit or loss and loans and
receivables.
21
30 JUNE 2008
2.
SUMMARY OF SIGNIFICANT
SIGNIFICANT ACCOUNTING POLICIES
POLICIES CONTINUED
Recognition and derecognition
Purchases and sales of financial assets that require delivery of assets within the time frame generally established by
regulation or convention in the market place are recognised on the trade date i.e. the date that the Fund commits to
purchase the assets. Financial assets are derecognised when the right to receive cash flows from the financial
assets have expired or been transferred.
Financial assets at fair value through profit or loss
For investments where there is no quoted market or unit price, fair value is determined by reference to the current
market value of another instrument which is substantially the same or is calculated based on the expected cash
flows of the underlying net asset base of the investment.
After initial recognition, investments, which are classified as held for trading, are measured at fair value. Financial
assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the
intention of making a profit. Gains or losses on investments held for trading are recognised in the income statement.
Loans and receivables
Loans and receivables including loan notes and loans to key management personnel are non-derivative financial
assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at
amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans
and receivables are derecognised or impaired, as well as through the amortisation process.
Subsidiaries
Investments in subsidiaries are held at cost.
(m) Investment properties
The Fund’s investment properties relate to freehold land and buildings acquired for investment purposes to generate
passive income.
Land and buildings are considered to have the function of an investment and are therefore regarded as a composite
asset, the overall value of which is influenced by many factors, the most prominent being income yield, rather than
diminution in value of the building content due to the passing of time. Accordingly, the buildings and all components
thereof, including integral plant and equipment, are not depreciated.
Investment properties are measured initially at cost including transaction costs such as stamp duty, legal and
professional fees, acquisition fees and other associated acquisition costs. Subsequent to initial recognition
investment properties are stated at fair value. Gains and losses arising from changes in the fair value of investment
properties are included in the income statement in the year in which they arise.
Amounts capitalised to construction projects include costs of sundry acquisitions and development costs in respect
of qualifying assets and borrowing costs during the construction.
At each reporting date, the carrying value of the portfolio of investment properties is assessed by the directors and
where the carrying value differs materially form the directors assessment of fair value, an adjustment to the carrying
amount is recorded as appropriate.
Independent valuations are performed annually to ensure that the carrying amount does not differ materially from the
asset’s fair value at the balance sheet date. In determining fair value, the capitalisation of net income method and the
discounting of future cashflows to their present value have been used.
Investment properties are derecognised when they have either been disposed of or when the investment property is
permanently withdrawn from use and no future benefit is expected from its disposal. Any gains or losses on
derecognition are recognised in the income statement in the year of derecognition.
22
30 JUNE 2008
2.
(n) Property, plant and equipment
Hotel property (including land and buildings), plant and equipment represent owner-occupied properties and are
initially measured at costs including transaction costs and acquisition costs. Subsequent to initial recognition, hotel
properties are measured at fair value less accumulated depreciation and any impairment in value after the date of
revaluation.
Depreciation is charged to income statement on a straight-line basis over the estimated useful life of the asset as
follows:
Plant and equipment – over 3 to 20 years
Buildings – 50 years
Impairment
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset
belongs.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or
cash-generating securities are written down to their recoverable amount.
The recoverable amount of property (including land and buildings), plant and equipment is the greater of fair value
less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the assets.
Impairment losses would be recognised in the income statement.
Independent valuations are performed with annually on either a December or June anniversary date to ensure that
the carrying amount does not differ materially from the asset’s fair value at the balance sheet date.
Revaluations
Following initial recognition at cost, land and buildings are carried at a revalued amount which is the fair value at the
date of the revaluation less any subsequent accumulated depreciation on buildings and impairment losses after the
date of the revaluation.
Fair value is determined by reference to market-based evidence, which is the amount for which the assets could be
exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction
as at the valuation date.
Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the balance
sheet unless it reverses a revaluation decrease of the same asset previously recognised in the income statement.
Any revaluation deficit is recognised in the income statement unless it directly offsets a previous surplus of the same
asset in the asset revaluation reserve. An annual transfer from the asset revaluation reserve is made to retained
earnings for the depreciation relating to the revaluation surplus. In addition, any accumulated depreciation as at
revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the
revalued amount of the asset.
Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.
Independent valuations are performed annually on either a December or June anniversary date to ensure that the
carrying amount does not differ materially from the asset’s fair value at the balance sheet date.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
23
30 JUNE 2008
2.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included in the income statement in the year the item is
derecognised.
Derecognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included in the income statement in the year the item is
derecognised.
(o) Recoverable amount of assets
At each reporting date, the Fund assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Fund makes a formal estimate of recoverable amount. Where the carrying amount
of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable
amount.
(p) Payables
Liabilities for creditors are carried at cost, which is the fair value of the consideration to be paid in the future for
goods and services received whether or not billed to the consolidated entity.
Payables to related parties are carried at the principal amount and recognised as an expense on an accrual basis.
(q) Employee entitlements
Provision is made for employee entitlements accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities
arising in respect of wages and salaries, annual leave, sick leave and any other employee entitlements expected to
be settled within twelve months of the reporting date are measured at amounts expected to be paid when liabilities
are settled. All other employee entitlement liabilities are measured at the present value of the estimated future cash
outflow to be made in respect of services provided by the employees up to the reporting date. In determining the
present value of future cash outflows, the interest rates attaching to government guaranteed securities, which have
terms to maturity approximating the terms of the related liability, are used.
Employee entitlement expenses and revenues arising in respect of the following categories:
•
•
wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave, and other leave
entitlements; and
other types of employee entitlements are recognised against profits on a net basis in their respective categories.
(r) InterestInterest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of
issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount
or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as
through the amortisation process.
24
30 JUNE 2008
2.
(s) Distributions and dividends
All distributions to AHF stapled security holders were paid by AHT.
AHT generally distributes its distributable assessable income to its security holders. Distributions are payable at the
end of each quarter. Such distributions are determined by reference to the taxable income of the Trust. Distributable
income may include capital gains arising from the disposal of investments and tax-deferred income. Unrealised gains
and losses on investments that are recognised as income are usually retained and are generally not assessable or
distributable until realised. Capital losses are not distributed to security holders but are retained to be offset against
any future realised capital gains. Where distributable income is insufficient in a financial year to meet target
distributions, a distribution may be made (in part or whole) from equity.
A provision for dividend or distribution is recognised in the Balance Sheet if the provision has been declared,
determined or publicly recommended prior to balance date.
(t) Taxation
The Fund comprises taxable and non-taxable entities. A liability for current and deferred taxation and tax expense is
only recognised in respect of taxable entities that are subject to income and potential capital gains tax as detailed
below.
Trust income tax
Under current Australian income tax legislation, the Trust is not liable to Australian income tax provided security
holders are presently entitled to the taxable income of the Trust.
Company income tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised,
except when the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary
differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax
assets are only recognised to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
25
30 JUNE 2008
2.
Deferred income tax liabilities are recognised for all taxable temporary differences, except when the deferred
income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, and the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and
the same taxation authority.
New Zealand income tax
Trust operating in New Zealand (NZ) is treated as a company for NZ income tax purposes and is taxed at the
corporate tax rate of 33%. NZ income tax paid by the Trust can be claimed as foreign tax credits to offset against
foreign income and distributable to security holders. NZ tax losses are carried forward provided the continuity test of
ownership is satisfied. Interest expense from Trust is fully deductible subject to thin capitalisation considerations.
Property revaluation gains or losses are to be excluded from taxable income, with no deferred tax implications as
capital gains are not taxed in NZ.
Companies in the Fund are companies incorporated in Australia. Abacus Chateau Pty Limited (ACPL) is a wholly
owned subsidiary of AHL and is registered in NZ as an overseas company. Income derived by ACPL is exempt from
tax in Australia where the income has been taxed in NZ. This income is regarded as non-assessable non-exempt
income. As such, income tax is calculated on the company’s NZ taxable income and taxed at the NZ corporate tax
rate of 33%.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except when the GST incurred on a
purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and
payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified
as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
26
30 JUNE 2008
2.
