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CROMWELL DIVERSIFIED PROPERTY TRUST

ARSN: 102 982 598

ANNUAL FINANCIAL REPORT

30 JUNE 2010

Responsible Entity: Cromwell Property Securities Limited ABN 11 079 147 809, AFSL 238052 Level 19, 200 Mary Street BRISBANE QLD 4000

CROMWELL DIVERSIFIED PROPERTY TRUST FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2010

CONTENTS	PAGE
Directors’ Report	2
Auditor’s Independence Declaration	7
Consolidated Statement of Comprehensive Income	8
Consolidated Statement of Financial Position	9
Consolidated Statement of Changes in Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Financial Statements	12
Directors’ Declaration	43
Audit Report	44

Responsible Entity:

Cromwell Property Securities Limited ABN 11 079 147 809 Level 19, 200 Mary Street BRISBANE QLD 4000 Tel: (07) 3225 7777 Fax: (07) 3225 7788 Web: www.cromwell.com.au

Custodian:

The Trust Company Limited ABN 59 004 037 749 213 St Pauls Terrace BRISBANE QLD 4000 Tel: (07) 3364 9750 Fax: (07) 3252 3513 Web: www.trust.com.au

Share Registry:

Link Market Services Locked Bag A14 SYDNEY STH NSW 1235 Tel: 1300 554 474 Fax: (02) 9287 0303 Web: www.linkmarketservices.com.au

Auditor:

Johnston Rorke Chartered Accountants Level 30, Central Plaza One 345 Queen Street BRISBANE QLD 4000 Tel: (07) 3222 8444 Fax: (07) 3221 7779 Web: www.jr.com.au

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010

The Directors of Cromwell Property Securities Limited, the Responsible Entity of Cromwell Diversified Property Trust (“the Trust”), present their report for the year ended 30 June 2010. The parent entity of Cromwell Property Securities Limited is Cromwell Corporation Limited. The units in the Trust are stapled to shares of Cromwell Corporation Limited, to form the Cromwell Group.

1. Directors & Officers

(a) Directors

The persons who were Directors of the Responsible Entity at any time during the financial year and up to the date of this report were:

(i) Mr Geoffrey Levy (AO) – Chairman
Mr Levy has extensive public company executive and directorship experience and is the former Chief Executive Officer and current Deputy Chairman of Investec Bank (Australia) Ltd. He is currently Chairman of Speciality Fashion Group Limited and MZL Investments Pty Ltd. He was appointed an Officer in the Order of Australia in the Queen’s Birthday Honours List in June 2005.
(ii) Mr Robert Pullar – Non-Executive Director Mr Pullar is a Director of the Brisbane based property development company operating in Australia and Asia, Citimark Properties. He was previously a partner with chartered accounting firm Douglas Heck and Burrell, specialising in property investment, taxation and corporate reorganisation. Mr Pullar is a member of the Institute of Chartered Accountants and a Fellow of the Australian Institute of Company Directors. He is Chairman of Cromwell’s Nomination & Remuneration Committee, Chairman of Cromwell’s Investment Committee, and a member of Cromwell’s Audit & Risk Committee.
(iii) Ms Michelle McKellar – Non-Executive Director Ms McKellar has a wealth of property and portfolio management experience, having held a number of senior positions with Intro International Limited (now Jen Retail Properties) and CB Richard Ellis throughout Asia-Pacific. She is a Senior Member of the Property and Land Economy Institute and runs her private property companies. Ms McKellar is a member of Cromwell’s Nomination & Remuneration, Audit & Risk and Investment Committees.
(iv) Mr David Usasz – Non-Executive Director Mr Usasz has 20 years experience as partner with PricewaterhouseCoopers and has been involved in merger and acquisition advice, accounting and financial consultancy, specialising in corporate re-organisations. He holds a Bachelor of Commerce and is a Fellow of the Institute of Chartered Accountants. Mr Usasz is Chairman of Cromwell’s Audit & Risk Committee and a member of Cromwell’s Nomination & Remuneration and Investment Committees.
(v) Mr Richard Foster – Non-Executive Director Mr Foster is a licensed real estate agent with substantial experience in the real property industry specialising in largescale property acquisition for most of his professional life. He has had substantial input to the growth and development of the business and the Group’s investment products. Mr Foster is a member of Cromwell’s Nomination & Remuneration and Investment Committees.
(vi) Mr Marc Wainer – Non-Executive Director – Appointed January 2010

Mr Wainer has more than 35 years experience in the property industry in South Africa, including founding Investec Property Group, Investec Bank's property division. Marc is Chief Executive Officer and Director of listed South African property group Redefine Properties which he founded, and a director of Redefine International, a listed property investment company which is a substantial securityholder of Cromwell Group. He also is a non-executive director of Hyprop Investments Limited, a South African listed retail property fund.

(vii) Mr Paul Weightman – Chief Executive Officer Mr Weightman practised as a solicitor for more than 20 years, and holds degrees in commerce and law. He has extensive experience in property development and investment, financial structuring, public listings, mergers and acquisitions, revenue matters and joint ventures. Mr Weightman was Cromwell’s Executive Chairman from 1998 until the appointment of Mr Levy in April 2008, and has acted as a Director of companies in the property, energy and retail sectors. Mr Weightman is a member of Cromwell’s Investment Committee.
(viii) Mr Daryl Wilson – Finance Director
Mr Wilson is a member of the Institute of Chartered Accountants, and joined Cromwell in August 1999 in the role of Chief Financial Officer. He has many years experience in senior finance roles. Mr Wilson has led the development of Cromwell’s funds management capabilities, and has primary responsibility for the finance function. He holds a Bachelor of Commerce and a Diploma of Financial Planning. Mr Wilson is a member of Cromwell’s Investment Committee.
(ix) Mr Michael Flax – Alternate Director – Appointed January 2010
Mr Flax was appointed in January 2010 as an alternate director to Mr Marc Wainer.
All Directors of the Responsible Entity are also Directors of Cromwell Corporation Limited.

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010

1. Directors & Officers (Continued)

(b) Company Secretary

Ms Nicole Riethmuller – Appointed November 2008

Ms Riethmuller has 15 years experience as a corporate lawyer having worked primarily in the financial services industry. Prior to joining Cromwell, Nicole was General Counsel at the Queensland Investment Corporation where she headed the in-house legal team. Before that she was a Senior Associate in the Funds Management team at Minter Ellison lawyers in Sydney. Nicole has also been a lawyer and Assistant Company Secretary at Queensland Sugar Corporation. She has a Bachelor of Laws and a Bachelor of Commerce from the University of Queensland.

2. Principal Activity

The principal activity of the Trust and its subsidiaries (“the Group”) during the year was property investment. The Group operates in Australia. There were no significant changes in the nature of the Group’s principal activity during the year.

3. Review of Operations and Results

(a) Financial Performance

The Group reported a profit of $26,706,000 (2009: loss of $94,540,000) for the year. Basic earnings per unit were 3.5 cents (2009: loss of 13.4 cents).

The Directors adjust for certain items included in net profit to arrive at profit from operations as follows:

		2010	2009
		$’000	$’000
Profit from operations(1)		66,285	63,131
Reconciliation to profit/(loss)
Loss	on sale of investment properties	(554)	-
Gain on sale of available for sale financial assets		3,431	-
Fair	value adjustments/write downs:
•	Investment properties	(32,146)	(104,288)
•	Related to equity accounted investments(2)	(2,506)	(20,237)
•	Interest rate derivatives	(1,283)	(22,479)
•	Investments at fair value through profit and loss	836	(3,107)
•	Available-for-sale financial assets	-	(3,663)
Non	cash property investment income/(expenses):
•	Straight-line rental income	852	1,716
•	Lease incentives and lease costs amortised	(5,411)	(4,303)
•	Amortisation of loan transaction costs	(2,484)	(1,882)
•	Net(profit)/loss attributable to non-controllinginterests	(314)	572
Net	profit/(loss) attributable to unitholders of the Trust	26,706	(94,540)

(1) Includes other income of $nil (2009: $6,217,000)

(2) Includes fair value adjustments included in share of profits/(losses) of equity accounted entities

Profit from operations increased by 5% over the prior year.

The Group’s property portfolio continues to provide a strong and stable return with revenue from rentals and recoverable outgoings increasing by 4% despite the sale of three smaller investment properties during the year. Finance costs were 21% lower than in the prior year due to the combined impact of repayment of some borrowings and lower variable interest costs. These same lower variable interest rates also resulted in the Group earning 45% less in interest income than in the prior year.

Profit from operations of $66,285,000 equated to 8.7 cents (2009: 9.0 cents) per unit compared with distributions per unit of 8.0 cents (2009: 9.0 cents).

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010

3. Review of Operations and Results (Continued)

The decrease in earnings per unit can be partly attributed to the issue of 104,750,000 new units in December 2009. These funds provided the Group with additional flexibility in capital management.

(b) Financial Position

Financial Position
	2010	2009
Total assets ($’000)	1,271,529	1,294,175
Net tangible assets attributable to unitholders of the Trust ($’000)	564,396	530,800
Net debt_(1) _($’000)	572,553	660,481
Gearing_(2)_(%)	49%	54%
Units issued (’000)	808,110	703,360
NTAper security	$0.70	$0.75

(1) Borrowings less cash and cash equivalents.

(2) Net debt divided by total assets less cash and cash equivalents.

Valuations of the Group’s investment properties fell during the year by $32,146,000 which was the primary factor in the reduction in NTA per security from $0.75 to $0.70.

Gearing decreased from 54% to 49% following the Group repaying $56,989,000 of debt during the year as well as raising $67,531,000 in additional capital (net of equity issue transaction costs).

4. Significant Changes in the State of Affairs

Changes in the state of affairs of the Group during the year are set out within the financial report.

Other than as set out in the financial report, there have been no other significant changes in the state of affairs of the Group during the year.

5. Subsequent Events

A number of events have occurred since balance date, details of which are disclosed in note 35. No other matter or circumstance has arisen since balance date that has significantly affected or may significantly affect:

the Group’s operations in future years; or
the results of those operations in future years; or
the Group’s state of affairs in future years.

6. Likely Developments and Expected Results of Operations

The activities of the Trust are regulated by the Trust constitution. The Trust’s primary objective is to invest directly or indirectly in commercial, industrial and other non-residential property to provide unitholders with a diversified, stable income stream while maximising long-term value.

The Trust aims to achieve this objective by investing in a portfolio of quality investment-grade property with long-term leases. The Trust diversifies investment risk by investing in property with a range of:

geographical locations, concentrating on Australian capital cities and major regional centres;
sectors, concentrating predominantly on commercial and industrial properties; and
tenants, with preference given to government and substantial publicly listed companies.

The Responsible Entity, on behalf of the Trust, will continue to pursue opportunities which meet the primary objectives of the Trust. Further information on likely developments and expected results from operations has not been included as the Directors believe it would be likely to result in unreasonable prejudice to the Group.

7. Environmental Regulation

The Directors are not aware of any particular and significant environmental regulation under a law of the Commonwealth, State or Territory relevant to the Group.

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010

8. Distributions Paid or Payable

Distributions paid/payable to unitholders of the Trust for the year were $60,641,000 (2009: $63,302,000). Distributions payable at balance date were $16,162,000 (2009: $10,550,000).

