Download Great Southern Plantations Limited

Great Southern Limited
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ABN 54 052 046 536
Financial Statements
30 September 2007
Contents
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Key Personnel
Page
2
Review of Operations
22
Directors’ Report
25
Remuneration Report
34
Corporate Governance Statement
47
Financial Report
52
Directors’ Declaration
113
Independent Audit Report to the Members
114
Auditor’s Independence Declaration
116
Shareholder Information
117
Corporate directory
Directors
D C Griffiths
Chairman
For personal use only
J C Young
Managing Director
A McCleary
P J Mansell
M L Peacock
C A Rhodes
P C Butlin
Secretary
N J Hackett
Notice of Annual General
Meeting
The Annual General Meeting of Great Southern Limited will be held in
the Ball Room, Parmelia Hilton Hotel, Perth, WA at 10am (WST) on
Thursday, 28 February 2008.
Principal registered office in
Australia
16 Parliament Place
West Perth WA 6005
Telephone: (08) 9320 9700
Facsimile: (08) 9321 9288
Share and Transferable
REset Exchangeable
Securities TREES series 2
(TREES2) registry and
TREES series 3 (TREES3)
registry
Computershare Investor Services Pty Ltd
Level 2
45 St George’s Terrace
Perth WA 6000
Auditor
Ernst and Young
The Ernst and Young Building
11 Mounts Bay Road
Perth WA 6000
Solicitors
Freehills
Level 36
QV1 Building
250 St George’s Terrace
Perth WA 6000
Bankers
ANZ Banking Group Limited
77 St George’s Terrace
Perth WA 6000
Trustee for TREES2 and
TREES3 holders
Australian Executor Trustees Limited
80 Alfred Street
Milsons Point NSW 2061
Stock exchange listing
Great Southern Limited shares are listed on the Australian Stock
Exchange under the code GTP. TREES2 are listed on the Australian
Stock Exchange under the code GTPGA. TREES3 are listed on the
Australian Stock Exchange under the code GTPGB.
Website address
www.great-southern.com.au
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Minter Ellison
Level 49
Central Park
152 St George’s Terrace
Perth WA 6000
KEY PERSONNEL
Executive Committee
The Group’s senior executive team is referred to as the Executive Committee. The Executive Committee is
responsible to the board for all areas of corporate strategy and operational performance of the Group.
For personal use only
The Executive Committee currently comprises:
John Young
Managing Director
Cameron Rhodes
Executive Director and General Manager
Phillip Butlin
Executive Director and General Manager - Corporate Development
Julian Dayman
Chief Operating Officer
Neil Hackett
Company Secretary and General Manager – Corporate Services
Simon Martin
Chief Financial Officer
Stuart Moran
General Manager - Sales and Marketing
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Great Southern Limited
Great Southern Limited is Australia’s leading forestry and agricultural fund manager.
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We provide a means for Australians to participate in large-scale forestry and agricultural projects focused on
growing commodities that are in demand globally, particularly from expanding Asian markets.
The company’s rapid growth has positioned Great Southern at the very forefront of the industries in which we
operate.
In the Australian Agricultural market, Great Southern is:
The largest plantation forestry company and in the top 5 commodity producers for
Beef cattle
Wine grape
Olives
Almonds
Poultry - Chickens
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Chairman’s message
Dear Shareholders
For personal use only
I am pleased to present your company’s 2007 annual report.
The past year has been a challenging one for Great Southern and one that has presented the Company with
opportunities as well as some disappointments.
Notwithstanding the strong underlying economic strength of the economy the Company did not hit its sales
targets which resulted in a 10% reduction in MIS product sales resulting in a 3% reduction in sales revenue
which flowed on to a 25% reduction in the underlying net profit after tax to $99.6 million. The board elected to
make a provision for the impairment of horticultural assets as a prudent measure due to the uncertainty that
surrounds this sector reducing net profit before tax to $71.5 million down from $133 million in the year ending
30 June 2006. As a result of this reduction the final dividend was struck at 8 cents per share reducing the full
year dividend to 12 cents per share.
This was clearly a disappointing result and can in part be attributed to the uncertainty arising from the then
Coalition Government’s and Australian Taxation Office’s position on non forestry MIS and in part to the impact
of the changes which allowed one off contributions of up to $1 million to individuals superannuation funds. The
shortfall in the sales of Great Southern’s traditional pulp wood plantation product was also disappointing
however this project has now been restructured and significantly enhanced, which should provide a basis for
increased sales moving forward.
The year did however yield some promising opportunities that can provide a sound base for the coming year.
The regulatory regime for the Company’s plantation based projects was settled by the Commonwealth
Government and we expect the framework to remain in place for the foreseeable future. This gives the
Company a level of certainty it has not experienced before and this combined with the launch of a new
plantation timber project offers an exciting future for Great Southern in this sector.
With the purchase of Rural Funds Management Ltd. during the year the Company has procured a well
established rural funds manager which provides a base for Great Southern to leverage its considerable rural
expertise to take advantage of the recent investor interest in soft commodities and grow a non-MIS based rural
investment fund. While the immediate impact on the Company’s profit will be relatively small, Great Southern
believes this fund will grow to become a very important arm of the business and one which will provide steady
recurring returns to the Company.
The future of the MIS industry in the non forestry sector remains unclear however the new Federal Labor
Government’s policy does call for a comprehensive review of the sector. Great Southern will be a keen
participant in this review and will be poised to take advantage of any positive outcomes. The future position is
also dependant on a test case between the industry and the Australian Tax Office to be heard in the Federal
Court. Based on its legal advice Great Southern remains confident that this test case will support the industry’s
position.
While Great Southern remains cautiously optimistic that it will be selling non-forestry MIS products beyond
2008 the Company will not stand still waiting for the out come of this review. We have announced a new
strategic plan which will centre on new forestry projects which are less capital intensive and growth into the
non MIS rural funds management. We expect this model to improve longer term cash flows and make them
more commensurate with profits. Because of the changes to the timing of revenue recognition arising from the
new plantation forestry product profits will be lower next year but should improve the following year as the
recognition of the balance of the sales receipts flows through to revenue. Dividends in the coming year will
reflect cash availability and future expected profits and will not necessarily reduce with the profit reduction.
This annual report is the first that the company has produced under its new reporting timetable with a 30
September financial year end. This change is seen as more appropriate to the company to reflect the seasonal
nature of its agricultural operations and business model, and enables us to provide more meaningful
information to shareholders and the broader market. However it will mean that investors will need to be careful
when comparing results with previous reporting periods.
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On 10 December 2007 Great Southern announced that its founder Mr John Young will stand down from his role
as Managing Director after the Company’s annual general meeting in February but will remain as a major
shareholder and non-executive director of the Company. This is a significant change for the Company. John has
lead the Company from inception to its position where it is now Australia’ largest agribusiness investment
manager. The Company has planned for succession and it was very pleasing to appoint Cameron Rhodes as
the new managing director. Cameron has had a great deal of experience in a senior management role within
the company and is widely recognized as leader in the agricultural managed investment scheme sector. The
Board is very confident that Cameron has all the qualities required to lead Great Southern in executing its
growth plans.
The impact of water shortages and climate change on yields and the appreciation in the value of the Australian
dollar are providing significant challenges to the rural sector however there are also opportunities arising from
improving prices for soft commodities and improvements in production techniques. Great Southern with its
internal expertise and its carefully selected and geographically diverse estate is well placed to meet these
challenges and capitalise on the opportunities.
While it has been a disappointing year for shareholders it has been a very challenging and taxing one for our
board and staff. I would like to thank them all for their endeavours and commitment to the company. I would
also like to give a very special thanks to John Young and acknowledge his outstanding contribution over the
years. Finally I would like to thank shareholders for their patience and support.
David Griffiths
Chairman
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Managing Director’s message
Dear Shareholders
For personal use only
The past year has presented some substantial challenges for Great Southern Limited.
Drought conditions throughout many regions of Australia, competition from a one-off opportunity for investors
to make contributions of up to $1 million to their superannuation fund and legislative uncertainty combined to
create a tough environment for sales. As a result, sales of the company’s investment products totalled $412
million, somewhat lower than anticipated.
There are, however, many highlights in the results. Sales of our non-forestry managed investment scheme
projects, including horticulture and cattle, recorded substantial gains on the previous year. Our Beef Cattle
Project closed oversubscribed in March 2007, having raised more than $78 million. We successfully launched
our new High Value Timber Project, which focuses on the development of teak and African mahogany
plantations in Australia’s tropical north, raising in excess of $60 million. Our Wine Grape Income Project also
closed over subscribed, and we continued the expansion of our MIS product range with the launch of a new
almond project.
We continue to experience strong demand for our MIS projects. These investments provide a very attractive
option for Australian investors, providing sound investment and diversification benefits as well as providing
economic and social benefits to rural and regional Australia.
The group has achieved an underlying net profit after tax of $99.6 million, which after a specific
provision for impairment of horticultural assets translates into a net profit after tax of $71.5 million.
The company’s balance sheet remains sound, with net tangible assets per share of $2.16, underpinned by
significant land holdings.
Looking ahead to 2007/08 and beyond, the environment is showing significant signs of improvement, with
many of the issues of the past year now off the agenda or considerably diminished in their potential impact.
The incentive for investors to make significant contributions to their superannuation fund has been removed;
and with good rains received in many parts of Australia, drought is less of a front page issue.
Of all the headwinds we have faced over the past 12 months, none has been so challenging as the shifting
political environment.
The former Coalition Government introduced new taxation arrangements for forestry investments which were
extremely positive and well received by the industry. At the same time, the government announced that these
changes would not be extended to non-forestry managed investment schemes, and that the Australian Taxation
Office would in fact be seeking to reinterpret tax laws applying to non-forestry agri investments. Such laws
have been interpreted consistently for many years.
Uncertainty is of course bad for any industry, and ours in no exception.
However, the change of government with the Federal Election in November 2007 gives us renewed cause for
optimism, with the Rudd Labor government committed to a comprehensive review of non forestry MIS. With
MIS long proven to be the most effective way of injecting investment and creating employment in rural and
regional Australia, Great Southern calls on the government to deliver a policy which will ensure stability and
growth for this vital industry.
The majority of the company’s sales do of course continue to come from forestry. The new tax arrangements
for plantation forestry investments deliver an unprecedented period of certainty for investors, and provide the
opportunity for Great Southern to deliver a 100% tax deduction to investors in our forestry projects.
Forestry continues to be the core focus of the company, and with new opportunities – including our recently
released high value timber project to complement our pulpwood project – we are confident that this side of our
business will continue to grow.
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In line with the new legislation, we have recently restructured our plantation woodchip project to deliver an
improved product for shareholders and investors alike, and early indications are that this new product will be
warmly received by the market.
Forestry has, of course, become very much a “front and centre” issue in recent times with the focus on climate
change and the environment. At the recent United Nations conference in Bali, the major outcomes were the
development of a road map for a climate change agreement by 2009, and increased pressure to halt
deforestation, particularly in developing countries. In this post-Kyoto era, forestry is rightly being recognised as
of increasing importance, and as a company that manages in excess of 275,000 hectares of forestry land, Great
Southern is very well positioned to take advantage of the opportunities this brings.
Through the recent acquisition of a 50% shareholding in a woodchip mill located in Bunbury, Western Australia,
we are broadening our forestry operations into downstream processing. This asset represents an important part
of the company’s forestry and business plans moving forward, particularly as an increasing proportion of our
forestry estate reaches maturity.
During 2007, the company also acquired Rural Funds Management Ltd (RFM), an agricultural funds
management company which has provided the base and catalyst for a new Rural Opportunities Fund, giving
investors the opportunity of investing in a mainstream investment fund focused on diversified agricultural
commodities, assets and infrastructure.
The launch of this new fund is yet another indication of our view that the outlook for Australian agriculture
remains very good. We expect that global opportunities, particularly in Asia, will underpin the success of
participants in Australian agriculture and forestry for decades to come – especially those who can operate at
scale.
Critically, the price of soft commodities, including food, is on the rise globally, driven by a combination of
factors including changing consumption patterns in many developing countries, changing weather patterns and
increasing demand for biofuels. Again, your company is well positioned to capitalise on these opportunities and
convert them into tangible returns for shareholders over the years ahead.
Looking forward, the company has a direction for the future that seeks to leverage Great Southern’s existing
capabilities, assets and resources to consolidate the company as Australia’s leading forestry and agricultural
fund manager.
Our focus on increased cash flow and enhanced shareholder value has the objective of taking the company to
the next level by building further on our forestry core business and our broader agricultural funds under
management. It involves a three pronged approach:
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A core focus on forestry MIS, including a restructured plantation forestry MIS project, with significantly
reduced capital expenditure and other forestry MIS projects including its successful high value timber
project;
Increased growth and opportunities in agricultural funds management through both existing and new
projects, including the Rural Opportunities Fund;
Pursuing other growth opportunities and synergies within its existing forestry, agriculture, funds
management and distribution operations; and
Ensuring that the expanding operations of the company are run in a cost-effective manner.
As one of the largest forestry and agricultural investment managers in Australia, Great Southern currently
manages about $1.9 billion of funds. We have plans to grow this to nearly $3 billion over the course of the
next 12 to 18 months.
Moving forward, we will continue to build on forestry as our core business. With our newly restructured forestry
project, the very successful launch in 2006/ 07 of our high value timber project and the legislative certainty
now afforded to forestry MIS projects as a result of the new taxation arrangements, we believe there is a very
strong outlook for forestry.
From a cash flow perspective we believe the new pulpwood forestry project will deliver significant cash flow
benefits from the end of 2007/08 onwards as land acquired for the project is on sold to investors.
In accounting for the new forestry pulpwood project we do anticipate a one-off impact to the 2007/08 reported
results due to the expected affect of the project’s structural changes on the revenue recognition calculation.
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We anticipate at this stage that the amount able to be recognised in the year of sale is likely to be between
20% to 30% of the initial fee which is lower than around 60% for the previous project. The majority of the
initial fee (circa 80% - 90%) with the new project will be recognised as revenue by the end of the financial year
following sale, which compares to 100% recognition for the previous project, We should see a balancing out of
the impact of the new project to reported revenues in the 2008/09 financial year.
I would at this time like to pay tribute to the staff of Great Southern. This company has, first and foremost,
always operated as a team. The past year has been a tough one in many regards, and each and every member
of our team has worked exceptionally hard in challenging circumstances to deliver a very creditable result.
It has been disappointing to see the company’s share price trading at or below net tangible asset backing over
recent months, and shareholders can be assured that this is an issue that will be very much a focus for the
executive team over the coming year and beyond.
The company believes it can put a challenging 12 months behind it, and continue to grow shareholder value in
2008 through increased sales of forestry MIS products and continuing sales of non forestry MIS products, both
with increased cash generation through reduced capital expenditures.
In closing, shareholders will be aware that I have announced my intention to retire as Managing Director,
effective from the company’s Annual General Meeting on 28 February 2008. I leave the company in excellent
hands, with the appointment of Cameron Rhodes, our long-standing General Manager and Executive Director,
as the new Managing Director. I have no doubt that Cameron will be highly successful in steering Great
Southern into its next phase of development.
John Young
Managing Director
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Review of Operations
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FORESTRY
With more than 240,000 hectares of forestry land in its national estate, Great Southern is Australia’s leading
plantation manager. The company’s hardwood plantations are focused on the production of woodchip for the
pulp and paper industry of Japan. As Australia’s leading agribusiness investment manager Great Southern
manages plantations on behalf of managed investment scheme investors, whilst acting as landlord for the
estate and being entitled to 5.5% of the annual harvest proceeds. During 2007 Great Southern has expanded
its forestry operations into the establishment of new African mahogany and teak plantations in northern
Australia, taking advantage of strong global demand for these timbers for furniture, flooring, boat building and
other high value uses.
Key achievements
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The company’s largest-ever annual planting program was carried out during 2006/07, with more than
35,000 hectares planted
Expansion of forestry projects into High Value Timber plantations – African mahogany in the Northern
Territory and teak in far north Queensland.
Record planting of 9,563 hectares of Acacia mangium on Melville Island (Northern Territory) as part of
the Tiwi Island Forestry Project
Total woodchip exports passed 700,000 green metric tonnes
With Kangaroo Island (South Australia) reaching the critical 10,000 hectare target for plantations
established by Great Southern, the company purchased a former gypsum export site, providing a solid
option for a future woodchip export facility on the island
Great Southern’s forestry information management software program “ForMS” won both the 2007
Western Australia Industry “C.Y O’Connor” Export Award and the Albany Chamber of Commerce and
Industry Agribusiness Award.
Conditional purchase of 100% of Hansol plantation estate on the west coast of WA and a 50% share of
a woodchip and export facility at the Port of Bunbury.
First woodchip vessel to Oji Paper Company through Itochu Corporation.
Decisions taken to develop in-field chip receival facilities at Albany (WA) and to develop the company’s
woodchip export facility at the Port of Albany.
Investors in Great Southern’s 1994 to 1996 projects have received returns from the sale of
woodchips, while 1997 investors have received a small proportion while harvesting is ongoing.
Resources
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Forestry staff numbers grew from 120 to 125 full-time equivalents during 2006/07
In addition to the significant forestry team based in Albany, WA, the forestry division has regional
offices in Casterton and Gippsland (Vic), Bunbury (WA), Kangaroo Island (SA), Launceston (Tas)
Melville Island (NT), Main Camp (NSW), Darwin and Brisbane to manage the national plantation estate
The team includes 9 Tiwi Islander apprentices who are being trained in all aspects of forestry
operations and the Company funds the employment of 8 land and marine rangers.
Regional and functional work teams have been consolidated, with a focus on retention of key forestry
personnel
Key facts for 2006/2007
Iin excess of 36 million seedlings were planted during 2006/07 bringing the total to more than 135 million
seedlings planted since the company’s inception
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20,418 plantable hectares of land acquired:
o
18,247 ha for pulpwood plantations
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2,171 ha for high value timber plantations
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Approximately 1,700 hectares harvested
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297,000 tonnes of woodchip exported (6.5 shipments)
Market outlook
There is continued strong demand for eucalypt woodchips from Japanese customers. In early 2007, the export
price for hardwood plantation woodchip increased from $182 to $189.40 per bone dry metric tonne. The price
increase reflects buyers’ preference for plantation grown eucalypt woodchip over chip traditionally sourced from
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native forests, and also takes into account the strong global demand for high quality wood fibre. As the
company moves closer to commencing harvesting of its plantation estate in the Green Triangle region of south
western Victoria / south eastern South Australia, a range of customers has expressed strong interest for future
woodchip volumes from that region. While the company’s hardwood plantations have been focused to date
solely on production of woodchip for the pulp and paper industry of Japan, new industries and opportunities are
emerging across the energy and building products sectors that will only serve to increase demand for the
timber we produce in the years ahead. Accordingly the fibre price outlook seems positive over the medium
term to long term.
Demand for suitable plantation land across the regions in which Great Southern operates has continued to
grow, placing upward pressure on land values and highlighting the strategic and valuable plantation land assets
owned by the company.
Carbon Trading
A shift in the Australian Federal Government policy towards climate change targets, combined with growing
international pressure for positive action, is likely to further elevate the importance of carbon credits and
hopefully give rise to a sustainable national carbon trading regime within Australia. As custodian of over 130
million trees your company is well positioned for such an opportunity.
Forestry is increasingly being recognised as an important environmental investment, addressing the domestic
and international pressure to stop native forest logging. With the spotlight firmly on international greenhouse
gas emissions, plantations such as those established and managed by Great Southern, have never been more
important in looking after our global environment.
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HORTICULTURE
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Olives
One of Australia’s three largest producers of olives, Great Southern has established both organic and
conventional olive groves in Western Australia to the north, east and south of Perth. Great Southern manages
the olive groves on behalf of managed investment scheme investors, whilst acting as landlord for the olive
groves and charging a percentage of the annual harvest proceeds for rent and management fees. The extra
virgin olive oil produced from the fruit is sold both locally and into export markets, with strong demand as the
world’s appetite for olive oil continues to grow.
Key achievements
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Completed development of 445 hectare organic olive grove at Twin Brooks
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Acquired a property known as Waterville consisting of 131 ha planted and 375 ha newly planted.
Together with Twin Brooks these properties formed the basis for the 2007 Diversified Olive Project
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Preston Valley and Avon Valley, the properties which formed the basis of the 2005 and 2006 projects,
continued under contract management arrangement.
Resources
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Great Southern has a strong team of experts to manage its olives business both in the field and at the
senior level, including an experienced agronomist
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Up to 40 contractors are used to provide a range of pruning, maintenance and other services to the
groves
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Combined, this group brings a wide range of agribusiness, horticulture, farm operations, natural
resource management and organic farming experience to the operation
Key facts
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223,000 trees planted for 2007 Project
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2,787 hectares acquired
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219 hectares harvested
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Entered into an olive oil supply agreement with Sumich (EVOO) Australia Pty Ltd for all conventional
olives produced
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All organic olives produced from the projects have been contracted to Kailis Olive processing for the
full length of the projects
Market outlook
Global demand for olive oil continues to grow, driven substantially in recent years by an increased awareness of
the health benefits, particularly of extra virgin olive oil. Australia produces 1% of the world’s olive oil but 5% of
the world’s extra virgin olive oil and remains a net importer of olive oil. Due to increased plantings it is likely
that olive oil production will increase to some 30,000 tonnes by 2010 (compared to 4,500 tonnes in 2004 /05)
although this will still represent an insignificant amount of global production.
Infrastructure improvements on the olive groves and maturing of the olive trees underpin the increasing value
of Great Southern’s olive assets.
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Vineyards
Following the completion of five vineyard projects, Great Southern is now Australia’s fourth largest producer of
wine grapes, with our vineyards supplying grapes under contract to many of the nation’s leading wine makers.
Great Southern manages the vineyards on behalf of managed investment scheme investors, whilst acting as
landlord for the vineyards and charging a percentage of the annual harvest proceeds for rent and management
fees.
Key achievements
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The 2007 Wine Grape Income Project raised $49.5m – more than double the previous financial year.
The project structure comprised of 50% mature, 15% young and 35% new plantings
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Two vineyards acquired during 2006/07: Galerita (98 ha) and Sovereign Vineyards (179 ha) in the
Riverland, SA
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All vineyards now have grape sale agreements with nine wineries including Ferngrove, Fosters Wine
Estate, Hardys Wines, Crestview, Cockatoo Ridge and West Cape Howe for periods of 3 to 13 years.
Resources
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Great Southern’s vineyards are managed by a combination of the company’s 14-strong viticulture
team and specialist vineyard contractors in each region
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The team is highly qualified, with extensive experience in the development and management of
commercial vineyards
Key facts
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The area under vines has increased from 205 hectares (1 property) in 2004 to 1,535 hectares (12
properties) in 2007
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Vineyards are located in Western Australia, South Australia and Victoria
Market outlook
Global wine sales are maintaining their growth trend where New World countries, including Australia, are
capturing most of the market growth opportunity as well as taking share from the traditional Old World
producing countries. Actual and anticipated shortfalls of the 2007 and 2008 vintages are currently forecast to
eliminate the Australian wine inventory surplus that has recently depressed prices. Great Southern believes
current industry indicators suggest that the medium term wine grape supply environment will become one of
shortage due to several factors including recent declines in planting rates and restricted water availability.
Infrastructure improvements on the vineyards and maturing of the vines underpin the increasing value of Great
Southern’s viticulture assets.
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Almonds
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One of Great Southern’s newest agribusiness projects has been the development of an almond business.
Widely regarded as the world’s most versatile nut, almonds are increasing sought-after for their exceptional
health benefits. Australia is developing a growing reputation as a quality producer of nuts, and Great Southern
is at the very forefront of the industry. Great Southern leases and manages the almond groves on behalf of
managed investment scheme investors, charging annual fixed fees for the rent and management expenses.
Key achievements
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Completed development of 1,000 hectare grove at Hillston in NSW
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Acquired established almond groves from RFM acquisition
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Orchard growth on target with expectations
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Project restructured for 2008 to enhance investor appeal
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Extensive sales & marketing program developed for 2008 project
Resources
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10.5 full time equivalent employees
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Specialist staff includes an almond manager and a technical consultant.
Key facts
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Approximately 280,000 trees planted
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Contract established with Almondco for 100% of off take, with no floor price
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Water sourced 100% from underground aquifer with sufficient current licensed volumes to meet
requirements
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Although located in the Murray Darling Basin area the almond groves do not rely on the river system
for watering, providing Great Southern and investors with a competitive advantage.
Market outlook
The market outlook remains positive. Demand continues to grow and current expansion in Australia is limited
by water reliability. In the United States, many old trees are currently being replaced, and these new plantings
will come on line in the next five years. However, this new supply should not impact on price significantly given
growing demand for almonds. India in particular continues to use almonds as a protein source.
Great Southern’s almond assets are predominantly owned within the Rural Opportunities Fund, with capital
improvements accruing to investors within that fund. The fixed fee structure of the Almond managed
investment project provides certainty of return, removing Great Southern’s exposure to agricultural risk.
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CATTLE
Great Southern manages beef cattle on behalf of managed investment scheme investors, whilst acting as
landlord and lessor of the breeding herd, and charging a percentage of the annual sales proceeds for rent,
management and agistment fees. With the expansion of investor and Great Southern’s cattle to 217,000 head,
the company is now Australia’s fourth largest cattle operator. Operations are split between a southern herd,
focused on King Island in Tasmania, and a northern herd which encompasses several of the nation’s iconic
cattle stations in the Kimberley region of Western Australia, the Northern Territory and far north Queensland.
Key achievements
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Strong market acceptance for 2007 Beef Cattle Project, with $78 million in sales by March 2007
Strengthening of value in Great Southern’s Cattle stations and properties across Australia
Successful ‘winding up’ of Environinvest 2004 & 2005 Projects
2006 project in line with independent researchers’ expectations despite drought
Cattle inventory increased by 25%
Very low staff turnover; administration head count remains at 2005 level despite herd increasing in size by
150,000 head
Resources
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Total 48 staff in Cattle team
Highly qualified management team plus experienced operational staff
Key facts
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Herd size now 217,000 head
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Land holdings: 20 properties spanning 3.58 million hectares (owned or leased)
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41,000 head of cattle sold / exported during 2006/07
Market outlook
There are several significant factors that are impacting on the beef cattle market. The drought that has
affected much of southern Australia is expected to reduce the nation’s cattle herd by 2.1%, thereby reducing
supply. The strength of the Australian dollar, coupled with sluggish export demand (particularly from key
markets of Korea, Japan and the US) will have an impact, however global beef market prospects are expected
to strengthen over the short to medium term.
During the year Great Southern engaged independent valuers to value its Moola Bulla, Wrotham Park and
Chudleigh Cattle Stations. Each Station’s valuation showed a significant appreciation in its market value from
the acquisition prices, however this appreciation has not been brought to account in the balance sheet as Great
Southern records carrying value at cost. The identification and acquisition of the three cattle stations noted
above was achieved using an expert third party contractor as the knowledge and expertise required for
purchases of this kind was not well established in the company at that time. Pursuant to this arrangement the
fee for these services was 33% of the gain in the value of the properties (excluding livestock) which fee totalled
$10.65 million. The fee was settled by a combination of $5 million in cash and the issue of 2,513,258 Great
Southern Limited ordinary shares for the remainder.
The arrangement with the contractor has since been
terminated.
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OTHER
Rural Opportunities Fund
For personal use only
In August 2007, Great Southern acquired Canberra-based agricultural funds manager Rural Funds Management
Ltd (RFM). RFM had $180m funds under management in projects including diversified agriculture, chicken,
viticulture and land, water and infrastructure.
In the months following the acquisition, Great Southern launched the new Rural Opportunities Fund, a unitised
agricultural investment fund with the objective of providing investors with exposure to a diversified portfolio of
agricultural assets, with a bias towards agricultural property and infrastructure holdings.
The fund is designed to deliver returns to unitholders through a combination of both growth and distributions.
The creation of this new investment vehicle comes at a time when several factors – including global population
growth, food consumption, demand for alternative fuels, dwindling land availability and many agricultural
commodity prices trending upward – are combining to create outstanding opportunities for Australian
agriculture.
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Our people
Since its inception 20 years ago, Great Southern has been successful in attracting talented, hard-working
people across every facet of our operations.
For personal use only
Staff are dispersed across operational sites in regional centres, sales offices in every state capital, and a head
office in Perth.
This broad geographic spread is matched by the wide range of skill sets employed by the company.
The staff who run our forestry, horticulture and cattle operations are widely recognised as industry leaders,
bringing in-depth expertise and experience to the management of our properties. Our sales team has been
built on an unrivalled culture of service and success, while our head office executives and staff have largely
been drawn from investment banking, professional services and the broader finance sector and offer a level of
expertise unparalleled within the industry.
In addition, the company provides employment opportunities for thousands of people via our extensive
contractor network throughout regional Australia, and Great Southern is therefore a very significant employer in
many rural and regional communities. In addition to the creation of jobs in rural communities, independent
studies have highlighted that the MIS sector also provides greater access to technology, larger investments in
R&D and innovation, more sustainable agricultural practices and skills development.
The company is committed to the continuous development of its staff. Over the past year, approximately
$450,000 has been invested on staff training and development, ensuring our team is equipped for the
challenges of running the company today and into the future.
One of the highlights of the past 12 months has been the acquisition of Rural Funds Management (RFM). A
significant factor in this acquisition was the depth of expertise in horticulture which the RFM team brought to
the table. Great Southern employee numbers were boosted by more than 120 people as a result of this
transaction. The Group currently employs over 500 people across regional and rural Australia.
In the current booming economic conditions which are creating a widely-recognised shortage of talent Great
Southern is continuing to attract first-rate employees by offering interesting and challenging work, attractive
conditions and competitive remuneration.
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Great Southern and the Environment
Our philosophy and commitment
For personal use only
Great Southern is committed to environmental best practice and to the continual improvement of its
environmental performance, recognising its obligations to all stakeholders.
The company’s philosophy is to develop and manage agricultural projects which are sustainable, efficient and
well suited to the environs in which they are established. During 2006/07 the company developed an updated
environment policy in consideration of its expanded business interests and operations.
Through the key performance areas detailed in this policy, Great Southern built on its commitment to the
environment through a range of new and ongoing initiatives.
A focus on water and climate management
As several areas of Australia continue to be impacted by prolonged drought conditions, Great Southern
heightened its focus on strategies to both manage our precious water resources and minimise our
environmental ‘footprint’.