(u) Foreign currencies
Functional and presentation currency
Both the functional and presentation currency of the investments in foreign entities are in Australian dollars (A$). The
functional currency of certain subsidiary entities holding property assets or carrying on business in New Zealand is
New Zealand dollars. The presentation currency of these entities is Australian dollars to enable the consolidated
financial statements of the Abacus Hospitality Fund to be reported in a common currency.
Foreign currency transactions
Foreign exchange transactions are converted to Australian dollars at the exchange rates ruling at the date of those
transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date. Exchange differences arising from amounts payable and receivable are
treated as operating revenue or expense in the period in which they arise, except as noted below.
Translation of functional currency to presentation currency
The balance sheets of subsidiaries whose functional currency is not Australian dollars are translated at exchange
rates ruling at balance date and the income statement is translated at average exchange rates for the year.
Exchange differences arising on the re-translation to Australian dollars are taken directly to the foreign currency
translation reserve in equity.
(v) Derivative financial instruments
The Fund uses derivative financial instruments such as interest rate swaps to mitigate the risks associated with
interest rate fluctuations and to convert certain variable interest rate borrowings to fixed interest rates. Such
derivative financial instruments are stated at fair value. The fair value of interest rate swap contracts is determined
by reference to market values for similar instruments. Any gains or losses arising from changes in fair value are
taken directly to net profit or loss for the year.
(w) Earnings per stapled security (EPSS)
Basic EPSS is calculated as net profit attributable to stapled security holders, adjusted to exclude costs of servicing
equity, divided by the weighted average number of stapled securities on issue during the year under review.
(x) Transfers to / (from) total equity
In respect of the Fund, revaluation increments or decrements arising from changes in the fair value of investment
properties and derivative financial instruments, accrued income not yet assessable and expenses provided for or
accrued not yet deductible, net capital losses and tax free or tax deferred amounts maybe transferred to equity and
may not be included in the determination of distributable income.
(y) Contributed
Contributed equity
Issued and paid up capital is recognised at the fair value of the consideration received by the AHF. Stapled securities
are classified as equity. Incremental costs directly attributable to the issue of new securities are shown in equity as a
deduction, net of tax, from the proceeds.
27
30 JUNE 2008
3. FINANCIAL RISK MANAGEMENT
The risks arising from the use of the Fund’s financial instruments are credit risk, liquidity risk and market risk (interest
rate risk and foreign currency risk).
The Fund’s financial risk management focuses on mitigating the unpredictability of the financial markets and its
impact on the financial performance of the Fund. The Board reviews and agrees policies for managing each of these
risks, which are summarised below.
The main purpose of the financial instruments used by the Fund is to raise finance for the Fund’s operations. The
Fund has various other financial assets and liabilities such as trade receivables and trade payables, which arise
directly from its operations. The Fund also enters into derivative transactions principally interest rate swaps. The
purpose is to manage the interest rate arising form the Fund’s operations and its sources of finance.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in notes 2 and 4 to the financial statements.
(a) Credit Risk
Credit risk is the risk of financial loss to the Fund if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the Fund’s receivables from customers.
The Fund manages its exposure to risk by:
-
derivative counterparties and cash transactions are limited to high credit quality financial institutions;
policy which limits the amount of credit exposure to any one financial institution;
regularly monitoring receivables balances on an ongoing basis;
With respect to credit risk arising from the other financial assets of the Fund, which comprise cash and cash
equivalents and certain derivative instruments, the Fund’s exposure to credit risk arises from default of the counter
party, with a maximum exposure equal to the carrying amount of these instruments.
(b) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of
funding though an adequate and diverse amount of committed credit facilities, the ability to close out market
positions and the flexibility to raise funds through the issue of new stapled securities or Distribution Reinvestment
Plan.
The Fund’s policy is to maintain an available loan facility with banks sufficient to meet expected operational
expenses and to finance investment acquisitions for a period of 90 days, including the servicing of financial
obligations. Current loan facilities are assessed and extended for a maximum period based on the Fund’s
expectations of future interest and market conditions.
As at 30 June 2008, the Fund had cash of $9.434 million which are adequate to cover short term funding requirements.
Further information regarding the Fund’s debt profile is disclosed in Note 21.
28
30 JUNE 2008
3. FINANCIAL RISK MANAGEMENT continued
(c) Refinancing Risk
Refinancing risk is the risk that unfavorable interest rate and credit market conditions result in an unacceptable
increase in the Fund’s credit margins and interest cost. Refinancing risk arises when the Fund is required to obtain
debt to fund existing and new debt positions.
The Fund is exposed to refinancing risks arising from the availability of finance as well as the interest rates and
credit margins at which financing is available. The Fund manages this risk by spreading maturities of borrowings and
interest rate swaps and reviewing potential transactions to understand the impact on the credit rating.
(d) Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the
Fund’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
Foreign currency risk
The Fund is exposed to currency risk on its investment in foreign operations, equity investments, investment in
associates and property loans denominated in a currency other than the functional currency of Fund entities. The
currencies in which these transactions primarily are denominated are AUD and NZD.
As a result the Fund’s balance sheet can be affected by movements in the A$ / NZ$ exchange rates.
The Fund borrows loan funds in New Zealand dollars to substantially match the foreign currency property asset
value exposure with a corresponding foreign currency liability and therefore expects to substantially mitigate foreign
currency risk on its New Zealand denominated asset values.
Interest rate risk
The Fund’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt
obligations with a floating interest rate.
The Fund’s policy is to manage its interest cost using a mix of fixed and variable rate debt. The Fund’s aim is to keep
its borrowings at fixed rates of interest within an acceptable range. To manage this mix in a cost-efficient manner,
the Fund enters into interest rate swaps, in which the Fund agrees to exchange, at specified intervals, the difference
between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal
amount. At 30 June 2008, after taking into account the effect of interest rate swaps, approximately 84.9% of the
Fund’s borrowings are at a fixed rate of interest (2007: 71%).
Fair value interest rate risk
As the Fund holds fixed rate debt there is a risk that the economic value of a financial instrument will fluctuate
because of changes in market interest rates. The level of fixed rate debt is disclosed in note 21 and it is
acknowledged that this risk is a by-product of the Fund’s attempt to manage its cash flow interest rate risk.
4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
In applying the Fund’s accounting policies management continually evaluates judgments, estimates and assumptions
based on experience and other factors, including expectations of future events that may have an impact on the Fund.
All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of
circumstances available to management. Actual results may differ from the judgments, estimates and assumptions.
Significant judgments, estimates and assumptions made by management in the preparation of these financial
statements are outlined below:
29
30 JUNE 2008
4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS continued
(i) Significant accounting judgments
judgments
Operating lease commitments – Fund as lessor
The Fund has entered into commercial property leases on its investment property portfolio. The Fund has determined
that it retains all the significant risks and rewards of ownership of these properties and has thus classified the leases
as operating leases.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is
probable that future taxable profits will be available to utilise those temporary differences.
Impairment of non-financial assets other than goodwill
The Fund assesses impairment of all assets at each reporting date by evaluating conditions specific to the Fund and
to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the
asset is determined. This involves value in use calculations, which incorporate a number of key estimates and
assumptions.
(ii) Significant accounting estimates and assumptions
Valuation of investment properties and property, plant and equipment - Hotels
The Fund makes judgements in respect of the fair value of investment properties and property, plant and equipment
(note 2(m) and 2(n)). The fair value of these hotels are reviewed regularly by management with reference to annual
external independent property valuations and market conditions existing at reporting date, using generally accepted
market practices. The assumptions underlying estimated fair values are those relating to the receipt of contractual
rents, expected future market rentals, maintenance requirements, capitalisation rates discount rates that reflect
current market uncertainties and current and recent property investment prices. If there is any material change in
these assumptions or regional, national or international economic conditions, the fair value of hotels may differ and
may need to be re-estimated.
