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    Broadacre Asset Management Ltd Broadacre Asset Management Ltd Document Transcript

    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities Financial Report for the Year Ended 30 June 2009
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities Financial Report for the Year Ended 30 June 2009 DIRECTORS’ REPORT Your directors present their report on the company and its controlled entities for the financial year ended 30 June 2009. The names of the directors in office at any time during, or since the end of the year are: Andrew Lawson McBain Peter Macarthur Morrison Stephen Robert Dixon (retired 21/07/2009) Robert Charles Melville (retired 21/07/2009) Nadaisan Logaraj (retired 10/06/09) Trevor Gordon Stoney (appointed 18/06/2009) Mike Graham Shields (appointed 18/06/2009) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Name Age Experience and special responsibilities Period of directorship Andrew Lawson 35 Mr McBain was a founding member of AACL in 1997 and 01/06/2006 to present McBain has been the key concept developer, driver and promoter of AACL and the GCP model in that time. Andrew has experience in capital raising, taxation and company management. Previously Mr McBain was a founding stakeholder and non- executive director of Scimitar Resources Ltd (now Cauldron Energy Ltd), an ASX listed uranium development and exploration company. Currently Mr McBain is a non executive director of ASX listed company Carbon Conscious Ltd and an executive director of Broadacre Asset Management Limited (the major shareholder of AACL Holdings Ltd and Carbon Conscious Ltd). Peter Macarthur 57 Mr Morrison has been in the funds management industry 08/02/2008 to present Morrison since 1980. For 17 years he was the chief financial officer of Pacific Mutual Australia Ltd, a funds management group with over $4 billion in funds under management. In his role as director of that group he gained experience in all aspects of funds management including listed and unlisted property trusts, mortgage funds, Australian and international share funds, fixed interest funds, superannuation funds, wholesale investment funds and life insurance. Mr Morrison was previously a director of a number of companies involved in the funds management industry as well as providing consulting services in the area of funds management, financial services, property and retirement village development and management. 13_0500 Page 1 of 1
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities DIRECTORS’ REPORT Stephen Robert 45 Mr Dixon has over 20 years experience in the funds 08/02/2008 to 21/07/2009 Dixon management industry both in Australia and overseas fulfilling fund manager and director roles for a number of fund management groups. Mr Dixon has experience in all aspects of fund management including managing listed property trusts, unlisted property trusts, property excluded offers, life insurance, superannuation and retail and wholesale managed funds. Mr Dixon has undertaken various roles including capital raising, finance arrangement and management, property acquisition and due diligence, drafting of product disclosure statements and prospectuses, financial management and compliance functions. Mr Dixon was appointed Company Secretary of the company on 1 September 2009. Robert Charles 56 Mr Melville has been involved in the Australian and Asian 08/02/2008 to 21/07/2009 Melville funds management industries for the past 25 years and in that time has been a director of a number of fund management companies in Australia, Malaysia and Sri Lanka. Mr Melville’s experience covers many different aspects of the funds management industry including capital raising, business development, product development, administration and public relations. Mr Melville has built the distribution arms of two large successful property fund management companies and has an extensive knowledge of the Australian financial planning and advisory markets. Within Macro, Mr Melville’s primary responsibility is for the raising of capital into the company’s range of products. Nadaisan 60 Mr Logaraj has had a long career in law and investment 1/08/2007 to 10/06/2009 Logaraj banking. He is a Fellow of the Australian Institute of Company Directors (since 1988) and National President of the Australia-Singapore Chamber of Commerce (since 1993). Mr Logaraj is also a director of Carbon Conscious Ltd. Trevor Gordon 64 Mr Stoney has been farming for over 45 years in both 18/06/2009 – present Stoney Victoria and WA. Currently a partner in a family farming operation which has operations located in Dongara, Donnybrook and Esperance. Mr Stoney brings to the company significant farming experience from a wide range of farming locations and enterprises. Mr Stoney has been involved with AACL Ltd as a grower since its inception and has provided significant input and support through the development of AACL Pty Ltd. His director position provides the opportunity for Mr Stoney to represent Australian growers at board level. Michael Graham 35 Mr Shields is a leading Western Australian farmer with 18/06/2009 - present Shields significant interests in a number of large scale agricultural enterprises. Mr Shields completed a Bachelor of Commerce degree at the University of Western Australia and then went to work in the USA and Australia in the agricultural services divisions of a number of organisations including John Deere, Caterpillar and Westrac. Previously, Mr Shields was a director of Summit Fertilizers Pty Ltd and is currently a director of ASX listed company Marginbet Ltd. Page 2 of 2
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities DIRECTORS’ REPORT The consolidated loss of the consolidated group for the financial year after providing for income tax amounted to $4,482,794 (2008: $3,727,407). The loss of the parent entity for the financial year after providing for income tax amounted to $125 (2008: $94). Principle Activities and Significant Changes in the Nature of Activities The principal activities of the consolidated group during the financial year were: 1. Following the acquisition of AACL Pty Ltd the development and management of investments in the grain industry. 2. establishment of carbon sinks for the purposes of sequestration of carbon from the atmosphere via its investment in Carbon Conscious Ltd. No significant change in the nature of these activities occurred during the year. Review of Operations A review of the operations of the consolidated group during the financial year and the results of those operations found that the number of tonnes contracted as at 30 June 2009 increased by 24% to 467,000 versus contracted tonnes as at 30 June 2008 of 376,000. During June 2009 AACL Wholesale was party to an agreement with Grain Pool Pty Ltd whereby Grain Pool provided a loan advance of $30 million which was used to fund farmer commitments. With this “wholesale” arrangement in place as opposed to AACL Pty Ltd earning a fixed initial period fee through its Grain Co-Production Product, the amount paid to farmers under this “wholesale” arrangement have been brought to account as inventory in the balance sheet. As a result of this Revenue is lower at $61,081,506 (2008: $66,946,244), however the revenue from the sales of wholesale grain will be brought to account in the profit and loss in the next financial year. Agronomic costs are also lower at $58,269,624 (2008: $66,374,888), this is largely due to the amount paid to farmers under the wholesale arrangement have been brought to account as inventory in the balance sheet. The consolidated group incurred some significant expenses which the directors consider to be non- recurring and not part of normal operations. Page 3 of 3
