HALF YEARLY REPORT. 31 December Clarence Property Corporation Limited

Transcription

1 HALF YEARLY REPORT 31 December 2012 Clarence Property Corporation Limited ACN , AFSL As Responsible Entity for Westlawn Property Trust ARSN

2 FINANCIAL REPORT CONTENTS PAGE Directors' Report 2 Auditors' Independence Declaration 6 Statement of Comprehensive Income 7 Statement of Financial Position 8 Statement of Changes in Equity 9 Statement of Cash Flows 10 Notes to the Financial Statements 11 Directors' Declaration 30 Auditors' Report 31 DIRECTORY Responsible Entity and Manager Auditor for the Trust Clarence Property Corporation Limited Wappett & Partners ACN Molesworth Street AFSL Lismore NSW 2480 Registered Office Solicitors 2/75 Tamar Street McCullough Robertson Ballina NSW 2478 Level 11, Central Plaza Two Phone: Eagle Street Fax : Brisbane QLD enquiry@clarenceproperty.com.au Auditor for the Manager Registry WHK Rutherfords PO Box Carrington Street Ballina NSW 2478 Lismore NSW 2480 Page 1

3 DIRECTORS' REPORT The directors of Clarence Property Corporation Ltd ("Responsible Entity"), the responsible entity of Westlawn Property Trust (the "Trust") submit these statements in accordance with a resolution of the directors with respect to the results of the Trust for the half year ended 31 December 2012 and the state of the Trust's affairs at that date. 1 Directors and officers i) Directors The directors of the Responsible Entity at any time during the financial year and until the date of this report are: James William Dougherty Chairman of Directors (Non- Executive) Age 59 years Mr Dougherty is a licensed real estate agent and qualified Chartered Accountant. He has wide ranging experience in real estate having spent 12 years as principal of L J Hooker Grafton. He is an executive director of Westlawn Finance Limited and has been involved with the Trust since its creation in He holds a Bachelor of Economics and a Diploma of Financial Management, both from the University of New England. He has 158,900 ordinary units in the Trust, and another 115,000 ordinary units in the Trust jointly with Catherine Patricia Dougherty. He is a member of the JW & CP Dougherty Super Fund which owns 98,121 ordinary units in the Trust. Peter Nicholas Fahey Managing Director (Executive) Age 49 years Mr Fahey is a licensed real estate agent and property valuer and holds a Bachelor of Business (Real Property Valuation and Administration) from Queensland Agricultural College and is an Associate of the Australian Property Institute. He worked as a real estate valuer with the State Bank of NSW before joining L J Hooker Grafton in 1989 where he specialised in commercial sales, management and leasing until June He has been the driving force behind the Trust since its creation in He is a director of Wellington Funds Management Limited. He is a member of the P & D Fahey Super Fund which owns 536,419 ordinary units in the Trust. Michael James Dougherty Director (Non-Executive) Age 66 years Mr Dougherty is the Chairman of Directors of Westlawn Finance Limited, a Grafton based finance company with assets under management in excess of $100 million. He has extensive experience in the finance and lending industry and has been involved with the Westlawn group since He has held a security dealer's licence since 17 February He is a member of the M J Dougherty Superannuation Fund which owns 949,850 ordinary units in the Trust. Geoffrey Rex Shepherd Director (Non-Executive) Age 64 years Mr Shepherd has 34 years experience in public accounting and is a former partner of Grafton accounting firm Hudson Shepherd Pty Ltd. He is a Fellow of the Institute of Chartered Accountants and a Fellow of the Local Government Auditors Association of New South Wales. He is a member of the Hudson Shepherd Pty Ltd Superannuation Fund No 2 which owns 1,275,000 ordinary units in the Trust. Page 2

4 DIRECTORS' REPORT 1 Directors and officers (continued) ii) Company Secretary Paul James Rippon Age 55 years Mr Rippon has 31 years experience in public accounting. He holds a Bachelor of Business in Accounting & Business Law from the New South Wales Institute of Technology. Paul is a member of the Institute of Chartered Accountants and is a Financial Planning Specialist with the Institute. From 2000 until 2006, he was a principal of WHK Rutherfords Accountants and for 12 years prior to that was principal of Conways & Co Chartered Accountants. iii) Directors meetings Six directors meetings were held in the period 1 July 2012 to 31 December 2012 and attendances were: James William Dougherty 6 Peter Nicholas Fahey 5 Michael James Dougherty 6 Geoffrey Rex Shepherd 6 2 Principal activity The principal activity of the Trust during the financial period was to offer individual investors the opportunity to combine their funds with the funds of other investors to collectively, within the Trust, invest in income producing commercial, retail and industrial property. There was no significant change in the nature of this activity during this period. 3 Review of operations The following is a summary of key outcomes during the period: i) Operating results The net loss of the Trust for the financial period amounted to $5,237,668 (December 2011: net profit $2,209,183). ii) Investment property revaluations There were no independent valuations during the period. iii) Property sales There were no property sales during the period. iv) Other investments There were no movements in other investments during the period. v) Capital raising Pursuant to the Distribution Reinvestment Plan, 253,877 units were issued at $0.75 per unit during the period. Page 3