A key climate management strategy employed by Great Southern is the very deliberate geographic spread of
our projects across Australia. Most of our operations are located in areas with historic high annual rainfall
levels and in recent times we have established forestry and grazing interests in the tropical north of Australia,
which consistently receives high rainfall and remains unaffected by drought.
Great Southern takes the threat of climate change and drought conditions very seriously and is committed to
monitoring and managing the changing environment in relation to our operations. Overall, Great Southern is
well placed in relation to this issue, with access to adequate high security water, rainfall catchment on farm
private dams, regulated ground water and river supply as well as the ability to purchase temporary transfer
water as required.
Building expert resources
To deliver on our environmental obligations and the comprehensive program of work that goes to meeting
these obligations, Great Southern employs an in-house team of expert environmental resources.
In the past year, Great Southern has appointed a National Environment Manager, who is supported by 14 full
time dedicated environment staff.
Recognising the critical importance of water across all of our operational businesses and the imperative that we
adopt best practices across our existing and new agricultural developments, Great Southern has also appointed
a dedicated National Manager – Water Resources and Development. The main objectives of this position are to
secure and manage our current water assets and to build on these for future requirements.
As well as significantly bolstering our employee numbers in this important area, Great Southern has engaged
more than 15 external consultants over the past year to audit the company’s environmental performance, and
assist with the development and rollout of its environmental management systems, biodiversity and land use
management.
2006 / 07 Highlights:
Progress towards Australian and International best practice
Great Southern has a sound Health, Safety and Environment (HSE) record and has been an agribusiness leader
in the development of HSE solutions. With the diversification of operational activities the group in 2006
embarked on a program to align all operations as a minimum to the core HSE standards of ISO14001
(Environment), AS 4801 (Safety) and AS 4360 (Risk). Individual operations also are accredited to or in the
process of accreditation to more specific certification such as organic certification for our olive groves and food
safety certification for our viticultural operations.
The HSE management system being rolled out is based on a continuous improvement model The system guides
us in conducting all our operations within a “best practice” framework and to measure and continuously
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improve on our HSE performance. During 2006/07 our HSE team made significant progress towards alignment
to these standards with the rollout of corporate policies and procedures, resourcing of corporate and regional
HSE specialists and the engagement of specialist consultants and auditors. Training of our field personnel and
contractors is a large and continuous undertaking, and during the year personnel undertook courses in
advanced 4WD driving, chemical usage, first aid, fire fighting and incident management systems.
Greening Australia with our plantation forestry operations
The past year has seen the company’s forestry division conduct its largest-ever planting program, with more
than 36 million seedlings planted. Large scale hardwood plantations such as those managed by Great Southern
deliver a wide range of environmental benefits including the absorption of carbon and other greenhouse gases,
assist in addressing major degradation problems including salinity and erosion which have been caused by
historic over-clearing of native vegetation, play a significant role in restoring the health of river catchments and
contribute to the protection of old-growth native forests.
The establishment of hardwood plantations delivers a number of environmental benefits including:
•
Salinity Control
•
Absorption of phosphates,
•
Reduced land clearing
•
Alternatives to native forests, and
•
Lower woodchip treatment requirements.
Importantly, Great Southern’s growing plantation estate will assist in helping Australia meet its Kyoto
greenhouse gas targets by absorbing millions of tones of CO2 from the atmosphere and making a positive
contribution to the global environment.
Water management innovations in vineyard and horticulture operations
A range of simple, yet highly effective water saving methods have been introduced across our vineyards,
almond and olive operations during 2006/07. By planting grass swords in the rows between vines, our
viticulture team has developed a natural system for improving soil health, reducing water evaporation and
managing weeds. Vine canopies are managed and trained to hold more water and become more self-sufficient.
Similarly, a cereal crop called sudax has been established in every second row of our almond groves to
preserve and promote excellent soil health as well as assisting with water infiltration into the ground. The leaf
matter provided by these annual species supports microbial activity, which is also good for soil health.
Weed control
Weed control is an ongoing challenge across all our agricultural operations. The methodology employed in
weed control is dependent on the location of the property and the extent of the weed problem. Where large
bodies of weeds are historically present, fencing has been installed as a way to minimise further impact of
weeds and at a selection of sites, contract staff have been employed to control weed spread using low-impact
spray methods.
Individual states and territories have specific guidelines for the creation of natural reserves on properties,
felling of native trees and control of native wildlife. Audits of these guidelines by the relevant statutory bodies
occur regularly and are encouraged by Great Southern’s operational team to ensure that we meet our
obligations.
Waste management
Three important pieces of infrastructure have been established on the Tiwi Islands to effectively manage and
deal with waste generated from our forestry activities and large staff numbers on the Islands. Facilities
developed in 2006/07 include a recycling centre on Melville Island which captures and barges back to the
mainland all recyclable and hazardous materials; the construction of a sewage treatment facility to service the
staff camp; and a rubbish tip incorporating a recycling and landfill depot. The development of these facilities –
applauded by the NT Health Department – provides important resources for the Tiwi community.
The Great Southern poultry operations have also taken up the challenge of managing effluent in a sustainable
way, advancing processes for turning waste solids into fertiliser, which is in turn used by neighbouring farmers.
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Energy efficiencies
Great Southern’s chicken business, acquired as part of the acquisition of Rural Funds Management Ltd, is one of
Australia’s largest poultry contract growers, comprising 142 state-of-the-art chicken sheds which house over 25
million chickens annually for the production of poultry meat. Working in collaboration with the relevant NSW
and Victorian state government departments and other businesses, through a group known as Sustainable
Advantage, our poultry managers have trialled and introduced innovative measures to achieve considerable
energy savings in the poultry sheds. The installation of circulation fans has allowed access to previously
unutilised heat trapped in the ceiling of the sheds, resulting in a 15% saving on gas consumption. Managers
have also moved to install power correction units at each site which have achieved a 20% reduction in
electricity usage. Further, all new sheds are constructed to strict energy efficiency standards and we have
committed to using only 5-star energy rated equipment at each of our poultry sites.
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Working with communities
For personal use only
Great Southern has a positive impact on the communities in which it operates in numerous ways. Importantly,
our business model means that we are providing a channel for city-based investors to inject money into country
areas, helping to arrest and even reverse rural decline.
As well as creating opportunities for our investors and shareholders, we are making a contribution to a number
of rural and regional towns and centres by spending and employing locally, creating jobs and income, and by
stimulating regional investment through the development of long-term agricultural industries.
While these benefits occur as a natural flow-on effect from our operations, we also make financial and in-kind
contributions to a range of charities, community organisations, individuals and groups who rely on donations,
sponsorships and private sector support.
Rural and regional employment
Great Southern provides employment for more than 500 Australians, with a substantial workforce based outside
metropolitan areas.
The company employs more than double this number again in casual contract staff who provide services to our
various operating locations in all states and territories of Australia. It is our policy to hire locally wherever
possible.
During 2006/07, the company built its employee numbers significantly to meet an increase in forestry
harvesting activities and our expansion and diversification into new business areas.
Creating indigenous employment and economic health
The Tiwi Islands forestry project is a long-term, sustainable project being undertaken in partnership with the
Tiwi people. Plantations are being established on the islands for the production of woodchip exports.
Great Southern is the major commercial enterprise on the Tiwi islands, contributing just under a million dollars
annually to the community in wages and salaries alone.
The company’s forestry operations on the islands have so far led to the creation of 23 full-time permanent jobs
for Tiwi Islanders and have contributed more than $1million to the community through land lease payments
and via income generated from harvested pine and hardwood trees.
Great Southern’s contribution to the Tiwi community has also come via the company’s provision of
infrastructure, including new roads exceeding $2 million in value, as well as sponsorships and donations
towards local groups, clubs and initiatives.
Working with communities to manage bushfire
During the bush fire season Great Southern employees commit thousands of voluntary hours to fight bushfires
in the rural areas in which the company operates, assisting community and country fire service brigades.
During the 2006/07 summer alone, Great Southern’s Albany forestry employees devoted 530 hours of their
time to fighting fires in the south east of Western Australia. Similarly, our Victorian forestry team spent many
weeks battling and monitoring fires in Gippsland and other bushfire-affected regions of that State.
In 2007, Great Southern also committed to constructing a purpose-built fire-fighting airstrip and fast fill water
supply facility on Kangaroo Island. The facility, while funded by Great Southern will provide a valuable resource
not only for the company but also for the Country Fire Service and broader community.
Great Southern equips employees in most of its operating regions with fire fighting trucks and equipment,
which are in turn made available as extra resources to rural communities during the bushfire period.
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Helping the drought-affected
For personal use only
During 2006/07, Great Southern continued to assist communities with managing drought wherever possible.
Initiatives included providing neighbouring and nearby land users – affected by a lack of suitable fodder for
stock on their own land – with access to the company’s properties for grazing purposes. As well as providing
agistment, our forestry crews commenced harvesting grasses from the inter-rows of plantations to produce
much-needed stock-feed over the summer months.
On Kangaroo Island, Great Southern entered an agreement with SA Water, allowing the utility to pump water
from one of the company’s large private dams to supply the Kangaroo Island community. The agreement was
entered after the Island’s main supply reservoir became too low to meet requirements.
Delivering training and education
Great Southern proudly celebrated with nine of its Tiwi forestry employees as they graduated with a Certificate
III in Forestry in March 2007. The graduates were the first Tiwi apprentices employed and trained as part of
the Tiwi Islands Forestry Project, with plans for more local residents to follow in their footsteps as the project
expands.
During the past year, Great Southern also boosted its commitment to the unique Albany-based Forest Training
Centre (FTC), providing students with increased access to paid harvesting work. Through this arrangement, the
training centre is able to both provide students with the practical training they require and remain self-funded.
The FTC, originally based in Albany has now been replicated in Victoria, where Great Southern continues its
association with the organisation.
‘Grass roots’ sponsorships and community support
In 2006/07, Great Southern continued its support for worthwhile initiatives in each of its operating regions,
providing over $100,000 in sponsorships and donations.
Funds were provided for a variety of purposes across all regions, such as donations to Lions and Rotary-run
projects, financial contributions towards studies and research, assistance to emergency services groups to
purchase much-needed equipment and assistance for junior and indigenous sporting clubs.
The company’s strategy is to provide a large number of small to medium sized donations to a range of groups
and individuals, as opposed to providing a larger sum to a single cause. This approach means we are able to
support a variety of ‘grass roots’ initiatives so important to rural and regional communities.
Good corporate citizens
Great Southern commends its employees for their active participation in the communities in which they live and
work.
In particular, our forestry teams have shown great initiative in getting behind fundraising activities such as
‘Movember’ – a men’s health charity; the ‘Greatest Shave’ – raising funds for Leukaemia awareness; the Red
Cross Winter Blood Challenge and a range of other good causes.
Independently, our employees who have participated in these causes have raised over $15,000 for charity.
- - 21 - -
Great Southern Limited
Review of Operations
30 September 2007
REVIEW OF OPERATIONS
For personal use only
Commentary on Results
This is the first financial year of the Group’s new 30 September year end. Accordingly, comparisons of the
2007 results to the results for the 3 months to 30 September 2006 and the year to 30 June 2006 may be
misleading. Commentary on comparative results below refers to the year ended 30 June 2006 being the most
recent 12 month financial reporting period.
Sales in Great Southern’s MIS products in 2007 reduced by 10% to $412,000,000 and were affected by several
factors including legislative uncertainty and the one off opportunity to contribute up to $1 million into
superannuation.
Underlying EBITDA (before significant items) also reduced by 10% to $190,800,000 against the June 2006
financial year. Total revenue in 2007 reduced slightly along with the lower sales but this was compensated by a
net fair value increase from the valuation of the group’s investment property (land) estate of $37,572,000. The
group’s investment properties were independently valued and the valuations benefited from real price gains
over the past 12 months, that were higher than expected, and a lowering of the valuation discount rate. The
group’s investment property is valued at $722,310,000 at 30 September 2007.
Agriculture and MIS related expenses totalled $199,988,000 for the 2007 year and relate primarily to the
group’s forestry, horticulture and cattle business. The size of these businesses increase each year as new
projects are brought on line and the increase in costs noted reflect this operational volume increase. 2007
Agribusiness costs also include $18,929,000 in one off costs relating to existing projects that are not expected
to recur in future years.
As a result of the uncertainty surrounding the future of non forestry MIS projects, the group has put through
the income statement a $40,072,000 impairment loss relating to the its horticulture MIS project assets as these
assets may not be able to benefit from future cash flows of non forestry MIS sales post 30 June 2008.
Including the impact of the impairment loss noted above, EBITDA for 2007 is $150,700,000, a 29% decrease
on June 2006, and reported 2007 net profit after tax is $71,508,000 which is 46% lower than June 2006. NPAT
for the 2007 financial year includes the full year impact of the group’s capital management strategies which
include maintaining a suitable level of gearing for the group in order to maximize funding efficiencies.
Gearing at 30 September 2007 has remained consistent with the corresponding 30 September 2006 period at
46% (Sept 2006:47%) (measured by debt/debt + equity) and 59% (Sept 2006:54%) (measured by net
debt/equity). Excluding the group’s TREES (hybrid securities) the “debt/debt + equity” gearing reduces to
38%.
Operating cash flow during 2007 was strong with a net inflow of $203,572,000 ($244,951,000 for June 2006).
Cash at 30 September 2007 was $207,640,000 with current receivables and available for sale financial assets
standing at $157,829,000 Subsequent to the end of the financial year the Group increased its available bank
facilities by $105,000,000 and in November 2007 drew down $55,000,000 which will be used for asset and land
acquisitions. The Group expects to fully use its cash balances and existing facilities to acquire assets for use in,
or that are complementary to, its MIS projects and for general working capital requirements.
Shareholder Returns
The company’s share price has reduced from $2.49 at 30 September 2006 to $2.32 at 30 September 2007. As
noted in the 30 September 2006 annual report, there are a number of factors that may impact the company’s
share price that are outside the control of management. A major factor impacting the company’s share price
during the current reporting year has been the uncertainty over the outcome of the Australian government’s
review of the tax effective non forestry MIS industry, and the subsequent ongoing test case with the ATO with
respect to non-Forestry MIS projects.
Great Southern is a member of the S&P ASX 200 Index. This index is recognised as a key benchmark for the
Australian equity market and features the 200 leading publicly listed companies in Australia. Great Southern
has a broadly spread shareholder register with support from domestic and overseas institutions as well as
approximately 14,000 retail shareholders.
- - 22 - -
Great Southern Limited
Review of Operations
30 September 2007
Dividends
For personal use only
A final dividend of 8 cents per share in respect of the 30 September 2007 financial year was declared on 25
November 2007 and was paid to shareholders on 17 December 2007.
The company’s franking credit balance is $195,942,000 taking into account estimated tax payable at 30
September 2007, refer note 32 to the September 2007 financial statements. The company continues to look at
ways to return franking credits to shareholders within the constraints of the dividend policy and the capital
requirements of the Group.
INVESTMENT FOR FUTURE PERFORMANCE
The Group invests in assets, principally plantation land and other agribusiness properties that are expected to
provide long term benefit for shareholders.
Over the past 14 years the Group has acquired approximately 275,000 gross hectares of agricultural land that
is being used in ongoing plantation projects. These acquisitions include approximately 83,700 gross hectares of
land purchased from ZCM Matched Funding Corp in March 2004, the majority of which are still subject to
ongoing leases and so are yet to be made available to the Group for use in its projects. It is expected that the
majority of this land will become available between 2010 and 2013.
The Group’s pulpwood land is classified in investment property and is fair valued each financial year. This fair
value (refer note 16 to the financial accounts for details of the fair value calculation assumptions) uses an
expected annual nominal land price growth of approximately 4.75% per annum over the period to when the
land is expected to become available. Based on the independent valuations undertaken for the Group over the
past two years the nominal average increase in the unencumbered value of the Group’s pulpwood land has
been 9.8% p.a.
Over the past two years the Group has acquired 9 cattle stations covering approximately 1,437,000 hectares,
principally in northern Queensland and northern Western Australia. As noted in the review of Cattle operations
a valuation of the group’s three largest cattle stations indicate a significant capital gain that has not yet been
brought to account in the Group’s financial statements as these assets are carried at cost in the accounts
pursuant to Group accounting policy.
REVIEW OF FINANCIAL POSITION
Capital Structure
There has been no change to the capital structure of the Group during the financial year.
Liquidity, Funding and Capital Management
The Group’s agribusiness projects require, to varying degrees, investment in capital assets, principally land,
infrastructure and biological assets, including vines, olive trees and beef cattle. A major focus for the board and
management is to realise greater benefits from the Group’s balance sheet in the funding of these assets so as
to achieve capital efficiency savings for shareholders.
In August 2006, the Group entered into a structured finance transaction in which the Group received
$211,691,000 net of issue costs through the issue of debentures and purchased a held-to-maturity investment
for approximately $75,036,000 (refer to note 10). The transaction is structured such that the cash flows the
Group receives from the held-to-maturity investment are expected to be sufficient to meet the obligations of
the transaction through to 2012 including the payment of interest not capitalized. The amount to be repaid in
August 2012 including capitalized interest will total $257,670,000. The borrowings are limited in recourse to the
held-to-maturity investment and specified investment property land within Great Southern Property Trust, a
wholly owned entity of Great Southern Limited.
The Group also has in place a bank facility that at the date of this report is fully drawn to $350 million. The
facility principal is due to be repaid commencing September 2009 through to October 2012. The funds from this
facility have and will be used to acquire assets for use in, or that are complementary to, the Group’s MIS
projects.
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Great Southern Limited
Review of Operations
30 September 2007
Treasury and Financial Risk Management
For personal use only
The Group’s policy is to manage its downside exposures to adverse movements in interest rates and to
receivables.
The Group enters into hedging transactions that either fix or cap the rate of interest payable on its external
borrowings. Floating interest payments and interest capitalising relating to the structured finance transaction
discussed above are fully hedged (fixed) with an effective after tax interest cost of 5.27%. At the date of this
report interest payments for $200 million of the debt facility are fixed using hedging instruments. It is expected
that the variable interest payments for the remainder of the outstanding bank borrowings will also be fixed via
hedging instruments during the 2008 financial year.
In June 2006, the Group renegotiated its securitisation arrangement with Adelaide Bank. Under the new
arrangement, which is in place to June 2010, Adelaide Bank is required, subject to the usual portfolio
performance covenants, to securitise all eligible loans with no recourse to the Group for any subsequent loan
defaults. Accordingly, when loans are now securitised, no funds are set aside to Adelaide Bank as security
against default.
Great Southern has determined that under this new securitisation arrangement the majority of the risks and
rewards of the loans sold do not reside with Great Southern and accordingly loans that are securitised to
Adelaide Bank are no longer carried on the Group’s balance sheet.
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Great Southern Limited
Directors’ Report
30 September 2007
DIRECTORS’ REPORT
For personal use only
Your directors present their report on the consolidated entity (referred to hereafter as the Group), consisting of
Great Southern Limited (the company) and the entities it controlled at the end of, or during, the year ended 30
September 2007.
Directors
The following persons were directors of Great Southern Limited during the financial year and up to the date of
this report, unless otherwise stated:
D C Griffiths
J C Young
A McCleary
P J Mansell
M L Peacock
C A Rhodes
P C Butlin (appointed 21 December 2006)
Information on the directors of Great Southern Limited during the financial year and up to the date of this
report:
David Griffiths
B Ec (Hons), M Ec
Non-Executive Chairman
David Griffiths has over 14 years experience in investment banking, most recently as Divisional Director of
Macquarie Bank Limited and previously as Executive Chairman of Porter Western Limited. Mr Griffiths was
appointed to the board as Chairman on 6th July 2005 and he is a member of the company’s Audit Committee
and Chairman of the Nomination Committee. Mr Griffiths is currently a non-executive chairman of ARC Energy
Ltd and Advanced Nanotechnology Ltd and a non-executive director of ThinkSmart Ltd, Northern Iron Limited
and Automotive Holdings Group Ltd. Mr Griffiths has not served as a director of any other listed company,
other than those noted above, as at the reporting date or in the past three years.
Mr Griffiths is also Pro-Chancellor of the University of Western Australia and also sits on the Board of the Perth
International Arts Festival.
John Young
B Bus MBA CPA
Managing Director
John Young is a founding director and controls private companies that are substantial shareholders of the
Group. An accountant by profession and with a Masters Degree in Business Administration, Mr Young has an
extensive background in the superannuation and funds management industries in Australia and the United
Kingdom. As Managing Director, Mr Young has overall responsibility for the management of the Group. Mr
Young has been a director since 27 May 1991.
Mr Young is a member of the Nomination Committee. Mr Young has no directorships in any other listed
companies as at the reporting date or in the past three years.
Alice McCleary
B Ec, FCA, FTIA, FAICD
Non-Executive Director
Alice McCleary joined the board as a non-executive director in March 2003. Ms McCleary is a chartered
accountant and company director, based in Adelaide. She has a long professional background in corporate
taxation practice, and in 2001/2002 she was National President of the Taxation Institute of Australia. Ms
McCleary is Deputy Chancellor of the University of South Australia, and a director of UraniumSA Ltd; Archer
Exploration Ltd; TWT Group Ltd; Adelaide Community Healthcare Alliance Inc, and the Child, Youth & Women’s
Health Service (SA). She is a member of the Takeover Panel and has recently been appointed to the
International Ethical Standards Board for Accountants. Ms McCleary is a Fellow of the Taxation Institute of
Australia, a Fellow of the Australian Institute of Company Directors and a Fellow of the Institute of Chartered
Accountants in Australia. Ms McCleary is Chairman of the Audit Committee, and a member of the Remuneration
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Great Southern Limited
Directors’ Report
30 September 2007
Committee and the Nomination Committee. Ms McCleary has no directorships in any other listed companies as
at the reporting date or in the past three years.
For personal use only
Peter Mansell
B.Com, LLB, H.Dip Tax, FAICD
Non-Executive Director
Peter Mansell joined the board as a non-executive director in November 2005. Mr Mansell practiced as a
business lawyer for 35 years and has a wide range of experience in corporate matters. He was at various times
the Freehills National Chairman (1995-2000), Managing Partner of Freehills Perth office (1992-2002) and a
member of the Freehills’ National Board (1989-2002). Mr Mansell is a Fellow of the Australian Institute of
Company Directors, having been President of the Western Australian division and having sat on its National
Board from 2001 to 2003. He is currently the Chairman of the following listed companies; ThinkSmart Limited,
West Australian Newspaper Holdings Limited, Zinifex Ltd, and a Director of Bunnings Property Management
Limited (responsible entity for the listed Bunnings Warehouse Property Trust). Mr Mansell is a member of the
Audit Committee, the Remuneration Committee and the Nomination Committee. In the past three years Mr
Mansell has been a director of the following listed companies: Foodland Associated Ltd, Hardman Resources
Ltd, JDV Ltd, and Tethyan Copper Company Ltd.
Mervyn Peacock
ASA, FFin, GAICD
Non-Executive Director
Mervyn Peacock joined the board of Great Southern Ltd as a non-executive director in April 2006. Mr Peacock
has over 35 years of domestic and international experience in a variety of investment areas including Fund
Management, Private Equity, Infrastructure and Property. Mr Peacock was Chief Investment Officer and a
Director of AMP Capital Investors for five years until his retirement in January 2006. Prior to that he was the
Investor Relations Manager of AMP Limited. Mr Peacock currently holds a number of directorships including
Reckson Australia Management Ltd, UniSuper Ltd, Connector Motorways Group, Riverland Water Pty Ltd, The
Infrastructure Fund of India and ABN Amro Investments Australia Ltd. Mr Peacock qualified as an Associate of
the Australian Society of Accountants, is a Fellow of the Financial Services Institute of Australasia, and is a
Graduate of the Australian Institute of Company Directors.
Mr Peacock is Chairman of the Remuneration Committee and a member of the Audit Committee,and the
Nomination Committee.
In the past three years Mr Peacock has been a director of the following listed companies: Reckson New York
Property Trust, DUET Trust and Equatorial Mining Ltd.
Cameron Rhodes
B Com, CA, FTIA, FCIS, MAICD
Executive Director and General Manager
Cameron Rhodes is Great Southern’s General Manager, with responsibility for overseeing all facets of the
Group, including financial, corporate and administrative functions. A chartered accountant, Cameron joined the
company in April 1999 following 12 years with PricewaterhouseCoopers, where he was a director in the
business services division. He is a fellow of the Taxation Institute of Australia, a fellow of the Chartered
Secretaries Institute of Australia and a member of the Australian Institute of Company Directors. Mr Rhodes
has been a director since 12 January 2002. Mr Rhodes is a member of the compliance committee of Great
Southern Managers Australia Limited, the responsible entity for the Group’s MIS projects. Mr Rhodes has no
directorships in any other listed companies as at the reporting date or in the past three years.
Phillip Charles Butlin
BA, CA
Executive Director and General Manager – Corporate Development
Phillip Butlin joined the board as an Executive Director on 21 December 2006. As General Manager – Corporate
Development, Mr Butlin has specific responsibility for developing the Group’s strategic direction including new
product development, acquisitions and capital management. Mr Butlin joined Great Southern in January 2004
after a 10 year career with Macquarie Bank’s Investment Banking Division in Sydney and Hong Kong. His
previous professional experience as a chartered accountant has included 10 years’ experience in tax, audit and
financial services with major accounting firms in London and Sydney. Mr Butlin has no directorships in any
other listed companies as at the reporting date or in the past three years.
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Great Southern Limited
Directors’ Report
30 September 2007
Company Secretary
For personal use only
Neil Hackett
B Ec GDAFI GDFP FFin
Neil joined Great Southern in January 2004 to oversee Great Southern’s compliance with investment-related
regulatory requirements and manage the Group’s corporate secretarial, ASX and ASIC obligations. Neil is the
General Manager of Great Southern’s Corporate Services Division and has 15 years’ funds management
experience, including eight years regulatory experience with the ASIC, and a role as Senior Investment and
Compliance Officer with one of Western Australia’s largest Master Trusts. Neil holds a Bachelor of Economics
and post graduate qualifications in Applied Finance & Investment and in Financial Planning. Neil is an Affiliate
of the Chartered Secretaries Institute and a Fellow of the Financial Securities Institute of Australasia.
Change in year end
In the previous year, the Group changed its financial year end from 30 June to 30 September. The prior
reporting period is the three months to 30 September 2006, which is not a comparable reporting period.
Consequently, the comparative amounts shown in the Income Statement and Cash Flow Statement are for the
year-ended 30 June 2006 and the three months ended 30 September 2006.
Meetings of directors
The numbers of meetings of the company's board of directors and each board committee held during the year
ended 30 September 2007, and the number of meetings attended by each director, are shown in the table
below.
Meetings of committees
Full meetings
of directors
Audit
Remuneration
Nomination
23
4
8
2
D C Griffiths
23
4
8
2
J C Young
23
*
*
*
C A Rhodes
23
*
*
*
P C Butlin
20
*
*
*
A McCleary
23
4
8
2
P J Mansell
22
4
8
2
M L Peacock
22
4
8
2
Number of meetings held
Number of meetings attended by:
* Not a member of the relevant committee
1. P C Butlin was elected to the board of directors on 21 December 2006. There were 20 full meetings of
directors from the date of his election to 30 September 2007.
2. J C Young and C A Rhodes attended all audit committee meetings as standing invitees during the year. P C
Butlin attended all audit committee meetings since his appointment to the Board on 21 December 2006 as a
standing invitee.
3. J C Young attended all remuneration committee meetings as standing invitee during the year
Retirement, election and continuation in office of directors
A McCleary and P J Mansell are the directors retiring by rotation at the annual general meeting and who, being
eligible, offer themselves for re-election.
- - 27 - -
Great Southern Limited
Directors’ Report
30 September 2007
Directors' interests in securities / MIS projects
For personal use only
Each director, and any director related parties’ interest in the share capital, TREES series, options and
management performance rights of the parent entity, and of the Group’s ongoing MIS projects as at the date of
this report is shown in the table below:
6
Ordinary
Shares
TREES2 and
TREES3
Options
Rights
Number
Number
Number
Number
MIS Project
Interests 1
Number
Director
D Griffiths
130,000
-
-
-
-
J C Young
47,872,204
-
-
-
1,656
2
C A Rhodes
1,333,333
-
-
1,125,000
96
3
P C Butlin
1,037,580
-
-
1,125,000
2345
A McCleary
19,606
-
-
-
P J Mansell
50,789
-
-
-
-
M L Peacock
10,158
-
-
-
-
7
4
1. Represents the number of investor lot interests in the Group’s ongoing MIS projects. All interests are on the
same terms and conditions to those of other investors in the same project.
2. Mr Young has 1,656 investor lot interests in a total of 17 ongoing projects.
3. Mr Rhodes has 96 investor lot interests in a total of 4 ongoing projects.
4. Ms McCleary has 7 investor lot interests in 2 ongoing projects.
5. Mr Butlin has 234 investor lot interests in 6 ongoing projects.
6. Refer to Remuneration Report on page 34 regarding share based compensation and management
performance rights.
Principal activities
The Group’s principal activities during the year were the development, marketing and management of
agribusiness based projects. The Group provides finance to approved investors who wish to invest is the
Group’s projects. The Group also acquires and manages farmland and other agribusiness related properties
which are held for long term investment and may also be made available to investors in the Group’s projects.
Employees
The Group employed 498 employees as at 30 September 2007 (30 September 2006: 360 employees).
Review of operations
Refer “Commentary on Results” on page 22.
