MACARTHURCOOK A Member of AIMS Financial Group MACARTHURCOOK. AIMS Property Fund (St Kilda Road) ANNUAL REPORT 2013 ARSN

Transcription

1 MACARTHURCOOK A Member of AIMS Financial Group MACARTHURCOOK AIMS Property Fund (St Kilda Road) ANNUAL REPORT 2013

2 CONTENTS Directors Report 2 Auditor s Independence Declaration 7 Statement of Comprehensive Income 8 Statement of Financial Position 9 Statement of Changes in Equity 10 Statement of Cash Flows 11 Notes to the Financial Statements 12 Directors Declaration 28 Independent Auditor s Report 29 1

3 DIRECTORS REPORT The Directors of MacarthurCook Fund Management Limited, the Responsible Entity of AIMs Property Fund (St. Kilda Road) ("the Fund"), present their report together with the Financial Report of the Fund for the financial year ended 30 June The Responsible Entity s registered office and principal place of business is Level 16, Central Square, 323 Castlereagh Street, Sydney, NSW On 19 October 2012, MacarthurCook Fund Management Limited became the Responsible Entity of the Fund as a result of an approved proposal put forward in a Unitholder s meeting on 10 October 2012 to replace Australian Property Growth Fund ( APGF ) Management Limited as the responsible entity of the Fund. As a result of the Responsible Entity transition, the scheme name was changed from Austgrowth Property Syndicate No.23 to AIMS Property Fund (St. Kilda Road) on 2 January Directors The Directors of the Responsible Entity at any time during or since the end of the financial year are shown below. Directors were in office to the date of the report unless otherwise stated: Name, qualifications and independence status George Wang BE Executive Chairman Experience, special responsibilities and other directorships George is the founding CEO of AIMS Financial Group and an active participant in both the Australian and Chinese financial services industries. George came to Australia from China some 20 years ago and founded AIMS Financial Group two years later. Since inception, AIMS has evolved into a diversified financial services group, active in the areas of lending, securitisation, investment banking, real estate funds management and property, resources, high-tech and infrastructure investment. In the course of developing AIMS Financial Group into a significant financial services group in Australia, George has developed a strong skill base in the areas of lending, securitisation, real estate funds management, structured finance and innovative financial product development. George has developed an extensive business network in both Australia and China. In China, George is active in the Chinese financial sector. He is an advisor for a number of Chinese Government bodies and Government agencies. He holds the position of Deputy President of the International Trade Council of China, a constituent body of China Council for the Promotion of International Trade. In Australia, George is the President of the Australia-China Finance & Investment Council. As the President of Australia-China Finance & Investment Council, George has been laying the foundation for the financial bridge between Australia and China for many years. George was appointed as Executive Chairman on 19 October During the past three years has acted as a non-executive director or director of the following entities: - AIMS Financial Group - AIMS AMP Capital Industrial REIT - Asia Pacific Exchange Limited 2