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities DIRECTORS’ REPORT Cost attributable to farmer performance bonus special offers In the 2007 and 2008 season, due to low global grain stocks and production issues around the world, grain price markets (both in Australia and overseas) had one of the most volatile trading periods on record. Resulting in prices at the start of the 2008 season being very high compared to historical values. This market volatility meant that some farmers, particularly in more stable production areas, were reluctant to commit to grow crops under Grain Co-Production as they were concerned about the potential costs (versus using traditional finance) and in giving up control over the marketing of the grain. To ensure that the GCP Projects achieved a suitable diversification of farming locations, AACL provided selected farmers with the following options: 1. The right to select a benchmark (e.g. an external pool) price which would then be used to calculate the delivered value of grain for the purposes of determining the farmer bonus payable independent of the price received in the GCP Project Pool. 2. A reduced target value offer which lowered the level at which a farmer would achieve a farmer bonus from AACL. The cost, if any, being the difference between the farmer bonus payable to the farmer under the options offered by AACL and the maximum set under the product disclosure statement for the GCP Projects, was to be borne by AACL. AACL considered this potential cost to be warranted to ensure an appropriate geographic spread of farmers in the GCP Projects. As a consequence of continued volatility in grain markets, and compounded by the offers made to these farmers, AACL incurred a cost of $3,301,000 in the year ended 30 June 2009 as this cost is incorporated in the Agronomic costs within the Income Statement. This cost is a once-off cost. AACL has since developed the GCP model such that both options are no longer available to farmers. Under the current model the price that is used in determining the bonus payable by the GCP Project and by AACL to the farmer are the same. The structure of the new model has also addressed farmer pricing concerns in relation to volatile grain markets and seasons where the price is high at the commencement of the season. Development costs These are considered costs which are a one off and not part of normal operations of the AACL business (A$’000) Corporate advice and capital raising - corporate advisers were contracted to provide 424 corporate advice and assist with raising capital. No long term funding arrangements resulted and these costs were expensed. The expenses in relation to this offer, will be brought to account against equity. Establishment of Broadacre Investment Fund Structure 97 Product modeling, system analysis and charting - external consultants were contracted 249 to undertake specific modeling and system mapping tasks that are not anticipated to be undertaken again and are not considered part of ongoing operating costs. Specialist consulting: human resources, grain marketing, political lobbying – specialist 104 consultants were contracted to undertake specific tasks that are not anticipated to be required again and are not considered part of ongoing operating costs. Due diligence costs – business transaction 184 1,058 These costs are included under marketing costs and administration expenses within the Income Statement. Page 4 of 4
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities DIRECTORS’ REPORT Significant Changes in State of Affairs The following significant changes in the state of affairs of the parent entity occurred during the financial year: i. On 15 December 2008 the company made a Scrip for Scrip offer to AACL Pty Ltd (AACL) shareholders. The company issued 15,433,575 shares to AACL shareholders in consideration for 100% of the issued capital of AACL on the basis of 7 shares for every 20 AACL shares held. The offer was accepted and the consolidated group was formed on 15 December 2008. ii. On 5 June 2009 AACL Wholesale Pty Ltd (AACL Wholesale) was incorporated with 100% of the share capital owned by Broadacre Asset Management Ltd and forms part of the consolidated group. iii. Both AACL and AACL Wholesale operations involve attracting investment in main stream agriculture, such as wheat, barley and canola production and to provide investment vehicles to facilitate that investment. iv. The company is the largest shareholder in Carbon Conscious Ltd (CCF) presently holding a 30% interest in the issued capital. During the year the company also obtained a seat on the Board of Directors. The two conditions satisfy significant influence and therefore CCF is treated as an associate from 15 December 2008. After Balance Date Events During May and June 2009 the Company entered into loan agreements with two of its directors, subsequent to year end these loans have been drawn. These loans are detailed below: 1. Loan between Mike Shields and the Company - Amount of loan: $4,600,000 - Security: shares in Carbon Conscious Ltd held by the Company - Interest: higher rate 15% pa, lower rate 5.5% pa (calculated and accrued monthly) - Date of Loan: 19 June 2009 - Term: repayable in full by 25 December 2009 2. Loan between Trevor Stoney and the Company - Amount of loan: $2,000,000 - Security: none - Interest: higher rate 15% pa, lower rate 10% pa (calculated and accrued monthly) - Date of Loan: 19 May 2009 - Term: repayable in full by 31 January 2010 Page 5 of 5
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities DIRECTORS’ REPORT Subsequent to year end the Company has incorporated two new entities, AACL Holdings Ltd and AACL Services Pty Ltd, the details of these entities are as follows: 1. AACL Services Pty Ltd (ABN: 38 137 972 555) x Registered: 29 June 2009 x 100% owned by Broadacre Asset Management Ltd 2. AACL Holdings Ltd (ACN: 139 977 772) x Registered: 13 October 2009 x 100% owned by Broadacre Asset Management Ltd On 28 October 2009 AACL Holdings Ltd issued a Convertible Note to Augustus Minerals Ltd. The Convertible Note was issued for $1,000,000 with a fixed interest payment of $100,000 due at conversion or repayment which is payable from 28 January 2010. Other than those matters noted above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years. Likely developments in the operations of the consolidated group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the consolidated group. The consolidated group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory. No dividends have been paid or declared since the start of the financial year. No options over issued shares or interests in the company or a controlled entity were granted during or since the end of the financial year and there were no options outstanding at the date of this report. No indemnities have been given or insurance premiums paid, during or since the end of the financial year, for any person who is or has been an officer or auditor of the consolidated group. No person has applied for leave of Court to bring proceedings on behalf of the company or 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 any part of those proceedings. The company was not a party to any such proceedings during the year. Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under s 307C of the Corporations Act 2001 is set out on page 7. Signed in accordance with a resolution of the Board of Directors: Director Andrew McBain Dated this 23rd day of November 2009 Page 6 of 6
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF BROADACRE ASSET MANAGEMENT LTD I declare that, to the best of my knowledge and belief, during the year ended 30 June 2009 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. Name of Firm Name of Partner Date Address Page 7 of 7
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities INCOME STATEMENT FOR YEAR ENDED 30 JUNE 2009 Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Revenue 2 61,081,506 66,946,244 - - Other income 2 567,783 4,510 - - - - Agronomic costs (58,269,624) (66,374,888) - - Employee benefits expense (2,850,950) (2,226,057) - - Finance costs (668,063) (460,989) - - Marketing costs (1,467,972) (309,663) Administration expenses (2,265,659) (1,206,800) (125) (94) Depreciation and amortisation (146,923) (99,764) - - expense Share of net loss of associates (462,892) - - - Loss before income tax 3 (4,482,794) (3,727,407) (125) (94) Income tax expense 4 - - - - Loss for the year (4,482,794) (3,727,407) (125) (94) Loss attributable to members of the (4,482,794) (3,727,407) (125) (94) parent entity Page 8 of 8
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities BALANCE SHEET AS AT 30 JUNE 2009 Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ ASSETS CURRENT ASSETS Cash and cash equivalents 7 27,794,744 9,407,968 154 406 Trade and other receivables 8 1,468,577 8,639,983 7,527,023 138 Inventories 9 25,054,454 - - - Other financial assets 12 135,660 - - - TOTAL CURRENT ASSETS 54,453,435 18,047,951 7,527,177 544 NON-CURRENT ASSETS Investments accounted for using the 11 1,132,729 - - - equity method Available-for-sale financial assets 12 - - 3,870,890 4,409,589 Other financial assets 12 - 135,660 - - Other assets 55,621 - - - Property, plant and equipment 13 209,487 236,864 - - Intangible assets 14 477,378 167,404 - - TOTAL NON-CURRENT ASSETS 1,875,215 539,928 3,870,890 4,409,589 TOTAL ASSETS 56,328,650 18,587,879 11,398,067 4,410,133 CURRENT LIABILITIES Trade and other payables 15 31,335,492 20,737,731 6,719,284 - Borrowings 16 30,874,444 34,920 860,174 - Short-term provisions 18 146,405 60,193 - - TOTAL CURRENT LIABILITIES 62,356,341 20,832,844 7,579,458 - NON-CURRENT LIABILITIES Borrowings 16 - 2,382,542 - - Deferred tax liabilities 17 - - 817,173 1,322,877 TOTAL NON-CURRENT LIABILITIES - 2,382,542 817,173 1,322,877 TOTAL LIABILITIES 62,356,341 23,215,386 8,396,631 1,322,877 NET (LIABILITIES)/ASSETS (6,027,691) (4,627,507) 3,001,436 3,087,256 EQUITY Issued capital 19 4,892,610 1,810,000 1,094,918 638 Reserves 20 - - 1,906,737 3,086,712 Accumulated losses (10,920,301) (6,437,507) (219) (94) DEFICIT IN SHAREHOLDERS (6,027,691) (4,627,507) 3,001,436 3,087,256 FUNDS Page 9 of 9
