ANNUAL REPORT 2017 | 27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.  Basis of preparation a)  Statement of compliance The Aventus Retail Property Fund (“Fund”) is a listed managed investment scheme incorporated and domiciled in Australia. The financial statements comprise the consolidated financial statement of the Fund and its subsidiaries (“the Group”). These general purpose financial statements have been prepared in accordance with the Fund’s constitution, Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The Fund is a for-profit entity for the purpose of preparing the financial statements. The consolidated financial statements of the Group also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The financial statements were authorised for issue by the directors on 10 August 2017. b)  Impact of reverse acquisition on the presentation of the consolidated financial statements The Fund was established on 28 July 2015. On 29 July 2015, the Fund acquired 100% of the units in Aventus Kotara (South) Unit Trust (“Kotara”) (formerly BB Retail Property Unit Trust No.2). This transaction resulted in the unitholder of Kotara obtaining control of the merged entities. The acquisition was accounted for with reference to the guidance for reverse acquisitions set out in AASB 3 “Business Combinations” and resulted in the Fund (the legal parent) being accounted for as a subsidiary of the Group and Kotara (the legal subsidiary) being accounted for as the parent entity of the Group for financial reporting purposes. As Kotara is deemed to be the parent of the Group for accounting purposes, the consolidated financial statements of the Fund represent a continuation of the financial statements of Kotara, with the exception of the equity structure (i.e. the number and type of equity interests issued) which reflects the equity structure of the Fund. In addition to the above the Fund listed on the Australian Securities Exchange in October 2015 and acquired 13 properties following the completion of its initial public offering (“IPO”). The results of the Group for the year ended 30 June 2016 comprise the results of Kotara for the period 1 July 2015 to 30 June 2016 and the results of the Group subsequent to the completion of the IPO. c) Comparative information Where necessary, comparative information has been adjusted to conform with changes in presentation in the current year. d)  Historical cost convention The financial statements have been prepared on a historical cost basis, except for the following: yy financial assets and derivative financial instruments measured at fair value; and yy investment properties measured at fair value. e)  Rounding of amounts The Fund is a registered scheme of a kind referred to in Class Order 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the directors’ report and the financial report. Amounts in the directors’ report and the financial report have been rounded off to the nearest hundred thousand dollars in accordance with that Class Order. f)  Functional and presentation currency All amounts presented in the consolidated financial statements are expressed in Australian dollars which is the functional and presentation currency of the Group. 28 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 1.  Basis of preparation (continued) g)  New and amended accounting standards and interpretations adopted by the Group The Group has adopted all of the new and revised accounting standards and interpretations issued by the Australian Accounting Standards Board that are relevant to its operation and effective for the financial reporting period beginning 1 July 2016. The adoption of these new or revised standards and interpretations did not have a significant impact on the current or prior financial years and is not likely to affect future financial periods. h)  New and amended accounting standards and interpretations issued but not yet adopted by the Group Certain new accounting standards and interpretations have been published that are not mandatory for the year ended 30 June 2017 and have not been early adopted by the Group. The directors’ assessment of the impact of these new standards and interpretations is set out below. Title Key requirements and impacts AASB 9 Financial Instruments AASB 9 “Financial Instruments” addresses the classification, measurement and de-recognition of financial assets and financial liabilities. It has also introduced new rules for hedge accounting and impairment of financial assets. Effective date 1 January 2018 The directors do not expect the new standard to have a significant impact on the recognition or measurement of the Group’s financial instruments. The standard is not applicable until 1 January 2018 but is available for early adoption. At the date of this report the directors have not early adopted AASB 9. AASB 15 Revenue from Contracts with Customers The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 “Revenue” which covers contracts for goods and services and AASB 111 “Construction Contracts” which covers construction contracts. 1 January 2018 The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. The scope of AASB 15 excludes income derived from leases which is accounted for under AASB 117 “Leases”. As the Group’s main source of revenue is rental income derived from tenants in accordance with operating leases, and non-rental income is immaterial, the adoption of the new revenue recognition rules will not have a significant impact on the Group’s accounting policies or the amounts recognised in the financial statements. The standard is not applicable until 1 January 2018 but is available for early adoption. At the date of this report the directors have not early adopted AASB 15. AASB 16 Leases AASB 16 supersedes AASB 117 “Leases” and associated interpretations. Key features of AASB 16 from a lessor perspective include: yy AASB 16 substantially carries forward the lessor accounting requirements from AASB 117. Accordingly, a lessor continues to classify its leases as operating leases or finance leases. yy AASB 16 also requires enhanced disclosure to be provided by lessors that will improve information disclosed about a lessor’s risk exposure. As AASB 16 retains the distinction between operating leases and finance leases for lessors there is no fundamental change in accounting for leases between the Group and its tenants. The new standard will result in increased disclosure in the financial report. The new standard will be effective for annual reporting periods commencing 1 January 2019 but is available for early adoption. At the date of this report the directors have not early adopted AASB 16. 1 January 2019 ANNUAL REPORT 2017 | 29 2.  Summary of significant accounting policies This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all years presented unless otherwise stated. The consolidated financial statements are for the Group consisting of the Fund and its subsidiaries. a)  Principles of consolidation Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Inter-entity transactions, balances and unrealised gains on transactions between Group entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. When the Group ceases to consolidate for an investment because of a loss of control any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. b) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: yy fair values of the assets transferred 
 yy liabilities incurred to the former owners of the acquired business yy equity interests issued by the Group yy fair value of any asset or liability resulting from a contingent consideration arrangement, and yy fair value of any pre-existing equity interest in the subsidiary. 
 Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. 
 Acquisition-related costs are expensed as incurred. The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. 
 If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
 30 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2.  Summary of significant accounting policies (continued) c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as Darren Holland, in his capacity as chief executive officer and executive director of Aventus Capital Limited. d) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of allowances, rebates and amounts collected on behalf of third parties. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. Revenue for the Group’s business activities is recognised on the following basis: Rental and other property income Rental and other property income derived from investment properties (inclusive of outgoings recovered from tenants) is recognised on a straight-line basis over the term of the lease. The portion of rental income relating to fixed increases in rent in future years is recognised as a separate component of investment properties and amortised on a straight-line basis over the term of the lease. Interest income Interest income is recognised on an accruals basis using the effective interest method. Interest income is disclosed as ‘other income’ in the statement of comprehensive income. e) Expenses Property expenses Property expenses include rates, taxes and other property outgoings incurred in relation to investment properties. Property expenses are recorded on an accruals basis. Finance costs Finance costs include interest, fair value movements in derivative financial instruments, payments in respect of derivative financial instruments and the amortisation of other costs incurred in respect of obtaining finance. Finance costs associated with the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset during the period that is required to complete and prepare the asset for its intended use. Borrowing costs not associated with qualifying assets are recognised as an expense when incurred. Other costs incurred in respect of obtaining finance, including loan establishment fees, are deferred and expensed over the term of the respective loan facility. Management fees Management fees are recognised on an accruals basis. Refer to note 23(g) for further information on management fees. Other expenses All other expenses are recognised on an accruals basis. f) Income tax Under current income tax legislation, the Fund is not liable to pay income tax as the net income of the Fund is assessable in the hands of the beneficiaries (the unitholders) who are ‘presently entitled’ to the income of the Fund. There is no income of the Fund to which the unitholders are not presently entitled. As a result, deferred taxes have not been recognised in the financial statements in relation to differences between the carrying amounts of assets and liabilities and their respective tax bases, including taxes on capital gains which could arise in the event of a sale of investments for the amount at which they are stated in the financial statements. In the event that taxable gains are realised by the Fund, these gains would be included in the taxable income that is assessable in the hands of the unitholders as noted above. Realised capital losses are not distributed to unitholders but are retained within the Fund to be offset against any realised capital gains. The benefit of any carried forward capital losses are generally not recognised in the financial statements, on the basis that the Fund is a flow through trust for Australian tax purposes. If in any period realised capital gains exceed realised capital losses, including those carried forward from earlier periods and eligible for offset, the excess is included in taxable income that is assessable in the hands of unitholders in that period and is distributed to unitholders in accordance with the requirements of the Fund constitution. ANNUAL REPORT 2017 | 31 g)  Goods and service tax (“GST”) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the Australian Taxation Office (“ATO”). In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included within receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the ATO, are presented as operating cash flows. h)  Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. i) Receivables Receivables are initially recognised at the amounts due to the Group less any provision for doubtful debts. Rent and outgoings receivable are usually settled within 30 days of recognition. Receivables are presented as current assets unless collection is not expected for greater than 12 months after reporting date. Collectability of receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off in the year in which they are identified. A provision for doubtful debts is raised where there is objective evidence that the Group will not collect all amounts due. The amount of the provision is the difference between the carrying amount and estimated future cash flows. Cash flows relating to current receivables are not discounted. j) Rental guarantees Rental guarantees are measured as the expected future cash flows to be received under the guarantee arrangements and are disclosed as a separate asset in the balance sheet. Guarantees are recognised in the statement of comprehensive income on an amortised cost basis over the period of the guarantee. k) Investment properties Investment properties comprise large format retail centres which are held for long-term rental yields and/or capital appreciation and are not occupied by the Group. With the exception of investment properties acquired as part of a business combination (refer to note 2b), investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value. Fair value is the amount at which the investment property could be exchanged between knowledgeable, willing parties in an arm’s length transaction. A willing seller is neither a forced seller nor one prepared to sell at a price not considered reasonable in the market. The best evidence of fair value is current prices in an active market for similar properties. Where such information is not available the directors consider information from a variety of sources including: yy current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences; yy discounted cash flow projections based on reliable estimates of future cash flows; yy capitalised income projections based upon a property’s estimated net market income, and a capitalisation rate derived from an analysis of market evidence. Gains and losses arising from changes in fair value of investment properties are recognised in profit or loss in the period in which they arise. The Group obtains independent valuations for its investment properties at least every two years. At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account the most recent independent valuations. The directors determine a property’s value within a range of reasonable fair value estimates. Fair value is determined using a long term investment period. Specific circumstances of the owner are not taken into account. The carrying amount of investment properties recorded in the balance sheet may include the cost of acquisition, additions, refurbishments, improvements, lease incentives, leasing costs and assets relating to fixed increases in operating lease rentals in future years. Existing investment properties being developed for continued future use are also carried at fair value. Where the Group disposes of an investment property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, with a corresponding adjustment recorded in profit or loss. 32 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2.  Summary of significant accounting policies (continued) l)  Lease incentives and leasing fees Prospective lessees may be offered incentives as an inducement to enter into non-cancellable operating leases. These incentives may take various forms including rent-free periods, upfront cash payments, or a contribution to certain lessee costs such as a fitout contribution. Leasing fees may also be incurred for the negotiation of leases. Incentives and leasing fees are capitalised in the consolidated balance sheet as a component of investment properties and amortised on a straight-line basis over the term of the lease as an adjustment to rental income. m)  Impairment of assets Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. n) Payables Payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. o) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. p)  Derivative financial instruments The Group has entered into derivative financial instruments, in the form of interest rate swap agreements, to partially hedging against interest rate fluctuations on its debt facilities. The Group has not adopted hedge accounting. Derivative financial instruments are classified as financial instruments at fair value through profit or loss. Derivative financial instruments are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. Subsequent changes in fair value are recognised in profit or loss. Fair value is determined using valuation techniques with reference to observable market inputs for similar instruments. The fair value of all derivative contracts has been confirmed with the counter party. Derivative financial instruments are presented as current assets or liabilities as appropriate if they are expected to be settled within 12 months, or presented as non-current assets or liabilities if they are expected to be settled more than 12 months after the end of the reporting period. q) Distributions payable A payable is recognised for the amount of any distribution declared and appropriately authorised on or before the end of the reporting period but not distributed at the end of the reporting period. r) Issued units Issued units are classified as equity and recognised at the fair value of the consideration received by the Fund. Transaction costs directly attributable to the issue of new ordinary units are recognised directly in equity as a deduction from the proceeds received. ANNUAL REPORT 2017 | 33 s)  Earnings per unit Basic earnings per unit Basic earnings per unit is calculated by dividing the profit or loss attributable to unitholders by the weighted average number of ordinary units outstanding during the financial period, adjusted for bonus elements in ordinary units issued during the period. Diluted earnings per unit Diluted earnings per unit is calculated by dividing the profit or loss attributable to unitholders, adjusted for the after income tax effect of interest and other financing costs associated with dilutive potential ordinary units, by the weighted average number of ordinary units and dilutive potential ordinary units outstanding during the financial period. The weighted average number of units used in calculating basic and diluted earnings per unit is retrospectively adjusted for bonus elements in ordinary units issued during the financial year. 3.  Critical accounting estimates and judgements The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires the directors to exercise judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the consolidated financial statements, are disclosed below. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events, that may have a financial impact on the Group and are believed to be reasonable under the circumstances. a)  Critical accounting estimates and assumptions The Group is required in certain circumstances to make estimates and assumptions concerning the future. The resulting accounting estimates may differ from actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. Estimated fair value of investment properties Critical assumptions underlying the estimated fair value of investment properties are those relating to passing and market rents, capitalisation rates, terminal yields and discount rates. If there is any change in these assumptions or economic conditions the fair value of the investment properties may differ. Refer to note 24 for further information on the assumptions used in assessing the fair value of investment properties. Estimated fair value of derivative financial instruments The fair value of derivative assets and liabilities are based on assumptions of future events and involve significant estimates. The fair value of the derivatives reported at the reporting date may differ if there is volatility in market rates. Refer to note 24 for further information on the assumptions used in assessing the fair value of derivative financial instruments. Provision for performance fee Aventus Funds Management Pty Limited is entitled to a performance fee calculated in accordance with the terms and conditions of the Management Services Agreement disclosed in note 23(g). At 30 June 2017 the Group has recognised a $6.3 million provision for performance fee on the basis it is probable a performance fee will be incurred at the end of the inaugural performance period ending 30 June 2018. The provision has been calculated as the best estimate of expenditure required to settle the obligation at the end of the financial year. The actual performance fee payable (if any) may differ as key inputs into the calculation are dependent upon future events. b)  Critical judgements in applying the group’s accounting policies There were no significant judgements, apart from those involving estimations, in the process of applying the Group’s accounting policies that had a significant effect on the amounts recognised in the consolidated financial statements. 