4 DIRECTORS REPORT Name, qualifications and independence status Richard Nott AM BSc (Hons), MCom, MBA, MIRM Non-Executive Independent Director & Chairman of the Audit Committee Experience, special responsibilities and other directorships Richard Nott is a former General Manager and Chief Executive of CGU Lenders Mortgage Insurance Ltd, General Manager Corporate Banking at Standard Chartered Bank Australia Ltd, General Manager Banking and Associate Director at Australian Bank, plus a twenty six year career with National Australia Bank throughout Australia and England. Qualifications include a Bachelor of Science (Hons), Master of Business Administration, Master of Commerce and Master of Insurance and Risk Management. He is a Fellow of Australian and New Zealand Institute of Insurance and Finance, Chartered Insurance Institute (UK) and Chartered Institute of Bankers (UK), plus the Accounting, Chartered Secretaries, HR and Management Institutes. He is also a Senior Fellow and life member of FINSIA. For almost a decade Richard was President of the Australia-Britain Society and in recent years Chairman of the Australia-Britain Society Foundation. He is a member of the Cook Society and Fred Hollows Foundation. He was made a Member of the Order of Australia (AM) in Richard was appointed as a Non-Executive Independent Director and Chairman of the Audit Committee and on 19 October During the past three years has acted as a non-executive director or director of the following entities: - First American Title Insurance Company of Australia Limited - Four Hats Financial Services Pty Ltd - Mortgage Guarantee Insurance Corporation Australia - Prime Insurance Group - RHG Limited John Love BCom, MBA, MIRM, CPA Non-executive Independent Director John is currently the Chairman of Mortgage Guarantee Insurance Corporation Australia, and a Non-Executive Director, the Chairman and a Member of Audit, Governance & Risk Management Committee for The Australian Wine Society Co-operative Limited. He was previously the General Manager of an Australian mezzanine property finance company. John was also previously the Head of Corporate Banking Australia and Head of Credit at Standard Chartered Bank Australia Limited. Qualifications include a Bachelor of Commerce (Qld), a Master of Business Administration (AGSM) and a Master of Insurance and Risk Management (Deakin). In addition, he is a Certified Practicing Accountant, a Fellow of the Tax Institute of Australia, a Fellow of the Chartered Institute of Secretaries, a Fellow of FINSIA, a Fellow of the Australian Institute of Company Directors and a Fellow of the Australian Mutuals Institute. John was appointed as a Non-Executive Independent Director on 19 October During the past three years has acted as a non-executive director or director of the following entities: - Mortgage Guarantee Insurance Corporation Australia - The Australian Wine Society Co-operative Limited 3

5 DIRECTORS REPORT The Directors of the previous Responsible Entity, Australian Property Growth Fund Management Limited are shown below: Name, qualifications and independence status Neil Summerson BCom, FCA, FAICD, FAIM Non-executive Chairman Experience, special responsibilities and other directorships Neil Summerson was a Non-Executive Chairman of the company. He is current and has been a director of several public, private and government corporations and has over 40 years experience practising as a Chartered Accountant. He was a partner and Managing Partner (Queensland) of Ernst & Young and a past State Chairman of the Institute of Chartered Accountants. As a practising Chartered Accountant Neil s field of expertise was in corporate reconstruction, mostly in the building and property sectors and consequently he has broad experience in property development and construction. His core strengths include strategic planning, risk management, corporate governance, regulatory compliance and financial analysis. During the past three years has acted as a non-executive director or director of the following entities: - Bank of Queensland Limited and subsidiaries - Australian Made Campaign Limited. Geoffrey McMahon BEcon, BCom, FCPA, FAICD, FCIM, FFIN Director Geoffrey is Managing Director of APGFM. He has been working in the property sector for more than 20 years and is responsible for APGF s corporate strategy, property funds, management, investments and developments. Geoff has been involved in over $1 billion of property investments and developments and has been a driving force since its inception. Geoff has significant experience in corporate finance and strategy, property funds management, property investment, property development, capital raising and management, risk management, corporate governance and financial management. Adriano Cragnolini BBus, CA, FFIN Adriano Cragnolini is a Director and Secretary of APGFM. Adriano has more than 15 years experience in senior management positions spread between public practice experience at Ernst & Young Australia, and in commerce working for a diversified property/hospitality group based in Papua New Guinea as well as a venture capital backed IT start-up company based in London. Adriano is a Chartered Accountant and a member of the Australasian Compliance Institute, in addition to being a fellow of the Financial Services Institute of Australasia. Adriano is responsible for the Fund s corporate finance, risk management, regulatory compliance and property funds management. Adriano resigned as a director of APGF on 28 September

