HALF YEARLY REPORT 31 December 2015 Clarence Property Corporation Limited ACN 094 710 942, AFSL 230212 As Responsible Entity for Westlawn Property Trust ARSN 095 611 804
FINANCIAL REPORT CONTENTS PAGE Directors' Report 2 Auditors' 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 33 Auditors' Report 34 DIRECTORY Responsible Entity and Manager Auditor for the Trust Clarence Property Corporation Limited WCA Chartered Accountants ACN 094 710 942 158 Molesworth Street AFSL 230212 Lismore NSW 2480 Registered Office Solicitors 2/75 Tamar Street McCullough Robertson Ballina NSW 2478 Level 11, Central Plaza Two Phone: 02 6686 4122 66 Eagle Street Fax : 02 6686 5122 Brisbane QLD 4000 Email: enquiry@clarenceproperty.com.au Auditor for the Manager Registry WCA Chartered Accountants PO Box 1478 158 Molesworth Street Ballina NSW 2478 Lismore NSW 2480 Page 1
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 2015 (the reporting period) 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 reporting period and until the date of this report are: James William Dougherty Chairman of Directors (Non Executive) Age 62 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 1994. 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. He is a member of the JW & CP Dougherty Super Fund which owns 213,121 ordinary units in the Trust. Peter Nicholas Fahey Managing Director (Executive) Age 52 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 2003. He has been the driving force behind the Trust since its creation in 1994. He is a director of Wellington Funds Management Limited. He is a member of the P & D Fahey Super Fund which owns 589,544 ordinary units in the Trust. Michael James Dougherty Director (NonExecutive) Age 69 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 1972. He has held a security dealer's licence since 17 February 1984. He is a member of the M J Dougherty Superannuation Fund which owns 949,850 ordinary units in the Trust. Geoffrey Rex Shepherd Director (NonExecutive) Age 67 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
DIRECTORS' REPORT 1 Directors and officers (continued) ii) Company Secretary Paul James Rippon Age 58 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. He is a member of the Riverside Retirement Fund which owns 166,794 ordinary units in the Trust. iii) Directors meetings Six directors meetings were held in the period 1 July 2015 to 31 December 2015 and attendances were: James William Dougherty 6 Peter Nicholas Fahey 6 Michael James Dougherty 6 Geoffrey Rex Shepherd 6 2 Principal activity The principal activity of the Trust during the reporting 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, other than those stated in these statements. 3 Review of operations The following is a summary of key outcomes during the reporting period: i) Operating results The net loss of the Trust for the reporting period amounted to $7,295,267 (December 2014: net profit $4,136,948). ii) Investment property revaluations During the period the following properties were independently valued: Property description Valuation date Change Previous valuation New valuation since last valuation $ $ $ 100 Blundell Boulevard, Tweed Heads Oct15 8,500,000 8,700,000 200,000 812 Buller Street, Port Macquarie Sep15 16,000,000 14,000,000 (2,000,000) 7278 Prince Street, Grafton Jul15 1,850,000 1,300,000 (550,000) Byron West Shopping Fair Oct15 8,400,000 9,500,000 1,100,000 Easy T Shopping Centre, Robina Oct15 26,000,000 30,000,000 4,000,000 Tamar Village Shopping Centre, Ballina Aug15 3,400,000 3,200,000 (200,000) 2,550,000 Page 3
DIRECTORS' REPORT 3 Review of operations (continued) iii) Property acquisitions In August 2015 the Trust acquired the Bell Central Shopping Centre at Mudgeeraba, QLD for $13,500,000. In October 2015 the Trust acquired a 50% interest in the 'The Rocket', a 16 level office building located in Robina, QLD for $35,025,000. In November 2015 the Trust entered into conditional contracts to purchase 3 commercial properties in Maroochydore, QLD for a combined $3,550,000 and a commercial property in Beenleigh, QLD for $11,200,000. In February 2016 the Trust decided to not proceed with these contracts and they have since been terminated. iv) Property sales In December 2015, the Trust entered into a conditional contract for the sale of The Rocks Shopping Fair for a consideration of $9,000,000. The sale settled on 1 February 2016 with the net proceeds being used to initially reduce borrowings. v) Property development The Trust continued the development of "Epiq" Lennox with Stage 1A and sportfields nearly completed and Stage 1B well underway. A sales campaign for the residential lots in Stage 1A commenced in August 2015 and all 51 lots are now subject to unconditional contracts with gross proceeds being $12,860,000. Settlements are expected to take place mid year 2016, once practical completion of the civil works and title registration has been finalised. vi) Other investments During the period the Trust acquired 4,825,000 units at $1.00 each in the LFP Investment Trust. At the date of this report that balance was 1,885,500 units. During the period September 2015 to March 2016 the Trust disposed of its entire holding of 7,738,711 shares at an average price of $1.55 each in the National Storage REIT (NSR). vii) Capital raising On 9 December 2015, the Trust issued a Product Disclosure Statement (PDS) seeking to raise $20,000,000 through the issue of 25,316,456 units at $0.79 per unit. There is also capacity to accept oversubscriptions of a further 20,000,000 units at $0.79 each. At the date of this report $2,213,151 had been raised. Pursuant to the Distribution Reinvestment Plan, 713,930 units were issued at $0.65 per unit during the period. 