34 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. Segment information The Group has only one reportable segment being investment in Australian large format retail assets. The Group has determined it has one operating segment based on the internal information that is provided to the chief operating decision maker and which is used in making strategic decisions. Darren Holland has been identified as the chief operating decision maker in his capacity as chief executive officer and executive director of the Responsible Entity. 5. Finance costs 2017 $m Interest and finance costs Less: amounts capitalised relating to redevelopment of investment properties 2016 $m 14.9 8.9 Fair value (gains)/losses on interest rate swaps Finance costs expensed (0.2) (0.1) 14.7 8.8 (3.0) 3.5 11.7 12.3 The capitalisation rate used to determine the amount of borrowing costs capitalised during the year was the weighted average interest rate applicable to the Group’s general borrowings. 6.  Portfolio acquisition and transaction costs 2017 $m 2016 $m Stamp duty costs – 43.4 IPO offer management and advisory fees – 5.1 Interest rate swap break costs – 4.1 Other – 1.4 – 54.0 – 14.8 Advisory fees 1.9 1.8 Other 0.2 0.1 2.1 16.7 2.1 70.7 2017 2016 Net profit for the year ($m) 158.9 51.0 Weighted average number of units used in calculating basic and diluted earnings per unit 405.0 278.6 39.2 18.3 Portfolio acquisition and transaction costs IPO acquisition and transaction costs Post IPO acquisition and transaction costs Stamp duty costs Total portfolio acquisition and transaction costs 7.  Earnings per unit Basic and diluted earnings per unit (cents) The weighted average number of units used in calculating basic and diluted earnings per unit has been retrospectively adjusted for bonus elements in ordinary units issued during the financial year. ANNUAL REPORT 2017 | 35 8.  Cash and cash equivalents 30 June 2017 $m 33.9 4.3 30 June 2017 $m Cash at bank and in hand 30 June 2016 $m 30 June 2016 $m 9. Receivables Current Trade receivables 0.6 2.0 Provision for impairment (0.2) (0.2) 0.4 1.8 20.0 4.4 0.6 1.5 21.0 7.7 – 0.1 Deposits paid Other receivables Total Non-current Deposits paid Trade receivables represent outstanding rent due from tenants. Information about the impairment and ageing of receivables and the Group’s exposure to credit risk is disclosed in note 26(c). 10. Rental guarantees 30 June 2017 $m 30 June 2016 $m 2.2 2.2 0.5 2.2 Current Rental guarantees Non-current Rental guarantees Rental guarantees at 30 June 2017 expire in May 2021. Rental guarantees at 30 June 2016 expire between October 2016 and May 2021. 11. Other assets 30 June 2017 $m 30 June 2016 $m 24.0 – 1.4 0.7 25.4 0.7 Current Stamp duty paid in advance of settlement Prepayments Total $24.0 million in stamp duty paid in advance of settlement relates to the acquisition of Home Hub Castle Hill and Home Hub Marsden Park. Details of the acquisitions are disclosed in note 27. 36 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. Investment properties Property Ballarat Home Bankstown Home Belrose Super Centre Belrose Gateway Centre Caringbah Home Cranbourne Home Acquisition date Last independent valuation date Independent valuer Independent valuation $m Carrying value 30 June 2017 $m Carrying value 30 June 2016 $m October 2015 June 2016 Savills 36.5 38.6 36.5 May 2016 June 2017 Savills 56.5 56.5 53.3 October 2015 June 2017 Savills 151.0 151.0 122.0 December 2015 June 2017 Savills 7.7 7.7 6.4 October 2015 June 2015 Knight Frank 82.5 91.4 88.4 October 2015 December 2016 CBRE 125.0 129.2 120.1 December 2015 October 2015 Savills 40.0 40.8 40.0 Highlands Hub October 2015 December 2016 JLL 31.2 31.8 29.8 Jindalee Home October 2015 December 2015 CBRE 103.9 110.2 103.9 August 2008 June 2016 Knight Frank 107.0 112.5 107.0 Logan Super Centre May 2016 June 2017 Savills 88.5 88.5 81.9 MacGregor Home May 2016 April 2016 Savills 26.1 23.9 26.1 McGraths Hill Home May 2016 June 2017 Savills 39.4 39.4 36.1 Midland Home October 2015 June 2016 CBRE 54.5 58.5 54.5 Mile End Home October 2015 December 2016 Savills 89.5 92.1 83.2 Peninsula Home October 2015 December 2016 CBRE 75.3 79.8 71.7 May 2016 April 2016 Savills 21.6 21.7 21.6 Sunshine Coast Home October 2015 June 2017 JLL 85.0 85.0 66.8 Tuggerah Super Centre October 2015 June 2016 Knight Frank 60.5 65.5 60.5 Tweed Hub October 2015 December 2016 JLL 34.2 34.7 30.2 Warners Bay Home October 2015 December 2016 JLL Epping Hub Kotara Home (South) Shepparton Home Less amounts classified as rental guarantees Total 35.2 36.3 33.3 1,351.1 1,395.1 1,273.3 (2.7) (4.4) 1,392.4 1,268.9 A reconciliation of the movement in the carrying value of investment properties during the financial year is outlined below: 2017 $m Balance at the beginning of the financial year Additions via business combinations (excluding rental guarantees) Additions Capitalised expenditure Straight-lining of rental income Net gain on movement in fair value of investment properties Amounts reclassified from rental guarantees Balance at the end of the financial year Refer to note 24 for information on how the Group determines fair value of investment properties. 2016 $m 1,268.9 95.5 – 1,067.4 4.0 – 23.2 21.8 4.5 2.3 91.4 81.9 0.4 – 1,392.4 1,268.9 ANNUAL REPORT 2017 | 37 Post balance date acquisitions On 3 July 2017 the Group acquired Home Hub Castle Hill and Home Hub Marsden Park for $436.0 million. Refer to note 27 for details. Leasing arrangements The Group’s investment properties are leased to tenants under non-cancellable operating leases with rentals payable on a monthly basis. Future minimum rentals receivable under the leases as at 30 June 2017 and 30 June 2016 are as follows: 30 June 2017 $m 30 June 2016 $m Within 1 year 104.3 96.3 Later than 1 year but not later than 5 years 283.8 232.4 Later than 5 years 114.9 89.0 Total 503.0 417.7 30 June 2017 $m 30 June 2016 $m Trade payables and accruals 8.8 9.1 Other payables 2.0 1.7 10.8 10.8 30 June 2017 $m 30 June 2016 $m 16.0 14.5 30 June 2017 $m 30 June 2016 $m 3.1 1.8 13. Payables Current Total Trade payables are unsecured and are usually paid within 30 days of recognition. 14. Distributions payable Current Distributions payable 15. Deferred revenue Current Deferred revenue Deferred revenue represents rental income received in advance. Deferred revenue will be recognised as revenue in accordance with note 2(d). 38 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 16. Borrowings 30 June 2017 $m 30 June 2016 $m 329.3 462.0 (2.3) (2.9) 327.0 459.1 Non-current Secured Bank debt Less: unamortised transaction costs Total The Group’s borrowings represent a syndicated debt facility with Commonwealth Bank of Australia, Australian and New Zealand Banking Group Limited, and National Australia Bank Limited. At 30 June 2017 the debt facility had three tranches, the key features of which are summarised as follows: Tranche A Tranche B Tranche C Type of facility Revolving cash advance facility Revolving cash advance facility Revolving cash advance facility Amount $200 million $200 million $100 million Term 5 years 3 years 5 years Maturity October 2020 October 2018 May 2021 Interest 30 day BBSY + margin 30 day BBSY + margin 30 day BBSY + margin Repayment Interest only with a lump sum payment of all amounts outstanding at the end of the term. All borrowings are denominated in Australian dollars. Financing arrangements The Group had access to the following undrawn borrowing facilities at the end of the financial year: 30 June 2017 30 June 2016 Limit $m Drawn $m Undrawn $m Limit $m Drawn $m Undrawn $m – Tranche A 200.0 40.0 160.0 200.0 200.0 – – Tranche B 200.0 200.0 – 200.0 200.0 – – Tranche C 100.0 89.3 10.7 100.0 62.0 38.0 Total 500.0 329.3 170.7 500.0 462.0 38.0 Syndicated debt facility Undrawn debt under the syndicated debt facility may be drawn at any time. An additional tranche (tranche D) of up to $100 million may be added to the existing debt facility subject to the satisfaction of certain conditions. No commitment is provided by the banks for this additional tranche and there is no certainty that it will be available in future financial periods. Security The syndicated debt facility is secured by: yy a first ranking real property mortgage in respect of each property in the portfolio; yy a first ranking general security deed over all the assets of the guarantors; yy a first ranking specific security deed over all the shares and units held by the guarantors; and yy a limited recourse share mortgage provided by Aventus Capital Limited. ANNUAL REPORT 2017 | 39 Compliance with debt covenants The Fund has complied with the financial covenants of its borrowing facilities during the financial year. Key financial covenants under the syndicated debt facility are summarised as follows which are assessed semi-annually: yy Interest cover ratio is at least 2 times; yy Loan to value ratio is less than or equal to 55%; and yy Total liabilities to total tangible assets ratio is less than or equal to 55%. Expansion of borrowings On 3 July 2017 the Group finalised a $300 million extension of its existing debt facility to partially fund the acquisition of Home Hub Castle Hill and Home Hub Marsden Park. Refer to note 27 for details of the acquisition. The revised debt facility includes 4 new tranches. Key terms and conditions are summarised as follows: Tranche E Tranche F Tranche G Tranche H Amount $50 million $50 million $75 million $125 million Term 4 years 4 years 5 years 5 years Maturity July 2021 July 2021 July 2022 July 2022 Interest 90 day BBSY + margin 90 day BBSY + margin 90 day BBSY + margin 30 day BBSY + margin Repayment Interest only with a lump sum payment of all amounts outstanding at the end of the term. Other key terms and conditions of the debt facility, including security and debt covenants, remain unchanged. $1.4 million in debt establishment costs were incurred in relation to the new tranches subsequent to balance date. 17.  