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2009 Note Fully paid Financial Accumulated Total ordinary Assets Losses shares Reserve $ $ $ $ Consolidated Group Balance at 1 July 2007 1,747,500 - (2,710,100) (962,600) Shares issued during the year 62,500 - - 62,500 Loss attributable to members of parent entity – as previously stated - - (2,040,487) (2,040,487) Adjustment to prior year 31 - - (1,686,920) (1,686,920) Balance at 30 June 2008 1,810,000 - (6,437,507) (4,627,507) Shares issued during the year 1,539,099 - - 1,539,099 Increase in issued capital on reverse acquisition 1,543,511 - - 1,543,511 Loss attributable to members of parent entity - - (4,482,794) (4,482,794) Balance at 30 June 2009 4,892,610 - (10,920,301) (6,027,691) Note Fully paid Financial Accumulated Total ordinary Assets Losses shares Reserve $ $ $ $ Parent Entity Balance at 1 July 2007 - - - - Shares issued during the year 638 - - 638 Revaluation increment - 3,086,712 - 3,086,712 Loss attributable to members of parent - - (94) (94) entity Balance at 30 June 2008 638 3,086,712 (94) 3,087,256 Shares issued during the year 1,094,280 - - 1,094,280 Loss attributable to members of parent - - (125) (125) entity Share of associates revaluation - (1,179,975) - (1,179,975) decrement Sub-total 1,094,280 (1,179,975) (125) (85,820) Balance at 30 June 2009 1,094,918 1,906,737 (219) 3,001,436 The accompanying notes form part of these financial statements. Page 10 of 10
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities CASH FLOW STATEMENT FOR YEAR ENDED 30 JUNE 2009 Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 87,335,265 69,148,700 - (138) Payments to suppliers and employees (98,002,149) (60,720,205) (125) (94) Interest received 230,656 1,083 - - Finance costs (684,550) (73,337) - - Net cash provided by (used in) (11,120,778) 8,356,241 (125) (232) operating activities 26 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant 140,818 22,728 - - and equipment Purchase of property, plant and (723,238) (182,591) - - equipment Purchase of available-for-sale (52,600) - (52,600) - investments Purchase of held-for-trading (135,660) - - investments Purchase of other non-current assets (2,200) (5,598) - - Net cash provided by (used in) (637,220) (301,121) (52,600) - investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 62,500 - 638 Proceeds from acquisition 406 - - - Proceeds from borrowings 31,621,932 800,574 52,473 - Repayment of borrowings (1,477,564) (877,592) - - Net cash provided by (used in) 30,144,774 (14,518) 52,473 638 financing activities Net increase in cash held 18,386,776 8,040,602 (252) 406 Cash at beginning of financial year 7 9,407,968 1,367,366 406 - Cash at end of financial year 7 27,794,744 9,407,968 154 406 The accompanying notes form part of these financial statements. Page 11 of 11
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 This financial report includes the consolidated financial statements and notes of Broadacre Asset Management Ltd and controlled entities (‘Consolidated Group’ or ‘Group’), and the separate financial statements and notes of Broadacre Asset Management Ltd as an individual parent entity (‘Parent Entity’). NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) of the Australian Accounting Standards Board and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated. The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Going Concern The Financial Statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its commitments, realise its assets and discharge its liabilities in the ordinary course of the business. The balance sheet at 30 June 2009 shows a net liabilities position of $6,027,691. The Directors are of the opinion the Group is a going concern on the basis that an Initial Public Offering (IPO) for AACL Holdings Limited (incorporated by Broadacre Asset Management Ltd on 13 October 2009) will be completed in December 2009 and will raise funding of a minimum of $13,894,000 (net of issue costs), the IPO is not underwritten. Should the Group be unsuccessful in raising the balance of $13,894,000 from the IPO, and the existing shareholders are unable to provide sufficient funds to replace these funds, then the going concern basis may not be appropriate and the Group may have to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts different from those stated in the Financial Statements. No allowance for such circumstances has been made in the Financial Statements. Reverse Acquisition Broadacre Asset Management Ltd Limited completed the legal acquisition of AACL Pty Ltd on 15 December 2008. Under the terms of AASB 3 Business Combinations, AACL Pty Ltd was deemed to be the accounting acquirer in the business combination. This transaction has therefore been accounted for as a reverse acquisition under AASB 3. Accordingly the consolidated financial statements of Broadacre Asset Management Ltd Limited have been prepared as a continuation of the consolidated financial statements of AACL Pty Ltd. Broadacre Asset Management Ltd, as the deemed legal acquirer, has accounted for the acquisition of AACL Pty Ltd from 15 December 2009. The comparative information from 1 July 2008 presented in the consolidated financial statements is that of AACL Pty Ltd. Refer to Note 25 for further details of the business combination. The implications of the application of AASB 3 on each of the attached financial statements are as follows: Income Statements The 2009 Consolidated Income Statement comprises 12 months of AACL Pty Ltd, and 6.5 months of Broadacre Asset Management Ltd. Page 12 of 12
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 The 2008 Consolidated Income Statement comprises 12 months of AACL Pty Ltd. Balance Sheets The 2009 Consolidated Balance Sheet represents both AACL Pty Ltd and Broadacre Asset Management Ltd. The 2008 Consolidated Balance Sheet represents AACL Pty Ltd as at 30 June 2008. Statement of Changes in Equity The 2009 Consolidated Statement of Changes in Equity comprises: - The equity balance of AACL Pty Ltd at the beginning of the year - The profit for the year and transactions with equity holders, being 12 months of AACL Pty Ltd and 6.5 months of Broadacre Asset Management Ltd - The equity balance of AACL Pty Ltd and Broadacre Asset Management Ltd at the end of the year. - The 2008 Consolidated Statement of Changes in Equity comprises 12 months of AACL Pty Ltd. Cash Flow Statements The 2009 Consolidated Statement of Cash Flows comprises: - The cash balance of AACL Pty Ltd at the beginning of the year - The transactions for the year, being 12 months of AACL Pty Ltd and 6.5 months of Broadacre Asset Management Ltd - The cash balance of AACL Pty Ltd and Broadacre Asset Management Ltd at the end of the year. - The 2008 Consolidated Statement of Cash Flows comprises 12 months of AACL Pty Ltd. As the reverse acquisition accounting principles outlined above apply only in the Consolidated financials, the Parent entity financials will continue to represent Broadacre Asset Management as a stand alone entity for the 2009 and 2008 financial years. a. Principles of Consolidation A controlled entity is any entity over which Broadacre Asset Management Ltd has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. A list of controlled entities is contained in Note 22 to the financial statements. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the consolidated group during the year, their operating results have been included (excluded) from the date control was obtained (ceased). All inter-group balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. Minority interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity interests held by persons outside the group, are shown separately within the Equity section of the consolidated Balance Sheet and in the consolidated Income Statement. Business combinations Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method. The purchase method requires an acquirer of the business to be identified and for the cost of the Page 13 of 13
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss. b. Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Page 14 of 14
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 Tax consolidation Broadacre Asset Management Ltd and its wholly owned Australian subsidiaries have not formed an income tax consolidated group under tax consolidation legislation. c. Inventories Per AASB 141: Inventory shall be measured at its fair value less estimated point-of-sale costs at the point of harvest. The general basis on which cost is determined is the value against the Harvest Loan. The basis of valuation is the same as that used at the end of the previous financial period. d. Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Depreciation The depreciable amount of all fixed assets, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Depreciation Rate Office Equipment 20 - 40% Fixtures and Fittings 20% Computer Systems Software 15% Motor Vehicles 18.75% 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. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. e. Leases Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the consolidated group, are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight-line basis over the lease term. Page 15 of 15