- - 28 - -
Great Southern Limited
Directors’ Report
30 September 2007
Dividends and coupons
Dividends paid or declared by the company to members and coupons paid to TREES2 and TREES3 holders since
the end of the previous financial year are as follows:
Amount
per share
Total
amount
cents
$’000
11
Declared and paid during the year
Interim September 2007
Declared after year-end
Final September 2007
For personal use only
Ordinary dividends
Franked /
unfranked
Date of payment
34,111
Franked
27 October 2006
4
12,608
Franked
22 June 2007
8
25,362
Franked
17 December 2007
Coupon
per $100
TREES
Total
amount
Franked /
unfranked
Date of payment
%
$’000
6.4%
7.75%
6.4%
7.75%
2,564
4,872
2,557
4,832
Franked
Unfranked
Franked
Unfranked
31 October 2006
31 October 2006
30 April 2007
30 April 2007
Paid during the year
Final June 2006
TREES 2 / TREES 3 Coupons
Declared and paid during the
Six monthly coupon – TREES
Six monthly coupon – TREES
Six monthly coupon – TREES
Six monthly coupon – TREES
year
2
3
2
3
Earnings per share
Year to 30
September
2007
cents
3 months to
September
2006
cents
Year to
June
2006
cents
Basic earnings/(loss) per share
22.68
(12.21)
43.78
Diluted earnings/(loss) per share
20.67
(12.21)
40.73
In the prior year, the Group changed its financial year from the year ending 30 June to the year ending 30
September and given the nature of its seasonal operations had reported a net loss for the period ended 30
September 2006. Further information is provided in “Commentary on Results” on page 22.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Group during the year were as follows:
(a)
An increase in contributed equity from ordinary shareholders as a result of:
$’000
Issue of 620,000 fully paid ordinary shares at $1.00 - $1.50 each between 1 October 2006 and 30
September 2007 from the exercise of share options
630
Issue of 5,093,799 fully paid ordinary shares at $2.36 each from members’ participation in the
dividend reinvestment plan
12,022
Issue of 1,021,021 fully paid ordinary shares at $2.54 each from members’ participation in the
dividend reinvestment plan
3,046
Conversion of 157 TREES2 into 6,500 ordinary shares, net of issue costs
Total increase in contributed equity for the year ended 30 September 2007
- - 29 - -
15
15,713
Great Southern Limited
Directors’ Report
30 September 2007
Matters subsequent to the end of the financial year
For personal use only
(i)
Land acquisition
Since 30 September 2007, the Group has entered into new contracts for the purchase of land which, as of the
date of this report, are either conditional or unconditional, amounting to approximately $61,371,000. The
Group will continue to identify and acquire land throughout the year for use in future projects.
(ii)
Corporate Facility
Subsequent to the end of the financial year the Group has increased the size of its bank syndicated corporate
facility to $350,000,000 (2006: $245,000,000) and has fully drawn down on the facility to its limit.
(iii)
Agreement to acquire plantations and woodchip mill
Subsequent to year-end, the Group entered into an agreement to acquire rights to approximately 14,700
hectares of hardwood plantations and a 50% shareholding in a woodchip mill in Bunbury, Western Australia.
The total purchase price for the transaction is expected to be $47.3 million.
Transaction completion is expected to occur in the early part of 2008 following the satisfaction of a number of
conditions. The transaction will be funded with existing corporate debt facilities.
(iv)
Dividends
On 25 November 2007 the directors declared a fully franked dividend of $25,361,594 (8.00 cents per ordinary
share) to the holders of fully paid ordinary shares in respect of the financial year ended 30 September 2007.
The record date is 10 December 2007 and the dividend will be paid on 17 December 2007.
(v)
Retirement of the Managing Director
On 10 December 2007, the Group’s managing director, Mr John Young, announced his intention to retire
effective from the company’s annual general meeting to be held on 28 February 2008. Mr Young will provide
consultancy services to the Group from that date to 30 June 2008 after which Mr Young will join the Board as a
non-executive director. Mr Cameron Rhodes will take over the position of Managing Director and Chief
Executive Officer from 1 March 2008.
Likely developments and expected results of operations
There are no significant likely developments or proposed changes to the usual operations of the Group as at the
date of this report.
Environmental regulation
As one of Australia's largest private landholders, the Group has agribusiness operations in each State and
Territory and is required to comply with strict and extensive environmental regulation and the terms of
environmental approvals. In this regard Great Southern has developed, and is continuing to improve, a
comprehensive environmental management system to assist the Group with meeting its environmental
obligations.
Forestry is an industry which has particularly been the subject of a high degree of regulation and associated
public and regulator scrutiny and the Group’s performance in this industry has been historically well received.
The Group acquired Sylvatech Limited in 2005 and with it acquired the ongoing forestry operations on the Tiwi
islands. The operations on Tiwi are subject to regulation under the Environment Protection and Biodiversity
Conservation Act 1999 (Cth) (EPBC Act). An approval is held under the EPBC Act in relation to the Group’s Tiwi
island forestry operations jointly with the Tiwi Land Council.
Recent auditing undertaken in relation the Tiwi island operations has identified a possible compliance issue with
the establishment of plantations around buffer zones. Great Southern does not believe this issue is likely to
materially impact the Group or the environment however Great Southern takes its environmental
responsibilities very seriously and is proactively working with the Northern Territory and Commonwealth in
relation to the investigation and appropriate resolution of this issue.
- - 30 - -
Great Southern Limited
Directors’ Report
30 September 2007
Other than the issue noted above the directors are not aware of any significant issues relating to environmental
regulations during the period covered by this report that are likely to result in a material impact to the Group of
the environment
For personal use only
Shares under option
Un-issued ordinary shares of Great Southern Limited under option at the date of this report are as follows:
Date
Options/Rights
granted
Expiry date
Issue price of
shares
Options – Other
31 July 2003
31 July 2008
$1.00
200,000
Options - Other
Plan
Number under
option
30 June 2006
30 June 2008
$1.50
170,000
Management
Performance Rights
17 December 2004
17 December 2009
$0.00
3,920,000
Management
Performance Rights
31 March 2006
31 March 2011
$0.00
1,735,000
Management
Performance Rights
30 June 2006
30 June 2011
$0.00
350,000
Management
Performance Rights
20 December 2006
20 December 2011
$0.00
3,080,000
9,455,000
Shares issued on the exercise of options
The following ordinary shares of Great Southern Limited were issued during the year ended 30 September 2007
on the exercise of options granted. No amounts are unpaid on any of the shares.
Date options
granted
Issue price of
shares
Shares issued during
the year ended
30 September 2007
Shares issued since
30 September 2007
31 July 2003
$1.00
600,000
-
30 June 2006
$1.50
20,000
100,000
620,000
100,000
Directors’ and executives’ remuneration
Refer separate Remuneration Report at page 34 which forms part of this Directors’ Report.
Share options granted to directors and key management personnel
During the financial year, the Group granted 3,245,000 management performance rights (“Rights”) to executive
directors and key management personnel (including the five most highly remunerated executives) of the
company and the Group as part of their remuneration. For further details on the management performance
rights refer to the Remuneration Report on page 34.
Loans to directors and other key management personnel
Information on loans to executive directors and executives are set out in note 35 to the financial statements.
- - 31 - -
Great Southern Limited
Directors’ Report
30 September 2007
Other
For personal use only
In accordance with ASX Listing Rule 4.10.18, the company confirms that it has not initiated an on-market buyback in respect of the company's shares.
Insurance of officers
During the year the Group paid premiums to insure all officers of the parent entity and its controlled entities.
The officers of the parent entity covered by the insurance policy include the directors, former directors,
secretaries and all executive officers. The policy also includes cover for directors and executive officers of all
subsidiary entities.
The insurance contract specifically prohibits disclosure of the nature of the insured liabilities, the limit of
aggregate liability and the premiums paid.
Indemnity of directors and officers
Access and indemnity deeds have been executed by the parent entity with each of the directors and certain
officers of the parent entity. The deeds require the parent entity to indemnify each director or former director
against any legal proceedings and any claims of any kind, to the extent permitted by the law, made against,
suffered, paid or incurred by the officer pursuant to, arising from or in any way connected with the officer being
an officer of the company, the employment of the officer by the company and any act or omission by the
officer, directly or indirectly, connected therewith or a breach by the company of its obligations under the deed.
The deeds stipulate that the parent entity will meet the full amount of such liabilities, including costs and
expenses. Further, under the deeds, the company irrevocably and unconditionally guarantees the performance
of any controlled entity of all obligations under the deeds.
No liability has arisen under these indemnities as at the date of this report.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party, for
the purpose of taking responsibility on behalf of the company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under
section 237 of the Corporations Act 2001.
Auditors’ independence and non-audit services
The directors received the independence declaration on page 116 from Ernst & Young, the auditors of Great
Southern Limited.
The following table details the non-audit services provided by Ernst & Young in the year ended 30 September
2007. The directors are satisfied that the provision of non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The nature and the scope of each
type of non-audit service provided means that auditor independence was not compromised for the following
reasons:
ƒ
all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the
impartiality and objectivity of the auditor; and
ƒ
none of the services undermine the general principles relating to auditor independence as set out in
Professional Statement F1, which forms part of the Joint Code of Professional Conduct of the ICAA and the
CPAA, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making
capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards.
Ernst & Young received or is due to receive the following amounts for fees for the provision of non-audit
services for the Group. Details of audit services provided by Ernst and Young are disclosed in note 36 of the
financial report.
This is the first financial year that Ernst & Young have been the auditors of the Group.
- - 32 - -
Great Southern Limited
Directors’ Report
30 September 2007
30 Sept
2007
$
For personal use only
Other Advisory Services
49,955
Rounding of amounts to the nearest thousand dollars
The company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities and
Investments Commission, relating to the "rounding off" of amounts in the directors' report. In accordance with
that Class Order amounts in this report have been rounded off to the nearest thousand dollars, or in certain
cases, to the nearest dollar.
This report is made in accordance with a resolution of directors.
Dated at Perth, 20 December 2007
David Griffiths
Cameron Rhodes
Chairman
Executive Director
- - 33 - -
Great Southern Limited
Remuneration Report
30 September 2007
For personal use only
REMUNERATION REPORT
This Remuneration Report outlines the director and executive remuneration arrangements of the company and
the Group in accordance with the requirements of the Corporations Act 2001 and its Regulation. It also provides
the remuneration disclosures required by paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 Related Party
Disclosures, which have been transferred to the Remuneration Report in accordance with Corporations
Regulation 2M.6.04. For the purposes of this report Key Management Personnel (KMP) of the Group are defined
as those persons having authority and responsibility for planning, directing and controlling the major activities
of the company and the Group, directly or indirectly, including any director (whether executive or otherwise) of
the parent company, and includes the five executives in the parent and the Group receiving the highest
remuneration.
For the purposes of this report, the term ‘executive’ encompasses the Chief Executive, senior executives,
general managers and secretaries of the parent and the Group, that are disclosed in this report.
Remuneration of directors and executives is referred to as compensation as defined in Accounting Standard
AASB 124 Related Party Disclosures.
Compensation principles and policies - audited
The key underlying philosophy of Great Southern Limited’s remuneration policy is to protect and build
shareholder value through the successful attraction, motivation and retention of valuable employees
throughout the Company. To do so, the Company and Board are committed to remuneration practices
which:
•
Motivate employees to perform in the best interests of the Company and its stakeholders;
•
Link corporate, team and individual performance;
•
Attract and retain the talented people and skills needed to ensure the Company achieves both
short and long term success;
•
Provide remuneration which is competitive and remuneration structures which are sufficiently
flexible to cope with competitive pressures; and
•
Ensure equity and consistency across the Company.
Extensive benchmarking is used to ensure the right balance is achieved, with the total remuneration,
including performance incentives, of Great Southern employees positioned at the 75th percentile of the
relevant remuneration market, commensurate with Great Southern’s market position, growth profile and
complexity.
Executive Committee members’ compensation and other terms of employment are reviewed annually by the
Remuneration Committee having regard to overall company performance and personal performance. The
Board’s Remuneration Committee obtains independent advice on the appropriateness of remuneration packages
and has access to relevant comparative information including benchmarking.
Other executives’ remuneration and other terms of employment are reviewed annually by the Executive
Committee having regard to personal performance and overall corporate performance. The Executive
Committee may obtain independent advice where necessary on the appropriateness of remuneration
packages, including benchmarking and access to relevant comparative information.
Remuneration Committee
The Board’s Remuneration Committee advises the Board on compensation policies and practices generally and
makes specific recommendations on compensation packages and other terms of employment for executive
directors and Executive Committee members.
Refer the Corporate Governance Statement for further information regarding the Remuneration Committee.
- - 34 - -
Great Southern Limited
Remuneration Report
30 September 2007
For personal use only
Non-executive Directors
Fees and payments to non-executive directors reflect the demands and the responsibilities of the directors.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically
recommended for approval by the shareholders. Non-executive directors do not receive performance or equity
based remuneration. The maximum total remuneration limit for non-executive directors was set at $750,000
for the year ended 30 June 2006 and beyond and non-executive director fees currently total $491,000 per
annum. The annual individual non-executive director fee is currently set at $97,000 per annum and the annual
non-executive chairman’s fee is currently set at $200,000 per annum. The current fees for non-executive
directors have been set with reference to guidance provided in 2006 by an independent benchmarking study on
director remuneration.
Each non-executive director receives a base fee which is inclusive of superannuation and committee fees.
Non-executive director fees are reviewed annually by the Board.
Executive Committee
The Company’s senior executive team is referred to as the Executive Committee and through the twelve month
period to 30 September 2007 comprised executive directors J C Young, C A Rhodes and P C Butlin and
executives J S Dayman, N J Hackett, S C Martin and S A Moran.
Compensation Components
For the Executive and management staff, compensation packages generally comprise a mix of:
¾
Fixed Compensation - Base compensation, superannuation and benefits;
¾
Variable Compensation
o
Short-term incentive (STI) based on performance to annual corporate and individual goals;
and
o
Long-term incentives (LTI) in the form of performance rights issued under the Management
Performance Rights Plan (as previously approved by shareholders), based on corporate
performance and employee position
For other employees, packages generally comprise a mix of:
¾
Fixed Compensation - Base compensation, superannuation and benefits; and
¾
Variable Performance Linked Compensation - Short-term incentive (STI) based on performance to
annual corporate and individual goals.
The objective of this mix of fixed and variable (or at risk) compensation is designed to attract, motivate and
retain valuable employees throughout the Company through the provision of competitive remuneration, whilst
ensuring shareholder value creation by rewarding achievement of the Company’s short, medium and long term
strategic plans.
The Company intends to introduce an employee share plan in 2008, subject to shareholder approval. This will
provide the opportunity to give medium to long term incentives to employees in the form of restricted shares
which are subject to a service requirement, and encourage through the possibility of share salary sacrifice,
employee share ownership and alignment with shareholder interests.
Retirement benefits are not paid as part of the pay and remuneration framework, other than to J C Young.
Fixed Compensation
Fixed compensation consists of base compensation and employer contributions to superannuation funds. Base
compensation is structured as a total employment cost package which can be delivered as a mixture of cash
and prescribed non-cash benefits at the executive’s discretion.
- - 35 - -
Great Southern Limited
Remuneration Report
30 September 2007
Executives are offered a competitive base compensation that is set following extensive benchmarking, to reflect
the market for a comparable role having regard to the responsibilities and accountabilities of the role.
Base compensation for executives is reviewed annually to ensure the remuneration remains competitive with
the market. This financial year, the base compensation for the executive directors did not increase.
For personal use only
There are no guaranteed base remuneration increases fixed in any executive contract.
Variable Compensation
Variable compensation includes both short term and long term incentives and is “at risk” as the payment of this
remuneration component is contingent on the achievement of individual and Company targets. The short term
incentive (STI) is a bonus provided in the form of cash or cash and deferred shares (subject to shareholder
approval of the proposed employee share plan), and is designed to reward employees for meeting or exceeding
annual performance objectives. The long term incentive (LTI) is provided as performance rights pursuant to the
Company’s Management Performance Rights Plan or deferred shares (subject to shareholder approval of the
proposed employee share plan). The Board exercises discretion in the payment of bonuses and allocations of
shares or performance rights to employees.
Short-Term Incentive
Grants of STI are made on an annual basis at the end of the financial year, in conjunction with the performance
appraisal process and the assessment of individual employee’s achievement to their annual performance
objectives. These may be cash or a combination of cash and deferred shares (subject to shareholder approval
of the proposed employee share plan).
The Remuneration Committee determines STI grants for the Executive Committee having regard to the
performance of the Company and the performance of the individual executive, during the year and sets target
performance level STI percentages for the rest of the executive. The Remuneration Committee also sets the
bonus pool for the remainder of the Company. The base target STI level for Executive Committee members for
2006/07 was set at 60% of base remuneration however the Remuneration Committee had the discretion to
provide an STI in excess of this target.
Each employee job band has, pursuant to the Remuneration Policy, threshold and target STI quantum set in
consideration of the accountabilities of the roles in the band and impact on the performance of the Company.
The major key performance measure used by the Remuneration Committee to determine the level of STI
bonuses for executives was the net profit result, excluding one off items as determined by the Committee, and
the performance against budget for the full financial year. In addition for the financial year 2006/07, in
consideration of the performance of the Company and the difficult regulatory environment the bonus pool was
significantly reduced from the prior financial years, with the bonus as a percentage of the past year’s
remuneration at an average of 23% in the financial year 2006 – 2007 down from 57% in the 05/06 financial
year. This was despite strong competition for employees in most of the Company’s employment markets, and
with 15% more staff overall. Executive bonuses were significantly reduced to an average of 28% of base
remuneration and the managing Director J C Young did not receive any STI allocation.
Bonuses are not payable to non-executive directors.
Long-term equity based incentives
The current LTI plan
Under the plan, performance rights (“Rights”) are issued under the Company’s Management Performance
Rights Plan (MPR Plan). The maximum number of Rights that may be on issue is set at 10% of the number of
ordinary shares on issue in accordance with the management performance rights plan approved by
shareholders in October 2004. That plan is due to be ratified again by shareholders at the forthcoming AGM.
All managers, other than the Managing Director, JC Young, are eligible to participate in the MPR Plan.
The Remuneration Committee determines in its discretion the number of Rights to allocate to Executive
Committee members having regard to the business goals of the company and the other elements of
remuneration provided to the executives. The Committee also determines the pool of Rights to make available
to other employees.
On 20 December 2006, the Company issued 3,245,000 Rights to 95 employees under the current MPR Plan.
- - 36 - -
Great Southern Limited
Remuneration Report
30 September 2007
For personal use only
The ability to exercise management performance rights is dependant upon the Group achieving certain
performance hurdles. If a Right has vested it can be exercised into one ordinary share prior to the Right’s
expiry date. The Rights are issued for no consideration and no consideration is paid to exercise the Right.
The performance measure is Total Shareholder Return (TSR), being broadly the change in the share price over
the performance period plus dividends notionally re-invested in the Company’s shares. The TSR growth for the
company at each measurement point in the vesting period is ranked against the equivalent TSR growth of all
companies in the S&P/ASX 200 Industrials Accumulation Index.
The level of the company’s performance at or above the 51st percentile ranking dictates the number of Rights
that vest and may be exercised, as follows:
TSR Ranking in S&P ASX 200 Industrials
Accumulation Index
Below 51st percentile
Number of Rights Exercisable
Nil
st
51 percentile
52% of Rights exercisable
75th percentile
100% of Rights exercisable
st
th
Greater than 51 percentile and less than 75
percentile
Calculated on a pro rata basis between 52% and
100% depending on the company’s percentile
performance ranking (rounded down to the
nearest whole number)
The vesting period for each Right ranges from a period of 3 to 5 years from the initial Right’s grant date. The
start of a Right’s vesting period is referred to as the “first performance measurement date”.
The performance measure is retested each three months throughout the vesting period until either 100% of the
Rights vest or, if earlier, the expiry date. As at the date of this report no Rights have met the performance
hurdle and no Rights have vested. In addition, for those Rights for which performance testing is not yet
applicable, the number of Rights that meet the performance hurdle at the date of this report is nil.
The revised plan
Great Southern’s LTI strategy for executives and senior management was reviewed in late 2007. The purpose
of the review was to ensure that the Company had an LTI plan that would facilitate the achievement of the five
year strategic plan and was consistent with market practice. Key to achievement of the five year strategic plan
is the retention of key executives. As a consequence, the goals of the LTI plan were refined to:
o
to align the interests of the executives and senior managers with shareholder interests; and
o
to retain, motivate and lock in senior executives
through a LTI plan with time and share price performance based vesting hurdles.
As a consequence, new performance Rights will be split equally between two tranches. As with the old plan, if a
Right has vested it can be exercised into one ordinary share prior to the Right’s expiry date. The Rights are
issued for no consideration and no consideration is paid to exercise the Right.
The first tranche will be dependant upon the Group achieving certain performance hurdles. The performance
measure is relative Total Shareholder Return (TSR). The TSR growth for the company at the measurement
point at the sole vesting period is ranked against the equivalent TSR growth of all companies in the S&P/ASX
200 Small Industrials Accumulation Index (excluding mining companies). There is no retesting of the
performance measure.
As with the current plan, the level of the company’s performance at or above the 51st percentile ranking
dictates the number of Rights that vest and may be exercised.
The second tranche is specifically designed to retain key executives. It is dependant on the Group achieving
certain performance hurdles. The performance measure is TSR growth ranked against CPI plus a growth target.
Vesting is achieved if the employee remains in employment with the Company and TSR in relation to the
- - 37 - -
Great Southern Limited
Remuneration Report
30 September 2007
reference price is better than CPI plus 2% p.a. in year 3, CPI plus 2.5% p.a. in year 4, and CPI plus 3% p.a. in
year 5. These are modest targets as the main purpose of this tranche is retention.
Executives receive benefits such as allocated car park spaces and payment of relevant professional
subscriptions. The Remuneration Committee has the discretion to provide other benefits to executives on
determining an appropriate and competitive compensation package.
Retirement benefits
Retirement benefits are not paid as part of key management personnel service agreements, other than to J C
Young. Under the terms of his service agreement J C Young will accrue a retirement benefit equivalent to 20%
of base remuneration per annum for each year of completed service after ten years of completed service,
capped at a maximum of 200% of base remuneration.
Termination benefits
Termination benefits are paid on early termination by the employer other than for gross misconduct and are
linked to remuneration, reduced by the amount of any payment made in lieu of notice (further details on
termination benefits can be found on page 39).
Shareholder Wealth
50
40
30
20
10
0
-10
June 2004* June 2005
June 2006 Sept 2006** Sept 2007
-20
EPS
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Share price ($)
The graph below shows the performance of the Group as measured by earnings per share and share price for
the current year and the previous 4 financial years.
Cents per share
For personal use only
Other Benefits
Share price
* June 2004 was prepared under AGAAP whilst all other periods presented are under AIFRS.
** In 2006 the Company changed its year end to 30 September and as part of this change the company was
required to prepare an annual report for the 3 months ended 30 September 2006.
Details of remuneration - audited
Details of the remuneration of the directors and the key management personnel (as defined in AASB 124
Related Party Disclosures) of the company and Group are set out in the following tables.
The key management personnel of Great Southern Limited include the directors as per page 25 and the
following executives which include the five company and Group executives who received the highest
remuneration for the year ended 30 September 2007:
•
J S Dayman – Chief Operating Officer
•
S C Martin – Chief Financial Officer
•
N J Hackett – Company Secretary and General Manager – Corporate Services
•
S A Moran – General Manager – Sales and Marketing
•
G Ellis – General Manager – Forestry
- - 38 - -
Great Southern Limited
Remuneration Report
30 September 2007
For personal use only
Short-term benefits
Directors
Post Employment benefits
Share-based
payment
Salary &
fees
Cash
bonus
Nonmonetary
benefits
Superannuation
Retirement
benefits
Rights 1
Total
Proportion of
remuneration
that is
performance
related
$
$
$
$
$
$
$
$
Compensation
consisting of
Rights
%
Non-executive
D C Griffiths
A McCleary
P J Mansell
M L Peacock
Year to 30 Sept 2007
114,827
-
-
85,173
-
-
200,000
0.0%
0.0%
3 months to 30 Sept 2006
43,226
-
-
2,928
-
-
46,154
0.0%
0.0%
0.0%
Year to 30 Sept 2007
61,609
-
-
35,391
-
-
97,000
0.0%
3 months to 30 Sept 2006
20,536
-
-
1,849
-
-
22,385
0.0%
0.0%
Year to 30 Sept 2007
88,991
-
-
8,009
-
-
97,000
0.0%
0.0%
3 months to 30 Sept 2006
20,536
-
-
1,849
-
-
22,385
0.0%
0.0%
Year to 30 Sept 2007
-
-
-
97,000
-
-
97,000
0.0%
0.0%
3 months to 30 Sept 2006
-
-
-
22,385
-
-
22,385
0.0%
0.0%
0.0%
Executive
J C Young
C A Rhodes
P C Butlin
Sub-total
Year to 30 Sept 2007
803,030
-
26,091
96,970
90,813
-
1,016,904
0.0%
3 months to 30 Sept 2006
204,765
-
15,689
2,928
47,475
-
270,857
0.0%
0.0%
Year to 30 Sept 2007
510,308
225,000
51,091
39,692
-
505,446
1,331,537
54.9%
38.0%
3 months to 30 Sept 2006
123,995
-
7,099
2,928
-
106,107
240,129
44.2%
44.2%
Year to 30 Sept 2007
510,308
225,000
51,091
39,692
-
505,446
1,331,537
54.9%
38.0%
44.2%
44.2%
3 months to 30 Sept 2006
123,995
-
6,980
2,928
-
106,107
240,010
Year to 30 Sept 2007
2,089,073
450,000
128,273
401,927
90,813
1,010,892
4,170,978
3 months to 30 Sept 2006
537,053
-
29,768
37,795
47,475
212,214
864,305
1.
The fair value of the Rights granted to each of the above directors and executives is allocated on a straight line basis over the Rights’ expected vesting period.
2.
P C Butlin was appointed an executive director on 21 December 2006. In the prior period P C Butlin was included in “Other key management personnel”.
- - 39 - -
For personal use only
Short-term benefits
Other key management personnel
J S Dayman
S C Martin
N J Hackett
S A Moran
G Ellis
Sharebased
payment
Salary &
fees
Cash
bonus
Nonmonetary
benefits
Superannuation
Retirement
benefits
Rights 1
Total
Proportion of
remuneration
that is
performance
related
$
$
$
$
$
$
$
%
Compensation
consisting of
Rights
%
Year to 30 Sept 2007
306,871
160,000
1,091
13,129
-
145,579
626,670
48.8%
3 months to 30 Sept 2006
70,919
-
-
2,928
-
30,139
103,986
29.0%
29.0%
Year to 30 Sept 2007
306,871
160,000
1,091
13,129
-
145,579
626,670
48.8%
23.3%
23.3%
3 months to 30 Sept 2006
70,919
-
-
2,928
-
30,139
103,986
29.0%
29.0%
Year to 30 Sept 2007
251,871
120,000
1,091
13,129
-
99,407
485,498
45.2%
20.5%
3 months to 30 Sept 2006
58,226
-
-
2,928
-
18,952
80,106
23.7%
23.7%
Year to 30 Sept 2007
306,871
145,000
1,091
13,129
-
262,780
728,871
55.9%
36.1%
3 months to 30 Sept 2006
70,919
-
-
2,928
-
58,486
132,333
44.2%
44.2%
Year to 30 Sept 2007
251,773
120,000
17,091
48,227
-
100,261
537,352
41.0%
19.4%
24.6%
24.6%
3 months to 30 Sept 2006
62,230
-
4,273
2,928
-
22,613
92,044
1,424,257
705,000
21,455
100,743
-
753,606
3,005,061
333,213
-
4,273
14,640
-
160,329
512,455
Year to 30 Sept 2007
3,513,330
1,155,000
149,728
502,670
90,813
1,764,498
7,176,039
3 months to 30 Sept 2006
870,266
-
34,041
52,435
47,475
372,543
1,376,760
Sub-total
TOTAL – Key
Management
Personnel
Post Employment benefits
- - 40 - -
Great Southern Limited
Remuneration Report
30 September 2007
For personal use only
Service agreements - audited
Remuneration and other terms of employment for the executive directors and key management personnel are
formalised in service or employment contracts. Each of these contracts provide for the provision of
performance related cash bonuses, other benefits such as car parking and for Executive Committee members
interest free loans, and participation in, when available, an equity linked performance incentive plan. Other
major provisions of the agreements relating to remuneration are set out below:
Term of
contract
Base remuneration
Sept 2007 1
Termination benefit
3
Retirement benefit
20% x base
4
$
3,4
J C Young
Ongoing
900,000
12 months + STI
Ongoing
690,000
12 months + STI
n/a
Ongoing
690,000
12 months + STI
n/a
J S Dayman
Ongoing
320,000
n/a
n/a
S C Martin
Ongoing
320,000
n/a
n/a
N J Hackett
Ongoing
265,000
n/a
n/a
S A Moran
Ongoing
320,000
n/a
n/a
G Ellis
Ongoing
300,000
n/a
n/a
C A Rhodes
P C Butlin
2,3
2,3,
4
1.
Annual base remuneration is inclusive of superannuation and is reviewed annually. Superannuation
payments for all executives are $13,129 p.a, exclusive of any superannuation which is salary sacrificed.
2.
In addition to superannuation payments detailed in note 1 above the base remuneration package for C A
Rhodes and P C Butlin includes allowance for a motor vehicle, with an assessed benefit of $50,000 p.a.,
and the notional interest cost from the company providing the employee reserved shares (refer note 30) to
C A Rhodes $87,379 (September 2006: $27,472) and to P C Butlin $92,642 (September 2006: $28,539).
3.
If there is a substantial diminution in the role and responsibilities of any of J C Young, C A Rhodes or P C
Butlin then either the company or the particular executive may elect to terminate the executive’s
employment and in such circumstances the company will pay the executive a severance payment
equivalent to 12 months annual base salary plus short term incentive (STI) payment. The STI is calculated
to equal the average STI payout from the immediate prior three years, (less any amount paid in lieu of
notice under their employment contract).
4.
Under the terms of his employment contract J C Young will accrue a retirement benefit equivalent to 20%
of base remuneration per annum for each year of completed service after ten years of completed service,
capped at a maximum of 200% of base remuneration. At 30 September 2007 J C Young had been
employed by the company for a total of 19 completed years and accordingly he has an accrued retirement
benefit of $1,812,368.
Share based compensation - audited
Management Performance Rights Plan
The terms and conditions of each grant of Rights affecting remuneration for all employees including key
management personnel and the top five paid executives in this or future reporting periods are as follows.
As at the date of this report no Rights have met the performance hurdle and no Rights have vested. In addition,
for those Rights for which performance testing is not yet applicable, the number of Rights that meet the
performance hurdle at the date of this report is nil:
- - 41 - -
For personal use only
Great Southern Limited
Remuneration Report
30 September 2007
Grant date
Expiry
date
Fair value
per Right at
grant date
Exercise
price
Vesting period/date
exercisable1
17/12/04
17/12/09
$2.07
$0.00
17/12/06 to 17/12/09
31/03/06
31/03/11
$2.00
$0.00
17/12/06 to 31/03/11
31/03/06
31/03/11
$2.13
$0.00
31/03/08 to 31/03/11
30/06/06
30/06/11
$1.63
$0.00
31/03/09 to 31/03/11
20/12/06
20/12/11
$1.44
$0.00
20/12/09 to 20/12/11
1.
Dependant upon achieving the required performance measure during the vesting period.
2.
On 20 December 2006, the company issued 3,245,000 Rights to 95 employees. Each Right has an exercise
price of $nil and expires on 20 December 2011. Rights were issued to employees in two tranches with the
first performance measurement date for tranche 1 and tranche 2 being 20 December 2009 and 20
December 2010, respectively.