5 DIRECTORS' REPORT 4 Significant changes in the state of affairs of the Trust In the opinion of the Directors there were no significant changes in the state of affairs of the Trust during the period under review, other than those stated in these statements. 5 Matters arising since the period end No matter or circumstance has arisen since the end of the financial period that has significantly affected or may significantly affect: i) the operations of the Trust; ii) the results of those operations; or iii) the state of affairs of the Trust in subsequent financial years. 6 Likely developments in the operations of the Trust The Trust will continue with a similar level of activity for the year ending 30 June 2013 as in the past. The Manager will continue to ensure the long term growth of the Trust by identifying profitable long term property opportunities in Australia, and will continue to carefully manage existing properties. 7 Environmental issues The Trust's operations are not subject to any particular or significant environmental regulation under a law of the Commonwealth, State or Territory. 8 Distributions to fund members During the half year ended 31 December 2012 fund members received or were entitled to receive distributions of $2,349,059 (December 2011: $2,335,963). The average annualised rate of normal distributions for the financial period was 4.0 cents per unit (December 2011: 4.0 cents per unit). 9 Options on units There are no options over any units in the Trust. 10 Responsible Entity fees The Responsible Entity has been paid or is due fees of $867,012 (including managers fees of $855,012, custodial fees of $6,000 and registry fees of $6,000) for the half year ended 31 December 2012 (December 2011: $826,650) in accordance with the Constitution of the Trust. Further details of fees paid to the manager are disclosed in Note 19 on Page 25 of the financial statements. Page 4

6 DIRECTORS' REPORT 11 Indemnifying officers or auditor During or since the end of the reporting period the Responsible Entity has not given an indemnity or entered an agreement to indemnify any officer or auditor in respect of the operations of the Trust. The Responsible Entity pays premiums to insure each of the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the Responsible Entity, other than conduct involving a wilful breach of duty in relation to the Responsible Entity. 12 Interests in the Trust The details of the Trust for the half year ended 31 December 2012 were: i) Units as at 1 July ,304,705 Units issued during the period 253,877 Units redeemed during the period - Units as at 31 December ,558,582 ii) During the year the Responsible Entity acquired 9,774 units through the distribution reinvestment plan. The Responsible Entity holds a total of 373,876 as at 31 December iii) The value of the Trust's assets at 31 December 2012 was $290,508,630. Assets were valued at cost or fair value. 13 Proceedings on behalf of the Trust No person has applied for leave of Court to bring proceedings on behalf of the Trust or intervene in any proceedings to which the Trust is a party for the purpose of taking responsibility on behalf of the Trust for all or any part of those proceedings. The Responsible Entity was not a party to any such proceedings during the period. 14 Auditors' independence declaration A copy of the Auditors' lndependence Declaration, as required under section 307C of the Corporations Act 2001, is set out on page 6. Signed in accordance wíth a resolution of the Board of Directors: Peter Nicholas Fahey Managing Director James William Dougherty Director Dated in Ballina this 21st day of February 2013 Page 5

7 AUDITORS' INDEPENDENCE DECLARATION This declaration is made in connection with our review of the financial report of Westlawn Property Trust for the period ended 31 December 2012 and in accordance with the provisions of the Corporations Act We declare that, to the best of our knowledge and belief, there have been: No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to this review; and No contraventions of any applicable Code of Professional Conduct in relation to this review. Yours faithfully, WAPPETT & PARTNERS Trevor W Graham Partner Dated in Lismore this 21st day of February 2013 Liability limited by a scheme approved under Professional Standards Legislation PARTNERS Lismore Telephone (02) Molesworth Street (PO Box 198) Lismore NSW 2480 Ballina Telephone (02) /183 River Street (PO Box 396) Ballina NSW admin@wappetts.com.au Internet Facsimile (02) G.J. Smith B.Bus., LLB, C.A. T.W. Graham B.Bus., C.A., FFin. A.M. Jones B.Bus., Affiliate I.C.A.A., C.P.A. S.I. Trustum B.Bus., C.A. A. Bazzana B.Bus., C.A. Page 6