9. Options

(a) Units under option

Unissued units of the Trust under option at the date of this report are as follows:

Dategranted	Exercise date	Exerciseprice	Expiry date	Number
18/09/07	19/12/10 – 19/01/11	$1.21	19/01/11	2,811,434
18/09/07	19/12/10 – 19/01/11	$0.00	19/01/11	8,600
06/12/07	07/03/11 – 07/04/11	$1.21	07/04/11	1,082,933
16/12/09	15/12/11 – 15/01/12	$0.20	15/01/12	659,600
08/02/10	07/02/12 – 07/03/12	$0.00	07/03/12	126,859
				4,689,426

No option holder has any right under the options to participate in any other unit or interest issue of the Trust or any other entity, except that the option holders have a matching option for shares in Cromwell Corporation Limited as a result of the Group’s stapling arrangement. Units under option relate to Performance Rights issued by Cromwell Corporation Limited. If the Performance Rights are exercised the Responsible Entity must procure the Trust to issue units to the holder of the Performance Rights.

(b) Units issued on exercise of options

No units have been issued on the exercise of options up to the date of this report.

10. Directors’ Interests

Particulars of Directors’ relevant interests in the units of the Trust or a related entity as at the date of this report are as follows:

	Trust Units	Trust Options
G H Levy	370,000	-
R J Pullar	14,000,000	-
D E Usasz	1,927,580	-
M A McKellar	330,000	-
W R Foster	5,261,765	-
M Wainer	-	-
M Flax	-	-
P L Weightman	15,464,167	738,733
D J Wilson	1,955,744	344,200

The Trust granted the above options to Directors during 2008. No options were granted during 2010 or 2009. Each option is exercisable for one unit in the Trust.

11. Fees to Responsible Entity

Total amounts paid/payable to the Responsible Entity or its associates during the year were $11,120,974 (2009: $12,993,737).

12. Units held by Responsible Entity

Cromwell Corporation Limited, the parent company of the Responsible Entity, held 275,106 (2009: 275,106) units in the Trust throughout the year. Pursuant to Australian Securities & Investments Commission relief, the units are not stapled to shares in Cromwell Corporation Limited.

The Responsible Entity held 1,517,000 (2009: 1,517,000) units in the Cromwell Mary Street Planned Investment, a subsidiary of the Trust, throughout the year. The holding represents approximately 8% (2009: 8%) of the issued units in the Cromwell Mary Street Planned Investment.

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010

13. Indemnifying Officers or Auditors

No indemnities have been given during or since the end of the year, for any person who is or has been an officer or auditor of the Group. No insurance premiums have been paid for out of the assets of the Trust in regards to insurance provided to the Responsible Entity or the auditors of the Group.

14. Issued Units

Units issued in the Trust during the year are set out in note 22 in the accompanying financial report. There were 808,110,040 (2009: 703,360,040) issued units in the Trust at balance date. There were $nil (2009: $nil) redemptions of units in the Trust during the year as part of an on-market buy-back of stapled securities.

15. Value of Scheme Assets

The total carrying value of the Group’s assets as at balance date was approximately $1,271,529,000 (2009: $1,294,175,000). Net assets attributable to unitholders of the Trust were $564,396,000 (2009: $530,800,000), equating to $0.70 per unit (2009: $0.75 per unit).

The Group’s assets are valued in accordance with policies stated in note 1 of the financial statements.

16. Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 accompanies this report.

17. Rounding of Amounts

Pursuant to class order 98/0100, issued by the Australian Securities & Investments Commission, amounts in this report and the financial report have been rounded off to the nearest one thousand dollars unless otherwise indicated.

Signed in accordance with a resolution of the Directors of Cromwell Property Securities Limited.

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P.L. Weightman Director

Dated this 18[th] day of August 2010

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The Directors

Cromwell Property Securities Limited

As Responsible Entity for Cromwell Diversified Property Trust

Level 19 200 Mary Street BRISBANE QLD 4000

Auditor’s Independence Declaration

As lead auditor for the audit of Cromwell Diversified Property Trust for the year ended 30 June 2010, I declare that, to the best of my knowledge and belief, there have been:

(i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Cromwell Diversified Property Trust and the entities it controlled during the period.

JOHNSTON RORKE

Chartered Accountants

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RCN WALKER Partner

Brisbane, Queensland 18 August, 2010

Liability limited by a scheme approved under Professional Standards Legislation

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

	Note	2010	2009
		$’000	$’000
Revenue and other income
Rental income and recoverable outgoings		117,974	113,386
Distributions received		428	658
Interest received		6,152	11,226
Other revenue		127	44
Share of profits of equity accounted entities	15	3,858	-
Gain on sale of available-for-sale financial assets	23	3,431	-
Fair value net gain from:
• Investments at fair value through profit and loss		836	-
Other income	7	-	6,217
Total revenue and other income		132,806	131,531
Expenses
Property expenses and outgoings		21,663	19,613
Management and administration costs		8,988	9,601
Finance costs:	8
• Interest		38,668	48,781
• Amortisation of loan transaction costs		2,484	1,882
Share of losses of equity accounted entities	15	-	13,229
Fair value net loss from:
• Interest rate derivatives		1,283	22,479
• Investment properties	14	32,146	104,288
• Investments at fair value through profit and loss		-	3,107
Loss on sale of investment properties	6	554	-
Decrease in recoverable amount:
• Available-for-sale financial assets	23	-	3,663
Total Expenses		105,786	226,643
Profit/(loss)		27,020	(95,112)
Other comprehensive income
Available-for-sale financial assets	23	-	868
Other comprehensive income		-	868
Total comprehensive income/(loss)		27,020	(94,244)
Profit/(loss) is attributable to:
Trust unitholders	24	26,706	(94,540)
Non-controlling interests	25	314	(572)
Profit/(loss)		27,020	(95,112)
Total comprehensive income/(loss) is attributable to:
Trust unitholders		26,706	(93,672)
Non-controlling interests		314	(572)
Total comprehensive income/(loss)		27,020	(94,244)
Basic/diluted earnings/(loss) per unit (cents)	9	3.5¢	(13.4¢)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

	Note	2010	2009
		$’000	$’000
Current assets
Cash and cash equivalents	10	93,033	60,724
Trade and other receivables	11	2,508	19,406
Derivative financial instruments	12	1,353	-
Other current assets	13	1,413	2,112
Total current assets		98,307	82,242
Non-current assets
Trade and other receivables	11	48,360	30,000
Investment properties	14	1,064,100	1,117,175
Investments in jointly controlled entity/associate	15	56,775	58,292
Available-for-sale financial assets	16	-	3,547
Investments at fair value throughprofit and loss	17	3,987	2,919
Total non-current assets		1,173,222	1,211,933
Total assets		1,271,529	1,294,175
Current liabilities
Trade and other payables	18	9,073	14,189
Borrowings	19	29,232	81,179
Distributions payable	20	16,162	10,550
Derivative financial instruments	12	3,626	3,112
Other current liabilities	21	6,618	8,131
Total current liabilities		64,711	117,161
Non-current liabilities
Borrowings	19	636,354	640,026
Total non-current liabilities		636,354	640,026
Total liabilities		701,065	757,187
Net assets		570,464	536,988
Equity
Contributed equity	22	599,660	532,129
Reserves	23	-	-
Retained earnings/(accumulated losses)	24	(35,264)	(1,329)
Equity attributable to unitholders of the Trust		564,396	530,800
Non-controllinginterests	25	6,068	6,188
Total equity		570,464	536,988

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

	Attributable to unitholders of the Trust	Attributable to unitholders of the Trust
Note	Contributed equity General reserve Available- for-sale reserve Retained earnings/ (accumulated losses) $’000 $’000 $’000 $’000	Total Non- controlling interests $’000 $’000	Total equity $’000
Balance at 1 July 2009	532,129 - - (1,329)	530,800 6,188	536,988
Total comprehensive income for theyear	- - - 26,706	26,706 314	27,020
Transactions with unitholders Contributions of equity, net of transaction costs 22/25 Distributionspaid/payable 26/25	67,531 - - - - - - (60,641)	67,531 23 (60,641) (457)	67,554 (61,098)
Balance at 30 June 2010	599,660 - - (35,264)	564,396 6,068	570,464
Balance at 1 July 2008	532,129 131,834 (868) 24,679	687,774 6,468	694,242
Total comprehensive income/(loss) for theyear	- - 868 (94,540)	(93,672) (572)	(94,244)
Transactions with unitholders Transfers (from)/to reserves 23 Contributions of equity, net of transaction costs 25 Distributionspaid/payable 26	- (131,834) - 131,834 - - - - - - - (63,302)	- - - 802 (63,302) (510)	- 802 (63,812)
Balance at 30 June 2009	532,129 - - (1,329)	530,800 6,188	536,988

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

Note	2010 $’000 2009 $’000
Cash flows from operating activities Receipts in course of operations Payments in course of operations Interest received Distributions received Finance costs	132,826 128,986 (41,088) (36,808) 4,649 11,509 7,225 8,738 (39,141) (47,933)
Net cash inflow from operating activities 27	64,471 64,492
Cash flows from investing activities Payments for investment properties Proceeds from sale of investment properties Payments for property, plant and equipment Proceeds from other financial assets Proceeds from sale of available-for-sale financial assets Payments for investments at fair value through profit and loss Proceeds from sale of investments at fair value through profit and loss Loans made to related entities Repayments of loans made to related entities Refund of transaction costs on merger	(11,081) (15,480) 21,574 - - (37,390) - 25,700 6,978 - (2,599) (2,411) 2,367 1,500 (33,736) (23,100) 31,976 1,500 - 5,284
Net cash inflow/(outflow) from investing activities	15,479 (44,397)
Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Payment for derivative financial instruments Payment of loan transaction costs Proceeds from issue of units – controlled entity Proceeds from issue of units Equity issue transaction costs Payment of distributions	- 538,100 (56,989) (433,374) (1,606) - (1,114) (4,787) 23 802 67,847 - (316) - (55,486) (63,817)
Net cash inflow/(outflow) from financing activities	(47,641) 36,924
Net increase in cash and cash equivalents Cash and cash equivalents at 1 July	32,309 57,019 60,724 3,705
Cash and cash equivalents at 30 June 10	93,033 60,724

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements relate to the consolidated entity consisting of the Cromwell Diversified Property Trust (‘the Trust”) and its subsidiaries (“the Group”). As a result of changes to the Corporations Act 2001 separate financial statements of Cromwell Diversified Property Trust as an individual entity are no longer presented. Limited financial information for the Cromwell Diversified Property Trust, as an individual entity, is disclosed in note 29 and has been prepared on the same basis as the consolidated financial statements.

(a) Basis of Preparation

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 .

(i) Compliance with IFRS

The financial report complies with the International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board.

(ii) Historical cost convention

The financial report is prepared on the historical cost basis except for the following:

investment properties are measured at fair value
derivative financial instruments are measured at fair value
available-for-sale financial assets and investments at fair value through profit and loss are measured at fair value.
The methods used to measure fair values are discussed below.

(iii) Functional and presentation currency

The financial report is presented in Australian dollars which is the the functional currency of the Group.

(iv) Critical accounting estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are disclosed in note 2.

(v) Changes in accounting policies

The Group has adopted the following new and revised Australian Accounting Standards issued by the AASB which are mandatory to apply to the current period.

Presentation of financial statements

AASB 101 prescribes the contents and structure of the financial statements. Changes reflected in this financial report include:

The replacement of the income statement with a statement of comprehensive income. Items of income and expense not recognised in profit or loss are now disclosed as components of “other comprehensive income”. In this regard, such items are no longer reflected as equity movements in the statement of changes in equity;
The adoption of the single statement approach to the presentation of the statement of comprehensive income; and
Other statements are renamed in accordance with the Standard.