4 Significant changes in the state of affairs of the Trust From 1 July 2015 the income tax treatment of the Trust has changed. The Trust is now treated as a Public Trading Trust (PTT) in accordance with Division 6C of the Income Tax Assessment Act 1936 due to the Trust undertaking the "Epiq" Lennox residential land development. Consequently the Trust is now liable to pay income tax on its taxable income and distributions will now be in the form of dividends. As a result of this change in circumstance the Trust has recorded a oneoff adjustment in income tax expense of $5,958,649 relating to prior periods. 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. Page 4
DIRECTORS' REPORT 5 Matters arising since the period end On 21 January 2016 the Trust exercised its option to purchase 2 Treelands Drive, Yamba for $725,000. The property settled on 22 February 2016. On 1 February 2016 the Trust settled the purchase of 189 Yamba Road, Yamba for $325,000. It is proposed to develop a fuel station on these two adjoining lots. On 1 February 2016 the Trust settled the sale of The Rocks Shopping Fair. Net proceeds have intially been used to reduce borrowings. On 1 February 2016 the conditional contracts to purchase 3 commercial properties in Maroochydore, QLD and a commercial property in Beenleigh, QLD were terminated. No matter or circumstance, other than those mentioned above, has arisen since the end of the reporting 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 2016 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 2015 fund members received or were entitled to receive distributions of $3,914,427 (2014: $3,874,778). The average annualised rate of normal distributions for the financial period was 6.5 cents per unit (2014: 6.5 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 $2,271,591 (including managers fees of $507,023, acquisition and disposal fees of $1,709,633, development management fees of $48,000, registry fees of $6,000 and reimbursable expenses of $935) for the half year ended 31 December 2015 (December 2014: $1,392,926) in accordance with the Constitution of the Trust. Further details of fees paid to the manager are disclosed in Note 23 on Page 28 of the financial statements. Page 5
Westlawn PROPERTY TRUST WESTLAWN PROPERTY TRUST DIRECTORS' REPORT I I lndemnifying 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 12 lnterests in the Trust The details of the Trust for the half year ended 31 December 2015 were: i) Units as at 1 July 2015 Units issued during the period Units redeemed during the period Units as at 31 December 2015 120,028,221 713,930 _120,742,151 ii) During the reporting period the Responsible Entity acquired 23,498 units through the distribution reinvestment plan. The Responsible Entity holds 487,680 units as at 31 December 2015. iii) The value of the Trust's assets at 31 December 2015 was $208,965,885. Assets were valued at cost or fair value. l3 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. l4 Auditors' lndependence Declaration A copy of the Auditors' lndependence Declaration, as required under section 307C of the Corporations Act 2001, is set out on page 7. Signed in wíth a resolution of the Board of Directors: Peter cho Fahey Managing Di James William Dou Director Dated in Ballina this 1Oth day of M 2016 Page 6
audit & assurance services AUDITOR'S INDEPENDENCE DECLARATION This declaration is made in connection with our review of the financial report of wesilawn Property Trust for the period ended 31 December 2015 and in accordance with the provisions of the corporations Act 200'l, 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 audit; and. No contraventions of any applicable Code of Professional Conduct in relation to this audit, REGISTERED COMPANY AUDITORS TWGraham BBus, CA, FFln GJ Smith BBus, LLB, CA, Dip. FP Sl Trustum BBus, CA, D p. FP TL Kirkland BBus, CA SMSF AUDITORS GJ Smith BBus, LLB, CA, Dip. FP Sl Trustum BBus, CA, Dip. FP AM Jones BBus, Affliate ICAA, CPA, DIp. FP f Bazzana BBus, CA, Dip. FP Yours faithfully, wca audit & assurance services pty ltd Authorised Audit ComPanY î t,t'ilørcd Tania L Kirkland Director Date: "10 March 2016 lismore Office 158 Moleswortlr St PO Box l9b Lisnrore NSW 24BO t 02 6621 2581 Ballina Qffíce 1i 183 River St Balli a NSW 2478 t 02 6ô86 s655 t 02 6621 9740 e aclrn in(o)wca. corrr. au w www.wca.cont.au L ability limited by â sheme approved under Prof essjonal Standards Legislalion Page 7 solution driven
STATEMENT OF COMPREHENSIVE INCOME 31 December 31 December Note 2015 2014 $ $ Revenue Interest revenue 97,288 283,400 Property revenue 7,738,864 8,654,432 Other income 2 93,797 346,468 Total revenue 7,929,949 9,284,300 Expenses Financing costs 3 (1,950,943) (2,091,546) Property expenses and outgoings (2,265,385) (2,800,506) Bad and doubtful debts expense (20,078) (16,582) Responsible entity fees 23 (507,023) (528,551) Profit/(loss) on disposal of assets (1,201,160) 2,808,935 Loss on disposal of derivative financial instruments (57,319) Other expenses (329,849) (72,503) Total expenses (6,274,438) (2,758,072) Net profit before income tax expense 1,655,511 6,526,228 Income tax expense 5 (7,718,956) Profit/(loss) after income tax expense attributable to unitholders (6,063,445) 6,526,228 Other comprehensive income Fair value adjustments to investment properties 12 (353,148) (455,552) Fair value adjustments to financial assets (81,545) 1,582,387 Fair value adjustments to derivative financial instruments (797,129) (3,516,115) Total comprehensive income attributable to unitholders (7,295,267) 4,136,948 The above Statement of Comprehensive Income should be read in conjuction with the accompanying notes. Page 8