8 STATEMENT OF COMPREHENSIVE INCOME 31 December 31 December Note $ $ Revenue Interest revenue 88,251 89,868 Property revenue 13,765,743 14,945,965 Other income 2 270, ,124 Total revenue 14,124,807 15,274,957 Expenses Financing costs 3 (6,834,939) (7,148,787) Property expenses and outgoings (4,602,890) (4,242,361) Bad and doubtful debts expense (33,911) (1,520) Responsible entity's fees 19 (855,012) (826,650) Changes in inventories of land held for resale and other assets (200,000) - Other expenses (59,390) (77,065) Total expenses (12,586,142) (12,296,383) Net profit before fair value adjustments 1,538,665 2,978,574 Fair value adjustments to investment properties 10 (4,658,833) (769,391) Fair value adjustments to financial assets (2,117,500) - Total comprehensive income attributable to unitholders (5,237,668) 2,209,183 The above Statement of Comprehensive Income should be read in conjuction with the accompanying notes. Page 7

9 STATEMENT OF FINANCIAL POSITION As at 31 December 2012 ASSETS 31 December 30 June Note $ $ Current assets Cash and cash equivalents 5 3,231,649 4,961,215 Trade and other receivables 6 4,380,194 4,279,526 Inventory 8 500, ,000 Other assets 9 1,899,575 1,692,311 Total current assets 10,011,418 11,633,052 Non-current assets Trade and other receivables 6 1,732,500 3,850,000 Financial assets 7 5,998,080 5,998,080 Investment property ,705, ,555,000 Other assets 9 3,061,632 2,923,367 Total non-current assets 280,497, ,326,447 Total assets 290,508, ,959,499 LIABILITIES Current liabilities Trade and other payables 11 1,211,998 1,167,882 Other liabilities 12 1,396,266 1,494,931 Financial liabilities 13 1,750,000 - Total current liabilities 4,358,264 2,662,813 Non-current liabilities Financial liabilities ,500, ,250,000 Total non-current liabilities 161,500, ,250,000 Total liabilities 165,858, ,912,813 Net assets 124,650, ,046,686 EQUITY Unitholders' equity Issued capital 120,882, ,692,358 Undistributed income 3,767,601 11,354,328 Total unitholders' equity 124,650, ,046,686 The above Statement of Financial Position should be read in conjuction with the accompanying notes. Page 8

10 STATEMENT OF CHANGES IN EQUITY No. of units on issue Undistributed Issued capital income Total $ $ $ Balance at 1 July ,304, ,692,358 11,354, ,046,686 Total comprehensive loss attributable to unitholders - - (5,237,668) (5,237,668) 117,304, ,692,358 6,116, ,809,018 Transactions with unitholders recorded directly in equity: Distributions paid/payable - - (2,349,059) (2,349,059) Units issued 253, , ,407 Units redeemed Balance at 31 December ,558, ,882,765 3,767, ,650,366 No. of units on issue Undistributed Issued capital income Total $ $ $ Balance at 1 July ,530, ,112,005 4,095, ,207,690 Total comprehensive profit attributable to unitholders - - 2,209,183 2,209, ,530, ,112,005 6,304, ,416,873 Transactions with unitholders recorded directly in equity: Distributions paid/payable - - (2,335,963) (2,335,963) Units issued 448, , ,446 Units redeemed Balance at 31 December ,979, ,448,451 3,968, ,417,356 The above Statement of Changes in Equity should be read in conjuction with the accompanying notes. Page 9

11 STATEMENT OF CASH FLOWS 31 December 31 December Note $ $ Cash flows from operating activities Receipts from operations (including GST) 14,961,246 16,998,782 Interest received 88,251 89,868 Trust distributions received 265, ,623 Other receipts Payment to suppliers (6,287,869) (5,053,124) Goods & services tax received (paid) (699,669) (1,855,969) Borrowing costs paid (7,089,942) (7,088,187) Net cash provided by operating activities 17 1,237,072 3,270,248 Cash flows from investing activities Proceeds on sale of non-current assets - 803,983 Payment for property (808,833) (419,391) Net cash provided by/(used in) investing activities (808,833) 384,592 Cash flows from financing activities Proceeds from issue of units 190, ,446 Repayment of borrowings - (500,000) Distribution paid (2,348,213) (2,334,467) Net cash used in financing activities (2,157,805) (2,498,021) Net increase (decrease) in cash held (1,729,566) 1,156,819 Cash at beginning of financial year 4,961,215 3,073,461 Cash at the end of the financial period 5, 17 3,231,649 4,230,280 The above Statement of Cash Flows should be read in conjuction with the accompanying notes. Page 10