Operating Segments

AASB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. Operating segments are now reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the chief executive officer of the Responsible Entity.

This has resulted in no change to Segment reporting for the current period due the Group operating in only one segment. The Group has applied AASB 8 Operating Segments from 1 July 2009.

Investment property

AASB 140 (as revised) requires property that is being constructed or developed for future use as investment property, be accounted for under AASB 140 Investment Property . Such property was previously accounted for under AASB 116 Property, Plant and Equipment under the cost model. Under AASB 140 Investment Property , property under construction is measured under the fair value model unless fair value cannot be reliably determined, in which case, it is measured at cost until either its fair value becomes reliably determinable or construction is completed (whichever is earlier).

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies (Continued)

(a) Basis of Preparation (continued)

AASB 7 Financial Instruments: Disclosures

Amendments to AASB 7 Financial Instruments: Disclosures requires disclosure of financial instruments measured at fair value to be based on a three-level fair value hierarchy that reflects the significance of the inputs in such fair value measurements. Refer to note 5(d).

The Group has applied these changes from 1 July 2009. Investment properties under construction previously classified as property, plant and equipment and measured at cost and are now measured at fair value and classified as investment properties. On adoption of the revised standard at 1 July 2009 the Group had no properties under construction recognised as property, plant and equipment.

(b) Principles of Consolidation

Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries and the results of all subsidiaries for the year then ended.

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity, so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(o)).

Inter-entity transactions, balances and unrealised gains on transactions between Group entities are eliminated. Unrealised losses are eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and statement of financial position respectively.

Investments in subsidiaries are accounted for using the cost method in the separate financial statements of the Trust. A list of subsidiaries appears in note 30 to the consolidated financial statements.

Associates

Associates are entities over which the Group has significant influence but not control, generally accompanying a holding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the Group financial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the profit and loss and its share of postacquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends or distributions receivable from associates are recognised in the Group’s financial statements as a reduction of the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Joint ventures

The interest in a joint venture entity is accounted for in the Group financial statements using the equity method. Under the equity method, the share of the profits or losses of the joint venture entity is recognised in the profit and loss, and the share of movements in reserves is recognised in reserves.

Profits or losses on transactions establishing the joint venture entity and transactions with the joint venture are eliminated to the extent of the Group’s ownership interest until such time as they are realised by the joint venture entity on consumption or sale, unless they relate to an unrealised loss that provides evidence of the impairment of an asset transferred.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies (Continued)

(c) Revenue Recognition

Rental revenue

Rental revenue from investment property is recognised on a straight-line basis over the lease term. Rental revenue not received at reporting date is reflected in the statement of financial position as a receivable or if paid in advance, as rent in advance (unearned income). Lease incentives granted are considered an integral part of the total rental revenue and are recognised as a reduction in rental income over the term of the lease, on a straight-line basis. Contingent rents based on the future amount of a factor that changes other than with the passage of time, including turnover rents and CPI linked rental increases are only recognised when contractually due.

Interest revenue

Interest revenue is recognised as it accrues using the effective interest method.

Gain or loss on disposal of assets

Gain or loss on disposal of assets is calculated as the difference between the carrying amount of the asset at the date of disposal and the net proceeds from disposal and is included in the profit and loss in the year of disposal. Where revenue is obtained from the sale of properties, it is recognised when the significant risks and rewards have transferred to the buyer, which is normally when legal title passes to the buyer.

(d) Income Tax

Under current income tax legislation the Trust is not liable to pay tax provided its taxable income and taxable realised capital gains are distributed to unitholders. The liability for capital gains tax that may arise if the properties were sold is not accounted for in this report.

(e) Impairment of Assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

(f) Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and 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.

(g) Trade and Other Receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Receivables relating to operating leases of investment properties are due on the first day of each month, payable in advance. Other receivables are usually due for settlement no more than 90 days from the date of recognition.

Collectability of trade and other receivables is reviewed on an ongoing basis. Receivables which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. The amount of the provision is recognised in profit or loss.

Finance lease receivables are recognised at the amount equal to the aggregate of the present value of the minimum lease payments and the present value of any unguaranteed residual expected to accrue to the benefit of the Group at the end of the lease term. The asset is reduced by the principal component of lease receipts. The interest component is credited to profit or loss.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies (Continued)

(h) Investment Properties

Investment property is property which is held either to earn rental income or for capital appreciation or both. Investment property also includes properties that are under construction for future use as investment properties. Initially, investment property is measured at cost including transaction costs. The investment property is subsequently measured at fair value, with any change therein recognised in profit or loss. As part of the process of determining fair value an external, independent valuer, having an appropriate recognised professional qualification and recent experience in the location and category of property being valued, values individual properties at least every two years on a rotation basis or on a more regular basis if considered appropriate and as determined by management in accordance with the valuation policy of the Group. In addition, the Group has utilised internal valuation processes for determining fair value during the period.

These valuation processes are taken into consideration when determining the fair value of the investment properties. The fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgably, prudently and without compulsion.

The valuations are prepared by considering the capitalisation of net income and the discounting of future cash flows to their present value. These methods incorporate assumptions of future rental income and costs, appropriate capitalisation and discount rates and also consider market evidence of transaction prices for similar investment properties.

Valuations reflect, where appropriate;

the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness;
the allocation of maintenance and other operating cost responsibilities between lessor and lessee; and
the remaining economic life of the property.

Further information on assumptions underlying management’s assessment of fair value is contained in note 2.

(i) Investments and Other Financial Assets

The Group classifies its investments as either financial assets at fair value through profit or loss or available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading which are acquired principally for the purpose of selling in the short-term with the intention of making a profit. Derivatives are also categorised as held for trading unless they are designated as hedges. Financial assets at fair value through profit or loss also includes financial assets which upon initial recognition are designated as such.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of investments are recognised on trade date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the profit and loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, including interest and dividend income, are presented in profit or loss in the period in which they arise. Changes in the fair value of securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains or losses from investment securities.

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is reclassified from equity and recognised in profit or loss as a reclassification adjustment. Impairment losses recognised in profit or loss on equity instruments classified as available for sale are not reversed through profit or loss.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies (Continued)

(j) Trade and Other Payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost. These amounts generally represent liabilities for goods and services provided to the Group prior to the end of the year which are unpaid. The amounts are usually unsecured and paid within 30-60 days of recognition.

(k) Borrowings and Borrowing Costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest rate method. Under this method fees, costs, discounts and premiums directly related to the financial liability are spread over its expected life. 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 balance date.

Borrowing costs incurred for construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for intended use or sale. Other borrowing costs are expensed. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset the amount of borrowing costs capitalised is the actual borrowing costs incurred on that borrowing net of any interest earned on those borrowings. Where funds are borrowed generally the capitalisation rate used to determine the amount of borrowing costs to capitalise is the weighted average interest rate applicable to the Group’s outstanding borrowings during the year.

(l) Earnings Per Unit

Basic earnings per unit is calculated as net profit/(loss) attributable to unitholders divided by the weighted average number of ordinary units outstanding during the financial year.

Diluted earnings per unit is calculated as net profit/(loss) attributable to unitholders divided by the weighted average number of ordinary units and dilutive potential ordinary units outstanding during the year.

(m) Fair Value Estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quotes from financial institutions are used to determine fair value of certain instruments, including certain derivatives. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

The carrying value less impairment provision of trade and other receivables and payables are assumed to approximate their fair values due to their short-term nature.

(n) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
for trade and other receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of trade and other receivables or payables.

FOR THE YEAR ENDED 30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies (Continued)

(o) 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 fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. 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. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired are recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, 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.

(p) Derivative Financial Instruments

The Group is exposed to changes in interest rates and uses interest rate derivatives to hedge these risks. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at balance date. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. The Group enters into interest rate swap agreements to convert certain variable interest rate borrowings to fixed interest rates or vice versa. The derivatives are entered into with the objective of hedging the risk of adverse interest rate fluctuations. While the Group has determined that these arrangements are economically effective, they have not satisfied the documentation, designation and effectiveness tests required by accounting standards. As a result, they do not qualify for hedge accounting and gains or losses arising from changes in fair value are recognised immediately in profit or loss.

(q) Lease Incentives

Prospective lessees may be offered incentives as an inducement to enter into non-cancellable operating leases. These incentives may take various forms including up front cash payments, rent free periods, or a contribution to certain lessee costs such as fit out costs or relocation costs. They are recognised as an asset in the statement of financial position as a component of the carrying amount of investment property and amortised on a straight line basis over the lease period as a reduction of rental income.

(r) Initial Direct Leasing Costs

Initial direct leasing costs incurred by the Group in negotiating and arranging operating leases are recognised as an asset in the statement of financial position as a component of the carrying amount of investment property and are amortised as an expense on a straight line basis over the lease term.

(s) Repairs and Maintenance

Repairs and maintenance costs and minor renewals are charged as expenses when incurred.

(t) Comparatives

Where necessary, comparative figures have been adjusted to conform with changes in presentation in this financial report.

(u) Rounding of Amounts

The Group is of a kind referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with the Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

FOR THE YEAR ENDED 30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies (Continued)

(v) New Accounting Standards and Interpretations

Relevant accounting standards and interpretations that have recently been issued or amended but are not yet effective and have not been adopted for the year are as follows:

	Application	Application
Standard/Interpretation	date of	date for the
	standard	Group
AASB 9_Financial Instruments_and consequential amendments to other accounting
standards resultingfrom its issue	1 Jan 2013	1 Jul 2013
AASB 2009-5_Further Amendments to Australian Accounting Standards arising from the_
Annual Improvements Project	1 Jan 2013	1 Jul 2010
AASB 2009-8_Amendments to Australian Accounting Standards – Group Cash-settled_
Share-based Payment Transactions	1 Jan 2010	1 Jul 2010
AASB 2010-3_Amendments to Australian Accounting Standards arising from the Annual_
Improvements Project	1 Jul 2010	1 Jul 2010
AASB 2010-4_Amendments to Australian Accounting Standards arising from the Annual_
Improvements Project	1 Jan 2011	1 Jul 2011

The Directors anticipate that the adoption of these Standards and Interpretations in future years may have the following impacts:

AASB 9 – This revised standard provides guidance on the classification and measurement of financial assets, which is the first phase of a multi-phase project to replace AASB 139 Financial Instruments: Recognition and Measurement . Under the new guidance, a financial asset is to be measured at amortised cost only if it is held within a business model whose objective is to collect contractual cash flows and the contractual terms of the asset give rise on specified dates to cash flows that are payments solely of principal and interest (on the principal amount outstanding). All other financial assets are to be measured at fair value. Changes in the fair value of investments in equity securities that are not part of a trading activity may be reported directly in equity but upon realisation, those accumulated changes in value are not recycled to the statement of comprehensive income. Changes in the fair value of all other financial assets carried at fair value are reported in the statement of comprehensive income. The Group is yet to assess the impact of the new standard.

AASB 2009-5 – These amendments affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments are not expected to have a significant impact on the financial statements.

AASB 2009-8 – Introduces amendments to incorporate the requirements previously included in Interpretation 8 and Interpretation 11. The amendments require an entity that receives goods and services in share-based payment arrangements to account for those goods or services no matter which entity in the Group settles the transaction and no matter whether the transaction is settled in shares or cash. The amendments are not expected to have a significant impact on the financial statements.