STATEMENT OF FINANCIAL POSITION As at 31 December 2015 ASSETS 31 December 30 June Note 2015 2015 $ $ Current assets Cash and cash equivalents 6 3,382,773 1,500,601 Trade and other receivables 7 3,190,063 432,635 Financial assets 8 799,672 12,962,341 Inventory 9 23,949,703 17,737,069 Other assets 11 384,142 663,901 Total current assets 31,706,353 33,296,547 Noncurrent assets Trade and other receivables 7 850,000 Financial assets 8 6,250,000 1,425,000 Investment property 12 165,480,486 112,955,486 Deferred tax assets 10 5,470,452 Other assets 11 58,594 Total noncurrent assets 177,259,532 115,230,486 Total assets 208,965,885 148,527,033 LIABILITIES Current liabilities Trade and other payables 13 3,475,324 1,573,841 Income tax 14 1,285,897 Other liabilities 15 1,057,531 556,059 Financial liabilities 17 980,000 44,000,000 Total current liabilities 6,798,752 46,129,900 Noncurrent liabilities Deferred tax liabilities 16 11,903,511 Financial liabilities 17 97,815,000 Derivative financial instruments 4,744,838 3,947,709 Total noncurrent liabilities 114,463,349 3,947,709 Total liabilities 121,262,101 50,077,609 Net assets 87,703,784 98,449,424 EQUITY Unitholders' equity Issued capital 123,009,193 122,545,139 Undistributed income (35,305,409) (24,095,715) Total unitholders' equity 87,703,784 98,449,424 The above Statement of Financial Position should be read in conjuction with the accompanying notes. Page 9
STATEMENT OF CHANGES IN EQUITY No. of units on issue Undistributed Issued capital income Total $ $ $ Balance at 1 July 2015 120,028,221 122,545,139 (24,095,715) 98,449,424 Total comprehensive loss attributable to unitholders (7,295,267) (7,295,267) 120,028,221 122,545,139 (31,390,982) 91,154,157 Transactions with unitholders recorded directly in equity: Distributions paid/payable (3,914,427) (3,914,427) Units issued 713,930 464,054 464,054 Units redeemed Balance at 31 December 2015 120,742,151 123,009,193 (35,305,409) 87,703,784 No. of units on issue Undistributed Issued capital income Total $ $ $ Balance at 1 July 2014 118,907,954 121,816,965 (30,229,615) 91,587,350 Total comprehensive profit attributable to unitholders 4,136,948 4,136,948 118,907,954 121,816,965 (26,092,667) 95,724,298 Transactions with unitholders recorded directly in equity: Distributions paid/payable (3,874,778) (3,874,778) Units issued 535,941 348,361 348,361 Units redeemed Balance at 31 December 2014 119,443,895 122,165,326 (29,967,445) 92,197,881 The above Statement of Changes in Equity should be read in conjuction with the accompanying notes. Page 10
STATEMENT OF CASH FLOWS 31 December 31 December Note 2015 2014 $ $ Cash flows from operating activities Receipts from operations (including GST) 6,469,438 9,780,737 Interest received 97,288 283,400 Trust distributions received 226,975 284,909 Payment on sale of derivative financial instruments (2,990,000) Payment to suppliers (2,014,864) (1,308,421) Payment for inventory (6,212,634) (15,494,690) Goods & services tax received (paid) 58,089 (562,228) Borrowing costs paid (1,964,573) (2,033,816) Net cash used in operating activities 21 (3,340,281) (12,040,109) Cash flows from investing activities Net loans (advanced) repaid 850,000 (400,000) Proceeds on sale of noncurrent assets 10,847,704 38,051,706 Payment for property (52,998,746) (609,891) Payment for investments in trusts (4,825,000) (1,880,119) Net cash provided by/(used in) investing activities (46,126,042) 35,161,696 Cash flows from financing activities Proceeds from issue of units 464,055 348,362 Proceeds from borrowings 58,795,000 Repayment of borrowings (4,000,000) (37,500,000) Distribution paid (3,910,560) (3,871,875) Net cash provided by/(used in) financing activities 51,348,495 (41,023,513) Net increase (decrease) in cash held 1,882,172 (17,901,926) Cash at beginning of financial year 1,500,601 20,575,527 Cash at the end of the financial period 6, 21 3,382,773 2,673,601 The above Statement of Cash Flows should be read in conjuction with the accompanying notes. Page 11
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 noncurrent 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. The reported fair value of investment property reflects market conditions at the end of the reporting period. While this represents the best estimate as at the reporting date, actual sale prices achieved may be higher or lower than the most recent valuation. This is particularly relevant in periods of market illiquidity or uncertainty. Land & Buildings (including integral plant and equipment) which comprise the investment property are not depreciated. The carrying amount of investment properties includes components relating to lease incentives, leasing costs and receivables on rental income that have been recorded on a straight line basis Page 12
