AWB Limited - 2003 Annual Report
AWB Limited - 2003 Annual Report
AWB Limited - 2003 Annual Report
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<strong>Annual</strong> <strong>Report</strong> <strong>2003</strong><br />
imagine the future
contents<br />
Section<br />
Page<br />
<strong>2003</strong> at a Glance 2<br />
Who We Are<br />
4<br />
Chairman’s and Managing Director’s <strong>Report</strong> 6<br />
Pool Management Services<br />
10<br />
Finance and Risk Management<br />
14<br />
Grain Acquisition and Trading<br />
18<br />
Supply Chain and Other Investments<br />
20<br />
Grain Technology<br />
24<br />
Landmark<br />
26<br />
Our People and Systems<br />
28<br />
Our Environment<br />
30<br />
Our Grower Community<br />
31<br />
Executive Profiles<br />
32<br />
Corporate Governance<br />
34<br />
Financial Statements<br />
44<br />
Shareholder Communication<br />
91<br />
Major ASX Announcements<br />
92<br />
Glossary<br />
92
During the past year, Australia has been through one of its most severe droughts, one that<br />
was for some parts of the country, the worst in 100 years.<br />
These conditions have had a significant impact on rural and regional Australia, and in turn,<br />
on the financial performance of <strong>AWB</strong> <strong>Limited</strong> (<strong>AWB</strong>).<br />
In 2002, we reaffirmed our commitment to a strategy of growth and diversification, with a<br />
focus on being a leading global grains marketer and asset manager. In <strong>2003</strong>, we delivered<br />
on this, most noticeably, with the acquisition of Landmark, which has made <strong>AWB</strong> Australia’s<br />
leading agribusiness.<br />
For <strong>AWB</strong>, <strong>2003</strong> has been challenging, but the company has continued to mature and we are<br />
now better positioned than ever to deliver value to both farmers and shareholders.<br />
Andrew Lindberg<br />
Managing Director
<strong>2003</strong><br />
at a glance<br />
Operational performance summary<br />
Finalised the $5.3 billion 2001/02 <strong>AWB</strong> National Pool – representing<br />
the highest ever pool value and pay grade returns.<br />
Achieved $329 million extra value for 2001/02 <strong>AWB</strong> National Pool,<br />
over and above the Wheat Industry Benchmark.<br />
Exported about nine million tonnes during the <strong>2003</strong> year, down from 16<br />
million tonnes in 2002.<br />
Sold and shipped 400,000 tonnes of wheat to Iraq despite logistical<br />
challenges, and secured funding for the outstanding 800,000 tonnes of<br />
Iraqi contracts.<br />
Successfully implemented an innovative “ring fencing” structure,<br />
protecting the <strong>AWB</strong> National Pool from the commercial activities of<br />
<strong>AWB</strong>, and delivering the highest short term credit rating available for<br />
<strong>AWB</strong> Harvest Finance <strong>Limited</strong>.<br />
Despite a reduction in the size of the peak loan book to $1.6 billion,<br />
<strong>AWB</strong> maintained market leadership in wheat harvest finance in the face<br />
of increased competition.<br />
Traded more than three million tonnes of grain, increasing domesticallytraded<br />
volumes from 2002/03 despite the drought.<br />
Successful first full year of operation for <strong>AWB</strong> Geneva, with 1.5 million<br />
tonnes of traded grain.<br />
Established new grain logistics subsidiary, <strong>AWB</strong> GrainFlow Pty Ltd,<br />
which opened nine new greenfield sites for 2002/03 harvest and<br />
constructed four new sites for <strong>2003</strong>/04 harvest.<br />
Successful acquisition of Landmark from Wesfarmers for approximately<br />
$718 million.<br />
2<br />
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FINANCIAL PERFORMANCE SUMMARY<br />
Drought impacts financial results…<br />
NPAT ($m)<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Net profit reduced by 59%<br />
107.2<br />
Earnings per share (c)<br />
Earnings per share fell by 23 cents<br />
40<br />
39.2<br />
35<br />
34.1<br />
83.7<br />
30<br />
26.2<br />
63.3<br />
25<br />
43.9<br />
20<br />
15<br />
15.9<br />
10<br />
5<br />
0<br />
2000 2001 2002 <strong>2003</strong> 2000 2001 2002 <strong>2003</strong><br />
however…<br />
Dividends per share (c)<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
Stable dividend policy maintained<br />
25 25<br />
22 22<br />
2000 2001 2002 <strong>2003</strong><br />
Share price ($)<br />
4.30<br />
4.10<br />
3.90<br />
3.70<br />
3.50<br />
3.30<br />
3.10<br />
2.90<br />
2.70<br />
2.50<br />
<strong>AWB</strong>'s share price appreciated 8.5% during 2002/03<br />
Oct 02<br />
Nov 02<br />
Dec 02<br />
<strong>AWB</strong> S&P/ASX 200<br />
Jan 03<br />
Feb 03<br />
Mar 03<br />
Apr 03<br />
May 03<br />
Jun 03<br />
Jul 03<br />
Aug 03<br />
Sep 03<br />
FINANCIAL SUMMARY<br />
YEAR ENDED 30 SEPTEMBER<br />
($A million unless otherwise stated)<br />
<strong>2003</strong><br />
2002<br />
Change<br />
Operating results<br />
Operating revenue<br />
Operating profit before tax<br />
Net profit after tax<br />
2,212.0<br />
58.9<br />
43.9<br />
2,319.0<br />
153.2<br />
107.2<br />
-5%<br />
-62%<br />
-59%<br />
Financial position at year end<br />
Shareholders’ funds<br />
Total assets<br />
932.0<br />
2,415.9<br />
789.5<br />
2,641.0<br />
18%<br />
-8%<br />
Performance<br />
Earnings per share (cents)<br />
Dividends per share (cents)<br />
Return on equity (%)<br />
15.9<br />
25.0<br />
5.1<br />
39.2<br />
25.0<br />
13.9<br />
-59%<br />
0%<br />
-63%<br />
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
3
“Australia’s leading global manager<br />
of agricultural commodity assets,<br />
services and flows”<br />
who we are<br />
<strong>AWB</strong> is Australia’s leading agribusiness and one of the world’s largest<br />
wheat managing and marketing companies. Having evolved from the<br />
Australian Wheat Board, which operated as a government statutory<br />
marketing authority for 60 years, <strong>AWB</strong> is a listed, S&P/ASX 100<br />
Australian public company.<br />
<strong>AWB</strong> is the exclusive manager and marketer of all Australian bulk<br />
wheat exports through what is known as the Single Desk system. It<br />
also markets and trades a range of other grains including barley,<br />
sorghum and oilseeds.<br />
With the acquisition of Landmark, <strong>AWB</strong> now offers a unique one stop<br />
shop for Australian farmers, providing finance and risk management<br />
solutions across a wide range of agricultural enterprises, and has a<br />
considerable investment in rural and regional Australia.<br />
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VISION<br />
“Australia’s leading global manager of agricultural<br />
commodity assets, services and flows”<br />
MISSION<br />
“To leverage the existing brand, customer bases and<br />
business model across a broader range of services and<br />
agricultural commodities to become both the producers’,<br />
and end use consumers’, business partner of choice”<br />
4<br />
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There are six key business streams that comprise <strong>AWB</strong>’s value chain:<br />
pool management services<br />
This business manages the pooling and global marketing of Australian wheat to<br />
maximise net pool returns to Pool participants. It encompasses management of<br />
commodity price risk and currency risk and involves the implementation of least cost<br />
wheat supply chain pathways from paddock to plate. The Pool secures end user<br />
demand for Australian wheat. It also helps shape the national wheat crop by providing<br />
market information through the value chain to ensure Australian wheat products meet<br />
worldwide customer quality requirements.<br />
finance and risk management products<br />
This business is designed to provide competitive cash flow and underwriting products to<br />
Australian grain growers. It provides the National Pool Payment Options and<br />
underwriting for Australian wheat deliveries, making cash flow available to growers for<br />
wheat crop plantings. It meets the growing demand for risk management products and<br />
services for growers, and increasingly, for international customers. It also undertakes<br />
discretionary trading activities and attains returns on the <strong>AWB</strong> Group’s capital.<br />
grain acquisition and trading<br />
This business develops and offers contract acquisition products that provide growers<br />
with greater marketing flexibility. It trades as a principal in the deregulated domestic<br />
grain market (wheat, feed grain and oilseeds), and exports grain other than wheat, such<br />
as canola, sorghum and pulses.<br />
supply chain and other investments<br />
This business develops domestic supply chain infrastructure to move grain from<br />
paddock to international customer as efficiently as possible. It manages <strong>AWB</strong>’s<br />
chartering activities, providing competitive sea freight services for Australian grain, and<br />
trades sea freight in the international market. It develops end use grain business within<br />
the value chain, including offshore joint ventures in milling and grain processing, to help<br />
secure end user demand for <strong>AWB</strong> wheat products.<br />
grain technology<br />
This business manages <strong>AWB</strong>’s participation in plant breeding and commercialisation of<br />
proprietary seed varieties, as well as research and development projects throughout the<br />
grain value chain. It also provides analytical testing services and quality assurance to<br />
ensure the integrity of grain through the entire supply chain.<br />
landmark<br />
Acquired by <strong>AWB</strong> in August <strong>2003</strong>, Landmark is Australia’s the most significant supplier<br />
of agribusiness products and services, with interests in a wide range of agricultural<br />
industries. It provides customers with rural merchandise, livestock, wool marketing,<br />
agronomy, insurance, real estate and rural financial services. It is also a major distributor<br />
of fertiliser products.<br />
Page<br />
11<br />
15<br />
19<br />
21<br />
25<br />
27<br />
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
Geoff Crockett, Grower<br />
5
Andrew Lindberg, Managing Director and Brendan Stewart, Chairman<br />
6<br />
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chairman’s and<br />
managing director’s<br />
report<br />
For <strong>AWB</strong>, <strong>2003</strong> was an eventful year, marked by unique<br />
operational challenges and a strategically important acquisition.<br />
The challenges we confronted included drought, war, and<br />
extraordinary wheat market volatility. However, we were well<br />
positioned to meet the challenges and have weathered one of the<br />
toughest seasons by capitalising on our strengths, with innovative<br />
and flexible management and retaining a commitment to our<br />
company strategy.<br />
We have laid down a tangible platform for growth with the<br />
acquisition of Landmark from Wesfarmers. It is a transaction that<br />
precisely meets our strategy to diversify revenue streams and<br />
strengthen our core wheat business.<br />
Drought impacts our Financial Result<br />
<strong>AWB</strong>’s profit this year reflects the impact of what was in some<br />
parts of Australia, the worst drought in more than 100 years. It was<br />
a drought that reduced Australian wheat production from a record<br />
24.9 million tonnes to 9.7 million tonnes, and reduced Pool<br />
deliveries from 19.6 million tonnes to about 4.7 million tonnes.<br />
The severity of the drought impacted <strong>AWB</strong>, as well as Australia’s<br />
wheat growers. In response, <strong>AWB</strong> adopted a proactive<br />
management approach for the <strong>AWB</strong> National Pool, and<br />
implemented a significant cost minimisation program to reduce the<br />
operational cost base for the company.<br />
In this environment <strong>AWB</strong> announced a full year financial result of<br />
$43.9 million – a result we believe is a creditable one in the<br />
circumstances. Consistent with its commitment to a stable dividend<br />
policy, <strong>AWB</strong> declared a total dividend of 25 cents per share<br />
for 2002/03.<br />
A Landmark Acquisition<br />
29 August <strong>2003</strong> was an exciting day for the company. It was the<br />
day we positioned <strong>AWB</strong> as Australia’s leading agribusiness with the<br />
acquisition of Landmark.<br />
The acquisition strengthens <strong>AWB</strong>’s core wheat business and<br />
achieves substantial diversification in rural and financial services.<br />
<strong>AWB</strong> now provides a unique, one stop shop for the Australian<br />
farmer, with a suite of products and services that extend across<br />
their inputs and outputs, from inside the farm gate into the hands<br />
of our international customers.<br />
<strong>AWB</strong> has a comprehensive integration plan in place to achieve<br />
revenue and cost synergies, and as part of the plan has<br />
commenced consolidating the head office functions. The<br />
Landmark head office in Sydney will close on 31 March 2004.<br />
Highest ever Gross Pool Value<br />
We have not lost sight of our core business. In fact, during the year<br />
we delivered the highest ever Gross Pool Value - $5.3 billion - with<br />
the finalisation of the 2001/02 <strong>AWB</strong> National Pool. It was a result<br />
that required innovative pool management in the face of some<br />
difficult market circumstances, and involved two “Pool extensions”<br />
which protected an estimated $300 million in value for its<br />
participants.<br />
Success in Iraq<br />
The biggest marketing challenge during 2002/03 was Iraq. When<br />
hostilities erupted in the region in March, we were confronted with<br />
uncertainty – both about the future of our existing 1.2 million tonne<br />
contracts with Iraq, and the long term future of what is one of<br />
Australia’s most important wheat markets.<br />
7
What we were certain of however, was that our long trading history,<br />
the tried and tested relationships in Iraq and the skills and<br />
experience of our team would hold us in good stead. Since then,<br />
<strong>AWB</strong> has delivered on every aspect of our Iraq commitment: we<br />
successfully managed the logistics and execution risks presented<br />
by the outbreak of hostilities, we met the urgent needs of our Iraqi<br />
consumers by being the first to resume trade after the war, and we<br />
have subsequently secured funding for all 1.2 million tonnes of the<br />
wheat contracts previously struck with the Iraqi Grains Board.<br />
There is little doubt the Iraq market will change shape, and we will<br />
face increased competition. However, with a quality product and a<br />
proven track record over 50 years, <strong>AWB</strong> is clearly well positioned<br />
to meet any new competition in the market.<br />
Commitment to the Single Desk<br />
<strong>AWB</strong> remains steadfastly committed to the retention of the Single<br />
Desk for wheat exports, and the benefits it provides to growers.<br />
In 2004, a review will be conducted of <strong>AWB</strong> (International)<br />
<strong>Limited</strong>’s (<strong>AWB</strong>I) operation of the Single Desk. By outperforming<br />
the Wheat Industry Benchmark, as it did during <strong>2003</strong>, <strong>AWB</strong><br />
believes it will demonstrate again, the clear and tangible benefits of<br />
the current Australian wheat marketing system. This is not a<br />
National Competition Policy (NCP) review of the Single Desk. The<br />
Single Desk legislation (Wheat Marketing Act 1989) is scheduled<br />
for review under NCP principles in 2010.<br />
Australian wheat growers have reaffirmed their support for the<br />
current Single Desk system, with an independent and national<br />
Rural Press survey in August <strong>2003</strong> finding more than 80%<br />
supported the system, and that 79% regarded <strong>AWB</strong>’s management<br />
as “good to excellent”.<br />
Strong Credit Rating<br />
During <strong>2003</strong>, <strong>AWB</strong> incorporated changes to “ring fence” its wheat<br />
export related operations from its commercial activities. The reason<br />
for this was to improve and protect the ongoing operations of the<br />
<strong>AWB</strong> National Pool and the credit rating which supports finance to<br />
growers who deliver to it. This benefits the <strong>AWB</strong> National Pool by<br />
protecting it from the commercial activities of <strong>AWB</strong> and providing<br />
the ability to source competitive funding from the international<br />
market. <strong>AWB</strong> now retains the highest credit rating possible given<br />
our business mix and overall capitalisation.<br />
Competitive Global Environment<br />
Australia’s export dependent farmers continue to compete in a<br />
grossly distorted world market, and trade issues remained a key<br />
priority for <strong>AWB</strong> during <strong>2003</strong>.<br />
Trade reform progress through the World Trade Organization has<br />
been difficult, with talks faltering in Mexico in <strong>2003</strong>. However,<br />
<strong>AWB</strong> remains committed to pursuing a more level trade playing<br />
field for Australian growers, who are among the most productive<br />
and self sufficient in the world.<br />
<strong>AWB</strong> has been supportive of the bilateral trade agreements<br />
pursued by the Australian Government. A Free Trade Agreement<br />
(FTA) with Thailand this year presents further opportunities for<br />
Australian wheat in south east Asia. The FTA with the United<br />
States does not deliver significant benefit to the local grains<br />
industry as there is already free trade between the two countries.<br />
<strong>AWB</strong> supports the FTA for the potential benefits it could bring to<br />
other Australian agricultural industries, but is committed to ensuring<br />
wheat growers are not disadvantaged by any trade agreement.<br />
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8<br />
Andrew Lindberg meets the Iraqi Interim<br />
Minister of Trade and Interim Deputy Minister<br />
for Planning.<br />
XXXXX Brendan XXXXXX, Stewart Pasta meets Technichan growers in<br />
Esperance, WA.<br />
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As a gesture of <strong>AWB</strong>'s appreciation of its long-standing trade relationship with Iraq, Mr Lindberg presented Dr Ali Allawi with two skid steer loaders.<br />
From left to right: Michael Long, General Manager, Africa, Europe & Middle East; Dr Ali Allawi, Iraqi interim Minister for Trade; Andrew Lindberg,<br />
Managing Director; Mr Faik Rasool, Iraqi interim Deputy Minister for Planning and Mr Stephen Belani, Director Case Equipment - Victoria.<br />
A Solid Strategy<br />
<strong>AWB</strong> has two dominant strategic objectives:<br />
Strengthen Core Wheat Business<br />
The equation is simple: by managing the Single Desk system<br />
effectively, and maximising returns to growers, <strong>AWB</strong> will also<br />
generate a commercial return for its shareholders.<br />
We are delivering on that formula, and are well positioned to<br />
continue. Australian growers produce a quality wheat product, at<br />
relatively low cost with a strong brand internationally. We are also<br />
committed to reducing costs and improving services to growers by<br />
increasing competition and efficiencies in the grain supply chain.<br />
We will continue to pursue opportunities to secure end user<br />
demand for Australian wheat by improving our product and service<br />
offering, and the value proposition for our customers.<br />
Grow and Diversify<br />
It is also appropriate that <strong>AWB</strong> pursue sensible and rational<br />
diversification of its revenue streams. Doing so reduces its<br />
exposure to the Australian crop size, while strengthening the<br />
organisation’s capacity as Single Desk manager.<br />
<strong>AWB</strong> plans to diversify within the value chain, by increasing the<br />
volume of grains and other agricultural commodities under<br />
management. We can leverage our world leading expertise in grain<br />
marketing and risk management, and our established global sales<br />
customer base that is spread across 40 countries.<br />
We are also targeting growth by expanding our financial and risk<br />
management offering. <strong>AWB</strong> will use its acquisition of Landmark,<br />
and build on its strong relationship with growers and customers, to<br />
provide an extensive and unique one stop shop of rural and<br />
financial services and commodity management.<br />
Looking Ahead<br />
<strong>AWB</strong>’s financial objectives focus on solid financial growth, stable<br />
dividend payments, efficient capital management and improved<br />
quality of earnings.<br />
In 2004, our priority will be the successful integration of Landmark,<br />
capitalising on synergies and creating opportunities to improve our<br />
earnings. We have a strong integration team in place with clear<br />
goals and challenging performance targets set over a two year<br />
integration period.<br />
The environment for this to take place is encouraging. The<br />
Australian wheat crop has rebounded significantly for the <strong>2003</strong>/04<br />
harvest, returning to levels that exceed the five year average.<br />
Internationally, global wheat stocks are at historically low levels,<br />
which provides a foundation for strength in world grain markets.<br />
Our Thanks<br />
We have asked much of our staff through this tough and<br />
challenging year. On behalf of the <strong>AWB</strong> Board and management,<br />
we would like to thank them for their dedication, commitment and<br />
excellent performance.<br />
Brendan Stewart<br />
Chairman<br />
Andrew Lindberg<br />
Managing Director<br />
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
9
Year in brief<br />
• Finalised the 2001/02 <strong>AWB</strong> National<br />
Pool and achieved highest ever Pool value<br />
and pay grade returns – $5.3 billion.<br />
• Successfully exported about nine million<br />
tonnes during the <strong>2003</strong> year, completing<br />
the 16.8 million tonne export program<br />
from 2001/02 Pool.<br />
• Sold and delivered wheat to more than<br />
130 customers in more than 40 countries.<br />
• Managed customer quality and quantity<br />
requirements with a much smaller crop<br />
and a significantly different quality profile.<br />
• Sold in excess of one million tonnes of<br />
wheat domestically.<br />
• Sold and shipped 400,000 tonnes of<br />
wheat to Iraq despite logistical<br />
challenges, and secured funding for the<br />
outstanding 800,000 tonnes of Iraqi<br />
contracts.<br />
• Extended the 2001/02 <strong>AWB</strong> National<br />
Pool twice to protect and enhance Pool<br />
value.<br />
• Achieved $329 million extra value for the<br />
2001/02 <strong>AWB</strong> National Pool, over and<br />
above the Wheat Industry Benchmark.<br />
Pearl of Abu Dhaui which was loaded with 50,000 tonnes<br />
of premium Australian white wheat at Port Kembla, New South Wales.<br />
10<br />
<strong>AWB</strong> Grain Centre, The Gums, Queensland<br />
Geoff Robbins and Clare McCracken,<br />
Yarrawonga office
pool management<br />
services<br />
<strong>AWB</strong> National Pool<br />
<strong>AWB</strong>, through its wholly owned subsidiary <strong>AWB</strong>I, manages the<br />
<strong>AWB</strong> National Pool. Integrated services are provided by <strong>AWB</strong> to<br />
<strong>AWB</strong>I for a fee under a commercial services agreement. Both the<br />
<strong>AWB</strong> and <strong>AWB</strong>I Boards have negotiated and approved this<br />
agreement, with independent legal advice provided to each Board.<br />
<strong>AWB</strong> National Pool provides growers with a unique grain marketing<br />
and risk management system. All <strong>AWB</strong> National Pool participants<br />
enjoy the value of revenues generated from strong customer<br />
relationships and international sales, arbitrage and blending<br />
opportunities, logistics and supply chain efficiencies, research and<br />
development, physical pricing strategy and sophisticated derivative<br />
management programs.<br />
The Remuneration Model<br />
<strong>AWB</strong> is remunerated for pool management services through a<br />
performance based system introduced in 2001. To provide an<br />
objective and tangible measurement of its performance, <strong>AWB</strong> has<br />