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 Lease incentives under operating leases are recognised as a liability and amortised on a straight- line basis over the life of the lease term. f. Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either purchase or sell the asset (trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately. Classification and subsequent measurement Finance instruments are subsequently measured at fair value, amortised cost using the effective interest rate method or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: (i) the amount at which the financial asset or financial liability is measured at initial recognition; (ii) less principal repayments; (iii) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (iv) less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. (i) Financial assets at fair value through profit or loss Financial assets are classified at ‘fair value through profit or loss’ when they are either held for trading for the purpose of short term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. (iv) Available-for-sale financial assets Page 16 of 16
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 Available-for-sale financial assets are non-derivative financial assets that are either not capable of being classified into other categories of financial assets due to their nature or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. (v) Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. g. Impairment of Assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. h. Investments in Associates Investments in associate companies are recognised in the financial statements by applying the equity method of accounting. The equity method of accounting recognises the group’s share of post-acquisition reserves of its associates. i. Intangibles Goodwill Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Page 17 of 17
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 Software Software costs have a finite useful life. Software costs are capitalised and written off over the useful economic life of seven years. Costs associated with developing or maintaining computer software programs are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. j. Employee Benefits Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. k. Provisions Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at balance date. l. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short- term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet. m. Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue from major business activities include: revenue earned from the provision of services, including management of the Grain Co Production projects and the marketing and sale of grain, revenue earned from the sale of grain, including sales made on a cash basis and sales made to grain pools. (i) Sale of goods Revenue from sale of goods is recognised when the risks and rewards of the ownership of goods are transferred to the customer. This occurs upon delivery of the goods. In the case of grain sales, the delivery date is taken as the transaction date unless title is to pass at a materially different time. Revenue earned on grain sales made to grain pools is recognised on receipt of distributions from the pool, which occur approximately four times per annum. Due to uncertainties on price and total pool sales data it is only at this point that grain pool revenue can be reliably measured. (ii) Services Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. Amounts billed in advance are recorded as a current liability until such time as the service is performed. (iii) Other revenue Other revenue includes rental income which is recognised on a straight-line basis over the lease term, interest income which is recognised on a time proportion basis using the effective interest rate method and dividends which are recognised when the right to receive payment is established. All revenue is stated net of the amount of goods and services tax (GST). Page 18 of 18
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 n. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use of sale. All other borrowing costs are recognised in income in the period in which they are incurred. o. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. p. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. q. Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Key estimates - Impairment (i) Impairment The company assesses impairment at each reporting date by evaluating conditions specific to the company that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. r. New Accounting Standards for Application in Future Periods The AASB has issued new, revised and amended Standards and Interpretations that have mandatory application dates for future reporting periods and which the group has decided not to early adopt. A discussion of those future requirements and their impact on the group is as follows: • AASB 3: Business Combinations, AASB 127: Consolidated and Separate Financial Statements, AASB 2008–3: Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 [AASB Standards 1, 2, 4, 5, 7, 101, 107, 112, 114, 116, 121, 128, 131, 132, 133, 134, 136, 137, 138 and 139 and Interpretations 9 and 107] (applicable for annual reporting periods commencing from 1 July 2009) and AASB 2008–7: Amendments to Australian Accounting Standards — Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate [AASB 1, AASB 118, AASB 121, AASB 127 and AASB 136] (applicable for annual reporting periods commencing from 1 January 2009). These Standards are applicable prospectively and so will only affect relevant transactions and consolidations occurring from the date of application. In this regard, the impact on the group is not able to be determined. Changes to accounting requirements include: — acquisition costs incurred in a business combination will no longer be booked to goodwill but will be expensed unless the cost relates to issuing debt or equity securities; Page 19 of 19
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 — contingent consideration will be measured at fair value at the acquisition date and may only be provisionally accounted for during a period of 12 months after acquisition; — a gain or loss of control will require the previous ownership interests to be remeasured to their fair value; — there shall be no gain or loss from transactions affecting a parent’s ownership interest of a subsidiary with all transactions required to be accounted for through equity (this will not represent a change to the group’s policy); — dividends declared out of pre-acquisition profits will not be deducted from the cost of an investment but will be recognised as income; — impairment of investments in subsidiaries, joint ventures and associates shall be considered when a dividend is paid by the respective investee; and — where there is in substance no change to group interests, parent entities inserted above existing groups shall measure the cost of its investments at the carrying amount of its share of the equity items shown in the balance sheet of the original parent at the date of reorganisation. The group will need to determine whether to maintain its present accounting policy of calculating goodwill acquired based on the parent’s share of net assets acquired or change so that goodwill recognised will also reflect that of the non-controlling interest. • AASB 8: Operating Segments and AASB 2007–3: Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 and AASB 1038] (applicable for annual reporting periods commencing from 1 January 2009). This Standard replaces AASB 114 and requires identification of operating segments on the basis of internal reports that are regularly reviewed by the group’s board for the purposes of decision making. Whilst the impact of this Standard cannot be assessed at this stage, there is the potential for more segments to be identified. Given the lower economic level at which segments may be defined, and the fact that cash-generating units cannot be bigger than operating segments, impairment calculations may be affected. Management presently do not believe impairment will result however. • AASB 101: Presentation of Financial Statements, AASB 2007–8: Amendments to Australian Accounting Standards arising from AASB 101, and AASB 2007–10: Further Amendments to Australian Accounting Standards arising from AASB 101 (all applicable to annual reporting periods commencing from 1 January 2009). The revised AASB 101 and amendments supersede the previous AASB 101 and redefine the composition of financial statements including the inclusion of a statement of comprehensive income. There will be no measurement or recognition impact on the group. If an entity has made a prior period adjustment or reclassification, a third balance sheet as at the beginning of the comparative period will be required. • AASB 123: Borrowing Costs and AASB 2007–6: Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 and AASB 138 and Interpretations 1 and 12] (applicable for annual reporting periods commencing from 1 January 2009). The revised AASB 123 has removed the option to expense all borrowing costs and will therefore require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. Management has determined that there will be no effect on the group as a policy of capitalising qualifying borrowing costs has been maintained by the group. Page 20 of 20