5. SEGMENT INFORMATION
The Fund operates wholly within a business segment only, being investment in hotel related properties and assets in
Australasia.
30
30 JUNE 2008
6. REVENUE AND EXPENSES
(a) Hotel related income
Gross hotel revenue
Less: Cost of sales
Net hotel income
CONSOLIDATED
2007
2008
$'000
$'000
PARENT ENTITY
2008
2007
$'000
$'000
95,828
(11,045)
84,783
46,861
(6,480)
40,381
-
-
1,064
629
1,693
1,978
1,880
3,858
-
-
30,051
1,859
3,536
35,447
15,770
1,117
1,487
18,374
18,374
-
-
(d) Depreciation and amortisation expense
Depreciation of buildings, plant and equipment
Amortisation of management rights
Total depreciation and amortisation expense
9,297
50
9,347
5,024
5,024
-
-
(e) Other expenses
Management fees
Custody fees
Performance fee
Foreign currency exchange loss
Other
Total other expenses
2,663
29
681
207
546
4,127
607
21
398
1,026
3
3
1
1
12,373
7,526
194
20,093
(5,302)
14,791
7,465
1,888
281
9,634
(2,597)
7,037
-
-
(b) Rental income
Gross property rental
Rental guarantee income
Net rental income
(c) Employee benefits expense
Wages and salaries
Leave provisions
Other
Total employee benefits expense
(f) Finance costs
Interest on bank loans
Interest related party loans
Amortisation of finance costs
Total finance cost (on historical basis)
Unrealised (gains)/loss on interest rate swaps
Total finance costs
31
30 JUNE 2008
7. INCOME TAX
CONSOLIDATED
2008
2007
2008
$'000
$'000
PARENT ENTITY
2008
2007
$'000
$'000
(a) Income tax expense
The major components of income tax expense are:
Income Statement
Current income tax
Current income tax (benefit)/expense
(963)
(351)
49
-
281
113
-
-
(682)
(238)
49
-
Deferred income tax
Relating to origination and reversal of temporary
differences
Income tax (benefit)/expense reported in the income
statement
(b) Numerical reconciliation between aggregate tax expense
recognised in the income
income statement and tax expense calculated
per the statutory income tax rate:
Accounting profit/(loss) of companies before tax
At the AHL's Australian income tax rate of 30% (2007: 30%)
Tax effect on amounts which are not deductible / (taxable) in
calculating taxable income:
Entertainment
Difference in New Zealand income tax rate of 33%
Income tax expenses/(benefit)
Income tax expenses/(benefit) taken up upon acquisition of
Matson Resort
Income tax expenses/(benefit) taken up by Abacus Hospitality
Fund*
Income tax expense/(benefit) reported in the
consolidated Income Statement
(2,008)
(602)
(831)
(249)
(1)
-
(1)
-
2
(600)
(11)
(611)
2
(247)
(4)
(251)
-
-
(71)
-
-
-
-
13
-
-
(682)
(238)
-
-
1,418
703
390
2,511
371
391
134
1
897
-
-
-
-
648
648
226
226
-
-
Deferred
Deferred tax assets
Tax losses
Provisions for employee's entitlements
Accrued expenses
Provision for doubtful debts
Gross deferred income tax assets
Deferred tax liabilities
Property, plant & equipment
Gross deferred income tax liabilities
* For the period to 31 December 2006 where AHF was a subsidiary of APG.
32
30 JUNE 2008
7. INCOME TAX continued
The Fund has tax losses (tax effected at prevailing rates) arising in Australia and New Zealand of $4,215,676 and
$462,771 respectively that are available indefinitely for offset against future taxable profits of the companies in which
the losses arose.
At 30 June 2008, there is no recognised or unrecognised deferred income tax liability for taxes that would be payable
on the unremitted earnings of certain of the Fund’s subsidiaries as the Fund has no liability for additional taxation
should such amounts be remitted.
Tax consolidation
On 1 January 2007, with the sale of AGHL ‘s interest in AHF, AHF left the AGHL tax consolidated group and formed a
separate tax consolidated group with AHL as the head entity. Members of the tax groups during the relevant periods
have entered into tax sharing arrangements in order to allocate income tax expense to the head entity of the group.
In addition the agreements provide for the allocation of income tax liabilities between the entities should the head
entity default on its tax payment obligations. At the 30 June 2008, the possibility of default is remote.
Tax effect accounting by members of the tax consolidated group
The above tax funding agreement provides for the allocation of current taxes to the head entity of the tax
consolidated group in accordance with the member’s accounting profit or loss for the period, while deferred taxes
are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income
Taxes. Taxes, if allocated under the tax funding agreement, is recognised as an increase or decrease in the entity’s
inter company account with the tax consolidated group head company during the relevant period.
8. EARNINGS PER SECURITY
The following reflects the income used in the basic and diluted earnings per stapled security computations.
Earnings used in calculating earnings per security:
Net profit/(loss) attributable to stapled security holders
Weighted average number of stapled securities
2008
2007
$’000
$’000
(3,084)
14,828
34,378,411
7,961,628
Since 30 June 2008, the Fund has raised additional equity capital of approximately $426,000 and issued 318,378 units.
On 7 August 2008, Abacus Hospitality Fund paid the final distribution in respect of the June 2008 quarter and issued
112,947 units pursuant to the Distribution Reinvestment Plan.
Apart from the issuance of these stapled securities, there have been no other transactions involving stapled
securities in the Fund or potential stapled securities between the reporting date and the date of completion of these
financial statements.
33
30 JUNE 2008
9. DISTRIBUTIONS PAID AND PROPOSED
PROPOSED
CONSOLIDATED
PARENT ENTITY
2008
2007
2008
2007
$'000
$'000
$'000
$'000
September: 2.00 cents per unit (2007: nil)
494
-
494
-
December: 2.00 cents per unit (2007: from profit)
636
14,084
636
14,084
March: 2.00 cents per unit (2007: 2.00 cents)
788
304
788
304
1,918
14,388
1,918
14,388
927
411
927
411
927
411
927
411
2,845
14,799
2,845
2,845
14,799
(a) Distributions paid during the year
Interim distributions paid during the period:
(b) Distributions proposed and recognised
as a liability
Final distribution payable for the June quarter:
2.0625 cents per unit (2007: 2.00 cents)
Total distributions paid and payable
10. CASH AND CASH EQUIVALENTS
For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following:
CONSOLIDATED
2007
2008
$'000
$'000
Cash at bank and in hand
Deposit at call
8,919
515
9,434
6,080
860
6,940
PARENT ENTITY
2008
2007
$'000
$'000
-
-
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months, depending on the
immediate cash requirements of the Fund, and earn interest at the respective short-term deposit rates.
The fair value of cash and cash equivalents equals its carrying value.
34
30 JUNE 2008
10. CASH AND CASH EQUIVALENTS continued
CONSOLIDATED
2007
2008
$'000
$'000
$'000
PARENT ENTITY
2007
2008
$'000
$'000
Reconciliation of net profit after tax to net cash flows
from operations
Net (loss)/profit after tax
Adjustments for:
Depreciation of non-current assets
Net gain on sale of non-current assets
Loss on revaluation of property
Unrealised (gain)/loss on investments
Net fair value change on derivatives
Foreign currency effects on receivables and payables
Changes in assets and liabilities:
Decrease/(increase) in receivables and other assets
Increase/(decrease) in payables
Increase/(decrease) in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Increase/(decrease) in current tax liabilities
Net cash from operating activities
(3,084)
14,823
114
(1)
9,297
1,848
(5,302)
159
5,024
(12,522)
58
(166)
-
-
(1,300)
8,283
(895)
427
(224)
(8,057)
5,849
-
2
(1)
50
-
-
9,209
5,175
(1)
(1)
11. TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful debts
Other debtors
Deposits on exchanged properties
Related party receivables
Total trade and other receivables
2008
$'000
6,765
(9)
41
1,000
7,797
CONSOLIDATED
2007
$'000
2,322
(4)
6
6,230
1,908
10,462
PARENT ENTITY
2007
2008
$'000
$'000
1,080
1,080
Trade and other debtors are non-interest bearing and generally on 30 day terms.