also implemented an assessment model called the Wheat Industry<br />
Benchmark (WIB). The WIB acts as a “competing manager”<br />
generating a theoretical outcome for each seasonal pool against<br />
which actual performance can be measured.<br />
Remuneration is made via a two tiered payment structure. Firstly,<br />
there is a base fee, calculated at 1.5% of Gross Pool Value (GPV)<br />
(subject to a cap of $A61.8 million, and a floor of $A46.4 million –<br />
CPI indexed) which, depending on GPV, covers the majority of<br />
operating costs. Secondly, there is an Out Performance Incentive<br />
which is calculated as 20% of <strong>AWB</strong> National Pool returns achieved<br />
above the WIB and a hurdle (currently set at $US5 per tonne).<br />
Pool participants receive 80% of the revenue achieved above this<br />
level. The Out Performance Incentive is capped at 1.5% of GPV.<br />
<strong>AWB</strong> manages two to three seasonal Pools at any one time, and<br />
receives proportional remuneration from each of those Pools during<br />
the financial year.<br />
For the now finalised 2001/02 <strong>AWB</strong> National Pool, <strong>AWB</strong> achieved<br />
$329 million in additional value over and above the WIB. Under the<br />
remuneration structure, <strong>AWB</strong> received $28.3 million (spread across<br />
two financial years), with the remainder going to Pool participants.<br />
Total remuneration earned by <strong>AWB</strong> for its Pool Management<br />
Services for the 2002/03 financial year was $23.3 million, which<br />
included remuneration from two seasonal pools, as per below:<br />
($million) For the year ended September <strong>2003</strong> For the year ended September 2002<br />
2001/02 Pool 2002/03 Pool Total 2001/02 Pool Total<br />
Base Fee 6.0 41.8 47.8 54.0 54.0<br />
Out performance 14.0 15.3 29.3 14.3 14.3<br />
Administration costs – (53.8) (53.8) (50.9) (50.9)<br />
Total Pool 20.0 3.3 23.3 17.4 17.4<br />
Management Services (EBIT)<br />
25<br />
20<br />
($m)<br />
15<br />
10<br />
5<br />
0 INNOVATION FOCUS The TO leading DELIVER agribusiness NEW OPPORTUNITIES<br />
in Australia.<br />
2000 2001 2002 <strong>2003</strong><br />
NPBT – Pool Management Services<br />
11
Active Pool Management<br />
The past marketing year presented a challenging environment for<br />
the <strong>AWB</strong> National Pool management team, with a highly volatile<br />
world wheat market, a rising Australian dollar and a war in one of<br />
its most important markets.<br />
Yet, <strong>AWB</strong> finalised its largest ever <strong>AWB</strong> National Pool, announcing<br />
a Gross Pool Value of $5.3 billion for the 2001/02 Pool, and<br />
captured significant value for participants in the drought affected<br />
2002/03 Pool.<br />
The record pool returns from 2001/02 were the result of active<br />
and innovative Pool management, involving two “Pool extensions”.<br />
By modifying its sales and shipping program, carrying stock rather<br />
than competing at heavily discounted prices and then “extending”<br />
the Pool, <strong>AWB</strong> was able to protect an estimated $300 million that<br />
could have otherwise been eroded.<br />
International Sales and Marketing<br />
In 2002/03, <strong>AWB</strong> had to manage and ration customer demand<br />
across a significantly smaller crop.<br />
A feature of the world wheat market during the year was the<br />
substantial increase in trade from non-traditional exporters such as<br />
Eastern Europe, the former Soviet Union and India. Exports from<br />
these non-traditional exporters rose by about 70% from 2001/02<br />
to 2002/03, and as part of their aggressive sales campaign, that<br />
wheat was at times discounted by as much as $US70 per tonne to<br />
US parity values.<br />
Despite the smaller harvest in 2002/03, <strong>AWB</strong> has continued to<br />
foster new market opportunities in north and west Africa, which will<br />
be capitalised on in future higher production years.<br />
The biggest market challenge for 2002/03 was Iraq. Despite this<br />
challenge, <strong>AWB</strong> has been successful with its Iraq export program<br />
during <strong>2003</strong>, and is confident it can retain its leading supply<br />
position to Iraq in the future. Increased competition is expected, but<br />
<strong>AWB</strong> will build on its 50 year trading history, a proven wheat<br />
product and the strong relationships with Iraqi customers and<br />
consumers.<br />
The bigger challenge now is to sell a significantly larger crop during<br />
<strong>2003</strong>/04. <strong>AWB</strong> remains committed to securing end user demand<br />
for Australian wheat, by delivering a high quality product, made to<br />
order. <strong>AWB</strong> is also broadening its services to international<br />
customers via value added packages that include finance, credit<br />
and risk management components, along with chartering and<br />
technical wheat processing expertise.<br />
Risk Management Services<br />
<strong>AWB</strong> uses hedging instruments to protect the <strong>AWB</strong> National Pool,<br />
and growers, against risk associated with commodity and currency.<br />
During the life of the 2001/02 Pool, the Australian dollar ($A)<br />
appreciated significantly within a range of 20 cents against the US<br />
dollar ($US). <strong>AWB</strong> limited the exposure to this by delivering an<br />
average $US/$A currency hedge rate of 0.5215 cents, compared<br />
to the seasonal average of 0.5526 cents, and a Wheat Industry<br />
Benchmark result of 0.5261 cents.<br />
The currency hedging program for the 2002/03 Pool is well<br />
advanced, and is on track to achieve an average hedge rate below<br />
0.55 cents, against a seasonal average of above 0.58 cents. <strong>AWB</strong>’s<br />
currency hedging strategies have also allowed it to capture<br />
favourable exchange rates for the <strong>2003</strong>/04 <strong>AWB</strong> National Pool in<br />
a climate of a weakening US dollar.<br />
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For the 2001/02 Pool, <strong>AWB</strong> managed almost 700,000 individual<br />
grain deliveries requiring 7,180 separate train movements to transfer<br />
that grain, a combined total of two million kilometres to port, from<br />
where it was shipped through more than 3,000 separate bills of sale.<br />
Taking advantage of its market intelligence and expertise, <strong>AWB</strong> has<br />
also performed well in managing commodity risk for the <strong>AWB</strong><br />
National Pool. Participating in the US futures exchanges in Kansas,<br />
Chicago and Minneapolis, <strong>AWB</strong> capitalised on the strong rally in<br />
world wheat prices late in 2002 (driven by droughts in key<br />
exporting countries such as Canada, US and Australia), to the<br />
benefit of both the 2001/02 and 2002/03 <strong>AWB</strong> National Pools.<br />
Managing the Wheat Supply Chain<br />
During <strong>2003</strong>, <strong>AWB</strong> improved efficiencies and reduced costs along<br />
the supply chain on behalf of pool participants.<br />
On behalf of <strong>AWB</strong> National Pool, <strong>AWB</strong>’s supply chain management<br />
team continues to renegotiate domestic supply chain contracts on<br />
a more commercial basis. For example, in <strong>2003</strong>, it signed a three<br />
year contract with Queensland Rail, which will deliver more cost<br />
effective rail rates and reduce the rail assets required for the grain<br />
haulage task.<br />
By publishing Estimated Silo Returns on its website for each and<br />
every receival point around Australia, <strong>AWB</strong> is providing more<br />
transparency on site to sea costs, and an environment for more<br />
competition in the supply chain.<br />
In the year ahead, <strong>AWB</strong> will pursue new supply chain service<br />
arrangements with traditional providers, and will introduce new<br />
optimisation technology to better manage and performance monitor<br />
the supply chain program.<br />
Research and Development<br />
<strong>AWB</strong> has set ambitious targets for its product competitiveness in<br />
international markets. One such aim is to be marketing 60% of its<br />
wheat volumes into Asia by 2007. To achieve this, <strong>AWB</strong> remains<br />
focussed on its crop shaping activities, working closely with<br />
customers to identify key characteristics and deliver them through<br />
the wheat product .<br />
During <strong>2003</strong>, <strong>AWB</strong> hosted the first ever wheat breeding forum. Key<br />
market signals were discussed with the wheat research and<br />
breeding community to encourage development of new varieties to<br />
meet specific customer requirements.<br />
Grower Services<br />
During the year, <strong>AWB</strong> met face to face with more than 7,000<br />
growers at various meetings across the country. This year, <strong>AWB</strong><br />
extended its highly successful National Pool Forum concept,<br />
expanding on last year’s single event with four forums across four<br />
states this year. <strong>AWB</strong>’s Grower Services Centre this season<br />
received and managed more than 85,000 grower calls.<br />
<strong>AWB</strong> also launched a new website during <strong>2003</strong>, specifically<br />
designed to meet the increasingly sophisticated needs of growers<br />
and customers. The new site, www.awb.com.au has a dedicated<br />
grower channel which consolidates all relevant information, and will<br />
act as the main business portal for growers’ grain marketing and<br />
finance management requirements.<br />
Outlook<br />
A larger harvest in <strong>2003</strong>/04 will mean increased tonnage into the<br />
<strong>2003</strong>/04 <strong>AWB</strong> National Pool, and a larger export task for the pool<br />
management services businesses. The world wheat market has<br />
continued its trend of volatility into the <strong>2003</strong>/04 financial year, and<br />
should be marked by a return to more normal production levels in<br />
some of the major wheat exporters. <strong>AWB</strong> is committed to<br />
outperforming the benchmarks for all the services it provides to<br />
operate <strong>AWB</strong> National Pool, and is on track to outperform the WIB<br />
for the <strong>2003</strong>/04 Pool.<br />
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
13
Year in brief<br />
• Successfully implemented a “ring fencing” structure which delivered improved credit ratings of A1+ (short term) AA- (long<br />
term) stable outlook from Standard & Poor’s, and P-1 from Moody’s for <strong>AWB</strong> Harvest Finance <strong>Limited</strong>.<br />
• Improved competitiveness of <strong>AWB</strong> National Pool Payment Options, and maintained market leadership in harvest finance<br />
market despite increased competition.<br />
• Loan book peaked at $1.6 billion in December 2002.<br />
• Created a syndicated multi-option facility, which was used to finance the acquisition of Landmark.<br />
• Release of the <strong>AWB</strong> Fixed Basis contract, through <strong>AWB</strong> RiskAssist, for wheat, canola and sorghum.<br />
Matt Holgate, Regional Manager and<br />
Craig Prescott, Grower<br />
14<br />
Craig Prescott, Grower<br />
Ken Hudson and Rick Price,<br />
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finance and<br />
risk management<br />
Harvest Finance<br />
In 2002, <strong>AWB</strong> introduced its new National Pool Payment Options<br />
which provide growers a unique range of loan and payment options<br />
for harvest finance. Despite the drought, the new products<br />
achieved a strong uptake from participants in the 2002/03 <strong>AWB</strong><br />
National Pool.<br />
In <strong>2003</strong>, <strong>AWB</strong> responded to growers’ needs for greater cash flow<br />
flexibility by enhancing its National Pool Payment Options. This<br />
included removing the minimum drawdown amount for the Flexible<br />
Drawdown Loan, and, for the Deferred Payment option, moving all<br />
cash flow to the subsequent financial year. These enhancements<br />
have been well received by growers, third party advisers and staff,<br />
and highlight <strong>AWB</strong>’s responsiveness to growers’ changing financial<br />
requirements.<br />
Volumes through the loan book were lower this season, given that<br />
new season Pool deliveries fell from 19.3 million tonnes in<br />
2001/02, to 4.7 million in 2002/03. <strong>AWB</strong>’s loan book peaked at<br />
$1.6 billion in December 2002, down from a record peak of $2.1<br />
billion in the previous reporting year.<br />
The acquisition of Landmark promises exciting opportunities in the<br />
rural finance area, with access for <strong>AWB</strong> and farmers to a broader<br />
range of lending, transaction, deposit and insurance products. <strong>AWB</strong><br />
will support this broader financial services platform through<br />
investment in product development, recruitment of specialised staff<br />
and the creation of solutions that meet the unique needs of<br />
Australian farmers.<br />
Risk Management Products<br />
Basis Pool<br />
<strong>AWB</strong> Basis Pool remained a popular risk management product for<br />
growers seeking to manage their own commodity and foreign<br />
exchange exposures. After strong growth in Basis Pool volumes<br />
since 1998/99 when it was introduced, volumes assigned to the<br />
Basis Pool were significantly lower in 2002/03 due to the drought.<br />
About 180,000 tonnes were committed to the Basis Pool, although<br />
a significant proportion of that tonnage was cancelled, or<br />
“washed out”.<br />
Although the drought has reduced the general grower appetite for<br />
forward contracting, with increased crop production in <strong>2003</strong>/04,<br />
there will be more grain available for contracting through <strong>AWB</strong><br />
Basis Pool and <strong>AWB</strong> is expecting larger volumes as a result.<br />
<strong>AWB</strong> RiskAssist<br />
As a wholly owned subsidiary, <strong>AWB</strong> RiskAssist <strong>Limited</strong> was<br />
established to provide specialised risk management service to<br />
grower customers. After steady growth in its business, reduced<br />
production impacted the uptake of risk management services<br />
during <strong>2003</strong>. However, <strong>AWB</strong> RiskAssist has expanded its offering<br />
with a new Fixed Basis Contract, and with a significantly larger<br />
crop for <strong>2003</strong>/04, is anticipating a modest increase in the uptake<br />
of risk management services among growers for the year ahead.<br />
Partly offsetting the impact of reduced grower uptake has been<br />
<strong>AWB</strong> RiskAssist’s continued diversification of its customer base.<br />
($m)<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0 INNOVATION FOCUS TO Improve DELIVER performance NEW OPPORTUNITIES<br />
and returns.<br />
2000 2001 2002 <strong>2003</strong><br />
NPBT – Finance and Risk Management<br />
15
During <strong>2003</strong>, <strong>AWB</strong> "ring fenced" its wheat operations from the other<br />
commercial activities of the Group. <strong>AWB</strong> now retains the highest<br />
short term credit rating possible given our business mix and overall<br />
capitalisation.<br />
In <strong>2003</strong>, it provided services to international customers of <strong>AWB</strong><br />
National Pool, the Trading division’s domestic and international<br />
customers, and <strong>AWB</strong> Geneva’s international customer base, by<br />
embedding price risk components into the physical grain contracts.<br />
<strong>AWB</strong> RiskAssist expects to expand this aspect of its business in<br />
the year ahead.<br />
Group Funding Activities<br />
The size and duration of <strong>AWB</strong> Group’s borrowing program is largely<br />
determined by the crop size, timing of both grain delivery and sales,<br />
and the financing options chosen by growers. Group funding for<br />
the year was sourced from global and domestic markets,<br />
specifically a $US1.5 billion US commercial paper program, a<br />
$US1.5 billion global Euro commercial paper program and a $A2.0<br />
billion domestic commercial paper program.<br />
Liquidity support for <strong>AWB</strong> is provided through committed<br />
commercial paper standby facilities with a panel of banks, in<br />
accordance with <strong>AWB</strong>’s relationship banking strategy. <strong>AWB</strong> also<br />
uses various financial hedging instruments to protect its funding<br />
costs against the effects of interest rate fluctuations. These<br />
include interest rate swaps, forward rate agreements, exchange<br />
traded futures contracts and options on futures contracts.<br />
Credit Rating<br />
On 1 October <strong>2003</strong>, <strong>AWB</strong> “ring fenced” its wheat export related<br />
operations from the other commercial activities of the Group. In<br />
doing so, <strong>AWB</strong> improved and protected the credit rating for <strong>AWB</strong><br />
Harvest Finance <strong>Limited</strong> in providing finance to growers who<br />
deliver to the <strong>AWB</strong> National Pool. Growers who deliver to the <strong>AWB</strong><br />
National Pool, and use <strong>AWB</strong> National Pool Payment Options,<br />
benefit through the competitive finance products that are afforded<br />
with the improved credit rating.<br />
To achieve this outcome, <strong>AWB</strong> created three new wholly owned<br />
subsidiary companies:<br />
<strong>AWB</strong> Harvest Finance <strong>Limited</strong> – provides growers delivering to<br />
the <strong>AWB</strong> National Pool with a suite of financing alternatives<br />
(replacing <strong>AWB</strong> Finance <strong>Limited</strong>);<br />
<strong>AWB</strong> Services <strong>Limited</strong> – provides, on a fee for service basis, the<br />
management and business infrastructure required to support<br />
<strong>AWB</strong> Group operations, including asset management (building,<br />
IT software and hardware etc) and staff; and<br />
<strong>AWB</strong> Commercial Funding <strong>Limited</strong> – provides treasury and<br />
funding operations for the commercial subsidiaries of <strong>AWB</strong>.<br />
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Through “ring fencing”, <strong>AWB</strong> was able to achieve the highest<br />
possible short term rating available for <strong>AWB</strong> Harvest Finance<br />
<strong>Limited</strong>. The credit ratings achieved were:<br />
<strong>AWB</strong> Harvest Finance <strong>Limited</strong>:<br />
Standard & Poor’s: A1+ (short term)<br />
AA- (long term) stable outlook<br />
Moody’s: P-1<br />
Outlook<br />
With a considerably larger harvest for <strong>2003</strong>/04, <strong>AWB</strong> is<br />
anticipating strong uptake of its National Pool Payment Options,<br />
and retention of its leading position within the market. The larger<br />
crop should also provide an improved environment for the uptake<br />
of the expanded range of risk management products and services<br />
provided by <strong>AWB</strong>.<br />
<strong>AWB</strong> Commercial Funding <strong>Limited</strong>:<br />
Standard & Poor’s: BBB stable outlook<br />
(supported by an <strong>AWB</strong> <strong>Limited</strong> guarantee).<br />
<strong>AWB</strong> Harvest Finance <strong>Limited</strong> replaced <strong>AWB</strong> Finance <strong>Limited</strong> as at<br />
1 October <strong>2003</strong>, in providing harvest finance products to growers<br />
who deliver to the <strong>AWB</strong> National Pool. Domestic and offshore<br />
commercial paper programs have been created for <strong>AWB</strong> Harvest<br />
Finance <strong>Limited</strong> to finance the <strong>2003</strong>/04 operations.<br />
In addition, a committed $950 million syndicated multi option<br />
facility from five relationship banks has been created to fund <strong>AWB</strong><br />
Commercial Funding <strong>Limited</strong>. This facility provides both cash<br />
advances and bank guarantees for the commercial activities of the<br />
Group and was utilised to finance the acquisition of Landmark.<br />
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
17
Year in brief<br />
• Traded more than three million tonnes of grain,<br />
increasing volumes sold to the domestic market<br />
from 2002/03 despite the drought.<br />
• Successful first full year of operation for <strong>AWB</strong><br />
Geneva, which traded 1.5 million tonnes of grain.<br />
• Developed Washout Assistance Loan, which was<br />
applied to more than 450,000 tonnes.<br />
• Worked, in collaboration with other business<br />
divisions, to provide bundled grain, marketing,<br />
finance and risk management packages to<br />
growers, domestic and overseas customers.<br />
• Expanded oilseed market in Japan in<br />
collaboration with the <strong>AWB</strong>’s Japanese 51%<br />
owned subsidiary Zen-noh Corporation.<br />
Akira Yoshii and Toru Sano, Customers and Ken Hudson, Regional Manager<br />
18<br />
Adrian Hyland, Krissy Dixon, Mitch Morison<br />
and Tim Glass, Trading division
grain acquisition<br />
and trading<br />
Grain Acquisition Products<br />
<strong>AWB</strong>’s Trading division retained its leading position in securing<br />
grain supplies during <strong>2003</strong>. <strong>AWB</strong> was able to forward contract one<br />
million tonnes of grain prior to the 2002/03 harvest, a solid result<br />
given the reduced crop size. However, drought induced production<br />
shortfalls meant about 450,000 tonnes of grain contracts were<br />
cancelled, or “washed out”.<br />
To manage the contract cancellations, the Trading division provided<br />
growers with the flexibility of same day washout values, and<br />
implemented the innovative Washout Assistance Loan (WAL). The<br />
WAL provided a finance offering to help alleviate the cash flow<br />
impact caused by the washouts, and highlighted <strong>AWB</strong>’s innovation<br />
in the face of unusual market circumstances. <strong>AWB</strong> has taken a<br />
conservative approach to provisioning against this exposure.<br />
Domestic Trading<br />
Drought conditions during 2002/03 produced a unique dynamic in<br />
the domestic grain market, with volatile and historically high prices<br />
encouraging traders to import as much as 350,000 tonnes of feed<br />
grain. <strong>AWB</strong>’s Trading division did not import any grain, but remained<br />
the major buyer in the domestic market, and was the major trading<br />
house in terms of volume of supplies across 2002/03.<br />
Backed by its national grower services network and relationships<br />
with more than 50 domestic customers, <strong>AWB</strong> Domestic Trading<br />
was able to increase the volume of grain sold to the domestic<br />
market in 2002/03. By accessing <strong>AWB</strong> National Pool grain stocks<br />
through the public Pool tender system, <strong>AWB</strong> Domestic Trading was<br />
able to provide grain supply solutions to a wide cross-section of<br />
domestic consumers.<br />
With the drop in domestic production, grain exports were down<br />
sharply in <strong>2003</strong>. A pleasing result was that <strong>AWB</strong> was able to<br />
secure export sales of canola and sorghum into the Japanese<br />
market through its subsidiary trading company with Zen-noh<br />
Corporation (AZL) based in Tokyo.<br />
With a better production season ahead, <strong>AWB</strong> Domestic Trading will<br />
be able to build upon the business it has developed during the<br />
2002/03 season and maintain its prominent position in the market.<br />
Global Trading<br />
<strong>AWB</strong> Global Trading completed its first full year of operation in<br />
2002/03, delivering tangible benefits to growers, customers and<br />
shareholders.<br />
With drought reducing the ability of <strong>AWB</strong> National Pool to meet all<br />
customer demand, <strong>AWB</strong> was able to tailor other origin supplies<br />
through its Geneva based Global Trading operations to some of its<br />
long term customers. This provided a commercial return for <strong>AWB</strong>,<br />
but also retained customer relationships for <strong>AWB</strong> as it looks toward<br />
significantly larger crop levels again in <strong>2003</strong>/04.<br />
<strong>AWB</strong> Geneva was also able to secure contracts in markets that<br />
<strong>AWB</strong> National Pool considered not in the best interests of its<br />
participants. It allows improved access to customers in the<br />