AASB 2010-3 and AASB 2010-4 – These amendments introduce various changes to IFRS. The directors have not yet assessed the impact of the amendments, if any.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

2. Critical accounting estimates

Estimates of fair value of investment properties

The Group has investment properties with a carrying amount of approximately $1,064,100,000 (2009: $1,117,175,000) representing estimated fair value at balance date. In addition, the carrying amount of the Group’s investments in jointly controlled entity/associate of approximately $56,775,000 (2009: $58,292,000) also reflects underlying investment properties of the jointly controlled entity/associate carried at fair value. These investment properties represent a significant proportion of the total assets of the Group.

Fair value is determined within a range of reasonable estimates utilising both capitalisation of net market income and discounted future cash flow methodologies and comparing the results to market sales evidence.

The best evidence of fair value is considered to be current prices in an active market for similar properties, however global economic and financial turmoil has had an impact on many classes of real estate, including commercial real estate in Australia. The most significant impact has been a reduction in the availability of capital (debt and equity) for real estate assets. This reduction in available capital has led to falls in asset values and a relatively low level of transactions in most markets, although there have been signs in recent times of more stability in pricing and some increases in transactional levels. Where sufficient market information is not available, or to supplement this information, management considers other relevant information including:

Current prices for properties of a different nature, condition or location, adjusted to reflect those differences;
Recent prices of similar properties in a less active market, with adjustments to reflect changes in economic conditions or other factors;
Capitalised income calculations based on an assessment of current net market income based on current leases in place for that property or other similar properties, a capitalisation rate taking into account market evidence for similar properties and adjustment for short-term vacancy or lease expiries, incentive costs and capital expenditure requirements; and
Discounted cash flow forecasts including estimates of future cash flows based on current leases in place for that property, historical operating expenses, reasonable estimates of current and future rents and operating expenses based on external and internal assessments and using discount rates that appropriately reflect the degree of uncertainty and timing inherent in current and future cash flows.

The fair values adopted for investment properties have been supported by a combination of independent external valuations and detailed internal valuations, which are considered to reflect market conditions at balance date.

Key factors which impact assessments of value at each balance date include capitalisation rates, vacancy rates and weighted average lease terms. Details of these factors at each balance date were as follows:

% Value of Portfolio by Sector 2010 2009	Weighted Average Cap Rate 2010 2009	Weighted Average Lease Term 2010 2009	Occupancy 2010 2009
Commercial 85% 86% Industrial 11% 11% Retail/Entertainment 4% 3%	8.47% 8.23% 9.58% 9.07% 9.27% 10.45%	5.1yrs 5.4 yrs 2.8yrs 3.1 yrs 4.3yrs 5.1yrs	94.8% 99.6% 100.0% 100.0% 100.0% 100.0%
Total 100% 100%	8.62% 8.40%	4.8yrs 5.1 yrs	95.6% 99.8%

Estimates of fair value take into account factors and market conditions evident at balance date. Uncertainty and changes in global market conditions in the future may impact fair values in the future.

Estimates of fair value of interest rate derivatives

The fair value of interest rate derivatives has been determined using a pricing model based on discounted cash flow analysis and incorporating assumptions supported by market data at balance date including market expectations of future interest rates and discount rates, and taking into account estimates prepared by external counterparties. While certain derivatives may not be quoted on an active market, management have determined a value for those derivatives using market data adjusted for any specific features of the derivatives. All counterparties to interest rate derivatives are Australian financial institutions.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

3. Segment Information

The Group has one reportable segment. It holds properties throughout Australia, except Northern Territory. Revenue is derived from rentals and associated recoverable outgoings. The consolidated entity’s properties are leased on a commercial basis incorporating varying lease terms and conditions. These include the lease period, renewal options, periodic rent and, where applicable, indexation based on CPI, fixed and/or market reviews.

Revenue of approximately $42,486,000 (2009: $38,276,000) is derived from a single external customer.

4. Capital Risk Management

The Group’s capital management strategy seeks to maximise unitholder value through optimising the level and use of capital resources and the mix of debt and equity funding.

The Group’s capital management objectives are to:

ensure that Group entities comply with capital and distribution requirements of their constitutions and/or trust deeds;
ensure sufficient capital resources to support the Group’s operational requirements;
continue to support the Group’s credit worthiness; and
safeguard the Group’s ability to continue as a going concern.

The Group monitors the adequacy of its capital requirements, cost of capital and gearing (i.e. debt/equity mix) as part of its overall strategic plan. The Group’s capital structure is continuously reviewed to ensure:

sufficient funds and financing facilities are available, on a cost effective basis, to implement the Group’s property investment strategies; and
distributions to members are made within the stated distribution policy.

The Group is able to alter its capital mix by:

issuing new units;
activating its distribution reinvestment plan;
adjusting the amount of distributions paid;
activating its security buyback program; and
selling assets.

The Group also protects its equity in assets by taking out insurance cover with creditworthy insurers.

The Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by adjusted assets. Net debt is calculated as total borrowings less cash and cash equivalents. Adjusted assets are calculated as total assets less cash and cash equivalents, restricted cash and intangible assets. The gearing ratios at each balance date were as follows:

	2010	2009
	$’000	$’000
Total borrowings	665,586	721,205
Less: cash and cash equivalents	93,033	60,724
Net debt	572,553	660,481
Total assets	1,271,529	1,294,175
Less: cash and cash equivalents	93,033	60,724
Adjusted assets	1,178,496	1,233,451
Gearing ratio	49%	54%

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

5. Financial Risk Management

The Group’s activities expose it to a variety of financial risks; credit risk, liquidity risk and market risk (interest rate risk and price risk). The Group’s overall risk management program focuses on managing these risks and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as interest rate derivatives to hedge certain risk exposures. The Group seeks to deal only with creditworthy counterparties. Liquidity risk is monitored through the use of rolling future cash flow forecasts.

The Group’s management of treasury activities is centralised and governed by policies approved by the Directors who monitor the operating compliance and performance as required. The Group has policies for overall risk management, as well as policies covering specific areas such as identifying risk exposure, analysing and deciding upon strategies performance measurement, the segregation of duties and other controls around the treasury and cash management functions.

The Group holds the following financial instruments:

	2010	2009
	$’000	$’000
Financial Assets
Cash and cash equivalents(1)	93,033	60,724
Trade and other receivables(1)	50,868	49,406
Derivative financial instruments(2)	1,353	-
Available-for-sale financial assets	-	3,547
Investments at fair value throughprofit and loss(3)	3,987	2,919
Total financial assets	149,241	116,596
Financial Liabilities
Trade and other payables(4)	9,073	14,189
Derivative financial instruments(2)	3,626	3,112
Borrowings(4)	665,586	721,205
Distributionspayable(4)	16,162	10,550
Total financial liabilities	694,447	749,056

(1) Loans and receivables

(2) At fair value – held for trading

(3) At fair value - designated

(4) At amortised cost

The carrying value of loans and receivables and financial liabilities at amortised cost are assumed to approximate their fair value due to either their short term nature or their terms and conditions including interest receivable/payable at variable rates.

(a) Credit Risk

Credit risk is the risk that a counterparty will default on its contractual obligations under a financial instrument and result in a financial loss to the Group. The Group has exposure to credit risk on all financial assets included in their statement of financial position except available-for-sale financial assets and investments at fair value through profit and loss.

The Group manages this risk by:

establishing credit limits for customers and managing exposure to individual entities;
monitoring the credit quality of all financial assets in order to identify any potential adverse changes in credit quality;
derivative counterparties and cash transactions, when utilised, are transacted with high credit quality financial institutions;
providing loans as an investment in associates where the Group is comfortable with the underlying property exposure;
regularly monitoring loans and receivables on an ongoing basis; and
regularly monitoring the performance of associates on an ongoing basis.

The maximum exposure to credit risk at balance date is the carrying amount of financial assets recognised in the statement of financial position of the Group plus undrawn loan commitments described in note 19. The Group holds no significant collateral as security. There are no significant financial assets that have had renegotiated terms that would otherwise have been past due or impaired.

Cash is held with Australian financial institutions. Interest rate derivative counterparties are all Australian financial institutions.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

5. Financial Risk Management (Continued)

(a) Credit Risk (continued)

The ageing analysis of receivables past due at balance date is as follows:

	2010 $’000 2009 $’000
1 to 3 months 3 to 6 months Over 6 months*	1,267 1,358 352 - 625 -
	2,244 1,358

Of the amounts above $1,369,000 (2009: $nil) relates to the Cromwell Property Fund (refer note 11)

The Group had the following concentrations of credit risk at balance date:

the Group has amounts owing from Cromwell Property Fund of $31,369,000 (2009: $30,000,000) (refer note 11).
the Group has amounts owing from Cromwell Corporation Limited of $18,360,000 (2009: $16,600,000) (refer notes 11 and 32).

(b) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash reserves and finance facilities to meet the ongoing operational requirements of the business. It is the Group’s policy to maintain sufficient funds in cash and cash equivalents to meet expected near term operational requirements. The Group prepares and monitors rolling forecasts of liquidity requirements on the basis of expected cash flow. The Group monitors the maturity profile of borrowings and puts in place strategies designed to ensure that all maturing borrowings are refinanced in the required timeframes.

The current weighted average debt maturity of the Group is 1.9 years (2009: 2.8 years).

Contractual maturity of financial liabilities (borrowings and payables), including interest thereon, is as follows:

	2010	2009
	$’000	$’000
Due within one year	95,605	139,060
Due between one and five years	679,484	597,481
Due after fiveyears	2,470	121,679
	777,559	858,220

Information on borrowings, the maturity profile of borrowings and the effective weighted average interest rate by maturity periods is set out in note 19.

(c) Market Risk

(i) Price risk

The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified on the statement of financial position as available-for-sale financial assets and investments at fair value through profit and loss. The Group is not exposed to commodity price risk. The majority of the Group’s equity investments are publicly traded and are included in the ASX All Ordinaries index.

Group sensitivity

Based on the financial instruments held at balance date, had the ASX All Ordinaries index increased/decreased by 20% (2009: 20%) with all other variables held constant and all the Group’s equity instruments moved in correlation with the index, the impact on the Group’s profit and equity for the year would have been $797,000 (2009: $1,294,000) higher/lower.

(ii) Interest rate risk

The Group’s interest-rate risk primarily arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group’s policy is to effectively maintain hedging arrangements on not less than 50% of its borrowings. At balance date, 75% (2009: 37%) of the Group’s borrowings were effectively hedged.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

5. Financial Risk Management (Continued)

(c) Market Risk (continued)

The Group manages its cash flow interest-rate risk by using interest rate derivatives. Such interest rate derivatives have the economic effect of converting borrowings from floating rates to fixed or a limited range of rates. Generally, the Group raises long term borrowings at floating rates and hedges a portion of them into fixed or capped rates. Under the interest-rate derivatives, the Group agrees with other counter parties to exchange, at specified intervals (usually 30 days), the difference between contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.

The fixed or limited interest rates range between 4.75% and 5.95% (2009: 4.88% and 5.95%) and the variable rates are generally based on the 30 day bank bill swap bid rate which at balance date was 4.80% (2009: 3.20%). At balance date, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:

	2010	2009
	$’000	$’000
Less than 1 year	184,661	71,060
1-2 years	200,000	76,745
2-3 years	-	-
3-4 years	-	-
4-5 years	-	-
Greater than 5years	118,180	118,180
	502,841	265,985

The Group’s interest rate derivatives do not meet the accounting requirements to qualify for hedge accounting treatment. Gains or losses arising from changes in fair value have been reflected in the profit and loss.