35
STATEMENTS
30 JUNE 2008
12. OTHER CURRENT ASSETS
Prepayments
Inventories
Total other current assets
13. OTHER FINANCIAL ASSETS
NonNon-current
Derivatives at fair value
Total other financial assets
14. PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED
2007
2008
$'000
$'000
1,406
651
699
406
2,105
1,057
PARENT ENTITY
2008
2007
$'000
$'000
-
CONSOLIDATED
CONSOLIDATED
2008
2007
$'000
$'000
PARENT ENTITY
2008
2007
$'000
$'000
7,556
7,556
7,556
2,517
2,517
CONSOLIDATED
2008
2007
$'000
$'000
-
-
PARENT ENTITY
2008
2007
$'000
$'000
Hotel land and buildings
At 1 July, cost or fair value
Accumulated depreciation on buildings
Net book amount
126,913
(627)
126,286
93,916
(135)
93,781
-
-
Exchange differences
Revaluation surplus
Loss on revaluation
Additions
Depreciation charge on buildings
At 30 June, net book amount
(3,444)
7,851
(1,848)
136,813
(3,745)
261,913
2,039
15,768
16,163
(1,465)
126,286
-
-
Fair value
Accumulated depreciation
Net carrying amount at 30 June
268,987
(6,774)
261,913
126,913
(627)
126,286
126,286
-
-
36
30 JUNE 2008
14. PROPERTY, PLANT AND EQUIPMENT continued
CONSOLIDATED
2008
2007
$'000
$'000
Hotel furniture, fittings, equipment and vehicles
vehicles
At 1 July, cost or fair value
Net book amount
27,230
(1,718)
25,512
25,778
(148)
25,630
Exchange differences
Additions
Disposals
Depreciation charge on buildings
At 30 June, net book amount
(418)
14,439
(82)
(5,552)
33,899
Cost or fair value
Net carrying amount at 30 June
Total property, plant and equipment
PARENT ENTITY
2008
2007
$'000
$'000
-
-
-
-
337
3,120
(16)
(3,559)
25,512
-
-
41,192
(7,302)
33,889
27,230
(1,718)
25,512
-
-
295,802
151,798
-
-
Recoverable amount of property, plant and equipment
Property relates to various assets associated with the hotels of Rydges Tradewinds, Cairns, QLD, Chateau on the
Park, Christchurch, New Zealand, Novotel Twin Waters Resort, Sunshine Coast, QLD, Rydges Gladstone, QLD,
Rydges Townsville, QLD, Swissôtel Sydney, NSW and Rydges Esplanade Resort in Cairns, QLD. Independent
valuations were obtained upon acquisition to assess the recoverable amount of the assets. These properties are
100% owned by the Trust and were independently valued at an amount at or exceeding its carrying value.
At 30 June 2008, the valuation of the hotel property, plant and equipment are as follows:
Hotel
Rating
Valuation
Valuer
Novotel Twin Waters Resort
4.5 stars
$68 million
CB Richard Ellis
Chateau on the Park
4 stars
$30.8 million*
Colliers International NZ
Rydges Tradewinds Cairns
4.5 stars
$41 million
CB Richard Ellis
Rydges Gladstone
4 stars
$15.5 million
CB Richard Ellis
Rydges Townsville
4 stars
$19.25 million
Landmark White
Rydges Esplanade Resort
4.5 stars
$35.8 million
CB Richard Ellis
Swissôtel Sydney
5 stars
$87.7 million
Landmark White
Date of
Valuation
December
2007
December
2007
December
2007
February
2008
February
2008
September
2007
February
2008
Manager
Accor
Internal
Rydges
Rydges
Rydges
Rydges
Fairmont
* The Chateau on the Park is valued at NZ$35 million, converted to Australian dollars at closing rate.
37
30 JUNE 2008
14. PROPERTY, PLANT AND EQUIPMENT continued
Refurbishment of Novotel Twin Waters Resort
Further to the above valuations, the Fund, as part of the refurbishment program for the Novotel Twin Waters Resort,
is currently refurbishing all guest rooms, bar and restaurant and certain common areas in the resort. The
refurbishment is being undertaken in stages to minimise the extent of any adverse impact on occupancy and is
expected to be completed in late 2008. At 30 June 2008, approximately $8.1 million had been spent on the
refurbishment and another estimated $0.9 million refurbishment expense is expected.
Rental guarantee
To ensure that the property’s value and return to the Fund is not affected by the refurbishment works undertaken on
the property over the refurbishment period, Abacus has provided a rental guarantee which equates to an 8.85%
annualised yield, based on the $64 million valuation and the forecast costs of refurbishment works of $8 million. This
guarantee expires on 31 December 2008, and to date Abacus has paid $1.6 million to the Fund.
15. INVESTMENT PROPERTIES
Investment properties, if any, are carried at the Directors’ determination of fair value based on independent
valuations where appropriate. This includes the original acquisition cost together with capital expenditure since
acquisition and either the latest full independent valuation or latest independent update. Total acquisition costs
include incidental costs of acquisition such as property taxes on acquisition, legal and professional fees and other
acquisition related costs.
Independent valuations of investment properties are conducted annually. Independent valuations are prepared using
both the capitalisation of net income method and the discounting of future cashflows method to their present value.
Capital expenditure since valuation may include purchases of sundry properties (and associated expenses of stamp
duty, legal fees etc) and other capital refurbishment and repair expenditure.
During the financial year ended 30 June 2008, the Fund acquired the Diplomat Hotel in Canberra, Australian Capital
Territory as an investment property with fair value of $14.4 million.
Acquisition
date
Cost including
all additions
$'000
Independent
valuation
date
2008
$'000
3-Sep-07
14,391
16-Jul-07
14,391
Hotel investment property
Diplomat Hotel, Canberra, ACT
16. INTANGIBLE ASSETS
CONSOLIDATED
2008
2007
$'000
$'000
Management rights
At 1 July, net of accumulated amortisation
Acquisition
Amortisation charge for the year
At 30 June, net of accumulated amortisation
860
(50)
810
-
PARENT ENTITY
2008
2007
$'000
$'000
-
-
Management rights
Management right are carried at cost and are amortised on a straight line basis over the period during which
benefits are expected to be received. Management rights are amortised over a period of 10 years being the term of
the management agreements.
38
NOTES
30 JUNE 2008
17. TRADE AND OTHER PAYABLES
Notes
Trade creditors and accruals
Trade and other creditors
Accrued interest expense
Accrued hotel and other expenses
Inter entity payables
Payables to related party
Others
Goods and services tax
Advance deposits
Total trade and other payables
(a)
(b)
CONSOLIDATED
2008
2007
$'000
$'000
PARENT ENTITY
2008
2007
$'000
$'000
(a)
3,705
2,555
3,954
10,214
2,973
1,534
1,493
6,000
1
1
-
(b)
-
-
724
724
-
2,370
970
3,340
13,554
277
1,654
1,931
7,931
725
-
Trade and other creditors are non-interest bearing and are normally settled on 30 day terms.
For terms and conditions relating to related party payables refer to note 19.