Mediterranean basin and in west and north Africa, and facilitates<br />
the supply of grain from the European Union, the former Soviet<br />
Union and subcontinent to these markets. This business is<br />
governed by the strict guidelines of the <strong>AWB</strong> National Pool, which<br />
has the right of veto over any wheat export sales.<br />
A strong contributor to the Global Trading operation was the<br />
performance of the oilseed book into markets that <strong>AWB</strong> has not<br />
serviced previously, notably, soybean exports to Indonesia. The<br />
ability to expand the range and volumes of grains under<br />
management is a key platform for growth for <strong>AWB</strong>.<br />
Outlook<br />
The significantly higher national wheat production in <strong>2003</strong>/04 will<br />
improve prospects for the Trading division, with larger grain<br />
volumes available for contracting though its acquisition products.<br />
As a result, <strong>AWB</strong> is also poised to export much larger tonnages of<br />
non-wheat grain in <strong>2003</strong>/04, and to further capitalise on joint<br />
venture opportunities through AZL. <strong>AWB</strong> is expecting a<br />
consolidation of the solid first year performance of its Global<br />
Trading operations.<br />
($m)<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Diversification and investment.<br />
2000 2001 2002 <strong>2003</strong><br />
NPBT – Grain Acquisition and Trading<br />
19
Year in brief<br />
• Launched new grain logistics subsidiary,<br />
<strong>AWB</strong> GrainFlow Pty Ltd, in January <strong>2003</strong>.<br />
• Opened nine greenfield sites for the<br />
2002/03 harvest and constructed four<br />
new sites for the <strong>2003</strong>/04 harvest.<br />
• Managed about 185,000 tonnes of grain<br />
receivals for the 2002/03 harvest.<br />
• Developed new Cost and Freight (CFR)<br />
markets in Tanzania, Indonesia and Japan.<br />
• Physical volumes and financial results for<br />
Geneva Global Freight ahead of budget.<br />
• Maintenance of market share by Five Star<br />
Flour Mill (Egypt), despite near record<br />
prices of Australian wheat.<br />
• Increased wheat sales to the Japanese<br />
Food Agency through the <strong>AWB</strong> – Zen-noh<br />
subsidiary to their highest levels.<br />
West Wyalong Grain Centre<br />
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<strong>AWB</strong> Grain Centre, The Gums, Queensland
supply chain and<br />
other investments<br />
Domestic Investments<br />
<strong>AWB</strong> continued to pursue investments in 2002/03 that reduce<br />
supply chain costs for growers, strengthen <strong>AWB</strong>’s regional position<br />
and achieve a commercial return to shareholders above the<br />
weighted average cost of capital.<br />
In January <strong>2003</strong>, <strong>AWB</strong> launched its new grain logistics company,<br />
<strong>AWB</strong> GrainFlow, which as a wholly owned subsidiary will operate<br />
<strong>AWB</strong>’s growing supply chain and logistical services. <strong>AWB</strong><br />
GrainFlow provides a new, defined and separate identity for<br />
business ventures, including <strong>AWB</strong> Grain Centres (and the<br />
coordination of services such as on-farm pick-up), company owned<br />
rail stock, the <strong>AWB</strong> investment in the Melbourne Port Terminal and<br />
any future supply chain investments.<br />
<strong>AWB</strong> GrainFlow<br />
Grain Centres<br />
<strong>AWB</strong> GrainFlow opened nine, state of the art greenfield sites in SA<br />
and NSW in time for the 2002/03 harvest. <strong>AWB</strong> GrainFlow has<br />
also constructed a further four new sites in NSW and QLD, and<br />
upgraded the Beanbri site in NSW for the <strong>2003</strong>/04 harvest, taking<br />
total storage capacity to more than three million tonnes. The<br />
drought, particularly in eastern Australia, directly impacted <strong>AWB</strong><br />
GrainFlow receivals for 2002/03, with total grain receipts of about<br />
185,000 tonnes being down considerably from the previous year.<br />
However, <strong>AWB</strong> improved its market share in the storage and<br />
handling sector, and the investments contributed positive gross<br />
margins over direct operating costs. With a considerably larger crop<br />
in <strong>2003</strong>/04, <strong>AWB</strong> GrainFlow’s Grain Centre business is well<br />
positioned to attract significant tonnage, and achieve long term<br />
commercial returns for shareholders over their investment life.<br />
Rail Freight<br />
<strong>AWB</strong> has committed about $5 million for 51 high capacity rail<br />
wagons, to be operated in NSW to improve grain haulage services,<br />
and provide a commercial return on investment. Grain volumes<br />
hauled by the wagons in 2002/03 were down due to the drought,<br />
but <strong>AWB</strong> anticipates the wagons will play an important part in the<br />
grain haulage task for coming seasons. <strong>AWB</strong>’s Waratah train, which<br />
was leased from Freight Australia in 1999, hauled its one millionth<br />
tonne of grain during 2002/03.<br />
Ports<br />
Rental income on <strong>AWB</strong>’s 50% ownership of the Melbourne Port<br />
grain terminal was impacted by reduced grain production and<br />
exports. In total, approximately 450,000 tonnes were handled<br />
through the facility in 2002/03.<br />
<strong>AWB</strong> continues to investigate further opportunities for port<br />
developments. Consistent with <strong>AWB</strong>'s supply chain and investment<br />
strategies, these are focussed on improving port services and<br />
delivering reduced costs to growers, as well as providing long term<br />
commercial returns to shareholders.<br />
Offshore Investments<br />
<strong>AWB</strong>’s offshore investments form a key platform in its strategy to<br />
diversify its income in a manner that expands end user demand for<br />
<strong>AWB</strong> products and services. The investments have extended<br />
<strong>AWB</strong>’s stake in the grain value chain, in the areas of flour and feed<br />
milling, food processing and grain trading, and have established a<br />
foothold for <strong>AWB</strong> in some of the world’s biggest and fastest<br />
growing grain markets. In <strong>2003</strong>, <strong>AWB</strong>’s offshore investments<br />
performed well in the difficult trading environment caused by<br />
drought in Australia.<br />
($m)<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
-5<br />
Commercial strategies to realise efficiency.<br />
2000 2001 2002 <strong>2003</strong><br />
NPBT – Supply Chain and Other Investments<br />
21
Five Star Flour Mills (Egypt)<br />
Five Star Flour Mills Company SAE (FSFM) is the leading producer of<br />
premium grade flour in Egypt and one of <strong>AWB</strong>’s largest wheat<br />
customers. <strong>AWB</strong> is the single largest shareholder with a 30% interest.<br />
FSFM’s strong flour brands are based on quality Australian wheat.<br />
During 2002/03, the mill maintained its market share in Egypt,<br />
despite near record prices for Australian wheat, versus the<br />
significantly lower priced, other origin wheat used by some of its<br />
competitors. This achievement demonstrates the value of FSFM’s<br />
product and the customer loyalty it has generated.<br />
In 2002/03, FSFM also commissioned a new, world-class feed mill<br />
at the same site. <strong>AWB</strong> has directly invested more than $4 million<br />
and has 33% equity. The mill will supply the fast growing stock<br />
feed related industries in the region.<br />
<strong>AWB</strong> – Zen-noh (Japan)<br />
<strong>AWB</strong> – Zen-noh <strong>Limited</strong> (AZL) is a joint venture commodity trading<br />
company established between <strong>AWB</strong> and Japan’s largest<br />
agricultural trading cooperative. <strong>AWB</strong> has a 51% holding.<br />
Drought and tightening supplies of feed grain negatively impacted<br />
the performance of AZL during 2002/03. However, this was partly<br />
offset by the fact that AZL was able to post strong sales to the<br />
Japanese Food Agency.<br />
AZL is aiming to increase grain volumes in <strong>2003</strong>/04 on the back<br />
of much improved production prospects in Australia.<br />
Shenzen Southseas Grain (China)<br />
Shenzen Southseas Grain Industries <strong>Limited</strong> (SSGI) is one of the<br />
largest and most efficient flour and feed milling businesses in<br />
southern China. <strong>AWB</strong> holds a minority 8% stake. Business<br />
performance in 2002/03 was impacted by the SARS virus.<br />
However, SSGI commands a leading position in the premium<br />
segment of the Chinese flour market, which is growing strongly.<br />
Vietnam Flour Mills (Vietnam)<br />
Vietnam Flour Mills <strong>Limited</strong> (VFM) was commissioned in November<br />
2001 and has secured significant market share in the rapidly<br />
expanding Vietnamese market. <strong>AWB</strong> holds a 17.5% share in VFM.<br />
The operations are performing to budget and further sales growth<br />
is expected <strong>2003</strong>/04.<br />
Chartering<br />
<strong>AWB</strong> Chartering provides ocean freight services to <strong>AWB</strong> National<br />
Pool, <strong>AWB</strong>’s Trading division and external customers, generating<br />
income via service fees and trading of freight.<br />
Drought made 2002/03 a difficult year, with a substantially lower<br />
base of cargo to leverage in one of the most volatile freight<br />
markets on record. However, <strong>AWB</strong> Chartering was still able to<br />
exceed budget expectations.<br />
A significant achievement was the successful management of<br />
freight and war execution risk into the Iraq market. <strong>AWB</strong> Chartering<br />
played a key role in landing wheat in Iraq after the hostilities, and<br />
protecting <strong>AWB</strong> National Pool, and <strong>AWB</strong>, from the freight and<br />
execution risk that existed at the time.<br />
Chartering was also able to develop new Cost and Freight (CFR)<br />
markets by securing freight business with traditional Free on Board<br />
(FOB) customers in countries such as Tanzania, Indonesia and<br />
Japan. During the year, <strong>AWB</strong> also reached a significant freight<br />
memorandum of cooperation with Iran. By offering competitive<br />
freight as part of its product and service range, <strong>AWB</strong> is able to<br />
secure end user demand, and thereby capture value, for <strong>AWB</strong><br />
National Pool.<br />
<strong>AWB</strong> Chartering has continued to diversify its revenue streams, and<br />
in 2002/03 began taking vessels on time charter and trading them<br />
in a rising freight market. In November 2002, <strong>AWB</strong> began trading in<br />
the freight swaps paper market using Forward Freight Agreements<br />
(FFAs), and successfully traded in the international freight market.<br />
An important contributor to the Chartering result was the success<br />
of Geneva Global Freight, which in its first year of operation,<br />
exceeded its target grain volumes. <strong>AWB</strong> is aiming to build on this<br />
and capitalise on opportunities in Geneva to expand its non-Pool<br />
related business in the future.<br />
<strong>AWB</strong> continues to sell about 40% of wheat on a CFR basis –<br />
increasing that proportion marginally from 2001/02.<br />
Outlook<br />
<strong>AWB</strong> will receive a significant increase in grain receival into its<br />
<strong>AWB</strong> GrainFlow centres in <strong>2003</strong>/04, and has set targets for<br />
receipts of 60% of its total storage capacity. The improved crop<br />
prospects will also increase throughput at the Melbourne Port<br />
Terminal and its rail investments. <strong>AWB</strong>’s offshore investments are<br />
now well positioned for further growth with a solid contribution<br />
anticipated from the well established FSFM. For its Chartering<br />
business, <strong>AWB</strong> has strategies in place to increase the percentage<br />
of wheat sold on a CFR basis, targeting 45% CFR volumes for<br />
<strong>2003</strong>/04.<br />
XXXXX XXXXXX, Pasta Technichan<br />
22<br />
XXXXX XXXXXX, Pasta Technichan<br />
XXXXX XXXXXX, Pasta Technichan<br />
XXXXX XXXXXX, Pasta Technichan
Children of <strong>AWB</strong> employees enjoying end use products.<br />
From bottom left clockwise:<br />
Rajnita Iyer<br />
Shahrul Azudin<br />
Yurana Twadrous<br />
Sebastian Twadrous<br />
Robert Cassidy<br />
Renee Sinni<br />
Brandon Xiao<br />
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
23
Year in brief<br />
• Delivered a new agreement<br />
introducing Syngenta as a partner<br />
to Graingene II, bringing technology<br />
and germplasm access.<br />
• Expanded the product suite for<br />
<strong>AWB</strong> Seeds, with the addition of<br />
five new grain varieties.<br />
• Expanded the research and<br />
development project list to diversify<br />
the business development potential.<br />
• Completed the open-plot<br />
quarantine trial facility at Agrifood<br />
Technology in Werribee.<br />
• Commissioned and implemented a<br />
new laboratory information system<br />
at Agrifood Technology.<br />
• Participated in industry committees<br />
and discussions to assist the<br />
responsible management of the<br />
potential introduction of genetically<br />
modified grains.<br />
XXXXX XXXXXX, Chan-Yu Pasta Kuo, Technichan Analyst – Quality, Milling and End Products<br />
24<br />
XXXXX Veronica XXXXXX, Lo, Analyst Pasta – Quality, Technichan Milling and Sandra XXXXX XXXXXX, Bruengger, Pasta Analyst Technichan – Quality, Milling Yang XXXXX Chen, XXXXXX, Method Pasta Development TechnichanOfficer<br />
End Products<br />
and End Products
grain technology<br />
<strong>AWB</strong> Grain Technology business invests in opportunities that add<br />
value for growers and customers through superior product<br />
offerings. Value for <strong>AWB</strong> is generated and captured through<br />
strategic participation in, or ownership of, technology such as novel<br />
grain or end product traits.<br />
The Grain Technology business is involved in alliances to develop<br />
these plant traits and new cereal varieties with the aim of<br />
establishing appropriate proprietary positions.<br />
Agrifood Technology<br />
Agrifood Technology Pty Ltd (Agrifood Technology) is a wholly<br />
owned subsidiary of <strong>AWB</strong>, and provides crucial analytical services to<br />
assist <strong>AWB</strong>’s marketing program. Agrifood Technology generates a<br />
commercial return by providing world class analytical and laboratory<br />
services to external clients in the food and feed related industries.<br />
During 2002/03, Agrifood Technology launched an open plot<br />
quarantine trial facility at its Werribee base, one of only two in<br />
Australia. This provides quarantine approved, seed increasing<br />
facilities to responsibly manage the introduction of international<br />
germplasm into Australia’s crop gene pool. Another major<br />
achievement this year was the implementation of a new laboratory<br />
information system, which facilitates faster and more accurate<br />
service to all customers.<br />
<strong>AWB</strong> Seeds<br />
<strong>AWB</strong> Seeds has continued its transition to its Seednet business<br />
structure – which involves partnerships with 22 regionally based<br />
seed merchants.<br />
This will offer improved systems for seed production in Australia,<br />
delivering locally produced seed under strict quality assurance<br />
guidelines. The benefits to seed users, Seednet partners and <strong>AWB</strong><br />
will flow through enhanced inventory management, regionally<br />
tailored grain varieties and more flexible systems to respond to<br />
market demand.<br />
<strong>AWB</strong> Seeds was successful in gaining five new licences for grain<br />
varieties this year, expanding its product suite to 27 varieties, with<br />
an aim to add more broadacre crop varieties in the coming season.<br />
Innovation and Research<br />
The Innovation and Research group remains focussed on improving<br />
efficiencies for farmers, through improved crop yields or disease<br />
resistances, as well as specific end use desired qualities. In the<br />
future, these will become proprietary positions for <strong>AWB</strong>.<br />
In January <strong>2003</strong>, <strong>AWB</strong>, CSIRO and the Grains Research and<br />
Development Corporation signed an agreement to renew<br />
Graingene – the Australian national crop genetics research<br />
consortium. Under the new agreement, global crop protection<br />
company, Syngenta, joined the consortium, bringing to it their global<br />
presence and technology expertise. Known as Graingene II, the<br />
new agreement has earmarked four major research platforms to<br />
improve the value of the national wheat crop – crop stress<br />
resistance, pest and disease resistance, grain quality, and wheat<br />
genomics technologies.<br />
Established in 1999, Graingene has already developed a strong<br />
strategic position in new technologies, particularly in value added<br />
traits in wheat. A direct outcome of this research has been this<br />
year’s commercial release of the new transpiration efficient wheat<br />
varieties, Drysdale and Rees.<br />
LongReach Plant Breeders, the Australian national wheat breeding<br />
joint venture formed by <strong>AWB</strong> and Syngenta in 2002, will have the<br />
first option to develop and commercialise the technology developed<br />
through Graingene II for Australian cereal crops. Syngenta will have<br />
the first option to develop and commercialise technology in other<br />
crops and other countries, which will generate value from the<br />
intellectual property for all Graingene II partners.<br />
Outlook<br />
<strong>AWB</strong>’s Grain Technology strategies remain an important contributor<br />
to the company’s value chain. <strong>AWB</strong> expects positive contributions<br />
from both the Agrifood Technology and <strong>AWB</strong> Seeds businesses in<br />
<strong>2003</strong>/04. Building on its Seednet model, <strong>AWB</strong> Seeds aims to<br />
continue growing its suite of broadacre grain varieties during 2004.<br />
With the signing of Graingene II, <strong>AWB</strong> will further leverage its<br />
research involvement and capitalise on propriety opportunities.<br />
($m)<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
-5<br />
-6<br />
-7<br />
-8<br />
INNOVATION Innovation FOCUS TO focus DELIVER to deliver NEW new OPPORTUNITIES<br />
opportunities.<br />
2000 2001 2002 <strong>2003</strong><br />
NPBT – Grain Technology<br />
25
Paul Lomax, Sue Gilmore and Walter Graham, <strong>AWB</strong> Landmark, Bendigo<br />
26<br />
Craig Prescott, Grower Bill Chilcott and Gary Willis, <strong>AWB</strong> Landmark<br />
with Alton Winter, Grower<br />
Goondiwindi, <strong>AWB</strong> Landmark
landmark<br />
Overview<br />
Landmark is Australia’s largest supplier of farm inputs with about<br />
$1.4 billion in annual sales, and is a significant marketer of wool,<br />
livestock and real estate. It is also a major provider of tailored<br />
finance and insurance packages to primary producers.<br />
Landmark has a diversified earnings base, with its business spread<br />
across all agricultural regions of Australia and all major rural<br />
industries – broadacre cropping, wool, beef, sheep and prime<br />
lambs, cotton, viticulture, sugar and specialist horticulture.<br />
It has an extensive network comprising 230 company owned<br />
locations plus 200 outlets managed by franchisees, agents and<br />
affiliate members. Landmark has about 1,950 staff and services<br />
100,000 customers.<br />
Landmark also has an experienced management team which has<br />
presided over previous successful acquisitions and significant<br />
earnings growth, and is well positioned to extract the most from<br />
new growth opportunities.<br />
Acquisition and Integration<br />
<strong>AWB</strong>’s acquisition of Landmark is consistent with its corporate<br />
strategy, and its vision as Australia’s leading global manager of<br />
agricultural commodity assets, services and flows.<br />
<strong>AWB</strong> acquired Landmark at a cash purchase price of approximately<br />
$718 million, a price which represents good value for <strong>AWB</strong> given<br />
the cross selling opportunities it presents. The acquisition was<br />
funded via cash, debt and new equity, with an Institutional Share<br />
Placement worth $152 million, a Share Purchase Plan for existing<br />
shareholders and an underwritten Dividend Reinvestment Plan.<br />
Integration is governed by the desire to minimise disruption to <strong>AWB</strong><br />
and Landmark during the <strong>2003</strong>/04 harvest period. The integration<br />
process is underway with the head office functions now being<br />
consolidated and the Landmark head office in Sydney due to be<br />
closed in March 2004.<br />
Strategy<br />
Integration, extraction of synergies and building on growth<br />
platforms will be a major focus in <strong>2003</strong>/04.<br />
<strong>AWB</strong> will target growth opportunities for financial and risk<br />
management services, and cross selling of products and services to<br />
farmers and international customers. The acquisition will open<br />
doors to global markets for Australian agriculture, with access to<br />
<strong>AWB</strong>’s customer base in more than 40 countries around the world.<br />
Consolidation of <strong>AWB</strong> and Landmark corporate, head office and<br />
network functions, will also take place where appropriate.<br />
Total earnings enhancement opportunities, derived primarily from<br />
finance growth, are assessed at $5 – $10 million in <strong>2003</strong>/04,<br />
increasing to $30 – $40 million by 2005/06.<br />
Outlook<br />
The outlook for Landmark’s business is positive. The large<br />
<strong>2003</strong>/04 winter harvest has flow-on benefits across the business,<br />
as will strengthening livestock prices, although stock numbers<br />
across Australia are currently low following the drought. Record<br />
land values and strong demand for rural property and real estate in<br />
regional Australia are contributing to positive results in Landmark’s<br />
real estate business. Landmark will continue to focus on<br />
productivity improvements in merchandise, wool, livestock and real<br />
estate, and growth in fertiliser, insurance and finance distribution.<br />
Future growth plans and opportunities.<br />
27
Michelle Sunderland and Lauretta Lane, Information Services<br />
28<br />
Wayne Pearn and Julie-Anne Donnellan,<br />
Document Services<br />
Justin Kearins and Chris Aucote,<br />
<strong>AWB</strong> National Pool<br />
Kate Henderson, Group Trading and<br />
Chris Battle, Mergers & Acquisitions
our people and systems<br />
People<br />
<strong>AWB</strong> employs over 2,500 people (including 1,950 at Landmark),<br />
based in offices in Australia and around the world. <strong>AWB</strong> is<br />
committed to positioning itself as an employer of choice, and<br />
regards engagement of staff as critical to meeting the company’s<br />
objectives. <strong>AWB</strong> has continued to develop its talent and succession<br />
management framework to ensure the business has the leadership<br />
strength to achieve its long term strategic objectives.<br />
A new operating structure for the company was implemented in<br />
order to meet <strong>AWB</strong>’s credit rating objectives. As part of this<br />
process, all employees were asked to transfer across to a new<br />
subsidiary, <strong>AWB</strong> Services <strong>Limited</strong>, with no change to their<br />
entitlements, benefits and terms and conditions. All staff agreed to<br />
the transfer on 1 October <strong>2003</strong>.<br />
During the year, <strong>AWB</strong> installed a revised Safety Management<br />
System, involving implementation of an occupational health and<br />
safety Environmental Risk Register to help track risk information<br />
and company risk profile at an overall and divisional level.<br />
<strong>AWB</strong> also successfully negotiated the simplification of an award for<br />
non-executive employees, providing the company with a simple and<br />
reliable platform for the management of employment terms and<br />
conditions, and help position itself as an employer of choice.<br />
Under its structured Employee Ownership Plan, <strong>AWB</strong> made an<br />