An employee who holds shares in the company as a result of the exercise of a vested Right may not deal with
those shares before the earlier of: (a) the end of a ten year period commencing at the grant date of the Rights;
(b) the date the employee ceases to be employed by the company; and (c) a time determined by the board
(“the Restriction Period”).
An employee issued with Rights who ceases to be an employee (for reasons other than for termination) during
the period from the grant date to the expiry date is entitled to exercise any vested Rights. For an employee
whose employment with the company is terminated all Rights grants remaining unexercised at the date of
termination lapse.
Rights issued to employees are not transferable except with the approval of the board or by operation of law on
death or legal incapacity.
The amounts disclosed for emoluments relating to management performance rights above are assessed at the
fair values at grant date of the Rights granted to the Executive Committee member and the manager, allocated
equally over the period from the grant date to the average vesting period end date.
Fair values at grant date and the average vesting period end date are independently valued using a Monte Carlo
simulation to model the potential TSR ranking of the company and other companies in the ASX/S&P 200
Accumulation Index over 10,000 iterations. The model used takes into account the share price at grant date,
the performance measurement hurdles to vesting, the expected price volatility of the company’s ordinary
shares, the expected dividend yield, the risk-free interest rate, the exercise price of the Rights and the average
restriction period for dealing in shares after exercise.
- - 42 - -
Great Southern Limited
Remuneration Report
30 September 2007
The model inputs for the Rights included in key management compensation for the year ended 30 September
2007 included:
Grant date
17/12/04
31/03/06
31/03/06
30/06/06
20/12/06
$3.93
$4.05
$4.05
$3.40
$2.84
First performance measurement date – tranche 1
17/12/06
17/12/06
31/03/08
31/03/09
20/12/09
First performance measurement date – tranche 2
17/12/07
17/12/07
31/03/09
31/03/10
20/12/10
First performance measurement date – tranche 3
-
-
31/03/10
-
-
17/12/09
17/12/09
31/03/11
31/03/11
20/12/11
Each 3
months
Each 3
months
Each 3
months
Each 3
months
Each 3
months
35.0%
35.0%
35.0%
35.0%
35.0%
Expected dividend yield
3.6%
4.1%
4.1%
4.2%
4.41%
Risk-free interest rate
5.0%
5.4%
5.4%
5.8%
5.96%
7 years
7 years
7 years
7 years
7 years
For personal use only
Share price at grant date
Last performance measurement date – all tranches
Re-testing of performance measure if 100% not vesting
Expected price volatility of the company’s shares
Average share dealing restriction period
Rights Vesting
Details of Rights over ordinary shares in the company provided as remuneration to each executive director of
Great Southern Limited and each of the key management personnel, including the 5 most highly remunerated
personnel, of the Group are set out below. When exercisable, each Right is converted into one ordinary share of
Great Southern Limited.
Number of Rights granted
during the year
Number of Rights vested
during the year
Year ended 30
September
2007
3 months
ended 30
September
2007
Year ended 30
September
2007
3 months
ended 30
September
2007
C A Rhodes
450,000
-
-
-
P C Butlin
450,000
-
-
-
J S Dayman
120,000
-
-
-
S C Martin
120,000
-
-
-
N J Hackett
100,000
-
-
-
S A Moran
100,000
-
-
-
75,000
-
-
-
G Ellis
- - 43 - -
Great Southern Limited
Remuneration Report
30 September 2007
Shares provided on exercise of remuneration options
For personal use only
No remuneration options or performance rights have been exercised during the financial year by any director of
Great Southern Limited and other key management personnel of the Group.
Share-based compensation: Rights
The value of Rights granted during the year to executive directors and key management personnel are set out
below:
Name
Right value at
Grant Date 1
Right value
at Exercise
Date 2
Right value
at Lapse
Date 3
Total
$
$
$
$
C A Rhodes
645,700
-
-
645,700
P C Butlin
645,700
-
-
645,700
J S Dayman
172,200
-
-
172,200
S C Martin
172,200
-
-
172,200
N J Hackett
143,500
-
-
143,500
S A Moran
143,500
-
-
143,500
G Ellis
107,625
-
-
107,625
1. The value of remuneration consisting of Rights, based on the value at grant date, calculated in accordance
with AASB 2 Share-based Payment of Rights granted during the year as part of remuneration.
2. The value at exercise date of Rights that were granted as part of remuneration and were exercised during
the year.
3. The value at lapse date of Rights that were granted as part of remuneration and that lapsed during the year.
- - 44 - -
Great Southern Limited
Remuneration Report
30 September 2007
Additional information – unaudited
For personal use only
Details of Remuneration: Cash Bonuses and Rights
For the year to 30 September 2007 executives were entitled to an STI cash bonus with the amount of the STI
determined by the Remuneration Committee or the Executive Committee. For Executive Committee members
the base STI level was set at 60% of base remuneration although the Remuneration Committee had the
discretion to provide an STI in excess of this target. For general managers the base target STI level was set at
50% of base remuneration although the Executive Committee had the discretion to provide an STI in excess of
this target. For the year ended 30 September 2007 CA Rhodes and P C Butlin achieved 68% of their target STI
(32% of target STI not achieved), J S Dayman and S C Martin achieved 83% of their target STI (17% target
STI not achieved), N J Hackett and S A Moran achieved 75% of their target STI (25% target STI not achieved)
and G Ellis achieved 80% of his target STI (20% target not achieved). J C Young did not receive an STI
payment and so 100% of his base target STI was not achieved.
For each grant of Right and options included in remuneration the percentage of the available grant that vested
in the financial year and the percentage that was forfeited, due to the highest performance criteria not being
achieved, is set out below:
Options / Rights
C A Rhodes
P C Butlin
J S Dayman
S C Martin
N J Hackett
S A Moran
G Ellis
Maximum
total value of
grant yet to
vest 4
Year
Granted
Vested
Forfeited
-
-
%
-
%
-
%
-
$
-
$
-
500,000
30/06/05
-
-
nil
93,372
175,000
30/06/06
-
-
nil
181,205
450,000
30/09/07
-
-
30/09/07 to
30/09/10
30/09/08 to
30/09/11
30/09/10 to
30/09/12
nil
507,392
500,000
30/06/05
-
-
nil
93,372
175,000
30/06/06
-
-
nil
181,205
450,000
30/09/07
-
-
30/09/07 to
30/09/10
30/09/08 to
30/09/11
nil
507,392
100,000
30/06/05
-
-
nil
18,674
75,000
30/06/06
-
-
nil
82,061
120,000
30/09/07
-
-
nil
135,304
100,000
30/06/05
-
-
nil
18,674
75,000
30/06/06
-
-
nil
82,061
120,000
30/09/07
-
-
nil
135,304
60,000
30/06/05
-
-
nil
11,205
50,000
30/06/06
-
-
nil
54,707
100,000
30/09/07
-
-
nil
112,754
225,000
30/06/06
-
-
nil
103,880
100,000
30/09/07
-
-
nil
112,754
75,000
30/06/05
-
-
nil
14,006
50,000
30/06/06
-
-
nil
54,707
75,000
30/09/07
-
-
30/09/07 to
30/09/10
30/09/08 to
30/09/11
30/09/10 to
30/09/12
30/09/07 to
30/09/10
30/09/08 to
30/09/11
30/09/10 to
30/09/12
30/09/07 to
30/09/10
30/09/08 to
30/09/11
30/09/10 to
30/09/12
30/09/07 to
30/09/11
30/09/10 to
30/09/12
30/09/07 to
30/09/10
30/09/08 to
30/09/11
30/09/10 to
30/09/12
nil
84,565
Number
J C Young
Minimum
total value of
grant yet to
vest 3
Financial years
in which
Options/ Rights
vest 1, 2
1.
In the prior year the Group’s financial year end changed from a 30 June year end to a 30 September year
end.
2.
Vesting period is inclusive of financial years shown in the table.
- - 45 - -
For personal use only
Great Southern Limited
Remuneration Report
30 September 2007
3.
The minimum value of Rights yet to vest is $nil as the performance criteria may not be met and
consequently no Rights may vest.
4.
The maximum value of Rights yet to vest is not determinable as it depends on the market price of shares
of the company on the Australian Stock Exchange at the date the Right is exercised. The maximum values
presented above are based on the fair value of Rights determined on the respective Right grant dates that
remain to be amortised in the accounts.
- - 46 - -
Great Southern Limited
Corporate Governance Statement
30 September 2007
CORPORATE GOVERNANCE STATEMENT
For personal use only
Overview
Since the introduction of the ASX Corporate Governance Council's Principles of Good Corporate Governance and
Best Practice Recommendations ("ASX Principles and Recommendations"), the Board of Great Southern
Limited ("the company") has made it a priority to adopt systems of control and accountability as the basis for
the administration of corporate governance. Great Southern’s Board of Directors and management strongly
support the principles of good corporate governance, and are committed to building on the Group’s reputation
for integrity. This is particularly important given the highly regulated industry in which the Great Southern
Group operates, and is essential for increasing our opportunities within the funds management and financial
services sectors, as well as for the long term sustainability of our business. The Group’s corporate governance
practices are reviewed regularly and will continue to be developed and refined to meet the needs of the Group
and appropriate practices.
The Great Southern Group adopts the “Principles of Good Corporate Governance and Best Practice
Recommendations” which were published by the Australian Securities Exchange Corporate Governance Council
(ASX CGC) in March 2003. The company's corporate governance practices are fully compliant with these ASX
Principles and Recommendations and have been for the year to 30 September 2007.
On 2 August 2007, the ASX CGC published revised principles and recommendations, which will apply to the
Great Southern Group for the financial year 1 July 2008 to 30 June 2009. The Great Southern Group is
reviewing the revised principles and recommendations to ensure appropriate measures are taken with the aim
of complying with best practice.
The board of directors and management of the company are responsible for governance. This corporate
governance statement outlines the key principles and practices of the company which form the system of
governance. The company has followed each of the ASX Principles and Recommendations, taking into account
factors such as the size of the company and the Board, resources available and activities of the company.
The company includes information about its corporate governance practices on the company's website at
www.great-southern.com.au including charters (for the board and its sub-committees), the company's code of
conduct and other policies and procedures relating to the board and its responsibilities.
The company and its directors are committed to high standards of corporate governance. Set out below is a
description of the company’s main corporate governance practices which have been in place for the full financial
year unless otherwise stated.
Board of Directors and its Committees
The Board has responsibility for approving the strategy and monitoring the implementation of the strategy and
the performance of Great Southern Limited and its subsidiaries (the group of companies is referred to as “the
Group” in this report), protecting the rights and interests of shareholders and is responsible for overall
corporate governance. The Managing Director and Executive Committee are responsible for day to day
management of the Group and implementing the strategies adopted by the Board.
The Board’s responsibilities include:
•
Approving and monitoring the strategic planning process of the Group and reviewing and approving
the long term goals and annual budgets to ensure that these strategic objectives are met;
•
Monitoring the performance of management against these goals and objectives;
•
Ensuring that there are adequate internal controls and ethical standards of behaviour adopted and met
within the Group;
•
Ensuring the integrity of the Group’s financial reporting;
•
Ensuring that the business risks facing the Group are identified and that appropriate monitoring and
reporting controls are in place to manage these risks;
- - 47 - -
For personal use only
Great Southern Limited
Corporate Governance Statement
30 September 2007
•
Appointing the Managing Director, evaluating performance and determining the remuneration of senior
executives and ensuring that appropriate policies and procedures are in place for recruitment, training,
remuneration and succession planning; and
•
Delegating to the Managing Director and Executive Committee the authority to manage and supervise
the business of the Group, including the making of all decisions regarding the Group’s operations, that
are not specifically reserved to the Board.
In connection with their duties and responsibilities, Directors and Board committees have the right to seek
independent professional advice at the company’s expense. Prior written permission from the Chairman is
required.
Composition of the Board
The Board comprises seven directors who are appointed to ensure that the company is run in the best interest
of all shareholders. Other than John Young, Cameron Rhodes and Phillip Butlin all the directors, including the
Chairman, David Griffith, are independent non-executives. Subject to the Corporations Act requirements in
relation to the retirement of directors, the current directors have not been appointed for a specified term.
Skills, experience, expertise and term of office of each director
A profile of each director containing the skills, experience, expertise and term of office of each director is set
out in the Directors' Report.
Identification of independent directors
The Board is to be comprised of both executive and non-executive directors with a majority of non–executive
directors. Non-executive directors bring a fresh perspective to the Board’s consideration of strategic, risk and
performance matters and are well placed to exercise independent judgement and review and constructively
challenge the performance of management.
The Board Charter states that ‘a director will be considered independent if they have no relationship to the
company that may interfere with the exercise of their independence from management and the company’.
During the year to 30 September 2007 the Board satisfied this principle. For the purposes of determining
independence the Board has determined that a material professional adviser is one where the adviser’s
revenues derived from the Group exceeds 5% of the adviser’s total revenues from all sources.
Applying the independence criteria, the Board considers that D C Griffiths, A McCleary, P J Mansell and M L
Peacock are all independent.
Committees
The Board has three committees to assist in the implementation of its corporate governance practices and
fiduciary and financial reporting and audit responsibilities. These are an Audit Committee, a Remuneration
Committee and a Nomination Committee.
Each of these committees has its own charter setting out its role and responsibilities, composition, structure,
membership requirements and the manner in which the committee is to operate. Details of these charters are
available on the company website.
Audit Committee
The responsibility of the Audit Committee is to assist the Board in fulfilling its audit duties through review and
supervision of the Group’s financial reporting process and internal control system. The members of the
committee comprise all of the non-executive directors and the composition of the committee meets the
requirements of the ASX Listing Rules. The Audit Committee has appropriate financial expertise and knowledge
of the funds management and financial services industries.
The Audit Committee considers the annual and interim financial statements of the company and its subsidiaries
and any other major financial statements prior to approval by the Board, and reviews standards of internal
control and financial reporting within the Group. The Audit Committee is also responsible for overview of the
relationship between the Group and its external auditors, including periodic review of performance and the
- - 48 - -
Great Southern Limited
Corporate Governance Statement
30 September 2007
terms of appointment of the auditors. This committee considers any matters relating to the financial affairs of
the Group and its subsidiaries and any other matter referred to it by the Board.
Remuneration Committee
For personal use only
The responsibility of the Remuneration Committee is to assist the Board in ensuring that the company:
•
has coherent remuneration policies and practices which are observed and which enable it to attract
and retain executives and directors who will create value for shareholders;
•
fairly and responsibly rewards executives having regard to the performance of the company, the
performance of the executive and the general pay environment; and
•
complies with the provisions of the ASX Listing Rules and Corporations Law of Australia.
The Primary purpose of the Remuneration Committee is to support and advise the Board in fulfilling these
responsibilities to shareholders by:
•
determining the overall remuneration policy of the Group;
•
determining the remuneration of executive directors;
•
reviewing and approving the remuneration of direct reports to the Managing Director, and as
appropriate other senior executives;
•
agreeing benchmarks for employee salary reviews; and
•
reviewing and approving all equity-based plans and executive director allocations.
Nomination Committee
The primary purpose of the Nominations Committee is to support and advise the Board in fulfilling their
responsibilities to shareholders in ensuring that the Boards are comprised of individuals who are best able to
discharge the responsibilities of directors having regard to the law and the highest standards of governance by:
•
assessing the skills required on the Board;
•
from time to time assessing the extent to which the required skills are represented on the Board;
•
make recommendations to the Board regarding succession planning for the Board;
•
establishing processes for the review of the performance of individual directors and the Board as a
whole; and
•
establishing processes for the identification of suitable candidates for appointment to the Board.
Business risk
The Board acknowledges its responsibility for risk oversight and ensuring that significant business risks are
appropriately managed, whilst acknowledging that such risks may not be wholly eliminated. The Great
Southern Group has in place a Risk Management Framework, policies and procedures, which set out the roles,
responsibilities and guidelines for managing financial and operational risks associated with the Group’s
businesses. The Executive Risk Committee has been delegated responsibility as the primary body for risk
oversight and for ensuring that appropriate risk management policies, systems and resources are in place.
During the financial year Great Southern’s Executive Risk Management Committee updated and monitored the
risk profiles for each of the Group’s key operating divisions and all major projects. These profiles identify the:
•
Nature and likelihood of occurrence for specific material risks;
•
Key controls that are in place to mitigate and manage the risk;
•
Sources and levels of assurance provided on the effective operation of key controls; and
- - 49 - -
Great Southern Limited
Corporate Governance Statement
30 September 2007
•
Responsibilities for managing these risks.
For personal use only
The risk profiles for each key operating division and major project are reported to the full Board within the
standing agenda item. Details of the company’s risk management policy and internal compliance and control
system are available on the company’s website.
External auditors
The performance of the external auditors is reviewed annually. Ernst and Young were appointed as the
external auditors in 2007. It is Ernst and Young’s policy to rotate audit engagement partners on listed
companies every 5 years.
The external auditors will be attending the Annual General Meeting and will be available to answer shareholder
questions about the conduct of the audit and the preparation and content of the audit report.
Ethical standards
The company places a strong emphasis on compliance with policies to ensure that all directors, managers and
employees act with the utmost integrity and objectivity in their dealings with all people that they come in
contact with during their Great Southern working life. A Code of Conduct has been introduced to assist in
maintaining this culture. This code applies to all directors and employees and compliance with the code forms
part of the performance appraisal of all employees. Details of this code are available on the company’s
website.
Directors’, senior executives’ and staff dealings in shares
The company requires that:
•
Directors discuss any proposed trade in Great Southern Limited shares with the Chairman prior to any
trade.
•
Senior executives and all staff discuss any proposed trade in shares with the Managing Director,
Executive Director and Company Secretary prior to any trade.
Unless otherwise approved, trades in Great Southern Limited shares by directors and senior executives are
limited to the period of two weeks after the release of the company’s half year and annual results to the
Australian Securities Exchange and from the lodgement of the company’s annual report with the Australian
Securities Exchange.
Directors, senior executives and all staff are prohibited from trading in Great Southern Limited shares if the
director or officer is in possession of inside or price sensitive information or would be trading for a short term
gain. All employees within the Group have also been advised of their obligations in regard to inside or price
sensitive information and these obligations are replicated in employment contracts and the Code of Conduct.
Directors and senior executives are also aware of their obligations to ensure that they do not communicate
price sensitive information to any other person who is likely to buy or sell Great Southern Limited shares or
communicate that information to another party.
The company’s existing practices are documented in a code, details of which are available on the company’s
website.
Continuous disclosure and shareholder communication
The Board strongly believes that the company’s shareholders should be fully informed of all material matters
that affect the company in accordance with its continuous disclosure obligations. Following release to the ASX
all financial reports and other significant information are available on the company’s website for access by its
shareholders and the broader community. Procedures are in place to review all information and to ensure all
relevant information is immediately released to the market.
The Company Secretary has been appointed as the person responsible for communications with the Australian
Securities Exchange.
- - 50 - -
Great Southern Limited
Corporate Governance Statement
30 September 2007
The company seeks to enhance its communication with shareholders through the introduction of new types of
communication through cost effective electronic means, and the provision of significant information in addition
to the reporting required by legislation.
For personal use only
Statement concerning availability of independent professional advice
If a director considers it necessary to obtain independent professional advice to properly discharge the
responsibility of his/her office as a director, then, provided the director first obtains approval for incurring such
expense from the chairman, the company will pay the reasonable expenses associated with obtaining such
advice.
Performance evaluation of the Board
During the reporting year an evaluation of the Board and its members was carried out. The evaluation process
comprised each person completing a questionnaire. On completion of the questionnaire the Chairman
discussed the responses with the board to consider the outcomes and any actions required. It is intended to
follow up the review process during 2008 by engaging an external consultant to carry out a review of the
Board.
Existence and terms of any schemes for retirement benefits for non-executive directors
There are no termination or retirement benefits for non-executive directors.
Group strategic planning
Great Southern has a formal strategic planning process whereby a strategic plan is recommended by executive
management and approved by the Board each year. The intent of the annual review is to consider a wide
range of strategies and provide management with guidance on those strategies that, in the Board’s opinion, will
enhance shareholder value.
- - 51 - -
Great Southern Limited and Controlled Entities
For personal use only
FINANCIAL REPORT
Page
Income Statement
53
Balance Sheet
54
Statement of Changes in Equity
55
Cash Flow Statement
56
Notes to the Financial Statements
57
Directors’ Declaration
113
Independent Audit Report to the Members
114
Auditor’s Independence Declaration
116
Shareholder Information
117
This financial report covers both Great Southern Limited as an individual entity and the Group consisting of Great
Southern Limited and its controlled entities. The financial report is presented in Australian currency.
Great Southern Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Great Southern Limited
16 Parliament Place
West Perth WA 6005
A description of the nature of the Group’s operations and its principal activities is included in the review of
operations and activities in the directors’ report.
The financial report was authorised for issue by the directors on 20 December 2007. The company has the power
to amend and reissue the financial report.
- - 52 - -
Great Southern Limited and Controlled Entities
Income Statement
For the year ended 30 September 2007
For personal use only
Consolidated
Notes
Parent Entity
Year to 30
Sept 2007
Three
months to
30 Sept
2006
Year to
30 June
2006
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
$’000
$’000
$’000
$’000
$’000
$’000
Revenue
4
466,081
49,597
493,890
265,801
363
213,393
Other income
Total revenue and other
income
4
59,103
2,612
5,267
883
10
232
525,184
52,209
499,157
266,684
373
213,625
(74,064)
(11,093)
(80,743)
(21,033)
(5,026)
(20,407)
(199,988)
(60,820)
(141,190)
(82,612)
(28,151)
(71,315)
(8,980)
(8,297)
(25,408)
(14)
-
-
(42,322)
(5,411)
(32,548)
(31,342)
(4,435)
(24,750)
(51,300)
(12,607)
(22,997)
(32,801)
(8,853)
(16,017)
-
(6,910)
(3,282)
-
-
-
Commissions, marketing and
promotion of product and
industry
Agriculture and MIS related expenses
Cost of agricultural produce sold
5
Corporate and other expenses
Financing costs
Fair value decrement to
investment property
5
16
Impairment of horticultural
assets
5
(40,072)
-
-
-
Profit/(loss) before income tax
5
108,458
(52,929)
192,989
98,882
(46,092)
81,136
Income tax (expense)/benefit
6
(36,950)
15,064
(60,130)
(34,375)
12,995
(26,499)
Profit/(loss) for the year
71,508
(37,865)
132,859
64,507
(33,097)
54,637
Profit/(loss) attributable to the
members of Great Southern
Limited
71,508
(37,865)
132,859
64,507
(33,097)
54,637
44
22.68
(12.21)
43.78
44
20.67
(12.21)
40.73
Basic (loss)/earnings per share cents
Diluted (loss)/earnings per share cents
The above Income Statements should be read in conjunction with the accompanying notes.
- - 53 - -
Great Southern Limited and Controlled Entities
Balance Sheet
As at 30 September 2007
Notes
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
For personal use only
Current Assets
Cash and cash equivalents
7
207,640
246,732
40,562
70,452
Trade and other receivables
8
121,468
102,138
318,903
96,994
21,158
15,363
-
-
6,788
3,831
2,971
760
Biological assets
Inventories
14
9
Available-for-sale financial assets
11
36,361
131,619
-
-
Other financial assets
10
9,932
9,567
-
-
403,347
509,250
362,436
168,206
Total Current Assets
Non-Current Assets
Trade and other receivables
12
96,342
87,154
843,397
699,040
Other financial assets
10
58,557
64,969
114,502
101,411
100,438
-
-
14,982
12,486
Biological assets
14
112,399
Property, plant and equipment
15
187,156
151,029
Investment properties
16
722,310
522,569
298
264
Derivative financial instruments
13
3,136
-
1,526
-
73,534
17
81,196
3,597
2,540
Deferred tax assets
18
54,925
66,498
16,677
14,861
Other
19
983
353
16
-
Total Non-Current Assets
1,317,004
1,066,544
994,995
830,602
Total Assets
1,720,351
1,575,794
1,357,431
998,808
39,114
342,473
81,875
Goodwill and other intangible assets
Current Liabilities
Trade and other payables
20
88,364
Interest-bearing loans and borrowings
21
930
763
336
239
Current tax liabilities
22
-
2,238
-
2,238
Provisions
23
16,842
45,493
2,971
35,893
24
146,202
150,096
-
-
252,338
237,704
345,780
120,245
445,726
401,530
Deferred revenue
Total Current Liabilities
Non-Current Liabilities
25
660,819
615,098
Derivative financial instruments
13
-
838
-
838
Provisions
27
32,916
32,478
32,049
15,638
Deferred revenue
28
8,316
6,850
-
-
Total non-current liabilities
702,051
655,264
477,775
418,006
Total Liabilities
954,389
892,968
823,555
538,251
Net Assets
765,962
682,826
533,876
460,557
30
447,859
432,708
447,859
432,708
Reserves
31
13,342
4,257
12,677
6,408
Retained earnings
31
304,761
245,861
73,340
21,441
765,962
682,826
533,876
460,557
Interest-bearing loans and borrowings
Equity
Contributed equity
Total Equity
The above Balance Sheets should be read in conjunction with the accompanying notes.
- - 54 - -
Great Southern Limited and Controlled Entities
Statement of Changes in Equity
For the year ended 30 September 2007
For personal use only
Consolidated
Notes
Total equity at the beginning of the
financial period
Profit/(loss) for the period
Cash flow hedging reserve
Total recognised income and
expense for the period
31
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of issue
costs
Conversions of TREES Series, net of
issue costs
Exercise of options
Management Performance Rights
Dividends declared
Total equity at the end of the
financial period
32
Parent Entity
Year to 30
Sept 2007
Three
months to 30
Sept 2006
Year to 30
Sept 2007
Three
months to 30
Sept 2006
$’000
$’000
$’000
$’000
682,826
756,240
71,508
(37,865)
460,557
64,507
527,052
(33,097)
4,474
(2,738)
1,658
(587)
75,982
(40,603)
66,165
(33,684)
14,506
-
14,506
-
15
-
15
-
630
160
630
160
4,611
1,140
4,611
1,140
(12,608)
(34,111)
(12,608)
(34,111)
765,962
682,826
533,876
460,557
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
- - 55 - -
Great Southern Limited and Controlled Entities
Cash Flow Statement
For the year ended 30 September 2007
Notes
Consolidated
Three
months to
Year to 30
30 Sept
Sept 2007
2006
Year to
30 June
2006
Parent Entity
Three
Year to
months to
30 Sept
30 Sept
2007
2006
Year to
30 June
2006
$’000
$’000
$’000
$’000
Receipts from growers/customers
124,173
105,718
231,545
5,411
10,479
-
Securitisation of loan receivables
Payments to suppliers and
employees
469,844
4,493
403,350
-
-
-
(342,309)
(164,913)
(322,312)
(136,708)
(73,547)
(175,320)
251,708
(54,702)
312,583
(131,297)
(63,068)
(175,320)
-
-
-
-
-
226,926
15,209
3,965
8,115
293
113
179
(37,779)
For personal use only
$’000
$’000
Cash flows from operating
activities
Management fees received
Interest received
Income taxes paid
(37,779)
(32,358)
(73,222)
(32,358)
(73,222)
Finance costs paid
Net cash inflow/(outflow) from
operating activities
(25,566)
(6,135)
(2,525)
(16,408)
(4,727)
(950)
203,572
(89,230)
244,951
(185,191)
(100,040)
(22,387)
(49,310)
(26,740)
(85,972)
(5,134)
(2,462)
(11,248)
(148,225)
(22,111)
(167,465)
-
-
(264)
3,647
500
779
-
-
-
1,977
1,027
-
1,102
1,015
-
(42,560)
(35,286)
(73,816)
-
-
-
(4,505)
-
(34,122)
(4,505)
-
(34,122)
(238,976)
(82,610)
(360,596)
(8,537)
(1,447)
(45,634)
Purchase of financial asset
-
(75,036)
-
-
-
-
Loans from/(to) related parties
-
-
-
167,526
132,967
(177,458)
(31,463)
-
(30,704)
(31,463)
-
(30,704)
-
214,666
-
-
-
-
Cost of issue of debentures
-
(4,621)
-
-
-
-
Proceeds from issue of TREES
-
-
124,700
-
-
124,700
42
Cash flows from investing
activities
Payments for property, plant and
equipment
Payments for investment property
Proceeds from sale of investment
property
Proceeds from sale of property, plant
and equipment
Payments for biological assets
Payments for business acquisitions
Net cash outflow from investing
activities
45
Cash flows from financing
activities
Dividends paid
Proceeds from issue of debentures
Cost of issue of TREES
Payment of TREES series coupons
Options exercised
-
-
(4,994)
-
-
(4,994)
(14,826)
-
(10,717)
(14,826)
-
(10,717)
630
160
1,680
630
160
1,680
45,000
45,000
200,000
204,388
200,000
173,366
(3,029)
(203,429)
(168)
(3,029)
(172,297)
(168)
(3,688)
131,740
284,185
163,838
160,830
75,705
Net (decrease)/increase in cash
held
(39,092)
(40,100)
168,540
(29,890)
59,343
7,684
Cash at the beginning of the period
246,732
286,832
118,292
70,452
11,109
3,425
207,640
246,732
286,832
40,562
70,452
11,109
Receipts from borrowings
Repayment of borrowings
Net cash inflow from financing
activities
Cash at the end of the period
7
The above Cash Flow Statements should be read in conjunction with the accompanying notes.
- - 56 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 1.
Summary of significant accounting policies
For personal use only
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 report includes
separate financial statements for Great Southern Limited as an individual entity and the Group consisting of Great
Southern Limited and its subsidiaries.
In the previous year, the Group changed its financial year end from 30 June to 30 September. The prior reporting
period is the three months to 30 September 2006, which is not a comparable reporting period. Consequently, the
comparative amounts shown in the Income Statement and Cash Flow Statement are for the year-ended 30 June 2006
and the three months ended 30 September 2006.
The financial report was authorised for issue in accordance with a resolution of the directors on 20 December 2007.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and
the Corporations Act 2001.
The financial report is presented in Australian dollars.
Historical cost convention
These financial statements have been prepared under the historical cost convention, except for investment property,
available-for-sale financial assets and derivative financial instruments, which have been measured at fair value, and
biological assets recorded at fair value less point of sale costs.
Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards
(IFRS). Refer to note 1(ac) for the assessment of Australian Accounting Standards that have been recently issued but
are not yet effective.
Critical accounting estimates
The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process of applying the
Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed in note 3.