Derivative financial instruments 30 June 2017 $m 30 June 2016 $m 0.7 – 1.2 3.5 Non-current assets Interest rate swaps – at fair value Non-current liabilities Interest rate swaps – at fair value The Group utilises interest rate swaps to partially hedge against interest rate risk fluctuations. Interest rate swaps have the economic effect of converting borrowings from floating interest rates to fixed interest rates. At 30 June 2017 the Group had entered into interest rate swap agreements totalling $240.0 million (30 June 2016: $240.0 million) representing 72.9% (30 June 2016: 51.9%) of drawn debt. Key features of the interest rate swaps are summarised as follows: Notional amount $m Fair value 30 June 2017 $m Fair value 30 June 2016 $m October 2018 80.0 (0.5) (1.0) October 2019 40.0 (0.3) (0.8) May 2020 20.0 0.1 (0.1) October 2020 40.0 (0.4) (1.1) May 2021 60.0 0.6 (0.5) 240.0 (0.5) (3.5) Maturity date Total As at 30 June 2017 the fixed rate on the interest rate swaps varies from 1.83% to 2.36% per annum (30 June 2016: 1.83% to 2.36%). Interest rate swap contracts require settlement of net interest receivable or payable on a monthly basis. 40 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 18. Issued units 30 June 2017 $m 967.0 490,421,802 ordinary units (2016: 394,717,614) 30 June 2016 $m 747.6 A reconciliation of the movement in ordinary units during the financial year is as follows: 2017 Units 2017 $m 2016 Units 2016 $m 394,717,614 747.6 – 4.3 Redemption of units – – – (0.5) Return of capital – – – (0.2) Establishment of the Fund – – 1 – Units issued under reverse acquisition – – 19,744,091 – Units issued as consideration for business combinations – – 171,821,115 343.6 Balance at the beginning of the financial year Units issued at IPO Units issued under entitlement offer Unit issue costs Units issued in accordance with the distribution reinvestment plan Balance at the end of the financial year – – 151,667,500 303.3 92,533,186 214.7 51,484,907 104.5 – (2.4) – (7.4) 3,171,002 7.1 – – 490,421,802 967.0 394,717,614 747.6 As stipulated in the Fund’s constitution, each unit represents a right to an individual share in the Fund and does not extend to a right to the underlying assets of the Fund. Each units ranks equally and has the same rights attached to it as with all other units on issue. Each unit confers the right to vote at meetings of unitholders, subject to any voting restrictions imposed on a unitholder under the Corporations Act and the ASX Listing Rules. Entitlement offer On 30 May 2017 the Fund invited institutional and retail investors to participate in a 1 for 4.3 accelerated non-renounceable entitlement offer to assist fund the acquisition of Home Hub Castle Hill and Home Hub Marsden Park. Refer to note 27 for details of the acquisition. The entitlement offer resulted in the issue of 92.5 million units, at an issue price of $2.32, and raised a total of $214.7 million in additional equity. New units issued under the offer rank equally with existing units and are entitled to all future distributions of the Fund, except for distributions relating to the quarter ended 30 June 2017. Costs directly associated with the equity raise amounted to $2.4 million and have been recognised directly in equity as a reduction to gross proceeds raised. ANNUAL REPORT 2017 | 41 19. Retained earnings 30 June 2017 $m 144.7 48.8 2017 $m 2016 $m 48.8 Retained earnings 30 June 2016 $m 34.8 A reconciliation of the movement in retained earnings during the financial year is as follows: Balance at the beginning of the financial year Net profit for the year 158.9 51.0 (63.0) (37.0) 144.7 48.8 2017 2016 Distribution Distribution $m – cents per unit 2016 Distribution $m Distributions paid or payable Balance at the end of the financial year 20. Distributions 2017 Distribution – cents per unit Fully paid ordinary units September quarter 3.88 15.3 N/A N/A December quarter 3.96 15.7 2.89 9.9 March quarter 4.02 16.0 3.68 12.6 June quarter 4.02 16.0 3.68 14.5 15.88 63.0 10.25 37.0 Total Distribution Reinvestment Plan (“DRP”) During the financial year the Fund established a DRP under which unitholders may elect to reinvest all or part of their distribution in new units in the Fund rather than being paid in cash. The first period which the DRP was operational was the quarter ended 30 September 2016. The last date for the receipt of an election notice for participation in the DRP is the next business day after the record date for the respective quarterly distribution. The DRP unit price is determined as the average of the daily volume weighted average price of the Fund’s units sold on the Australian Securities Exchange during a ten day trading period prior to the payment date for the distribution, less a discount of 2%. 42 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 21.  Statement of cash flow information a)  Reconciliation of profit to net cash flows from operating activities 2017 $m Profit for the year 2016 $m 158.9 51.0 (0.2) (3.4) Adjustments for Finance costs capitalised Portfolio acquisition and transaction costs 2.1 70.7 Straight-lining of rental income (4.5) (2.3) Amortisation of rental guarantees 1.3 0.5 Amortisation of debt establishment costs 0.8 0.5 (91.4) (81.9) (3.0) 3.5 (Increase)/decrease in receivables 2.4 (1.3) (Increase)/decrease in other assets (0.6) 0.4 Increase/(decrease) in payables (0.8) (6.9) Increase/(decrease) in deferred revenue 1.3 0.9 Increase/(decrease) in provision for performance fee 6.3 – 72.6 31.7 2017 $m 2016 $m Net gain on movement in fair value of investment properties Net (gain)/loss on movement in fair value of interest rate swaps Change in operating assets and liabilities, net of effects from purchase of controlled entities: Net cash inflow from operating activities b)  Non-cash investing and financing activities Units issued in accordance with the Fund’s distribution reinvestment plan Units issued as consideration for business combinations There were no other non-cash investment or financing activities during the financial year. 7.1 – – 343.6 ANNUAL REPORT 2017 | 43 22. Business combinations Business combinations occurring during the year ended 30 June 2016 are outlined below. a) IPO acquisitions The Fund was established on 28 July 2015 and was registered with ASIC as a managed investment scheme on 14 September 2015. The Fund subsequently listed on the Australian Securities Exchange (“ASX”) on 16 October 2015. On 29 July 2015, the Fund acquired 100% of the units in Aventus Kotara (South) Unit Trust (“Kotara”) (formerly BB Retail Property Unit Trust No.2). The Fund subsequently acquired 100% interests in the assets outlined below (”IPO acquisition assets”), which were funded partially by the issue of units in the Fund, and partially by cash raised during the Fund’s IPO. yy BBRC Belrose Fund yy BBRC Mile End Fund yy Caringbah Unit Trust yy BBRC Midland Fund yy BBRC Diversified Retail Fund yy Cranbourne Home yy BBRC Jindalee Fund yy Sunshine Coast Home yy Peninsula Unit Trust yy Tuggerah Super Centre yy BBJ Thompsons Road Unit Trust yy Mile End Trust Reverse acquisition As disclosed in note 1(b) the acquisition of Kotara by the Fund resulted in the unitholder of Kotara obtaining control of the merged entities. Consequently, the acquisition has been accounted for with reference to the guidance for reverse acquisitions set out in AASB 3. The application of the reverse acquisition guidance contained in AASB 3 has resulted in the Fund (the legal parent) being accounted for as a subsidiary of the Group and Kotara (the legal subsidiary) being accounted for as the parent entity of the Group for financial reporting purposes. At the date of acquisition the Fund was non-trading and its operations did not fall within the definition of a business under AASB 3. Consequently, the acquisition did not meet the definition of a business combination under AASB 3, and the principles of AASB 3 could not be applied in their entirety. Instead, the transaction has been accounted for as a share-based payment transaction using the principles set out in AASB 2 “Share-based Payment” whereby Kotara is deemed to have issued shares in exchange for the net assets of the Fund. In accordance with AASB 2, the difference between the fair value of the deemed consideration paid by Kotara and the fair value of the identifiable net assets of the Fund is required to be recognised as an expense. At the date of acquisition the fair value of the net assets of the Fund was $2 and the deemed consideration paid by Kotara amounted to $2. As a result, no expense arose. This is consistent with the accounting outcome that would have been achieved under AASB 3 had the Fund met the definition of a business at the time of the acquisition of Kotara. 