18. PROVISIONS
CONSOLIDATED
2008
2007
$'000
$'000
$'000
CURRENT
Employee entitlements
Provision for distributions
Other
NONNON-CURRENT
Employee entitlements
PARENT ENTITY
2008
2007
$'000
$'000
1,548
945
24
2,517
782
411
22
1,215
-
-
769
500
-
-
39
NOTES TO THE FINANCIAL
FINANCIAL STATEMENTS
30 JUNE 2008
19. INTERESTINTEREST-BEARING LOANS AND BORROWINGS
CONSOLIDATED
2007
2008
$'000
$'000
(a) Current
Loan from related parties
(b) NonNon-Current
Bank loans – AUD (1)
Bank loan – NZD (2)
Loan from related parties (3)
(c) The maturity profile of current and nonnon-current
interest bearing loans
Due within one year
Due within two to five years
Due after five years
Total interestinterest-bearing loans and borrowings
PARENT ENTITY
2008
2007
$'000
$'000
22,757
22,757
757
22,
-
-
-
154,213
27,758
73,932
255,903
57,899
31,746
55,789
145,434
145,434
-
-
22,757
181,971
73,932
278,660
89,645
55,789
145,434
-
-
AHF maintains a range of interest-bearing loans and borrowings. The sources of funding are split between two banks
to minimise credit risk and the terms of the instruments are negotiated to achieve a balance between capital
availability and cost of debt.
1)
Bank loans – A$ are provided by two major banks at floating interest rates. The loans are denominated in Australian dollars and are
secured by a charge over the hotel property plant and equipment in note 14. The interest on floating rate borrowings is paid quarterly based
on existing swap and yield rates quoted on the rate reset date. The loans mature in March 2011, June 2011 and June 2012 and have a
weighted average term to maturity of 3.4 years.
2)
Bank loan – NZ$ is provided by a major bank at floating interest rate. The loan is denominated in New Zealand dollars and is secured by a
charge over the hotel property plant and equipment in note 14. The interest on floating rate borrowings is paid quarterly based on existing
swap and yield rates quoted on the rate reset date. The loan matures in June 2011 and has a term to maturity of 2.9 years.
3)
Loans from related parties relates to fixed rate loan provided by Abacus to assist in funding the acquisition of hotels and provide working
capital ahead of equity capital raising from the public. The interest rate on the borrowing was 8.0% p.a. for the year. The loan matures in
March 2016 and has a remaining term to maturity of 7.7 years.
CONSOLIDATED
2008
2007
$'000
$'000
(d) Financing facilities available
Committed facilities available to the Fund:
Bank facilities
Abacus working capital facility
Total financing facilities at the end of the year
Amount utilised
Available financing facilities
Cash
Financing resources available a the end of the year
182,034
150,000
332,034
278,660
53,374
9,434
62,808
109,342
150,000
259,342
145,434
113,908
6,940
120,848
PARENT ENTITY
2008
2007
$'000
$'000
-
40
30 JUNE 2008
2008
19. INTEREST BEARING LOANS AND BORROWINGS continued
CONSOLIDATED
2008
2007
$'000
$'000
Maturity profile of the financing facilities
Maturity profile in respect of above financing facilities:
Due within one year
Due within two to five years
Due after five years
Total financing facilities at the end of the year
182,034
150,000
332,034
109,342
150,000
259,342
PARENT ENTITY
2008
2007
$'000
$'000
-
-
These facilities comprise fixed and floating rate secured facilities. Amounts which are denominated in foreign
currencies are translated at exchange rates ruling at balance date.
20. CONTRIBUTED EQUITY
CONSOLIDATED
2007
2008
$'000
$'000
(a) Issued capital
Issued securities
(b) Movements in contributed equity for the year
At 30 June 2007
distribution reinvestment plan
public equity raising
less: transaction costs on securities issue
At 30 June 2008
42,063
18,116
CONSOLIDATED
CONSOLIDATED
Value
Number
$
20,494
18,116
349
342
24,649
24,630
(1,025)
45,492
42,063
PARENT ENTITY
2007
2008
$'000
$'000
2,270
1,027
PARENT ENTITY
Value
Number
$
20,494
1,027
349
12
24,649
1,231
45,492
2,270
Since the end of the financial year:
-
The Fund has issued a further 318,378 units for a cash consideration of $0.4 million pursuant to further public
equity raising.
-
On 7 August 2008 112,947 units were issued for cash consideration of $114,009 pursuant to the AHF Distribution
Reinvestment Plan.
Security holders have the right to receive distributions from the Fund, and in the event of winding up of the Fund, to
participate in the proceeds from sale of all surplus assets in proportion to the number of stapled securities held.
Stapled security holders can vote their shares and securities in accordance with the Corporations Act, either in
person or by proxy, at a meeting of the Company or Trust.
CAPITAL MANAGEMENT
AHF seeks to manage its capital requirements through a mix of debt and equity funding. It also ensures that AHF
entities comply with capital and distribution requirements of their constitutions and/or trust deeds, the capital
requirements of relevant regulatory authorities and continue to operate as going concerns. AHF also protects its
equity in assets by taking out insurance.
41
30 JUNE 2008
20. CONTRIBUTED EQUITY continued
AFML issued a product disclosure statement and prospectus for the issue of stapled securities in AHF at an issue
price of $1.03 adjusted accrued distributions. The offer opened 4 April 2008 and closes on 26 April 2009. It is intended
to raise $100 million of securities in AHF.
AHF assesses the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its
broader strategic plan. In addition to tracking actual against budgeted performance, AHF continuously reviews its
capital structure to ensure sufficient funds and financing facilities, on a cost effective basis are available to
implement AHF’s strategy that adequate financing facilities are maintained and distributions to members are made
within the stated distribution guidance.
AHF actively manages its capital via the following strategems: issuing new stapled securities, activating its
distribution reinvestment plan (presently active at 2% discount to the issue price of new securities under the then
current offer document), adjusting the amount of distributions paid to members, activating a security buyback
program, divesting assets, active management of the AHF’s fixed rate swaps or (where practical) recalibrating the
timing of transactions and capital expenditure so as to avoid a concentration of net cash outflows.
21. FINANCIAL INSTRUMENTS
(i) Credit Risk
Credit Risk Exposures
The carrying amount of the Fund’s financial assets represents the maximum credit exposure. The Fund’s maximum
exposure to credit risk at the reporting date was:
CONSOLIDATED
Trade Receivables
Allowance for impairment loss
Other debtors
Derivatives
Carrying amount of trade and other receivables
Carrying Amount
2008
$’000
6,765
(9)
6,756
41
1,000
9,434
7,556
24,787
PARENT
PARENT
Receivables
2007
$’000
2,322
(4)
2,318
6
8,138
6,940
2,517
19,919
Carrying Amount
2008
$’000
-
2007
$’000
1,080
1,080
Impairment – Receivables
Trade receivables are non-interest bearing and are generally on 30 days terms. A provision for impairment loss is
typically recognised when there is objective evidence that an individual trade receivable is impaired. An impairment
loss of $19,000 (2007: $4,000) has been recognised by the Fund in the current year.
42
30 JUNE 2008
INSTRUMENTS
(i) Credit Risk continued
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
CONSOLIDATED
2007
2008
$'000
$'000
Balance at 1 July 2007
Impairment loss recognised
Amounts written off
Balance at 30 June 2008
2008
$'000
PARENT
2007
$'000
-
-
0 – 30 days 31 - 60 days 61 - 90 days
$'000
$'000
$'000
91+ days
$'000
4
19
(14)
9
4
4
The following table illustrates grouping of the Fund’s related party receivables and trade receivables.