Group sensitivity

At balance date, if interest rates for all relevant time periods had changed by +/- 100 basis points from the year end rates with all other variables held constant, profit would have been $6,525,000 higher/lower (2009 – change of 100 bps: $3,693,000 higher/lower), mainly as a result of increases/decreases in the fair value of interest rate derivatives. Equity would have been $6,525,000 higher/lower (2009: $3,693,000 higher/lower) mainly as a result of increases/decreases in the fair value of interest rate derivatives.

(d) Fair Value Estimates

The table below analyses financial instruments carried at fair value, by the source of measurement inputs. The different levels have been defined as follows:

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 (as prices) or indirectly (derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

	Level 1	Level 2	Level 3	Total
For theyear ended 30 June 2010	$’000	$’000	$’000	$’000
Financial Assets
Derivative financial instruments	-	1,353	-	1,353
Investments at fair value throughprofit and loss	3,987	-	-	3,987
	3,987	1,353	-	5,340
Financial Liabilities
Derivative financial instruments	-	3,626	-	3,626
	-	3,626	-	3,626

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

6. 7. 8.	2010 $’000 2009 $’000
	Loss on Sale of Investment Properties Net proceeds from sale of investment properties 21,574 - Carryingvalue of investmentproperties sold and other costs of sale (22,128) -
	Loss on sale of investment properties (554) -
	Other Income Refund of transaction costs on merger - 5,284 Other - 933
	Other income - 6,217
	Finance Costs Total interest 38,668 50,363 Less: interest capitalised(1) - (1,582)
	Interest expense 38,668 48,781 Amortisation of loan transaction costs 2,484 1,882
	Finance costs 41,152 50,663

(1) Interest capitalised related to the Synergy investment property which was completed in November 2008 and transferred to investment property during construction.

9. Earnings per Unit

	2010	2009
Basic/diluted earnings/(loss) per unit (cents)	3.5¢	(13.4¢)
Earnings/(loss) used to calculate basic and diluted earnings per unit – Profit/(loss) attributable to Trust unitholders ($’000)	26,706	(94,540)
	Number of	Number of
	Units	Units
Weighted average number of ordinary units used in calculating basic/diluted earnings per unit (number of units)	757,600,451	703,360,040
Effect of dilutive securities:
- Director and employee options	309,857	-
Weighted average number of ordinary units and potential ordinary units used in calculating diluted earnings/(loss) per unit	757,910,308	703,360,040

Options granted under the Performance Rights Plan are considered to be potential ordinary units and have been included in the determination of diluted earnings/(loss) per unit to the extent to which they are dilutive. The options have not been included in the determination of basic earnings/(loss) per unit.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

	2010	2009
	$’000	$’000
Cash and Cash Equivalents
Cash at bank	28,033	60,724
Deposits	65,000	-
Cash and cash equivalents	93,033	60,724

10. Cash and Cash Equivalents

Cash at bank is earning variable interest at market rates with a weighted average of 4.52% at balance date (2009: 3.94%). The deposits earn interest at market rates which was 6.01% at balance date and have a maturity of 6 months.

11. Trade and Other Receivables

Current Assets
Trade debtors	1,139	1,356
Other receivables - associates	1,369	1,448
Loans:
• Amounts due from Cromwell Corporation Limited	-	16,600
	2,508	19,406
Non-current Assets
Loans:
• Amounts due from Cromwell Corporation Limited	18,360	-
• Associates	30,000	30,000
	48,360	30,000

Trade debtors include amounts owing by tenants of the Group’s investment properties. Trade and other receivables are usually non-interest bearing, unsecured and generally payable on no more than 30 day terms.

(a) Past due but not impaired receivables

At balance date, trade and other receivables of $2,244,000 (2009: $1,358,000) for the Group were past due but not impaired. Of this $875,000 relates to a number of tenants for whom there is no recent history of default. Other receivables of $1,369,000 (2009: $nil) relate to the Cromwell Property Fund, being interest on a loan receivable.

(b) Impaired receivables

No receivables have been determined to be impaired.

12. Derivative Financial Instruments

Current assets
Interest rate derivatives – at fair value	1,353	-
Current liabilities
Interest rate derivatives – at fair value	3,626	3,112
Other Current Assets
Prepayments	1,413	2,112

13. Other Current Assets

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

		2010	2009
		$’000	$’000
14.	Investment Properties
	Investment properties at fair value	1,064,100	1,117,175
(a)	Movement in investment properties
	Balance at 1 July	1,117,175	1,120,716
	Additions at cost
	• Transfer from property plant and equipment	-	79,545
	• Transaction costs	-	55
	• Capital expenditure	3,542	10,197
	Disposals	(22,128)	-
	Straight-lining rentals	852	1,716
	Lease costs and incentives	2,216	13,537
	Amortisation of lease costs and incentives	(5,411)	(4,303)
	Net loss from fair value adjustments	(32,146)	(104,288)
	Balance at 30 June	1,064,100	1,117,175
(b)	Amounts recognised in profit and loss for investment properties
	Rental and recoverable outgoings	117,974	113,386
	Directpropertyexpenses and outgoings	(21,663)	(19,613)
		96,311	93,773

(c) Assets pledged as security

Borrowings (refer note 19) are secured by fixed and floating charges over each investment property plus charges over any building document, lease document, performance bond and bank guarantee in addition to a real property mortgage over each property.

(d) Leases as a lessor

The investment properties are generally leased to tenants on long-term operating leases with rentals payable monthly. Minimum lease payments under the non-cancellable operating leases of the investment properties not recognised in the financial statements are receivable as follows:

Within one year	96,247	93,841
Later than one year but not later than five years	305,681	310,616
Later than fiveyears	100,066	164,426
	501,994	568,883

(e) Valuation basis

Independent valuations of properties were carried out by qualified valuers with relevant experience in the types of property being valued. Independent valuations are mostly carried out at least annually but no later than every two years. The value of investment properties is measured on a fair value basis, being the amounts for which the properties could be exchanged between willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases. In assessing the value of the investment properties, the independent valuers have considered both discounted cash flow, and capitalisation methodologies. In addition, the Group has utilised similar internal valuation processes for determining fair value where independent valuations are not obtained. Further information on assumptions underlying management’s assessment of fair value is contained in note 2.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

14. Investment Properties (Continued)

(f) Details of investment properties

	Title	Acquisition date	Acquisition price	Most recent independent	Independent valuation amount	Independent valuation amount	Carrying	amount	Fair value	adjustment
				valuation date	2010	2009	2010	2009	2010	2009
			$’000		$’000	$’000	$’000	$’000	$’000	$’000
Properties held by Trust:
NQX Distribution Centre, QLD	Freehold	Feb 2003	17,778	Jun 2010	25,750	24,000	25,750	23,400	2,513	(3,847)
Henry Waymouth Centre, SA	Freehold	Apr 2003	30,420	Nov 2009	35,000	40,000	33,500	38,250	(4,752)	(3,785)
Hellman Distribution Centre, VIC	Freehold	Jun 2003	9,700	SOLD	-	8,425	-	8,425	-	(2,736)
Brooklyn Woolstore, VIC	Freehold	Jun 2004	34,000	Nov 2009	35,550	36,500	37,000	37,300	(220)	(3,788)
Village Cinemas, VIC	Freehold	Jun 2004	8,900	Dec 2009	11,000	10,300	11,000	9,800	1,200	(1,201)
Vodafone Call Centre, TAS	Freehold	Jun 2004	15,900	Nov 2009	16,400	12,500	16,400	12,500	3,102	(5,399)
Hobart Cinema Centre, TAS	Freehold	Jun 2004	16,000	Dec 2009	15,600	14,400	15,750	13,000	2,765	(2,821)
Village Cinemas, TAS	Freehold	Jun 2004	3,500	SOLD	-	3,150	-	3,000	329	(139)
Regent Cinema Centre, NSW	Freehold	Jun 2004	9,900	Dec 2009	12,700	11,900	12,700	10,900	1,799	(1,126)
78 Mallard Way, WA	Freehold	Jun 2004	7,600	Dec 2009	8,400	10,000	8,400	9,800	(1,577)	(2,677)
Elders Woolstore, SA	Freehold	Jun 2004	10,900	Nov 2009	13,900	14,100	13,900	14,100	(184)	(1,340)
700 Collins Street, VIC	Freehold	Dec 2004	133,000	Nov 2009	156,000	167,750	160,000	162,000	(1,382)	(21,648)
Kmart Distribution Centre, VIC	Freehold	Feb 2005	41,000	Dec 2009	33,500	39,000	32,000	37,500	(5,526)	(6,952)
19 National Circuit, ACT	Leasehold	July 2005	35,530	Jun 2010	36,000	33,500	36,000	33,500	2,234	(3,268)
AWB Building, VIC	Freehold	Dec 2005	88,000	Jun 2010	94,500	102,800	94,500	102,800	(8,068)	(7,031)
101 Grenfell St, SA	Freehold	Jan 2006	30,375	Jun 2010	37,200	36,500	37,200	36,500	136	(5,492)
475 Victoria Av, NSW	Freehold	Mar 2006	102,650	Jun 2010	127,500	135,000	127,500	135,000	(5,529)	(7,829)
Synergy, QLD	Freehold	Nov 2008	85,727	Nov 2009	82,000	83,500	78,000	82,700	(4,720)	(8,260)
200 Mary St, QLD	Freehold	Jun 2001	29,250	Apr 2009	85,500	90,000	85,500	90,000	(5,108)	(10,637)
Terrace Office Park, QLD	Freehold	Jun 1999	13,600	Dec 2009	28,100	33,500	27,500	32,000	(5,351)	(4,552)
Sun Microsystems Building, ACT	Leasehold	Nov 2001	23,550	Jun 2010	34,000	34,000	34,000	34,000	(183)	(360)
Quadrant Building, ACT	Leasehold	Jun 2000	5,800	SOLD	-	9,700	-	9,700	-	(702)
Scrivener Buildings, ACT	Leasehold	Jun 2000	10,750	Jun 2010	10,000	11,000	10,000	11,000	(960)	(1,787)
TuggeranongOffice Park,ACT	Leasehold	Jun 2008	166,025	Jun 2010	167,500	170,000	167,500	170,000	(2,664)	3,089
Total investment properties			929,855		1,066,100	1,131,525	1,064,100	1,117,175	(32,146)	(104,288)

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

15. Investments in Jointly Controlled Entity and Associate

The Group has investments in a jointly controlled entity, Cromwell TGA Planned Investment (“TGA”) and an associate, Cromwell Property Fund (“CPF”). These entities were formed in Australia and their principal activity is property investment. The investments are accounted for in the consolidated financial statements using the equity method of accounting.

Investments in equity accounted entities are initially accounted for (recognised) at cost. The carrying amount is reduced where the fair value of the underlying interest, primarily representing an indirect interest in a share of an investment property, is less than cost or the equity accounted carrying amount.

The reporting dates of the jointly controlled entity and associate are the same as for the Group. The proportion of voting power held equates to the proportion of ownership interest held except for TGA for which both the Group and the CPF must consent to the strategic, financial and operating decisions. The jointly controlled entity and associate do not recognise income tax expense or liabilities given their nature.

TGA

The Group holds a 67% (2009: 67%) interest in TGA. The remaining 33% was acquired by CPF during the 2008 year from an external investor. The Group exercises joint control over TGA, but neither the Group nor CPF has control in its own right, irrespective of their ownership interest, as both the Group and CPF must consent to the strategic, financial and operating decisions relating to TGA. TGA has no borrowings and no material liabilities. Since balance date the Group has acquired CPF’s one-third interest in TGA – refer note 35(a).

CPF

At balance date the Group held 18% (2009; 18%) of the issued units of CPF. The Group is considered to have significant influence over CPF due to it being the single largest investor in CPF, with the next largest investor representing 1.3% (2009: 1.3%) of the issued units of CPF.