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 • AASB 2008–1: Amendments to Australian Accounting Standard — Share-based Payments: Vesting Conditions and Cancellations [AASB 2] (applicable for annual reporting periods commencing from 1 January 2009). This amendment to AASB 2 clarifies that vesting conditions consist of service and performance conditions only. Other elements of a share-based payment transaction should therefore be considered for the purposes of determining fair value. Cancellations are also required to be treated in the same manner whether cancelled by the entity or by another party. • AASB 2008–5: Amendments to Australian Accounting Standards arising from the Annual Improvements Project (July 2008) and AASB 2008–6: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (July 2008) detail numerous non-urgent but necessary changes to Accounting Standards arising from the IASB’s annual improvements project. No changes are expected to materially affect the group. The group does not anticipate early adoption of any of the above reporting requirements and does not expect them to have any material effect on the group’s financial statements. Page 21 of 21
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 2: REVENUE AND OTHER INCOME Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Sales revenue: — Grain Co Production Project 53,550,051 68,796,244 - - Fees — Grain sales 6,471,642 - - - — Grain Marketing services 1,059,813 150,000 - - 61,081,506 68,946,244 - - Other income: — Management Fees to 2a 226,386 - - - associated entity — Interest received 230,657 1,083 - - — gain on disposal of property, 8,201 - - - plant and equipment — other 102,539 3,427 - - Total other income 567,783 4,510 - - a. Management fees provided to associated entity Management services provided to associated entity are on normal commercial terms and conditions no more favourable than those available to other parties. NOTE 3: LOSS BEFORE INCOME TAX Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ a. Expenses Agronomic costs 58,269,624 66,374,888 - - Finance costs: Interest expense on wholesale borrowings 527,974 - - - Interest expense on shareholder loans 133,565 379,094 - - Other finance costs 6,524 81,895 - Total finance costs 668,063 460,989 - - Administration expenses — Consultant fees 862,594 526,761 - - — Due diligence costs 159,846 - - - — Other administration costs 1,218,275 680,039 125 94 2,240,715 1,206,800 125 94 Page 22 of 22
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 3: LOSS BEFORE INCOME TAX (CONT’D) Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Depreciation and amortisation expense Plant and equipment — Office equipment 57,246 26,122 - - — Motor vehicles 21,987 47,384 - - Intangibles — Systems software 67,690 26,258 - - 146,923 99,764 - - NOTE 4: INCOME TAX EXPENSE Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ a. The components of tax expense comprise: Current tax (1,965,252) - - - Deferred tax 1,965,252 - - - - - - - b. The prima facie tax on profit /(loss) from ordinary activities before income tax is reconciled to the income tax as follows: Prima facie tax payable on profit / (loss)from ordinary activities before income tax at 30% (2008: 30%) — consolidated group (1,344,838) (1,118,222) (37) (28) Add: Tax effect of: — Deferred tax asset not bought to account (636,485) 1,112,658 37 28 — Previously unrecognised and unused tax losses and tax offsets now recognised deferred tax assets 1,965,252 - - - — other non-allowable items 16,071 5,564 - - Income tax expense reported - - - - The applicable weighted average effective tax rates are as follows: Nil% Nil% Nil% Nil% Page 23 of 23
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 4: INCOME TAX EXPENSE (CONT’D) Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Balance of franking account Nil Nil Nil Nil c. Income tax recognised directly in equity The following current and deferred tax amounts were charged directly to equity during the period Deferred tax: - Available for sale financial assets - - (505,704) 1,322,877 d. Deferred tax assets — Tax losses 68,661 2,032,550 - — Provisions 86,212 18,057 - — Other 2,697,410 1,746,901 - 2,852,283 3,797,508 - - — Set-off deferred tax liabilities - (2,134,512) - — Net deferred tax asset not recognised (2,852,283) (1,662,996) - - - - - d. Deferred tax liabilities — Accrued Income - 2,134,512 - — Set-off deferred tax - (2,134,512) - — Available for sale financial assets 817,173 1,322,877 - - 817,173 1,322,877 d. Net deferred tax asset — Net deferred tax asset which not has been recognised 2,852,283 1,662,996 - Potential deferred tax assets attributable to tax losses have not been bought to account at 30 June 2009 because the directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time. These benefits will only be obtained if: a. The company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the loss to be realised; b. The Company continues to comply with conditions for deductibility imposed by law; and c. No changes in tax legislation adversely affect the company in realising the benefit from the deductions for the loss. Page 24 of 24
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION Short-term Post- Other long- Total benefits employment term benefits benefit 2009 (a) Non Executive Raj Logaraj 42,047 - - 42,047 Total compensation 42,047 - - 42,047 2008 (a) Executives Steve Dixon 100,000 - - 100,000 Andrew McBain 100,000 - - 100,000 Peter Morrison 100,000 - - 100,000 (b) Non Executive Raj Logaraj 73,301 - - 73,301 Total compensation 373,301 - - 373,301 NOTE 6: AUDITORS’ REMUNERATION Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Remuneration of the auditor of the parent entity for: — auditing the financial report 23,000 20,000 - - 23,000 20,000 - NOTE 7: CASH AND CASH EQUIVALENTS Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CURRENT Cash at bank and in hand 22,972,217 4,691 154 406 Cash held in Trust account by related 4,822,527 9,403,277 - - party 27,794,744 9,407,968 154 406 Page 25 of 25
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 8: TRADE AND OTHER RECEIVABLES Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Receivable from Related Parties 8(a) 11,884 - 7,527,023 138 GST receivable 1,390,059 102,747 - - Amounts due from farmers 11,460 1,410,000 - - Accrued Income - 7,117,141 - - Other receivables 55,174 10,095 - - Total current trade and other receivables 1,468,577 8,639,983 7,527,023 138 a. Receivable from Related Parties Amounts receivable from wholly owned subsidiary - - 7,527,023 138 Other related parties 11,884 - - - 11,884 - 7,527,023 138 NOTE 9: INVENTORIES Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CURRENT At fair value: Inventory – Crop planted 9a 25,054,454 - - - 25,054,454 - - - a. Inventory – Crop planted The Company arranged for a crop to be planted prior to 30 June 2009. It is expected these crops will be harvested between October 2009 and January 2010. The value of the crop has been recorded at fair value. NOTE 10: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Associated companies 11a 1,132,729 - - - 1,132,729 - - - Page 26 of 26
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 Note 11: ASSOCIATED COMPANIES Interests are held in the following associated companies: Name Principal Country of Share Ownership Carrying Amount of Activity Incorporation Interest* Investment 2009 2008 2009 2008 % % $ $ Listed: Carbon Bio- Conscious Ltd sequestration Australia Ord 36% - 1,132,729 - * Percentage of voting power in proportion to ownership Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ a. Movements during the year in equity accounted investments in associated companies Balance at beginning of the financial year - - - - Add: Acquired during the acquisition of Broadacre Asset Management 1,559,021 - - - New investment during the year 36,600 - - - Share of associated company’s loss after income tax 11b (462,892) - - - Balance at end of the financial year 1,132,729 - - - b. Equity accounted associate profits are broken down as follows Share of associate’s loss before income tax expense (462,892) - - - Share of associate’s income tax expense - - - - Share of associate’s loss after income tax (462,892) - - - Page 27 of 27