CONSOLIDATED
30--Jun30
Jun-08
$'000
Original term
$'000
Others
Total Consolidated
1,000
41
1,041
1,000
41
1,041
-
-
Parent
Total Parent
Total
CONSOLIDATED
3030-JunJun-08
$'000
Trade receivables
Total Consolidated
Consolidated
6,765
6,765
5,643
5,643
886
886
157
157
79
79
-
-
-
-
-
Total
Parent
Total Parent
CONSOLIDATED
3030-JunJun-07
$'000
Original term
$'000
Others
Total Consolidated
8,138
6
8,144
8,138
6
8,144
Parent
Total Parent
Parent
1,080
1,080
1,080
1,080
Total
43
30 JUNE 2008
(i) Credit Risk continued
CONSOLIDATED
3030-JunJun-07
$'000
Trade receivables
Total Consolidated
2,322
2,322
1,938
1,938
305
305
28
28
52
52
-
-
-
-
-
Total
Parent
Total Parent
0 – 30 days 31 - 60 days 61 - 90 days
$'000
$'000
$'000
91+ days
$'000
(ii) Liquidity Risk
The table below shows an analysis of the contractual maturities of key assets and liabilities which form part of the
Group’s assessment of liquidity risk.
CONSOLIDATED
3030-JunJun-08
Liabilities
Interest bearing loans & borrowings
Total liabilities
PARENT
3030-JunJun-08
Liabilities
Total liabilities
CONSOLIDATED
3030-JunJun-07
Liabilities
Total liabilities
PARENT
3030-JunJun-07
Liabilities
Total liabilities
Carrying
Amount
$'000
Contractual
cash flows
$'000
1 Year or
less
$'000
Over 1 year
to 5 years
$'000
Over
5 years
$'000
13,554
278,660
292,214
13,554
436,578
450,132
13,554
21,253
34,807
244,642
244,642
170,683
170,683
Carrying
Amount
$'000
Contractual
cash flows
$'000
1 Year or
less
$'000
Over 1 year
to 5 years
$'000
Over
5 years
$'000
725
725
725
725
725
725
-
-
Carrying
Amount
$'000
Contractual
cash flows
$'000
1 Year or
less
$'000
Over 1 year
to 5 years
$'000
Over
5 years
$'000
7,931
145,434
153,365
7,931
329,028
336,959
7,931
11,961
19,892
150,657
150,657
166,410
166,410
Carrying
Amount
$'000
Contractual
cash flows
$'000
1 Year or
less
$'000
Over 1 year
to 5 years
$'000
Over
5 years
$'000
-
-
-
-
44
NOTES TO THE NANCIAL STATEMENTS
30 JUNE 2008
21. FINANCIAL INSTRUMENTS continued
(iii) Currency Risk
The following table shows the Australian dollar equivalents of the Fund’s investments denominated in a foreign
currency.
NZD
CONSOLIDATED
Assets
Total assets
assets
Liabilities
Provisions
Total liabilities
2008
$'000
2007
$'000
1,150
779
546
2,475
1,790
138
1,287
3,215
921
295
35,000
36,216
884
261
35,000
36,145
The Fund borrows loan funds in New Zealand dollars to substantially match the foreign currency property asset
value exposure with a corresponding foreign currency liability and therefore expects to substantially mitigate the
foreign currency risk on its New Zealand denominated asset values.
The parent has no NZD denominated assets or liabilities.
The following sensitivity is based on the foreign currency risk exposures in existence at the balance sheet date:
At 30 June 2008, had the Australian Dollar moved, as illustrated in the table below, with all other variables held
constant, equity would have been affected as follows:
Judgements of reasonably
possible movements:
Equity
Higher/(Lower)
2008
$’000
2007
$’000
Consolidated
AUD/NZD +10%
AUD/NZD -10%
29
(35)
4
(5)
Parent
AUD/NZD +10%
AUD/NZD -10%
-
-
45
30 JUNE 2008
(iv) Interest rate risk
The Fund’s exposure to interest rate risk and the effective weighted average interest rates for each class of financial
asset and financial liability are:
CONSOLIDATED
3030-JunJun-08
Financial Assets
Cash & cash equivalents
Derivatives
Total financial assets
Weighted average interest rate
Financial liabilities
Related party loans
Payables
Total financial liabilities
Weighted average interest rate*
PARENT
3030-JunJun-08
Financial Assets
Fixed
Fixed
Fixed
interest
maturing in
interest
interest
Floating interest 1 year or maturing in 1 maturing in
rate
less
to 5 years over 5 years
$'000
$'000
$'000
$'000
Non
interest
bearing
$'000
Total
$'000
9,434
9,434
7.34%
-
-
-
7,556
7,797
15,353
9,434
7,556
7,797
24,787
27,913
27,913
8.64%
22,757
22,757
8.00%
154,058
154,058
7.21%
73,932
73,932
8.00%
13,554
13,554
181,971
96,689
13,554
292,214
Non
interest
erest
int
bearing
$'000
Total
$'000
Fixed
Fixed
Fixed
interest
maturing in
interest
interest
Floating interest 1 year or maturing in 1 maturing in
rate
less
to 5 years over 5 years
$'000
$'000
$'000
$'000
-
-
-
-
-
-
Payables
-
-
-
-
725
725
725
725
46
30 JUNE 2008
(iv) Interest rate risk continued
CONSOLIDATED
3030-JunJun-07
Financial Assets
Cash & cash equivalents
Derivatives
Related party loans
Payables
PARENT
3030-JunJun-07
Financial Assets
Fixed
Fixed
interest
Fixed
interest
Fixed
maturing in maturing in
interest
Floating interest 1 year or
1 to 5 maturing in Non interest
rate
less
years over 5 years
bearing
$'000
$'000
$'000
$'000
$'000
Total
$'000
6,940
6,940
6.00%
-
-
-
2,517
10,462
12,979
6,940
2,517
10,462
19,919
10,848
10,848
7.21%
-
78,797
78,797
7.18%
55,789
55,789
8.00%
7,931
7,931
89,645
55,789
7,931
153,365
Fixed
Fixed
interest
Fixed
interest
maturing in maturing in
interest
Floating interest
1 to 5 maturing in Non interest
interest 1 year or
rate
less
years over 5 years
bearing
$'000
$'000
$'000
$'000
$'000
Total
$'000
-
-
-
-
1,080
1,080
1,080
1,080
-
-
-
-
-
-
47
30 JUNE 2008
Summarised interest rate sensitivity analysis
The table below illustrates the potential impact a change in interest rate by +/- 1% would have had on the Fund’s
profit and equity:
CONSOLIDATED
3030-JunJun-08
Financial assets
PARENT
3030-JunJun-08
Financial assets
CONSOLIDATED
3030-JunJun-07
Financial assets
PARENT
3030-JunJun-07
Financial assets
Carrying amount
Floating
$'000
9,434
27,914
Carrying amount
Floating
$'000
-
Carrying amount
amount
Floating
$'000
6,940
10,848
Carrying amount
Floating
$'000
-
AUD
-1%
Profit
$'000
(94)
279
AUD
-1%
Profit
$'000
AUD
-1%
Profit
$'000
(69)
108
AUD
-1%
Profit
$'000
-
+1%
Equity
$'000
Profit
$'000
Equity
$'000
(94)
279
94
(279)
94
(279)
Equity
$'000
Profit
$'000
Equity
$'000
-
-
-
Equity
$'000
Profit
$'000
Equity
$'000
(69)
108
69
(108)
69
(108)
Equity
$'000
Profit
$'000
Equity
$'000
-
-
-
+1%
+1%
+1%
48
30 JUNE 2008
INSTRUMENTS continued
Summarised interest rate sensitivity analysis continued
CONSOLIDATED
3030-JunJun-08
Carrying amount
Floating
$'000
Financial assets
PARENT
3030-JunJun-08
Financial assets
CONSOLIDATED
3030-JunJun-07
Financial assets
PARENT
3030-JunJun-07
Financial assets
1,696
-
Carrying amount
Floating
$'000
-
Carrying amount
amount
Floating
$'000
3,077
-
Carrying amount
Floating
$'000
-
NZD
-1%
Profit
$'000
(17)
NZD
-1%
Profit
$'000
NZD
-1%
Profit
$'000
(31)
NZD
-1%
Profit
$'000
-
+1%
Equity
$'000
Profit
$'000
Equity
$'000
(17)
-
17
-
17
-
Equity
$'000
-
Equity
$'000
(31)
-
Equity
$'000
-
+1%
Profit
$'000
-
+1%
Profit
$'000
31
-
+1%
Profit
$'000
-
Equity
$'000
-
Equity
$'000
31
-
Equity
$'000
-
49
30 JUNE 2008
(v) Fair values
As at 30 June 2008, the carrying amounts and fair values of financial assets and financial liabilities are:
CONSOLIDATED
Financial assets
Financial Liabilities
Net financial assets / (liabilities)
Unrealised
Unrealised losses
PARENT
Financial assets
Financial Liabilities
Net financial assets / (liabilities)
Unrealised losses
Carrying
Amount
2008
$'000
Fair
Value
2008
$'000
Carrying
Amount
2007
$'000
Fair
Value
2007
$'000
9,434
7,797
7,556
24,787
9,434
7,797
7,556
24,787
6,940
10,462
2,517
19,919
6,940
10,462
2,517
19,919
13,554
278,660
292,214
(267,427)
13,554
278,660
292,214
(267,427)
-
7,931
145,434
153,365
(133,446)
7,931
145,434
153,365
(133,446)
-
Carrying
Amount
2008
$'000
Fair
Value
2008
$'000
Carrying
Amount
2007
$'000
Fair
Value
2007
$'000
-
-
1,080
1,080
1,080
1,080
725
725
(725)
725
725
(725)
-
1,080
1,080
-
50
30 JUNE 2008
22. BUSINESS COMBINATION
Acquisition of Hotel Businesses
On 3 July 2007 and 4 July 2007, Abacus Townsville Hotel Pty Limited and Abacus Townsville Trust, subsidiaries of
AHF, acquired the hotel property and business of Rydges Southbank Townsville in Townsville, Queensland. The
purchase price of the hotel property and business was a cash payment of $18,739,000.