	Ownership	Interest
	2010	2009	2010	2009
Investments accounted for using the equity method:	%	%	$’000	$’000
TGA – jointly controlled entity	67	67	49,872	51,850
CPF – associate	18	18	6,903	6,442
			56,775	58,292

(a) Movement in carrying amount of Investments in Jointly Controlled Entity and Associate

	CPF	TGA	Total
	$’000	$’000	$’000
2010
Balance at 1 July 2009	6,442	51,850	58,292
Share of profit/(loss)(1)	636	3,222	3,858
Distributions received	(175)	(5,200)	(5,375)
Balance at 30 June 2010	6,903	49,872	56,775
2009
Balance at 1 July 2008	22,024	58,568	80,592
Share of profit/(loss)(1)	(13,332)	103	(13,229)
Distributions received	(2,250)	(6,821)	(9,071)
Balance at 30 June 2009	6,442	51,850	58,292

(1) Share of profit/(loss) includes fair value gain/(loss) on investment properties and interest rate derivatives where applicable.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

15. Investments in Jointly Controlled Entity and Associate (Continued)

(b) Share of assets and liabilities in Jointly Controlled Entity and Associate

(b)	Share of assets and liabilities in Jointly Controlled Entity and Associate
(c)	2010 2009 CPF TGA CPF TGA $’000 $’000 $’000 $’000
	Assets Current assets 20,202 124 813 1,619 Non-current assets Investment properties – at fair value 40,924 50,000 56,265 51,667 Other 4,788 - 11,124 -
	Total non-current assets 45,712 50,000 67,389 51,667
	Total assets 65,914 50,124 68,202 53,286
	Liabilities Current liabilities Borrowings (57,859) - (52,405) - Other (1,152) (252) (9,355) (1,436)
	Total current liabilities (59,011) (252) (61,760) (1,436)
	Total liabilities (59,011) (252) (61,760) (1,436)
	Net assets 6,903 49,872 6,442 51,850
	Share of revenue, expenses and results of Jointly Controlled Entity and Associate Revenue(1) 7,777 5,303 7,788 5,497 Expenses(1) (7,141) (2,081) (21,120) (5,394)
	Share of profit/(loss) 636 3,222 (13,332) 103

(1) Includes share of fair value adjustment to investment properties and interest rate derivatives where applicable.

		2010	2009
		$’000	$’000
16.	Available-for-sale Financial Assets
	Listed equity securities at fair value	-	3,547
17.	Investments at fair value through profit and loss
	Listed equity securities at fair value	3,987	2,919

These investments are designated at fair value through profit and loss. Gains and losses are shown in profit or loss.

18. Trade and Other Payables

Trade payables and accruals	5,802	5,465
Other payables	2,986	8,309
Amounts payable to Cromwell Corporation Limited and its subsidiaries	114	234
Tenant securitydeposits	171	181
Trade and other payables	9,073	14,189

Trade and other payables are generally unsecured, non-interest bearing and paid in cash within 30-60 days of recognition. Amounts payable to Cromwell Corporation Limited and its subsidiaries relate to ordinary operating activities of the Group. The amounts are unsecured, non-interest bearing and payable in cash at call.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

		2010	2009
		$’000	$’000
19.	Borrowings
	Current
	Loans – financial institutions	29,232	81,179
	Non-Current
	Loans – financial institutions	636,354	640,026

Loans shown above are net of transaction costs which are amortised over the term of the loan.

(a) Borrowing Details

Details of borrowings of the Group at balance date are set out below:

Facility	Note	Secured	Maturity Date	Facility 2010 $’000	Utilised 2010 $’000	Facility 2009 $’000	Utilised 2009 $’000
Bank Loan – Syndicate Finance	(i)	Yes	Oct 2011	430,893	430,893	452,000	452,000
Bank loan – Tuggeranong (Tranche 1)	(ii)	Yes	June 2015	107,916	107,916	107,916	107,916
Bank loan – Tuggeranong (Tranche 2)	(ii)	Yes	June 2013	9,961	9,961	13,282	13,282
Bank loan – Synergy	(iii)	Yes	July 2011	46,800	46,800	77,861	77,861
Bank loan - TGA	(iv)	Yes	Mar 2011	25,946	25,946	25,946	25,946
Bank loan – MaryStreet	(v)	Yes	Aug2011	47,000	47,000	49,500	48,500
Total facilities				668,516	668,516	726,505	725,505
Less unamortised transaction costs					(2,930)		(4,300)
Total borrowings					665,586		721,205

(i) Bank Loan – Syndicate Finance

The Syndicate finance facility of $430,893,000 (June 2009: $452,000,000) is secured by first registered mortgages over the majority of the investment properties held by the Group and a registered floating charge over the assets of the Trust. Interest is payable monthly in arrears at variable rates based on a margin over the 30 day BBSY rate. An amount of $367,925,000 (June 2009: $238,985,000) was effectively fixed at balance date through interest rate swap arrangements which expire between July 2010 and September 2017 (June 2009: expired between July 2009 and September 2017). Repayments of $21,107,000 (June 2009: $nil) were made during the year from the net proceeds of the sale of investment properties.

(ii) Bank Loan - Tuggeranong

The Group has a $117,877,000 (June 2009: $121,198,000) loan in relation to its investment in Tuggeranong Office Park. The loan is secured by a first registered mortgage over the investment property and a registered floating charge over the assets of Tuggeranong Trust. The first tranche of the loan matures in June 2015. The second tranche matures in June 2013 with $830,000 repayable each quarter until June 2013. The loan bears interest at a variable rate based on a margin over the 30 day BBSY rate. An amount of $107,916,000 (Tranche 1) was fixed at balance date (June 2009: $nil) through interest rate swap arrangements which expire in July 2010. Repayments of $3,321,000 (June 2009: $3,321,000) were made during the year.

(iii) Bank Loan - Synergy

This facility was extended in July 2009 and split into two Tranches. Tranche A ($47,100,000) is repayable in July 2011 and Tranche B ($30,761,000) was repayable by July 2010. Repayments of $31,061,000, representing the full amount of Tranche B i.e. $30,761,000 (June 2009:$nil) and $300,000 relating Tranche A (June 2009: $nil), were made during the year. The loan is secured by a registered floating charge over the assets of the Group specific to the Synergy investment property. The loan bears interest at a variable rate based on a margin over the 30 day BBSY rate.

(iv) Bank Loan - TGA

The Group has a $25,946,000 (June 2009: $25,946,000) loan in relation to its investment (67%) in Cromwell TGA Planned Investment. The loan is secured by a first registered mortgage over the TGA property and a registered floating charge over the assets of Cromwell TGA Planned Investment. These assets are reflected in the carrying value of the investment in jointly controlled entity. The loan bears interest at a variable rate based on a margin over the 30 day BBSY rate. The loan was effectively 100% fixed at balance date through interest rate swap arrangements to August 2010 (June 2009: 100%).

FOR THE YEAR ENDED 30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

19. Borrowings (Continued)

(v) Bank Loan – Mary Street

The Group has a $47,000,000 (June 2009: $49,500,000) facility secured over the 200 Mary Street investment property. The loan has been drawn down in two tranches, Tranche 1 for $20,000,000 and Tranche 2 for $28,500,000, with both tranches repayable by August 2011. Repayments of $1,500,000, relating Tranche 2 (June 2009: $nil), were made during the year. The loan bears interest at a variable rate based on a margin over the 30 day BBSY rate.

(b) Maturity Profile

Maturity profile of the principal amounts of current and non-current borrowings together with estimated interest thereon:

	2010	2009
	$’000	$’000
Due within one year	69,182	109,042
Due between one and five years	674,203	584,342
Due after fiveyears	-	112,524
	743,385	805,908

(c) Unused Finance Facilities

The Group had $nil (2009: $1,000,000) in unused finance facilities at balance date.

(d) Interest rate maturity profile

Interest Rate Derivatives

The Group manages its cash flow interest-rate risk by using floating-to-fixed interest rate derivatives. Such interest rate derivatives have the economic effect of converting borrowings from floating rates to fixed or limited range of rates. Generally, the Group raises long term borrowings at floating rates and swaps a portion of them into a fixed or limited range of rates.

The Group’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods at balance date is set out in the following table.

Fixed interest rate maturing in

	Floating
	interest	1 year or	Over 1 to	Over 2 to 3	Over 3 to 4	Over 4 to 5	Over 5
	rate	less	2 years	years	years	years	years	Total
	$’000	$’000	$’000	$’000	$’000	$’000	$’000	$’000
2010
Financial institution loans	665,586	-	-	-	-	-	-	665,586
Interest rate derivatives
(1)	(502,841)	184,661	200,000	-	-	-	118,180	-
	162,745	184,661	200,000	-	-	-	118,180	665,586
Weighted average interest
rate %	5.53%	5.43%	4.75%				5.94%
2009
Financial institution loans	721,205	-	-	-	-	-	-	721,205
Interest rate derivatives
(1)	(265,985)	71,060	76,745	-	-	-	118,180	-
	455,220	71,060	76,745	-	-	-	118,180	721,205
Weighted average interest
rate %	4.78%	5.06%	5.56%	-	-	-	5.94%

(1) notional principal amounts

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

20. Distributions Payable Distributionspayable		2010 $’000 2009 $’000
		16,162 10,555

Distributions payable relate to June quarter distributions declared in June and payable in August of each year.

21.	Other Current Liabilities
	Unearned income	6,618	8,131

Unearned income primarily comprises rent paid in advance.

22. Contributed Equity (a) Units

Consolidated Balance at 1 July Issue of units – 24 Dec 2009 Unit issue transaction costs	2010	2009
	No. of Units ’000 $’000 703,360 532,129 104,750 67,847 - (316)	No. of Units ’000 $’000 703,360 532,129 - - - -
Balance at 30 June	808,110 599,660	703,360 532,129

Units in the Trust entitle the unitholder to participate in distributions and proceeds on the winding up of the Trust in proportion to the number of units held.

On a show of hands each unitholder present at a meeting in person or by proxy is entitled to one vote, and on a poll each member has one vote for each dollar of the value of the total units they have in the Trust.

Units in the Trust are stapled with shares in Cromwell Corporation Limited and listed on the Australian Securities Exchange (ASX) as the Cromwell Group. Units on issue are fully paid.

There is no authorised capital nor par value.

(b) Options

At balance date, 4,689,426 (2009: 4,192,117) options, each exercisable for one unit, were on issue. The options, together with matching options for shares in Cromwell Corporation Limited, are exercisable, in total, for either $1.21, $0.20 or $0.00 and expire between 19 January 2011 and 7 March 2013. Options relate to Performance Rights issued by Cromwell Corporation Limited. If the Performance Rights are exercised the Responsible Entity must procure the Trust to issue units to the holder of the Performance Rights.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

	2010	2009
	$’000	$’000
Reserves
General reserve	-	-
Available-for-sale financial assets revaluation reserve	-	-
	-	-
Movements in reserves
General reserve
Balance at 1 July	-	131,834
Transfer to retained earnings/(accumulated losses)	-	(131,834)
Balance at 30 June	-	-

23. Reserves

Following the change in the constitution of the Trust on 1 June 2007 the net assets attributable to unitholders were transferred from liabilities to equity. Amounts not originally relating to the issue of units were transferred to a general reserve.