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 11: ASSOCIATED COMPANIES (CONT’D) Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ c. Summarised presentation of aggregate assets, liabilities and performance of associates Current assets 3,301,530 - - - Non-current assets 1,668,324 - - - Total assets 4,969,854 - - - Current liabilities 736,260 - - - Total liabilities 736,260 - - - Net assets 4,233,594 - - - Revenue 268,170 - - - Profit after income tax of associates (2,367,675) - - - d. Market value of listed investment in associate 2,776,510 - - - NOTE 12: FINANCIAL ASSETS Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CURRENT Other investments 12b 135,660 - - - 135,660 - - - NON-CURRENT Available-for-sale financial assets 12a - - 2,776,510 4,409,589 Other investments 12b - 135,660 1,094,380 - Total non-current assets - 135,660 3,870,890 4,409,589 a. Available-for-sale financial assets Listed investments, at fair value: - Shares in listed corporations - - 2,776,510 4,409,589 Total available-for-sale financial assets - - 2,776,510 4,409,589 Available-for-sale financial assets comprise investments in the ordinary issued capital of various entities. There are no fixed returns or fixed maturity dates attached to these investments. No intention to dispose of any unlisted available-for-sale financial assets existed at 30 June 2009. Page 28 of 28
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 12: FINANCIAL ASSETS (CONT’D) Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ b. Other investments Shares in subsidiaries - - 1,094,380 - Investment in 2007 Grain Co Production Project 135,660 135,660 - - 135,660 135,660 1,094,380 - NOTE 13: PROPERTY, PLANT AND EQUIPMENT Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ PLANT AND EQUIPMENT Office Equipment At cost 324,655 140,082 - - Accumulated depreciation (128,460) (71,496) - - 196,195 68,586 - - Motor Vehicles At cost 29,056 284,512 - - Accumulated depreciation (15,764) (116,234) - - 13,292 168,278 - - Total plant and equipment 209,487 236,864 - - Office Motor Total Equipment Vehicles $ $ $ a. Movements in carrying amounts Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year. Consolidated Group: Balance at 1 July 2007 54,718 162,521 217,239 Additions 39,990 82,196 122,186 Disposals - (29,055) (29,055) Depreciation expense (26,122) (47,384) (73,506) Balance at 30 June 2008 68,586 168,278 236,864 Page 29 of 29
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 13: PROPERTY, PLANT AND EQUIPMENT Office Motor Total Equipment Vehicles $ $ $ Additions 185,028 - 185,028 Disposals (174) (151,918) (152,092) Depreciation expense (57,246) (3,067) (60,313) Carrying amount at 30 June 2009 196,194 13,293 209,487 NOTE 14: INTANGIBLE ASSETS Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Systems Software Cost 577,787 200,122 - - Accumulated impairment losses (100,409) (32,718) - - Net carrying value 477,378 167,404 - - Reconciliation of Systems Software Balance at the beginning of year 167,404 133,613 - - Additions 377,665 60,404 - - Amortisation charge (67,691) (26,613) - - Closing carrying value at the end of financial year 477,378 167,404 - - NOTE 15: TRADE AND OTHER PAYABLES Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CURRENT Trade Payables 158,689 1,671,076 - - Amounts due to farmers 29,631,337 18,526,317 6,472,358 Amounts due to Grain Co-Production Projects 171,087 - Employee Benefits 344,117 147,286 - - Sundry payables and accrued expenses 783,336 393,052 - - Amounts payable to: - Loans to other related entities 246,926 - 246,926 - 31,335,492 20,737,731 6,719,284 - Page 30 of 30
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 16: BORROWINGS Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CURRENT Lease liability 16c 14,270 34,920 - - Borrowings – Grain pool 16d 30,000,000 - - - Loans from shareholders 16a 860,174 - 860,174 - Total current borrowings 30,874,444 34,920 860,174 - a. Loans from shareholders A. McBain (Director) 187,465 - 187,465 - S Dixon (Director) 100,000 - 100,000 - P Morrison (Director) 183,569 - 183,569 - T Stoney (Director) 389,140 389,140 860,174 - 860,174 - NON-CURRENT Lease liability 16c - 72,836 - - Other payables - 461,438 - - Amounts payable to: - Directors fees - 347,500 - - - Loans from shareholders 16b - 1,130,854 - - - Loans to other related entities - 369,914 - - Total non-current borrowings - 2,382,542 - - Total borrowings 30,874,444 2,417,462 - - b. Loans from shareholders A. McBain (Director) - 531,098 - - D Stevens - 21,686 - - K Hunter - 185,885 - - S Dixon (Director) - 7,298 - - P Morrison (Director) - 384,887 - - - 1,130,854 - - c. Lease liabilities are secured by the underlying leased assets. d. The loan from Grain pool is secured over grain planted to the value of the Advanced amount plus interest costs. As at 30 June 2009, Grain Pool had provided $30,000,000, however only $25,712,808 was required for planting payments. The remaining $4,287,200 is held in cash. The company will pay Grain Pool interest at Grain Pool’s cost of funds plus 5.2% on all advances, calculated daily. As at 30 June 2009, the rate of interest is 8.4% on the outstanding advance of $30,000,000. Page 31 of 31
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 17: TAX Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ CURRENT Income tax - - - - NON-CURRENT Deferred tax liabilities comprise - Available for sale financial assets - - 817,173 1,322,877 Deferred tax assets not brought to account are disclosed in Note 4. NOTE 18: PROVISIONS Long-term Total Employee Benefits $ $ CURRENT Consolidated Group Opening balance at 1 July 2008 60,193 60,193 Additional provisions raised during the year 125,529 125,529 Amounts used (39,317) (39,317) Balance at 30 June 2009 146,405 146,405 Parent Entity Opening balance at 1 July 2008 - - Balance at 30 June 2009 - - Page 32 of 32
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 18: PROVISIONS (CONT’D) Consolidated Group Parent Entity 2009 2008 2009 2008 Analysis of total provisions Current 146,405 60,193 - - Non-current - - - - 146,405 60,193 - - NOTE 19: ISSUED CAPITAL Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ 21,795,616 (2008: 6,362,040) fully paid ordinary shares 4,892,610 1,810,000 1,094,918 638 4,892,610 1,810,000 1,094,918 638 The company has authorised share capital amounting to 21,795,616 ordinary shares of no par value. a. Ordinary Shares At the beginning of reporting period 6,362,040 Shares issued during year: — 15 December 2008 (i) 15,433,576 At reporting date 21,795,616 (i) On 15 December 2008, the company made a Scrip for Scrip offer to AACL Pty Ltd shareholders. The company issued 15,433,576 shares to AACL shareholders in consideration for 100% of the issued capital of AACL on the basis of 7 shares for every 20 AACL shares held. Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. b. Capital Management The group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the group since the prior year. Page 33 of 33
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 20: RESERVES Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Financial Assets Reserve 20a - - 1,906,737 3,086,712 - - 1,906,737 3,086,712 a. Financial Assets Reserve The financial assets reserve records revaluation of financial assets. NOTE 21: CAPITAL AND LEASING COMMITMENTS Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ a. Finance Lease Commitments Payable — minimum lease payments: — not later than 12 months 16,010 43,487 - - — between 12 months and - 76,487 - - five years Minimum lease payments 16,010 119,974 - - Less future finance charges (1,740) (12,218) - - Present value of minimum 14,270 107,756 - - lease payments 16 b. Operating Lease Commitments Payable – minimum lease payments - Not later than 12 months 154,267 87,736 - - - Between 12 months and 230,991 261,167 - - five years 385,258 348,903 - - Page 34 of 34
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 22: CONTROLLED ENTITIES Country of Percentage Owned (%)* Incorporation 2009 2008 Controlled Entities Consolidated Subsidiaries of Broadacre Management Ltd: AACL Pty Ltd Australia 100% - AACL Wholesale Pty Ltd Australia 100% - AACL Services Pty Ltd (dormant at 30 June 2009) Australia 100% - * Percentage of voting power in proportion to ownership On 15 December 2008 the parent entity acquired 100% of AACL Pty Ltd, details of the acquisition are included at Note 25. On 5 June 2009 the parent entity incorporated AACL Wholesale Pty Ltd On 29 June 2009 the parent entity incorporated AACL Services Pty Ltd NOTE 23: CONTINGENT LIABILITIES AND CONTINGENT ASSETS No contingent liabilities exist. NOTE 24: SEGMENT REPORTING The Group operates in the one business and geographical segment, being the agricultural industry in Australia. NOTE 25: BUSINESS COMBINATION a. Summary of acquisition and purchase consideration Broadacre Asset Management Ltd completed the legal acquisition of AACL Pty Ltd on15 December 2008. The initial consideration was provided by Broadacre Asset Management Ltd at completion through the issue of 15,433,575 shares to AACL shareholders in consideration for 100% of the issued capital of AACL on the basis of 7 shares for every 20 AACL shares held. The offer was accepted and the consolidated group was formed on 15 December 2008. As a result of the consideration paid to the shareholders of AACL, the shareholders of AACL obtained 71% of the voting rights in Broadacre Asset Management Ltd and the acquisition is considered to be a reverse acquisition. No goodwill has been recognised under the reverse acquisition. Assets and Liabilities acquired The assets and liabilities arising from the acquisition are as follows: Acquiree’s Carrying Fair Value Broadacre Asset Management Ltd -15 December amount 2008 $ $ Cash 224 224 Investments (net of associated deferred tax liability) 1,559,021 1,559,021 Trade payables (15,735) (15,735) Net Assets 1,543,510 1,543,510 Net identifiable net assets acquired 1,543,510 Page 35 of 35