6 DIRECTORS REPORT Principal Activities The Fund is a registered management investment scheme domiciled in Australia. The Fund continued its principal activity which is to hold and acquire investment properties for rental and capital gain returns. The fund did not have any employees during the year. Results and Review of Operations Change in Responsible Entity On 19 October 2012, MacarthurCook Fund Management Limited became the Responsible Entity of the Fund as a result of an approved proposal put forward in a Unitholder s meeting on 10 October 2012 to replace Australian Property Growth Fund ( APGF ) Management Limited as the responsible entity of the Fund. On 2 January 2013, the scheme name was changed from Austgrowth Property Syndicate No.23 to AIMS Property Fund (St. Kilda Road). Operations The comprehensive loss attributable to unitholders for the year ended 30 June 2013 is $421,947 (2012: $1,928,967). Distributions Paid or Recommended In respect of the financial year ended 30 June 2013, no distributions were paid or recommended. Significant Changes in State of Affairs Other than as noted in Results and Review of Operations, there were no significant changes in the state of affairs of the Fund which occurred during the financial year ended 30 June After Balance Date Events Other than matters disclosed in note 16 of the financial statements, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Responsible Entity of the Fund, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. Future Developments, Prospects and Business Strategies Other than disclosed elsewhere in the report, further information about likely developments in the operations of the Fund and the expected results those operations have not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Fund. Environmental Issues The Fund s operations are not subject to any significant environmental regulation under Commonwealth, State or Territory legislation. Other relevant information The following is a list of other relevant information required to be reported under the Corporations Act 2001: Fees paid to the Responsible Entity refer to note 14 to the financial statements; Indemnifying Officers or Auditor Under the Fund s constitution, the Responsible Entity is indemnified out of the Fund s assets for any loss, damage expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Fund. Insurance premiums have been paid, during or since the end of the financial year for all of the directors of the Responsible Entity of the Fund. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. 5

7 DIRECTORS REPORT Indemnifying Officers or Auditor (cont.) No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for the auditor of the Fund. Auditor s Independence The auditor s independence declaration is set out on page 7 and forms part of the directors report for the financial year ended 30 June Signed in accordance with a resolution of the Directors of MacarthurCook Fund Management Limited: Mr George Wang Executive Chairman Dated this 23 rd day of August

8 AUDITORS INDEPENDENCE DECLARATION 7

9 STATEMENT OF COMPREHENSIVE INCOME Notes Rental Income 4 3,453,536 3,233,133 Outgoings paid (1,276,362) (1,068,954) Net rental income 2,177,174 2,164,179 Interest income 11,371 25,173 Net Investment Income 2,188,545 2,189,352 Auditors' remuneration 17 (31,525) (15,865) Bank fees (145) (159) Finance costs (1,434,754) (1,519,592) Filing fees & penalties (1,086) (1,069) Compliance fees (926) (3,040) Custodian fees (9,447) (12,171) Depreciation (690,576) (690,576) Registry fees (21,430) (18,504) Professional fees (259,246) (71,063) Responsible Entity fees 14 (103,488) (156,688) Impairment of investment property 8 - (1,570,725) Other (57,870) (58,867) Total expenses (2,610,493) (4,118,319) Net Loss for the year (421,947) (1,928,967) Other comprehensive income for the year - - Total comprehensive loss for the year (421,947) (1,928,967) The Statement of Comprehensive Income is to be read in conjunction with the notes to the financial statements 8

10 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013 Notes Current assets Cash and cash equivalents 5 410, ,244 Trade and other receivables 6 114, ,568 Other current assets 7 372, ,111 Total current assets 897, ,923 Non-current assets Investment Property 8 24,419,768 24,950,644 Total non-current assets 24,419,768 24,950,644 Total assets 25,317,358 25,767,567 Current liabilities Trade and other payables 9 380, ,380 Other current liabilities , ,015 Interest bearing liabilities ,719 18,592,307 Total current liabilities 990,934 19,158,702 Non-current liabilities Interest bearing liabilities 11 18,139,506 - Total non-current liabilities 18,139,506 - Total liabilities 19,130,441 19,158,702 Net assets 6,186,918 6,608,865 Equity Unitholder's funds 12 13,408,815 13,408,815 Undistributed income (7,221,897) (6,799,950) Total equity 6,186,918 6,608,865 The Statement of Financial Position is to be read in conjunction with the notes to the financial statements 9