44 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. Business combinations (continued) a)  IPO acquisitions (continued) IPO acquisitions The Group’s acquisition of the IPO acquisition assets on 20 October 2015 met the definition of a business and therefore the principles of a business combination under AASB 3 were applied in their entirety to the Group’s acquisition. The purchase consideration did not exceed the fair value of the identifiable assets and liabilities of the IPO acquisition assets and accordingly, no goodwill arose as a result of the transaction. The above transactions have been disclosed as one single transaction for the purposes of the disclosure adopted in the financial statements. Details of the purchase consideration and the net assets and liabilities acquired related to the IPO acquisition assets are as follows: 2016 $m Purchase consideration Cash paid 124.0 Units issued 343.6 Total 467.6 The assets and liabilities recognised as a result of the acquisition are as follows: Fair Value 2016 $m Cash and cash equivalents 6.2 Trade and other receivables 1.0 Other assets 0.7 Investment properties Rental guarantees Trade and other payables 809.0 1.3 (12.3) Borrowings (338.3) Net identifiable assets acquired 467.6 Transaction costs of $54.0 million not directly attributable to the issue of units, were expensed during the year ended 30 June 2016 and are included as part of portfolio acquisition and transactions costs in the statement of comprehensive income. Transaction costs of $5.4 million, directly attributable to the issue of units, were recognised directly in equity as a reduction of issued units. From the date of acquisition to 30 June 2016, the acquired businesses contributed revenues of $63.9 million and a net profit, including transaction costs, of $60.3 million to the Group. ANNUAL REPORT 2017 | 45 b)  Epping Hub acquisition On 9 December 2015 the Group acquired Epping Hub. Net assets were acquired at fair value. Accordingly, no goodwill arose as a result of the transaction. Details of the purchase consideration and the net assets acquired are as follows: 2016 $m Purchase consideration Cash paid Units issued Total 40.0 – 40.0 The assets recognised as a result of the acquisition are as follows: Fair Value 2016 $m Investment properties 40.0 Net identifiable assets acquired 40.0 Total transaction costs of $2.5 million were expensed during the year ended 30 June 2016 and are included as part of portfolio acquisition and transactions costs in the statement of comprehensive income. From the date of acquisition to 30 June 2016, Epping Hub contributed revenues of $2.1 million and a net loss, including transaction costs, of $1.8 million to the Group. c)  Belrose Gateway Centre acquisition On 18 December 2015 the Group acquired the Belrose Gateway Centre. Net assets were acquired at fair value. Accordingly, no goodwill arose as a result of the transaction. Details of the purchase consideration and the net assets acquired are as follows: 2016 $m Purchase consideration Cash paid Units issued Total 6.4 – 6.4 The assets recognised as a result of the acquisition are as follows: Fair Value 2016 $m Investment properties 6.4 Net identifiable assets acquired 6.4 Total transaction costs of $0.4 million were expensed during the year ended 30 June 2016 and are included as part of portfolio acquisition and transactions costs in the statement of comprehensive income. From the date of acquisition to 30 June 2016, the Belrose Gateway Centre contributed revenues of $0.4 million and a net loss, including transaction costs, of $0.2 million to the Group. 46 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. Business combinations (continued) d) Portfolio acquisition On 20 May 2016 the Group acquired the Aventus Bankstown Unit Trust (formerly Chapel Road Bankstown Trust), Aventus Logan Unit Trust (formerly Logan Megacentre Trust), Aventus MacGregor Unit Trust (formerly Kessels Road Trust), McGraths Hill Unit Trust (formerly Windsor Road Unit Trust) and Shepparton Home. Net assets were acquired at fair value. Accordingly, no goodwill arose as a result of the transaction. Details of the purchase consideration and the net assets acquired are as follows: 2016 $m Purchase consideration Cash paid 219.5 Units issued Total – 219.5 The assets and liabilities recognised as a result of the acquisition are as follows: Fair Value 2016 $m Cash and cash equivalents 1.0 Trade and other receivables 0.5 Other assets 0.3 Investment properties 215.2 Rental guarantees 3.8 Trade and other payables (0.6) Deferred revenue (0.7) Net identifiable assets acquired 219.5 Total transaction costs of $13.7 million were expensed during the year ended 30 June 2016 and are included as part of portfolio acquisition and transactions costs in the statement of comprehensive income. From the date of acquisition to 30 June 2016 the acquired businesses contributed revenues of $2.2 million and a net loss, including transaction costs, of $12.3 million to the Group. ANNUAL REPORT 2017 | 47 23.  Related party transactions a) Responsible entity The responsible entity of the Fund is Aventus Capital Limited (“Responsible Entity”). In the prior financial year One Managed Investment Funds Limited (“OMIFL”) was the responsible entity of the Fund for the period 14 September 2015 to 11 March 2016. On 11 March 2016 OMIFL retired as responsible entity and was replaced by Aventus Capital Limited. b)  Directors of the Responsible Entity The following persons held office as directors of the Responsible Entity during the whole of the financial year and up to the date of this report, unless otherwise stated: yy Bruce Carter Independent Non-Executive Chairman yy Darren Holland Executive Director yy Kieran Pryke Independent Non-Executive Director yy Robyn Stubbs Independent Non-Executive Director yy Tracey Blundy Non-Executive Director (resigned 18 August 2016) yy Nico van der Merwe Non-Executive Director (appointed 18 August 2016) yy Brett Blundy Alternate Director to Nico van der Merwe (appointed 18 August 2016) Executive and non-executive directors of the Responsible Entity are remunerated by the Aventus Property Group. Director fees of independent non-executive directors are reimbursed by the Group. The total amount reimbursed for the year ended 30 June 2017 amounted to $367,000 (2016: $250,000). Director fees are disclosed as part of other expenses in the statement of comprehensive income. In the prior financial year the following persons held office as directors of OMIFL during its term as responsible entity: yy Frank Tearle Executive director yy Elizabeth Reddy Non-executive director yy Justin Epstein Executive director Directors of OMIFL were not remunerated by the Group and did not hold any units in the Fund. c)  Responsible Entity fees The Responsible Entity is not entitled to a fee for services provided to the Group. During its term as responsible entity OMIFL derived a fee directly from Aventus Capital Limited. The fees were not recharged to the Fund. d)  Directors’ interest in the Fund Directors’ interest in the Fund at 30 June 2017 and 30 June 2016 are summarised as follows: Director Bruce Carter Darren Holland Kieran Pryke Robyn Stubbs Nico van der Merwe Brett Blundy Number of units held in the Fund 30 June 2017 Number of units held in the Fund 30 June 2016 919,312 745,856 2,264,077 1,836,892 70,873 57,500 28,349 23,000 159,374 125,000 142,643,925 115,838,399 48 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23.  Related party transactions (continued) e)  Key management personnel Key management personnel (“KMP”) are defined by AASB 124 “Related Party Transactions” as “those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity”. The Responsible Entity is considered to be the KMP of the Group. f) Manager The manager of the Fund is Aventus Funds Management Pty Limited (“Manager”). Directors of the Manager are Darren Holland and Brett Blundy. Directors of the Manager are remunerated by the Aventus Property Group. g) Management fees The Manager is entitled to remuneration in the form of an investment management fee and a performance fee in accordance with a Management Services Agreement. Investment management fee The investment management fee is calculated as: yy 0.6% per annum of the gross asset value (“GAV”) of the Group, where GAV is less than or equal to $2.0 billion; and yy 0.5% of the GAV of the Group, where GAV is greater than $2.0 billion. The investment management fee is calculated and payable on a monthly basis. Total investment management fees incurred for the year ended 30 June 2017 amounted to $7,912,000 (2016: $4,272,000). Performance fee The Manager is also entitled to a performance fee of 20% of the percentage by which the total return of the Fund exceeds a hurdle of 12%. This is calculated as: 20% x Outperformance % x Closing NTA (together with any carry forward outperformance as further described below) where: yy Outperformance % = Total Return less the Hurdle Rate yy Total Return = Change in the NTA per unit over the relevant period plus the distributions per unit paid during the relevant period dividend by the NTA per unit at the commencement of the relevant period (expressed as a percentage). Total return is measured on a three-year rolling basis and annualised as a compounded annual growth rate. For the 2016 financial year, total return is measured from the commencement date of the Management Services Agreement to 30 June 2016 and the first performance fee period ends on 30 June 2018. yy Hurdle Rate = 12% yy Closing NTA = The NTA of the Fund on the last day of the relevant period. The first performance fee amount (if any) will become payable on the publication of the Fund’s financial results after the third financial year after commencement of the Management Services Agreement (i.e. after 30 June 2018), with performance fees calculated and payable annually thereafter. The total fee payable (comprising the investment management fee plus the performance fee) in any year is capped at 1.0% of GAV of the Fund. Any excess fee is carried over to subsequent performance fee periods (subject to the performance of the Fund and any application of the cap during that period). Any prior period underperformance must be recovered before the Manager becomes entitled to the payment of a performance fee in respect of a subsequent period. The performance fee may be paid to the Manager in cash or units (at the election of the Manager). At 30 June 2017 the Group has recognised a $6,269,000 provision for performance fees on the basis it is probable a performance fee will be incurred at the end of the inaugural performance period ending 30 June 2018. The provision has been calculated as the best estimate of expenditure required to settle the obligation at the end of the financial year. As disclosed in note 3(a) the provision represents a critical accounting estimate as it is dependent upon future events. ANNUAL REPORT 2017 | 49 h)  Property and development management fees Aventus Property Management Pty Limited (“Property Manager”) is entitled to the following fees in accordance with the Property Management and Development Agreement: Fee type Basis of calculation Leasing fee for new tenants 15% of face rental (being gross rent payable by a tenant, disregarding incentives and rent abatements) for the first year of the lease term. Leasing renewal fee (existing tenant not exercising an option) 10% of face rental for the first year of a new lease or additional leased space (as applicable) if an existing tenant enters into a new lease for premises it currently occupies (excluding by way of exercise of an option), relocates to new premises within the relevant property or enters into a new lease for new space in a property in the portfolio. Leasing renewal fee (existing tenant exercising an option) 7% of face rental