12 1 Summary of significant accounting policies The financial statements cover Westlawn Property Trust (the "Trust") as an individual entity. The Trust is a registered managed investment scheme in accordance with the Corporations Act 2001 and is domiciled in Australia. Basis of preparation The financial statements are general purpose financial statements prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) of the Australian Accounting Standards Board. Australian Accounting Standards set out accounting policies the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of the financial statements are presented below and have been consistently applied unless otherwise stated. The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The financial statements are presented in Australian dollars which is the Trust's functional and presentational currency. Statement of compliance A number of new standards, amendments to standards and interpretations are available for early adoption but have not been applied in preparing these financial statements. The potential impact of the new standards, amendments to standards and interpretations has been considered and they are not expected to have a significant effect on the financial statements. a) Investment property Investment property comprises investment interests in land and buildings (including integral plant and equipment) held for the purpose of letting to produce rental income or for capital appreciation or both. Initially, investment property is measured at cost including transaction costs. Subsequent to initial recognition, investment property is then stated at fair value at each balance date with any gain or loss arising from a change in fair value of investment property recognised in the Statement of Comprehensive Income in the period in which it arises. Fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion. External independent valuations are commissioned at least once every three years or when the directors are of the opinion there has been a material movement in the market. Internal valuations are also undertaken by suitably experienced and qualified appraisers for those properties not externally valued at each balance date. Investment property is derecognised when disposed of or when the investment property is permanently withdrawn from use and no future benefit is expected from its disposal. Any gain or loss on derecognition of an investment property is recognised in the Statement of Comprehensive Income in the period of derecognition. Page 11

13 1 Summary of significant accounting policies (continued) a) Investment property (continued) Costs incurred on investment property subsequent to initial acquisition are capitalised only when it is probable the fair value of the relevant property will increase in proportion to those costs incurred. Otherwise, the costs are expensed as incurred. Land & Buildings (including integral plant and equipment) which comprise the investment property are not depreciated. Where a property is acquired to be redeveloped into investment property it is classified as property, plant and equipment. The construction or development of an investment property is classified as property, plant and equipment. Transfers are made from property, plant & equipment to investment property when, and only when, there is a change in use as evidenced by commencement of an operating lease to another party or the ending of construction or development. For a transfer from property, plant & equipment to investment property, any difference between the fair value of the property at that date and it's previous carrying amount is recognised in the Statement of Comprehensive Income in the period in which the transfer takes place. b) Operating leases - investment property The minimum rental revenue of operating leases with fixed rental increases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, is recognised on a straight-line basis. Revenue from other leases is recognised in accordance with the lease agreement, which is considered to best represent the pattern of service rendered through the provision of the leased asset. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight-line basis over the lease term. Lease incentives under operating leases are recognised as an asset and amortised on a straight-line basis over the life of the lease term. c) Inventories Where a property or asset is acquired for the purpose of undergoing redevelopment and subsequent resale or is in the process of production for such sale, it is treated as inventories. Inventories is stated at the lower of cost and net realisable value. Cost includes acquisition, development and holding costs such as borrowing costs, rates and taxes. Holding costs incurred after the completion of the development are expensed. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. Transfers are made from inventories to investment property when, and only when, there is a change in use evidenced by commencement of an operating lease to another party. For a transfer from inventories to investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in the Statement of Comprehensive Income in the period in which the transfer takes place. Transfers are made from investment property to inventories when, and only when, there is a change in use as evidenced by commencement of development with a view to sale. Page 12

14 1 Summary of significant accounting policies (continued) d) Financial instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Trust becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date the Trust commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transactions costs except where the instrument is classified at fair value through profit or loss in which case transaction costs are expensed to the Statement of Comprehensive Income immediately. Classification and subsequent measurement Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: - the amount at which the financial asset or financial liability is measured at initial recognition; - less principal repayments; - plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest rate method; and - less any reduction for impairment. The effective interest rate method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in the Statement of Comprehensive Income. i) Financial assets at fair value through profit or loss Financial assets are classified at 'fair value through profit or loss' when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in the Statement of Comprehensive Income. ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except those which are not expected to mature within 12 months after the end of the reporting period, which are classified as non-current assets. iii) Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Page 13

15 1 Summary of significant accounting policies (continued) d) Financial instruments (continued) Fair value Fair value is determined based on current bid price for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities including recent arm s length transactions, reference to similar instruments or option pricing models. Impairment At the end of each reporting period, the Trust assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised by transferring all valuation decrements recognised in equity relating to a particular investment to the Statement of Comprehensive Income. Derecognition Financial assets are derecognised where the contractual right to receipt of cash flows expires or the asset is transferred to another party whereby the Trust no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of noncash assets or liabilities assumed, is recognised in the Statement of Comprehensive Income. e) Impairment of assets At the end of each reporting period, the Trust assesses whether there is any indication an asset may be impaired. The assessment includes considering external and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset (being the higher of the asset s fair value less costs to sell or value in use) to the asset s carrying value. Any excess of the asset s carrying value over its recoverable amount is expensed to the Statement of Comprehensive Income. Where it is not possible to estimate the recoverable amount of an individual asset, the Trust estimates the recoverable amount of the cash-generating unit to which the asset belongs. f) Provisions Provisions are recognised when the Trust has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. g) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the Statement of Financial Position. Page 14