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 26: CASH FLOW INFORMATION Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ a. Reconciliation of cash flow from operations with profit after income tax Profit/(Loss) after income tax (4,482,794) (3,727,407) (125) (94) Non-cash flows in profit: — depreciation 146,923 99,764 - - — net gain on disposal of property, (8,201) 6,327 - - plant and equipment — net gain on disposal of investments - - — share of associated company’s net 462,892 - - loss after dividends Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: — (Increase)/decrease in receivables 7,171,306 (6,915,891) (7,527,023) (138) — increase in inventories (25,054,454) - - - — increase/(decrease) in payables 10,557,338 18,893,448 7,527,023 - — decrease) in deferred taxes - - - payable — increase in provisions 86,212 - - - (11,120,778) 8,356,241 (125) (232) Page 36 of 36
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 27: EVENTS AFTER THE BALANCE SHEET DATE a. On 19 June 2009 the Company entered into loan agreements with two of its directors, subsequent to year end these loans have been drawn. These loans are detailed below: 1. Loan between Mike Shields and the Company - Amount of loan: $4,600,000 - Security: 12,950,000 shares in Carbon Conscious Ltd - Interest: higher rate 15% pa, lower rate 5.5% pa (calculated and accrued monthly) - Term: repayable in full by 25 December 2009 2. Loan between Trevor Stoney and the Company - Amount of loan: $2,000,000 - Security: none - Interest: higher rate 15% pa, lower rate 10% pa (calculated and accrued monthly) - Term: repayable in full by 31 January 2010 The financial effect of these transactions has not been bought to account in the 2009 financial report. b. Subsequent to year end the Company has formed two new entities, AACL Holdings Ltd and AACL Services Pty Ltd, the details of these entities are as follows: 1. AACL Services Pty Ltd (ABN: 38 137 972 555) x Registered: 29 June 2009 x 100% owned by Broadacre Asset Management Ltd 2. AACL Holdings Ltd (ACN: 139 977 772) x Registered: 13 October 2009 x 100% owned by Broadacre Asset Management Ltd There is no direct financial effect in the forming of these two entities to the consolidated group. c. On 28 October 2009 AACL Holdings Ltd issued a Convertible Note to Augustus Minerals Ltd. The convertible Note was issued for $1,000,000 with a fixed interest payment of $100,000 due at conversion or repayment. The financial effect of this transaction has not been bought to account in the 2009 financial report. Page 37 of 37
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 28: RELATED PARTY TRANSACTIONS Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with related parties: a. Macro Funds Ltd (a company controlled by P.M. Morrison & S.R. Dixon) - Consultant fees paid to Macro Funds Ltd 330,000 388,414 - - b. The shareholders listed below had made loans to the AACL Pty Ltd as at 30 June 2008. On 31 October 2008, key stakeholders of the company agreed to convert $1,539,099 of loans to equity in the company. These loans were converted to shares on the basis of $0.30 per share. K M Hunter. - (185,885) - - A.L. McBain. - (531,098) - - S.R. Dixon. - (7,298) - - P.M. Morrison. - (384,887) - - Macro Funds Ltd (a company controlled by P.M. Morrison & S.R. Dixon) - (369,914) - - c. Carbon Conscious Ltd (associate company) - Management fees received from Carbon Conscious Ltd 226,386 - - - Balances with related parties: d Payable to related parties Macro Funds Ltd (a company controlled by P.M. Morrison & S.R. Dixon) (173,414) - (173,414) - MKM Securities (Shareholder) (73,512) - - - f. Amount due from subsidiaries - - 7,527,023 138 g. Receivable from Carbon Conscious Ltd 11,884 - - - Page 38 of 38
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 29: FINANCIAL RISK MANAGEMENT The group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bills and leases. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements are as follows: Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Financial assets Cash and cash equivalents 7 27,794,744 9,407,968 154 406 Loans and receivables 8 1,468,577 8,639,983 7,527,023 138 Investments accounted from using the 11 1,132,729 - - - equity method Other investments 12 135,660 135,660 1,094,380 - Available-for-sale financial assets: — equity investments 12 - - 2,776,510 4,409,589 30,531,710 18,183,611 11,398,067 4,410,133 Financial liabilities Financial liabilities at amortised cost: — trade and other payables 15 31,335,492 20,737,731 6,719,284 - — borrowings 16 30,874,444 2,417,462 860,174 - 62,209,936 23,155,193 7,579,458 - Financial Risk Management Policies The directors’ overall risk management strategy seeks to assist the company in meeting its financial targets, whilst minimising potential adverse effects on financial performance. Risk management policies are approved and reviewed by the Board of Directors on a regular basis. These include the credit risk policies and future cash flow requirements. The main purpose of non-derivative financial instruments is to raise finance for company operations. The company does not have any derivative instruments at 30 June 2009. Specific Financial Risk Exposures and Management The main risks the group is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. a. Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The group is also exposed to earnings volatility on floating rate instruments. The net effective variable interest rate borrowings (ie unhedged debt) exposes the group to interest rate risk which will impact future cash flows and interest charges and is indicated by the following floating interest rate financial liabilities: Page 39 of 39
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 29: FINANCIAL RISK MANAGEMENT (CONT’D) Note Consolidated Group Parent Entity 2009 2008 2009 2008 $ $ $ $ Floating rate instruments Borrowings – Grain pool 16 30,000,000 - - - 30,000,000 - - - b. Liquidity risk Liquidity risk arises from the possibility that the group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The group manages this risk through the following mechanisms: • preparing forward-looking cash flow analyses in relation to its operational, investing and financing activities; • maintaining a reputable credit profile; • managing credit risk related to financial assets; • only investing surplus cash with major financial institutions. Financial liability and financial asset maturity analysis Consolidated Within 1 Year 1 to 5 Years Over 5 Years Total Group 2009 2008 2009 2008 2009 2008 2009 2008 $ $ $ $ $ $ $ $ Financial liabilities due for payment Bank overdrafts and loans 30,874,444 - - 2,309,706 - - 30,874,444 2,309,706 Trade and other payables (excluding est. annual leave) 31,335,492 20,737,731 - - - - 31,335,492 20,737,731 Lease liabilities 14,270 34,920 - 72,836 - - 14,270 107,756 Total expected outflows 62,224,206 20,772,651 - 2,382,542 - - 62,224,206 23,155,193 Financial assets — cash flows realisable Cash and cash equivalents 27,829,744 9,407,968 - - - - 27,829,744 9,407,968 Trade, term and loan receivables 1,722,681 8,639,983 - - - - 1,722,681 8,639,983 Page 40 of 40
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 29: FINANCIAL RISK MANAGEMENT (CONT’D) Consolidated Within 1 Year 1 to 5 Years Over 5 Years Total Group 2009 2008 2009 2008 2009 2008 2009 2008 $ $ $ $ $ $ $ $ Investments accounted for using the equity method - - - - 1,132,730 - 1,132,730 - Other investments 157,860 135,660 - - - - 157,860 135,660 Total anticipated inflows 29,710,285 18,183,611 - - 1,132,730 - 30,843,015 18,183,611 Net (outflow)/inflow on financial instruments (32,513,921) (2,589,040) - (2,382,542) 1,132,730 - 31,381,191 (4,971,582) Parent Entity Within 1 Year 1 to 5 Years Over 5 Years Total 2009 2008 2009 2008 2009 2008 2009 2008 $ $ $ $ $ $ $ $ Financial liabilities due for payment Trade, term and loan payables 6,719,284 - - - - - 6,719,284 - Tax Liability - - - - 827,462 1,322,877 827,462 1,322,877 Total expected outflows 6,719,284 - - - 827,462 1,322,877 7,546,746 1,322,877 Financial assets — cash flows realisable Cash and cash equivalents 154 406 - - - - 154 406 Trade, term and loan receivables 7,527,023 138 - - - - 7,527,023 138 Available-for-sale assets - - - - 3,852,589 4,409,589 3,852,589 4,409,589 Total anticipated inflows 7,527,177 544 - - 3,852,589 4,409,589 11,379,766 4,410,133 Net (outflow)/inflow on financial instruments 807,893 544 - - 3,025,127 3,086,712 3,833,020 3,087,256 Page 41 of 41