offer of shares to staff in December 2002, which was well received<br />
and accepted by a high percentage of employees. In all, more than<br />
85% of <strong>AWB</strong> employees (excluding Landmark employees) now<br />
own shares in the company by participating in one or more of <strong>AWB</strong><br />
share offers, fostering a high level of staff investment and<br />
ownership in the company.<br />
Systems<br />
<strong>AWB</strong> has continued to focus on system development, and the<br />
improvement of internal work practices and procedures. Leveraging<br />
off last year’s successful introduction of the new SAP Enterprise<br />
Management System, <strong>AWB</strong> now has the ability to process larger<br />
information volumes, with better position management and<br />
inventory controls.<br />
<strong>AWB</strong> has specifically focussed on the development of systems to<br />
meet continually evolving corporate governance requirements. It<br />
has established a central management system for corporate<br />
governance, ensuring <strong>AWB</strong> continues to meet, and stay abreast of,<br />
all industry compliance standards.<br />
The company has also invested in a significant upgrade of its<br />
website. The new site, still located at www.awb.com.au went live in<br />
October <strong>2003</strong>, offering improved functionality to growers and<br />
customers, and building a platform for further development and<br />
enhancement in the future.<br />
Substantial increase in rural and regional presence, by numbers…<br />
…by region<br />
Number of Employees<br />
2500<br />
2000<br />
1500<br />
1000<br />
500<br />
0<br />
Number of Employees<br />
0<br />
2000 2001 2002 <strong>2003</strong> NSW/ACT VIC QLD WA SA NT TAS OS<br />
1000<br />
800<br />
600<br />
400<br />
200<br />
<strong>2003</strong><br />
2002<br />
29
our environment<br />
A core value for <strong>AWB</strong> is accountability for the environment, health<br />
and safety. <strong>AWB</strong> complies with all relevant environmental<br />
legislation, regulations and licences, and environment, health, safety<br />
and community responsibilities are integral to the way the company<br />
conducts its business.<br />
As a sign of its commitment to sustainable development, an initial<br />
environmental audit was undertaken in <strong>2003</strong> by Australian<br />
Corporate Environmental.<br />
The audit identified important environmental Commonwealth and<br />
State legislation which applies to <strong>AWB</strong>’s operations, and as it<br />
moves into areas such as grain storage and handling, the company<br />
recognises that environmental law has become a regulatory risk.<br />
Identified issues in respect to the storage and handling facilities,<br />
and to Agrifood Technology’s laboratory facilities, include the<br />
management of waste and regulations applying to the use of<br />
chemicals. <strong>AWB</strong> is also working with regional and State planning<br />
regulators to meet requirements at a more local level, particularly<br />
with regard to its grain centre business. The audit did note<br />
however, that the activities of <strong>AWB</strong> are not heavily regulated by<br />
environmental legislation relative to other industries.<br />
The company is implementing an Environmental Management<br />
System (EMS) in accordance with the standard AS/NZS ISO<br />
14001. Following recent company developments, <strong>AWB</strong> is<br />
undertaking a thorough risk assessment study to determine priority<br />
environmental risks for the company. This is expected to be<br />
completed by the end of the <strong>2003</strong>/04 financial year.<br />
The EMS is consistent with <strong>AWB</strong>'s Environmental Policy, which<br />
dictates that environment considerations are included in all aspects<br />
of the business, in accordance with <strong>AWB</strong>’s responsibility as a good<br />
corporate citizen. <strong>AWB</strong> is also committed to educating staff and<br />
contractors on pertinent environmental issues, and to regular<br />
consultation with staff, government and the wider community where<br />
operations have an environmental impact.<br />
XXXXX XXXXXX, Pasta Technichan<br />
30<br />
XXXXX XXXXXX, Pasta Technichan<br />
XXXXX XXXXXX, Pasta Technichan
<strong>AWB</strong> has committed itself to a thorough process of<br />
communication and consultation with grower organisations<br />
and community representatives.<br />
our grower community<br />
<strong>AWB</strong> continues to play an active support and developmental role in<br />
regional communities. Ongoing sponsorship programs were<br />
continued with groups such as Women In Agriculture and Partners<br />
in Grain, as well as key industry events such as Grains Week, and<br />
Agriculture Australia.<br />
The annual sponsorship program represents a significant<br />
investment in the industry and in country Australia by <strong>AWB</strong>.<br />
Regionally based sponsorships were also provided to a small<br />
country hospital, rural media awards, grains innovation awards,<br />
agricultural show societies and research foundations and farming<br />
groups. This is complemented by a thorough process of<br />
communication and consultation with farming organisations and<br />
community representatives.<br />
In addition, <strong>AWB</strong> has created a further link with grain growers<br />
across Australia through the formation of 14 Grower Consultative<br />
Groups (GCGs) and the continuation of the Managing Director’s<br />
Roundtable.<br />
The GCGs are regionally based groups that facilitate two way<br />
communication between growers and <strong>AWB</strong> to allow the company to<br />
better meet grower requirements. It is intended the groups meet<br />
three times per year. The Managing Director’s Roundtable operates<br />
simultaneously and allows selected Roundtable growers to provide<br />
direct strategic advice to the Managing Director of the company.<br />
In response to the drought’s impact on regional communities, <strong>AWB</strong><br />
launched a concerted effort to assist by establishing a special<br />
drought committee during 2002. More than $35,000 was raised<br />
via staff initiatives and donations, and these contributions were<br />
matched dollar for dollar by <strong>AWB</strong>. These funds were used to hold<br />
Christmas functions in 25 of the hardest hit, grain growing<br />
communities across regional Australia, with extremely positive<br />
feedback.<br />
Grower Advocate<br />
<strong>AWB</strong> has introduced a new Complaints Handling Procedure for<br />
growers, overseen by the Grower Advocate. Under the new system,<br />
the Grower Advocate acts on behalf of the Managing Director to<br />
seek rapid and mutually beneficial resolutions to grower complaints.<br />
The process complies with the Australian Standard for complaints<br />
handling (AS 4269) and is intended to cater for written complaints<br />
regarding a grower or grower group’s grain marketing transactions<br />
with the <strong>AWB</strong> Group.<br />
It offers improved transparency, and the right for growers to request<br />
intervention (by the Grower Advocate) if they feel their rights under<br />
the process have not been observed or that the complaint has not<br />
been resolved to their satisfaction. The program is a critical part of<br />
<strong>AWB</strong>'s commitment to continuous improvement in the level and<br />
quality of services provided to Australian grain growers.<br />
INNOVATION FOCUS TO DELIVER NEW Sense OPPORTUNITIES<br />
of community.<br />
Ross Haebich, Craig Prescott<br />
and Craig Blick, Growers<br />
Harry Prescott, Grower<br />
31
executive profiles<br />
Andrew Lindberg<br />
Managing Director, 50, BComm, BSc,<br />
MBA, FAICD<br />
Joined <strong>AWB</strong> in 2000. Mr Lindberg is<br />
responsible for the management of <strong>AWB</strong><br />
and is a director on the Boards of <strong>AWB</strong><br />
<strong>Limited</strong> and <strong>AWB</strong> (International) <strong>Limited</strong>.<br />
Mr Lindberg has senior management<br />
experience in both the private and public<br />
sectors, at Federal and State levels. Prior<br />
positions have included senior management<br />
responsibilities in manufacturing, Federal<br />
industry policy development, insurance and<br />
leading key sector financial reforms.<br />
Sarah Scales<br />
General Manager <strong>AWB</strong>I, 37, BAgSc<br />
Joined <strong>AWB</strong> in 1992. Ms Scales is<br />
responsible for managing the <strong>AWB</strong> National<br />
Pool and the operation of the Single Desk<br />
system. Her recent positions within <strong>AWB</strong><br />
include responsibility for pricing and risk<br />
management strategies and the execution<br />
of the commodity hedge book in New York.<br />
She has also worked in the Domestic<br />
Trading division, trading pulses and wheat.<br />
Before joining <strong>AWB</strong>, Ms Scales worked<br />
with Cargill Australia.<br />
Paul Ingleby<br />
Chief Financial Officer, 52, BA<br />
(Accounting), CA<br />
Joined <strong>AWB</strong> in 1998. Mr Ingleby is<br />
responsible for finance and administration,<br />
treasury, trade finance, risk management<br />
and compliance. Before joining <strong>AWB</strong>, he<br />
was the Chief Financial Officer of a major<br />
diversified, agriculturally focussed<br />
corporation. Mr Ingleby’s previous positions<br />
have also been in banking and merchant<br />
banking (where he was involved in the<br />
analysis, valuation and sale of businesses in<br />
Australia, New Zealand and Hong Kong),<br />
chartered accounting (corporate advisory<br />
and audit) and government (companies and<br />
securities regulation and corporate crime<br />
investigation).<br />
Jill Gillingham<br />
Group General Manager, Supply<br />
Chain, Technology and Business<br />
Processes, 53, BEc, MBA<br />
Joined <strong>AWB</strong> in 2000. Ms Gillingham is<br />
responsible for information systems and<br />
supply chain management and the grower<br />
service centre. She has a broad range of<br />
general management experience, having<br />
held executive positions and been<br />
responsible for major business operations in<br />
the general insurance, workers<br />
compensation and occupational health and<br />
safety sectors. Ms Gillingham has also been<br />
responsible for the development and<br />
implementation of large IT initiatives within<br />
the insurance industry. Before joining <strong>AWB</strong>,<br />
Ms Gillingham held the position of Group<br />
General Manager Operations at the Victorian<br />
WorkCover Authority for three years.<br />
Peter Geary<br />
Group General Manager, Trading and<br />
Commodities, 42, BBus, GradDip<br />
(Marketing)<br />
Joined <strong>AWB</strong> in 1985. Mr Geary is<br />
responsible for domestic and global trading,<br />
risk management products for growers and<br />
end users, grower services and chartering.<br />
His previous positions within <strong>AWB</strong> have<br />
included General Manager of National<br />
Wheat Pools, policy and export sales in<br />
Africa, Europe, Middle East and South<br />
America, as well as the management of<br />
<strong>AWB</strong>’s overseas offices in Europe and the<br />
United States. Before joining <strong>AWB</strong>, Mr<br />
Geary was employed with the Grain<br />
Elevators Board of Victoria (now Graincorp<br />
<strong>Limited</strong>) for a period of four years. Mr<br />
Geary has a family farming background in<br />
north east Victoria.<br />
32<br />
Andrew Lindberg Sarah Scales<br />
Paul Ingleby Jill Gillingham<br />
Peter Geary
Charles Stott<br />
Group General Manager, Rural<br />
Services, 44, Dip AppSc (Ag)<br />
Joined <strong>AWB</strong> in 2000. Mr Stott is<br />
responsible for Landmark Rural Services,<br />
which includes procurement, merchandise,<br />
fertiliser, agency business and grain<br />
technology. Prior to this Mr Stott was<br />
responsible for strategy and business<br />
development, investments, mergers and<br />
acquisitions. Previously, he was General<br />
Manager, International Sales and Marketing.<br />
Mr Stott has worked with BHP Petroleum,<br />
where his positions included Project Director<br />
and International Business Development<br />
Manager. Prior to BHP, he was with the<br />
Australian Wheat Board and held various<br />
roles including marketing manager for the<br />
Middle East, Europe and Africa. Mr Stott<br />
has extensive international experience in<br />
trade finance, risk management, business<br />
development and project management<br />
across a broad range of industries including<br />
grain, petroleum and minerals.<br />
Richard Fuller<br />
General Manager Executive and<br />
Company Secretary, 44, BA (Hons)<br />
PhD (Political Science)<br />
Joined <strong>AWB</strong> in 2000. Dr Fuller is<br />
responsible for the management of the<br />
Office of the Managing Director and is the<br />
Company Secretary. Before joining <strong>AWB</strong>, he<br />
held senior management roles in the<br />
insurance industry and positions as a lecturer<br />
with the University of Melbourne and RMIT.<br />
Marcus Kennedy<br />
Group General Manager, Financial<br />
Services, 44, BSc (Hons) (Applied<br />
Mathematics and Chemistry), MSc<br />
(Geophysics), MBA, MAICD, ASIA.<br />
Joined <strong>AWB</strong> in 2002. Mr. Kennedy is<br />
responsible for financial services, insurance<br />
and product development. He has<br />
extensive management experience in both<br />
retail and wholesale financial services, and<br />
across many management functions,<br />
including sales and customer management,<br />
strategy and product development.<br />
Previously he worked in a number of<br />
leadership roles with Westpac including<br />
wealth management, corporate banking and<br />
mortgage businesses. Prior to this, Mr<br />
Kennedy worked in Europe as a consultant,<br />
and in investment banking in Wardley Ltd<br />
(Hong Kong), Shanghai Banking<br />
Corporation and Westpac. He was also a<br />
Geophysicist and Financial Analyst with<br />
Exxon Corporation.<br />
Michael Thomas<br />
General Manager, Corporate, 36, BAgSc,<br />
GradDip AgEc, MEc, ASIA, GAICD<br />
Joined <strong>AWB</strong> in 1998. Mr Thomas is<br />
responsible for stakeholder relations<br />
(media, government, grower and investor<br />
relations), marketing, human resources and<br />
corporate services.<br />
Previously, he held the positions of General<br />
Manager, Stakeholder Relations and Head<br />
of Investor Relations. Before joining <strong>AWB</strong>,<br />
he was an executive at SA Farmers<br />
Federation. Prior to this, Mr Thomas was<br />
the Senior Economist at Primary Industries<br />
South Australia. He was also an economist<br />
with private and public consulting<br />
companies undertaking consultancies in<br />
Asia and the Pacific region.<br />
John Maher<br />
General Manager, Network<br />
Operations, 41, BAgSc (Hons), MBA<br />
Joined Landmark in July 1994. Mr Maher<br />
is responsible for the national network<br />
operations of Landmark. Prior to the<br />
acquisition of the Landmark rural services<br />
business by <strong>AWB</strong> in August <strong>2003</strong>, Mr<br />
Maher was General Manager, Network<br />
Operations with Wesfarmers Landmark. Mr<br />
Maher has also been Regional Manager for<br />
Southern Region and General Manager –<br />
Livestock.<br />
Prior to joining Wesfarmers Landmark, Mr<br />
Maher was the International Livestock<br />
Marketing Manager for the Australian Meat<br />
and Livestock Corporation (AMLC). In that<br />
role, he had accountability for the<br />
development of the AMLC’s marketing<br />
strategy in Australia’s Asia Pacific, Middle<br />
East and North African livestock markets.<br />
Charles Stott<br />
Richard Fuller Marcus Kennedy Michael Thomas<br />
John Maher<br />
33
corporate governance<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Role of the Board<br />
The Board is responsible for the overall<br />
governance of <strong>AWB</strong> and its strategic<br />
direction. This includes setting goals,<br />
monitoring performance and ensuring<br />
<strong>AWB</strong>’s internal control and reporting<br />
procedures are adequate, effective and<br />
ethical and that <strong>AWB</strong>’s strategic direction<br />
provides value for shareholders.<br />
Regardless of who elects or appoints a<br />
director, each director is obliged to act in<br />
the interests of <strong>AWB</strong> as a whole. Although<br />
directors may be elected by particular<br />
shareholders, directors are not considered<br />
the servants or agents of particular groups<br />
of shareholders or required to follow<br />
directions or requests of any group of<br />
shareholders (whether constituted by class<br />
or region).<br />
<strong>AWB</strong> has adopted a formal Board Charter<br />
(available from the Company Secretary) and<br />
the division of responsibilities has recently<br />
been reviewed and re-established by formal<br />
delegations and a system of Board<br />
reserved powers.<br />
Standard Terms of Appointment<br />
Upon appointment to the Board, each<br />
director receives a letter of appointment<br />
which sets out the key terms and<br />
conditions of their appointment.<br />
The Composition of the Board<br />
The constitution of <strong>AWB</strong> contains<br />
provisions which ensure that a majority of<br />
the directors are non-executive directors.<br />
This approach ensures that there are a<br />
sufficient number of non-executive<br />
directors to:<br />
bring an independent view to the Board’s<br />
deliberations;<br />
help the Board (and the Chairman)<br />
provide the company with effective<br />
leadership and ensure that the company<br />
is competently run in the interests of all<br />
shareholders; and<br />
foster the continuing effectiveness of the<br />
Managing Director and management.<br />
The Board of <strong>AWB</strong> comprises:<br />
seven A class directors, elected by the A<br />
class shareholders in various regions as<br />
follows:<br />
NSW/ACT<br />
WA<br />
SA<br />
VIC/TAS<br />
QLD/NT<br />
– two A class directors;<br />
– two A class directors;<br />
– one A class director;<br />
– one A class director;<br />
– one A class director;<br />
two B class directors (elected by B class<br />
shareholders);<br />
two additional directors; and<br />
the Managing Director.<br />
Independence<br />
All non-executive directors are independent,<br />
being independent of management and<br />
having no business or other relationship<br />
that could compromise their autonomy.<br />
The Board has determined that an A class<br />
director is not considered to lack<br />
independence by reason only that the<br />
director (or entities associated with the<br />
director) has a material personal interest in<br />
the sale of wheat or other grain to a<br />
company in the <strong>AWB</strong> Group by the director<br />
and/or is a customer for products or<br />
services of a company in the <strong>AWB</strong> Group.<br />
Board Committees<br />
The Board has several committees of its<br />
members to support effective corporate<br />
governance. These committees are advisory<br />
in nature and do not exercise any powers.<br />
Audit Committee<br />
The role of the Audit Committee is<br />
documented in a Charter which is approved<br />
by the Board of directors. The principal<br />
functions of the Committee are to:<br />
monitor <strong>AWB</strong>’s Risk Management<br />
Program on an overall basis. The Audit<br />
Committee has delegated risk<br />
management activities for market<br />
(commodity price, currency, interest rate)<br />
and credit risks to the Group Corporate<br />
Risk Committee;<br />
ensure that the accounting policies and<br />
practices are appropriate and in<br />
accordance with generally accepted<br />
practices including such advice and<br />
information which the external and<br />
internal auditors are responsible for<br />
providing to the Committee from time to<br />
time;<br />
ensure that the financial statements of<br />
<strong>AWB</strong> <strong>Limited</strong> accurately reflect a true<br />
and fair position of its financial<br />
operations;<br />
ensure that proper internal controls exist<br />
in relation to <strong>AWB</strong> <strong>Limited</strong>’s financial<br />
transactions;<br />
review risk management practices and<br />
processes and monitor the control of<br />
corporate operating risks and exposures;<br />
monitor policies and procedures to<br />
ensure compliance with statutory and<br />
legal, financial and corporate governance<br />
responsibilities and overall efficiency and<br />
effectiveness of <strong>AWB</strong> operations;<br />
provide through regular meetings, a<br />
forum for communication between the<br />
Board, senior financial management and<br />
the internal and external auditors;<br />
provide an advisory and liaison role for<br />
the <strong>AWB</strong> <strong>Limited</strong> Board in regard to audit<br />
advice, risk management advice and<br />
information with relevant external bodies;<br />
and<br />
monitor audit recommendations to ensure<br />
that they are implemented.<br />
The constitution of <strong>AWB</strong> article 3.1(f)<br />
requires the Board to ensure that separate<br />
accounts are prepared for <strong>AWB</strong><br />
(International) <strong>Limited</strong> – that is, in respect<br />
of the <strong>AWB</strong> National Pool. The accounts of<br />
the <strong>AWB</strong> National Pool are reviewed by the<br />
Board of <strong>AWB</strong> (International) <strong>Limited</strong>.<br />
In addition to the Committee members,<br />
meetings are attended by the Managing<br />
Director, the Chief Financial Officer, the<br />
Chief Risk Officer, the Company Secretary,<br />
a representative of internal audit and a<br />
representative of the external auditor.<br />
The Audit Committee consists of six<br />
independent non-executive directors at the<br />
date of this report: Mr Robert Barry (Chair),<br />
Mr Brendan Stewart (ex-officio), Mr Laurie<br />
Marshall, Mr Xavier Martin, Mr Warrick<br />
McClelland and Mr John Thame. Members<br />
of the Committee are financially literate and<br />
34
the chairman, Mr Robert Barry and Mr John<br />
Thame have extensive financial experience.<br />
(Refer to page 38 for details of the<br />
qualifications and experience of committee<br />
members and to page 49 for details of the<br />
number of committee meetings held during<br />
the year).<br />
The company’s external auditors, Ernst &<br />
Young, were appointed prior to <strong>AWB</strong>’s<br />
listing on the Australian Stock Exchange<br />
(ASX) on 22 August 2001. The Audit<br />
Committee will be responsible for<br />
nominating future external auditors. <strong>AWB</strong><br />
has agreed to adopt the external auditors’<br />
procedure that no engagement partner will<br />
serve longer than five years.<br />
Corporate Risk Committee<br />
The role of the Corporate Risk Committee<br />
is documented in a Charter which is<br />
approved by the Boards of <strong>AWB</strong> <strong>Limited</strong><br />
and <strong>AWB</strong> (International) <strong>Limited</strong>.<br />
The principal functions of the Committee<br />
are to:<br />
act as an advisory Committee of both the<br />
<strong>AWB</strong> <strong>Limited</strong> Board and the <strong>AWB</strong><br />
(International) <strong>Limited</strong> Board on<br />
discharging the Boards’ responsibilities as<br />
they relate to policy, guidelines, controls,<br />
management and reporting of market and<br />
credit risks affecting the <strong>AWB</strong> Group<br />
(both <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong><br />
(International) <strong>Limited</strong>);<br />
provide, through regular meetings, a<br />
forum for communication between the<br />
<strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong> (International)<br />
<strong>Limited</strong> Boards and senior management<br />
on market and credit risk management<br />
issues;<br />
provide an advisory and liaison role for<br />
the <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong> (International)<br />
<strong>Limited</strong> Boards in relation to advice and<br />
information relating to market and credit<br />
risk management matters. This role is<br />
coordinated with the Audit Committee’s<br />
role of monitoring the Risk Management<br />
Program on an overall basis.<br />