16 1 Summary of significant accounting policies (continued) h) Revenue and other income Interest revenue is recognised using the effective interest rate method, which for floating rate financial assets is the rate inherent in the instrument. Dividend & trust distribution revenue is recognised when the right to receive a dividend or trust distribution has been established. Investment property revenue is recognised on a straight-line basis over the period of the lease term so as to reflect a constant periodic rate of return on the net investment. i) Trade and other payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the Trust during the reporting period, which remain unpaid. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. j) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Borrowing costs, except loan establishment costs, are recognised in the Statement of Comprehensive Income in the period in which they are incurred. Loan establishment costs are capitalised and amortised over the term of the facility to which they relate, or 5 years, whichever is shorter. k) Taxation i) Income Tax Under current Australian income tax legislation, the Trust is not liable to income tax provided its taxable income (including any realised capital gains) is fully distributed to unitholders each year. The Trust fully distributes its taxable income to unitholders. ii) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the GST incurred on a purchase of goods and services is not recoverable from the Tax Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the Tax Office is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows 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 Tax Office, are classified as operating cash flows. Page 15

17 1 Summary of significant accounting policies (continued) l) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Trust has retrospectively applied an accounting policy, made a retrospective restatement of items in the financial statements or reclassified items in its financial statements, an additional Statement of Financial Position as at the beginning of the earliest comparative period will be disclosed. m) Critical accounting estimates and judgements The Responsible Entity evaluates estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Trust. Key Estimates The Trust assesses impairment at the end of each reporting period by evaluation of conditions and events specific to the Trust that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations, which incorporate various key assumptions. Key judgements Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: Note 10 - Investment property. Page 16

18 31 December 31 December Revenue and other income $ $ Other income comprises: Trust distributions 270, ,869 Other revenue , ,124 3 Profit Net profit before fair value adjustments has been determined after: Financing costs Interest expense 6,783,379 7,088,187 Borrowing costs 51,560 60,600 6,834,939 7,148,787 4 Auditors' remuneration Detail of remuneration of auditor is set out below: Auditing or reviewing the financial statements 30,250 30,200 Compliance plan audit ,250 30,200 Page 17

19 31 December 30 June Cash and cash equivalents $ $ Security deposits 3,700 3,700 Cash held in trust 60,423 79,146 Cash at bank 3,167,526 4,878,369 3,231,649 4,961,215 6 Trade and other receivables Current Trade and other debtors 4,069,911 3,953,463 Less provision for doubtful debts (21,538) - Sundry debtors 331, ,063 Total current 4,380,194 4,279,526 Non-current Loan - Wises Farm Development Trust 1,732,500 3,850,000 Total non-current 1,732,500 3,850,000 Total trade and other receivables 6,112,694 8,129,526 Future minimum lease receivables Future minimum lease payments receivable from non-cancellable operating leases: Within one year 18,680,153 19,114,490 Later than one year but not later than five years 53,650,898 50,027,057 Later than five years 24,389,517 24,990,115 96,720,568 94,131,662 The Trust, as lessor, typically enters into operating leases with tenants for periods of 3 years to 10 years with option periods. The lease agreements provide for either rental increases as specified in the agreement or CPI increases. The movement in provision for doubtful debts during the period was as follows: Opening balance - 5,500 Provision for doubtful receivables 37,302 12,990 Receivables written off during the year (15,764) (12,990) Reversals of amounts provided - (5,500) Closing balance 21,538 - Page 18

20 31 December 30 June Financial assets $ $ Non-current Financial assets at fair value through profit or loss Units in unlisted unit trusts 5,998,080 5,998,080 5,998,080 5,998,080 8 Inventory Current At cost Land held for resale 441, , , ,120 At net realisable value Land held for resale 500, , , ,000 The land at 9 Treelands Drive, Yamba was independently valued in June 2012 by Taylor Byrne Valuations at $700, Other assets Current Prepayments 1,899,575 1,692,311 1,899,575 1,692,311 Non-current Prepayments 3,061,632 2,923,367 3,061,632 2,923,367 Total other assets 4,961,207 4,615,678 Page 19