11 STATEMENT OF CHANGES IN EQUITY Unitholder's Undistributed funds income Total equity $ Balance as at 1 July ,408,815 (4,870,983) 8,537,832 Net loss for the year - (1,928,967) (1,928,967) Other comprehensive income for the year Transactions with owners in their capacity as owners: Distributions paid Balance as at 30 June ,408,815 (6,799,950) 6,608,865 Balance as at 1 July ,408,815 (6,799,950) 6,608,865 Net loss for the year - (421,947) (421,947) Other comprehensive income for the year Transactions with owners in their capacity as owners: Distributions paid Balance as at 30 June ,408,815 (7,221,897) 6,186,918 The Statement of Changes in Equity is to be read in conjunction with the notes to the financial statement 10

12 STATEMENT OF CASH FLOWS Notes Cash flows from operating activities Gross rent income 3,463,716 3,312,993 Interest received 11,371 25,173 Payments to suppliers (1,968,542) (1,839,082) Interest and other costs of finance (1,423,165) (1,518,101) Net cash from/(used in) operating activities 5 83,380 (19,017) Cash flows from investing activities Payment for property improvements (159,699) (199,958) Net cash (used in) investing activities (159,699) (199,958) Cash flows from financing activities Repayment of borrowings (18,572,307) (60,374) Net proceeds from secured bank loan 18,704,718 - Net cash (used in) financing activities 132,411 (60,374) Net increase in cash and cash equivalents 56,092 (279,349) Cash and cash equivalents at beginning of period 354, ,593 Cash and cash equivalents at end of period 5 410, ,244 The Statement of Cash Flows is to be read in conjunction with the notes to the financial statements 11

13 Statement 1. General Information These financial statements cover AIMS Property Fund (St. Kilda Road) as an individual entity domiciled in Australia. The Fund was constituted on 29 March The Fund s final disposal date was extended to 31 December The financial statements were authorised for issue by the Board of Directors 23 August The Fund is primarily involved in holding and acquiring investment properties for rental and capital gain returns. The Fund is a for-profit fund for the purposes of preparing the financial statements. The financial statements have been prepared on a going concern basis which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The ability of the Fund to pay its debts is dependent on launching the Entitlement Offer in or around September this year and receipting the proceeds. The sole purpose of the Entitlement Offer is to raise funds to reduce the Fund s gearing level to around 50%. 2. Basis of preparation A) Statement of compliance The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards issued by the Australian Accounting Standards Board (AASB) and the Corporations Act Compliance with Australian Accounting Standards ensures that the financial statements comply with the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). B) Basis of measurement The financial statements have been prepared on an accrual basis and are based on historical cost with the exception of financial assets and property investment assets, which are measured at fair value. C) Use of estimates and judgements In the application of the Fund s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Accounting policies which are subject to significant accounting estimates and judgements at the reporting date and have a significant risk of causing material adjustments to the financial statements in the next annual reporting period include estimate of fair values of investment properties. 12

14 3. Significant accounting policies The accounting policies set out below have been applied in the preparation of the financial statements. A) Cash and cash equivalents Cash and cash equivalents in the statement of financial position consist of cash on hand, cash at bank and short-term deposits that are readily convertible into known amounts of cash. The Fund considers a short-term deposit to have a maturity of three months or less and be subject to an insignificant risk of change in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash on hand and at bank, short-term deposits (as outlined above) net of any bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in current liabilities. B) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be uncollectable are written off when identified. An impairment provision is recognised when there is objective evidence that the Fund may not be able to collect the receivable. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the difference between the receivable carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of impairment loss is recognised in the statement of comprehensive income. When a trade receivable for which an impairment allowance had been recognised before it becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against doubtful debt expense in the statement of comprehensive income. C) Financial instruments (i) Classification The Fund's investments are classified as loans and receivables, and financial instruments at fair value through profit or loss. They comprise: Financial instruments at fair value through profit or loss upon initial recognition Financial assets and financial liabilities designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Fund s documented investment strategy. The Fund s policy is for the responsible entity to evaluate the information about these financial assets on a fair value basis together with other related financial information. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables and receivables in the statement of financial position. 13