for the first year of a new lease if an existing tenant exercises an option to continue leasing their current space in a property in the portfolio. Leasing market rent review fee 7% of the increase between the rent payable for the year before the relevant rent review and the rent payable for the year after that rent review date as a result of the market rent review. Leasing administration fee $4,000 per lease documentation negotiated and prepared by the Property Manager (without double servicing where relevant lease agreements are prepared by external parties). Asset and property management fee 4% of face rental (payable in equal monthly instalments in arrears) provided that where, immediately prior to a property becoming subject to the Property and Development Management Agreement (for example, the acquisition of a new property), the property management fee in respect of that property (which is recoverable from tenants as outgoings under the terms of the relevant lease agreements) is higher than 4% of the total face rent, the Property Manager shall be entitled to that higher fee for so long as it remains recoverable from the tenants under the relevant lease agreements. The property manager is also entitled to salary and on-cost recoveries associated with managing the property. Development services fee 5% of total development costs (being the total cost of any development works undertaken in respect of a property), calculated and payable monthly in arrears. The Property Manager will only be able recover an amount equal to 2% of the total development cost from the time the development proposal is approved to the commencement of construction, with the balance to be paid in instalments from the time that construction commences to delivery of the project. Total fees incurred in accordance with the Property Management and Development Agreement for the year ended 30 June 2017 amounted to $13,498,000 (2016: $8,375,000). Asset and property management fees are included as part of property expenses in the statement of comprehensive income. Leasing fees and development services fees are capitalised into the carrying value of investment properties. i) Rental guarantees In conjunction with acquisitions made in October 2015 a director related entity provided rental guarantees to the Group which expired in October 2016. The rental guarantees were negotiated on an arm’s length basis. Rental guarantees claimed from the director related entity during the financial year amounted to $53,000 (2016: $125,000). There were no rental guarantees outstanding at 30 June 2017 (30 June 2016: $53,000). j) Rental income Total rental income derived from the Aventus Property Group during the financial year amounted to $220,000 (2016: $Nil). k)  Reimbursement of costs by the Fund The Responsible Entity, Manager and Property Manager are entitled to be reimbursed for expenses relating to proper performance of their respective duties as responsible entity, manager and property manager. This includes the cost of the Group’s external advisors, (including auditors), custodian fees, registry fees, ASX fees, and expenses, costs and disbursements incurred by Aventus Property Group personnel in connection with the due and proper management and administration of the Group. Total amounts reimbursed by the Group for the above costs during the year ended 30 June 2017 amounted to $514,000 (2016: $2,775,000). In the prior year $2,170,000 of these total costs related to portfolio acquisition and transactions costs disclosed in note 22(a). Total property expenses reimbursed by the Group to a director related party during the year ended 30 June 2017 amounted to $92,000 (30 June 2016: Nil). l)  Outstanding payable balances with related parties Total amounts payable to the Aventus Property Group at 30 June 2017 amounted to $8,234,000 (30 June 2016: $1,874,000). Total payables at 30 June 2017 include a $6,269,000 provision for performance fee. Related party payables are unsecured and are usually paid within 30 days of recognition. 50 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23.  Related party transactions (continued) m) Subsidiaries As disclosed in note 1(b) Aventus Kotara South Unit Trust (legal subsidiary) is deemed to be the parent entity of the Group and Aventus Retail Property Fund (legal parent) is deemed to be a subsidiary for financial reporting purposes. The Group’s subsidiaries are set out below. All subsidiaries are incorporated in Australia. NAME OF ENTITY OWNERSHIP INTEREST 2017 % PRINCIPAL ACTIVITIES 2016 % Deemed parent (legal subsidiary) Aventus Kotara South Unit Trust Property investment Deemed subsidiary (legal parent) Aventus Retail Property Fund 100% 100% Investment holding trust 100% 100% Investment holding trust 100% 100% Property investment Aventus Belrose Unit Trust 100% 100% Property investment Aventus Caringbah Unit Trust 100% 100% Property investment Aventus Castle Hill Unit Trust – 2 100% – Property investment Aventus Cranbourne Unit Trust 100% 100% Property investment Aventus Cranbourne Thompsons Road Unit Trust 100% 100% Property investment Aventus Diversified Unit Trust Subsidiaries Aventus Bankstown Holding Trust Aventus Bankstown Unit Trust – 1 100% 100% Investment holding trust Aventus Ballarat Unit Trust – 3 100% 100% Property investment Aventus Highlands Unit Trust – 3 100% 100% Property investment Aventus Tweed Unit Trust – 3 100% 100% Property investment Aventus Warners Bay Unit Trust – 3 100% 100% Property investment Aventus Epping Unit Trust 100% 100% Property investment Aventus Jindalee Unit Trust 100% 100% Property investment Aventus Logan Holding Trust 100% 100% Investment holding trust Aventus Logan Unit Trust – 4 100% 100% Property investment Aventus MacGregor Holding Trust 100% 100% Investment holding trust Aventus MacGregor Unit Trust – 5 100% 100% Property investment Aventus Marsden Park Unit Trust – 6 100% – Property investment Aventus McGraths Hill Holding Trust 100% 100% Investment holding trust 100% 100% Property investment Aventus Midland Unit Trust 100% 100% Property investment Aventus Mile End Unit Trust 100% 100% Property investment Aventus Mile End Stage 3 Unit Trust 100% 100% Property investment Aventus Peninsula Unit Trust 100% 100% Property investment Aventus Property Administration Pty Limited 100% – Administration Aventus Shepparton Unit Trust 100% 100% Property investment Aventus Sunshine Coast Unit Trust 100% 100% Property investment Aventus Tuggerah Unit Trust 100% 100% Property investment Aventus McGraths Hill Unit Trust – 7 1 – Entity is a 100% owned subsidiary of Aventus Bankstown Holding Trust 2 – Entity has been created to acquire Home Hub Castle Hill 3 – Entity is a 100% owned subsidiary of Aventus Diversified Unit Trust 4 – Entity is a 100% owned subsidiary of Aventus Logan Holding Trust 5 – Entity is a 100% owned subsidiary of Aventus MacGregor Holding Trust 6 – Entity has been created to acquire Home Hub Marsden Park 7 – Entity is a 100% owned subsidiary of Aventus McGraths Hill Holding Trust ANNUAL REPORT 2017 | 51 n)  Key related party contracts Kotara Home call option and pre-emptive deed The Group’s Kotara Home (South) property (“Kotara South”) is adjacent to another property (“Kotara North”) which is owned by an entity associated with Brett Blundy. The respective owners have entered into the Kotara Call Option and Pre-emptive Deed under which: yy The owner of Kotara South grants to the owner of Kotara North a call option to acquire Kotara South (“Call Option”); and yy The owner of Kotara North and the owner of Kotara South have each granted the other reciprocal pre-emptive rights in the event that either of them wishes to sell their respective Kotara properties (“Pre-emptive Right”). Further information relating to the Call Option and the Pre-emptive Right is outlined below. Call option Where as a result of a vote of the unitholders in the Fund, there is a change of the responsible entity of the Fund to an entity who is not a member of the Aventus Property Group (“Call Option Event”) the following process will apply: yy The owner of Kotara North may require a valuation to be conducted on Kotara South, with two independent valuers to be appointed – one by the owner of Kotara North Owner and one by the new responsible entity; yy the purchase price for Kotara South will be the average of the two valuations; and yy upon receipt of those valuations, the owner of Kotara North may exercise the call option and purchase Kotara South for the relevant purchase price so determined. Pre-emptive right Under the pre-emptive right, where an owner wishes to deal with their Kotara property, it must give notice to the other owner of the proposed sale terms which will constitute an offer to the relevant recipient to acquire the selling owner’s Kotara property. The owner will have 40 days to accept those sale terms. If the offer is not accepted, then the owner selling its Kotara asset may sell to another third party within six months on terms and at a price that are no more favourable to the proposed purchaser than the terms offered under the pre-emptive right. o)  Parent entity related party transactions 1 July 2016 to 30 June 2017 During the financial year Aventus Kotara South Unit Trust incurred $777,000 in property management, leasing fees and salary and wages recoveries from the Property Manager in accordance with the Property Management and Development Agreement. Details of the fees are outlined in note 23(h). 20 October 2015 to 30 June 2016 Total fees incurred under the Property Management and Development Agreement for the period 20 October 2015 to 30 June 2016 amounted to $653,000. 1 July 2015 to 19 October 2015 For the period 1 July 2015 to 19 October 2015 Aventus Kotara South Unit Trust incurred property management, leasing fees and salary and wages recoveries from BBRC Property Management Pty Limited. Total fees for the period amounted to $365,000. Details of the fees are summarised as follows: Property management fees Property management fees were agreed annually with BBRC Property Management Pty Limited. Fees were calculated and payable on a monthly basis. 52 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 23.  