21 Independent Valuation 31 December 30 June Amount Date Firm Investment property $ $ $ Investment property (at fair value) Commercial 100 Blundell Boulevard, Tweed Heads 8,250,000 Jun-12 CB Richard Ellis 8,250,000 8,250, Buller Street, Port Macquarie 15,400,000 Jun-12 Savills 15,400,000 15,400, Molesworth Street, Lismore 18,500,000 May-11 CB Richard Ellis 18,500,000 18,500, Queen Street, Brisbane (Note 1) 127,000,000 Jun-12 M3 Property 125,000, ,000, George Street, Parramatta (Note 1 & 2) 39,000,000 Jun-12 Jones Lang Lasalle 37,500,000 39,000,000 Retail Prince Street, Grafton 1,760,000 May-11 Herron Todd White 1,760,000 1,760,000 Yamba Shopping Fair 20,000,000 Jun-11 CB Richard Ellis 20,000,000 20,000,000 Yamba Residential Properties (Note 3) 895,000 Mar-11 Taylor Byrne 895, ,000 The Rocks Shopping Fair, South West Rocks 6,300,000 Mar-11 Colliers International 6,300,000 6,300,000 Byron West Shopping Fair 8,500,000 Jun-12 M3 Property 8,500,000 8,500,000 Easy T Shopping Centre, Robina 25,000,000 Jun-12 M3 Property 25,000,000 25,000,000 Tamar Village Shopping Centre, Ballina (Note 1 & 4) 3,850,000 Jun-10 Taylor Byrne 2,600,000 2,950, ,455, ,705, ,555,000 Note 1 - The 31 December 2012 amount is an internal valuation. Note 2 - The amounts quoted represent the Trust's 50% ownership in the building. Note 3 - These properties adjoin the Trust's Yamba Shopping Fair property and are held for future development of the centre. Note 4 - The 30 June 2012 amount is an internal valuation. Valuation basis The fair value model is applied to all investment property. External independent valuations are commissioned at least once every three years or when the directors are of the opinion there has been a material movement in the market. Internal valuations are undertaken by suitably experienced and qualified appraisers for those properties not externally valued at each balance date. Movement in investment properties Opening balance 273,555, ,280,000 Additions at cost Acquisition price - - Transaction costs - - Improvements 808,833 2,665,483 Disposals - (5,900,000) Net fair value adjustment (4,658,833) 7,509,517 Transfers to inventory - - Closing balance 269,705, ,555,000 Page 20

22 31 December 30 June Trade and other payables $ $ Current Other creditors 746, ,046 Distributions to unitholders 391, ,016 GST payable 73,750 (30,180) 1,211,998 1,167,882 Included in the above are amounts due to related parties: Other creditors 50,717 57,121 Distributions to unitholders 1,246 1,182 51,963 58, Other liabilities Current Rent received in advance 1,090,634 1,191,454 Units to be issued 29,983 31,985 Other liabilities 275, , Financial liabilities 1,396,266 1,494,931 Current Loan 1,750,000 - Non-current Bank Bills 161,500, ,500,000 Loan - 1,750, ,250, ,250,000 Details of the Trust's financial liabilities at balance date are as follows: Facility Utilised Facility Utilised 31 December 31 December 30 June 30 June Facility $ $ $ $ Bank Bills - National Australia Bank (i) 161,500, ,500, ,500, ,500,000 Loan - Mayne Investments Ltd (ii) 1,750,000 1,750,000 1,750,000 1,750,000 Total facilities 163,250, ,250, ,250, ,250,000 The Trust had $Nil (2012: $Nil) in unused finance facilities at balance date. i) The National Australia Bank finance facility is secured by first registered mortgages over the majority of the investment properties held by the Trust and a registered fixed and floating charge over the assets of the Trust. The facility has a maturity date of June ii) The Mayne Investments facility is secured by a first registered mortgage over one of the investment properties held by the Trust. The facility has a maturity date of November Page 21

23 14 Segment reporting The Trust operates as a property investor throughout Australia. 15 Contingencies Contingent assets $100,000 (June 2012: $100,000) receivable in respect to a Green Building Fund grant obtained for base building energy performance upgrade works at the Trust's 307 Queen Street, Brisbane building. The grant is conditional on the Trust undertaking the approved upgrade works within specified timescales. At reporting date the upgrade works were complete. The timing of receipt is expected to be $100,000 in financial year Contingent liabilities The Trust had no contingent liabilities at reporting date (June 2012: $Nil). 16 Commitments for capital expenditure As at 31 December 2012 the Trust had the following capital expenditure commitments contracted for which costs have not been recognised as liabilities. 31 December 31 December $ $ Capital expenditure projects payable within 12 months Page 22