1 Summary of significant accounting policies (continued) a) Investment property (continued) 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. When an investment property is disposed of without development, it continues to be treated as an investment property until it is derecognised and does not treat it as inventory. 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. Investment property also includes property under construction for future use as investment property. These are carried at fair value, or at cost where fair value cannot be reliably determined and the construction is incomplete. 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 straightline 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 straightline basis over the lease term. Lease incentives under operating leases may take the form of cash, rentfree periods, contributions to certain lessee costs, relocation costs and lessee or lessor owned fitouts and improvements. These incentives are capitalised as part of the carrying value of the investment property and amortised on a straightline basis over the term of the lease as a reduction of rental income. The carrying amount of the lease incentives is reflected in the fair value of investment property. 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. Page 13
1 Summary of significant accounting policies (continued) d) Financial assets and liabilities 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 transaction 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 shortterm 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 nonderivative 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 noncurrent assets. iii) Financial liabilities Nonderivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Page 14
1 Summary of significant accounting policies (continued) d) Financial assets and liabilities (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) Derivative financial instruments The Trust is exposed to changes in interest rates and enters into interest rate swap agreements to convert certain variable interest rate borrowings to fixed interest rates. The swaps are entered into with the objective of hedging the risk of adverse interest rate fluctuations. While the Manager has determined that these arrangements are economically effective, they have not satisfied the documentation, designation and effectiveness tests required by Australian Accounting Standards and therefore do not qualify for hedge accounting. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at each reporting date. Gains or losses arising from changes in fair value are recognised immediately in the Statement of Comprehensive Income. Fair value at reporting date is calculated to be the present value of the estimated future cash flows of these instruments. The two key variables used in the valuation are the forward price curve and discount rates. Each instrument is discounted at the market interest rate appropriate to the instrument. Derivative financial instruments are classified as assets when their fair value is positive and as liabilities when their fair value is negative. f) 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 cashgenerating unit to which the asset belongs. Page 15
1 Summary of significant accounting policies (continued) g) 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. h) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within shortterm borrowings in current liabilities on the Statement of Financial Position. i) 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 straightline basis over the period of the lease term so as to reflect a constant periodic rate of return on the net investment (refer to note 1b). j) 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. k) 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 five years, whichever is shorter. Page 16
1 Summary of significant accounting policies (continued) l) Taxation i) Income Tax Under current Australian income tax legislation, the Trust is liable to income tax as it is classified as a Public Trading Trust. The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities, and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. 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, is classified as operating cash flows. Page 17
1 Summary of significant accounting policies (continued) 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 valueinuse 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 is described in the following note: Note 12 Investment property. Page 18
31 December 31 December 2015 2014 2 Revenue and other income $ $ Other income comprises: Trust distributions 93,797 346,468 93,797 346,468 3 Profit Net profit before income tax expense has been determined after: Financing costs Interest expense 1,848,679 2,033,816 Borrowing costs 102,264 57,730 1,950,943 2,091,546 4 Auditors' remuneration Detail of remuneration of auditor is set out below: Auditing or reviewing the financial statements 20,710 28,150 20,710 28,150 5 Income tax expense Income tax expense Current tax 1,285,897 Adjustment recognised for prior periods 5,958,649 Deferred tax (asset)/liability 474,410 7,718,956 Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense 1,655,511 Tax at the statutory tax rate of 30% 496,653 Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Capital gain on disposal of assets 2,842,078 Movement in market values (369,547) 2,969,184 Adjustment recognised for prior periods 4,749,772 Income tax expense 7,718,956 Page 19