(b) Principles of consolidation
The consolidated financial statements comprise the financial statements of Great Southern Limited and its subsidiaries
(“the Group”).
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so
as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using
consistent accounting policies. The effects of all transactions between entities in the Group are eliminated in full.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from
the date that control ceases. Where there is a loss of control of a subsidiary the consolidated financial statements
include the results for the part of the reporting year during which Great Southern Limited has control.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note
1(f)).
Inter-company transactions, balances, income, expenses and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also 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.
Investments in subsidiaries are accounted for at cost in the individual financial statements of Great Southern Limited.
- - 57 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(c) Segment reporting
For personal use only
A business segment is a distinguishable component of the Group engaged in providing products or services that are
subject to risks and returns that are different to those of other business segments. A geographical segment is engaged
in providing products or services within a particular economic environment and is subject to risks and returns that are
different from those of segments operating in other economic environments.
(d) Revenue recognition
Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is
probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Amounts
disclosed as revenue are net of returns, trade allowances, interest free loan restatement and duties and taxes paid.
Revenue is recognised for the major business activities as follows:
(i)
Project revenues – MIS Plantation and High Value Timber Projects Sales
Revenue earned from contracts to perform services under project land and management agreements is recognised
based upon the proportion of directly attributable work performed relative to the company’s estimate of the total work
to be performed in order to fully complete the obligations under each agreement.
Directly attributable work includes a number of activities including securing the contract, land acquisition, packaging
land for MIS sale, preparation and entering into land and management and lease agreements, land preparation and
establishment of the plantation.
(ii)
Project revenues – MIS Vineyard, Olive, Almond and Beef Cattle Projects Sales
Revenue earned from lease and management agreements entered into is recognised over the period that the services,
for which the fees charged, are completed as required under each agreement.
(iii)
Revenue deferral – All MIS Projects
Income received from land and management and lease agreements entered into that is not recognised as revenue in
the current year is deferred until the year in which the work is performed.
(iv)
Project ongoing fees – MIS Plantation Projects
Income for plantation management and property rental fees earned during the life of the project are payable out of the
projects’ net harvest proceeds. These fees earned are not recognised as revenue until the value of the project’s net
harvest proceeds can be measured reliably. Costs are expensed as incurred.
(v)
Project ongoing fees - MIS Vineyard, Olive, Almond and Beef Cattle Projects
Annual revenue due to the Group from the operation of Vineyard, Olive, Almond and Beef Cattle projects is recognised
on an as-earned basis. Costs are expensed as incurred.
(vi)
Sale of produce from biological assets
Revenue from the sale of woodchip and timber, wine grapes, olives, almonds and cattle is recognised when risks and
rewards of the goods passes to the customer.
(vii)
Finance interest and other interest income
Finance interest, relating to interest from loans, and other interest revenue are recognised on the effective interest
method.
(viii)
Sale of property, plant and equipment
The net profit or loss arising on the sale of assets is recognised as other income or expense at the date that control of
the asset passes to the buyer. Gains or losses on disposal are calculated as the difference between the carrying amount
of the asset and the net proceeds at disposal.
- - 58 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(e) Income tax and other taxes
For personal use only
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax
laws to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their net carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all temporary differences, except:
ƒ
When the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
ƒ
When the taxable temporary difference is associated with investments in subsidiaries, in joint ventures, and the
timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
ƒ
When the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; or
ƒ
When the deductible temporary difference is associated with investments in subsidiaries, in which case a deferred
tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the
foreseeable future and taxable profit will be available against which the temporary difference will be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to
be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation
authority.
Tax consolidation legislation
Great Southern Limited and its wholly-owned controlled entities have implemented the tax consolidation legislation as
of 1 July 2003.
The head entity, Great Southern Limited, and the controlled entities in the tax consolidated group continue to account
for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax
consolidated group continues to be a stand alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Great Southern Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.
- - 59 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Other taxes
For personal use only
Revenues, expenses and assets are recognised net of the amount of GST except:
ƒ
When the GST incurred on a purchase of goods or services is not recoverable from the taxation authority, in which
case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
ƒ
Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the balance sheet.
Cash flows are included in the Cash Flow Statement on a gross basis unless otherwise stated, and the GST component
of the cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority, is classified as part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
(f) Business combinations
The purchase method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are
acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the
date of exchange plus costs directly attributable to the acquisition.
Except for non-current assets classified as held for sale, identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the
Group’s share of the identifiable net assets acquired is recorded as goodwill (refer to note 1(s)). If the cost of
acquisition is less than the Group's share of the fair value of the identifiable net assets of the subsidiary acquired, the
difference is recognised directly in the income statement, but only after a reassessment of the identification and
measurement of the net assets acquired.
When settlement of any part of the 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 Group’s incremental borrowing rate, being the
rate at which a similar borrowing could be obtained from an independent financier under comparable terms and
conditions.
(g) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and 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.
For Cash Flow Statement presentation purposes, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
(h) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less an allowance
for doubtful debts.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written
off when identified. An allowance for doubtful debts 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 receivables. The amount of the allowance is the
difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
effective interest rate. The amount of the allowance is recognised in the income statement.
- - 60 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(i) Securitisation of loan receivables
For personal use only
When the Group enters into a securitisation arrangement for the sale of finance receivables, an assessment is made of
the risk profile of those receivables to be securitised. Where it is considered that the majority of the risks and benefits
of ownership are transferred to the purchaser, the receivables securitised are no longer recognised in the Group’s
financial statements.
Where it is considered that the Group retains the majority of the risks and benefits of ownership, the receivables
securitised remain in the Group’s financial statements and together with the funds received from the securitisation of
the receivables, a liability is recognised equal to the value of the receivables securitised. The net impact on the net
assets of the Group from the retention of the receivables securitised and the recognition of a matching liability is zero.
(j) Biological assets and agricultural produce
Biological assets include eucalypt and pine trees, grape vines, olive trees, almond trees and cattle owned by the Group.
Biological assets are measured on initial recognition and each reporting date at fair value less estimated point of sale
costs except when the fair value cannot be measured reliably. In this instance the biological asset is measured at its
cost less any accumulated depreciation and any accumulated impairment losses until such time as its fair value can be
reliably measured.
Agricultural produce is the harvested product of a biological asset and includes logs, grapes, almonds and olives.
Agricultural produce is measured at its fair value less point of sale costs at the point of harvest.
Net movements in fair value less estimated point of sale costs of biological assets are included in the income statement
for the year they arise.
(k) Inventories
(i)
Raw materials and stores
Raw materials and stores are stated at the lower of cost and net realisable value. Cost is determined on the first in,
first out basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
(ii)
Processed agricultural produce
Agricultural produce processed after harvesting is stated within inventories at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
(l) Derivative financial instruments and hedging
The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with interest
rate fluctuations. Such derivative instruments are initially recognised at fair value on the date a derivative contract is
entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of
the item being hedged. The Group designates certain derivatives as either fair value hedges or cash flow hedges.
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values
or cash flows of hedged items.
(i)
Fair value hedge
Fair value hedges are hedges of the Group’s exposure to changes in the fair value of a recognised asset or liability or an
unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment that is
attributable to a particular risk and could affect profit or loss. Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective
portion of interest rate swaps hedging fixed rate borrowings is recognised in the income statement within other income
or other expense together with the gain or loss relating to the ineffective portion and changes in the fair value of the
hedge fixed rate borrowings attributable to interest rate risk.
- - 61 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(ii)
Cash flow hedge
For personal use only
Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular risk
associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised
immediately in the income statement within other income or other expense.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income
statement.
(iii)
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised immediately in the income statement and are
included in other income or other expenses.
(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. Quoted market prices or dealer quotes for similar
instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows,
are used to determine fair value for the remaining financial instruments. The fair value of interest-rate swaps is
calculated as the present value of the estimated future cash flows.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate
their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
(n) Investments and other financial assets
The Group classifies its investments and other financial assets into the following categories: loans and receivables,
held-to-maturity investments and 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
and re-evaluates this designation at each reporting date. When financial assets are recognised initially, they are
measured at fair value.
All regular purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits
to purchase the asset.
(i)
Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money, goods or services directly to a debtor. Such assets are
carried at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss
when the loans and receivables are derecognised or impaired. Loans and receivables are included in trade and other
receivables in the balance sheet.
(ii)
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group’s management has the positive intention and ability to hold to maturity. Investments that are
intended to be held to maturity are subsequently measured at amortised cost, where gains and losses are recognised in
profit or loss when the investments are derecognised or impaired.
- - 62 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
(iii)
Available-for-sale financial assets
Available-for-sale financial assets, comprising principally receivables that the Group intends to sell under its
securitisation program, are non-derivatives that are either designated as available-for-sale or not classified in any of
the other categories. After initial recognition available-for-sale investments are measured at fair value, with gains or
losses being recognised as a separate component of equity until the investment is derecognised or until the investment
is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in
profit or loss. They are included in current assets unless management intends to dispose of the investment more than
12 months after the balance sheet date.
(o) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of
assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
(p) Property, plant and equipment
All property, plant and equipment (except for investment properties - refer to note 1(r)) is stated at historical cost less
accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Pre-establishment activities on Melville Island are one-off activities that benefit the Group for the term of the lease as
these activities improve land that is unsuitable to carry on a forestry or agricultural business into land that is suitable
for ongoing commercial agricultural activities. The cost of pre-establishment activities is capitalised within leasehold
improvements and amortised over the remaining life of the lease.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to the income statement during the
financial year in which they are incurred.
The Group’s land and pastoral leases are not depreciated. Depreciation on other assets is calculated using the straight
line and diminishing value basis method to allocate their cost, net of their residual values, over their estimated useful
lives, as follows:
Plant and equipment
3 - 13 years
Motor vehicles
7 years
Equipment under finance lease
5 - 7 years
Leasehold improvements
26 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount (note 1(o)).
Sale of property, plant and equipment
The net profit or loss arising on the sale of assets is recognised as other income or expense at the date that control of
the asset passes to the buyer. Gains or losses on disposal are calculated as the difference between the carrying amount
of the asset and the net proceeds at disposal.
- - 63 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(q) Leases
For personal use only
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
Leases of property, plant and equipment are classified as finance leases where the Group has substantially all the risks
and rewards of ownership. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the
leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of
finance charges, are included in other non-current liabilities. Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate on the finance balance outstanding. The property, plant and equipment
acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Pastoral
property leases have been included in property, plant and equipment at 30 September 2007.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged
to the income statement on a straight-line basis over the year of the lease.
Lease income from operating leases is recognised in income on a straight-line basis over the lease term.
(r) Investment properties
Investment properties, principally comprising land used in the Group’s MIS plantation and cattle projects, are held for
capital appreciation and long-term rental yields. Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition, investment properties are carried at fair value, which reflects
market conditions at the balance sheet date. Gains and losses arising from changes in the fair values of investment
properties are recognised in profit or loss in the year in which they arise.
All investment properties were valued by an independent external valuation expert on an unencumbered basis as at 30
June 2005. At 30 June 2006 and 30 September 2007, due to the number of investment properties owned by the
Group, approximately one third of properties were valued by an independent external valuation expert. The Group
intends to independently value approximately one third of its properties annually with the aim of independently valuing
each property at least once over a three year period.
For properties unencumbered by leases to project investors, fair value represents the open market value determined by
external valuation expert.
For properties encumbered by leases issued to project investors there is not readily available an open market on which
to determine fair value. Fair value is determined using a discounted cash flow (DCF) valuation model. The model
discounts the expected future cash flows attributable to each property.
Investment properties are derecognised when they have been disposed of. Any gains or losses on the disposal of an
investment property are recognised in profit or loss in the year of disposal.
(s) Intangible assets
(i)
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business
combination over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition goodwill is measured at cost less any accumulated impairment losses. Goodwill is not
amortised and is reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value has been impaired.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Impairment is determined by
assessing the recoverable amount of the cash-generating unit to which the goodwill relates. When the recoverable
amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Gains and
losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Impairment losses recognised for goodwill are not subsequently reversed.
- - 64 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(ii)
Land access rights
For personal use only
Land access rights represent the value to the Group of the various lease agreements in place with the Tiwi Aboriginal
Land Trust for the long term lease of plantation land on Melville Island in the Northern Territory. This amount has been
independently valued as part of the acquisition of Sylvatech Limited in April 2005.
Land access rights are amortised on a straight line basis over 27 years, being the period of the remaining lease term.
(iii)
Water licences and sales contracts
Water licences and sales contracts represent the value to the Group of the right to water reserves and existing sales
agreements acquired with the purchase of properties. The sales contracts are amortised over the life of the contracts,
which varies from approximately 3 to 10 years. The water licences have an indefinite useful life and are not amortised.
Water licences are reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value has been impaired.
(iv)
Software
Software licences purchased and costs incurred in the development of internal projects are recorded at cost and
amortised on a straight line basis over their remaining useful lives, which vary from 3 to 4 years.
(t) Trade and other payables
Trade payables and other payables are carried at amortised cost. These amounts represent liabilities for goods and
services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and
are usually paid within 30 days of recognition.
(u) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the income statement net of any reimbursements.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the balance sheet date. If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The
increase in the provision resulting from the passage of time is recognised in finance costs.
(v) Employee benefits
(i)
Wages and salaries and annual leave
Liabilities for wages and salaries and annual leave are recognised and are measured at the amounts expected to be
paid when the liabilities are settled.
(ii)
Long service leave
The liability for long service leave is recognised and measured as the present value of expected future payments to be
made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures and years of
service. Expected future payments are discounted using interest rates at the reporting date on national government
bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
(iii)
Bonus plans
A liability for bonus plans is recognised in other creditors when there is no realistic alternative but to settle the liability
and at least one of the following conditions is met:
•
there are formal terms in the plan for determining the amount of the benefit;
•
the amount to be paid is determined before the time of completion of the financial reports; or
•
best practice gives clear evidence of the amount of the obligations.
- - 65 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to
be paid when they are settled.
For personal use only
(iv)
Share-based payments
Share-based compensation benefits are provided to employees via the Management Performance Rights Plan. The fair
value of management performance rights is recognised as an employee benefit expense with a corresponding increase
in equity. The fair value is measured at grant date and recognised over the period during which the rights are expected
to vest.
The fair value at grant date is independently determined using a Monte Carlo simulation model that takes into account
the term of the right, the vesting and performance criteria, the expected dividend yield, the share price at grant date
and expected price volatility of the underlying security, the expected dividend yield and the risk-free interest rate for
the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example,
profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of
rights that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the
number of rights that are expected to become exercisable. The employee benefit expense recognised each year takes
into account the most recent estimate.
(v)
Employee benefit on-costs
Employee benefit on-costs, including payroll tax, are recognised and included in accruals and costs when the employee
benefits to which they relate are recognised as liabilities.
(w) Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised at the fair value of the consideration received, net of
transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the year of
the borrowings using the effective interest method.
Transferable REset Exchangeable Securities Series 2 and 3 (TREES2, and TREES3) are perpetual, subordinated reset
convertible notes with no fixed maturity and are redeemable at the option of the Group. TREES2 has no cumulative
coupon obligations and TREES3 has a cumulative coupon obligation. All notes are classified in interest bearing loans and
borrowings. The distributions on TREES2 and TREES3 are recognised in the income statement as interest expense.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Costs associated with the initial setup of a borrowing facility are capitalised as a reduction of the related liabilities and
amortised as a finance cost over the term of the facility.
Borrowing costs
Ongoing borrowing costs are recognised as expenses in the year in which they are incurred except where they are
included in the costs of any qualifying assets.
(x) Convertible instruments
The component of the convertible instruments that exhibits characteristics of a liability is recognised as a liability in the
balance sheet, net of transaction costs.
On issuance of the convertible instrument the fair value of the liability component is determined using a market rate for
an equivalent non-convertible bond and this amount is carried as a long-term liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a
finance cost.
The remainder of the proceeds is included in shareholder’s equity, net of transaction costs. This is not re-measured in
subsequent years.
- - 66 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(y) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
For personal use only
Transferable REset Exchangeable Securities (TREES) are converted to ordinary shares on conversion, net of conversion
costs.
(z) Earnings per share
(i)
Basic earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the parent,
excluding any costs of servicing equity (other than dividends), by the weighted average number of ordinary shares
outstanding during the financial year.
(ii)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into
account the after-tax effect of interest and other financing costs associated with dilutive potential ordinary shares and
the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive
potential ordinary shares.
(aa) Dividends
Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or
before the end of the financial year but not distributed at balance date.
(ab) Rounding of amounts
The Group is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and 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 that Class Order to the nearest thousand dollars, or in certain cases, to the nearest
dollar.
(ac) New accounting standards and UIG interpretations
Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30
September 2007 reporting years. The company’s assessment of the impact of these new standards and interpretations
is set out below:
AASB
Amendment
/ Standard
Title
Impact on the Group financial
report
Application
date of
Standard
Application
date for
the Group
2005-10
Amendments to Australian
Accounting Standards
arising from the release of
AASB 7 in August 2005
[AASB 132, AASB 101,
AASB 114, AASB 117,
AASB 133, AASB 139,
AASB 1, AASB 4,
AASB 1023 & AASB 1038]
AASB 7 is a disclosure standard so
will have no direct impact on the
amounts included in the Group’s
financial statements. However the
amendments will result in changes
to the financial instrument
disclosures included in the financial
report.
1 January
2007
1 October
2007
2007-1
Amendments to Australian
Accounting Standards
arising from AASB
Interpretation 11 (AASB 2)
This is consistent with the Group’s
existing accounting policies for
share-based payments so will have
no impact.
1 March
2007
1 October
2007
2007-3
Amendments to Australian
Accounting Standards
AASB 8 is a disclosure standard so
it will have no direct impact on the
1 January
2009
1 October
2009
- - 67 - -
For personal use only
Great Southern Limited
Notes to the Financial Statements
30 September 2007
arising from AASB 8
[AASB 5, AASB 6,
AASB 102, AASB 107,
AASB 119, AASB 127,
AASB 134, AASB 136,
AASB 1023 & AASB 1038]
amounts included in the Group’s
financial report. However the new
standard may have an impact on
the segment disclosures included in
the Group’s financial report.
2007-4
Amendments to Australian
Accounting Standards
arising from ED 151 and
Other Amendments [AASB
1, 2, 3, 4, 5, 6, 7, 102,
107, 108, 110, 112, 114,
116, 117, 118, 119, 120,
121, 127, 128, 129, 130,
131, 132, 133, 134, 136,
137, 138, 139, 141, 1023
& 1038]
Changes to disclosure requirements
will not have a direct impact on
amounts included in the Group’s
financial statements. However the
new standard may have an impact
on the disclosures included in the
Group’s financial report.
1 July 2007
1 October
2007
2007-7
Amendments to Australian
Accounting Standards
[AASB 1, AASB 2, AASB 4,
AASB 5, AASB 107 &
AASB 128]
Refer to AASB 2007-4 above.
1 July 2007
1 October
2007
AASB 7
Financial Instruments:
Disclosures
Refer to AASB 2005-10 above.
1 January
2007
1 October
2007
AASB 8
Operating Segments
Refer to AASB 2007-3 above.
1 January
2009
1 October
2009
AASB 101
Presentation of Financial
Statements
AASB 101 is a disclosure standard
so it will have no direct impact on
the amounts included in the
Group’s financial report. However
the new standard may have an
impact on the disclosures included
in the Group’s financial report.
1 January
2007
1 October
2007
AASB
2007-8
Amendments to Australian
Accounting Standards
arising from AASB 101
The amendment may have an
impact on the disclosures included
in the Group’s financial report.
1 January
2009
1 October
2009
The following amendments are not applicable to the Group and therefore have no impact:
AASB Amendment
Title
2007-2
Amendments to Australian Accounting Standards arising from AASB
Interpretation 12 [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121,
AASB 127, AASB 131 & AASB 139]
2007-5
Amendments to Australian Accounting Standard – Inventories Held for
Distribution by Not-for-Profit Entities [AASB 102]
2007-6
Amendments to Australian Accounting Standards arising from AASB 123
[AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and
Interpretations 1 & 12]
AASB Interpretation 12
Service Concession Arrangements
AASB Interpretation 129
(revised June 2007)
Service Concession Arrangements: Disclosures
AASB Interpretation 13
Customer Loyalty Programmes
AASB Interpretation 14
AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
- - 68 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 2.
Financial risk management
For personal use only
The Group's activities expose it to a variety of financial risks, namely credit risk and liquidity risk. The Group's overall
risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group.
(a) Credit risk
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of
products and services are made to customers with an appropriate credit history. Derivative counterparties and cash
transactions are limited to high credit quality financial institutions. The Group has policies that limit the amount of
credit exposure to any one financial institution. The maximum credit risk of the Group’s financial assets is their
carrying amounts.
(b) Liquidity risk
The Group’s ongoing capital requirements, arising mainly from developing and offering new MIS projects to investors,
requires prudent liquidity risk management which implies maintaining sufficient cash and marketable securities, the
availability of funding through an adequate amount of committed credit facilities and the ability to close-out market
positions. Due to the dynamic nature of the underlying businesses, the Group aims at maintaining flexibility in funding
by keeping committed credit lines available.
In addition, the Group provides finance to investors for the majority of its MIS project sales, and the ability of the
Group to securitise these finance receivables is an important part of its liquidity risk management program.
(c) Cash flow and fair value interest rate risk
The Group has converted floating interest rates to fixed interest rates on its structured finance borrowings and for the
majority of the corporate debt borrowings (refer notes 29 and 33). Other than this and cash and cash equivalents, the
Group’s significant interest-bearing assets and liabilities have a fixed interest rate and the Group’s income and
operating cash flows are not materially exposed to changes in market interest rates. The Group policy is to fix interest
rates on borrowings whenever practical.
Note 3.
Critical accounting estimates and judgements
In applying the Group’s accounting policies, estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events that may have a financial impact on the
Group and that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
(i) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy
stated in note 1(o). The recoverable amounts of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of assumptions. Refer to note 17 for details of these assumptions and
the potential impact of changes to the assumptions.
(ii) Revenue recognition
The Group determines revenue for plantation project sales based upon the proportion of work performed at balance
date relative to the estimate of the total amount of work to be performed for the project’s initial services (refer note
1(d) for details of the Group’s revenue recognition policy). The Group has 12 months from the date of execution of the
project Lease and Management Agreement to complete the services. In determining the total amount of work to be
performed, estimates are made of the amount and effort of future work required and these estimates are dependant
upon a number of factors, including the availability and location of land yet to be sourced. Should the Group not be
able to complete the initial services in the prescribed time, for example by not acquiring all the necessary land, then the
Group may be required to return application monies to some investors which will then reduce the amount of revenue
and deferred revenue (see notes 24 and 28) that can be recognised in the future financial statements of the Group.
- - 69 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(iii) Investment property
For personal use only
The Group reports its investment property at fair value, in accordance with the accounting policy stated in note 1(r).
The fair value of investment properties that are leased to project investors has been determined using a discounted
cash flow valuation model that requires the use of assumptions. Refer to note 16 for details of these assumptions and
the potential impact of changes to the assumptions.
(iv) Biological assets
The Group reports its biological assets at fair value less point of sale costs, in accordance with the accounting policy
stated in note 1(j). The fair value of horticulture biological assets has been determined using a discounted cash flow
valuation model that requires the use of assumptions. Refer to note 14 for details of these assumptions.
(v) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by an external valuer using a Monte
Carlo simulation model, with the assumptions detailed in note 34. The accounting estimates and assumptions relating
to equity-settled share-based payments would have no impact on the carrying amount of assets and liabilities within
the next annual reporting period but may impact expenses and equity.
(b) Critical judgements in applying the entity’s accounting policies
(i) Securitised loan receivables
The Group has made a judgement that the majority of the risks and rewards associated with the securitisation of loans
to Adelaide Bank have been transferred to Adelaide Bank and in accordance with Group policy the loans securitised are
de-recognised from the Group’s balance sheet.
(ii) Income taxes
The Group is subject to income taxes in Australia and significant judgement is required in determining the provision for
income taxes. There are many transactions and calculations undertaken during the ordinary course of business for
which the ultimate tax determination is uncertain. Where the final tax outcome is different from the amounts that were
initially recorded, such differences will impact the current and deferred tax provisions in the year in which such
determination is made. Deferred tax assets are recognised for deductible temporary differences when management
considers it probable that those future taxable profits will be available to utilise those temporary differences.
- - 70 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 4.
Revenue
For personal use only
(i) Revenue
Consolidated
Parent Entity
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
$’000
$’000
$’000
$’000
$’000
$’000
252,969
-
259,811
-
-
-
149,774
34,298
157,147
-
-
-
19,183
5,416
25,630
745
-
-
4,557
-
14,051
264,761
250
213,213
Provision of finance services (note (c))
25,806
7,007
28,079
-
-
-
Interest revenue
13,792
2,876
9,172
295
113
180
466,081
49,597
493,890
265,801
363
213,393
Fair value increment to investment
property (note 16)
Release of project maintenance provision
(note (b))
37,592
-
-
34
-
-
6,944
-
-
-
-
-
Other income
14,567
2,612
5,267
849
10
232
59,103
2,612
5,267
883
10
232
Revenue
Project revenues:
Revenue from current financial
year sales (note (c))
Revenue from previous financial
year sales
Sale of agricultural produce (note (a))
Management fee income (note (b))
(ii) Other income
(a)
Included in the sale of agricultural produce is a net increment to the fair value of biological assets of $5,165,000
(30 Sept 2006: $3,607,000 decrement and 30 June 2006: $nil).
(b)
The release of unused provision for the future cost of maintaining the 2004 and 2005 beef cattle projects
purchased from Environinvest Limited in 2005, following the wind-up of these projects in March 2007.
Management fees in respect of these projects for the current financial year totalled $Nil compared to $9,080,000
in the year to 30 June 2006.
(c)
Impact of interest free receivables
In accordance with AASB 139, interest free loans extended to investors in the Group’s managed investment
schemes that are payable in equal monthly instalments, predominantly over a twelve month term, are included in
current trade receivables and are discounted to present value. The difference between the face value and present
value of the interest free loan is initially recognised as a reduction of current year project revenue on the date
that the loan originated. The entire amount of the initial discount is then recognised over the term of the loan as
interest income. At 30 September 2007, the parent company does not hold any significant interest free
receivables.
For the year ended 30 September 2007, the Group recognised $2,719,000 (three months ended 30 September
2006: $777,000; year ended 30 June 2006: $9,032,000) of interest income that resulted from the discounting of
interest free receivables. This amount is included in revenue from the provision of financial services. For the year
ended 30 September 2007, $9,860,000 (three months ended 30 September 2006: $nil; year ended 30 June
2006: $12,908,000) was recognised as a reduction of current year project revenue for the initial discounting of
interest free receivables.
As at 30 September 2007, the current trade receivables balance includes a $1,161,000 (30 September 2006:
$2,332,000) discount to face value that will be recognised as interest income over the subsequent nine months.
Total interest revenue included in provision of finance services was $7,340,000 (30 September 2006:
$1,146,000).
- - 71 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 5.
Expenses
For personal use only
Consolidated
Parent Entity
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
$’000
$’000
$’000
$’000
$’000
$’000
Interest and finance charges payable
35,186
7,738
9,520
16,687
3,984
2,540
TREES series interest expense
16,114
4,869
13,477
16,114
4,869
13,477
Total Finance costs
51,300
12,607
22,997
32,801
8,853
16,017
32,360
7,560
24,105
31,767
7,449
23,427
Profit/(loss) before income tax
includes the following specific
expenses:
Employee benefits expense:
- Wages and salaries
- Defined contribution superannuation
expense
2,602
695
1,675
2,558
695
1,675
- Expense of share based payments
4,611
1,140
3,095
4,611
1,140
3,095
- Employee benefits provisions
2,094
425
504
1,970
425
504
Total employee benefits expense
41,667
9,820
29,379
40,906
9,709
28,701
Cost of agricultural produce sold
8,980
8,297
25,408
14
-
-
Amortisation of intangible assets
2,830
836
901
1,520
512
-
6,689
1,589
3,712
1,536
565
1,739
5,731
1,138
679
193
-
-
11,775
9,360
4,380
11,775
-
4,380
-
9,600
4,750
-
-
-
25,283
5,321
13,119
3,296
1,259
2,625
224
-
744
163
-
714
Research and development
-
72
456
-
71
395
Decrement in the fair value of investment
properties (note 16)
-
6,910
3,282
-
-
-
7,154
-
-
-
-
-
Depreciation:
- Plant and equipment (note 15)
Other charges against assets:
- Bad and doubtful debts expense
Other provisions:
- Provision for land assessment (note 27)
- Project timber (note 23)
Rental expense relating to operating
leases:
- Minimum lease payments
Loss on disposal
- Property plant and equipment
Property acquisition fees
- - 72 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 5. Expenses (Continued)
For personal use only
Consolidated
Impairment of horticultural assets:
Impairment of property, plant
and equipment (note 15)
Reduction in the fair value of
biological assets (note 14)
Write-off of grape sale
agreements (note 17)
Note 6.
Parent Entity
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
Year to
30 Sept
2007
Three
months to
30 Sept
2006
Year to
30 June
2006
$’000
$’000
$’000
$’000
$’000
$’000
25,024
-
-
-
-
-
11,181
-
-
-
-
-
3,867
-
-
-
-
-
40,072
-
-
-
-
-
Income tax expense
Consolidated
Three
Year to
months to
30 Sept
30 Sept
2007
2006
Year to
30 June
2006
Parent Entity
Three
Year to
months to
30 Sept
30 Sept
2007
2006
Year to
30 June
2006
$’000
$’000
$’000
$’000
$’000
$’000
25,703
(17,260)
65,341
34,861
(12,930)
37,801
(a) Income tax expense/(benefit)
Current tax
Current income tax charge
Adjustments in respect of current
income tax of previous years
2,318
-
-
2,318
-
-
8,929
2,196
(5,211)
(2,804)
(65)
(11,302)
36,950
(15,064)
60,130
34,375
(12,995)
26,499
108,458
(52,929)
192,989
98,882
(46,092)
81,136
32,537
(15,879)
57,897
29,665
(13,828)
24,341
TREES2 interest expense
1,536
639
1,738
1,536
639
1,738
Under-provision of tax in prior year
2,318
-
-
2,318
-
-
559
176
495
856
194
420
36,950
(15,064)
60,130
34,375
(12,995)
26,499
2,644
(1,047)
757
988
(1,047)
757
2,644
(1,047)
757
988
(1,047)
757
Deferred tax
(b) Numerical reconciliation of
income tax expense to prima facie
tax payable
Profit/(loss) before income tax expense
Tax at the Australian tax rate of 30%
(30 Sept 2006 and 30 June 2006:
30%)
Tax effect of amounts which are not
deductible/(taxable) in calculating
taxable income:
Sundry items
Income tax expense/(benefit)
(c) Amounts recognised directly in
equity
Aggregate current and deferred tax
arising in the reporting year and not
recognised in net profit or loss but
directly debited or credited to equity
Net deferred tax – (credited)/debited
directly to equity
- - 73 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(d) Tax consolidation legislation
Great Southern Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 July 2003. The accounting policy in relation to this legislation is set out in note 1(e).