24 31 December 31 December Note Notes to the Statement of Cash Flows $ $ a) Cash and cash equivalents Cash at the end of the period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: Security deposits 5 3,700 3,700 Cash held in trust 5 60,423 46,136 Cash at bank 5 3,167,526 4,180,444 3,231,649 4,230,280 b) Reconciliation of net profit/(loss) to net cash flows from operating activities Total comprehensive profit/(loss) attributable to unitholders (5,237,668) 2,209,183 Non-cash items: Loss on sale of non-current assets - - Fair value adjustments to investment properties 4,658, ,391 Fair value adjustments to financial assets 2,117,500 - Transfers to inventory from investment property - - Changes in assets and liabilities: Decrease (increase) in current receivables (94,910) 94,922 Decrease (increase) in trust distributions receivable (5,758) (60,246) Decrease (increase) in inventories 200,000 - Decrease (increase) in other assets (345,530) (16,615) Increase (decrease) in sundry creditors (60,660) (333,106) Increase (decrease) in other liabilities 2, ,646 Increase (decrease) in GST payable 103, ,685 Increase (decrease) in income in advance (100,820) 225,388 Net cash provided by operating activities 1,237,072 3,270, Events subsequent to reporting date There were no material events subsequent to the reporting date. Page 23

25 19 Related party disclosures a) Responsible Entity The Trust is required to have an incorporated responsible entity to manage the activities of the Trust. The Responsible Entity of the Westlawn Property Trust is Clarence Property Corporation Limited. b) Key management personnel The following persons were key management personnel of the Responsible Entity from 1 July 2012 to 31 December 2012, unless otherwise stated. Key management person James William Dougherty Peter Nicholas Fahey Michael James Dougherty Geoffrey Rex Shepherd Position Chairman Non-Executive Managing Director - Executive Director Non-Executive Director Non-Executive c) Key management personnel compensation No compensation is paid to any of the key management personnel or employees of the Responsible Entity directly by the Trust. d) Unit holdings: The Responsible Entity and its key management personnel held units in the Trust as follows: Balance Net Purchases Balance Net Purchases Balance 1/07/2011 / (Sales) 30/06/2012 / (Sales) 31/12/2012 James Dougherty: James Dougherty 158, , ,900 James & Catherine Dougherty 115, , ,000 JW & CP Dougherty Super Fund 98,121-98,121-98,121 Peter Fahey: P & D Fahey Super Fund 522,670 9, ,747 4, ,419 Yehaf Developments Pty Ltd 100 (100) Michael Dougherty: M J Dougherty Super Fund 949, , ,850 Geoffrey Shepherd: HS P/L Super Fund No. 2 1,275,000-1,275,000-1,275,000 Responsible Entity: Clarence Property Corporation Ltd 342,868 21, ,102 9, ,876 Total 3,462,509 30,211 3,492,720 14,446 3,507,166 Page 24

26 31 December 31 December Related party disclosures (continued) $ $ e) Transactions Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated: Transactions with: The Manager Paid/payable to the Manager: Management fees 855, ,650 Custodial fees 6,000 - Registry fees 6, , ,650 Received/receivable from the Manager: Rental of business premises - 21,424 21,424 Clarence Property Works Pty Ltd Property management, rent review & leasing fees 628, ,832 Westlawn Insurance Brokers Pty Ltd Insurance premiums 297, ,349 including broker fee of 31,000 28,000 - Page 25

27 20 Financial instruments a) Financial risk management The Trust has exposure to the following risks from its use of financial instruments: - Credit risk - Liquidity risk - Market risk (interest rate risk & equity price risk). i) Credit risk Credit risk is the risk of financial loss to the Trust if a customer or counterpart to a financial instrument fails to meet its contractual obligations, and arises principally from the Trust's receivables from tenants and investment in securities. Trade and other receivables The Trust's exposure to credit risk is influenced mainly by the individual characteristics of each purchaser. The Trust has a diverse range of tenants and therefore there is no significant concentration of credit risk, either by nature of industry or geographically. Investment in securities The Trust limits its exposure to credit risk by only investing in liquid securities or securities that have fixed term durations. ii) Liquidity risk Liquidity risk is the risk that the Trust will not be able to meet its financial obligations as they fall due. The Trust's approach to managing liquidity is to ensure, as far as possible, it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Trust's reputation. The Trust has liquidity risk management policies, which assist in monitoring cash flow requirements. Typically the Trust ensures it has sufficient cash on demand to meet expected operational expenses and commitments for a period of 90 days, including the servicing of financial obligations. Cash on demand is defined as cash held or unutilised borrowing facilities. The Trust also ensures that as far as practicable, sufficient borrowing facilities are approved for a minimum of 3 years. iii) Market risk Market risk is the risk that changes in market prices, such as interest rates and equity prices, will affect the Trust's income or value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return. The Trust enters into financial liabilities in order to manage market risks. Interest rate risk Interest rate risk is the risk that a financial instrument's value will fluctuate as a result of changes in the market interest rate. The Trust has a guideline that 70-90% of its exposure to changes in interest rates on borrowings is hedged through entering into fixed rate bills or interest rate swaps. Additionally the Trust holds interest rate caps to provide further protection should extreme unforeseen circumstances arise. Equity securities price risk The Trust is exposed to equity securities price risk. The key risk variable is the quoted price of stocks which is influenced by a range of factors, most of which are outside the control of the Trust. The Trust only invests in securities that are primarily backed by real property assets. Page 26