31 December 30 June 2015 2015 6 Cash and cash equivalents $ $ Security deposits 3,700 3,700 Cash held in trust 128,013 Cash at bank 3,251,060 1,496,901 3,382,773 1,500,601 7 Trade and other receivables Current Trade and other debtors 2,781,157 124,950 Less provision for doubtful debts (35,869) (45,102) GST receivable 252,927 27,761 Sundry debtors 191,848 325,026 Total current 3,190,063 432,635 Noncurrent Loan Wises Farm Development Trust Loan Robina Quays Unit Trust 850,000 Total noncurrent 850,000 Total trade and other receivables 3,190,063 1,282,635 Future minimum lease receivables Future minimum lease payments receivable from noncancellable operating leases: Within one year 13,377,815 10,604,664 Later than one year but not later than five years 24,279,214 18,669,076 Later than five years 6,668,213 7,129,491 44,325,242 36,403,231 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 45,102 21,077 Provision for doubtful receivables 22,085 33,549 Receivables written off during the year (31,318) Reversals of amounts provided (9,524) Closing balance 35,869 45,102 Page 20
31 December 30 June 2015 2015 8 Financial assets $ $ Current Financial assets at fair value through profit or loss Units in listed unit trusts 799,672 12,962,341 799,672 12,962,341 Noncurrent Financial assets at fair value through profit or loss Units in unlisted unit trusts 6,250,000 1,425,000 6,250,000 1,425,000 7,049,672 14,387,341 9 Inventory Current At cost Land held for resale 850,000 850,000 Land under development 23,329,703 17,117,069 24,179,703 17,967,069 At net realisable value Land held for resale 620,000 620,000 Land under development 23,329,703 17,117,069 23,949,703 17,737,069 The land at 9 Treelands Drive, Yamba was independently valued in September 2015 by Opteon Property Group at $620,000. The land known as Epiq Lennox (previously Pacific Pines) was independently valued in July 2015 by Taylor Byrne Valuations at $18,000,000. Page 21
31 December 30 June 2015 2015 10 Deferred tax assets $ $ Deferred tax assets comprises temporary differences attributable to: Provision for doubtful debts 10,761 Accrued expenses 8,964 Capital raising costs 45,614 Derivative financial instruments 1,423,451 Investment properties 3,629,856 Financial assets 351,806 Total deferred tax assets 5,470,452 11 Other assets Current Prepayments 384,142 663,901 384,142 663,901 Noncurrent Prepayments 54,594 Other assets 4,000 58,594 Total other assets 442,736 663,901 Page 22
Independent Valuation 31 December 30 June Amount Date Firm 2015 2015 12 Investment property $ $ $ Investment property (at fair value) Commercial 100 Blundell Boulevard, Tweed Heads 8,700,000 Oct15 CB Richard Ellis 8,700,000 8,500,000 812 Buller Street, Port Macquarie 14,000,000 Sep15 Taylor Byrne 14,000,000 16,000,000 29 Molesworth Street, Lismore 16,750,000 May15 M3 Property 16,750,000 16,750,000 The Rocket (Note 1) 35,025,000 Jul15 Jones Lang Lasalle 35,025,000 N/A Retail 7278 Prince Street, Grafton 1,300,000 Jul15 Taylor Byrne 1,300,000 1,300,000 Yamba Shopping Fair 24,100,000 May15 Jones Lang Lasalle 24,100,000 24,100,000 Yamba Residential Properties (Note 2) 945,000 May15 Taylor Byrne 945,000 945,000 The Rocks Shopping Fair, South West Rocks 7,500,000 May15 Jones Lang Lasalle 8,400,000 7,500,000 Byron West Shopping Fair 9,500,000 Oct15 CB Richard Ellis 9,500,000 8,400,000 Easy T Shopping Centre, Robina 30,000,000 Oct15 CB Richard Ellis 30,000,000 26,000,000 Tamar Village Shopping Centre, Ballina 3,200,000 Aug15 Taylor Byrne 3,200,000 3,400,000 Proposed Yamba Fuel Station (Note 3) N/A N/A N/A 60,486 60,486 Bell Central Shopping Centre (Note 4) 13,500,000 Aug15 M3 Property 13,500,000 N/A 164,520,000 165,480,486 112,955,486 Note 1 The property was acquired in October 2015. The amounts quoted represent the Trust's 50% ownership in the building. Note 2 These properties adjoin the Trust's Yamba Shopping Fair property and are held for future development of the centre. Note 3 The amounts represent deposits and minor costs relating to the purchase of two residential properties on which the Trust proposes, subject to planning approval to build a fuel station. Note 4 The property was acquired in August 2015. 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 (particularly downwards) 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 112,955,486 143,825,000 Additions at cost Acquisition price 48,525,000 46,385 Transaction costs 4,441,823 Improvements 332,635 Disposals 32,259 (37,522,458) Net fair value adjustment (353,148) 6,039,419 Lease incentives and leasing fees deferred 31,923 527,892 Amortisation of lease incentives and leasing fees (94,902) (202,769) Movement in straightlining rental income asset (57,955) (90,618) Closing balance 165,480,486 112,955,486 Page 23
31 December 30 June 2015 2015 13 Trade and other payables $ $ Current Other creditors 2,821,304 923,688 Distributions to unitholders 654,020 650,153 GST payable 3,475,324 1,573,841 Included in the above are amounts due to related parties: Other creditors 1,917,389 31,792 Distributions to unitholders 2,642 2,514 1,920,031 34,306 14 Income tax Current Provision for income tax 1,285,897 1,285,897 15 Other liabilities Current Rent received in advance 489,053 311,429 Units to be issued 95,731 76,708 Other liabilities 472,747 167,922 1,057,531 556,059 16 Deferred tax liabilities Deferred tax liabilities comprises temporary differences attributable to: Prepayments 231,444 Lease receivable debtor 379,004 Inventory 53,664 Investment property 11,239,399 Total deferred tax liabilities 11,903,511 Page 24