And on 13 July 2007, Abacus Market Street Hotel Pty Limited and Abacus Market Street Hotel Trust, subsidiaries of
AHF, acquired the hotel property and business of Swissôtel Sydney in Sydney, New South Wales. The purchase price
of the hotel property and business was a cash payment of $84,810,000.
The fair value of the identifiable assets and liabilities of the businesses as at the date of acquisition were:
Recognised on acquisition
Rydges Southbank
Townsville
$'000
17,500
1,250
4
31
46
37
18,868
Swissôtel
Sydney
$'000
74,363
10,637
203
555
148
85,906
(5)
(67)
(57)
(129)
(8)
(412)
(676)
(1,096)
Fair value of identifiable net assets
18,739
84,810
Cost of the combination:
Cash paid
18,739
84,810
4
(18,739)
(18,735)
(84,810)
(84,810)
Land and buildings
Plant and equipment
Deferred tax asset
Trade debtors
Prepayments
Inventories
Other creditors
Advance deposits
Provisions
The cash outflow on acquisition is as follows:
Net cash acquired with the business
Cash paid
Net consolidated cash outflow
51
30 JUNE 2008
22. BUSINESS COMBINATION continued
Acquisition of Abacus Matson Resort Trust (AMRT)
On 18 December 2007, AHT acquired 100% of the units of Abacus Matson Resort Trust (AMRT), an unlisted unit trust
which owns a 75% tenants-in-common interest in the land and buildings of the Rydges Esplanade Resort in Cairns,
Queensland. And AHF acquired 75% of the voting shares of Abacus Matson Holdings Pty Limited (AMHPL), an
unlisted private company which owns and operates and hotel business at the Rydges Esplanade Resort in Cairns,
Queensland.
The cost of the combination of the AMRT was $16,549,000 comprising cash payment and costs directly attributable to
the combination and the cost of the combination of AMHPL was $2,551,000 comprising cash payment and costs
directly attributable to the combination.
On 30 May 2008, AMRT acquired further 25% interest in the land and buildings of the Rydges Esplanade Resort in
Cairns, Queensland from CEC group and AHL acquired further 25% interest in AMHPL.
The fair value of the identifiable assets and liabilities of AMRT and AMHPL as at the date of acquisition were:
52
30 JUNE 2008
22. BUSINESS COMBINATION continued
BUSINESS COMBINATION
ACQUISITION OF 75%
INTEREST
December 2007
Freehold land & buildings
AMRT
ACQUISITION OF 25%
INTEREST
May 2008
Recognised Carrying
ACQUISITION OF 75%
INTEREST
December 2007
AMHPL
ACQUISITION
ACQUISITION OF 25%
INTEREST
May 2008
Recognised
Carrying
Recognised
Carrying
Recognised
Carrying
On acquisition
Value
On acquisition
Value
On acquisition
Value
On acquisition
Value
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
25,089
15,732
5,299
5,299
-
-
1,620
1,154
365
365
526
526
90
90
1,624
1,624
451
51
Trade debtors
1,190
1,190
217
217
444
444
117
117
159
153
159
153
31
39
31
39
204
Plant and equipment
Deferred tax asset
Other debtors
1,223
1,223
Prepayments
Inventories
Management rights
660
860
204
Loan to related entities
556
491
85
85
6,930
6,600
1,601
1,601
Loan from related entities
26,312
16,955
(9,657)
(9,657)
5,299
5,299
Trade creditors
Other creditors
(62)
(66)
Advance deposits
Provisions
GST payable
(44)
(2,330)
(528)
(528)
(487)
(487)
(238)
(238)
(3)
(3)
(4)
(4)
(337)
(337)
(85)
(85)
(127)
(127)
(22)
(22)
Income tax liability
(266)
(266)
-
-
Minority interests
(829)
-
-
-
(4,380)
(3,552)
(876)
(876)
(9,763)
Fair value of identifiable
net assets
(44)
(2,330)
(9,767)
-
-
16,549
5,299
2,551
725
16,549
5,299
2,551
559
1,624
451
(5,299)
(2,551)
(559)
(5,299)
(927)
(108)
Cost of the combination:
Cash paid
The cash outflow on
acquisition is as follows:
Net cash acquired with
the subsidiary
Cash paid
Net consolidated cash
outflow
Discount on acquisition
(16,549)
-
166
53
30 JUNE 2008
23. CAPITAL AND OTHER COMMITMENTS
There were no contingent liabilities referable to the AHF at 30 June 2008.
Information required to be disclosed concerning relationships, transactions and balances with related parties of the
Fund is set out in this note unless disclosed elsewhere in this financial report.
The Company forms part of the AHF and the related party disclosures for the Fund have the same applicability to it.
As such while the related party disclosures make reference to the Fund, they also relate to the Company.
24. RELATED PARTY DISCLOSURES
(a) Responsible Entity
The Responsible Entity of AHF is AFML, an Australian Financial Services License holder whose immediate and
ultimate holding company is AGHL.
Transactions between the Fund and the Responsible Entity result from normal dealings with that company as the
Fund’s Responsible Entity.
(b) Details of Key Management Personnel
(i) Directors
The Directors of AHL and AFML are considered to be Key Management Personnel of the Fund. AFML pays the
remuneration of Key Management Personnel. The Directors of AHL and the Responsible Entity received no
remuneration from the Fund.
The Directors of AHL in office during the year and up to the date of the report are:
Mr John Thame
Dr Frank Wolf
Mr William Bartlett
Mr David Bastian
Mr Dennis Bluth
Mr Malcolm Irving
Mr Len Lloyd
Chairman (Non-executive)
Managing Director (executive)
Director (Non-executive)
Director (Executive)
The Directors of the Responsible Entity in office during the year and up to the date of the report are:
Mr John Thame
Dr Frank Wolf
Mr William Bartlett
Mr David Bastian
Mr Dennis Bluth
Mr Malcolm Irving
Mr Len Lloyd
Chairman
Managing Director (executive)
Director (non-executive)
Director (executive)
Directors have been in office for the entire period unless otherwise disclosed.