For personal use only
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing
agreement which, in the opinion of the directors, limits the joint and several liability of the wholly-owned entities in the
case of a default by the head entity, Great Southern Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate
Great Southern Limited for any current tax payable assumed and are compensated by Great Southern Limited for any
current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred
to Great Southern Limited under the tax consolidation legislation. The funding amounts are determined by reference to
the amounts recognised in the wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the
head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also
require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts
are recognised as current inter-company receivables or payables.
Note 7.
Current assets – cash and cash equivalents
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Cash at bank and on hand
Deposits at call
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
51,162
246,121
40,511
70,401
156,478
611
51
51
207,640
246,732
40,562
70,452
Cash at bank and on hand is at floating interest rates between 6% and 6.50% pa (30 Sept 2006: between 5% and
5.8% pa). Deposits at call are at fixed interest rates between 6.20% and 6.75% pa (30 Sept 2006: 5.45% and 5.6%).
These deposits have an average maturity of 30 days.
Note 8.
Current assets – trade and other receivables
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Trade receivables
Less: Provision for doubtful receivables
Loans to related parties (note 39)
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
62,082
57,929
41
-
(2,255)
(4,874)
-
-
59,827
53,055
41
-
-
2,936
309,824
93,467
Prepayments
11,012
3,279
3,431
79
Other receivables
50,629
42,868
5,607
3,448
121,468
102,138
318,903
96,994
Trade receivables
Trade receivables include the current portion of MIS loans receivable, a portion of which are interest-bearing. The
remaining trade receivables are non-interest bearing and generally on 30-90 day terms.
- - 74 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Bad and doubtful receivables
The Group has recognised an expense of $5,731,000 in respect of bad and doubtful receivables during the year ended
30 September 2007 (three months ended 30 September 2006: $1,138,000; year ended 30 June 2006: $679,000). The
loss has been included in corporate and other expenses in the income statement.
For personal use only
Other receivables
Other receivables includes amounts receivable from the Great Southern Plantations project trust accounts which holds
the deposits paid by investors until all of the requirements in the projects’ constitutions for the release of funds are
met.
Effective interest rate risk
Information concerning the effective interest rate risk of both current and non-current receivables is set out in note 33.
Note 9.
Current assets – inventories
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Woodchip and timber – at cost
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
824
443
-
-
Fertiliser and chemicals – at cost
3,976
2,922
1,766
760
Other inventory – at cost
1,988
466
1,205
-
6,788
3,831
2,971
760
Inventories recognised as an expense during the year ended 30 September 2007 for the Group amounted to
$31,164,000 (three months ended 30 September 2006: $6,470,000; year ended 30 June 2006: $16,700,000).
Inventories recognised as an expense for the parent entity amounted to $18,009,000 (three months ended 30
September 2006: $5,085,000; year ended 30 June 2006: $9,004,000).
Note 10.
Other financial assets
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Parent entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Current assets
Held-to-maturity investment (note (a))
9,932
9,567
-
-
Total current other financial assets
9,932
9,567
-
-
55,560
61,725
-
-
2,997
3,244
-
-
-
-
115,463
102,372
Non-current assets
Held-to-maturity investment (note (a))
Bonds held (note (b))
Shares in controlled entities – at cost
Less: Impairment loss
Total non-current other financial assets
Total other financial assets
(a)
-
-
(961)
(961)
58,557
64,969
114,502
101,411
68,489
74,536
114,502
101,411
The held-to-maturity investment was purchased in August 2006 as part of a structured finance transaction in
which the Group received $211,691,000 net of issue costs through the issue of debentures (refer note 29).
- - 75 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
(b)
In June 2001 the Group entered into an arrangement with NM Rothschild & Sons (Australia) Limited for the
partial securitisation of the company’s loan book. The Group has acquired bonds in the loan acquiring entity that
at 30 September 2007 have a face value of $2,997,000 (30 September 2006: $3,244,000; 30 June 2006:
$3,317,000). During the year bonds totalling $247,000 were redeemed by the loan acquiring entity. Interest is
payable on the bond by the acquiring entity at an average fixed rate of 9.63% pa (three months ended 30
September 2006: 9.60%; year ended 30 June 2006: 9.57% pa). The bond is repayable from, and to the extent
of, collections of receivables by the acquiring trust after repayment of principal and interest to the other note
holders.
Note 11.
Current assets – available-for-sale financial assets
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
36,361
Receivables available-for-sale
131,619
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
-
Available-for-sale financial assets, comprise principally receivables that qualify for securitisation and which
management intends to dispose of within 12 months of the balance sheet date.
Effective interest rate risk
Information concerning the effective interest rate risk of available-for-sale financial assets is set out in note 33.
Note 12.
Non-current assets – trade and other receivables
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Term trade receivables
Less: Provision for doubtful receivables
Loans to related parties (note 39)
Other receivables
Less: Provision for doubtful other receivables
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
96,210
86,792
-
-
(358)
(106)
-
-
95,852
86,686
-
-
-
-
843,397
698,847
490
468
193
193
-
-
(193)
-
96,342
87,154
843,397
699,040
Term trade receivables
To secure these receivables, a charge is held over the underlying property, being the land and management agreement
to which the loan relates. Where collection of the receivable is doubtful and the assessed value of the property is less
than the amount outstanding, a provision for doubtful receivables is recognised for the shortfall. The receivables have
a maximum maturity of 10 years. Interest rates are fixed at the time of entering into the contract and range between
9.5% pa and 11.5% pa (three months ended 30 September 2006: 9.5% pa and 11.5% pa; year ended 30 June 2006:
9.5% pa and 11.5% pa).
Interest rate risk
Information concerning the effective interest rate risk of both current and non-current receivables is set out in note 33.
Credit risk
There is no large concentration of credit risk with respect to current and non-current receivables. Under the
securitisation arrangement with Adelaide Bank there is no credit recourse to the Group on any loans securitised.
- - 76 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 13.
Derivative financial instruments
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Non-current assets
Interest rate swap contracts – cash flow hedges
3,136
-
1,526
-
Total derivative financial instrument assets
3,136
-
1,526
-
Non-current liabilities
-
838
-
838
Interest rate swap contracts – cash flow hedges
-
838
-
838
Instruments used by the Group
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to
fluctuations in interest rates in accordance with the Group’ s financial risk management policies.
Interest rate swap contracts – cash flow hedges
Bank loans of the Group currently bear an average variable interest rate of approximately 8.1%. The Group has entered
into interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at
fixed rates.
Swaps currently in place cover $200,000,000, being approximately 82% of the loan principal outstanding, and are
generally timed to expire as each loan repayment falls due. The fixed interest rates range between approximately
0.25% and 1.30% and the variable rates are between 0.76% and 1.81% above the 90 day bank bill rate which at
balance date was 6.9%.
At 30 September 2007, the fair value and years of expiry of the interest rate swap contracts are as follows:
30 Sept 2007
30 Sept 2006
$’000
$’000
-
(309)
1 – 2 years
1,526
(529)
2 – 5 years
1,610
-
Less than 1 year
Most of the contracts require the settlement of net interest receivable or payable each 90 days. The settlement dates
generally coincide with the dates on which interest is payable on the underlying borrowings.
The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve, to
the extent that the hedge is effective, and re-classified into profit and loss when the hedged interest expense is
recognised. The ineffective portion is recognised in the income statement immediately. As at 30 September 2007, the
Group recorded a positive fair value adjustment of $6,391,000 to its cash flow hedging instruments with a
corresponding tax effected increase in the cash flow hedging reserve.
- - 77 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 14.
Biological assets
Consolidated
September 2007
Horticulture
Beef Cattle
Standing
Timber
For personal use only
$’000
Opening balance at
beginning of the year
Additions
$’000
$’000
3,578
15,240
96,983
Total
Standing
Timber
$’000
$’000
115,801
September 2006
HorticBeef
ulture
Cattle
$’000
Total
$’000
3,587
14,733
$’000
103,661
121,981
-
13,776
38,915
52,691
22
507
359
888
(1,076)
-
(27,843)
(28,919)
(517)
-
(3,430)
(3,947)
-
(11,181)
-
(11,181)
-
-
-
-
146
-
5,019
5,165
486
-
(3,607)
(3,121)
2,648
17,835
113,074
133,557
3,578
15,240
96,983
115,801
Current
1,390
1
19,767
21,158
2,363
-
13,000
15,363
Non-current
Total Biological
Assets
1,258
17,834
93,307
112,399
1,215
15,240
83,983
100,438
2,648
17,835
113,074
133,557
3,578
15,240
96,983
115,801
-
-
154,595
154,595
-
-
167,134
167,134
-
-
176,544
176,544
-
-
154,595
154,595
106,064
-
-
106,064
106,567
-
-
106,567
80,175
-
-
80,175
106,064
-
-
106,064
-
2,133
-
2,133
-
2,097
-
2,097
-
4,537
-
4,537
-
2,133
-
2,133
Harvested/sold
Written down (note
15(a))
Market value increment
/ (decrement)
Closing balance as at
end of the year
Number of Cattle
Opening balance
Closing balance as at
end of the year
Number of Green
Metric Tonnes of
Standing Timber
Opening balance
Closing balance as at
end of the year
Number of Hectares
of horticulture
biological assets
Opening balance
Closing balance as at
end of the year
The parent entity held no biological assets as at 30 September 2007 or 30 September 2006.
The biological assets comprise pine and eucalypt trees situated in the south west of Western Australia, New South
Wales and the Green Triangle region in South Eastern Australia, wine grape vines, almond trees and olive trees situated
in the south west of Western Australia and cattle situated in northern Western Australia, Tasmania, New South Wales
and Queensland.
Standing timber
For mature eucalypt and pine trees, the net market value is based upon the current arms length market price less
point-of sale costs. During the year ended 30 September 2007, approximately 26,000 green metric tons of timber was
harvested (three months ended 30 September 2006: 12,000).
Horticulture
The net market value of established vineyard, almond and olive grove biological assets has been assessed by the
company as the difference between the net present value of the cash flows expected to be generated by the
vineyard/almond/olive grove and the net market value of integral property, plant and equipment associated with the
vineyard/almond/olive grove.
Refer to note 15(a) for the major assumptions used in the valuation model to determine the net market value of the
vineyards, almond trees and olive groves.
In accordance with the Group’s accounting policy a vineyard, almond or olive grove is not considered fully established
until one year from the date of planting, and until such time the fair value of these biological assets is determined to be
equivalent to its cost of establishment.
During the year ended 30 September 2007 the Group harvested 1,740 tonnes of wine grapes (three months ended 30
September 2006: nil), 2.8 tonnes of olives (three months ended 30 September 2006: nil) and 105,000 litres of olive oil.
- - 78 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
The Group did not harvest any almonds during the year (three months ended 30 September 2006: nil).
As at 30 September 2007, approximately $13,729,000 (30 September 2006: $15,002,000; 30 June 2006:
$14,295,000) of the horticulture biological assets were leased to investors in the Group’s managed investment
schemes. The existing leases have remaining terms ranging from 14 to 20 years.
For personal use only
Beef cattle
The value of beef cattle is measured at fair market value less point-of sale costs at each reporting date. During the
year ended 30 September 2007, approximately 41,000 head of beef cattle were sold (three months ended 30
September 2006: 7,200). As at 30 September 2007, approximately $110,000,000 (30 September 2006: $55,000,000)
of the beef cattle biological assets were leased to investors in the Group’s managed investment schemes. The existing
leases have remaining terms ranging from 6 to 7 years.
Financial risk management strategies
The Group is exposed to financial risks arising from changes in the price of beef cattle and from changes to the prices to
wine grape and olives. The Group does not anticipate prices of these commodities will decline significantly in the
foreseeable future and, therefore, has not entered into derivative or other contracts to manage the risk of a decline in
prices. The Group reviews its outlook for beef cattle prices and wine grape and olives prices regularly in considering the
need for active financial risk management.
Note 15.
Non-current assets – property, plant and equipment
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Land and buildings
Freehold land - at cost
58,560
34,635
1,042
-
Pastoral leases – at cost
53,048
53,041
-
-
114,395
70,702
17,776
15,119
(38,847)
(7,349)
(3,836)
(2,633)
75,548
63,353
13,940
12,486
187,156
151,029
14,982
12,486
Plant and Equipment
Plant and equipment – at cost
Less: Accumulated depreciation/impairment
Total plant and equipment
Total property, plant and equipment
Reconciliations
Reconciliations of the carrying amount of each class of property, plant and equipment at the beginning and end of the
current financial year are set out below:
Freehold land
$’000
Pastoral leases
$’000
Plant and
equipment
$’000
Leased
equipment
$’000
Total
$’000
Consolidated – 30 September
2007
Carrying amount at start of year
34,635
53,041
58,345
5,008
151,029
Additions
23,925
7
45,464
375
69,771
Disposals
-
-
(1,194)
(737)
(1,931)
Depreciation
-
-
(5,901)
(788)
(6,689)
Impairment (note (a))
-
-
(25,024)
-
(25,024)
58,560
53,048
71,690
3,858
187,156
Carrying amount at end of year
- - 79 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Freehold land
$’000
Pastoral leases
$’000
Plant and
equipment
$’000
Leased
equipment
$’000
Total
$’000
Parent Entity – 30 September
2007
For personal use only
Carrying amount at start of year
-
-
11,557
929
12,486
Additions
1,042
-
4,092
-
5,134
Disposals
-
-
(1,102)
-
(1,102)
Depreciation
Carrying amount at end of year
-
-
(1,327)
(209)
(1,536)
1,042
-
13,220
720
14,982
Consolidated – 30 September
2006
Carrying amount at start of period
33,787
50,696
51,632
4,689
140,804
Additions
848
2,345
10,014
517
13,724
Disposals
-
-
(1,910)
-
(1,910)
Depreciation
-
-
(1,391)
(198)
(1,589)
34,635
53,041
58,345
5,008
151,029
-
-
11,008
982
11,990
Carrying amount at end of period
Parent Entity – 30 September
2006
Carrying amount at start of period
Additions
-
-
1,059
2
1,061
Disposals
-
-
-
-
-
Depreciation
-
-
(510)
(55)
(565)
Carrying amount at end of period
-
-
11,557
929
12,486
(a)
A value in use assessment of horticulture assets, performed using the assumption of no ongoing non-forestry
MIS post 30 June 2008, has identified an impairment loss in respect of the olives and wine grape cash
generating units totalling $40,072,000, split between property, plant and equipment $25,024,000, biological
assets $11,181,000 and intangible assets $3,867,000. These horticulture assets form part of a reportable
segment, “MIS Horticulture”, as disclosed in note 41.
The valuation model used to determine the net market value of the vineyards, almond trees and olive groves
used the following major assumptions:
- Discount rate – 12.7% – 16.8% (pre tax)
- Inflation – 2.75%
- newly established vineyards reach maturity in 6 years but start producing in year 3
- newly established olive groves and almond trees reach maturity in 7 years but start producing in year 3
- the vineyard, almond and olive crops will at least maintain their prices in real terms and are based on prices
from the 2007 harvest.
(b)
The Group’s cattle stations that are held under leasehold agreement with the Crown are classified in property,
plant and equipment as pastoral leases. These properties in Queensland and Western Australia are mainly
pastoral holdings which are term leases with maximum years of 53 years and 50 years respectively.
While there is no obligation for leases to be renewed by either the Queensland or Western Australian State
Governments at expiry, the directors are not presently aware of any reason why leases would not be renewed
in substantially the same terms based upon practice by both State Governments.
(c)
Leased equipment is pledged as security for the related finance lease liabilities.
- - 80 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
Note 16.
Non-current assets – investment properties
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
At fair value
Opening balance
522,569
508,631
264
264
Additions – cost
166,758
21,003
-
-
Disposals
Fair value adjustment
Closing balance at 30 September
Plantation properties
Cattle properties (note (e))
(4,609)
(155)
-
-
37,592
(6,910)
34
-
722,310
522,569
298
264
708,949
510,752
298
264
13,361
11,817
-
-
722,310
522,569
298
264
(a)
The fair value of investment properties reflects the nature and characteristics of the property and the prevailing
market conditions at the reporting date.
(b)
The nature of the Group’s plantation projects, and in particular the deferral of the payment of property lease
rental fees until the end of the project (approximately 10 – 11 years from project commencement), is such that
the fair value of a property will reduce when it is leased to growers (encumbered) in the project. This reduction
is recorded in the income statement as an investment property fair value adjustment. During the year to 30
September 2007 the Group recorded a fair value reduction of $98,596,700.
Each subsequent year the fair value of existing investment property is expected to increase as the lease period
reduces (known as the “unwinding of the discount”) and this gain is also recorded in the income statement as an
investment property fair value adjustment. The increase in fair value from the discount unwind of properties
encumbered at the beginning of the year totalled $61,823,200.
(c)
The fair value of investment properties was determined by an independent expert using a discounted cash flow
(DCF) model and, in accordance with Group policy, with the benefit of independent valuations (on an
unencumbered basis) of approximately one third of the Group’s properties.
The Independent expert provided a valuation range for the Group’s investment property of $720,000,000 to
$770,000,000 with a mid-point of $745,000,000.
The valuation recorded in the Group’s 30 September 2007 financial statements is $722,310,000, which is based
on the following assumptions:
Present value land valuation
basis
Length of project lease
Average annual real price
growth of land
CPI
Lease rental fees
Post harvest – remediation
costs
Discount rate
Assumption range
Unencumbered best available
use
10 – 11 years
1% to 3% per annum
Valuation assumption
Unencumbered best available
use
10 – 11 years
2.0% per annum
2.5% to 3% per annum
2.5% of estimated project net
harvest proceeds
$550 - $1000
2.75% per annum
2.5% of estimated project net
harvest proceeds
Average of $750 per hectare
9.5% - 10.5% per annum
10.5% per annum (2006: 11.5%
per annum)
- - 81 - -
For personal use only
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(d)
The 2007 independent valuation of investment properties was positively impacted by a reduction in the discount
rate used in the DCF model. The discount rate decreased from 11.5% at 30 September 2006 to 10.5% at 30
September 2007. The effect of the change in accounting estimate is an increase in the value of investment
properties of $45,800,000 and an increase in net profit after tax of $32,060,000.
(e)
In accordance with Group policy Cattle properties are identified as investment properties only when an
insignificant portion of the cattle on the property are being managed to the Group’s account. At balance date the
majority of Cattle properties are classified in property, plant and equipment.
Note 17.
Non-current assets – goodwill and other intangible assets
(a) Reconciliation of the carrying amount at the beginning and the end of the period
Consolidated
Land
Access
Rights
$’000
Goodwill
$’000
Parent
Water
licences
$’000
Software
$’000
Wine
grape
sales
contracts
$’000
Consolidated
Total
$’000
Software
$’000
Year ended 30
September 2007
Opening net book amount
60,852
2,019
2,540
3,022
5,101
73,534
2,540
Additions
7,503
-
2,577
4,393
-
14,473
2,577
Impairment (note 15(a))
(114)
-
-
-
(3,867)
(3,981)
-
Amortisation
Closing net book amount
-
(76)
(1,520)
-
(1,234)
(2,830)
(1,520)
68,241
1,943
3,597
7,415
-
81,196
3,597
68,355
2,130
5,845
7,415
5,873
89,618
5,845
(114)
(187)
(2,248)
-
(5,873)
(8,422)
(2,248)
68,241
1,943
3,597
7,415
-
81,196
3,597
At 30 September 2007
Cost
Accumulated amortisation
and impairment
Net book amount
Three months ended 30
September 2006
Opening net book amount
60,852
2,038
3,003
2,988
5,298
74,179
3,003
Additions
-
-
49
34
108
191
49
Amortisation
-
(19)
(512)
-
(305)
(836)
(512)
60,852
2,019
2,540
3,022
5,101
73,534
2,540
60,852
2,130
3,409
3,022
5,874
75,287
3,409
-
(111)
(869)
-
(773)
(1,753)
(869)
60,852
2,019
2,540
3,022
5,101
73,534
2,540
Closing net book amount
At 30 September 2006
Cost
Accumulated amortisation
Net book amount
(b) Description of the Group’s intangible assets and goodwill
Goodwill
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated
impairment losses. Goodwill is not amortised and is reviewed for impairment annually or more frequently if events or
changes in circumstances indicate that the carrying value has been impaired (refer to section (c) of this note).
Land Access Rights
Land access rights represent the value to the Group of the various lease agreements in place with the Tiwi Aboriginal
Land Trust for the long term lease of plantation land on Melville Island in the Northern Territory. This amount was
- - 82 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
independently valued as part of the acquisition of Sylvatech Limited in April 2005. Land access rights are amortised on
a straight line basis over 27 years, being the period of the remaining lease term.
Software
For personal use only
Software is comprised of software licences purchased and costs incurred in the development of internal projects. These
are recorded at cost and amortised on a straight line basis over their remaining useful lives, which vary from 3 to 4
years.
Water Licences
Water licences represent the value to the Group of the right to water reserves acquired with the purchase of properties.
The water licences have an indefinite useful life and are not amortised. Water licences are reviewed for impairment
annually or more frequently if events or changes in circumstances indicate that the carrying value has been impaired.
Wine Grape Sales Contracts
Wine grape sales contracts represent the value to the Group of existing sales agreements acquired with the purchase of
properties. The sales contracts are amortised over the life of the contracts, which vary from approximately 3 to 10
years. Refer to note 15(a) for a description of the impairment.
(c) Impairment
Impairment tests for goodwill
Goodwill is allocated to certain cash-generating units (CGU) within the Group. As at 30 September 2007, goodwill has
been allocated to the Forestry CGU ($39,748,000), Cattle CGU ($21,104,000) and Funds Management CGU
($7,503,000).
(i) Forestry CGU
The recoverable amount of the Forestry CGU is determined based on value-in-use calculations. These calculations use
cash flow projections based on financial budgets approved by management covering a 19 year period.
The key assumptions to determining the value-in-use of the Forestry CGU in the current year are:
Cash generating unit
Forestry
Nominal
growth rate
Discount rate
Inflation
rate
%
%
%
2.75
14.50
2.75
These assumptions have been used for the analysis of the CGU. Management determined the budgeted growth rate in
the unit price of a MIS woodlot based on its expectations for the future. The discount rates used reflect specific risks
relating to the relevant CGUs. The inflation rate is based on management’s expectations for the future.
(ii) Cattle CGU
The Cattle CGU was assessed for impairment based on fair value less costs to sell. Key assumptions in management’s
determination of the fair value less costs to sell include:
-
The value of land (being land classified in Property, Plant and Equipment and in Investment Properties) and cattle
biological assets were based on independent valuations;
-
Selling costs were estimated based on past experience and management’s best estimate.
(iii) Funds Management CGU
The Funds Management CGU consists of Great Southern Funds Management Pty Ltd and its 100% owned subsidiary,
which was acquired during the current financial year. The assessment of the recoverable amount of the Funds
Management CGU was performed as part of the acquisition process. Refer to note 45 for details of the acquisition.
- - 83 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 18.
Non-current assets – deferred tax assets
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
The balance comprises:
Deferred tax assets
73,387
69,577
18,036
15,081
(18,462)
(3,079)
(1,359)
(220)
54,925
66,498
16,677
14,861
Receivables and doubtful debts
1,132
3,381
57
1,188
Employee benefits
1,673
1,104
1,504
1,104
-
3,159
-
-
Deferred tax liabilities (note 26)
Net deferred tax assets
The balance comprises temporary differences
attributable to:
Amounts recognised in profit or loss
Investment property
Accruals and provisions
18,709
14,833
12,335
6,837
Deferred revenue
34,973
38,257
-
-
-
3,311
-
1,809
Amortisation of debt issue expense
Property, plant and equipment
Tax losses *
Sundry items
11,192
-
-
-
1,903
2,899
1,903
2,899
3,091
216
1,523
-
72,673
67,160
17,322
13,837
714
2,417
714
1,244
73,387
69,577
18,036
15,081
69,577
70,551
15,081
13,866
5,513
(2,021)
3,485
168
Amounts recognised directly in equity
Share issue expenses and derivative assets
Net deferred tax assets
Movements:
Opening balance
Credited/(charged) to the income statement
Credited/(charged) to equity
Closing balance at 30 September
(1,703)
1,047
(530)
1,047
73,387
69,577
18,036
15,081
*The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing
assessable temporary differences.
Note 19.
Non-current assets – other
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Maintenance deposits
622
334
-
-
Other assets
361
19
16
-
983
353
16
-
- - 84 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 20.
Trade and other payables
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Current liabilities
Trade payables
10,458
8,910
4,063
2,310
Other payables
4,751
3,366
435
337
73,155
26,838
30,473
19,803
-
-
307,502
59,425
88,364
39,114
342,473
81,875
Accruals
Payables to related parties (note 39)
Note 21.
Current liabilities – Interest-bearing loans and borrowings
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Current liabilities
Hire purchase liability (note 38)
635
763
336
239
Short term borrowings
295
-
-
-
930
763
336
239
Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on borrowings are set out in note 33.
Note 22.
Current liabilities – current tax liabilities
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Current income tax liability
Note 23.
-
2,238
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
2,238
Current liabilities – provisions
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Provision for dividend (note 32)
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
34,111
-
34,111
Employee benefits (note 27)
3,416
1,782
2,971
1,782
Project timber (note (a))
9,600
9,600
-
-
Other provisions
3,826
-
-
-
16,842
45,493
2,971
35,893
(a) This provision relates to the maximum contribution that the Group may make to existing plantation project
investors. Whilst the Group is under no legal obligation to make any such contribution the Group has previously made a
contribution payment to investors in the Group’s first 2 plantation projects, being the 1994 plantation project and 1995
plantation project. Also, subsequent to the end of the financial year, on 13 December 2007, the Group made a
contribution of $4,721,000 to 1996 plantation project investors, leaving a provision of 4,879,000 available for other
projects. It is the Board’s current view that no additional provisions for contributions by the Group to investors will be
made.
- - 85 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Movements in provisions
Movements in provisions during the current financial year, other than employee benefits, are set out below:
Year ended 30 September 2007
For personal use only
Dividend
$’000
Other
provisions
$’000
Total
$’000
Carrying amount at start of the year
34,111
-
34,111
Additional provisions recognised
12,608
3,826
16,434
Provisions used during the year
(46,719)
-
(46,719)
-
3,826
3,826
Carrying amount at the end of the year
Note 24.
Current liabilities – deferred revenue
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Deferred revenue
Note 25.
146,202
150,096
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
-
Non-current liabilities – Interest-bearing loans and borrowings
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
2,140
Hire purchase liability (note 38)
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
3,324
754
TREES2
78,281
78,224
78,281
1,447
78,224
TREES3
121,691
121,859
121,691
121,859
Debentures, net of issue costs
213,707
211,691
-
-
Other long term borrowings
245,000
200,000
245,000
200,000
660,819
615,098
445,726
401,530
TREES series
In October 2004 the company issued 800,000 Transferable REset Exchangeable Securities series 2 (TREES2), each with
a face value of $100 raising $80,000,000 before issue costs. At the discretion of the directors each TREES2 pays a
preferential non-cumulative franked coupon payable semi-annually in arrears.
In October 2005 the company issued a third hybrid security series, Transferable REset Exchangeable Securities series
3, or TREES3. A total of 1,247,000 TREES3 with a face value of $100 each were issued raising a total of $124,700,000
before issue costs. TREES3 pays a preferential cumulative unfranked coupon payable semi-annually in arrears.
TREES2 and TREES3 are perpetual, subordinated reset convertible notes with no fixed maturity and are redeemable at
the option of the Group. TREES2 has no cumulative coupon obligations and TREES3 has a cumulative coupon obligation.
The distributions on TREES2 and TREES3 are recognised in the income statement as interest expense. The coupon rates
for TREES2 and TREES3 are 6.4% and 7.75% respectively.
Debentures
On 17 August 2006, the Group entered into a structured finance transaction with ANZ Investment Bank that provides
the Group with approximately $211,691,000, net of issue costs, through the issue of debentures by a Group subsidiary
(refer to note 29).
Long term borrowings
At 30 September 2007 the Group had fully drawn its unsecured bank lending facilities to the limit of $245,000,000
(refer note 29). Subsequent to the end of the financial year the Group increased and restructured this facility to a limit
of $350,000,000 with principal repayable from September 2009 through to October 2012. This increased facility is
secured by way of fixed and floating charge against the majority of assets in the Group and is subject to the normal
covenants for a facility of this type.
- - 86 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 26.
Non-current liabilities – deferred tax liabilities
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Biological assets
8,219
2,070
-
-
Investment property
8,119
-
10
-
1,183
1,009
891
220
17,521
3,079
901
220
941
-
458
-
18,462
3,079
1,359
220
Inventories
Net deferred tax liabilities
Amounts recognised directly in equity
Derivative assets
Net deferred tax liabilities
Movements:
3,079
2,904
220
117
14,442
175
681
103
941
-
458
-
18,462
3,079
1,359
220
Opening balance
Charged/(credited) to the income statement
Charged/(credited) to directly to equity
Closing balance at 30 September (note 18)
Note 27.
Non-current liabilities – provisions
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Employee benefits (note 23)
2,160
1,898
-
16,840
-
-
25,515
13,740
25,515
13,740
Provision for project maintenance
Provision for land assessment (note 37)
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Other provisions
2,044
1,898
5,241
-
4,490
-
32,916
32,478
32,049
15,638
5,576
3,680
5,014
3,680
375
342
358
342
Other
provisions
$’000
Total
$’000
Aggregate employee benefits
Average number of employees during the financial year
Movements in provisions
Movements in provisions during the financial year, other than employee benefits, are set out below:
Land
assessment
$’000
Project
maintenance
$’000
Carrying amount at start of the year
13,740
16,840
-
30,580
Additional provisions recognised
11,775
-
5,241
17,016
-
(16,840)
-
(16,840)
25,515
-
5,241
30,756
Year ended 30 September 2007
Provisions utilised/released during the year
Carrying amount at the end of the year
- - 87 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 28.
Non-current liabilities – deferred revenue
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Deferred revenue
Note 29.