The Committee’s Charter requires that at<br />
least three non-executive directors of <strong>AWB</strong><br />
<strong>Limited</strong> should be members of the<br />
Committee, one of whom should also be a<br />
director of <strong>AWB</strong> (International) <strong>Limited</strong> and<br />
that, where possible, the Chair of the<br />
Committee should be a director of both <strong>AWB</strong><br />
<strong>Limited</strong> and <strong>AWB</strong> (International) <strong>Limited</strong>.<br />
The members of the Corporate Risk<br />
Committee at the date of this report are Mr<br />
Peter Polson (Chair), Mr Brendan Stewart<br />
(ex-officio), Mr Brendan Fitzgerald, Mr<br />
Christopher Moffet and Mrs Kerry<br />
Sanderson.<br />
Remuneration Committee<br />
The role of the Remuneration Committee is<br />
documented in a Charter which is approved<br />
by the <strong>AWB</strong> <strong>Limited</strong> Board. The principal<br />
functions of the Committee are to review<br />
and recommend to the Board, where<br />
appropriate:<br />
the remuneration policy including the<br />
executive incentive policy, employee<br />
share plans and superannuation;<br />
recruitment, retention and termination<br />
policies and procedures for senior<br />
management;<br />
the performance appraisal policy;<br />
the Managing Director’s performance<br />
goals and remuneration.<br />
and to review prior to implementation:<br />
the remuneration and contract terms of<br />
the five most senior executives reporting<br />
to the Managing Director;<br />
the design of new or amendments to<br />
current executive incentive plans and the<br />
total proposed payments from each<br />
executive plan;<br />
the continuing appropriateness of the<br />
performance hurdles in each executive<br />
incentive program;<br />
termination payments to the five most<br />
senior executives reporting to the<br />
Managing Director;<br />
the design of other executive benefit<br />
programs; and<br />
succession planning.<br />
The Committee also provides advice to the<br />
Board on the remuneration of nonexecutive<br />
directors and approval of awards<br />
under the Employee Share Plan, Staff<br />
Ownership Plan, Equity Share Plan and<br />
Performance Rights Plan.<br />
The members of the Remuneration<br />
Committee at the date of this report are Mr<br />
Brendan Stewart (Chair), Mr Andrew<br />
Lindberg, Mr Peter Polson, Mr John<br />
Simpson and Mr John Thame.<br />
Nomination Committee<br />
The role of the Nomination Committee is<br />
documented in a Charter approved by the<br />
<strong>AWB</strong> <strong>Limited</strong> Board. The principal functions<br />
of the Committee are to advise the Board<br />
of <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong> (International)<br />
<strong>Limited</strong> respectively as appropriate on:<br />
the composition of the Board and advice<br />
to be given by the Board to shareholders<br />
in accordance with articles 19.15 and<br />
19.18 of <strong>AWB</strong>’s constitution;<br />
the range of skills available on the Board<br />
and appropriate balance of skills for<br />
future Board membership;<br />
the appointment of an external expert to<br />
advise on the composition of the Board<br />
and candidates for election;<br />
identification of prospective candidates<br />
for positions of director;<br />
recommendations by the Board to<br />
shareholders in connection with Board<br />
elections to enable shareholders to<br />
effectively discharge their role under<br />
article 19.15 of <strong>AWB</strong>’s constitution;<br />
implementation of the election process<br />
generally;<br />
recommendations by the <strong>AWB</strong> Board to<br />
the Chairman of any general meeting on<br />
the allocation of open proxies; and<br />
succession of the Chairman.<br />
The Committee members are required to<br />
consist of the Chair of the <strong>AWB</strong> <strong>Limited</strong><br />
Board and two non-executive directors of<br />
<strong>AWB</strong>. The non-executive directors are to<br />
consist of one A class director and one B<br />
class director.<br />
The members of the Nomination Committee<br />
at the date of this report are Mr Brendan<br />
Stewart (Chair), Mr Robert Barry and Mr<br />
John Simpson.<br />
35
Services Agreement Committee<br />
The Services Agreement is the contract<br />
under which <strong>AWB</strong> <strong>Limited</strong> provides services<br />
to <strong>AWB</strong> (International) <strong>Limited</strong>.<br />
The role of the Services Agreement<br />
Committee is documented in a Charter<br />
which is approved by the <strong>AWB</strong> <strong>Limited</strong><br />
Board. The principal functions of the<br />
Committee are to:<br />
review the Services Agreement;<br />
negotiate any amendments to the<br />
Services Agreement with the Compliance<br />
Committee of the <strong>AWB</strong> (International)<br />
<strong>Limited</strong> Board; and<br />
make recommendations to the <strong>AWB</strong><br />
<strong>Limited</strong> Board on the Services<br />
Agreement.<br />
The members of the Services Agreement<br />
Committee at the date of this report are Mr<br />
Laurie Marshall (Chair), Mr Warrick<br />
McClelland and Mr John Thame.<br />
Investment Committee<br />
The role of the Investment Committee is<br />
documented in a Charter approved by the<br />
<strong>AWB</strong> <strong>Limited</strong> Board. The Committee was<br />
established to oversee, on behalf of the<br />
<strong>AWB</strong> <strong>Limited</strong> Board major acquisitions and<br />
the successful integration of these<br />
acquisitions.<br />
The members of the Investment Committee<br />
at the date of this report are Mr Brendan<br />
Stewart (Chair), Mr Andrew Lindberg, Mr<br />
Robert Barry, Mr Warrick McClelland, Mr<br />
Peter Polson and Mr John Thame.<br />
Board Performance<br />
Every 12 to 18 months, the Board of <strong>AWB</strong><br />
<strong>Limited</strong> and <strong>AWB</strong> (International) <strong>Limited</strong><br />
conduct formal reviews of their<br />
performance. The Chairman also discusses<br />
with each individual director his or her<br />
contribution to the Board.<br />
Director Education<br />
<strong>AWB</strong> provides assistance to directors of<br />
<strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong> (International)<br />
<strong>Limited</strong> who wish to complete the<br />
Australian Institute of Company Directors<br />
education program and other programs<br />
which can be shown to add value to the<br />
director’s role. In addition, <strong>AWB</strong> holds<br />
several in-house seminars each year to<br />
update directors on issues relevant to their<br />
position as directors.<br />
Independent Legal Advice and<br />
Access to Company Information<br />
Directors of both <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong><br />
(International) <strong>Limited</strong> are entitled to any<br />
information they need or require from their<br />
respective companies to exercise their<br />
functions and to fulfil their duties as<br />
directors and, subject to prior approval by<br />
the Chairman, may seek independent legal<br />
advice on any issue submitted to the Board<br />
at the company’s expense.<br />
Director Remuneration<br />
At the 2002 <strong>Annual</strong> General Meeting,<br />
shareholders determined that the<br />
aggregate remuneration for non-executive<br />
directors of <strong>AWB</strong> <strong>Limited</strong> would be<br />
$900,000 per annum.<br />
The remuneration paid to each director of<br />
<strong>AWB</strong> <strong>Limited</strong> during the year ended 30<br />
September <strong>2003</strong> is set out in the Directors’<br />
<strong>Report</strong> (refer to page 47). The aggregate<br />
amount of non-executive directors’<br />
remuneration was $792,450.<br />
<strong>AWB</strong> (International) <strong>Limited</strong>’s constitution<br />
provides that the directors are entitled to be<br />
paid out of the funds of the company as<br />
remuneration for their services as directors<br />
such sum as the company determines. As<br />
the sole member of <strong>AWB</strong> (International)<br />
<strong>Limited</strong>, the company has approved the<br />
directors each being paid $25,000 per<br />
annum. However, a person who is a director<br />
of both the company and <strong>AWB</strong><br />
(International) <strong>Limited</strong> does not receive any<br />
additional remuneration in relation to their<br />
services as a director of <strong>AWB</strong> (International)<br />
<strong>Limited</strong> – i.e. they only receive a fee for<br />
services as a director of the company.<br />
(The Directors’ <strong>Report</strong> contains details<br />
about benefits provided to directors.)<br />
The following principles are applied in<br />
determining the amount of remuneration for<br />
non-executive directors:<br />
the amount of time required for directors<br />
to consider <strong>AWB</strong> and Board matters<br />
including preparation time;<br />
acknowledgement of the personal risk<br />
borne as a company director;<br />
a comparison with professional market<br />
rates of remuneration and those offered<br />
by comparative companies and external<br />
independent advice as to appropriate<br />
levels to remain competitive with the<br />
market, having regard to companies of<br />
similar size and complexity; and<br />
the desire to attract directors of a high<br />
calibre, with appropriate levels of<br />
expertise and experience.<br />
Share Dealing by Directors<br />
The Boards of both <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong><br />
(International) <strong>Limited</strong> adopted Share<br />
Dealing Guidelines which restrict share<br />
trading by directors, <strong>AWB</strong> managers, <strong>AWB</strong><br />
staff with financial reporting responsibilities<br />
and their associates to specified “window<br />
periods”.<br />
The window periods are as follows:<br />
six weeks commencing two days after the<br />
announcement of the half year results;<br />
six weeks commencing two days after<br />
the announcement of the annual results;<br />
six weeks commencing two days after<br />
the company’s <strong>Annual</strong> General Meeting;<br />
in the period of a qualifying prospectus,<br />
six weeks from the date of the allotment<br />
of shares.<br />
The guidelines make clear that prohibitions<br />
on insider trading must be complied with at<br />
all times. The guidelines also specify that<br />
any shares acquired by directors and <strong>AWB</strong><br />
employees must not be sold for at least 12<br />
months.<br />
Continuous Disclosure<br />
<strong>AWB</strong> <strong>Limited</strong> has implemented Continuous<br />
Disclosure Guidelines to ensure that <strong>AWB</strong><br />
<strong>Limited</strong> meets its continuous disclosure<br />
obligations under the ASX Listing Rules<br />
and the Corporations Act 2001.<br />
Under these guidelines, information which<br />
may have a material effect on the price or<br />
value of <strong>AWB</strong> <strong>Limited</strong>’s securities is<br />
monitored and referred to a Continuous<br />
Disclosure Coordinator. The Continuous<br />
Disclosure Coordinator is responsible for<br />
examining the material to determine<br />
whether the matter must be disclosed and<br />
may refer the matter to <strong>AWB</strong>’s General<br />
Counsel or external advisers to determine<br />
whether consideration is required by the<br />
Managing Director or the Board.<br />
Conflicts and Declarations of<br />
Interests<br />
The Boards of <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong><br />
(International) <strong>Limited</strong> have procedures in<br />
place for the disclosure and resolution of<br />
any matter which may give rise to actual or<br />
potential conflicts between the interests of<br />
a director and those of their respective<br />
companies.<br />
36
Identification and Management<br />
of Significant Business Risks<br />
<strong>AWB</strong> has in place a transparent monitoring,<br />
management and reporting framework that<br />
allows business risks to be identified,<br />
managed and overseen in a timely and<br />
efficient manner. <strong>AWB</strong> actively mitigates<br />
risks and optimises <strong>AWB</strong>’s resources not<br />
only to protect the company but also to<br />
provide a sound return to shareholders<br />
commensurate with the risk profile adopted.<br />
<strong>AWB</strong> has implemented an Enterprise-wide<br />
Risk Management (ERM) system that<br />
provides a comprehensive risk profile of the<br />
company and allows for formalised ongoing<br />
risk monitoring and reporting to the<br />
company’s Executive Leadership Group, the<br />
<strong>AWB</strong> Group Corporate Risk Committee, the<br />
<strong>AWB</strong> (International) <strong>Limited</strong> Board<br />
Compliance Committee, the Board Audit<br />
Committee and the Board of <strong>AWB</strong> <strong>Limited</strong><br />
and <strong>AWB</strong> (International) <strong>Limited</strong>.<br />
The Internal Audit plan is designed to be risk<br />
focussed and is aligned with the ERM risk<br />
profile. It takes into consideration company<br />
strategic initiatives, and provides assurance<br />
on risks and their control status to the Board<br />
Audit Committee. The internal audit function<br />
is outsourced to a professional firm,<br />
managed in line with the key objectives of<br />
<strong>AWB</strong>’s Corporate Risk Unit.<br />
The Corporate Risk Unit has been formed<br />
with primary responsibility to serve the<br />
Board Audit Committee and the <strong>AWB</strong><br />
Group Corporate Risk Committee. It<br />
continually monitors the company risk<br />
profile, particularly that of the trading<br />
activity and has authority to report to any<br />
level of executive management or the<br />
Board any significant concerns that may<br />
arise. This is particularly relevant to issues<br />
that arise outside of the formal reporting<br />
timetable.<br />
<strong>Annual</strong> financial budgets are compiled and<br />
submitted by management to the Board for<br />
approval. Monthly Chief Financial Officer<br />
and Managing Director reports are provided<br />
to the Board for oversight of financial and<br />
non-financial risk exposures and<br />
performance.<br />
Issues considered worthy of further attention<br />
by the Board are managed through the use<br />
of a corporate action list, controlled by the<br />
company secretary. This is used to register<br />
and manage requests of management raised<br />
by the Board.<br />
Risk mitigation is also undertaken by an<br />
insurance program managed by the<br />
Corporate Risk Unit. It is continually<br />
monitored and enhanced to match the<br />
company’s changing business profile, and is<br />
also regularly reported to the Board.<br />
Corporate Ethics and Code of<br />
Conduct<br />
The Board of <strong>AWB</strong> <strong>Limited</strong> and <strong>AWB</strong><br />
(International) <strong>Limited</strong> are committed to<br />
clearly promoting and demonstrating that<br />
their business affairs and operations are at<br />
all times being conducted legally, ethically<br />
and in accordance with the highest<br />
standards of integrity and propriety. This is<br />
a fundamental principle of their operations<br />
and business affairs. The <strong>AWB</strong> Code of<br />
Conduct policy is based on this principle<br />
and its observance provides the foundation<br />
on which the company’s reputation with<br />
growers, customers, suppliers and<br />
stakeholders is based.<br />
The Code of Conduct (available from<br />
www.awb.com.au) sets out the values,<br />
responsibilities and obligations of Board<br />
members and all people employed,<br />
contracted by, associated with or acting on<br />
behalf of the <strong>AWB</strong> Group.<br />
Occupational Health and Safety<br />
Policy<br />
<strong>AWB</strong> <strong>Limited</strong> is committed to providing and<br />
maintaining a healthy and safe working<br />
environment for all people attending <strong>AWB</strong>’s<br />
workplace and recognises its obligations<br />
under the applicable occupational health<br />
and safety (OH&S) legislation.<br />
<strong>AWB</strong> has an integrated policy to address<br />
OH&S issues which is reviewed regularly to<br />
ensure that <strong>AWB</strong> maintains best practice<br />
procedures in relation to OH&S issues.<br />
Environmental Policy<br />
<strong>AWB</strong> <strong>Limited</strong>’s Environmental Policy states<br />
that:<br />
the company is committed to sustainable<br />
development;<br />
environmental, health, safety and<br />
community responsibilities are integral to<br />
the company’s business operations;<br />
<strong>AWB</strong> employees are encouraged to be<br />
proactive in these matters; and<br />
accountability for the environment, health<br />
and safety is a core value of the company.<br />
<strong>Report</strong>ing to Shareholders<br />
The <strong>AWB</strong> <strong>Limited</strong> Board aims to ensure<br />
that <strong>AWB</strong> <strong>Limited</strong>’s shareholders are<br />
informed of all major developments<br />
affecting the company.<br />
Information is regularly communicated to<br />
shareholders via regular announcements to<br />
the ASX in accordance with <strong>AWB</strong> <strong>Limited</strong>’s<br />
continuous disclosure obligations, media<br />
releases, periodic mail-outs and grower<br />
briefing meetings. Information is also freely<br />
available from <strong>AWB</strong> <strong>Limited</strong>’s Investor<br />
Relations on its website www.awb.com.au<br />
In addition, a copy of the <strong>Annual</strong> <strong>Report</strong> is<br />
distributed to all shareholders who have<br />
elected to receive a copy, and is also<br />
available from the company’s website. The<br />
Board ensures that the <strong>Annual</strong> <strong>Report</strong><br />
includes all relevant and accurate<br />
information about the company including<br />
details of its operations, future development<br />
and any disclosures required by the<br />
Corporations Act 2001 and the ASX Listing<br />
Rules.<br />
The Board encourages full participation by<br />
shareholders at the <strong>Annual</strong> General<br />
Meeting to ensure a high level of<br />
accountability and to ensure that<br />
shareholders remain informed of <strong>AWB</strong><br />
<strong>Limited</strong>’s strategy and goals. Important<br />
issues are presented to shareholders as<br />
single resolutions. <strong>AWB</strong>’s external auditors,<br />
Ernst & Young, are invited to attend the<br />
<strong>Annual</strong> General Meeting to answer<br />
shareholder questions about the conduct of<br />
the audit and the preparation and content<br />
of their reports.<br />
ASX Principles of Good<br />
Corporate Governance<br />
According to the ASX, the enhancement of<br />
corporate accountability and the adoption<br />
of the ASX Principles of Good Corporate<br />
Governance represents a major evolution in<br />
corporate governance practice in Australia 1 .<br />
<strong>AWB</strong> <strong>Limited</strong> is committed to<br />
benchmarking itself against the Principles<br />
of Good Corporate Governance as they<br />
evolve, and is working to ensure that it<br />
meets the substantive aims those principles<br />
represent. Although <strong>AWB</strong>’s governance<br />
currently satisfies the ASX Principles, some<br />
<strong>AWB</strong> policies are currently being enhanced<br />
to deal in detail with all of the matters in<br />
the ASX Best Practice Recommendations.<br />
1 Karen Leslie Hamilton, Chairperson, ASX Corporate<br />
Governance Council, Foreward to ASX Corporate<br />
Governance Council Principles of Good Corporate<br />
Governance and Best Practice Recommendations<br />
37
oard of directors<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Brendan Stewart<br />
Chairman, Non-executive director,<br />
36, MAICD<br />
Committees: Remuneration (Chair),<br />
Nomination (Chair), Investment (Chair),<br />
Audit (ex-officio member) and Corporate<br />
Risk (ex-officio member) (pictured on<br />
page 6)<br />
Appointed on 3 February 2000 and reelected<br />
on 13 March <strong>2003</strong>. Mr Stewart<br />
was elected by the directors as Chairman<br />
on 14 March 2002 and re-elected<br />
Chairman on 13 March <strong>2003</strong>. Mr Stewart is<br />
also Chairman and a non-executive director<br />
of <strong>AWB</strong> (International) <strong>Limited</strong>. Mr Stewart<br />
operates a 3,200 hectare property that<br />
produces grain, cotton and cattle at<br />
Chinchilla, QLD. He is a former President<br />
of Queensland Graingrowers Association<br />
and Grains Council of Australia and was<br />
Chair of the Joint Ministerial Working Group<br />
on the Australian Wheat Board Restructure<br />
and Vice President of National Farmers<br />
Federation (NFF). Mr Stewart is a former<br />
Chairman of the NFF Economics and Trade<br />
Committee and former chairman of<br />
Wideland Insurance Brokers Pty Ltd.<br />
In January <strong>2003</strong>, Mr Stewart was appointed<br />
inaugural Chairman of the Council for<br />
Australian Arab Relations.<br />
Andrew Lindberg<br />
Managing Director, 50, BComm,<br />
BSc, MBA, FAICD<br />
Committees: Investment and Remuneration<br />
(Refer to page 32 for personal details)<br />
(pictured on page 6)<br />
Robert Barry<br />
Deputy Chairman, Non-executive<br />
director, 56, BComm, FCPA, FAICD<br />
Committees: Audit (Chair), Nomination<br />
and Investment<br />
Appointed on 12 January 1999 and reelected<br />
on 15 March 2001. Mr Barry has a<br />
mixed farming enterprise at Willow Tree in<br />
NSW and has extensive financial<br />
experience in domestic and international<br />
capital markets. He was Chief Executive<br />
Officer of Dominguez Barry Samuel<br />
Montagu <strong>Limited</strong> (a predecessor to UBS<br />
Australia) and Head of International Capital<br />
Markets for the Midland Bank Group in<br />
London. Mr Barry is a non-executive<br />
director of Sugar Australia Pty <strong>Limited</strong>, New<br />
Zealand Sugar Company <strong>Limited</strong>, Snowy<br />
Hydro <strong>Limited</strong>, Queensland Cotton <strong>Limited</strong><br />
and Unisearch <strong>Limited</strong>.<br />
Brendan Fitzgerald<br />
Non-executive director, 59, FCDA<br />
Committee: Corporate Risk<br />
Appointed on 13 March <strong>2003</strong>. Mr<br />
Fitzgerald is a grain grower from Kimba in<br />
SA. He has operated in partnership with<br />
his family a farming and contract harvesting<br />
business since 1975. In 1986, Mr<br />
Fitzgerald was elected to the SACBH<br />
Board and as a director was involved in<br />
finance and audit, nomination/remuneration<br />
and listing committees and chaired the<br />
strategic infrastructure committee. Mr<br />
Fitzgerald has studied export grain<br />
marketing and storage in North America,<br />
South Africa and England.<br />
Laurie Marshall<br />
Non-executive director, 53, FCDA<br />
Committees: Services Agreement (Chair)<br />
and Audit<br />
Appointed on 1 May 1998 and re-elected<br />
on 15 March 2001. Mr Marshall has over<br />
30 years experience on his grain and<br />
merino sheep enterprise at Lake Grace,<br />
WA. Mr Marshall is a former president of<br />
the Grains Section of WA Farmers<br />
Federation and a former member of the<br />
Grains Council of Australia Executive and<br />
Wheat Committee and was also Chairman<br />
of the latter.<br />
Mr Marshall was a member of the<br />
Australian Wheat Board from 1995.<br />
Xavier Martin<br />
Non-executive director, 44, MAICD<br />
Committee: Audit<br />
Appointed on 13 March <strong>2003</strong>. Mr Martin is<br />
a wheat grower and director of his family<br />
farming enterprise near Gunnedah, NSW.<br />
During the past decade, Mr Martin has<br />
been representing growers in leadership<br />
positions across a range of organisations<br />
including NSW Farmers Association, Grains<br />
Council of Australia, Durum Wheat Growers<br />
Association and the new Australian Durum<br />
Industry Association. Mr Martin is a director<br />
of various private companies and the public<br />
company, Plant Health Australia Ltd.<br />
Warrick McClelland<br />
Non-executive director, 60, BAgSc<br />
Committees: Audit, Services Agreement<br />
and Investment<br />
Appointed on 4 November 1998 and reelected<br />
on 14 March 2002. Mr McClelland<br />