15 3. Significant accounting policies (cont.) (ii) Recognition/derecognition The Fund recognises financial assets and financial liabilities on the date it becomes party to the contractual agreement (trade date) and recognises changes in fair value of the financial assets or financial liabilities from this date. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value and transaction costs are expensed in the statement of comprehensive income. Investments are derecognised when the right to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership. (iii) Measurement Financial assets and liabilities held at fair value through profit or loss Financial assets and liabilities held at fair value through profit or loss are measured initially and subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the statement of comprehensive income within other income or other expenses in the period in which they arise. Loans and receivables Loan assets are measured initially at fair value plus transaction costs and subsequently amortised using the effective interest rate method, less impairment losses if any. Such assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If evidence of impairment exists, an impairment loss is recognised in the statement of comprehensive income as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the writedown, the write-down is reversed through the statement of comprehensive income. (iv) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 14

16 3. Significant accounting policies (cont.) D) Investment property Investment property is measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at cost, which is based on the original cost of the asset less accumulated depreciation on the building. The fair value of investment properties are disclosed separately in the notes with evaluations of fair value being conducted periodically but at least triennially by external independent valuers who apply the International Valuation Standards as issued by the International Valuations Standards Committee. Investment property is derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the statement of comprehensive income in the year of retirement or disposal. Transfers are made to investment property when, and only when, there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale. E) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership, but not the legal ownership, to the lessee. All other leases are classified as operating leases. (i) Fund as lessor Leases in which the Fund retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income. Income from operating leases is recognised on a straight line basis over the term of the lease, unless another more systematic basis is more representative of the time pattern in which the benefit derived from the leased asset is diminished. (ii) Lease incentives Incentives such as cash, rent free periods or contributions towards lessee or lessor owned fit outs, may be provided to lessees to enter into an operating lease. These incentives are capitalised and amortised over the term of the lease as a reduction in rental income on a straight line basis. F) Trade and other payables Trade and other payables are carried at amortised cost due to their short term nature they are not discounted. They represent liabilities for goods and services provided to the Fund prior to the end of the financial year that are unpaid and arise when the Fund becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. 15

17 3. Significant accounting policies (cont.) G) Interest bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings. Borrowings are classified as current liabilities unless the Fund has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or finance cost. (i) Borrowing costs Borrowing costs are recognised as an expense when incurred, except to the extent that they are incurred in the acquisition or construction of qualifying assets. Borrowing costs directly associated with this asset would be capitalised (including any other associated costs directly attributable to the borrowing and temporary investment income earned on the borrowing). H) Provisions Provisions are recognised when the Fund has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Fund expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the reporting date using a discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount rate. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. 16

18 3. Significant accounting policies (cont.) I) Investment income Income is recognised and measured at the fair value of the consideration received or receivable to the extent 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: (i) Interest income Income 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. (ii) Rental income Rental income from investment properties is accounted for on a straight-line basis over the lease term. Contingent rental income is recognised as income in the periods in which it is earned. Lease incentives granted are recognised as an integral part of the total rental income. J) Income tax and other taxes (i) Income Taxes Under current income tax legislation the Fund is not liable to pay income tax provided that the taxable income and taxable realised gains are fully distributed to unitholders each year. (ii) Goods and Services Tax 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 which 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 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 taxation authority is classified as part of operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the taxation authority. K) Distributions In accordance with the Fund s constitution, the Fund distributes income adjusted for amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. 17