8,316
6,850
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
-
Financing arrangements
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Unrestricted access was available at balance date to the
following facilities:
Structured finance facility
Total facility
214,666
214,666
-
-
Used at balance date
214,666
214,666
-
-
-
-
-
-
Total facility
245,000
245,000
245,000
245,000
Used at balance date
245,000
200,000
245,000
200,000
-
45,000
-
45,000
13,446
13,446
-
-
Used at balance date
6,874
9,024
-
-
Unused at balance date
6,572
4,422
-
-
Unused at balance date
Senior corporate debt facility
Unused at balance date
Bank guarantee facility
Total facility
Structured finance facility
In August 2006 the Group entered into a structured finance transaction in which the Group received $211,691,000 net
of issue costs through the issue of debentures and purchased a held-to-maturity investment for approximately
$75,036,000 (refer note 10). The transaction is structured such that the cash flows the Group receives from the heldto-maturity investment are expected to be sufficient to meet the obligations of the transaction through to 2012
including the payment of interest not capitalized. The amount to be repaid in August 2012 including capitalized interest
will total $257,670,000.
The borrowings are limited in recourse to the held-to-maturity investment and specified investment property land
within Great Southern Property Trust, a wholly owned entity of Great Southern Limited.
Senior corporate debt facility
An unsecured senior debt facility, fully drawn at 30 September 2007. Refer note 40 for information regarding an
increase in this facility post 30 September 2007.
Bank guarantee facility
Great Southern Managers Australia Limited (GSMAL) holds an unsecured guarantee facility with ANZ for $13,446,000
(30 Sept 2006: $13,446,000) in respect of plantation maintenance reserve funds which are required to be held by
Great Southern Managers Australia Limited, the Responsible Entity, for its 2003 and prior plantation projects. This
facility guarantees the funds required, as determined by the independent forester on an annual basis, for the
maintenance of plantations being managed for specific projects. At 30 September 2007, guarantees in place are
$6,874,000 (30 Sept 06: $9,024,000).
- - 88 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 30.
Contributed equity
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
For personal use only
Notes
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Share capital
Ordinary shares fully paid
(a)
450,393
435,498
450,393
435,498
Employee reserved shares
(b)
(2,534)
(2,790)
(2,534)
(2,790)
447,859
432,708
447,859
432,708
(a) Movement in ordinary share capital over the last two financial reporting periods ending 30 September 2007 and 30
September 2006:
Notes
30 September 2007
Number of
shares
$’000
30 September 2006
Number of
shares
$’000
310,098,599
435,498
309,958,599
435,338
Issue price $1.00
600,000
600
100,000
100
Issue price $1.50
20,000
30
40,000
60
5,093,799
12,022
-
-
1,201,021
3,046
-
-
6,500
15
-
-
-
(818)
-
-
317,019,919
450,393
310,098,599
435,498
Balance at the beginning of the year
Option conversions during the year:
Dividend reinvestment plan issues:
Issue price $2.36
Issue price $2.54
TREES2 converted into ordinary shares,
net of issue costs
Equity issuance cost
Balance at the end of the year
(b) Movement in employee reserved shares over the last two financial reporting periods ending 30 September 2007
and 30 September 2006:
Notes
Balance at the beginning of the year
30 September 2007
Number of
$’000
shares
2,224,515
(2,790)
2,224,515
(2,790)
-
256
-
-
2,224,515
(2,534)
2,224,515
(2,790)
Dividend applied
Balance at the end of the year
35(e)
30 September 2006
Number of
$’000
shares
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in
proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares
present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Effective 1 July 1998, the Corporations legislation abolished the concepts of authorised capital and par value shares.
Accordingly the company does not have authorised capital nor par value in respect of its issued capital.
Employee reserved shares
A loan of $1,500,000 was provided to both C A Rhodes and to P C Butlin for the sole purpose of acquiring ordinary
shares (“employee reserved shares”) in Great Southern Limited. Both are members of the company’s Executive
Committee and are considered by the board to be key executives in the company. Aligning the long term interests of
these key executives with those of the company is considered by the board to be in the best interests of the company
and its shareholders.
Proceeds, net of applicable taxation, from dividends received by the director or executive in respect of the loan shares
are used to repay outstanding principal. In addition, net proceeds received by the director or executive from the
- - 89 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
disposal of loan shares up to a maximum of the original cost of acquisition of the loan shares disposed of are used to
repay outstanding principal.
For personal use only
Each loan is interest free and is for a year of 10 years commencing 30 July 2003 ($1,000,000 loan) and 16 January
2004 ($500,000 loan) for C A Rhodes and 16 January 2004 ($1,500,000 loan) for P C Butlin. Each loan is secured by a
first mortgage over the loan shares acquired. Recourse for each loan is limited in certain circumstances to the proceeds
from sale, net of applicable taxation, of the relevant loan shares.
Dividend reinvestment plan
The company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of
their share dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash.
Shares are issued under the plan at a discount of 5% (three months ended 30 September 2006: 5%) to market price.
Options
Information relating to options issued to employees, including details of options issued, exercised and lapsed during the
financial year and options outstanding at 30 September 2007 are set out in note 34.
Management performance rights
The company has a Management Performance Rights Plan under which eligible persons are granted rights subject to
certain performance hurdles being met. No payment is required for the grant of a right unless the board determines
otherwise. Refer to the Remuneration Report on page 34.
Note 31.
Reserves and Retained Profits
(a) Reserves
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Share based payment reserve
11,606
6,995
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
11,606
6,995
1,736
(2,738)
1,071
(587)
13,342
4,257
12,677
6,408
Balance at start of period
6,995
5,855
6,995
5,855
Management performance rights
4,611
1,140
4,611
1,140
Cash flow hedging reserve
Movements:
Share based payment reserve
Other
Balance at 30 September
-
-
-
-
11,606
6,995
11,606
6,995
(2,738)
-
(587)
-
Cash flow hedging reserve
Balance at start of period
Tax effected fair value adjustment
698
(2,738)
698
(587)
Transfer to balance sheet/income statement
3,776
-
960
-
Balance at 30 September
1,736
(2,738)
1,071
(587)
(b) Retained profits
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Retained profits at the beginning of the financial
period
Net profit/(loss) attributable to members of Great
Southern Limited
Dividends provided for or paid (note 32)
Retained profits at 30 September
- - 90 - -
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
245,861
317,837
21,441
88,649
71,508
(37,865)
64,507
(33,097)
(12,608)
(34,111)
(12,608)
(34,111)
304,761
245,861
73,340
21,441
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(c) Nature and purpose of reserves
Share based payments reserve
For personal use only
The share based payments reserve is used to recognise the fair value of options issued but not exercised.
Cash flow hedging reserve
The cash flow hedging reserve is used to record gains and losses on a hedging instrument in a cash flow hedge that are
recognised directly in equity, as described in note 1(l). Amounts are recognised in profit and loss when the associated
hedged transaction affects profit and loss.
Note 32.
Dividends
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Ordinary shares
Final dividend declared on 30 August 2006 and paid for on 27 October 2006, for
the year ended 30 June 2006 of 11 cents per ordinary share, fully franked, based
on tax paid at 30%
34,111
34,111
Interim dividend for the year ended 30 September 2007 of 4 cents per fully paid
ordinary share paid on 22 June 2007, fully franked, based on tax paid at 30%
(No interim dividend was declared for the period ended 30 September 2006)
12,608
-
Total dividends provided for or paid
46,719
34,111
Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the year ended
30 September 2007 and the period ended 30 September 2006 were as follows:
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Paid in cash*
31,651
-
Satisfied by issue of shares
15,068
-
46,719
-
*Excludes dividends paid on treasury shares
Franked dividends
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Franking credits available for subsequent financial years at 30%
(30 June 2006: 30%)
194,942
166,995
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
194,942
166,995
The above amounts represent the balance of the franking accounts as at the end of the financial year, adjusted for:
(a)
franking credits that will arise from the payment of the current tax liability;
(b)
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
(c)
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date;
and
(d)
franking credits that may be prevented from being distributed in subsequent financial years.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of
controlled entities were paid as dividends.
- - 91 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 33.
Financial instruments
For personal use only
(a) Credit risk exposures
The credit risk on financial assets of the Group which have been recognised in the balance sheet, other than
investments in shares, is generally the carrying amount, net of any provisions for doubtful debts. Having a large
portion of debtors resulting from MIS project sales using long-term finance offered by a wholly owned subsidiary of the
parent entity may expose the Group to a level of credit risk which may be considered above the “normal” level. This
credit risk is mitigated through the securitisation of receivables.
(b) Interest rate risk exposures
The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial
assets and financial liabilities is set out on the following page. Exposures arise predominantly from assets and liabilities
bearing variable interest rates as the Group intends to hold fixed rate assets and liabilities to maturity.
Consolidated
Fixed interest maturing in:
30 September 2007
Floating
interest
rate
$'000
Financial assets
Cash and cash
equivalents
Receivables and other
financial assets
Investments
<1 year
$'000
1-2 years
2-3 years
-
-
207,640
-
207,640
29,699
462
30,161
24,905
268
25,173
30,908
1,966
32,874
6.25%
8.98%
9.02%
-
930
930
Weighted average
interest rate – pa
-
Net financial
assets/(liabilities)
207,640
Weighted average
interest rate – pa
Financial liabilities
Borrowings
Payables
-
-
207,640
32,248
118
32,366
31,000
81
31,081
66,464
102
66,566
110,792
110,792
326,016
2,997
536,653
9.24%
9.18%
9.03%
10.05%
-
247,140
-
78,281
-
121,691
-
247,140
78,281
121,691
213,707
213,707
-
88,364
88,364
10.46%
7.47%
6.4%
7.75%
8.22%
-
-
29,231
(221,967)
(45,407)
(89,325)
(182,626)
66,566
22,428
Floating
interest
rate
$'000
4-5 years
$'000
>5
years
$'000
<1 year
$'000
1-2 years
2-3 years
-
22,262
268,994
10,418
453
10,871
32,303
800
33,103
27,688
686
28,374
5.58%
10.24%
10.47%
-
763
763
Weighted average
interest rate – pa
-
Net financial
assets/(liabilities)
268,994
Financial liabilities
Borrowings
Payables
Total
$'000
-
246,732
Weighted average
interest rate – pa
4-5 years
$'000
Non interest
bearing
$'000
>5
years
$'000
661,749
88,364
750,113
(213,460)
Fixed interest maturing in:
30 September 2006
Financial assets
Cash and cash
equivalents
Receivables and other
financial assets
Investments
3-4
years
3-4
years
Non interest
bearing
$'000
Total
$'000
-
-
-
246,732
18,459
457
18,916
13,844
343
14,187
110,909
505
111,414
160,777
160,777
396,660
3,244
646,636
10.47%
10.47%
10.47%
10.80%
-
3,324
-
200,000
-
78,224
-
3,324
200,000
78,224
333,550
333,550
-
41,352
41,352
6.66%
6.66%
7.30%
6.40%
7.69%
-
-
10,108
29,779
(171,626)
(59,308)
(319,363)
111,414
119,425
- - 92 - -
615,861
41,352
657,213
(10,577)
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Parent
Fixed interest maturing in:
For personal use only
30 September 2007
Floating
interest
rate
$'000
Non interest
bearing
$'000
>5
years
$'000
<1 year
$'000
1-2 years
2-3 years
3-4 years
4-5 years
$'000
40,562
-
-
-
-
-
-
-
40,562
40,562
-
-
-
-
-
-
1,278,521
1,278,521
1,278,521
1,319,083
6.25%
-
-
-
-
-
-
-
-
336
336
245,754
245,754
78,281
78,281
121,691
121,691
-
-
342,473
342,473
Weighted average
interest rate – pa
-
10.50%
7.45%
6.40%
7.75%
-
-
-
Net financial
assets/(liabilities)
40,562
(336)
(245,754)
(78,281)
(121,691)
-
-
936,048
Financial assets
Cash and cash
equivalents
Receivables and other
financial assets
Weighted average
interest rate – pa
Financial liabilities
Borrowings
Payables
Total
$'000
446,062
342,473
788,535
530,548
Fixed interest maturing in:
30 September 2006
Floating
interest
rate
$'000
Non interest
bearing
$'000
>5
years
$'000
<1 year
$'000
1-2 years
2-3 years
3-4 years
4-5 years
$'000
70,452
-
-
-
-
-
-
-
70,452
70,452
-
-
-
-
-
-
897,445
897,445
897,445
967,897
5.58%
-
-
-
-
-
-
-
-
239
239
1,447
1,447
200,000
200,000
78,224
78,224
121,859
121,859
-
84,951
84,951
Weighted average
interest rate – pa
-
6.66%
6.66%
7.30%
6.40%
7.69%
-
-
Net financial
assets/(liabilities)
70,452
(239)
(1,447)
(200,000)
(78,224)
(121,859)
-
812,494
Financial assets
Cash and cash
equivalents
Receivables and other
financial assets
Weighted average
interest rate – pa
Financial liabilities
Borrowings
Payables
- - 93 - -
Total
$'000
401,769
84,951
486,720
481,177
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Reconciliation of net financial assets to net assets
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Net financial assets/(liabilities) as above
(213,460)
(10,577)
Parent
30 Sept
2007
$’000
530,548
30 Sept
2006
$’000
481,177
Non-financial assets and liabilities
Inventories
6,788
3,831
2,971
760
Property, plant and equipment
187,155
151,029
14,982
12,486
Investment property
722,310
522,569
298
264
81,196
73,534
3,597
2,540
(2,613)
(4,980)
(193)
15,081
68,622
69,577
18,036
133,558
115,801
-
-
379
38
16
-
Goodwill and other intangible assets
Provision for doubtful debts
Deferred tax assets
Biological assets
Other assets
Deferred tax liabilities
(13,697)
(3,079)
(1,359)
(220)
Provisions
(49,758)
(77,971)
(35,020)
(51,531)
(154,518)
(156,946)
-
-
765,962
682,826
533,876
460,557
Deferred revenue
Net assets per balance sheet
(c) Net fair value of financial assets and liabilities
On balance sheet
The net fair value of cash and cash equivalents as well as interest bearing and non-interest bearing monetary financial
assets and financial liabilities of the Group approximates their carrying value.
The net fair value of other monetary financial assets and financial liabilities is based upon market prices where a market
exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar
risk profiles.
- - 94 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 34.
Share-based payment plans
(a) Executive Options Issued
For personal use only
The directors have at their discretion issued options to key executives. Options are granted for no consideration and
vest over a period of up to five years at the discretion of the directors.
Options granted under the plan carry no dividend or voting rights.
When exercised, each option is converted into one ordinary share within 14 days of exercise. Amounts received on
exercise of options are recognised as share capital.
Set out below are summaries of options granted to employees under the plan:
Grant
Expiry
Exercise
date
date
price
Company and Consolidated –
30 September 2007
31/07/03
31/07/08
Balance at
start of
year
Issued
during the
year
Exercised
during the
year
Lapsed
during the
year
Balance at
end of the
year
Exercisable
at the end
of the year
$1.00
200,000
-
-
-
200,000
200,000
Weighted average exercise price
$1.00
-
-
-
$1.00
$1.00
$1.00
300,000
-
(100,000)
-
200,000
200,000
Weighted average exercise price
$1.00
-
$1.00
-
$1.00
$1.00
Company and Consolidated –
30 September 2006
31/07/03
31/07/08
No options were exercised during the financial year. Options exercised during the prior year and the number of shares
issued to employees on the exercise of options was 100,000.
The fair value of shares issued on exercise of options, being the market price of shares of the company traded on the
Australian Stock Exchange as at close of trading, for 30 September 2006 was $2.33.
No options were forfeited during the years covered by the above table.
The weighted average remaining contractual life of share options outstanding at the end of the year was 2 years (30
September 2006: 2 years).
Consolidated
30 Sept
30 Sept
2006
2007
Aggregate proceeds received from employees on the
exercise of options and recognised as issued share
capital
Parent Entity
30 Sept
30 Sept
2007
2006
$
$
$
$
-
100,000
-
100,000
Consolidated
30 Sept
30 Sept
2006
2007
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
$’000
$’000
-
233
-
233
Fair value of shares issued to employees on their
exercise of options as at their issue date
(b) Management Performance Rights Plan
The company has previously used management performance rights (Rights) to key executives in the Group pursuant to
the Management Performance Rights Plan. The Rights were granted for no consideration and vest over a period of up
to five years subject to the attainment of pre-set shareholder value based performance hurdles.
When exercised each Right converts into one ordinary share within 14 days of exercise. No amounts are received on the
exercise of Rights.
- - 95 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Set out below is a summary of the Rights granted under the Management Performance Rights Plan up to 30 September
2007:
For personal use only
Grant
date
Expiry
date
Exercise
price
Balance
at start of
year
Issued
during
the year
Exercised
during the
year
Lapsed
during the
year
Balance
at end of
the year
Exercisable at
the end of the
year
Company and consolidated –
30 September 2007
17/12/04
17/12/09
$0.00
4,235,000
-
-
(315,000)
3,920,000
-
31/03/06
17/12/09
$0.00
400,000
-
-
-
400,000
-
31/03/06
31/03/11
$0.00
1,492,500
-
-
(157,500)
1,335,000
-
30/06/06
30/03/11
$0.00
350,000
-
-
-
350,000
-
20/12/06
20/12/06
$0.00
-
3,245,000
-
(165,000)
3,080,000
-
6,477,500
3,245,000
-
(637,500)
9,085,000
-
4,235,000
-
-
-
4,235,000
-
Weighted average exercise price $nil
Company and consolidated –
30 September 2006
17/12/04
17/12/09
$0.00
31/03/06
17/12/09
$0.00
400,000
-
-
-
400,000
-
31/03/06
31/03/11
$0.00
1,492,500
-
-
-
1,492,500
-
30/06/06
30/03/11
$0.00
350,000
-
-
-
350,000
-
6,477,500
-
-
-
6,477,500
-
Weighted average exercise price $nil
Further information on the Management Performance Rights Plan can be found in the Remuneration Report on page 34.
The terms and conditions of each grant of Rights are as follows:
Grant date
Expiry
date
Fair value
per Right at
grant date
Exercise
price
Vesting period/date
exercisable1
17/12/04
17/12/09
$2.07
$0.00
17/12/06 to 17/12/09
31/03/06
31/03/11
$2.00
$0.00
17/12/06 to 31/03/11
31/03/06
31/03/11
$2.13
$0.00
31/03/08 to 31/03/11
30/06/06
30/06/11
$1.63
$0.00
31/03/09 to 31/03/11
20/12/06
20/12/11
$1.44
$0.00
20/12/09 to 20/12/11
1.
Dependant upon achieving the required performance measure during the vesting period.
2.
On 20 December 2006, the company issued 3,245,000 Rights to 95 employees. Each Right has an exercise price of
$nil and expires on 20 December 2011. Rights were issued to employees in two tranches with the first
performance measurement date for tranche 1 and tranche 2 being 20 December 2009 and 20 December 2010,
respectively.
An employee who holds shares in the company as a result of the exercise of a vested Right may not deal with those
shares before the earlier of: (a) the end of a ten year period commencing at the grant date of the Rights; (b) the date
the employee ceases to be employed by the company; and (c) a time determined by the board (“the Restriction
Period”).
An employee issued with Rights who ceases to be an employee (for reasons other than for termination) during the
period from the grant date to the expiry date is entitled to exercise any vested Rights. For an employee whose
employment with the company is terminated all Rights grants remaining unexercised at the date of termination lapse.
Rights issued to employees are not transferable except with the approval of the board or by operation of law on death
or legal incapacity.
- - 96 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
The amounts disclosed for emoluments relating to management performance rights above are assessed at the fair
values at grant date of the Rights granted to the Executive Committee member and the manager, allocated equally
over the period from the grant date to the average vesting period end date.
Fair values at grant date and the average vesting period end date are independently valued using a Monte Carlo
simulation to model the potential TSR ranking of the company and other companies in the ASX/S&P 200 Accumulation
Index over 10,000 iterations. The model used takes into account the share price at grant date, the performance
measurement hurdles to vesting, the expected price volatility of the company’s ordinary shares, the expected dividend
yield, the risk-free interest rate, the exercise price of the Rights and the average restriction period for dealing in shares
after exercise.
The model inputs for the Rights included in key management compensation for the year ended 30 September 2007
included:
Grant date
17/12/04
31/03/06
31/03/06
30/06/06
20/12/06
$3.93
$4.05
$4.05
$3.40
$2.84
First performance measurement date – tranche 1
17/12/06
17/12/06
31/03/08
31/03/09
20/12/09
First performance measurement date – tranche 2
17/12/07
17/12/07
31/03/09
31/03/10
20/12/10
First performance measurement date – tranche 3
-
-
31/03/10
-
-
17/12/09
17/12/09
31/03/11
31/03/11
20/12/11
Each 3
months
Each 3
months
Each 3
months
Each 3
months
Each 3
months
35.0%
35.0%
35.0%
35.0%
35.0%
Expected dividend yield
3.6%
4.1%
4.1%
4.2%
4.41%
Risk-free interest rate
5.0%
5.4%
5.4%
5.8%
5.96%
7 years
7 years
7 years
7 years
7 years
Share price at grant date
Last performance measurement date – all tranches
Re-testing of performance measure if 100% not vesting
Expected price volatility of the company’s shares
Average share dealing restriction period
Note 35.
(a)
Key management personnel disclosures
Directors
The following persons were directors of Great Southern Limited during the financial year:
Name
Position
Executive directors
J C Young
Managing Director (i)
C A Rhodes
General Manager - Operations (i)
P C Butlin
General Manager - Corporate Development
Non-executive directors
D C Griffiths
Chairman
A McCleary
P J Mansell
M L Peacock
(i)
On 10 December 2007, the Group’s managing director, Mr John Young, announced his intention to retire
effective from the company’s annual general meeting to be on 28 February 2008. Mr Young will provide
consultancy services to the Group from that date to 30 June 2008 after which Mr Young will join the Board as a
non-executive director. Mr Cameron Rhodes will take over the position of Managing Director and Chief
Executive Officer from 1 March 2008.
(b)
Executive committee
The Group’s senior executive team is referred to as the Executive Committee and through the year to 30 September
2007 comprised executive directors J C Young, C A Rhodes and P C Butlin, and other executives J S Dayman, N J
Hackett, S C Martin and S A Moran. The Executive Committee is responsible for all areas of corporate strategy and
operational performance of the Group and reports to the Board through the Managing Director.
- - 97 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(c)
Other key management personnel
For personal use only
The following persons also had authority for the strategic direction and management of the Group during the financial
year:
Name
Position
J S Dayman
Chief Operating Officer
S C Martin
Chief Financial Officer
N J Hackett
Company Secretary
S A Moran
General Manager – Sales and Marketing
All of the above persons are employed by Great Southern Limited and were also key management persons during the
period ended 30 September 2006.
(d)
Key management personnel compensation
Key management personnel compensation
Consolidated
30 Sept
2007
$
Short-term employee benefits
4,818,058
Parent Entity
30 Sept
2006
$
904,307
30 Sept
2006
$
4,818,058
30 Sept
2006
$
904,307
593,483
99,910
593,483
99,910
Share-based payments
1,764,498
372,543
1,764,498
372,543
Total
7,176,039
1,376,760
7,176,039
1,376,760
Post-employment benefits
The company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the detailed
remuneration disclosures required by AASB 124 Relates Parties paragraphs Aus 25.4 to 25.7.2 to the Remuneration
Report section of the Directors’ Report. These transferred disclosures have been audited.
(e)
Equity instrument disclosures relating to key management personnel
Management Performance Rights
Information regarding the Management Performance Rights Plan issued during the year ended 30 September 2007
including the terms and conditions of management performance rights (Rights) issued to the directors and the key
management personnel can be found in the Remuneration Report on page 34. All Rights issued during the year were
subject to the same terms and conditions.
Details of Rights over ordinary shares in the company provided as remuneration to each director and key management
personnel of the company and each of the key management personnel of the Group are set out below. When
exercisable each Right converts into one ordinary share of Great Southern Limited:
Balance at
the start of
the year
Granted during
the year as
compensation
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable at
the end of the
year
C A Rhodes
675,000
450,000
-
-
1,125,000
-
P C Butlin
Other key management
personnel
675,000
450,000
-
-
1,125,000
-
Directors
J S Dayman
175,000
120,000
-
-
295,000
-
S C Martin
175,000
120,000
-
-
295,000
-
N J Hackett
110,000
100,000
-
-
210,000
-
S A Moran
225,000
100,000
-
-
325,000
-
- - 98 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
No Rights are vested and unexercisable at the end of the year.
On 20 December 2006, the Group issued 3,245,000 management performance rights to 95 employees under the
Group’s Management Performance Rights Plan (Plan). For further details of the Plan, refer to the Remuneration Report
on page 34.
For personal use only
Shares provided on exercise of remuneration options or Rights
Options or Rights that had previously been provided as remuneration to any of the directors or key management
personnel and that were exercised during the financial year are disclosed in note 34.
Option holdings
Option holdings of directors and key management personnel of Great Southern Limited, including their personally
related entities, during the financial year include Management Performance Rights, as disclosed above, and the
following in-substance options relating to employee reserved shares (refer to note 30(b)):
Balance at
the start of
the year
Granted during
the year as
compensation
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable at
the end of the
year
Directors
C A Rhodes
1,224,515
-
-
-
1,224,515
1,224,515
P C Butlin
1,000,000
-
-
-
1,000,000
1,000,000
2,224,515
-
-
-
2,224,515
2,224,515
The weighted average exercise price of the above options at the end of the financial year is $1.14 (2006: $1.25).
Shareholdings
The numbers of shares in the company held during the financial year by each director of Great Southern Limited and
each of the key management personnel of the Group, including their personally related entities, are set out below:
Balance at start
of the year
Received during
the year on
exercise of
options
Other changes
during the
year
Balance at the
end of the
financial year
-
130,000
Ordinary shares:
Directors
D C Griffiths
J C Young
130,000
-
47,872,204
-
-
47,872,204
A McCleary
19,606
-
-
19,606
P J Mansell
30,312
-
20,477
50,789
M Peacock
-
-
10,158
10,158
C A Rhodes
1,333,333
-
-
1,333,333
P C Butlin
1,037,580
-
-
1,037,580
34,308
-
871
35,179
2,423
-
-
2,423
Transferable REset Exchangeable
Securities series 2:
N J Hackett
25
-
-
25
Transferable REset Exchangeable
Securities series 3:
N J Hackett
25
-
-
25
Other key management personnel
S C Martin
N J Hackett
- - 99 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(f)
Loans to directors and executives
Details of loans made to directors of Great Southern Limited and the key management personnel of the Group,
including their personally related entities, are set out below:
For personal use only
Aggregate for directors and other key management personnel
Name
Balance at the
start of the
year
$
Interest paid
and payable for
the year
$
Balance at
the end of
the year
$
4,352,671
28,984
3,692,573
3
12,159
922
11,237
3
4,835,732
14,558
4,352,671
3
13,158
346
12,159
Number in group at
end of year
2007
Directors*
Key management
personnel
2006
Directors
Key management
personnel
3
Individuals with loans above $100,000 during the financial year
Name
Balance at the
start of the
year
$
Interest paid
and payable
for the year
$
Balance at the
end of the
year 4
$
Highest
indebtedness
during the year
$
2007
Directors
J C Young
1, 2
P C Butlin
1
1,537,244
16,453
811,494
2,185,874
159,433
7,803
-
159,433
2,075,911
7,622
1,537,244
2,075,911
159,763
5,320
159,433
160,548
2006
Directors
J C Young
1, 2
P C Butlin
1
1.
Loans advanced in order to finance the purchase of investments in Great Southern’s plantation or vineyard
projects. These loans are provided on normal commercial terms and conditions. Loans are for a year of 10 years
and secured by way of a secured interest over the lease, forest right or land and management agreements.
Interest rates vary from between 8% pa to 10% pa.
2.
Of the total balance outstanding at 30 September 2007, approximately $653,375 relates to 12 month interest
free finance provided on the same terms and conditions as all other investors in the company’s projects.
3.
Loans sold (securitised) to Adelaide Bank are excluded from the above table.
(g)
Other transactions with directors and other key management personnel
There have been no other transactions with directors and other key management personnel other than as mentioned
above.
- - 100 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 36.
Remuneration of auditors
During the year the Group changed its auditor from PricewaterhouseCoopers to Ernst and Young.
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$
$
Parent Entity
30 Sept
30 Sept
2007
2006
$
$
During the year the auditor of the parent entity and its
related practices earned the following remuneration:
Ernst and Young – Australian firm
Assurance Services
Audit or review of financial reports of the entity or any entity
of the Group
311,800
-
267,111
-
-
-
-
-
311,800
-
267,111
-
Other advisory services
49,955
-
49,955
-
Total remuneration for advisory services
49,955
-
49,955
-
361,755
-
317,066
-
Audit or review of financial reports of the entity or any entity
of the Group
30,000
198,250
30,000
120,000
Total remuneration for assurance services
30,000
198,250
30,000
120,000
Other audit related work
Total remuneration for assurance services
Other Advisory Services
Total remuneration
The previous auditor of the parent entity and its related
practices earned the following remuneration:
PricewaterhouseCoopers – Australian firm
Assurance Services
Taxation services
-
-
-
-
Taxation Advisory Services
226,042
149,212
163,992
149,212
Total remuneration for taxation services
226,042
149,212
163,992
149,212
Other Advisory Services
40,019
-
-
-
Total remuneration for advisory services
40,019
-
-
-
296,061
347,462
193,992
269,212
Taxation Compliance and Product Services
Other advisory services
Total remuneration
Note 37.
Contingent liabilities
Details and estimates of maximum amounts of contingent liabilities are as follows:
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Guarantees
1.
Pursuant to the arrangements with Rothschild Australia
(refer note 10) a contingent liability exists for up to 10% of
the book value of the term debtors sold (comprising a
guarantee of 5% and potential loss of value of bond of 5%).
This liability will only be recognised in the event that the
debtors sold default. In the event that this occurs the Group
has a secured interest over the Land & Management and
Lease Agreement (the subject of the loan). The maximum
potential liability is:
- - 101 - -
6,508
6,839
-
-
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
For personal use only
2.
Unsecured guarantees provided by the company and certain
controlled entities for the provision of banking facilities
(refer note 29).
6,874
9,024
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
-
3.
In the course of its normal business the Group occasionally receives claims and writs for damages and other
matters arising from its operations. Where, in the opinion of the directors, it is deemed appropriate, a specific
provision is made in relation to such matters, otherwise the directors deem such matters to be either without merit
or of such kind or involve such amounts that would not have a material adverse effect on the operating results or
financial position of the Group if disposed of unfavourably. As at the date of this annual report, no specific
provisions have been made in relation to such matters.