54
30 JUNE 2008
24. RELATED PARTY DISCLOSURES continued
(ii) Director-related entity transactions
A partner in HWL Ebsworth, Mr Dennis Bluth, is a director of the Responsible Entity and AGHL. HWL Ebsworth was
paid $29,261 (2007: $44,000) for legal services relating to corporate issues, lease documentation and fund offer
documents.
(iii) Other Key Management Personnel
In addition to the Directors noted above, AFML, the Responsible Entity of the Fund is considered to be Key
Management Personnel with the authority for the strategic direction and management of the fund.
(iv) Compensation of Key Management Personnel
No amount is paid by the fund directly to the Directors of the Responsible Entity. Consequently, no compensation as
defined in AASB 124 “Related Party Disclosures” is paid by the Fund to the Directors as Key Management Personnel.
Compensation is paid to the Responsible Entity in the form of fees and is disclosed in note 24(c).
(c) Fees
AFML provides management and investment accounting services to the Fund.
All costs associated with the provision of investment accounting services are paid for by the Responsible Entity, and
are conducted on normal commercial terms and conditions.
The Responsible Entity receives all management fees that have been paid by the Fund during the year. In
accordance with Fund’s offer document and constitution, the Responsible Entity is entitled to receive a management
fee of 0.85% of the total assets of the fund per annum under the terms of the Constitution. The fees are paid on a
monthly basis. Total fees paid to the Responsible Entity during the year for management of the Fund were $2.6 million
(2007: $0.6 million). As at the balance sheet date, $0.5 million (2007: nil) was owing to the Responsible Entity in relation
to management fees.
Also in accordance with the terms in the Fund’s offer document and constitution, the Responsible Entity is entitled to
receive property acquisition, fund establishment and capital raising fees. AHF paid property acquisition, fund
establishment and capital raising fees to the Responsible Entity of $4.1 million for the year ended 30 June 2008 (2007:
$2.1 million), of which $1.3 million (2007: 2.2 million) was owing to the Responsible Entity at 30 June 2008.
(d) Related party transactions
(i) Related parties
Transactions between the Fund and the Responsible Entity during the year are outlined in note 24(c) above. The other
entities detailed below are considered related parties of the Fund by virtue of the significant influence of the Fund’s
directors and Responsible Entity over these entities.
55
30 JUNE 2008
(ii) Other related entity transactions
The following table provides the total amount of transactions that were entered into with related parties for the
relevant financial year.
CONSOLIDATED
2008
Related party
Abacus Property Group
CONSOLIDATED
2007
Related party
Abacus Property Group
Sales / fees /
income
come charged
in
to related
parties
$'000
1,533
-
Purchases / fees /
interest
from related
parties
$'000
3,291
7,511
Amounts
owing by
related
parties
$'000
383
-
Amounts
owing to
related
parties
$'000
1,324
97,621
Sales / fees /
income charged
to related
parties
$'000
1,880
-
Purchases / fees /
interest
from related
parties
$'000
$'000
2,711
2,164
Amounts
owing by
related
parties
$'000
1,880
-
Amounts
owing to
related
parties
$'000
2,200
56,826
Sales and fees to, and purchases and fees charged from related parties are made in arm's length transactions both
at normal market prices and on normal commercial terms.
Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash. No provision for
doubtful debts has been recognised or bad debts incurred with respect to amounts payable or receivable from
related parties during the year.
Yield guarantee income of Novotel Twin Waters Resort
Under the yield guarantee agreement with AFML, AHF’s yield guarantee income entitlement for the period from 1
January 2008 to 30 June 2008 is $0.38 million receivable.
Loan from Abacus Property Group
During the financial year, Abacus Property Group, as part of the Abacus Working Capital Facility subjected to a
Facility Agreement with a facility limit of $150 million, advanced loans to the Fund to assist in financing the acquisition
of fund assets. Interest is charged at a rate equals to the AHF distribution rate of 8.0% per annum for the year. The
balance of these loans (including accrued interest) at year end is $ 97.6 million (2007: $56.8 million). Interest expense
of $7.5 million was incurred on these loans (2007: $2.2 million).
56
30 JUNE 2008
(e) Investments
Related party investments in the Fund
Details of investments in the Fund by related funds and the Abacus Property Group are set out below:
2008
Abacus
Property Group
Abacus
Diversified
Income Fund II
2007
Abacus
Property Group
Abacus
Diversified
Income Fund II
Fair value of
holdings
% interest
Securities
acquired
Securities
disposed
Distributions
paid / payable
$2.7 million
6.2%
2.8 million
-
$58,416
$4.8 million
10.7%
4.9 million
-
$297,234
Fair value of
holdings
% interest
Securities
acquired
Securities
disposed
Distributions
paid / payable
-
-
-
15.1 million
$14.1 million
$2.8 million
14.2%
2.9 million
-
$116,000
(f) Subsidiaries
Investments held in subsidiaries are disclosed in Note 28. Transactions with wholly owned subsidiaries are on
normal commercial terms and eliminate in full on consolidation.
25. AUDITORS’ COMPENSATION
The auditor of the Fund is Ernst & Young.
Amounts received or due and receivable by Ernst
& Young Australia for:
- an audit of the financial report of the fund
2008
$'000
2007
$'000
104
72
26. SUPERANNUATION
SUPERANNUATION COMMITMENTS
The Fund sponsors accumulation style superannuation funds and plans to provide retirement benefits to its
employees. There are no unfunded liabilities in respect of these superannuation funds and plans at 30 June 2008. The
Fund does not sponsor defined benefit style superannuation funds and plans.
27. EMPLOYEES
At 30 June 2008, Abacus Hospitality Fund, through its controlled entities, employed 895 employees in total. (2007: 577
employees).
57
30 JUNE 2008
28. DETAILS OF CONTROLLED ENTITIES
The consolidated financial statements include the financial statements of the following entities listed in the following
table:
Name
Abacus Hospitality Limited and its subsidiaries:
Abacus Tradewinds Operating Company Pty Ltd
Abacus Chateau Pty Ltd
Abacus Twin Waters Resort Pty Ltd
Abacus Gladstone Hotel Pty Ltd
Abacus Townsville Hotel Pty Ltd
Abacus Market Street Hotel Pty Ltd
Abacus Matson Holdings Pty Ltd
Abacus Hospitality Trust and its subsidiaries:
Abacus Tradewinds Trust
Abacus Chateau Trust
Abacus Twin Waters Resort Trust
Abacus Gladstone Hotel Trust
Abacus Townsville Hotel Trust
Abacus Market Street Hotel Trust
Abacus Diplomat Hotel Trust
Abacus Matson Resort Trust
% of equity interest
2008
2007
Investment ($)
2007
2008
100
100
100
100
100
100
100
100
100
100
100
-
1
1
1
1
1
1
3,210,752
3,210,758
1
1
1
1
1
5
100
100
100
100
100
100
100
100
100
100
100
100
-
18,614,630
7,801,999
43,777,241
5,761,001
7,028,001
35,000,001
5,500,501
16,549,241
140,032,615
18,614,630
7,801,999
43,777,241
5,761,001
75,954,871
29. EVENTS AFTER THE BALANCE SHEET DATE
Other than as disclosed in this report and to the knowledge of directors, there has been no matter or circumstance
that has arisen since the end of the financial year that has significantly affected, or may affect, the Fund’s operations
in future financial years, the results of those operations or the Fund’s state of affairs in future financial years.
58
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors, we state that:
In the opinion of the Directors:
(a) the financial statements and notes of the Company and the consolidated entity are in accordance with
the Corporations Act 2001, including :
(i) give a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June
2008 and of their performance for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
On behalf of the Board of Abacus Hospitality Limited
John Thame
Chairman
Frank Wolf
Managing Director
Sydney, 23 September 2008
59

2008 annual financial reports

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