Related party transactions (continued) o)  Parent entity related party transactions (continued) 1 July 2015 to 19 October 2015 (continued) Leasing fees Leasing fees were calculated as follows: Fee type Basis of calculation New tenants 14.35% of gross rent (including marketing levy or fees but disregarding incentives or rent free periods) for the first year of the lease. Additional space from existing tenants 14.35% of gross rent (including marketing levy or fees but disregarding incentives or rent free periods) for the first year of the lease. Lease renewals by existing tenants 6.7% of gross rent (including marketing levy or fees but disregarding incentives or rent free periods) for the first year of the lease. Option renewal by existing tenants 6.7% of gross rent (including marketing levy or fees but disregarding incentives or rent free periods) for the first year of the lease. Assignment of leases $2,000 per lease. Fees were calculated and payable on a monthly basis. Salary and wages recoveries BBRC Property Management Pty Limited were entitled to salary and on-cost recoveries associated with managing the Kotara South property. Fees were calculated and payable on a monthly basis. 24.  Fair value measurement This note provides information about how the Group determines fair value of financial and non-financial assets and liabilities. a)  Assets and liabilities measured at fair value on a recurring basis The Group measures investment properties and derivative financial instruments at fair value on a recurring basis. To provide an indication about the reliability of inputs used in determining fair value, the Group classifies its assets and liabilities into three levels prescribed under accounting standards. An explanation of each level is outlined below: Level 1 ­ Quoted prices (unadjusted) in active markets for identical assets or liabilities. – Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Inputs for the asset or liability are not based on observable market data (unobservable inputs). The following table summarises the Group’s assets and liabilities measured and recognised at fair value on a recurring basis: LEVEL 2 LEVEL 3 TOTAL Note 30 June 2017 $m 30 June 2016 $m 30 June 2017 $m 30 June 2016 $m 30 June 2017 $m 30 June 2016 $m Derivative financial instruments 17 0.7 – – – 0.7 – Investment properties 12 – – 1,392.4 1,268.9 1,392.4 1,268.9 17 1.2 3.5 – – 1.2 3.5 Non-financial assets Financial liabilities Derivative financial instruments There were no transfers between levels of fair value measurement during the financial year. The Group did not measure any financial assets or liabilities at fair value on a non-recurring basis as at 30 June 2017 or 30 June 2016. ANNUAL REPORT 2017 | 53 Valuation techniques used to derive level 2 fair values The only level 2 assets or liabilities measured at fair value are interest rate swaps. The fair value of interest rate swaps is estimated using the discounted cash flow technique. Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties. Valuation techniques used to derive level 3 fair values The only level 3 assets or liabilities measured at fair value are investment properties. The Group obtains independent valuations for its investment properties at least every two years. At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account the most recent independent valuations. The directors determine a property’s value within a range of reasonable fair value estimates. The fair value of investment properties is determined using recognised valuation techniques such as the capitalisation of net income method and discounted cash flow method. Key inputs used in determining property values as at 30 June 2017 and 30 June 2016 are outlined below. Terminal yields and discount rates relate solely to independent valuations. Range 30 June 2017 Weighted average 30 June 2017 Range 30 June 2016 Weighted average 30 June 2016 Net passing rent ($ per square metre) $94 to $353 $227 $117 to $343 $216 Net market rent ($ per square metre) $133 to $353 $232 $128 to $343 $223 Adopted capitalisation rate (%) 6.75% to 8.00% 7.24% 6.50% to 8.00% 7.53% Adopted terminal yield (%) 7.00% to 7.25% 7.16% 6.75% to 8.50% 7.73% Adopted discount rate (%) 8.50% to 8.75% 8.62% 8.00% to 9.25% 8.85% In determining the valuation of all investment properties measured at recurring fair value, consideration has been given to the highest and best use of those properties. Sensitivity analysis Valuation input Relationship of valuation input to fair value Net passing rent The higher net passing rent, the higher the fair value. Net market rent The higher net market rent, the higher the fair value. Adopted capitalisation rate The higher the capitalisation rate, the lower the fair value. Adopted terminal yield The higher the termination yield, the lower the fair value. Adopted discount rate The higher the discount rate, the lower the fair value. b)  Assets and liabilities not measured at fair value The Group has a number of assets and liabilities which are not measured at fair value in the balance sheet. The fair values of these assets and liabilities are not materially different to their carrying amounts. 54 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 25. Capital management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so it can continue to provide returns for unitholders and maintain an optimal capital structure to reduce the cost of capital.
 The Group’s capital structure consists of cash, borrowings and equity. In determining the optimal capital structure, the Group takes into account a number of factors including the capital needs of its portfolio, the relative cost of debt versus equity, the execution and market risk of raising equity or debt, the financial risks of debt including increased volatility of earnings due to exposure to interest rate movements, the liquidity risk of maturing debt facilities and the market in general. In order to maintain or adjust the capital structure, the Group may adjust the amount of distributions paid to unitholders, return capital to unitholders, issue new units or sell assets to reduce debt. 
 The Group’s capital position is monitored using the following gearing ratio:
 30 June 2017 $m Gross borrowings Less: cash and cash equivalents Net debt Total assets (less cash and cash equivalents) Gearing ratio (%) 30 June 2016 $m 329.3 462.0 (33.9) (4.3) 295.4 457.7 1,442.2 1,281.8 20.5% 35.7% The decrease in the gearing ratio is mainly attributable to a temporary $160.0 million repayment of debt in June 2017 on receipt of funds raised from the entitlement offer. As disclosed in note 27, the Group’s gearing ratio increased to 38.9% subsequent to balance date on the acquisition of Home Hub Castle Hill and Home Hub Marsden Park. The Group’s strategy is to maintain a gearing ratio of between 30% and 40%. 26.  Financial risk management The Group’s activities expose it to financial risks including interest rate risk, liquidity risk and credit risk. a)  Interest rate risk Interest rate risk is the risk that the fair value of cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Group’s main interest rate risk arises from borrowings with variable interest rates. The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps which have the effect of converting a portion of the Group’s borrowings from variable to fixed interest rates. The Group’s policy for maintaining minimum levels of borrowings at fixed rates using interest rate swaps varies depending upon the maturity profile of the debt. The Group’s exposure to interest rate risk from borrowings is summarised in the table below: 30 June 2017 $m 30 June 2016 $m 329.3 462.0 (240.0) (240.0) 89.3 222.0 Floating rate borrowings Bank debt Derivative financial instruments Interest rate swaps (notional principal amount) Net interest rate exposure Further details of the Group’s borrowings and interest rate swaps held at 30 June 2017 and 30 June 2016 are disclosed in notes 16 and 17 respectively. Interest rate risk sensitivity The impact of a 1% increase/decrease in market interest rates at balance date would result in a $0.9 million (2016: $2.2 million) decrease/ increase in profit or loss per annum. Aside from the profit or loss impact on equity, the 1% increase/decrease in market interest rates at the reporting date has no other impact on equity. ANNUAL REPORT 2017 | 55 b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Management manages liquidity by ensuring there is sufficient cash and/or committed undrawn borrowings available. Management prepares and monitors rolling forecasts of liquidity reserves, comprising cash and undrawn borrowing facilities, on the basis of expected future cash flows. The Group’s financing arrangements, debt maturity profiles and access to undrawn borrowing facilities at 30 June 2017 and 30 June 2016 are disclosed in note 16. Maturities of financial liabilities The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities for: a) all non-derivative financial liabilities, and b) net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. For interest rate swaps the cash flows have been estimated using forward interest rates applicable at the end of the reporting period. 30 June 2017 Less than 6 months 6-12 months 1 to 3 years 3-5 years Total contracted cash flows Carrying amount of liabilities Payables 10.8 – – – 10.8 10.8 Distributions payable 16.0 – – – 16.0 16.0 4.9 4.8 210.6 132.2 352.5 329.3 – – 6.3 – 6.3 6.3 31.7 4.8 216.9 132.2 385.6 362.4 0.5 0.5 1.0 0.1 2.1 1.2 Less than 6 months 6-12 months 1 to 3 years 3-5 years Total contracted cash flows Carrying amount of liabilities Payables 10.8 – – – 10.8 10.8 Distributions payable 14.5 – – – 14.5 14.5 Contractual maturities of financial liabilities Non-derivative Borrowings Provision for performance fee Total Derivative Interest rate swaps 30 June 2016 Contractual maturities of financial liabilities Non-derivative Borrowings Total 7.0 6.9 223.8 274.0 511.7 462.0 32.3 6.9 223.8 274.0 537.0 487.3 0.3 0.3 0.9 0.4 1.9 3.5 Derivative Interest rate swaps 56 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 26.  