is a grain and livestock producer from<br />
38<br />
Robert Barry Brendan Fitzgerald Laurie Marshall Xavier Martin<br />
Warrick McClelland
Birchip in Victoria and a former Victorian<br />
Farmers Federation Grains Council<br />
President and Grains Council of Australia<br />
Deputy President. Mr McClelland is a<br />
former director of BRI Australia.<br />
Christopher Moffet<br />
Non-executive director, 59, FAICD<br />
Committee: Corporate Risk<br />
Appointed on 4 November 1998 and reelected<br />
on 14 March 2002 and a nonexecutive<br />
director of <strong>AWB</strong> (International)<br />
<strong>Limited</strong>. Mr Moffet’s grains industry<br />
experience includes ownership of a 16,000<br />
hectare grain and grazing property and<br />
involvement in the areas of finance,<br />
marketing and business management. Mr<br />
Moffet’s qualifications incorporate a former<br />
directorship of the Morawa Cooperative and<br />
over 30 years of WA Farmers Federation<br />
membership, including roles as President of<br />
branch, zone and the Federation’s Grains<br />
Council and executive member of Grains<br />
Council of Australia. As a director of the<br />
Grain Pool of WA for eight years, Mr Moffet<br />
completed studies in grain trading and<br />
futures management at the Chicago Board<br />
of Trade. Mr Moffet is a Fellow of the<br />
Australian Institute of Company Directors<br />
and has recently been awarded the<br />
Advanced Diploma from the Institute.<br />
Peter Polson<br />
Non-executive director, 57, BComm,<br />
MBL<br />
Committees: Corporate Risk (Chair),<br />
Remuneration and Investment<br />
Appointed on 31 March <strong>2003</strong>. Mr Polson<br />
recently held the position of Group<br />
Executive, Investment and Insurance<br />
Services, Commonwealth Bank, responsible<br />
for all investment and insurance services<br />
for the Group, including the Group’s funds<br />
management, master funds, superannuation<br />
and insurance businesses such as Colonial<br />
First State, Colonial Insurance,<br />
Commonwealth Investment Management,<br />
Commonwealth Insurance and third party<br />
support services for brokers, agents and<br />
financial advisers.<br />
Mr Polson was Managing Director of the<br />
international funds management business<br />
at the Colonial Group, which was acquired<br />
by the Commonwealth Banking Group in<br />
mid 2000.<br />
Kerry Sanderson<br />
Non-executive director, 52, BSc,<br />
BEcons, FCIT, FAIM, MAICD<br />
Committee: Corporate Risk<br />
Appointed on 1 May 1998, and re-elected<br />
by shareholders on 14 March 2002. Mrs<br />
Sanderson is Chief Executive Officer of<br />
Fremantle Ports in Western Australia and<br />
Vice President of the Association of<br />
Australian Ports and Marine Authorities Inc.<br />
Mrs Sanderson has specific skills in<br />
business management and trade promotion<br />
with experience in transport and shipping.<br />
She is a member of the Board of Trustees<br />
of the Fremantle Hospital Medical Research<br />
Foundation, a director of Rio Tinto WA<br />
Futures Foundation and a member of the<br />
Australian Logistics Council. She is a<br />
Fellow of the Chartered Institute of<br />
Transport and of the Australian Institute of<br />
Management.<br />
Mrs Sanderson was a member of the Board<br />
of the Australian Wheat Board from 1995.<br />
John Simpson<br />
Non-executive director, 44<br />
Committees: Remuneration and<br />
Nomination<br />
Appointed on 4 November 1998 and reelected<br />
on 14 March 2002. Mr Simpson is<br />
a former director of <strong>AWB</strong> (International)<br />
<strong>Limited</strong>. Mr Simpson is joint Managing<br />
Director of Nowranie Pastoral Co Pty Ltd, a<br />
family owned company farming 10,000<br />
hectares in the Riverina of NSW. He was a<br />
representative for grain growers on the<br />
NSW Farmers’ Association Grains<br />
Committee for seven years, serving two<br />
years as vice chairman. He is also<br />
Chairman of the Billabong Creek Advisory<br />
group and has been appointed by<br />
government to represent landholders and<br />
irrigators on the Murray Unregulated River<br />
Management Committee.<br />
John Thame<br />
Non-executive director, 61, FCPA<br />
Committees: Audit, Remuneration,<br />
Investment and Services Agreement<br />
Appointed a director on 9 April 1999 and<br />
re-appointed on 14 March 2002. Mr<br />
Thame joined the NSW Building Society in<br />
1971 and oversaw the conversion of the<br />
Society to Advance Bank in 1985. He was<br />
Chief Executive Officer of Advance Bank<br />
from 1985 until its merger with St George<br />
Bank in January 1997. Mr Thame is on the<br />
Board of St George Bank <strong>Limited</strong>, Reckon<br />
<strong>Limited</strong>, Village Building Co Ltd, Abacus<br />
Property Group and The Council of the<br />
National Museum of Australia.<br />
Richard Fuller<br />
General Manager, Executive and<br />
Company Secretary, 44, BA (Hons),<br />
PhD (Political Science)<br />
(refer to page 33 for personal details)<br />
(pictured on page 33)<br />
Christopher Moffet<br />
Peter Polson Kerry Sanderson John Simpson<br />
John Thame<br />
39
<strong>AWB</strong> (International)<br />
<strong>Limited</strong><br />
<strong>AWB</strong> (International) <strong>Limited</strong> (<strong>AWB</strong>I), is a<br />
wholly owned subsidiary of <strong>AWB</strong> <strong>Limited</strong>,<br />
created to operate the <strong>AWB</strong> National Pool<br />
as a requirement of the <strong>AWB</strong> constitution<br />
and the Wheat Marketing Act 1989. The<br />
constitution was framed by the<br />
Commonwealth Government in consultation<br />
with the Grains Council of Australia as part<br />
of the process of privatising the Australian<br />
Wheat Board, effective in July 1999.<br />
The Board of <strong>AWB</strong>I under its constitution<br />
has responsibility to maximise net pool<br />
return for growers who sell wheat into the<br />
<strong>AWB</strong> National Pool by securing, developing<br />
and maintaining markets for wheat and<br />
minimising costs as far as practicable.<br />
Directors of <strong>AWB</strong> <strong>Limited</strong> under their<br />
constitution have the same obligation to<br />
growers. Thus, the two constitutions and<br />
the governance obligations of the two<br />
Boards are aligned.<br />
<strong>AWB</strong>I has a separate Board from <strong>AWB</strong><br />
<strong>Limited</strong>. Since <strong>AWB</strong>I should not on its own<br />
account make either a profit or a loss, the<br />
primary function of the Board is to watch<br />
over the interests of growers for maximising<br />
returns from the <strong>AWB</strong> National Pool. While<br />
the Chairman and three other directors are<br />
required under its constitution to be<br />
common to the Boards of <strong>AWB</strong> <strong>Limited</strong> and<br />
<strong>AWB</strong>I, three directors – Wayne Gibson,<br />
Clinton Starr and Ian Donges – are grower<br />
elected directors for <strong>AWB</strong>I only. (Their<br />
qualifications and experience are set out at<br />
the end of this statement.)<br />
The Wheat Export Authority, a<br />
Commonwealth statutory authority, monitors<br />
<strong>AWB</strong>I’s performance in accordance with the<br />
Wheat Marketing Act 1989.<br />
The Board met 10 times during the year.<br />
Compliance Committee<br />
<strong>AWB</strong>I has appointed a Compliance<br />
Committee – the membership of which is<br />
restricted to the three directors directly<br />
appointed to <strong>AWB</strong>I by growers to oversee<br />
the relationship between <strong>AWB</strong> <strong>Limited</strong> and<br />
<strong>AWB</strong>I.<br />
A Charter issued by the Board of <strong>AWB</strong>I<br />
establishes the purpose, role and functions<br />
of that Committee.<br />
The Compliance Committee has the<br />
responsibility of ensuring that:<br />
any dealing that <strong>AWB</strong>I has with its parent<br />
and subsidiaries of <strong>AWB</strong> <strong>Limited</strong> are not<br />
in conflict with the objectives of <strong>AWB</strong>I as<br />
operator of the <strong>AWB</strong> National Pool;<br />
the business rules and obligations as set<br />
down in the Services Agreement with<br />
<strong>AWB</strong> <strong>Limited</strong> are observed and<br />
maintained and are consistent with the<br />
objectives of <strong>AWB</strong>I as operator of the<br />
<strong>AWB</strong> National Pool; and<br />
the requirements of the appropriate laws,<br />
regulations, the constitution of <strong>AWB</strong>I and<br />
appropriate industry codes, agreements<br />
and regulations are observed.<br />
Although both <strong>AWB</strong>I and <strong>AWB</strong> <strong>Limited</strong> have<br />
specific constitutional requirements to<br />
maximise and distribute net pool returns to<br />
growers, the Compliance Committee is<br />
designed as an additional mechanism to<br />
ensure that these obligations to growers are<br />
fulfilled. In fulfilling its Charter, the Compliance<br />
Committee reports to the Board of <strong>AWB</strong>I.<br />
<strong>AWB</strong>I charged the Compliance Committee<br />
with responsibility of negotiating the<br />
Services Agreement with <strong>AWB</strong> <strong>Limited</strong>.<br />
The Committee met nine times during the<br />
year. The members of the Compliance<br />
Committee at the date of this report are Mr<br />
Clinton Starr (Chair), Mr Ian Donges and Mr<br />
Wayne Gibson.<br />
<strong>AWB</strong>I 2004 Review Committee<br />
The role of the <strong>AWB</strong>I 2004 Review<br />
Committee is to oversee the company’s<br />
contribution to the review of <strong>AWB</strong>I’s<br />
performance in managing the Single Desk,<br />
to be conducted in accordance with the<br />
Wheat Marketing Act 1989.<br />
The Committee met twice during the year.<br />
The members of the <strong>AWB</strong>I 2004 Review<br />
Committee at the date of this report are Mr<br />
Clinton Starr (Chair), Mr Brendan Stewart<br />
and Mr Andrew Lindberg.<br />
40
Brendan Stewart<br />
Chairman, Non-executive director<br />
Committee: <strong>AWB</strong>I 2004 Review<br />
(refer to page 38 for personal details)<br />
(pictured on page 6)<br />
Andrew Lindberg<br />
Director<br />
(refer to page 32 for personal details)<br />
(pictured on page 6)<br />
Christopher Moffet<br />
Non-executive director<br />
(refer to page 39 for personal details)<br />
Peter Polson<br />
Non-executive director<br />
(refer to page 39 for personal details)<br />
Ian Donges<br />
Non-executive director, 57, FAICD<br />
Committee: Compliance<br />
Appointed on 15 March 2001. Mr Donges<br />
is a grain grower from central NSW. He<br />
has operated, in partnership with his wife, a<br />
farming business since 1975. Mr Donges<br />
has extensive representative involvement in<br />
farm organisations including at a local level<br />
through NSW Farmers and the NSW<br />
Agricultural Bureau. At a state level, Mr<br />
Donges has been involved with NSW<br />
Farmers and has served that organisation in<br />
a number of capacities including President<br />
for three years and Chairman of the Grains<br />
Committee. Mr Donges has represented<br />
NSW on the Grains Council of Australia for<br />
six years and is a past president of the<br />
National Farmers Federation. Mr Donges<br />
has represented Australia at a number of<br />
international forums. Mr Donges is a<br />
director of Supermarkets Asia <strong>Limited</strong> and<br />
ACS <strong>Limited</strong> and Chairman of the Grain<br />
and Graze Program, an initiative of three<br />
research and development corporations.<br />
Wayne Gibson<br />
Non-executive director, 55, MCDA<br />
Committee: Compliance<br />
Appointed on 3 February 2000 and reelected<br />
13 March <strong>2003</strong>. Mr Gibson is a<br />
grain grower from Kondinin, Western<br />
Australia and a former executive committee<br />
member of the Kondinin Group and former<br />
WA Farmers Federation Zone President<br />
and Grains Council delegate. Mr Gibson is<br />
a Councillor of the Kondinin Shire Council<br />
and a member of the Corporate Directors’<br />
Association of Australia.<br />
Clinton Starr<br />
Non-executive director, 56, BEc, MBA<br />
Committees: Compliance (Chair) and<br />
<strong>AWB</strong>I 2004 Review (Chair)<br />
Appointed on 4 November 1998 and reelected<br />
on 14 March 2002. Mr Starr has<br />
had 20 years experience in international<br />
funds management, including 10 years<br />
experience in international funds marketing.<br />
This extended to all main asset classes and<br />
he served as an executive director from<br />
1986 until 1998 both in Australia and<br />
overseas. Since 1998, he has managed the<br />
family partnership, which has interests in<br />
small company management consulting and<br />
farming. He is also a non-executive<br />
director of Multimedia Ltd (Deputy<br />
Chairman), Biological Farmers of Australia<br />
(Co-op) Ltd, Green Environmental Pty Ltd,<br />
Mulch-Tech Pty Ltd, Green Planet Holdings<br />
Pty Ltd (Chairman), Longboat Holdings Pty<br />
Ltd (Chairman) and Marshall Lord<br />
Launches Australia Pty Ltd (Chairman).<br />
Mr Starr is currently completing a Doctorate<br />
in Business Administration at RMIT,<br />
researching the optimal growth paths for<br />
small/medium entrepreneurial businesses<br />
in Australia.<br />
Richard Fuller<br />
General Manager, Executive and<br />
Company Secretary, 44, BA (Hons),<br />
PhD (Political Science)<br />
(refer to page 33 for personal details)<br />
(pictured on page 33)<br />
Christopher Moffet Peter Polson<br />
Ian Donges Clinton Starr<br />
Wayne Gibson<br />
41
national and<br />
<strong>AWB</strong> National Locations<br />
Landmark National Locations<br />
refer to page 93 for named locations<br />
XXXXX XXXXXX, Pasta Technichan<br />
42<br />
<strong>AWB</strong> staff hosting overseas delegations in regional Australia<br />
XXXXX XXXXXX, Pasta Technichan
international presence<br />
43
financial statements<br />
Contents<br />
Directors' <strong>Report</strong><br />
Statement of Financial Performance<br />
Statement of Financial Position<br />
Statement of Cash Flows<br />
Notes to and forming part of the Financial Statements<br />
Directors' Declaration<br />
Independent Audit <strong>Report</strong><br />
46<br />
50<br />
51<br />
52<br />
53<br />
88<br />
89<br />
XXXXX XXXXXX, Pasta Technichan<br />
44<br />
XXXXX XXXXXX, Pasta Technichan<br />
XXXXX XXXXXX, Pasta Technichan<br />
XXXXX XXXXXX, Pasta Technichan
INNOVATION FOCUS TO DELIVER NEW OPPORTUNITIES<br />
45
DIRECTORS' REPORT<br />
Your directors submit their report for the year ended 30 September<br />
<strong>2003</strong>.<br />
DIRECTORS<br />
The directors of the company in office at the date of this report are:<br />
Brendan Stewart (Chairman) <br />
Robert Barry (Deputy Chairman)<br />
Andrew Lindberg (Managing Director)<br />
Brendan Fitzgerald (elected at <strong>2003</strong> <strong>Annual</strong> General Meeting)<br />
Laurie Marshall<br />
Xavier Martin (elected at <strong>2003</strong> <strong>Annual</strong> General Meeting)<br />
Warrick McClelland <br />
Christopher Moffet <br />
Peter Polson (appointed 31 March <strong>2003</strong>)<br />
Kerry Sanderson<br />
John Simpson <br />
John Thame.<br />
Except where noted, the directors held their position as director for<br />
the financial year and up to the date of this report. A summary of<br />
the experience, qualifications and special responsibilities of each<br />
director is provided on page 38 and 39.<br />
PRINCIPAL ACTIVITIES<br />
The <strong>AWB</strong> Group is Australia's leading rural services provider and<br />
one of the world's largest wheat managers and marketers. Refer<br />
to Note 34(a) to the Financial Statements for details of entities<br />
within the Group.<br />
<strong>AWB</strong> Group's operations can be categorised into six key business<br />
areas:<br />
Pool Management Services – managing the aggregation and<br />
global marketing of Australian wheat to maximise net pool<br />
returns; and providing commodity price and currency risk<br />
management;<br />
Rural Services (Landmark) – Landmark is Australia's largest<br />
supplier of agribusiness products and services. It provides<br />
clients with rural merchandise, fertiliser, livestock, wool<br />
marketing, agronomy, insurance, real estate and rural financial<br />
services;<br />
Finance and Risk Management Products – the provision of<br />
finance and risk management products to grain growers;<br />
Grain Acquisition and Trading – the trading, as principal, of<br />
grains and the provision of marketing products to Australian<br />
grain growers;<br />
Grain Technology – the development and Australian application<br />
of leading edge grain related technologies; and<br />
Supply Chain and Other Investments – the development of,<br />
and direct investment in, supply chain infrastructure and end<br />
user grain businesses, along with the management and trading<br />
of shipping capacity.<br />
RESULTS AND REVIEW OF OPERATIONS<br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Consolidated entity profit after tax and<br />
outside equity interests for the financial year 43,891 107,192<br />
A review of the operations and results of the consolidated entity<br />
and its principal businesses during the financial year is contained in<br />
pages 12 to 31 of this annual report.<br />
DIVIDENDS<br />
Subsequent to year end, a fully franked final dividend of 11 cents<br />
per share was approved by the board on 26 November <strong>2003</strong> and<br />
is payable on 19 December <strong>2003</strong>. All dividends paid or provided<br />
for will be fully franked at the company tax rate of 30%. The 2002<br />
final dividend of $30.1 million and the <strong>2003</strong> interim dividend of<br />
$38.4 million were paid to shareholders during the period.<br />
SIGNIFICANT CHANGES IN THE STATE OF<br />
AFFAIRS<br />
Significant changes in the state of affairs of the consolidated entity<br />
during the financial year were as follows:<br />
on 29 August <strong>2003</strong>, the <strong>AWB</strong> Group acquired its rural services<br />
business (Landmark) for cash consideration of approximately<br />
$718 million. Completion accounts, to be finalised, will determine<br />
the final price; and<br />
<strong>AWB</strong> <strong>Limited</strong> completed a new issue of B class shares during<br />
the financial year to fund part of the purchase price of its rural<br />
services business (Landmark). A total of 41,100,000 shares<br />
were issued through the institutional placement at $3.70 per<br />
share raising approximately $152 million.<br />
SIGNIFICANT EVENTS AFTER BALANCE DATE<br />
The following significant events have arisen since the end of the<br />
financial year:<br />
<strong>AWB</strong> <strong>Limited</strong> completed a new issue of B class shares on 20<br />
October <strong>2003</strong> in connection with the purchase of its rural<br />
services business (Landmark). A total of 11,840,908 shares<br />
was issued through the share purchase plan at $3.70 per share<br />
raising approximately $43.8 million; and<br />
a dividend of 11 cents per share resulting in a dividend payable<br />
of $35.97 million was declared on 26 November <strong>2003</strong>.<br />
REGISTERED OFFICE<br />
380 La Trobe Street,<br />
Melbourne, Victoria, 3000<br />
Financial Statements cover: Philip Mills, Grower<br />
46
LIKELY DEVELOPMENTS AND EXPECTED<br />
RESULTS<br />
The consolidated entity will continue to pursue its policy of<br />
increasing the profitability and market share of its major business<br />
areas during the next financial year. Further information about<br />
likely developments in the operations of the consolidated entity and<br />
the expected results of those operations in future financial years<br />
has not been included in this report because disclosure of the<br />
information would be likely to result in unreasonable prejudice to<br />
the consolidated entity.<br />
ENVIRONMENTAL REGULATION AND<br />
PERFORMANCE<br />
The consolidated entity's operations are subject to various<br />
Commonwealth, State and Territory environmental legislation and<br />
regulation. There is no environmental regulation specific to the<br />
consolidated entity. The board is not aware of any significant<br />
environmental breaches during the financial year.<br />
INDEMNIFICATION AND INSURANCE<br />
The constitution of <strong>AWB</strong> <strong>Limited</strong> provides an indemnity for all<br />
current and previous company directors, secretaries and executive<br />
officers. The company indemnifies these people to the maximum<br />
extent permitted by law for any liabilities or expenses incurred in<br />
defending any proceedings where judgement is given in the<br />
person's favour. The indemnity does not however, cover conduct<br />
involving a lack of good faith.<br />
A Deed of Access, Indemnity and Insurance was entered into<br />
between the company and each director during the period which<br />
provides that the company will maintain a directors' and officers'<br />
insurance policy. The Deed also provides an indemnity to the<br />
maximum extent permissible by law to the director for any liabilities<br />
incurred as a director, other than liabilities to the company or a<br />
related body corporate, or liabilities arising out of conduct involving<br />
lack of good faith.<br />
A directors' and officers' insurance policy is maintained; however,<br />
the terms of the contract prohibit disclosure of the amount of the<br />
premium. During or since the end of the financial year, no director,<br />
officer or auditor had recourse to the indemnity or insurance.<br />
DIRECTORS' AND OTHER OFFICERS'<br />
EMOLUMENTS<br />
Remuneration policy<br />
The Remuneration Committee of the board of directors is<br />
responsible for reviewing and recommending remuneration and<br />
performance of the Managing Director, the Performance Appraisal<br />
Policy and any Employee Share Plans and superannuation policies.<br />
The remuneration and performance of the executive team is<br />
assessed by the Managing Director on a periodic basis by<br />
reference to relevant employment market conditions with the<br />
overall objective of ensuring maximum shareholder benefit from the<br />
retention of a high quality executive team.<br />
Details of the nature and amount of each element of the<br />
emolument of each director and each of the five executive officers<br />
of <strong>AWB</strong> <strong>Limited</strong> and the consolidated entity receiving the highest<br />
emolument for the financial year are as follows:<br />
Emoluments of directors of <strong>AWB</strong> <strong>Limited</strong><br />
Base fee<br />
$<br />
Superannuation<br />
$<br />
2002 bonus paid in<br />
current year $<br />
Brendan Stewart 147,425 14,688 – 5,850 167,963<br />
Robert Barry 55,500 5,400 – – 60,900<br />
Andrew Lindberg 630,265 33,087 150,000 3,470 816,822<br />
Ian Cush 1 28,500 2,700 – – 31,200<br />
Brendan Fitzgerald 2 32,857 2,957 – – 35,814<br />
Laurie Marshall 55,500 5,400 – – 60,900<br />
Xavier Martin 2 32,857 2,957 – – 35,814<br />
Warrick McClelland 21,660 39,240 – – 60,900<br />
Christopher Moffet 55,500 5,400 – – 60,900<br />
Peter Polson 3 30,238 2,721 – – 32,959<br />
Kerry Sanderson 55,500 5,400 – – 60,900<br />
Brenda Shanahan 4 28,500 2,700 – – 31,200<br />
Michael Shanahan 1 28,500 2,700 – – 31,200<br />
John Simpson 55,500 5,400 – – 60,900<br />
John Thame 55,500 5,400 – – 60,900<br />
Total 1,313,802 136,150 150,000 9,320 1,609,272<br />
Other<br />
$<br />
Total<br />
$<br />
1<br />
Not re–elected at the <strong>2003</strong> <strong>Annual</strong> General Meeting<br />
2<br />
Elected at the <strong>2003</strong> <strong>Annual</strong> General Meeting<br />
3<br />
Appointed 31 March <strong>2003</strong><br />
4<br />
Resigned 31 March <strong>2003</strong><br />
47
DIRECTORS' REPORT (continued)<br />
Emoluments of the five most highly paid executive officers of <strong>AWB</strong> <strong>Limited</strong> and the consolidated entity<br />
Base fee Superannuation 2002 bonus paid in Other Total<br />
$ $ current year $ $ $<br />
Paul Ingleby 427,253 10,640 99,960 18,618 556,471<br />
Charles Stott 287,783 10,640 58,800 153,665 b 510,888<br />
Tim Goodacre a 62,966 1,952 105,000 310,320 c 480,238<br />
Marcus Kennedy 369,070 10,890 – 76,275 d 456,235<br />
Jill Gillingham 277,445 67,351 83,300 3,716 431,812<br />