31 December 30 June 2015 2015 17 Financial liabilities $ $ Current Loan 980,000 44,000,000 980,000 44,000,000 Noncurrent Loan 97,815,000 97,815,000 98,795,000 44,000,000 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 2015 2015 2015 2015 Facility $ $ $ $ Loan National Australia Bank (i) 78,000,000 78,000,000 62,000,000 44,000,000 Loan ING Bank (Australia) (ii) 21,015,000 19,815,000 Loan Responsible Entity (iii) 1,000,000 980,000 Total facilities 100,015,000 98,795,000 62,000,000 44,000,000 The Trust had $1,220,000 (June 2015: $18,000,000) in unused finance facilities at balance date. (i) The National Australia Bank finance facility is secured by first registered mortgages over all but two of the investment properties held by the Trust and a first priority General Security Agreement over all present and afteracquired property of the Trust. The facility has a maturity date of October 2017. (ii) The ING Bank (Australia) finance facility is secured by a first registered mortgage and a General Security Agreement limited to the property known as 'The Rocket' of which the Trust owns 50%. This is a joint facility with the coowner of that property. The amounts quoted represent the Trust's 50% interest. The facility has a maturity date of October 2018. (iii) Details of the Responsible Entity loan are disclosed in Note 23 on page 28 of the financial statements. 18 Segment reporting The Trust operates as a property investor throughout Australia. 19 Contingencies The Trust had no contingent assets or liabilities at reporting date (June 2015: $Nil). 20 Commitments for capital expenditure As at 31 December 2015 the Trust had the following commitments contracted for which costs have not been recognised as liabilities. Inventory Development costs payable within 12 months 6,411,358 3,239,488 6,411,358 6,411,358 Page 25
31 December 31 December Note 2015 2014 21 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 6 3,700 3,700 Cash held in trust 6 128,013 415,507 Cash at bank 6 3,251,060 2,254,394 b) Reconciliation of net profit/(loss) to net cash flows from operating activities 3,382,773 2,673,601 Total comprehensive profit/(loss) attributable to unitholders (7,295,267) 4,136,948 Noncash items: Profit (loss) on sale of noncurrent assets 1,201,160 (2,808,935) Fair value adjustments to investment properties 353,148 455,552 Fair value adjustments to financial assets 81,545 (1,582,387) Straightlining of rental income 57,955 21,681 Amortisation of lease incentives and leasing fees 94,902 110,199 Changes in assets and liabilities: Decrease (increase) in current receivables (2,665,440) 20,015 Decrease (increase) in trust distributions receivable 133,178 (61,559) Decrease (increase) in inventories (6,212,634) (15,494,690) Decrease (increase) in deferred tax assets (5,470,452) Decrease (increase) in other assets 221,165 2,671,552 Increase (decrease) in sundry creditors 1,897,616 (115,316) Increase (decrease) in other liabilities 323,848 14,853 Increase (decrease) in GST payable (225,166) (108,343) Increase (decrease) in provision for income tax 1,285,897 Increase (decrease) in deferred tax liabilities 11,903,511 Increase (decrease) in income in advance 177,624 116,887 Increase (decrease) in derivative financial instruments 797,129 583,434 Net cash used in operating activities (3,340,281) (12,040,109) 22 Events subsequent to reporting date On 21 January 2016 the Trust exercised its option to purchase 2 Treelands Drive, Yamba for $725,000. The property settled on 22 February 2016. On 1 February 2016 the Trust settled the purchase of 189 Yamba Road, Yamba for $325,000. It is proposed to develop a fuel station on these two adjoining lots. On 1 February 2016 the Trust settled the sale of The Rocks Shopping Fair. Net proceeds have intially been used to reduce borrowings. On 1 February 2016 the conditional contracts to purchase 3 commercial properties in Maroochydore, QLD and a commercial property in Beenleigh, QLD were terminated. Page 26
23 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 2015 to 31 December 2015, unless otherwise stated. Key management person James William Dougherty Peter Nicholas Fahey Michael James Dougherty Geoffrey Rex Shepherd Position Chairman NonExecutive Managing Director Executive Director NonExecutive Director NonExecutive 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: Net Balance Net Purchases Balance Purchases / Balance 1/07/2014 / (Sales) 30/06/2015 (Sales) 31/12/2015 James Dougherty: James Dougherty 158,900 158,900 158,900 James & Catherine Dougherty JW & CP Dougherty Super Fund 213,121 213,121 213,121 Peter Fahey: P & D Fahey Super Fund 564,031 25,513 589,544 589,544 Michael Dougherty: M J Dougherty Super Fund 949,850 949,850 949,850 Geoffrey Shepherd: HS P/L Super Fund No. 2 1,275,000 1,275,000 1,275,000 Responsible Entity: Clarence Property Corporation Ltd 420,525 43,657 464,182 23,498 487,680 Total 3,581,427 69,170 3,650,597 23,498 3,674,095 Page 27