4.
Land to be used in each of the 2004, 2005 and 2006 Great Southern Plantation Project’s is assessed, on a project
by project basis, as to whether it expected to be capable of being managed as a whole to produce an average of at
least 250m3 (or 220m3 on the Tiwi Islands) gross of timber produce per hectare of Woodlots after approximately
10 years of growth.
This assessment is made following completion of planting, which for the 2006 project is required to be completed
by no later than 30 April 2008. Where necessary additional resource is established or acquired to ensure the initial
productivity target are met. A provision for $25,515,000 has been made to cover the potential additional operating
costs of meeting this requirement. Further, the Group may be required to purchase land on which to establish
additional timber plantations in meeting this requirement.
It is expected that the Great Southern Plantation 2006 Project will be the last of the Group’s plantation forestry
MIS projects that will require the acquisition of additional timber resource.
Note 38.
Commitments for expenditure
Consolidated
30 Sept
30 Sept
2006
2007
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Operating lease commitments
Commitments in relation to operating leases contracted for at the
reporting date but not recognised as liabilities, payable:
Within one year
15,264
14,514
2,625
2,595
Later than one year but not later than 5 years
50,384
49,535
8,602
7,440
Later than 5 years
24,519
32,176
1,213
2,872
90,167
96,225
12,440
12,907
90,167
96,225
12,440
12,907
Representing:
Non-cancellable operating leases
The Group’s operating leases mainly pertain to plantation and cattle land, office buildings and motor vehicles.
original terms of these leases range from 1 to 12 years.
- - 102 - -
The
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
Hire purchase lease commitments
Commitments in relation to hire purchase liabilities contracted for at the
reporting date, payable:
Within one year
Later than one year but not later than 5 years
635
763
336
239
2,140
3,324
754
1,447
2,775
4,087
1,090
1,686
2,775
4,087
1,090
1,686
Representing:
Hire purchase liabilities
The Group’s hire purchase liabilities mainly pertain to equipment. The original terms of these leases range from 2 to 5
years.
Maintenance funds
Pursuant to the Compliance Plans of each of the Managed Investment Schemes the responsible entity, Great Southern
Managers Australia Limited, is required to maintain the plantations up until harvest.
Maintenance reserve funds have been established by way of a combination of cash and bank backed securities for all of
the Group’s plantation projects, up to and including the 2003 project (note 29). At harvest the responsible entity is
entitled to 5.5% of the net harvest proceeds. Of this amount, 3% is to recoup maintenance expenditure.
Asset acquisition
In the course of its normal activities, Great Southern identifies and acquires land for use in its MIS Projects. As at 30
September 2007, Great Southern had entered into conditional and unconditional contracts to acquire land totalling
approximately $68,956,000. Of this amount as at 4 December 2007, contracts representing approximately $56,464,000
have settled and the balance remain conditional or unconditional.
Since 30 September 2007, the Group has entered into new contracts for the purchase of land which are now either
conditional or unconditional, amounting to approximately $61,371,000. The Group will continue to identify and acquire
land throughout the year for use in future projects.
Project establishment
As a result of the plantation projects sales of $162,977,000 in the year ended 30 June 2007 the Group is required,
under the terms of the Land and Management Agreements it enters into with the growers, to establish approximately
54,326 woodlots for the growers by no later than 30 June 2008.
At 30 September 2007 the Group has recorded in its balance sheet deferred revenue of approximately $51,681,000 in
respect of performance of the outstanding plantation establishment services at that date.
As at 30 September 2007 the Group had acquired land, including leased land located on Melville Island, sufficient to
satisfy approximately 14,139 woodlots. The remaining land required to meet the 2007 sales requirements are to be
purchased or leased in the period to 31 March 2008.
Note 39.
Related parties
Directors and key management personnel
Disclosures relating to directors and key management personnel are set out in note 35.
Wholly-owned group
The wholly-owned group consists of Great Southern Limited (ultimate parent entity) and its wholly-owned controlled
entities, set out below:
- - 103 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
Name of Entity
Country of
incorporation
Class of shares/
units
Equity holding
30 Sept
2007
%
30 Sept
2006
%
Great Southern Managers Australia Limited
Australia
Ordinary
100
100
Great Southern Land Holdings Pty Ltd
Australia
Ordinary
100
100
Great Southern Vineyard Holdings Pty Ltd
Australia
Ordinary
100
100
Great Southern Olive Holdings Pty Ltd
Australia
Ordinary
100
100
Great Southern Olives Company Limited
Australia
Ordinary
100
-
Great Southern Cattle Holdings Pty Ltd
Australia
Ordinary
100
100
Great Southern Almond Holdings Pty Ltd
Australia
Ordinary
100
-
Great Southern HVT Holdings Pty Ltd
Australia
Ordinary
100
-
Great Southern Managers Pty Ltd
Australia
Ordinary
100
100
Great Southern Blue Gum Trust
Australia
Ordinary
100
100
Great Southern Finance Pty Ltd
Australia
Ordinary
100
100
Great Southern Timber Pty Ltd
Australia
Ordinary
100
100
Great Southern Property Managers Limited
Australia
Ordinary
100
100
100
Great Southern Property Trust
Australia
A units
100
Great Southern Export Company Pty Ltd
Australia
Ordinary
100
100
Great Southern Property Holdings Limited
Australia
Ordinary
100
100
GSPT Debenture Holdings Pty Ltd
Australia
Ordinary
100
100
Great Southern Cattle Managers Pty Ltd
Australia
Ordinary
100
100
BM Pty Ltd
Australia
Ordinary
100
100
Beagle Holdings Pty Ltd
Australia
Ordinary
100
100
Beagle Management Pty Ltd
Australia
Ordinary
100
100
Great Southern Pine Pty Ltd
Australia
Ordinary
100
100
Great Southern Securities Pty Limited
Australia
Ordinary
100
100
Hampton Securities Australia Pty Limited
Australia
Ordinary
100
100
COT Trust No.1
Australia
A units
100
100
Sylvatech Limited
Australia
Ordinary
100
100
Sylvatech Securities Limited
Australia
Ordinary
100
100
Australia
Ordinary
100
100
Australia
Ordinary
100
100
Great Southern Forestry Pty Ltd
(1)
Sylvatech Finance Pty Ltd
Pensyl Pty Ltd
Australia
Ordinary
100
50
Pensyl Constructions Pty Ltd
Australia
Ordinary
100
50
-
Great Southern Property Trust No. 2
Australia
A units
100
Great Southern Infrastructure Pty Ltd
Australia
Ordinary
100
-
Great Southern Funds Management Ltd
Australia
Ordinary
100
-
Great Southern Funds Management Farming Pty Ltd
Australia
Ordinary
100
-
(1)
Previously Sylvatech Forestry Pty Ltd
Transactions between Great Southern Limited and other entities in the wholly-owned group during the year ended 30
September 2007 and the period ended 30 September 2006 consisted of:
•
the payment of management fees to Great Southern Limited;
•
loans advanced by Great Southern Limited;
•
loans repaid to Great Southern Limited;
•
loans advanced to Great Southern Limited;
•
loans repaid by Great Southern Limited; and
•
transactions between Great Southern Limited and its wholly owned entities under the accounting tax sharing
agreement discussed in note 1(e).
- - 104 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Loans between Great Southern Limited and entities in the wholly owned Group are repayable at call. Interest is not
charged on at call inter-company loans. Classification of at call related party loans as current or non-current in the
financial statements is based upon current expectations of loan repayments.
For personal use only
Aggregate amounts included in the determination of profit from ordinary activities before income tax that resulted from
transactions with entities in the wholly-owned group:
Parent Entity
30 Sept
2007
$’000
Plantation management fee revenue
Management services fee revenue
Provision for non-recovery of related party loan *
30 Sept
2006
$’000
234,761
-
30,000
250
-
(9)
* Provision for non-recovery of related party loans relates to loans to wholly-owned subsidiaries.
Transactions with related parties
The following transactions occurred with related parties:
Parent Entity
30 Sept
2007
$’000
30 Sept
2006
$’000
Superannuation contributions
Contributions to superannuation funds on behalf of employees
2,558
695
309,824
93,467
Aggregate amounts receivable from and payable to subsidiaries in the whollyowned group at balance date:
Current receivables
Loans to related parties
Non-current receivables
Loans to related parties
843,397
698,847
1,153,221
792,314
Loans from related parties
307,502
59,425
Total payables
307,502
59,425
Total receivables
Current payables
Note 40.
Events occurring after the balance sheet date
Land acquisition
Since 30 September 2007, the Group has entered into new contracts for the purchase of land which are now either
conditional or unconditional, amounting to approximately $61,371,000. The Group will continue to identify and acquire
land throughout the year for use in future projects.
Corporate Facility
Subsequent to the end of the financial year the Group has increased its bank syndicated corporate facility to
$350,000,000 (2006: $245,000,000) (refer to note 25) and has fully drawn down on the facility to its limit.
Agreement to acquire plantations and woodchip mill
Subsequent to year-end, the Group entered into an agreement to acquire rights to approximately 14,700 hectares of
hardwood plantations and a 50% shareholding in a woodchip mill in Bunbury, Western Australia. The total purchase
price for the transaction is expected to be $47.3 million.
Transaction completion is expected to occur in the early part of 2008 following the satisfaction of a number of
conditions. $30.3 million of the purchase price will be payable on completion, with the balance payable on 1 July 2008.
The transaction will be funded with existing corporate debt facilities.
- - 105 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Dividends
On 25 November 2007 the directors declared a fully franked dividend of $25,361,594 (8.00 cents per ordinary share) to
the holders of fully paid ordinary shares in respect of the financial year ended 30 September 2007. The record date is
10 December 2007 and the dividend will be paid on 17 December 2007.
For personal use only
Retirement of the Managing Director
On 10 December 2007, the Group’s managing director, Mr John Young, announced his intention to retire effective from
the company’s annual general meeting to be on 28 February 2008. Mr Young will provide consultancy services to the
Group from that date to 30 June 2008 after which Mr Young will join the Board as a non-executive director. Mr Cameron
Rhodes will take over the position of Managing Director and Chief Executive Officer from 1 March 2008.
Note 41.
Segment information
(a) Description of Segments
Business segments
The Group is organised into the following divisions by product and service type:
(i)
MIS Forestry
The promotion, packaging and management of forestry based managed investment schemes.
(ii)
MIS Horticulture
The promotion, packaging and management of olive, vine and almond managed investment schemes.
(iii)
MIS Cattle
The promotion, packaging and management of cattle managed investment schemes.
(iv)
Lending Services
The provision of finance for investors in the managed investment schemes.
(v)
Other
Incorporates other activities including the sale of agricultural produce and managed funds.
(b) Primary reporting - business segments
The following tables present revenue, profit and certain asset and liability information regarding business segments for
the year ending 30 September 2007 and the period ending 30 September 2006.
- - 106 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
30 September 2007
MIS
Forestry
MIS
Horticulture
$’000
$’000
MIS Cattle
Lending
Services
$’000
$'000
Other
Intersegment
eliminations
Consolidated
$'000
$’000
$’000
Revenue
Sales to external customers
Other revenue and income
252,329
2,590
101,391
1,793
49,022
9,851
25,806
19,183
13,135
(1,300)
421,925
51,875
Total segment revenue and income
254,919
103,184
58,873
25,806
32,318
(1,300)
473,800
Interest revenue
Increment on investment property
13,792
37,592
Total consolidated revenue and income
Result
Segment results
Corporate and other expenses
525,184
117,475
23,440
2,455
22,398
36,187
-
201,955
(42,197)
Profit/(loss) before tax and finance costs
Finance costs
Profit/(loss) from operations before income
tax
159,758
(51,300)
Income tax expense
(36,950)
108,458
Net profit after tax
Assets and liabilities
Segment assets
Unallocated assets
71,508
1,230,764
408,423
231,925
174,804
19,417
(351,973)
Total assets
Segment liabilities
Unallocated liabilities
1,720,351
735,000
205,667
9,397
6,734
9,945
(33,058)
Total liabilities
Other segment information
Acquisitions of property, plant and
equipment and investment properties
Depreciation and amortisation expense
Non-cash expenses other than
depreciation, amortisation and impairment
Impairment
1,713,360
6,991
933,685
20,704
954,389
194,540
5,363
25,949
2,070
3,405
1,961
-
12,635
125
-
236,529
9,519
11,829
-
13
40,072
153
-
2,618
-
-
-
14,613
40,072
- - 107 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
30 September 2006
MIS
Forestry
$’000
MIS
Horticulture
$’000
MIS Cattle
$’000
Lending
Services
$'000
Intersegment
eliminations
$’000
Other
$'000
Consolidated
$’000
Revenue
Sales to external customers
Other revenue and income
26,489
-
3,790
-
3,651
-
7,007
5,783
2,613
-
39,713
9,620
Total segment revenue and income
26,489
3,790
3,651
7,007
8,396
-
49,333
Interest revenue
Increment on investment property
2,876
-
Total consolidated revenue and income
Result
Segment results
Corporate and other expenses
52,209
(15,976)
1,169
(10,154)
5,094
(15,044)
-
Profit/(loss) before tax and finance costs
Finance costs
Profit/(loss) from operations before income
tax
(40,322)
(12,607)
(52,929)
Income tax benefit
15,064
Net loss after tax
Assets and liabilities
Segment assets
Unallocated assets
(37,865)
1,037,465
326,567
203,439
267,630
15,291
(344,175)
Total assets
Segment liabilities
Unallocated liabilities
1,506,217
69,577
1,575,794
553,922
8,340
225,434
241,783
8,551
(184,490)
Total liabilities
Other segment information
Acquisitions of property, plant and
equipment, intangibles and other noncurrent segment assets
Depreciation and amortisation expense
Non-cash expenses other than depreciation
and amortisation
(34,911)
(5,411)
853,540
39,428
892,968
16,874
1,391
1,053
87
5,476
451
-
2,215
-
-
25,618
1,929
10,759
672
3,492
1,138
-
-
16,061
- - 108 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
(c) Secondary reporting - geographical segments
Great Southern Limited and its controlled entities operate solely within one geographical segment, being Australia.
For personal use only
(d) Notes to and forming part of the segment information
Accounting policies
Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1 and
accounting standard AASB 114 Segment Reporting.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the
relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets
used by a segment and consist primarily of operating cash, receivables, inventories, property, plant and equipment
and goodwill and other intangible assets, net of related provisions. While most of these assets can be directly
attributable to individual segments, the carrying amounts of certain assets used jointly by segments are allocated
based on reasonable estimates of usage. Segment liabilities consist primarily of trade and other creditors,
employee benefits and provision for service warranties. Segment assets and liabilities do not include income taxes.
Inter-segment transfers
Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an
''arm’s-length'' basis and are eliminated on consolidation.
- - 109 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
Note 42.
Reconciliation of profit/(loss) after income tax to net cash inflow/(outflow) from
operating activities
For personal use only
Consolidated
Profit/(loss) for the year
Depreciation and amortisation
Parent Entity
Year to 30
Sept 2007
Three
months to
30 Sept
2006
Year to 30
Sept 2007
Three
months to
30 Sept
2006
$’000
$’000
$’000
$’000
71,508
(37,865)
64,507
(33,097)
9,519
2,425
3,057
565
(37,592)
6,910
(34)
-
Net (gain)/loss on disposal of property, plant and equipment
(425)
-
120
-
Change in fair value of biological assets
9,472
6,551
-
-
Non-cash employee benefits expense – share based payments
4,611
1,140
4,611
1,140
Amortisation of TREES series issue costs
1,289
322
1,289
322
(Increase)/decrease in fair value of investment property
Amortisation of debenture issue costs
Doubtful debts expense
Discounting of interest free receivables
Interest income recognised on interest free receivables
Impairment of horticulture assets
511
-
-
-
5,731
1,138
193
-
9,860
-
-
-
(2,719)
(777)
-
-
40,072
-
-
-
(13,571)
35,420
(36)
-
6,047
-
(13,091)
-
95,258
10,749
-
-
(2,957)
(399)
(2,211)
(369)
Change in operating assets and liabilities
Decrease/(increase) in trade receivables
Decrease/(increase) in other financial assets
Decrease/(increase) in available-for-sale financial assets
(Increase)/decrease in inventories
Decrease/(increase) in deferred tax assets
(3,810)
974
(2,955)
(1,215)
(Increase)/decrease in derivative financial instruments
(3,975)
(70,453)
(2,364)
838
(15,901)
32,630
(5,040)
939
-
-
(227,671)
(19,308)
(19,368)
(29,525)
12,521
(421)
Decrease/(increase) in other operating assets
(Increase)/decrease in related party loans
(Decrease)/increase in trade creditors
67,508
22,721
-
(8,363)
(2,238)
(51,127)
(2,715)
(51,127)
(Decrease)/increase in provisions
(28,213)
14,803
(16,511)
9,953
Increase in deferred tax liabilities
15,383
175
1,139
103
(2,428)
(35,042)
-
-
203,572
(89,230)
(185,191)
(100,040)
(Decrease)/increase in other operating liabilities
(Decrease)/increase in current tax liabilities
(Decrease)/increase in deferred revenue
Net cash inflow / (outflow) from operating activities
Note 43.
Non-cash investing and financing activities
Consolidated
30 Sept
30 Sept
2007
2006
$’000
$’000
Acquisition of non-current assets by means of finance leases
Refer to note 32 for details of the dividend reinvestment plan.
- - 110 - -
305
517
Parent Entity
30 Sept
30 Sept
2007
2006
$’000
$’000
-
2
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
Note 44.
Earnings per share
30 Sept 2007
Consolidated
30 Sept
2006
30 June
2006
Basic earnings/(loss) per share – cents
22.68
(12.21)
43.78
Diluted earnings/(loss) per share – cents
20.67
(12.21)
40.73
Weighted average number of ordinary shares outstanding during the
year used in the calculation of basic earnings/(loss) per share
315,232,619
310,009,250
303,469,793
Weighted average number of ordinary shares outstanding during the
year used in the calculation of diluted earnings/(loss) per share (ii)
403,616,032
392,761,211
351,613,494
$’000
$’000
$’000
Net profit/(loss) after tax
71,508
(37,865)
132,859
Earnings used in calculating basic earnings/(loss) per share
71,508
(37,865)
132,859
(i) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Diluted earnings per share
Net profit/(loss) after tax
71,508
(37,865)
132,859
Add: TREES coupons as interest expense (after tax)
11,914
3,822
10,367
Earnings used in calculating diluted earnings/(loss) per share
83,422
(34,043)
143,226
(ii) Information concerning the classification of securities
TREES2, TREES3, Options and Management Performance Rights
Transferable REset Exchangeable Securities series 2 and 3 (TREES2 and TREES3) and Options and Rights granted
are considered to be potential ordinary shares and have been included in the determination of diluted earnings per
share. They have not been included in the determination of basic earnings per share. Details relating to the
options are set out in note 34.
At 30 September 2006, TREES2 and TREES3 were not dilutive.
Note 45.
Business combinations
Acquisition of Rural Funds Management Ltd
On 3 August 2007, Great Southern Limited acquired 100% of the voting shares of Rural Funds Management Ltd, an
unlisted private company based in Australia specialising in traditional managed funds in the agricultural industry.
The total cost of the combination was $13,206,000 and comprised the payment of cash, deferred consideration and
costs directly attributable to the acquisition.
Factors giving rise to goodwill include access to an ongoing agricultural fund with a strong track record, and the
experience and skills that the employees will bring to the Group.
- - 111 - -
Great Southern Limited
Notes to the Financial Statements
30 September 2007
For personal use only
The fair value of the identifiable net assets and liabilities of Rural Funds Management Ltd as at the date of
acquisition were:
Recognised on
acquisition
$’000
Carrying value
$’000
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Investments in managed funds
Deferred tax assets
Intangibles
Total assets
3,995
6,867
210
345
1,367
377
13,161
3,995
6,867
210
345
1,367
377
13,161
Trade and other payables
Interest bearing liabilities
Provisions
Other
Total liabilities
(3,050)
(14)
(4,096)
(298)
(7,458)
(3,050)
(14)
(4,096)
(298)
(7,458)
Fair value of identifiable net assets acquired
5,703
Cost of the business combination:
Cash paid
Present value of deferred consideration
Transaction costs
Total cost
8,500
4,490
216
13,206
Goodwill:
Total cost of the business combination
Fair value of identifiable net assets acquired
Goodwill on acquisition
13,206
(5,703)
7,503
Cash flow:
The cash outflow on acquisition is as follows:
Net cash acquired with the subsidiary
Cash paid
Net consolidated cash outflow
3,995
(8,500)
(4,505)
From the date of acquisition, Rural Funds Management Ltd has contributed $175,000 to the net profit of the Group.
Due to the different reporting dates and operational changes made subsequent to the acquisition, it is not
practicable to determine the profit and revenue that would have been attributable to the Group had the acquisition
taken place at the beginning of the year.
On acquisition, the name of Rural Funds Management Ltd was changed to Great Southern Funds Management Ltd.
- - 112 - -
Directors’ Declaration
30 September 2007
DIRECTORS’ DECLARATION
In the directors’ opinion:
For personal use only
(a)
the financial statements and notes set out on pages 53 to 112 are in accordance with the
Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
(ii)
give a true and fair view of the company’s and Group’s financial position as at 30
September 2007 and of their performance, as represented by the results of their
operations, changes in equity and their cash flows, for the financial year ended on that
date; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable; and
(c)
the audited remuneration disclosures set out on pages 34 to 44 of the directors’ report comply
with Accounting Standards AASB 124 Related Party Disclosures and the Corporations Regulations
2001.
The directors have been given the declarations by the managing director and chief financial officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
On behalf of the Board
D Griffiths
C Rhodes
Chairman
Executive Director
Perth
20 December 2007
- - 113 - -
For personal use only
Independent auditor’s report to the members of Great Southern Limited
We have audited the accompanying financial report of Great Southern Limited, which comprises the
balance sheet as at 30 September 2007, and the income statement, statement of changes in equity and
cash flow statement for the year ended on that date, a summary of significant accounting policies, other
explanatory notes and the directors’ declaration of the consolidated entity comprising the company and
the entities it controlled at the year’s end or from time to time during the financial year.
The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of
Accounting Standard 124 Related Party Disclosures (“remuneration disclosures”), under the heading
“Remuneration Report” on pages 34 to 44 of the directors’ report, as permitted by Corporations
Regulation 2M.6.04.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with the 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 that the financial report, comprising the financial statements and notes,
complies with International Financial Reporting Standards. The directors are also responsible for the
remuneration disclosures contained in the directors’ report.
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 and that
the remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on our judgment, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, we consider internal controls 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 controls. 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.
Liability limited by a scheme approved under
Professional Standards Legislation.
114
RK:KT:GSP:117
For personal use only
Independence
In conducting our audit we have met the independence requirements of the Corporations Act 2001. We
have given to the directors of the company a written Auditor’s Independence Declaration, a copy of
which is included in the directors’ report. In addition to our audit of the financial report and the
remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the
financial statements. The provision of these services has not impaired our independence.
Auditor’s Opinion
In our opinion:
1.
the financial report of Great Southern Limited is in accordance with the Corporations Act 2001,
including:
(i)
giving a true and fair view of the financial position of Great Southern Limited and the
consolidated entity at 30 September 2007 and of their performance for the year ended on
that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
2.
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1.
3.
the remuneration disclosures that are contained on pages 34 to 44 of the directors’ report comply
with Accounting Standard AASB 124 Related Party Disclosures.
Ernst & Young
R A Kirkby
Partner
Perth
20 December 2007
115
For personal use only
Auditor’s Independence Declaration to the Directors of Great Southern Limited
In relation to our audit of the financial report of Great Southern Limited for the financial year ended 30
September 2007, to the best of my knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct.
Ernst & Young
R A Kirkby
Partner
Perth
20 December 2007
Liability limited by a scheme approved under
Professional Standards Legislation.
116
RK:KT:GSP:116
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 20 December 2007
A.
Distribution of Equity Securities
For personal use only
Analysis of numbers of equity security holders by size of holding:
Class of Equity Security
Ordinary Shares
Shares
Options
2,157
5,692
2,447
2,485
197
1
12,978
1
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
There were 274 holders of less than a marketable parcel of ordinary shares.
B.
Equity Security Holders
(i)
Twenty Largest Quoted Equity Security Holders
Ordinary Shares
The names of the twenty largest holders of quoted ordinary shares are listed below:
Ordinary Shares
Number Held
Percentage of
Issued Shares
Name
JSJA Holdings (Carlton a/c)
26,404,645
8.17
HSBC Custody Nominees (Australia) Limited
23,442,634
7.26
JP Morgan Nominees Australia Limited
14,231,143
4.40
West Star Holdings Pty Ltd
12,771,472
3.95
Citicorp Nominees Pty Limited (CFS WSLE Imputation Fnd a/c)
10,889,333
3.37
Citicorp Nominees Pty Limited
8,845,267
2.74
ANZ Nominees Limited (Cash income a/c)
8,376,888
2.59
Latitude Holdings Pty Ltd
8,002,840
2.48
National Nominees Limited
7,515,902
2.33
Citicorp Nominees Pty Limited (CFS Imputation Fund a/c)
7,435,061
2.30
Forbar Custodians Limited (Forsyth Barr Ltd – Nominee a/c)
7,354,070
2.28
Banos Asset Management Ltd
5,794,503
1.79
Cogent Nominees Pty Limited
5,357,747
1.66
Citicorp Nominees Pty Limited (CFS WSLE Aust Share Fnd a/c)
5,114,832
1.58
UBS Wealth Management Australia Nominees Pty Ltd
4,530,169
1.40
HSBC Custody Nominees (Australia) Limited – A/c 2
4,312,380
1.33
Citicorp Nominees Pty Limited (CFS WSLE Industrial Shr a/c)
2,759,077
0.85
IAG Nominees Pty Limited
2,675,392
0.83
Merrill Lynch (Australia) Nominees Pty Limited
2,535,113
0.78
Leichhardt Pastoral Pty Limited
2,513,258
0.78
170,861,726
- - 117 - -
52.88
Transferable Reset Exchangeable Securities series 2 (TREES2)
The names of the twenty largest holders of quoted TREES2 are listed below:
TREES2
Percentage of
Number Held
Issued TREES2
Name
For personal use only
JP Morgan Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees Pty Limited (GSENIP
A/c)
183,448
22.96
70,471
8.82
Goldman Sachs JBWere Capital Markets Ltd (Hybrid Portfolio A/c)
46,725
5.85
Merrill Lynch (Australia) Nominees Pty Limited (Berndale A/c)
44,820
5.61
Merrill Lynch (Australia) Nominees Pty Limited
40,530
5.07
M F Custodians Ltd
23,599
2.95
Fortis Clearing Nominees P/L (Settlement A/c)
16,704
2.09
Argo Investments Limited
10,000
1.25
8,400
1.05
Mr Lionel Cedric Julian Lees & Mrs Colleen Kerry Lees (LSF A/c)
Warnford Nominees Pty Limited (No. 4 Account)
6,587
0.82
Citicorp Nominees Pty Limited
5,584
0.70
RBC Dexia Investor Services Australia Nominees Pty Limited (MLCI A/c)
4,674
0.58
Jawp Pty Ltd (the Jawp S/F A/c)
3,000
0.38
Invia Custodian Pty Limited (Button Super Fund A/c)
2,504
0.31
Aust Executor Trustees NSW Ltd (Lewis High Yield Fund A/c)
2,500
0.31
Australian Executor Trustees Limited (No. 1 Account)
2,291
0.29
Mr Robert John Wilson (Wilson PShip A Ltd PShip A/c)
2,100
0.26
Mr Laurie Raymond Jones & Mrs Patricia Grant Jones
2,000
0.25
The Synod of the Diocese of Adelaide Anglican Church of Australia Inc.
2,000
0.25
Twenty Second Natro Pty Ltd (CAP Superannuation Fund A/c)
1,910
0.24
479,847
60.06
Transferable Reset Exchangeable Securities series 3 (TREES3)
The names of the twenty largest holders of quoted TREES3 are listed below:
TREES3
Percentage of
Number Held
Issued TREES3
Name
Citicorp Nominees Pty Limited
231,667
18.58
JP Morgan Nominees Australia Limited
227,054
18.21
HSBC Custody Nominees (Australia) Limited-GSCO ECA
208,005
16.68
ANZ Nominees Limited (Cash Income A/c)
154,990
12.43
79,904
6.41
Cogent Nominees Pty Limited (SMP Accounts)
Merrill Lynch (Australia) Nominees Pty Limited
59,357
4.76
National Nominees Limited
45,185
3.62
UBS Nominees Pty Ltd
39,000
3.13
HSBC Custody Nominees (Australia) Limited-GSI ECSA
30,000
2.41
Equity Trustees Limited (Eqt High Inc Wholesale A/c) Premium Client
25,000
2.00
Elise Nominees Pty Limited
15,550
1.25
Ecapital Nominees Pty Limited (No. 4 A/c)
11,215
0.90
7,500
0.60
Warnford Nominees Pty Limited (No. 4 Account)
Cambooya Pty Limited
3,000
0.24
Cogent Nominees Pty Limited
3,000
0.24
Wood Family Foundation Pty Ltd (Wood Family Foundation A/c)
3,000
0.24
Sandhurst Trustees Ltd 9SAIHYF A/c)
2,750
0.22
Sandhurst Trustees Ltd (MWHYF Services A/c)
2,600
0.21
Netwealth Investments Limited (Wrap Services A/c)
2,070
0.17
Aust Executor Trustees NSW Ltd (Lewis High Yield A/c)
2,033
0.16
1,152,880
92.45
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(ii)
Unquoted Equity Securities
Number on
Issue
Number of
Holders
270,000
3
9,085,000
87
Number Held
Percentage of
Issued Shares
JSJA Holdings Pty Ltd (Carlton A/C)
26,404,645
8.17
HSBC Custody Nominees (Australia) Limited
23,442,634
7.26
Other options issued
For personal use only
Rights issued under the Management Performance Rights Plan
C.
Substantial Shareholders
Substantial shareholders in the company are set out below:
Ordinary Shares
D.
Voting Rights
The voting rights attaching to each class of equity securities are set out below:
(a)
Ordinary Shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
(b)
Options and Rights
Options and Rights holders do not have any voting rights.
(c)
Transferable REset Exchangeable Securities series 2 (TREES2) and TREES series 3 (TREES3)
TREES2 and TREES3 holders do not have any voting rights.
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