Total 1,424,517 101,473 347,060 562,594 2,435,644<br />
Notes: <br />
The terms 'director' and 'officer' have been treated as mutually exclusive for the purposes of this disclosure.<br />
a<br />
Tim Goodacre resigned on 6 December 2002.<br />
b<br />
"Other" emoluments include performance related payments relating to the acquisition of Landmark.<br />
c<br />
"Other" emoluments include the payment of accrued annual leave and long service leave entitlements.<br />
d<br />
"Other" emoluments includes an amount paid on commencement of employment.<br />
DIRECTORS' MEETINGS<br />
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings<br />
attended by each director were as follows:<br />
Director Board meetings Audit Committee Corporate Risk Remuneration<br />
meetings Committee meetings Committee meetings<br />
Eligible to Attended Eligible to Eligible to Eligible to<br />
attend attend Attended attend Attended attend Attended<br />
Brendan Stewart 13 13 7 7 8 8 3 3<br />
Robert Barry 13 12 7 7<br />
Andrew Lindberg 13 13 5 5 3 3<br />
Ian Cush 1 5 5 4 4<br />
Brendan Fitzgerald 2 8 8 3 3<br />
Laurie Marshall 13 13 7 7<br />
Xavier Martin 2 8 8 3 3<br />
Warrick McClelland 13 13 7 7<br />
Christopher Moffet 13 13 8 8<br />
Peter Polson 3 6 6 4 4 2 2<br />
Kerry Sanderson 13 12 8 7<br />
Brenda Shanahan 4 7 7 4 4 1 1<br />
Michael Shanahan 1 5 5 4 4<br />
John Simpson 13 13 3 3<br />
John Thame 13 13 7 7 3 3<br />
In all cases where a director did not attend a meeting, prior leave of absence was granted by the board or chairman to the director.<br />
1<br />
Not re–elected at the <strong>2003</strong> <strong>Annual</strong> General Meeting.<br />
3<br />
Appointed 31 March <strong>2003</strong>.<br />
2<br />
Elected at the <strong>2003</strong> <strong>Annual</strong> General Meeting.<br />
4<br />
Resigned 31 March <strong>2003</strong>.<br />
48
DIRECTORS' MEETINGS (continued)<br />
Director Nomination Committee Investment Committee Services Agreement<br />
meetings meetings Committee meetings<br />
Eligible to Eligible to Eligible to<br />
attend Attended attend Attended attend Attended<br />
Brendan Stewart 5 5 3 3<br />
Robert Barry 5 5 3 1<br />
Andrew Lindberg 3 3<br />
Ian Cush 1<br />
Brendan Fitzgerald 2<br />
Laurie Marshall 3 3 5 5<br />
Xavier Martin 2<br />
Warrick McClelland 3 3 5 5<br />
Christopher Moffet<br />
Peter Polson 3 3 3<br />
Kerry Sanderson<br />
Brenda Shanahan 4<br />
Michael Shanahan 1<br />
John Simpson 2 2<br />
John Thame 3 3 5 5<br />
In all cases where a director did not attend a meeting, prior leave of absence was granted by the board or chairman to the director.<br />
1<br />
Not re–elected at the <strong>2003</strong> <strong>Annual</strong> General Meeting.<br />
3<br />
Appointed 31 March <strong>2003</strong>.<br />
2<br />
Elected at the <strong>2003</strong> <strong>Annual</strong> General Meeting.<br />
4<br />
Resigned 31 March <strong>2003</strong>.<br />
ROUNDING<br />
The amounts contained in this report and in the financial statements have been rounded off under the option available to the company<br />
under Australian Securities and Investments Commission Class Order 98/100. Amounts in this report have been rounded off in<br />
accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.<br />
Signed in accordance with a resolution of the directors:<br />
Brendan Stewart<br />
Chairman<br />
Sydney<br />
26 November <strong>2003</strong><br />
Andrew Lindberg<br />
Managing Director<br />
49
STATEMENT OF FINANCIAL PERFORMANCE<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Notes $'000 $'000 $'000 $'000<br />
Revenue from ordinary activities 2 2,211,890 2,319,550 212,399 425,042<br />
Cost of sales (1,889,225) (1,926,340) (6,029) (197,441)<br />
Borrowing costs 3 (70,505) (98,559) (1,250) (4,886)<br />
Other expenses from ordinary activities (195,350) (142,472) (139,589) (132,796)<br />
Share of net profits of associates accounted for using<br />
the equity method 9(b) 2,097 993 – –<br />
Profit from ordinary activities before income tax expense 58,907 153,172 65,531 89,919<br />
Income tax expense relating to ordinary activities 4(a) (14,757) (45,343) (4,234) (11,967)<br />
Net profit from ordinary activities after income tax expense 23 44,150 107,829 61,297 77,952<br />
Net profit attributable to outside equity interests 20 (259) (637) – –<br />
Net profit attributable to members of <strong>AWB</strong> <strong>Limited</strong> 19(b) 43,891 107,192 61,297 77,952<br />
Net exchange differences relating to self sustaining<br />
foreign operations 19(a) (12,975) (336) – –<br />
Total changes in equity other than those resulting<br />
from transactions with owners as owners attributable<br />
to members of <strong>AWB</strong> <strong>Limited</strong> 21 30,916 106,856 61,297 77,952<br />
Basic earnings per share (cents) 35 15.9 39.2<br />
Diluted earnings per share (cents) 35 15.9 39.2<br />
50
STATEMENT OF FINANCIAL POSITION<br />
AS AT 30 SEPTEMBER <strong>2003</strong><br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Notes $'000 $'000 $'000 $'000<br />
Current assets<br />
Cash assets 5 54,785 69,921 2,328 23,996<br />
Receivables 6 1,006,482 2,137,041 842,188 733,395<br />
Inventories 7 185,377 134,062 – –<br />
Other financial assets 11 59,451 62,598 – 2,488<br />
Current tax assets 4(b) 13,444 – – 9,934<br />
Other assets 8 12,200 3,268 185 201<br />
Total current assets 1,331,739 2,406,890 844,701 770,014<br />
Non–current assets<br />
Receivables 6 6,167 4,085 54,711 4,085<br />
Investments accounted for using the equity method 9(c) 12,910 16,958 – –<br />
Other financial assets 11 138,066 14,419 38,763 36,508<br />
Intangible assets 12 583,574 168 172 114<br />
Property, plant and equipment 13 300,443 170,519 54,917 58,811<br />
Deferred tax assets 4(b) 43,044 28,039 6,585 5,853<br />
Total non–current assets 1,084,204 234,188 155,148 105,371<br />
Total assets 2,415,943 2,641,078 999,849 875,385<br />
Current liabilities<br />
Payables 14 336,066 122,681 46,880 76,927<br />
Interest bearing liabilities 15 668,007 1,637,518 9,752 5,961<br />
Current tax liabilities 4(b) – 10,422 3,122 –<br />
Provisions 16 50,649 40,264 14,650 39,365<br />
Other liabilities 17 22,049 20,076 1,001 –<br />
Total current liabilities 1,076,771 1,830,961 75,405 122,253<br />
Non–current liabilities<br />
Interest bearing liabilities 15 394,877 – – –<br />
Provisions 16 1,721 1,513 1,721 1,513<br />
Deferred tax liabilities 4(b) 10,554 19,141 6,125 6,595<br />
Total non–current liabilities 407,152 20,654 7,846 8,108<br />
Total liabilities 1,483,923 1,851,615 83,251 130,361<br />
Net assets 932,020 789,463 916,598 745,024<br />
Equity<br />
Contributed equity 18 848,958 700,312 848,958 700,312<br />
Reserves 19(a) 1,717 14,692 15,000 15,000<br />
Retained profits 19(b) 78,337 72,815 52,640 29,712<br />
Total parent entity interest 929,012 787,819 916,598 745,024<br />
Outside equity interests 20 3,008 1,644 – –<br />
Total equity 21 932,020 789,463 916,598 745,024<br />
51
STATEMENT OF CASH FLOWS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Notes $'000 $'000 $'000 $'000<br />
Cash flows from operating activities<br />
Receipts from customers 2,494,079 1,923,350 141,886 241,121<br />
Payments to suppliers and employees (1,975,985) (2,080,800) (149,147) (340,744)<br />
Repayments of grower loans 1,650,882 2,023,180 – –<br />
Loans advanced to growers (587,437) (2,383,910) – –<br />
Interest received 82,997 132,006 33,336 32,701<br />
Borrowing costs paid (70,505) (98,102) (1,250) (4,886)<br />
Dividends received 4,604 279 42,162 62,710<br />
Income taxes paid (54,341) (67,502) 7,620 (22,401)<br />
Net cash flows from/(used in) operating activities 23(a) 1,544,294 (551,499) 74,607 (31,499)<br />
Cash flows from investing activities<br />
Payments for property, plant and equipment (93,167) (81,740) (17,612) (28,516)<br />
Proceeds from sale of property, plant and equipment 572 747 22 747<br />
Payment for controlled entities (net of cash acquired) 34(b) (542,765) – – –<br />
Purchases of investments (122,642) (11,428) (2,402) (21,845)<br />
Proceeds from/(placement of) short term deposits &<br />
securities (net) (25,287) 74,417 – 18,251<br />
Net cash flows from/(used in) investing activities (783,289) (18,004) (19,992) (31,363)<br />
Cash flows from financing activities<br />
Proceeds from issues of ordinary shares 153,967 – 152,484 –<br />
Payment of share issue and listing costs (5,321) (524) (5,321) (524)<br />
Proceeds from/(repayment of) borrowings from related party<br />
(<strong>AWB</strong> National Pools) (234,944) (128,799) 3,791 5,961<br />
Proceeds from/(repayment of) borrowings from wholly owned<br />
group – – (158,793) 98,890<br />
Proceeds from/(repayment of) interest bearing deposits 3,711 – – –<br />
Proceeds from/(repayment of) borrowings (625,015) 768,969 – –<br />
Dividends paid (68,539) (60,145) (68,444) (60,145)<br />
Net cash flows from/(used in) financing activities (776,141) 579,501 (76,283) 44,182<br />
Net increase/(decrease) in cash held (15,136) 9,998 (21,668) (18,680)<br />
Cash at the beginning of the financial year 69,921 59,923 23,996 42,676<br />
Cash at the end of the financial year 23(b) 54,785 69,921 2,328 23,996<br />
52
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
1. SUMMARY OF SIGNIFICANT ACCOUNTING<br />
POLICIES<br />
(a) Basis of preparation<br />
The financial report is a general purpose financial report which has<br />
been prepared in accordance with Accounting Standards, Urgent<br />
Issues Group Consensus Views, other authoritative<br />
pronouncements of the Australian Accounting Standards Board<br />
and the Corporations Act 2001.<br />
It has been prepared on the basis of historical costs and except<br />
where stated, does not take into account fair values of non–current<br />
assets.<br />
(b) Changes in accounting policies<br />
Accounting policies have been consistently applied by each entity<br />
in the consolidated entity and are consistent with those of the<br />
previous year except for the accounting policies with respect to the<br />
provision for dividends and employee benefits. Comparative<br />
information has been repositioned or reclassified where appropriate<br />
to ensure comparability with the current reporting period.<br />
Provision for dividend<br />
The consolidated entity has adopted the new Australian Accounting<br />
Standard AASB 1044: Provisions, Contingent Liabilities and<br />
Contingent Assets which has resulted in a change in the<br />
accounting for the dividends provision. Previously, the consolidated<br />
entity recognised a provision for dividend based on the amount that<br />
was proposed or declared after the reporting date. In accordance<br />
with the requirements of the new Standard, a provision for<br />
dividends will only be recognised at the reporting date where the<br />
dividends have been declared, determined or publicly<br />
recommended prior to the reporting date. In accordance with the<br />
new Standard, no provision for dividend has been recognised for<br />
the year ended 30 September <strong>2003</strong>.<br />
Employee benefits<br />
The consolidated entity has applied the revised AASB 1028:<br />
Employee Benefits issued June 2001 for the first time from<br />
1 October 2002.<br />
The liability for wages and salaries, and annual leave is now<br />
calculated using the remuneration rates <strong>AWB</strong> <strong>Limited</strong> expects to<br />
pay as at each reporting date, not wage and salary rates current at<br />
reporting date. The effect of the revised policy is not material.<br />
(c) Principles of consolidation<br />
Controlled entities<br />
The financial statements of controlled entities are included from<br />
the date control commences until the date control ceases.<br />
Outside interests in the equity and results of the entities that are<br />
controlled by the company are shown as a separate item in the<br />
consolidated financial statements.<br />
Associates<br />
Associates are those entities, other than partnerships, over which<br />
the consolidated entity exercises significant influence and which<br />
are not intended for sale in the near future.<br />
In the consolidated financial statements, investments in associates<br />
are accounted for using equity accounting principles. Investments<br />
in associates are carried at the lower of the equity accounted<br />
amount and recoverable amount. The consolidated entity’s equity<br />
accounted share of the associates’ net profit or loss is recognised<br />
in the consolidated statement of financial performance from the<br />
date significant influence commences until the date significant<br />
influence ceases. Other movements in reserves are recognised<br />
directly in consolidated reserves.<br />
Joint venture operations<br />
Joint venture operations are jointly controlled by the consolidated<br />
entity. The consolidated entity’s interests in unincorporated joint<br />
ventures are brought to account by including its proportionate<br />
share of the joint ventures’ assets, liabilities and expenses and the<br />
consolidated entity’s revenue from the sale of its share of output<br />
on a line–by–line basis, from the date joint control commences to<br />
the date joint control ceases.<br />
Transactions eliminated on consolidation<br />
Unrealised gains and losses and inter–entity balances resulting<br />
from transactions with or between controlled entities are eliminated<br />
in full on consolidation.<br />
Unrealised gains resulting from transactions with associates and<br />
joint ventures, including those relating to contributions of<br />
non–monetary assets on establishment, are eliminated to the<br />
extent of the consolidated entity’s interest. Unrealised gains<br />
relating to associates and joint ventures are eliminated against the<br />
carrying amount of the investment. Unrealised losses are<br />
eliminated in the same way as unrealised gains, unless they<br />
evidence a recoverable amount impairment.<br />
<strong>AWB</strong> National Pools<br />
As in previous years, the activities of the <strong>AWB</strong> National Pools have<br />
not been recognised in the financial statements of the consolidated<br />
entity. The economic benefit from the activities of the <strong>AWB</strong><br />
National Pools are derived by pool participants rather than the<br />
consolidated entity.<br />
(d) Revenue recognition<br />
Revenues are recognised at fair value of the consideration received<br />
net of the amount of goods and services tax payable to the<br />
Australian Taxation Office.<br />
Sales<br />
Revenue from sales made on commercial terms is recognised<br />
when title for the commodity transfers to the customer. In the case<br />
of export sales, the bill of lading (shipment) date is taken as<br />
transaction date unless title is to pass at a materially different time.<br />
Management fee revenue<br />
Management fee revenue is recognised according to when the<br />
costs of providing the services are incurred.<br />
Interest revenue<br />
Interest revenue is recognised as it accrues taking into account the<br />
effective yield of the financial asset.<br />
Underwriting fee<br />
The underwriting fee charged on loan products is a fee for the<br />
service of providing a non–recourse loan. The recourse on this<br />
loan is limited to a percentage of the estimated pool return at a<br />
53
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
1. SUMMARY OF SIGNIFICANT ACCOUNTING<br />
POLICIES (continued )<br />
(d) Revenue recognition (continued)<br />
point in time. For 2002/03, this percentage was 81.8% (2001/02:<br />
81.8%). Underwriting fee revenue is recognised on a basis<br />
consistent with the pattern of the incidence of risk covered by the<br />
service provided.<br />
Sale of non–current assets<br />
The gross proceeds of non–current asset sales are included as<br />
revenue at the date control of the asset passes to the buyer,<br />
usually when an unconditional contract of sale is signed. The gain<br />
or loss on disposal is calculated as the difference between the<br />
carrying amount of the asset at the time of disposal and the net<br />
proceeds on disposal.<br />
(e) Goods and services tax<br />
Revenues, expenses and assets are recognised net of the amount<br />
of goods and services tax (GST), except where the amount of GST<br />
incurred is not recoverable from the Australian Taxation Office<br />
(ATO). In these circumstances, the GST is recognised as part of the<br />
cost of acquisition of the asset or as part of the expense.<br />
Receivables and payables are stated with the amount of GST<br />
included.<br />
The net amount of GST recoverable from, or payable to, the ATO is<br />
included as a current asset or liability in the statement of financial<br />
position.<br />
Cash flows are included in the statement of cash flows on a gross<br />
basis. The GST components of cash flows arising from investing<br />
and financing activities which are recoverable from, or payable to,<br />
the ATO are classified as operating cash flows.<br />
(f) Income tax<br />
Income tax expense is calculated at current rates on the<br />
accounting profit adjusted for permanent differences. Future<br />
income tax benefits and liabilities arise because some items are<br />
included in accounting profit in a period different from that in which<br />
the items are assessed for income tax and are included in the<br />
statement of financial position as a non–current asset and<br />
non–current liability respectively.<br />
As provided for in Australian Accounting Standard AASB 1020:<br />
Income Taxes, these deferred tax balances have been offset<br />
where applicable.<br />
Future income tax benefits are not brought to account unless<br />
realisation of the asset is assured beyond reasonable doubt.<br />
(g) Foreign currencies<br />
Transactions<br />
Transactions in foreign currencies are converted to Australian<br />
currency at the rate of exchange ruling at the date of the<br />
transaction. Amounts receivable and payable in foreign currencies<br />
at reporting date are translated at the rates of exchange ruling on<br />
that date.<br />
Exchange differences relating to amounts receivable and payable<br />
in foreign currencies are brought to account as exchange gains or<br />
54<br />
losses in the statement of financial performance in the financial<br />
year the exchange rates change, except where hedging specific<br />
anticipated transactions. (refer to Note 1(h) Derivatives)<br />
Translation of controlled foreign operations<br />
The assets and liabilities of foreign operations, including controlled<br />
entities and associates, that are self sustaining are translated at the<br />
rates of exchange ruling at balance date. Equity items are<br />
translated at historical rates. The statements of financial<br />
performance are translated at either a weighted average rate for<br />
the year or transaction date. Exchange differences arising on<br />
translation are taken directly to the foreign currency translation<br />
reserve until the disposal, or partial disposal, of the operations.<br />
The assets and liabilities of foreign operations, including controlled<br />
entities and associates, that are integrated are translated using the<br />
temporal method. Monetary assets and liabilities are translated into<br />
Australian currency at rates of exchange current at balance date,<br />
while non–monetary items and revenue and expense items are<br />
translated at exchange rates current when the transactions<br />
occurred. Exchange differences arising on translation are brought<br />
to account in the statement of financial performance.<br />
(h) Derivatives<br />
The consolidated entity is exposed to changes in interest rates,<br />
foreign exchange rates and commodity and freight prices from its<br />
activities. The consolidated entity uses the following derivative<br />
financial instruments to hedge these risks: interest rate swaps,<br />
forward rate agreements, interest rate options, forward foreign<br />
exchange contracts, foreign exchange options, forward commodity<br />
price contracts, commodity options and forward freight agreements.<br />
Hedges<br />
– Anticipated transactions<br />
Where hedge transactions are designated as a hedge of an<br />
anticipated specific purchase or sale of goods or an anticipated<br />
interest transaction, gains and losses on the hedge arising up to<br />
the date of the anticipated transaction, together with any costs or<br />
gains arising at the time of entering into the hedge, are deferred<br />
and included in the measurement of the anticipated transaction<br />
when the transaction occurs as designated. Any gains or losses on<br />
the hedge transaction after that date are included in the statement<br />
of financial performance.<br />
The net amounts receivable or payable under forward foreign<br />
exchange contracts, open swaps, forward rate agreements and<br />
futures contracts and the associated deferred gains or losses are<br />
recorded on the statement of financial position from the date of<br />
inception of the hedge transaction. The net receivables or payables<br />
are revalued using the foreign currency, interest or commodity rates<br />
current at reporting date.<br />
When the anticipated transaction is no longer expected to occur as<br />
designated, the deferred gains and losses relating to the hedged<br />
transaction are recognised immediately in the statement of<br />
financial performance.<br />
Where a hedge transaction is terminated early and the anticipated<br />
transaction is still expected to occur as designated, the deferred<br />
gains and losses that arose on the hedge prior to its termination<br />
continue to be deferred and are included in the measurement of<br />
the purchase or sale or interest transaction when it occurs. Where<br />
a hedge transaction is terminated early because the anticipated
(h) Derivatives (continued)<br />
transaction is no longer expected to occur as designated, deferred<br />
gains and losses that arose on the hedge prior to its termination are<br />
included in the statement of financial performance for the period.<br />
Where a hedge is redesignated as a hedge of another transaction,<br />
gains and losses arising on the hedge prior to its redesignation are<br />
only deferred where the original anticipated transaction is still<br />
expected to occur as designated. When the original anticipated<br />
transaction is no longer expected to occur as designated, any gains<br />
or losses relating to the hedge instrument are included in the<br />
statement of financial performance for the period.<br />
Other derivatives<br />
All other derivative transactions are initially recorded at the relevant<br />
rate at the date of the transaction. Derivatives outstanding at<br />
balance date are valued at the rates ruling on that date and any<br />
gains or losses are brought to account in the statement of financial<br />
performance.<br />
(i) Cash<br />
For the purpose of the statement of cash flows, cash includes cash<br />
on hand and in banks, net of outstanding bank overdrafts. Bank<br />
overdrafts are carried at the principal amount. Interest is charged<br />
as an expense as it accrues.<br />
(j) Receivables<br />
The collectability of debts is assessed at balance date and specific<br />
provision is made for any doubtful accounts.<br />
Trade debtors<br />
Terms of trade receivables generally require settlement within 30<br />
days.<br />
Receivables from related parties have been discounted to their<br />
present value using a market determined discount rate.<br />
(k) Inventories<br />
Inventories are valued at the lower of cost or net realisable value.<br />
(l) Investments<br />
Controlled entities<br />
Investments in controlled entities are carried in the Company’s<br />
financial statements at the lower of cost or recoverable amount.<br />
Associates<br />
Investments in unlisted shares of associates are carried in the<br />
financial statements at the lower of cost or recoverable amount.<br />
Joint venture operations<br />
Investments in joint venture operations are accounted for in the<br />
financial statements as set out in Note 1(c) Principles of<br />
consolidation.<br />
Other entities<br />
Investments in other entities are carried at the lower of cost or<br />
recoverable amount.<br />
(m) Lease assets<br />
Finance leases<br />
Finance leases are capitalised. A lease asset and a lease liability<br />
equal to the present value of the minimum lease payments are<br />
recorded at the inception of the lease.<br />
Lease liabilities are reduced by repayments of principal. The<br />