31 December 31 December 2015 2014 23 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 507,023 528,551 Acquisition fees 1,455,750 450,000 Disposal fees 253,883 408,375 Development management fees 48,000 Registry fees 6,000 6,000 Reimbursable expenses 935 2,271,591 1,392,926 Clarence Property Works Pty Ltd Property management, rent review & leasing fees 204,173 238,526 Westlawn Insurance Brokers Pty Ltd Insurance premiums 181,682 173,895 including broker fee of 27,000 31,000 Westlawn Business Services Pty Ltd Accounting and tax advice 4,500 Robina Quays Unit Trust Purchase of units 425,000 Loan (850,000) 400,000 In December 2014 the Trust provided a short term interest bearing loan to Robina Quays Unit Trust. The purpose of the loan was facilitate the continuation of the property refurbishment pending an increased finance facility with an Australian bank. The maximum amount available under the terms of the loan agreement is $3,600,000, repayable in full by 31 December 2015. The loan is secured by a second mortgage in registrable form over the property with interest payable at a rate of 12% per annum. The loan was fully repaid in November 2015. LFP Investment Fund Purchase of units 4,825,000 During the period the Trust acquired 4,825,000 units at $1.00 each in the LFP Investment Trust (a managed investment scheme run by the Manager). f) Responsible Entity loan In December 2015, the Trust entered into a short term fixed interest (6%) bearing loan agreement with Clarence Property Corporation Limited. The purpose of the loan was to fund operating expenses pending the settlement of the sale of the NSR shares. The maximum available under the terms of the agreement was $1.0 million. The loan was fully repaid on 8 January 2016. Page 28
24 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 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 7090% 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 may hold 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 29
24 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 2015 $ 30 June 2015 $ Cash and cash equivalents 3,382,773 1,500,601 Trade receivables 2,973,004 449,976 Loan receivables 850,000 Financial assets at fair value through profit or loss 7,049,672 13,405,449 14,387,341 17,187,918 c) Liquidity risk The following are the contractual maturities of financial liabilities: 31 December 2015 Nonderivatives Secured loans Trade & other payables Derivatives Net settled interest rate swaps Carrying amount 1 year or less 13 years 3 5 years $ $ $ $ 98,795,000 980,000 97,815,000 4,532,855 4,532,855 103,327,855 5,512,855 97,815,000 4,744,838 1,116,041 2,900,499 935,726 4,744,838 1,116,041 2,900,499 935,726 More than 5 years $ 30 June 2015 Nonderivatives Secured bank loans/bills 44,000,000 44,000,000 Trade & other payables 2,129,900 46,129,900 2,129,900 46,129,900 Derivatives Net settled interest rate swaps 3,947,709 3,947,709 841,838 841,838 2,067,795 2,067,795 1,021,883 1,021,883 Page 30
24 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 2015 2015 2015 % % $ 30 June 2015 $ Fixed rate financial assets Cash National Australia Bank N/A N/A Fixed rate financial liabilities Loan National Australia Bank N/A N/A Variable rate financial assets Cash National Australia Bank 1.09 1.10 772,735 772,735 1,458,109 1,458,109 Variable rate financial liabilities Loan National Australia Bank 3.72 3.89 78,000,000 44,000,000 Loan ING Bank (Australia) 3.86 N/A 19,815,000 Loan Responsible Entity 0.00 N/A 980,000 98,795,000 44,000,000 In addition the Trust holds the following treasury instruments: Type BBSY Rate Amount $ Start Date Expiry Date Fixed Rate Swap Fixed Rate Swap Fixed Rate Swap Fixed Rate Swap 2.95% 100,000,000 Aug15 Aug16 3.35% 100,000,000 Aug16 Aug17 3.65% 100,000,000 Aug17 Aug18 3.90% 100,000,000 Aug18 Aug19 Page 31
24 Financial instruments (continued) Sensitivity analysis Interest rate risk represents the effect of a change in interest rates applied to the interest rate risk exposures at reporting date, including the estimated change in the value of derivative financial instruments that are carried at fair value. Cash and floating rate debt at reporting date are multiplied by the reasonably possible change in interest rates to determine the effect on profit for the financial year. The Trust's derivative financial instruments whose carrying values are affected by changes in interest rates are interest rate swaps. In calculating the change in value of interest rate swaps, a change in interest rates at reporting date is assumed to result in a parallel shift in the forward yield curve. A change in interest rates of up to 100 basis points (1%) is considered to be reasonably possible in the current economic environment. An increase of 100 basis points in interest rates at the reporting date would have increased equity and profit or loss by $3,544,762 (June 2015: an increased of $4,552,872); an equal change in the opposite direction would have decreased equity and profit or loss by $3,544,762 (June 2015: a decreased of $4,552,872). e) Equity securities price risk The Trust has exposure of $799,672 to equity investments listed on the Australian Securities Exchange. For these investments a 10 percent increase in their market value at the reporting date would have increased equity and profit and loss by $79,967 (June 2015: $1,296,234); an equal change in the opposite direction would have decreased equity and profit and loss by $79,967 (June 2015: $1,296,234). f) Fair values The net fair values of listed investments have been valued at the quoted market bid price at balance date. For other assets and other liabilities net fair value approximates their carrying value and is determined from observable market data (directly or indirectly). No financial assets or financial liabilities are readily traded on organised markets in standardised form other than listed investments. 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. 25 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 2015 there were tweleve employees of the Responsible Entity and its subsidiaries. Page 32