Available-for-sale financial assets revaluation reserve
Balance at 1 July	-	(868)
Increase/(decrease) in fair value of available-for-sale financial assets	3,431	(3,663)
Transfers to statement of comprehensive income:
• Impairment loss	-	3,663
• Realised gain	(3,431)	-
• Other	-	868
Balance at 30 June	-	-

Changes in the fair value of investments classified as available-for-sale are taken to the available-for-sale financial assets revaluation reserve. Amounts are recognised in profit or loss when the associated assets are disposed/sold or impaired.

24. Retained Earnings/(Accumulated Losses)

Retained earnings/(accumulated losses)	(35,264)	(1,329)
Movements
Balance at 1 July	(1,329)	24,679
Net profit/(loss)	26,706	(94,540)
Transfer from general reserve (note 23)	-	131,834
Distributions(note 26)	(60,641)	(63,302)
Balance at 30 June	(35,264)	(1,329)

25. Non-controlling Interests

Non-controlling interests	6,068	6,188
Movements
Balance at 1 July	6,188	6,468
Units issued by subsidiary	23	802
Net profit/(loss)	314	(572)
Distributions	(457)	(510)
Balance at 30 June	6,068	6,188

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

26. Distributions

	$’000	Centsper Unit
2010
Interim – paid 16 November 2009	14,067	2.0
Interim – paid 15 February 2010	14,250	2.0
Interim – paid 14 May 2010	16,162	2.0
Interim –payable 31 August 2010	16,162	2.0
Distributions – unitholders of Trust	60,641	8.0
2009
Interim – paid 14 November 2008	17,584	2.5
Interim – paid 16 February 2009	17,584	2.5
Interim – paid 15 May 2009	17,584	2.5
Interim –paid 31 August 2009	10,550	1.5
Distributions – unitholders of Trust	63,302	9.0

Distributions paid in cash, payable at balance date or satisfied by the issue of units under the distribution reinvestment plan during the past two years were as follows:

plan during the past two years were as follows:
	2010	2009
	$’000	$’000
Paid in cash_(1)_	55,029	63,817
Satisfied by issue of units_(2)_	-	-
Payable at balance date	16,162	10,550
	71,191	74,367

(1) Includes June distributions from prior year paid in August.

(2) Pursuant to Distribution Reinvestment Plan.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

27. Cash Flow Information

(a) Reconciliation of profit/(loss) to net cash provided by operating activities

	2010	2009
	$’000	$’000
Net profit/(loss)	27,020	(95,112)
Fair value net loss/(gain) from:
• Investment properties	32,146	104,288
• Interest rate derivatives	1,283	22,479
• Investments at fair value through profit and loss	(836)	3,107
(Increase)/decrease to recoverable amount:
• Available-for-sale financial asset	(3,431)	3,663
Amortisation of loan transaction costs	2,484	1,882
Amortisation of lease costs and incentives	5,411	4,303
Straight-lining rental income	(852)	(1,716)
Share of profits of associate and jointly controlled entity, net of distributions	1,517	22,300
Loss on sale of investment properties	554	-
Refund of transaction costs on merger	-	(5,284)
Changes in operating assets and liabilities
(Increase)/decrease in:
• Trade and other debtors	298	(451)
• Prepayments	699	(362)
Increase/(decrease) in:
• Trade and other payables	(309)	578
• Unearned income	(1,513)	4,817
Net cash provided by operating activities	64,471	64,492

(b) Finance Facilities

Refer to note 19 for details of unused finance facilities.

28. Remuneration of Auditor

During the year the following fees were paid or payable for services provided by the auditor of the Group.

	2010	2009
	$	$
Audit services
Auditors of the Group (Johnston Rorke)
Auditing or reviewing financial reports	161,000	187,500
Auditingcomplianceplans	30,000	27,500
	191,000	215,000

There were no fees paid for other services.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

29. Parent Entity Financial Information

As at and throughout the financial year ending 30 June 2010 the parent entity of the Group was Cromwell Diversified Property Trust.

(a) Summary financial information

The individual financial statements for the parent entity show the following aggregations:


	2010	2009
	$’000	$’000
Results
Profit/(loss) for theyear	39,326	(83,868)
Total comprehensive income/(loss) for theyear	39,326	(83,868)
Financial position
Current assets	204,645	190,230
Total assets	1,207,412	1,217,203
Current liabilities	47,884	113,192
Total liabilities	684,238	740,245
Net Assets	523,174	476,958
Total equity
Contributed equity	599,660	532,129
Retained earnings	(76,486)	(55,171)
Total equity	523,174	476,958

(b) Commitments for capital expenditure

As at balance date the parent entity had commitments of $24,750,000 (2009: $nil) in relation to capital expenditure contracted for but not recognised as liabilities.

(c) Guarantees provided

During the years ended 2009 and 2010 the parent entity had not provided any guarantees to entities it controlled.

(d) Contingent liabilities

The parent entity had no contingent liabilities at year end (2009: $nil).

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

30. Investments in Controlled Entities

The Trust’s investments in controlled entities are shown below, all of which are domiciled in Australia.

Name	Equity	Holding
	2010	2009
	%	%
Cromwell CMBS Pty Ltd	100%	100%
Cromwell Loan Note Pty Ltd	100%	100%
Cromwell Holding Trust No 1	100%	100%
Cromwell Holding Trust No 2	100%	100%
Cromwell Holding Trust No 4	100%	100%
Terrace Office Park Property Trust/Planned Investment	100%	100%
Cromwell Mary Street Property Trust/Planned Investment	92%	92%
Cromwell Goulburn Street Property Trust/Planned Investment	100%	100%
Cromwell Northbourne Planned Investment	100%	100%
Cromwell Planned Investment #3	100%	100%
Tuggeranong Head Trust	100%	100%
Tuggeranong Trust	100%	100%
Cromwell Phoenix Property Securities Fund	83%	83%
CDPT Finance Pty Ltd	100%	100%
EXM Head Trust	100%	-
EXM Trust	100%	-
Mascot Head Trust	100%	-
Mascot Trust	100%	-

EXM Trust and EXM Head Trust

The EXM Trust and EXM Head Trust were formed during the financial year to facilitate the post balance date purchase of 321 Exhibition Street, Melbourne, VIC (“the Exhibition Property”) from the Cromwell Property Fund - refer note 35.

Mascot Trust and Mascot Head Trust

The Mascot Trust and Mascot Head Trust were formed during the financial year to facilitate the post balance date purchase of 203 Coward Street, Mascot, NSW (“the Qantas Property”) - refer note 35.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2010

31. Key Management Personnel

(a) Key management personnel

The following persons were Directors and other key management personnel of the Responsible Entity from 1 July 2008 to 30 June 2010, unless otherwise stated:

Non-executive Directors

Geoffrey H Levy (AO) Robert J Pullar Michelle A McKellar David E Usasz W Richard Foster Marc Wainer (appointed 29 January 2010) Michael Flax (alternate director for Marc Wainer; appointed 29 January 2010)

Executive Directors Paul L Weightman Daryl J Wilson Company Secretary Nicole Riethmuller (appointed 11 November 2008)

There were no key management personnel employed by the Trust or its subsidiaries at any time during the past two years.

(b) Remuneration

Key management personnel (KMP) are defined in AASB 124 Related Party Disclosures as those having authority and responsibility for planning, directing and controlling the activities of the entity. The Responsible Entity meets the definition of KMP as it has this authority in relation to the activities of the Group. These powers have not been delegated by the Responsible Entity to any other person. Accordingly, the Directors and other employees of the Responsible Entity are not considered to be KMP as they do not have sufficient individual authority and responsibility for planning, directing and controlling the activities of the Group. Details of management fees charged to the Group by the Responsible Entity and its related entities are included below. No payments were made by the Group or by the Responsible Entity on behalf of the Group to any of the Directors or other KMP of the Responsible Entity during the financial year.

(c) Loans

The Directors and other KMP of the Responsible Entity, including their personally related parties, had no loans payable to or receivable from the Trust and its subsidiaries during the past two years.

(d) Unitholdings

Particulars of Directors’ and other KMP of the Responsible Entity relevant interests in the units of the Trust are as follows:

follows:
Name	Balance	Net purchases/	Balance	Net purchases/	Balance
	30 June 2008	(sales)	30 June 2009	(sales)	30 June 2010
G H Levy(1)	-	370,000	370,000	-	370,000
P L Weightman	15,464,167	-	15,464,167	-	15,464,167
R J Pullar	14,000,000	-	14,000,000	-	14,000,000
D E Usasz	1,747,602	129,978	1,877,580	50,000	1,927,580
M A McKellar	120,000	180,000	300,000	30,000	330,000
W R Foster	5,349,598	-	5,349,598	(87,833)	5,261,765
M Wainer(2)	-	-	-	-	-
M Flax(2)	-	-	-	-	-
D J Wilson	2,215,006	-	2,215,006	(259,262)	1,955,744
N E Riethmuller	-	-	-	-	-
	38,896,373	679,978	39,576,351	(267,095)	39,309,256

(1) Mr GH Levy is a Director of Investec Equity Investments Limited, which is the manager of the Investec Australian Equity Fund, which owns 1,213,595 (2009: 862,995) stapled securities in the Cromwell Group. Mr GH Levy has indirect beneficial ownership of the securities as a unitholder of the Fund.

(2) Mr M Wainer and Mr M Flax are directors of Redefine International Plc which indirectly owns Redefine Australia Investments Limited, which owns 104,750,000 stapled securities in the Cromwell Group.

No units were received by the above persons as compensation or on exercise of options during the past two years.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

31. Key Management Personnel (Continued)

(e) Option holdings

Particulars of Directors’ and other KMP of the Responsible Entity in substance options over units of the Trust are as follows:

Name	Balance at 1 July	Granted as compensation	Exercised	Forfeited	Balance at 30 June	Balance at 30 June
					Vested	Not Vested
2010
GH Levy	-	-	-	-	-	-
PL Weightman	738,733	-	-	-	-	738,733
RJ Pullar	-	-	-	-	-	-
MA McKellar	-	-	-	-	-	-
DE Usasz	-	-	-	-	-	-
M Wainer	-	-	-	-	-	-
M Flax	-	-	-	-	-	-
DJ Wilson	344,200	-	-	-	-	344,200
WR Foster	-	-	-	-	-	-
NE Riethmuller	-	-	-	-	-	-
	1,082,933	-	-	-	-	1,082,933
2009
GH Levy	-	-	-	-	-	-
PL Weightman	1,108,100	-	-	(369,367)	-	738,733
RJ Pullar	-	-	-	-	-	-
MA McKellar	-	-	-	-	-	-
DE Usasz	-	-	-	-	-	-
DJ Wilson	516,300	-	-	(172,100)	-	344,200
WR Foster	-	-	-	-	-	-
NE Riethmuller	-	-	-	-	-	-
	1,853,600	-	-	(770,667)	-	1,082,933

Units under option relate to Performance Rights issued by Cromwell Corporation Limited. If the Performance Rights are exercised the Responsible Entity must procure the Trust to issue units to the holder of the Performance Rights.

(f) Other transactions with key management personnel of the responsible entity

The Trust entered into a development agreement in 2007 with Citimark Properties Limited ("Citimark"), a company related to Mr. Robert Pullar, who is a Director of the Responsible Entity. Under the agreement, Citimark developed the Synergy investment property in Kelvin Grove, Brisbane for the Trust in accordance with specified terms, and to agreed standards. Construction was completed in November 2008. Under the development agreement, the Trust reimbursed Citimark for the costs of the project, and paid fees contingent upon the outcomes of certain events, mostly based on total construction costs and leasing outcomes. Citimark provided a rental guarantee to the Trust over the entire property for 18 months from the date construction was complete. During the 2009 financial year the Trust paid $49,706,942 to Citimark for development and construction costs and received $4,286,354 as settlement of the rental guarantee.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

32. Other Related Party Transactions

(a) Parent Entity

The ultimate parent entity of the Group is Cromwell Diversified Property Trust. Cromwell Diversified Property Trust (“the Trust”) is stapled to Cromwell Corporation Limited. At stapling, Cromwell Corporation Limited was identified as the acquirer as required by the relevant accounting standards. Cromwell Corporation Limited is also the parent entity of Cromwell Property Securities Limited, the Responsible Entity of the Trust.