19 L) New accounting standards and interpretations Standards and Interpretations affecting the reported results of financial position There are no new and revised Standards and interpretations adopted in these financial statements affecting the reported results or financial position. Accounting Standards and Interpretations issued but not yet effective Australian Accounting Standards that have recently been issued or amended, and may be applicable to, but are not yet effective and have not been adopted by the Fund for the annual reporting period ending 30 June 2013, are outlined in the table below. The Fund does not intend to early adopt these standards and none of these is expected to have a significant impact on the financial statements of the Fund. Standard/Interpretation AASB 9 Financial Instruments, and the relevant amending standards AASB 10 Consolidated Financial Statements and AASB Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards AASB 11 Joint Arrangements and AASB Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards AASB 12 Disclosure of Interests in Other Entities and AASB Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards AASB 127 Separate Financial Statements (2011) and AASB Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards ASB 128 Investments in Associates and Joint Ventures (2011) and AASB Amendments to Australian Accounting Standards arising from the consolidation and Joint Arrangements standards AASB 13 Fair Value Measurement and AASB Amendments to Australian Accounting Standards arising from AASB 13 AASB 119 Employee Benefits (2011) and AASB Amendments to Australian Accounting Standards arising from AASB 119 (2011) Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending 1 January June January June January June 2014 January June January June January June January June January June 2014 AASB Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure 18 1 July June 2014

20 Requirements Standard/Interpretation Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending AASB Amendments to Australian Accounting Standards Disclosures Offsetting Financial Assets and Financial Liabilities AASB Amendments to Australian Accounting Standards Offsetting Financial Assets and Financial Liabilities AASB Amendments to Australian Accounting Standards arising from Annual Improvements Cycle AASB Amendments to Australian Accounting Standards Transition Guidance and Other Amendments Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine and AASB Amendments to Australian Accounting Standards arising from Interpretation 20 1 January June January June January June January June January June 2014 Notes to the Financial Statements 19

21 4. Rental income Gross rental income 2,452,673 2,408,424 Lease incentive allocation (54,217) (93,811) Outgoings recovered 1,055, ,520 3,453,536 3,233, Cash and cash equivalents Cash at bank 188, ,173 Security deposits 222, , , ,244 Reconciliation of cash flows from operating activities Net loss for the period (421,947) (1,928,967) Adjustments for: Depreciation expense 690, ,576 Borrowing costs - 1,490 Movement of capitalised borrowing costs (175,496) - Discount on loan (20,000) - Unrealised change in fair value of investment property - 1,570,725 Change in trade and other receivables 10,180 (56,847) Change in other assets (34,755) (94,181) Change in trade and other payables 50,715 (1,771) Change in other liabilities (15,893) (200,042) Net cash (used in) operating activities 83,380 (19,017) 6. Trade and other receivables Tenant arrears (2,370) 68,489 Other receivables 116,758 56, , ,568 20

22 7. Other current assets Lease incentives 363, ,265 Prepayments 8, , , , Investment Property At cost (i) Cost 33,389,481 33,389,481 Capital additions 867, ,242 Accumulated depreciation (8,266,930) (7,576,354) Impairment (1,570,725) (1,570,725) Carrying value 24,419,768 24,950,644 At fair value (ii) 492 St Kilda Road, Melbourne 24,500,000 25,125,000 24,500,000 25,125,000 Valuation Basis (i) Book value is recorded at cost, being original cost plus capital expenditure less accumulated depreciation and impairment. The directors have assessed the recoverable amount of the investment property in accordance with accounting policies set out in Note 3. The directors have assessed that the book value is recorded at its recoverable amount. (ii) The fair value of the investment property as at 30 June 2013 is determined based on the directors assessment of current market conditions, the positioning of the property within the current market, and information provided by external property marketing agents. The valuation of investment property at fair value is based on the amount which the property could be expected to exchange between willing parties in an arm s length transaction, based on current prices in the market for similar properties in the same location and condition and subject to similar leases. The latest independent valuation was conducted as follows: Property 492 St Kilda Rd, Melbourne, VIC Independent valuer Valuation date Value $ Capitalisation rate Knight Frank 5 Nov ,500, % 21