Tffiestlawn PROPERTY TRUST WESTLAWN PROPERTY TRUST DIRECTORS' DECLARATION For the half year ended 3l December 2015 The directors of the Resonsible Entity declare that: 1. The financial statements and notes as set out on pages I to 32 are in accordance with the Corporations Act 2001 and: a) Give a true and fair view of the Trust's financial position as at 31 December 2015 and of its performance for the half year ended on that date; and b) Complywith Accounting Standard AASB 134: lnterim Financial Reporting; and c) Complywith Accounting Standards and lnternational Financial Reporting Standards as disclosed in Note 1 to the financial statements. 2. ln the directors' opinion there are reasonable grounds to believe the Trust 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 of the Responsible Entity and is signed for and on behalf of the directors by: Peter N Managing Dated in Ballina this 1Oth day of March 201 fl.j> James William Dou Director Page 33
audit & assurance services INDEPENDENT AUDITOR'S REVIEW REPORT ToTHEUNITHOLDERSoFWESTLAWNPROPERTYTRUST Report on the HalfYear Financial Report we have revìewed the accompanying halfyear financial reporl of westlawn Property Trust, which comprises the statement of financial position as at 31 December 20.15, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the halfyear ended on that date, notes comprising a summary of significant accounting potióies and other explanatory information, and the directors' declaratìon. Directors' Responsibility for the HalfYear Financial Report The directors of the disclosing entity are responsible for the preparation of the halfyear financiar report that gives a tiue uná fuir view in accordance with Australian Accounting standards and the c orporations Act 2001 and for such control as the directors determine is necessary lo enable the preparation of the halfyear financial report that gives a true and fair viów and is free from material misstatement, whether due to fraud or error. REGISTERED COMPANY AUDITORS TW Graham BBLrs, CA FFln GJ Smith BBus, LLB, CA, Dip. FP Sl Trustum BBLrs, CA, D p. FP TL Kirkland BBLrs. CA SMSF AUDITORS GJ Smith BBLrs, LLB, CA, Ditt. FP Sl Trustum BBus CA, Dip. FP AM Jones BBLrs, Affiiate ICAA, CPA, Dlp. FP T Sazzana BBus, CA, Dip. FP Auditor's ResPonsibilitY our responsibility is to express a conclusion on the halfyear financial report based on our review. we conducted our review in accordance with Auditing standard on Review Engagements ASRE 2410 Review of a Financiat Report Performed by the lndependent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have 'b*"o*" aware of any matter that makes us believe that the halfyear financìal report is not in accordance with 1he corporations Act 2001 including: giving a true and fair view of the disclosing entity's financial position as at 31 December 2015 and its performance for the halfyðar ended on that date; and complying with Accounting Standard 44SB 134 tntein Financial Reporting and the Corporations Regulations 2001, As the auditor of westlawn Properly Trust, ASRE 24'10 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a halfyear financial report consìsts of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and otherr,,:,,,,, :.,,,,:.rrr,, review procedures. A review is substantlutty t.tt in scope than an audit conducted in,,', accordance wilh Australian Auditing Standards and consequently does not enable us r,, r ', : r'r '',' ' " ', ' to obtain assurance that we would become aware of all significant matters that might ' ': "' ' ' '': 'r ' : be identified in an audit. AccordinglY, we do not express an audit opinion', : :..,., I t,., r' ri, l Lìab llly limiìed by a sclìcnìe approved under Pr(fosslona Slandards legisial or
audit & assurance services INDEPENDENT AUDITOR'S REVIEW REPORT lndependence TO THE UNITHOLDERS OF WESTLAWN PROPERTY TRUST ln conducting our review, we have complied with the independence requirements of The Corporations Act 2001 Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the halfyear financial report of Westlawn Property Trust is not in accordance with lhe corporations Act 2007 including: (a) giving a true and fair view of the disclosing entity's financial position as at 31 December 2015 and of its performance for the halfyear ended on that date; and (b)complyingwithaccountingstandardaasbls4interimfinancialreporting and Corporations Regulations 2001' REGISTERED COMPANY AUDITORS TWGraham BBus, CA, FFin GJ Smith BBus, LLB, CA, D p. FP Sl Trustum BBus, CA, D p. FP TL Kirkland BBus, CA SMSF AUDITORS GJ Smith BBus, LLB, CA, Dip. FP Sl Trustum BBus, CA, D p. FP AM Jones BBus, Affiliate ICAA, CPA, Dip. FP T Bazzana BBus, CA, Dip. FP WCA audit & assurance services pty ltd Authorised Audit ComPanY,r K,UL/A/U/ Tania L Kirkland Director Date: '10 March 2016 Lismore Office.i5B Moleswodtr St PO Box 198 Lismore NSW 24BO t 02 6621 2581 Ballina Office 1/183 Fliver St Ballina NSW 2478 t 02 6686 565s t 02 6621 974A e rdr in(øwca.com.au w' WWW,WCA.COII].AU Liab l ty lim ted by a scheme approved under Prolesional Standards Legislat on solution driven