(b) Transactions with Cromwell Corporation Limited and its subsidiaries (including the Responsible Entity)

		2010	2009
		$	$
(i)	Amounts paid/payable
	Expense
	• Funds management fees	7,724,054	8,248,700
	• Property management fees	2,415,597	2,061,663
	• Project management fees	193,912	138,088
	• Accounting fees	251,352	-
	Investment properties
	• Leasing commissions	536,059	517,286
	Borrowings
	• Finance arranging fees	-	2,028,000
	Distributions_(1)_	424,336	499,329
(ii)	Amounts received/receivable
	Revenue
	• Interest income	912,824	484,469
	• Rental income and recoverable outgoings	5,859,823	864,632
	Aggregate amount payable to responsible entity and associates at balance
	date (included in trade and other payables)	113,891	234,352
	Aggregate amount receivable from the responsible entity and associates at
	balance date(included in trade and other receivables)	18,759,513	16,600,000

(1) Distributions paid/payable mostly relate to the Responsible Entity’s 8% holding in Cromwell Mary Street Planned Investment.

The Responsible Entity holds 1,517,000 (2009: 1,517,000) units in a subsidiary of the Trust, Cromwell Mary Street Planned Investment.

(iii) Loan to Cromwell Corporation Limited

During the year the Trust advanced $9,260,000 (2009: $18,100,000) to Cromwell Corporation Limited (“CCL”) under the loan facility between the Trust and CCL and received repayments of $7,500,000 (2009: $1,500,000). The loan is unsecured, repayable on 1 July 2011 and earns interest at variable rates being the 30 day BBSW rate plus a margin of 2%.

(c) Transactions with Associates

(i) Loans - CPF

The Trust advanced $nil (2009: $5,000,000) to Cromwell Property Fund (“CPF”) during the year under the loan facility between the Trust and CPF. At 30 June 2010 the amount receivable from CPF was $30,000,000 (2009: $30,000,000). The loan is unsecured, repayable on 31 July 2010 and earns interest at a floating rate plus margin of 0.7% (capped at 8.00%) which was 5.43% (2009: 3.91%) at balance date. Since balance date, CPF has repaid $10,200,000 of the loan and repayment of the balance ($19,800,000) has been extended to 30 June 2012 – see note 35(a).

(ii) Other Transactions

The Group received distributions of $5,375,000 (2009: $9,071,000) from its jointly controlled entity and associate.

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

33. Commitments

(a) Commitments for Capital Expenditure

Commitments for capital expenditure for the Exhibition property contracted for at the reporting date but not recognised as a liability amounted to $24,750,000 (2009: $nil).

(b) Loan Facility

The Trust has provided a loan facility to Cromwell Corporation Limited of $30,000,000 (2009: $30,000,000) of which $18,360,000 (2009: $16,600,000) had been drawn at balance date.

34. Contingent Liabilities

The Directors are not aware of any material contingent liabilities of the Group.

35. Subsequent Events

Since balance date up to the date of this report the following transactions have occurred:

(a) Acquisition of Investment Properties from CPF

During the 2010 financial year the Group announced a proposal to acquire certain assets from Cromwell Property Fund (“CPF”). Prior to balance date, in accordance with the proposal, subsidiaries of the Trust entered into a purchase contract to acquire 321 Exhibition Street, Melbourne (“the Exhibition Property”) and a unit sale deed to acquire one third of the units the Group did not already own in the TGA Planned Investment, which owns the TGA Complex, Canberra (“the TGA Property”). At balance date the proposal was subject to satisfaction of certain conditions, including approval of unitholders of the Trust. The expected impact of these acquisitions on the Group was set out in an Explanatory Memorandum lodged with ASX on 8 June 2010.

Subsequent to balance date, unitholders in the Trust approved the proposal and settlement was completed in July 2010. The acquisition of the Exhibition Property for $90,200,000 was funded by way of repayment of $10,200,000 of the loan receivable from CPF and a new debt facility for $80,000,000. The loan facility to CPF was extended as part of the proposal, and the balance of $19,800,000 now expires in June 2012. The acquisition of TGA was effected by way of an assignment of CPF’s debt facility of $12,973,000 secured against the TGA property and payment of $12,065,000 to acquire one-third interest in the TGA Planned Investment, the owner of the TGA property.

Details of the purchase consideration for the one-third interest in TGA Planned Investment are set out below. The Trust already held a two-thirds interest in the TGA Planned Investment which was previously accounted for using the equity method – see note 15.

method – see note 15.
	$’000
Purchase consideration:
Cash paid	12,065
Assignment of debt	12,973
Investment alreadyheld in TGA – see note 15	49,872
	74,910
Assets and liabilities recognised
Cash	103
Prepayments	20
Investment property	75,000
Trade and otherpayables	(213)
	74,910

(b) Equity raising

On 12 July 2010 the Cromwell Group, comprising the Trust and Cromwell Corporation Limited, announced an institutional placement (“Placement”) to raise up to $80,000,000 and a rights issue (“Rights Issue”) to raise a further amount up to a combined total of $120,000,000. The Placement was completed by the Cromwell Group on 14 July 2010 with a total of $54,000,000 subscribed at $0.75 per stapled security. As a result of the Placement, an additional 72,000,000 units, at $0.694 per unit, were issued by the Trust for a total of $49,966,200 and 72,000,000 shares at $0.056 per share, were issued by Cromwell Corporation Limited for a total of $4,033,800. The Rights Issue was completed by the Group on 18 August 2010 with approximately $13,720,000 subscribed at $0.72 per stapled security..

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

35. Subsequent Events (continued)

As a result of the Rights Issue, an additional 19,056,000 units are expected to be issued by the Trust at $0.67 per unit, on 19 August 2010. All new securities issued under the Placement and Rights Issue rank equally with existing securities for the September quarter distribution.

Placement participants are also able to subscribe for approximately 68,927,000 additional stapled securities, being the shortfall from the Rights Issue not taken up by Rights Holders, at $0.72 per stapled security, for up to 10 weeks after close of the Rights Issue. No additional units have been issued to Placement participants up to the date of this report.

(c) Acquisition of Qantas Headquarters, Mascot, NSW

Cromwell has entered into a binding agreement to acquire the investment property known as Qantas Headquarters in Mascot, NSW for approximately $143,000,000, and expects to complete the acquisition, utilising the proceeds of the capital raising in conjunction with a new debt facility of $84 million, on 20 August 2010. In addition, Cromwell has agreed to fund lease incentives totalling approximately $25,600,000 payable under a new 10 year lease recently agreed with Qantas. These costs are expected to be payable over the next 12-18 months as underlying works are completed in conjunction with the tenants requirements.

(d) Interest rate hedging

The Group entered into additional interest rate derivatives subsequent to balance date. The new contracts comprised:

An interest rate swap for $80 million at 5.00% for three years commencing August 2010; and
An interest rate swap for $64 million at 5.00% for three years commencing September 2010.

In addition, the Group had entered into an interest rate derivative prior to balance date, which had an effective commencement date of July 2010. This derivative comprised an interest rate cap over $300 million, with interest capped at each 30 day period at the lower of 5.00% or the prevailing bank bill swap bid rate at the time.

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ DECLARATION

In the opinion of the Directors of the Responsible Entity, Cromwell Property Securities Limited:

(a) the attached financial statements and notes are in accordance with the Corporations Act 2001, including:
(i) complying with Australian Accounting Standards and the Corporations Regulations 2001;and
(ii) as stated in note 1, the consolidated financial statements also compy with International Financial Reporting Standards; and
(iii) giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance, as represented by the results of its operations, changes in equity and its cash flows, for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors of Cromwell Property Securities Limited.

==> picture [166 x 37] intentionally omitted <==

P.L. Weightman

Director

Dated this 18[th] day of August 2010

Independent Auditor’s Report to the Members of Cromwell Diversified Property Trust

Report on the Financial Report

==> picture [141 x 120] intentionally omitted <==

We have audited the accompanying financial report of Cromwell Diversified Property Trust, which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Cromwell Diversified Property Trust (the Trust) and the consolidated entity comprising the Trust and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of Cromwell Property Securities Limited (the responsible entity) are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditor's opinion

In our opinion:

(a) the financial report of Cromwell Diversified Property Trust is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of their performance for the year ended on that date; and
(ii) complying with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.

JOHNSTON RORKE

Chartered Accountants

RCN WALKER

Partner Brisbane, Queensland 18 August 2010

Liability limited by a scheme approved under Professional Standards Legislation

AI assistant

CROMWELL PROPERTY GROUP — Annual Report 2010

64673_rns_2010-08-18_efb06858-7f70-48ea-88dc-6c9dc0866230.pdf

CROMWELL DIVERSIFIED PROPERTY TRUST

ANNUAL FINANCIAL REPORT

30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2010

DIRECTORY

Responsible Entity:

Custodian:

Share Registry:

Auditor:

1. Directors & Officers

(a) Directors

1. Directors & Officers (Continued)

(b) Company Secretary

Ms Nicole Riethmuller – Appointed November 2008

2. Principal Activity

3. Review of Operations and Results

(a) Financial Performance

CROMWELL DIVERSIFIED PROPERTY TRUST DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2010

3. Review of Operations and Results (Continued)

(b) Financial Position

4.

Significant Changes in the State of Affairs

5. Subsequent Events

6. Likely Developments and Expected Results of Operations

7. Environmental Regulation

8. Distributions Paid or Payable

9. Options

(a) Units under option

(b) Units issued on exercise of options

10. Directors’ Interests

11. Fees to Responsible Entity

12. Units held by Responsible Entity

13. Indemnifying Officers or Auditors

14. Issued Units

15. Value of Scheme Assets

16. Auditor’s Independence Declaration

17. Rounding of Amounts

Auditor’s Independence Declaration

JOHNSTON RORKE

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

CROMWELL DIVERSIFIED PROPERTY TRUST CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies

(a) Basis of Preparation

(i) Compliance with IFRS

(ii) Historical cost convention

(iii) Functional and presentation currency

(v) Changes in accounting policies

Presentation of financial statements

Operating Segments

Investment property

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies (Continued)

(a) Basis of Preparation (continued)

AASB 7 Financial Instruments: Disclosures

(b) Principles of Consolidation

Subsidiaries

Associates

Joint ventures

CROMWELL DIVERSIFIED PROPERTY TRUST NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

1. Summary of Significant Accounting Policies (Continued)

(c) Revenue Recognition

Rental revenue

Interest revenue

Gain or loss on disposal of assets

(d) Income Tax

(e) Impairment of Assets

(f) Cash and Cash Equivalents

(g) Trade and Other Receivables

1. Summary of Significant Accounting Policies (Continued)

(h) Investment Properties

Valuations reflect, where appropriate;

(i) Investments and Other Financial Assets

Financial assets at fair value through profit or loss

1. Summary of Significant Accounting Policies (Continued)

(j) Trade and Other Payables

CROMWELL PROPERTY GROUP Annual Report 2010