23 8. Investment Property (cont.) Leasing arrangements The investment property is leased to tenants under operating leases. The minimum lease payments receivable under the existing lease contracts are as follows: Not later than one year 1,401,512 1,692,806 Later than one year and not later than five years 1,787,547 1,339,388 Later than five years - - 3,189,059 3,032, Trade and other payables Trade and other payables 249, ,207 Accruals 130, , , , Other current liabilities Security deposits 221, , , , Interest bearing liabilities Current liabilities AMAL Facility - 18,386,300 APGL Facility - 206,007 Secured bank loans 389, ,718 18,592,307 Non-current liabilities Secured bank loans 18,315,000 - Capitalised borrowing costs (175,494) - 18,139,506 - A facility of $18,315,000 was entered into with GE Capital during the year, which has a maturity date of 23 May The provider of the facility holds a first registered mortgage over the investment property. Monthly interest payments are required to be made. 22

24 11. Interest bearing liabilities (cont.) A subordinated loan was entered into with Yong Fei Gu for the amount of $389,719 during the year, which has a maturity date of 31 October The provider of the facility holds a second registered mortgage over the investment property. Monthly interest payments are required to be made. 12. Puttable financial instruments units units (a) Unitholders' balances Balance at beginning and end of the year 18,470,000 18,470,000 Balance at beginning of the year 6,608,865 8,537,832 Loss for the year (421,947) (1,928,967) Distributions paid - - Balance at end of the year 6,186,918 6,608,865 Less: Lease incentives (363,867) (232,265) Less: Investment property at cost (24,419,768) (24,950,644) Add: Investment property at fair value 24,500,000 25,125,000 5,903,282 6,550,956 NTA per unit (b) Obligation to redeem The Fund is a limited life entity, as defined in the standard that has a liability to distribute the net assets of the Fund to unitholders only upon the liquidation of the Fund. At the end of the Fund, all the assets of the Fund will be sold and the net cash proceeds will be divided equally among the units in the Fund and distributed. (c) Capital risk management The Fund considers its unitholders funds as capital. Under the terms of the Fund s Constitution, the Responsible Entity has the discretion to reject an application to transfer units if the exercise of such discretion is in the best interest of unitholders. 23

25 13. Financial risk management and financial instruments Overview The Fund s principal financial instruments comprise receivables, payables, bank loans, cash and derivatives. The Fund has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk Financial risk and risk management network The board of directors of the Responsible Entity has overall responsibility for the establishment and oversight of the Fund s risk management network. The Fund s risk management policies, including those related to its investment activities is developed and monitored by an Audit and Risk Committee. In addition to the policies adopted by the Audit and Risk Committee, the Responsible Entity has in place compliance plan which outlines the processes that will ensure both Fund and Responsible Entity comply with the requirements of the Australian Securities and Investment Commission (ASIC). Credit risk Credit risk is the risk that a counter-party to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund. The Fund s management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit risk arises from the financial assets of the Fund, which comprise cash and cash equivalents, trade and other receivables and derivative instruments. The Fund s exposure to credit risk arises from potential default of the counter-party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note. Regarding trade receivables, subject to a tenant s financial standing most tenants, at the commencement of a lease, are required to provide security via means of a cash deposit or bank guarantee. This security is maintained in the Fund s control for the duration of the tenancy and reverts to the Fund in the event of default. To date the Fund has not incurred any losses due to the nonrecoverability of its receivables. The Fund does not hold any credit derivatives to offset its credit exposure. Liquidity risk Liquidity risk is the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Fund s reputation. 24

26 13. Financial risk management and financial instruments (cont.) The following is the contractual maturity of financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Fund can be required to pay. 30 June 2013 Carrying amount Contractual cash flows 12 mths or less 1-5 years 5 years and more Trade and other payables 601, , , Interest bearing liabilities 18,529,225 18,704, ,719 18,315,000-19,130,440 19,305, ,934 18,315, June 2012 Carrying amount Contractual cash flows 12 mths or less 1-5 years 5 years and more Trade and other payables 566, , , Interest bearing liabilities 18,592,307 18,592,307 18,592, ,158,702 19,158,702 19,158, Market risk Market risk is the risk that changes in the market prices, such as interest rates and equity prices 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. Interest rate risk The Fund s exposure to market interest rates relates primarily to the Fund s long-term debt obligations. The level of debt is disclosed in note 11. A change of 100 basis points in interest rates at the reporting date would be increased (decreased) equity and profit or loss by the amounts below. This cash flow sensitivity analysis assumes that all other variables remain constant Impact on profit before tax/equity +1.00% (100 basis points) 181,270 5, % (100 basis points) (181,270) (5,228) 25