28 20 Financial instruments (continued) b) Credit risk The carrying amount of the Trust's financial assets represents the maximum credit exposure. The Trust's maximum exposure to credit risk at reporting date was: 31 December 2012 $ 30 June 2012 $ Cash and cash equivalents 3,231,649 4,961,215 Trade receivables 614, ,787 Loan receivables 1,732,500 3,850,000 Financial assets at fair value through profit or loss 5,998,080 11,576,261 5,998,080-15,457,082 c) Liquidity risk The following are the contractual maturities of financial liabilities: 31 December 2012 Secured bank loans/bills Trade & other payables 30 June 2012 Carrying amount 1 year or less 1-3 years 3-5 years $ $ $ $ 163,250,000 1,750, ,500,000-2,608,264 2,608, ,858,264 4,358, ,500,000 - More than 5 years $ Secured bank loans/bills 163,250, ,250, Trade & other payables 2,662,813 2,662, ,912,813 2,662, ,250, Page 27

29 20 Financial instruments (continued) d) Interest rate risk At reporting date the interest rate profile of the Trust's interest bearing financial instruments was: Weighted average effective interest rate 31 December 30 June 31 December % % $ 30 June 2012 $ Fixed rate financial assets Cash - National Australia Bank ,003,682 2,003,682 3,300,000 3,300,000 Fixed rate financial liabilities Bank bills - National Australia Bank N/A ,000, ,000,000 Variable rate financial assets Cash - National Australia Bank ,135,738 1,135,738 1,555,222 1,555,222 Variable rate financial liabilities Bank bills - National Australia Bank ,500,000 61,500,000 Loan - Mayne Investments Ltd ,750, ,250,000 1,750,000 63,250,000 In addition the Trust holds the following treasury instruments: Type BBSY Rate Amount $ Start Date Expiry Date Fixed Rate Swap 5.08% 10,000,000 Jul-10 Jul-13 Fixed Rate Swap Fixed Rate Swap Fixed Rate Swap Fixed Rate Swap 5.19% 4.29% 4.65% 6.79% 10,000,000 5,000,000 10,000,000 20,000,000 Jan-11 Aug-11 Aug-11 Dec-12 Jan-14 Aug-13 Aug-14 Feb-15 Fixed Rate Swap Fixed Rate Swap 7.38% 7.56% 30,000,000 30,000,000 Dec-12 Dec-12 Feb-15 Aug-15 Fixed Rate Swap 6.79% 20,000,000 Dec-12 Feb-16 Fixed Rate Swap 3.25% 10,000,000 Jan-14 Jan-16 Fixed Rate Swap 3.41% 10,000,000 Jan-14 Jan-16 Fixed Rate Swap 3.58% 15,000,000 Feb-15 Feb-17 Fixed Rate Swap 3.68% 15,000,000 Feb-15 Feb-17 Page 28

30 20 Financial instruments (continued) Sensitivity analysis The Trust does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Trust does not designate derivatives (interest rate swaps & caps) as hedging instruments under fair value accounting model. Therefore a change in interest rates at reporting date would not affect profit or loss or equity. Variable rate instruments - an increase of 100 basis points in interest rates at the reporting date would have decreased equity and profit or loss by $1,621,143 (June 2012: a decrease of $616,948); an equal change in the opposite direction would have increased equity and profit or loss by $1,621,143 (June 2012: an increase of $616,948). e) Equity securities price risk The Trust has no exposure to equity investments listed on the Australian Securities Exchange. f) Fair values The net fair values of listed investments have been valued at the quoted market bid price at balance date adjusted for expected transaction costs. For other assets and other liabilities net fair value approximates their carrying value. No financial assets or financial liabilities are readily traded on organised markets in standardised form other than listed investments. Financial assets where the carrying amount exceeds net fair values have not been written down as the Trust intends to hold these assets to maturity. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the Statement of Financial Position and in the notes to the financial statements. 21 Trust details The principal place of business is 2/75 Tamar Street Ballina NSW and its principal activity is investing in commercial rental properties. At 31 December 2012 there were eleven employees of the Responsible Entity and its subsidiaries. Page 29