Financial risk management (continued) c) Credit risk Risk management and security Credit risk is the risk that a customer or counterparty to a financial instrument will default on their contractual obligations resulting in a financial loss to the Group. The Group’s credit risk arises from cash and cash equivalents, receivables and rental guarantees. The carrying amount of these financial assets disclosed in the balance sheet represents the maximum credit exposure to the Group at 30 June 2017 and 30 June 2016. To manage credit risk in relation to cash and cash equivalents, deposits are held with financial institutions with AA- Standards and Poor’s credit ratings. To manage credit risk in relation to receivables and rental guarantees, tenants are billed monthly in advance. For some tenants the Group may also obtain collateral in the form of security deposits, bank guarantees or rental guarantees. Management also monitors tenancy exposure across its portfolio on a monthly basis.  Impaired receivables Individual receivables which are known to be uncollectible are written off by reducing the carrying amount directly. Other receivables are assessed collectively to determine whether there is objective evidence that an impairment has been incurred but not yet been identified. For these receivables the estimated impairment losses are recognised in a separate provision for impairment. The Group considers that there is evidence of impairment if any of the following indicators are present: yy significant financial difficulties of the debtor yy probability that the debtor will enter bankruptcy or financial reorganisation, and yy default or delinquency in payments (more than 30 days overdue). Receivables for which an impairment provision was recognised are written off against the provision when there is no expectation of recovering additional cash. There were no significant impaired trade receivables at 30 June 2017 or 30 June 2016. Receivables past due but not impaired As at 30 June 2017, trade receivables of $0.1 million (30 June 2016: $0.2 million) were past due but not impaired. These relate to tenants for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: 30 June 2017 $m 30 June 2016 $m 31–60 days 0.1 0.1 61–90 days – 0.1 90+ days – – 0.1 0.2 Total ANNUAL REPORT 2017 | 57 27.  Events occurring after the reporting period Acquisition of Home Hub Castle Hill and Home Hub Marsden Park On 3 July 2017 the Group settled Home Hub Castle Hill and Home Hub Marsden Park for $436.0 million. The acquisition was funded via a $214.7 million accelerated non-renounceable entitlement offer and a $300.0 million increase the Group’s debt facility. Details of the increased borrowings and entitlement offer are disclosed in notes 16 and 18 respectively. Both properties were acquired at fair value. Accordingly, no goodwill arose as a result of the transaction. Details of the purchase consideration and the net assets acquired are as follows: $m Purchase consideration Cash paid 436.0 Units issued Total – 436.0 The assets recognised as a result of the acquisition are as follows: Fair Value $m Investment properties 431.0 Rental guarantees Net identifiable assets acquired 5.0 436.0 Transaction costs $2.1 million of transaction costs were expensed during the year ended 30 June 2017 and are disclosed as part of portfolio acquisition and transactions costs in the statement of comprehensive income. An additional $24.0 million in stamp duty costs was expensed on 3 July 2017 at settlement. $2.4 million of transaction costs, directly attributable to the issue of new units under the entitlement offer, were recognised directly in equity as a reduction of issued units at 30 June 2017. In addition, $1.4 million in debt establishment costs, relating to the Group’s new debt tranches, were capitalised on 3 July 2017. Impact of the acquisition on related party investment management fees As part of the acquisition the Manager has agreed to waive 50% of its investment management fee relating to the acquired assets for the financial years ending 30 June 2018 and 30 June 2019. Proforma balance sheet The pro forma balance sheet outlined below has been presented in accordance with ASIC Class Order 2015/842 to highlight the financial effect of the acquisitions on the Group subsequent to balance date. The pro forma balance sheet has been prepared based on the actual balance sheet as at 30 June 2017 and adjusted for: yy the acquisition of Home Hub Castle Hill and Home Hub Marsden Park (excluding immaterial settlement adjustments); yy draw downs of cash and debt reserves to fund settlement; and yy stamp duty costs expensed at settlement. 58 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 27.  Events occurring after the reporting period (continued) Acquisition of Home Hub Castle Hill and Home Hub Marsden Park (continued) Proforma balance sheet (continued) Actual 30 June 2017 $m Impact of Acquisitions $m Proforma 30 June 2017 $m Cash and cash equivalents 33.9 (28.7) 5.2 Receivables 21.0 (20.0) 1.0 2.2 – 2.2 Proforma balance sheet Assets Current assets Rental guarantees Other assets 25.4 (24.0) 1.4 Total current assets 82.5 (72.7) 9.8 Derivative financial instruments 0.7 – 0.7 Rental guarantees 0.5 5.0 5.5 Investment properties 1,392.4 431.0 1,823.4 Total non-current assets 1,393.6 436.0 1,829.6 Total assets 1,476.1 363.3 1,839.4 Payables (10.8) – (10.8) Distributions payable (16.0) – (16.0) (3.1) – (3.1) (29.9) – (29.9) Non-current assets Liabilities Current liabilities Deferred revenue Total current liabilities Non-current liabilities Borrowings (327.0) (387.3) (714.3) Derivative financial instruments (1.2) – (1.2) Provision for performance fee (6.3) – (6.3) (334.5) (387.3) (721.8) Total non-current liabilities Total liabilities (364.4) (387.3) (751.7) 1,111.7 (24.0) 1,087.7 Issued units 967.0 – 967.0 Retained earnings 144.7 (24.0) 120.7 1,111.7 (24.0) 1,087.7 Net assets Equity Total equity NTA per unit ($) Gearing (%) $2.27 $2.22 20.5% 38.9% ANNUAL REPORT 2017 | 59 28. Commitments Capital commitments Significant capital expenditure contracted for at the end of the financial year but not recognised as liabilities is as follows: 30 June 2017 $m Acquisition of investment properties Development expenditure Total 30 June 2016 $m 416.4 3.6 7.5 3.8 423.9 7.4 Acquisition of investment properties Home Hub Castle Hill and Home Hub Marsden Park On 30 May 2017 the Group exchanged contracts to acquire Home Hub Castle Hill and Home Hub Marsden Park. As disclosed in note 27 the settlement date of the acquisitions was 3 July 2017. Total outstanding commitments under the contract at 30 June 2017 amounted to $416.4 million. Tuggerah land acquisition In the prior financial year the Group exchanged contracts to acquire additional land adjacent to the Tuggerah Super Centre. The settlement date of the acquisition was 1 July 2016. Total outstanding commitments under the contract at 30 June 2016 amounted to $3.6 million excluding GST. Development expenditure The Group has entered into contracts for the redevelopment of a number of its investment properties. Total commitments as at 30 June 2017 amounted to $7.5 million excluding GST (2016: $3.8 million excluding GST). 29.  Contingent assets and liabilities Bank guarantees On 14 September 2016 the Group entered into a 3 year $5 million bank guarantee facility. Drawn bank guarantees represent contingent liabilities of the Group and do not form part of borrowings disclosed in the balance sheet. Drawn bank guarantees are also excluded from total borrowings when calculating the Group’s debt covenants. At 30 June 2017 the Group had given $1.1 million in bank guarantees relating to the redevelopment of one of its investment properties. There were no other contingent liabilities or assets at 30 June 2017 or 30 June 2016. 60 |  AVENTUS RETAIL PROPERTY FUND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 30.  Remuneration of auditors During the financial year the following fees were paid or payable for services provided by the auditors of the Fund. 2017 $’000 2016 $’000 240 245 a)  Ernst & Young Audit and other assurance services Audit and review of financial statements Compliance plan audit 20 – Other assurance services 69 210 – 60 89 985 418 1,500 125 225 25 355 Total taxation services 150 580 Total remuneration of Ernst & Young 568 2,080 – 23 568 2,103 Agreed upon procedures engagements Due diligence services Total audit and other assurance services Taxation services Tax compliance services Tax advisory services b) PWC Audit services Compliance plan audit Total auditors’ remuneration 31.  Offsetting financial assets and liabilities Financial assets and liabilities are offset and the net amount reported in the balance sheet where the Group currently has 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. The Group has also entered into arrangements that do not meet the criteria for offsetting but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or the termination of a contract. Agreements with derivative counterparties are based on an ISDA Master Agreement. Under the terms of these arrangements, only where certain credit events occur (such as default), the net position payable/ receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated. At 30 June 2017 and 30 June 2016 there were no financial assets and liabilities that were offset in the balance sheet. ANNUAL REPORT 2017 | 61 32.  Parent entity information As outlined in note 1(b), Aventus Kotara South Unit Trust is deemed to be the parent entity of the Group for financial reporting purposes. a)  Summary financial information The individual financial statements for Aventus Kotara South Unit Trust show the following aggregate amounts: 2017 $m 2016 $m Profit for the year 11.7 16.9 Total comprehensive income for the year 11.7 16.9 30 June 2017 $m 30 June 2016 $m 0.5 0.5 Non-current assets 112.5 107.0 Total assets 113.0 107.5 (0.8) (0.9) Non-current liabilities (56.6) (51.2) Total liabilities (57.4) (52.1) Net assets 55.6 55.4 3.6 3.6 Retained earnings 52.0 51.8 Total equity 55.6 55.4 Statement of comprehensive income Balance sheet Current assets Current liabilities Issued capital b)  Guarantees entered into by the parent entity Aventus Kotara South Unit Trust had not provided any guarantees as at 30 June 2017 or 30 June 2016. c)  Contingent liabilities of the parent entity Aventus Kotara South Unit Trust did not have any contingent liabilities as at 30 June 2017 or 30 June 2016. d) Contractual commitments Aventus Kotara South Unit Trust did not have any contractual commitments as at 30 June 2017 or 30 June 2016. e)  Determining the parent entity financial information The financial information for Aventus Kotara South Unit Trust has been prepared on the same basis as the consolidated financial statements.