27 14. Related parties Key management personnel compensation and unitholdings Mr George Wang, Mr Richard Nott and Mr John Love are directors of the Responsible Entity, MacarthurCook Fund Management Limited, and deemed to be key management personnel. The key management personnel receive no compensation in relation to the management of the Fund. Responsible Entity Fees and other transactions MacarthurCook Fund Management Limited, as Responsible Entity from 10 October 2012 is entitled to management fees from the Fund during the financial year. No fees were paid, and total accrued Responsible Entity fees included in trade and other payables is $103,488. APGF Management Limited, as Responsible Entity up until 10 October 2012, received management fees from the Fund of nil (2011: $156,688) during the financial year. Management fees are charged at the rate of 0.6% of the value of real property held by the syndicate, in accordance with the constitution. The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: Current payables APGF Management Limited - 28,520 APGF Administration Pty Limited - 7,576 Macarthurcook Fund Management Limited 103,488 - Current interest bearing liabilities APGF Property Growth Limited - 206,700 Units in the Fund held by related parties Details of holdings in the Fund by the Responsible Entity, other funds operated by the Responsible Entity and other related parties are set out below: No. of units Entity Relationship MacarthurCook Property Securities Fund Other related party 3,500, Capital commitments and contingent liabilities The directors of the Responsible Entity are not aware of any potential liabilities, claims and capital commitments against the Fund as at balance date. 26

28 16. Subsequent events At a Meeting of Unitholders held on 26 July 2013 at AIMS office in Sydney the Resolution as disclosed in the Notice of Meeting dated 28 June 2013 was passed by the required majority. As a result the Responsible Entity will proceed to amend the Fund s Constitution in accordance with terms and conditions for the proposed Entitlement Offer which is set out in the Supplementary Deed as tabled at the Meeting. At this stage, the Responsible Entity intends to launch the Entitlement Offer in or around September this year. The sole purpose of the Entitlement Offer is to raise funds to reduce the Fund s gearing level to around 50%. There has not been any other events of a material and unusual nature likely in the opinion of the Responsible Entity, to significantly affect the operations of the Fund, the results of the operations, or the state of affairs of the Fund, in future financial years. 17. Auditors remuneration Audit and other assurance services Audit and review of financial statements 24,525 11,600 Audit of compliance plan 5,500 2,000 30,025 13,600 Taxation services Tax compliance services 1,500 2,265 1,500 2, Fund details The registered office and principal place of business of the Fund is: AIMS Property Fund (St. Kilda Road) Level 16, 323 Castlereagh Street Sydney NSW

29 DIRECTORS DECLARATION The directors of the Responsible Entity for AIMS Property Fund (St. Kilda Road) ( the Fund ) declare that: (a) The financial report as set out in pages 8 to 27 are in accordance with the Corporations Act 2001, including: (i) (ii) (iii) Giving a true and fair view of the financial position of the Fund as at 30 June 2013 and of its performance, for the financial year ended on that date; In compliance with International Financial Reporting Standards as stated in note 2 to the financial statements; and Complying with Australian Accounting Standards (including the Australian Accounting Interpretations), Corporations Regulations 2001 and other mandatory professional reporting requirements. (b) The directors of the Responsible Entity have declared that: (i) (ii) (iii) The financial records of the Fund for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; The financial statements and notes for the financial year comply with the Accounting Standards; and The financial statements and notes for the financial year give a true and fair view. (d) As at the date of this declaration, in the Directors opinion, there are reasonable grounds to believe that the Fund will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors made pursuant to Section 295(5) of the Corporations Act 2001: Signed in accordance with a resolution of directors of the Responsible Entity. Mr George Wang Executive Chairman Dated this 23 rd day of August