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 29: FINANCIAL RISK MANAGEMENT (CONT’D) c. Foreign exchange risk The extent to which the Group is at risk to foreign exchange fluctuations is limited to the impact exchange rate movements have on commodity prices (grain prices). d. Credit risk Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Company to incur a financial loss. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. The company does not have any material credit risk exposure to any single debtor or company of debtors under financial instruments entered into by the company. e. Commodity Price risk Commodity price risk is the risk that the sale value of commodities decrease as a result of changes in market prices, whether those changes are caused by factors specific to individual commodities or factors affecting all commodities or financial instruments in the market place. The Company has invested in the production and marketing of grain produced on farm land in Australia and is consequently exposed to the risk of a fall in grain prices. Net Fair Values The net fair value of financial assets and financial liabilities approximates their carrying values as disclosed in the balance sheet and notes to the financial statements. Page 42 of 42
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 29: FINANCIAL RISK MANAGEMENT (CONT’D) Sensitivity analysis The following table illustrates sensitivities to the group’s exposures to changes in interest rates, equity prices and commodity prices. The table indicates the impact on how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Consolidated Group Parent Entity Profit Equity Profit Equity $ $ $ $ Year ended 30 June 2009 +/- 2% in interest rates 372,377/ 372,377/ (372,377) (372,377) - - +/-10% in listed investments 182,131/ 182,131/ - - (182,131) (182,131) +/-5% in grain prices 76,962/ 76,962/ (76,962) (76,962) - - Year ended 30 June 2008 +/- 2% in interest rates 107,752/ 107,752/ (107,752) (107,752) - - +/-10% in listed investments 308,671/ 308,671/ - - (308,671) (308,671) +/-5% in grain prices 7,500/ 7,500/ (7,500) (7,500) - - NOTE 30: COMPANY DETAILS The registered office of the company is: Broadacre Asset Management Ltd Level 1, Suite 5, 12-20 Railway Road Subiaco WA 6008 The principal place of business is: Broadacre Asset Management Ltd Level 1, Suite 5, 12-20 Railway Road Subiaco WA 6008 Page 43 of 43
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 NOTE 31: PRIOR YEAR ADJUSTMENTS (i) An adjustment of $1,686,920 has been made to the prior year retained earnings of the Group. In preparing the 2008 Financial Statements of AACL Pty Ltd, management incorrectly calculated the amount of accrued income as at 30 June 2008. This error had the effect of overstating revenue, trade and other receivables and understating accumulated losses by $1,686,920 as at 30 June 2008. (ii) A reclassification of $9,403,277 has been made between trade and other receivables and cash and cash equivalents of the Group as at 30 June 2008. Amounts held in a trust account by Macro Funds Ltd on behalf of AACL were disclosed as a receivable rather than a cash equivalent as at 30 June 2008. This error had the effect of overstating trade and other receivables and understating cash and cash equivalents by $9,403,277 as at 30 June 2008. This error had nil effect on the net assets of AACL Pty Ltd as at 30 June 2008. (iii) A reclassification of $167,404 has been made between property, plant and equipment and intangible assets of the Group as at 30 June 2008. Software capitalised had been incorrectly disclosed as an item of plant property and equipment and not as an intangible asset as at 30 June 2008. This error had the effect of overstating plant property and equipment and understating intangible assets by $167,404 as at 30 June 2008. This error had nil effect on the net assets of AACL Pty Ltd as at 30 June 2008. The errors have been corrected by restating each of the affected financial statement line items in the income statement and balance sheet. The reconciliation of the balance before and after the restatement is as follows: Prior Year Reclassification 2008 2008 Prior Year Error Errors Restated $ $ $ $ Income Statement Revenue 68,483,164 (1,686,920) - 66,796,244 Profit before tax (2,040,487) (1,686,920) - (3,727,407) Profit after tax (2,040,487) (1,686,920) - (3,727,407) Balance Sheet Cash and cash equivalents 4,691 - 9,403,277 9,407,968 Trade and other receivables 19,730,180 (1,686,920) (9,403,277) 8,639,983 Property plant and equipment 404,268 - (167,404) 236,864 Intangibles assets - 167,404 167,404 Accumulated losses (4,750,587) (1,686,920) - (6,437,507) The cash flow statement for the year ended 30 June 2008 has also been restated for the above errors. Page 44 of 44
    • Broadacre Asset Management Ltd ABN 41 120 002 146 and Controlled Entities DIRECTORS’ DECLARATION The directors of the company declare that: 1. The financial statements and notes, as set out on page 8 to 44, are in accordance with the Corporations Act 2001 and: a. comply with Accounting Standards; and b. give a true and fair view of the financial position as at 30 June 2009 and of the performance for the year ended on that date of the company and consolidated group. 2. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Andrew McBain Dated this 23rd day of November 2009 Page 45 of 45
    • INDEPENDENT AUDIT REPORT TO MEMBERS OF BROADACRE ASSET MANAGEMENT PTY LTD We have audited the accompanying financial report, being a special purpose financial report of Broadacre Asset Management Pty Ltd (the company), which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the period then ended, a summary of significant accounting policies and other explanatory notes and the directors’ declaration. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report and have determined that the accounting policies described in Note 1 to the financial statements, which form part of the financial report are appropriate to meet the financial reporting requirements of the Corporations Act 2001 and are appropriate to meet the needs of the members. The directors’ responsibilities include establishing and maintaining internal control 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. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. No opinion is expressed as to whether the accounting policies used, as described in Note 1, are appropriate to meet the needs of the members. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s 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, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. The financial report has been prepared for distribution to members for the purpose of fulfilling the directors’ financial reporting under the Corporations Act 2001. We disclaim any assumption of responsibility for any reliance on this report or on the financial report to which it relates to any person other than the members, or for any purpose other than that for which it was prepared. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion, the financial report of Broadacre Asset Management Pty Ltd is in accordance with the Corporations Act 2001, including: a. giving a true and fair view of the company’s financial position as at 30 June 2009 and of its performance for the period ended on that date in accordance with the accounting policies described in Note 1; and b. complying with Australian Accounting Standards to the extent described in Note 1 complying with the Corporations Regulations 2001. Total Financial Solutions Member Horwath International WHK Horwath Perth Audit Partnership ABN 96 844 819 235 Level 6, 256 St Georges Terrace Perth WA 6000 Australia GPO Box P1213 Perth WA 6844 Australia Telephone +61 8 9481 1448 Facsimile +61 8 9481 0152 Horwath refers to Horwath International Association, a Swiss verein. Email perth@whkhorwath.com.au www.whkhorwath.com.au Each member of the Association is a separate and independent legal entity. A WHK Group firm
    • Inherent Uncertainty Regarding Continuation as a Going Concern Without qualification to the audit opinion expressed above, attention is drawn to the following matter. As a result of the matters described in Note 1 to the financial statements, there is significant uncertainty whether the consolidated entity will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. WHK HORWATH PERTH AUDIT PARTNERSHIP NICHOLAS HOLLENS Principal Perth, WA Dated this 23rd day of November 2009
    • AUDITOR’S INDEPENDENCE DECLARATION In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Broadacre Asset Management Pty Ltd for the year ended 30 June 2009, I declare that, to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. WHK HORWATH PERTH AUDIT PARTNERSHIP NICHOLAS HOLLENS Principal Perth, WA rd Dated this 23 day of November 2009 Total Financial Solutions Member Horwath International WHK Horwath Perth Audit Partnership ABN 96 844 819 235 Level 6, 256 St Georges Terrace Perth WA 6000 Australia GPO Box P1213 Perth WA 6844 Australia Telephone +61 8 9481 1448 Facsimile +61 8 9481 0152 Horwath refers to Horwath International Association, a Swiss verein. Email perth@whkhorwath.com.au www.whkhorwath.com.au Each member of the Association is a separate and independent legal entity. A WHK Group firm