interest components of the lease payments are expensed.<br />
Operating leases<br />
Payments made under operating leases are expensed on a straight<br />
line basis over the term of the lease.<br />
(n) Constructed non–current assets<br />
The cost of non–current assets constructed by the consolidated<br />
entity includes the cost of all materials used in construction, direct<br />
labour on the project and an appropriate proportion of overheads.<br />
(o) Research and development expenditure<br />
Research and development expenditure is expensed as incurred<br />
except to the extent that its recoverability is assured beyond any<br />
reasonable doubt, in which case it is deferred.<br />
(p) Intangible assets<br />
Goodwill<br />
On acquisition of some, or all, of the assets of another entity, the<br />
identifiable net assets acquired are measured at fair value. The<br />
excess of the fair value of the cost of acquisition over the fair value<br />
of the identifiable net assets acquired is brought to account as<br />
goodwill and will be amortised so that it is recognised as an<br />
expense in the statement of financial performance on a straight<br />
line basis over a period of 20 years or the expected useful life.<br />
Licence fees<br />
Costs associated with licence fees are deferred and amortised on a<br />
straight line basis over the period of their expected benefit.<br />
(q) Recoverable amount of non–current assets<br />
Non–current assets are not carried at an amount above their<br />
recoverable amount, and where carrying values exceed their<br />
recoverable amount, assets are written down to their recoverable<br />
amounts. In determining a recoverable amount, the expected net<br />
cash flows have been discounted to their present value using a<br />
market determined risk adjusted discount rate.<br />
(r) Depreciation of property, plant and equipment<br />
Depreciation is provided on a straight line basis for all property,<br />
plant and equipment, other than freehold land, from the date at<br />
which the asset becomes available for use. Depreciation charges<br />
are calculated to allocate cost or valuation, less estimated residual<br />
value at the end of the useful lives of the assets against revenue<br />
over those estimated useful lives.<br />
The depreciation rates used for each class of depreciable assets are:<br />
– buildings 2%<br />
– plant and equipment 5% to 33%.<br />
55
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
1. SUMMARY OF SIGNIFICANT ACCOUNTING<br />
POLICIES (continued )<br />
(s) Employee benefits<br />
Provision is made for long service leave and annual leave estimated<br />
to be payable to employees on the basis of their terms of<br />
employment and statutory requirements. The provision calculations<br />
include all employee related on–costs and are based on total<br />
remuneration packages. This method of calculating provisions<br />
provides a result that is materially correct in accordance with AASB<br />
1028: Employee Benefits.<br />
In respect of the consolidated entity's accumulation fund, any<br />
contributions made to the superannuation funds by entities within<br />
the consolidated entity are charged against profits when due.<br />
(t) Interest bearing liabilities<br />
All loans are measured at the principal amount. Interest is charged<br />
as an expense as it accrues.<br />
(u) Share capital<br />
Ordinary share capital is recognised at the fair value of the<br />
consideration received by <strong>AWB</strong> <strong>Limited</strong>. Any transaction costs<br />
arising on the issue of ordinary shares are recognised directly in<br />
equity as a reduction of the share proceeds received.<br />
(v) Earnings per share<br />
Basic earnings per share is calculated as net profit attributable to<br />
members, adjusted to exclude costs of servicing equity (other than<br />
dividends) and preference share dividends, divided by the weighted<br />
average number of ordinary shares, adjusted for any bonus element.<br />
Diluted earnings per share is calculated as the net profit<br />
attributable to members, adjusted for:<br />
costs of servicing equity (other than dividends) and preference<br />
share dividends;<br />
the after tax effect of dividends and interest associated with<br />
dilutive potential ordinary shares that have been recognised as<br />
expenses; and<br />
other non–discretionary changes in revenues and expenses<br />
during the period that would result from the dilution of potential<br />
ordinary shares divided by the weighted average number of<br />
ordinary shares and dilutive potential ordinary shares, adjusted<br />
for any bonus element.<br />
56
2. REVENUE FROM ORDINARY ACTIVITIES<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Notes $'000 $'000 $'000 $'000<br />
Revenue from sale of goods<br />
– other corporations 1,628,916 1,065,762 – –<br />
– related party (<strong>AWB</strong> National Pools) 409,720 1,033,154 8,991 206,128<br />
2,038,636 2,098,916 8,991 206,128<br />
Management fee revenue<br />
– related party (<strong>AWB</strong> National Pools) 77,091 68,305 77,091 68,305<br />
– wholly owned group – – 50,877 54,451<br />
77,091 68,305 127,968 122,756<br />
Dividends<br />
– other corporations 4,448 14 354 14<br />
– other related parties – – 208 266<br />
– wholly owned group – – 41,600 62,430<br />
4,448 14 42,162 62,710<br />
Interest<br />
– other persons/corporations 80,571 123,034 1,143 1,023<br />
– related party (<strong>AWB</strong> National Pools) 2,426 8,972 – 40<br />
– wholly owned group – – 32,193 31,638<br />
82,997 132,006 33,336 32,701<br />
Rental income 406 – – –<br />
Proceeds on sale of non–current assets 572 747 22 747<br />
Underwriting fees 4,176 17,328 – –<br />
Other revenue 3,564 2,234 (80) –<br />
Total revenue from ordinary activities 2,211,890 2,319,550 212,399 425,042<br />
Details of related party transactions are included in Note 27(b).<br />
57
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
3. PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE<br />
Profit from ordinary activities before income tax expense includes<br />
the following specific expenses:<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Notes $'000 $'000 $'000 $'000<br />
Amortisation of non–current assets<br />
– goodwill 2,441 1 – –<br />
– licence fees 26 15 26 15<br />
2,467 16 26 15<br />
Depreciation of non–current assets<br />
– plant and equipment 25,502 13,601 13,972 9,109<br />
– buildings 1,913 866 307 313<br />
27,415 14,467 14,279 9,422<br />
Total depreciation and amortisation expenses 29,882 14,483 14,305 9,437<br />
Write down in value of property plant and equipment to<br />
recoverable amount 7,182 – 7,182 –<br />
Borrowing costs expensed<br />
Interest expense<br />
– wholly owned group – – 901 3,895<br />
– related party (<strong>AWB</strong> National Pools) 10,353 21,987 – –<br />
– other persons/corporations 57,381 73,716 – 1,194<br />
Other borrowing costs<br />
– other persons/corporations 2,771 2,856 349 (203)<br />
Total borrowing costs 70,505 98,559 1,250 4,886<br />
Research and development costs 6,960 7,030 6,960 7,030<br />
Net (gain) / loss on disposal of property, plant and equipment (21) 1,531 23 1,531<br />
Operating lease rental expense 4,777 2,899 1,853 1,940<br />
Employee benefit expenses 72,350 59,065 54,644 56,663<br />
Net expense for movements in provisions:<br />
– employee benefits (330) 1,049 568 1,286<br />
– restructure costs 5,000 – 5,000 –<br />
– counterparty default relating to other financial assets 8,368 – – –<br />
– onerous contracts 1,548 – – –<br />
Net bad and doubtful debts expensed including movements in<br />
provision for doubtful debts 2,769 (3,478) (2,117) (874)<br />
58
4. TAXATION<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Notes $'000 $'000 $'000 $'000<br />
(a) Income tax expense<br />
The income tax expense for the year differs from the amount<br />
calculated on the profit. The differences are reconciled as follows:<br />
Prima facie income tax expense calculated at 30% on the profit<br />
from ordinary activities 17,672 45,952 19,659 26,976<br />
Tax effect of permanent differences:<br />
Share of net profits from associates (628) (298) – –<br />
Franking credits on dividends received (828) – (12,484) (18,729)<br />
Research and development concessions (656) (737) (656) (737)<br />
Amortisation of intangible assets 732 – – –<br />
Depreciation of buildings 351 193 – –<br />
Foreign tax credits (1,423) (38) (1,100) (38)<br />
Under/(over) provision of previous year (2,535) (744) (2,063) 4,366<br />
Tax rate differential on foreign entities 502 566 – –<br />
Other items (net) 1,570 449 878 129<br />
Income tax expense attributable to profit from ordinary activities 14,757 45,343 4,234 11,967<br />
(b) Deferred tax assets and liabilities<br />
Current tax assets 13,444 – – 9,934<br />
Future income tax benefit 43,044 28,039 6,585 5,853<br />
Current tax payable – 10,422 3,122 –<br />
Provision for deferred income tax – non–current 10,554 19,141 6,125 6,595<br />
This future income tax benefit will only be obtained if:<br />
• future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;<br />
• the conditions for deductibility imposed by tax legislation continue to be complied with; and<br />
• no changes in tax legislation adversely affect the consolidated entity in realising the benefit.<br />
59
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
5. CASH ASSETS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Cash at bank and on hand 54,785 69,921 2,328 23,996<br />
Details of significant terms and conditions are included in Note 32(a).<br />
6. RECEIVABLES<br />
Current<br />
Trade debtors<br />
– other persons/corporations 443,872 67,056 86 14<br />
– less provision for doubtful debts (24,293) (3,752) (1) (668)<br />
419,579 63,304 85 (654)<br />
– related party (<strong>AWB</strong> National Pools) 27(b) 162,100 597,064 – –<br />
581,679 660,368 85 (654)<br />
Grower loan receivables 413,236 1,476,681 – – <br />
Finance advances 5,200 – – – <br />
Goods and services tax receivable 904 (8) 2,718 498<br />
Other receivables <br />
– other persons/corporations 5,463 – – – <br />
– wholly owned group 27(b) – – 839,385 733,551<br />
1,006,482 2,137,041 842,188 733,395<br />
Non–current<br />
Other loans<br />
Employee share loan<br />
Subordinated loan<br />
– wholly owned group 27(b)<br />
3,672 3,073 2,216 3,073<br />
2,495 1,012 2,495 1,012<br />
– – 50,000 –<br />
6,167 4,085 54,711 4,085<br />
All amounts are effectively hedged and there are no material currency exposures.<br />
Details of significant terms and conditions are included in Note 32(a).<br />
7. INVENTORIES<br />
Finished goods 191,128 137,067 – –<br />
Provision for diminution in value (5,751) (3,005) – –<br />
185,377 134,062 – –<br />
60
8. OTHER ASSETS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $’000<br />
Prepayments<br />
Other assets<br />
6,486<br />
5,714<br />
959<br />
2,309<br />
–<br />
185<br />
–<br />
201<br />
12,200 3,268 185 201<br />
9. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD<br />
(a) Details of investments in associates held by the consolidated entity<br />
Consolidated<br />
Principal Balance <strong>2003</strong> 2002<br />
Name % activity date $'000 $'000<br />
Arcadian Wool Brokers <strong>Limited</strong><br />
Sydney Wool Brokers <strong>Limited</strong><br />
ACN 093 163 430 Pty Ltd<br />
Wooldumpers Australia Pty Ltd<br />
Five Star Flour Mills Company SAE (FSFM)<br />
Five Star Feed Mills & Animal Production Company SAE<br />
40 Wool handling 30 June 1,714 –<br />
46.7 Wool handling 30 June – –<br />
25 Rural financing 30 June – –<br />
50 Wool handling 30 June 889 –<br />
30 Flour mill 30 June 8,360 12,790<br />
(i) Feed mill. 30 June 1,947 4,168<br />
12,910 16,958<br />
Five Star Flour and Feed Mills are based in Egypt.<br />
(i) <strong>AWB</strong> Group holds 23.7% directly. The other 9% is indirectly held through FSFM.<br />
(b) Share of associates' profit<br />
Profit from ordinary activities before income tax expense 2,248 993<br />
Income tax expense relating to ordinary activities (151) –<br />
2,097 993<br />
(c) Movement in carrying amount of investments<br />
Carrying amount of investments in associates at the beginning of the year 16,958 12,961<br />
Investments in associates acquired during the year 2,134 3,228<br />
Dividends received from associates (156) (224)<br />
Share of net profits of associates' for the financial year 2,097 993<br />
Share of decrement in associates' revaluation reserve for the financial year (8,123) –<br />
Carrying amount of investments in associates at the end of the year 12,910 16,958<br />
(d) Share of assets and liabilities<br />
Current assets 16,289 15,788<br />
Non–current assets 33,655 20,700<br />
Non–current assets under construction – 4,168<br />
Current liabilities (18,299) (16,106)<br />
Non–current liabilities (18,735) (7,364)<br />
Net assets 12,910 17,186<br />
61
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
9. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)<br />
Consolidated<br />
Notes <strong>2003</strong> 2002<br />
$'000 $'000<br />
(e) Retained profits of the consolidated entity attributable to associates<br />
Balance at beginning of the year 5,977 5,208<br />
Share of net profits of associates 2,097 993<br />
less share of associates' dividends (156) (224)<br />
Balance at the end of the year 7,918 5,977<br />
(f) Reserves of the consolidated entity attributable to associates<br />
Balance at the beginning of the year (1,578) (545)<br />
Share of associates' reserves (6,545) (1,033)<br />
Balance at the end of the year (8,123) (1,578)<br />
10. INTERESTS IN JOINT VENTURE OPERATIONS<br />
<strong>AWB</strong> <strong>Limited</strong> holds a 50% (2002: 50%) interest in a joint venture operation, Australian Independent Commodity Handlers (AICH). AICH<br />
manages a storage and handling facility known as the Melbourne Port Terminal. The role of <strong>AWB</strong> <strong>Limited</strong> in this joint venture is one of<br />
administration and part financing for the facility. <strong>AWB</strong> <strong>Limited</strong> does not participate in the operation of the facility.<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Net assets employed in the joint venture operation are included in the<br />
financial statements as follows:<br />
Property, plant and equipment 16,071 16,955<br />
<strong>AWB</strong> <strong>Limited</strong> also holds interests in the following research and development joint venture operations, for which no assets are employed.<br />
Name Principal activity Interest<br />
LongReach Plant Breeders Management Pty Ltd To undertake research projects with the aim of 50%<br />
breeding and developing new proprietary varieties.<br />
The current research project aim is to breed, develop<br />
and commercialise varieties of feed wheat with<br />
improved nutrition, agronomic performance and<br />
resistance to plant diseases that are well adapted<br />
to specified growing areas in Australia.<br />
Stored Grain Research Laboratory To undertake the funding, management and 14.3%<br />
commercialisation of outputs of the Stored Grain<br />
Research Laboratory.<br />
Graingene Agreement To generate intellectual property and germplasm. 33.3%<br />
Capital expenditure commitments and contingent liabilities in respect of the joint venture operations are disclosed in Notes 29 and 30<br />
respectively.<br />
62
11. OTHER FINANCIAL ASSETS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Current<br />
Short term deposits 36,005 10,718 – –<br />
Financial assets 31,814 51,880 – 2,488<br />
Provision for counterparty risk (8,368) – – –<br />
59,451 62,598 – 2,488<br />
Non–current assets<br />
Shares<br />
Controlled entities 34(a) – – 21,757 19,355<br />
Other companies<br />
– listed 130,889 8,251 – 5<br />
– unlisted 5,862 5,719 15,691 16,699<br />
Memberships 1,315 449 1,315 449<br />
138,066 14,419 38,763 36,508<br />
12. INTANGIBLE ASSETS<br />
Goodwill<br />
At cost 586,134 29 – –<br />
Accumulated amortisation (2,737) (4) – –<br />
583,397 25 – –<br />
Licence fees<br />
At cost 217 166 212 137<br />
Accumulated amortisation (40) (23) (40) (23)<br />
177 143 172 114<br />
583,574 168 172 114<br />
63
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
13. PROPERTY, PLANT AND EQUIPMENT<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Freehold land – at cost 16,337 6,180 2,924 2,924<br />
Buildings on freehold land<br />
– at cost 54,401 19,576 8,809 8,568<br />
– accumulated depreciation (7,800) (1,285) (898) (591)<br />
46,601 18,291 7,911 7,977<br />
Leasehold improvements<br />
– at cost 11,715 364 433 272<br />
– accumulated amortisation (5,237) (182) (306) (181)<br />
6,478 182 127 91<br />
Total land and buildings 69,416 24,653 10,962 10,992<br />
Plant and equipment<br />
– at cost 321,568 165,560 70,021 61,586<br />
– accumulated depreciation (90,541) (19,694) (26,066) (13,767)<br />
Total plant and equipment 231,027 145,866 43,955 47,819<br />
Total property, plant and equipment 404,021 191,680 82,187 73,350<br />
Total accumulated depreciation and amortisation (103,578) (21,161) (27,270) (14,539)<br />
Total property, plant and equipment at net book value 300,443 170,519 54,917 58,811<br />
Reconciliations<br />
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:<br />
Freehold<br />
Leasehold<br />
land Buildings improvements<br />
$'000 $'000 $'000<br />
Plant and<br />
equipment<br />
$'000<br />
Total<br />
$'000<br />
Consolidated – <strong>2003</strong><br />
Carrying amount at the beginning of the year 6,180<br />
Acquisitions through entity acquired 6,280<br />
Additions 3,992<br />
Disposals (115)<br />
Recoverable amount write down –<br />
Depreciation/amortisation expense –<br />
Net foreign currency difference on translation of self sustaining<br />
foreign operations –<br />
Carrying amount at the end of the year 16,337<br />
18,291 182 145,866 170,519<br />
10,370 6,148 49,141 71,939<br />
20,095 430 68,650 93,167<br />
(242) (11) (184) (552)<br />
– – (7,182) (7,182)<br />
(1,913) (258) (25,244) (27,415)<br />
– (13) (20) (33)<br />
46,601 6,478 231,027 300,443<br />
Consolidated – 2002<br />
Carrying amount at the beginning of the year 4,737 12,010 171 88,616 105,534<br />
Additions 1,461 7,209 109 72,961 81,740<br />
Disposals (18) (62) – (2,208) (2,288)<br />
Depreciation/amortisation expense – (866) (98) (13,503) (14,467)<br />
Carrying amount at the end of the year 6,180 18,291 182 145,866 170,519<br />
64
13. PROPERTY, PLANT AND EQUIPMENT (continued)<br />
Freehold<br />
land<br />
$'000<br />
Parent entity – <strong>2003</strong><br />
Carrying amount at the beginning of the year 2,924<br />
Additions –<br />
Disposals –<br />
Recoverable amount write down –<br />
Depreciation/amortisation expense –<br />
Leasehold<br />
Buildings improvements<br />
$'000 $'000<br />
Plant and<br />
equipment<br />
$'000<br />
Total<br />
$'000<br />
7,977 91 47,819 58,811<br />
241 161 17,210 17,612<br />
– – (45) (45)<br />
– – (7,182) (7,182)<br />
(307) (125) (13,847) (14,279)<br />
Carrying amount at the end of the year 2,924 7,911 127 43,955 54,917<br />
Parent entity – 2002<br />
Carrying amount at the beginning of the year<br />
Additions<br />
Disposals<br />
Depreciation/amortisation expense<br />
Carrying amount at the end of the year<br />
2,942 8,177 171 30,715 42,005<br />
– 175 17 28,324 28,516<br />
(18) (62) – (2,208) (2,288)<br />
– (313) (97) (9,012) (9,422)<br />
2,924 7,977 91 47,819 58,811<br />
14. PAYABLES<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Trade creditors<br />
Other creditors<br />
183,907<br />
152,159<br />
51,167<br />
71,514<br />
18,959<br />
27,921<br />
41,353<br />
35,574<br />
Australian dollar equivalents of amounts payable in foreign currencies are all effectively hedged.<br />
336,066 122,681 46,880 76,927<br />
15. INTEREST BEARING LIABILITIES<br />
Current<br />
Interest bearing deposits 282,247 – – –<br />
Bank loans 69,965 1,086,779 – –<br />
Loans<br />
– related party (<strong>AWB</strong> National Pools) 27(b) 315,795 550,739 9,752 5,961<br />
668,007 1,637,518 9,752 5,961<br />
Non–current – unsecured<br />
Bank loans 391,800 – – –<br />
Interest bearing deposits 3,077 – – –<br />
Details of significant terms and conditions are included in Note 32(a).<br />
394,877 – – –<br />
65
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
15. INTEREST BEARING LIABILITIES (continued)<br />
Financing arrangements<br />
The consolidated entity has access to the following lines of credit:<br />
Consolidated<br />
Committed credit facilities<br />
<strong>2003</strong> 2002<br />
FACILITY LIMIT<br />
FACILITY LIMIT<br />
Facility Balance Facility Balance<br />
currency undrawn currency undrawn<br />
Currency $'000 A$'000 A$'000 $'000 A$'000 A$'000<br />
Bank overdraft AUD 10,000 10,000 10,000 10,000 10,000 10,000<br />
Liquidity support AUD 250,000 250,000 250,000 850,000 850,000 850,000<br />
Multi option facility – guarantee AUD 310,000 310,000 – – – –<br />
Multi option facility – loan AUD 640,000 640,000 248,200 – – –<br />
1,210,000 508,200 860,000 860,000<br />
Uncommitted credit facilities<br />
Bank overdraft USD 20,000 29,590 29,590 20,000 36,751 36,751<br />
US commercial paper USD 1,500,000 2,219,263 2,219,263 1,500,000 2,756,340 1,979,603<br />
Domestic commercial paper AUD 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 1,995,000<br />
Euro commercial paper USD 1,500,000 2,219,263 2,219,263 1,500,000 2,756,340 2,489,893<br />
6,468,116 6,468,116 7,549,431 6,501,247<br />
Total facilities 7,678,116 6,976,316 8,409,431 7,361,247<br />
Note: The multi option facility is inclusive of a guarantee facility. At 30 September <strong>2003</strong>, the guarantee facility was fully utilised, with a<br />
drawing of AUD310 million.<br />
66
16. PROVISIONS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Current<br />
Employee benefits<br />
Litigation<br />
Surplus leased premises and restoration<br />
Onerous contracts<br />
31 26,669<br />
5,200<br />
6,915<br />
1,548<br />
7,288<br />
2,900<br />
–<br />
–<br />
6,750<br />
2,900<br />
–<br />
–<br />
6,390<br />
2,900<br />
–<br />
–<br />
Restructure 10,317 – 5,000 –<br />
Dividends – 30,075 – 30,075<br />
50,649 40,264 14,650 39,365<br />
Non–current<br />
Employee benefits 31 1,721 1,513 1,721 1,513<br />
Consolidated <strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> <strong>2003</strong><br />
$'000 $'000<br />
Reconciliations<br />
Reconciliations of the carrying amounts of litigation, restructure and dividend provisions are set out below:<br />
Litigation<br />
Carrying amount at the beginning of the year 2,900 2,900<br />
Increase through acquisition of entity 2,300 –<br />
Decrease from favourable foreign currency movements (423) (423)<br />
Resolutions made during the year (334) (334)<br />
Provision made during the year 757 757<br />
Carrying amount at the end of the year 5,200 2,900<br />
Restructure<br />
Carrying amount at the beginning of the year – –<br />
Provision made during the year 5,000 5,000<br />
Increase through acquisition of entity 5,317 –<br />
Carrying amount at the end of the year 10,317 5,000<br />
Dividend<br />
Carrying amount at the beginning of the year 30,075 30,075<br />
Provision made during the year 38,369 38,369<br />
Payment made during the year (68,444) (68,444)<br />
Carrying amount at the beginning of the year – –<br />
17. OTHER LIABILITIES<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Current<br />
Financial liabilities 8,907 – – –<br />
Unearned income 9,458 120 1,001 –<br />
Deferred gains – hedging contracts 3,684 19,956 – –<br />
22,049 20,076 1,001 –<br />
67
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
18. CONTRIBUTED EQUITY<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
(a) Issued and paid up capital<br />
Ordinary shares fully paid 848,958 700,312 848,958 700,312<br />
<strong>2003</strong> 2002<br />
Number of $'000 Number of $'000<br />
(b) Movements in ordinary share capital shares shares<br />
Movements in B class share capital during the period were as follows:<br />
Balance at the beginning of the year 273,408,454 700,312 273,306,320 700,836<br />
Issued during the year<br />
– institutional placement <strong>2003</strong>: $3.70 per share 41,100,000 152,070 – –<br />
– employee share plan: nil per share 31 116,078 – 102,134 –<br />
– equity share plan: nil per share 31 51,034 – – –<br />
– employee share offer <strong>2003</strong>: $3.90 per share 31 486,418 1,897 – –<br />
– less transaction costs – (5,321) – (524)<br />
Balance at the end of the year 315,161,984 848,958 273,408,454 700,312<br />
<strong>AWB</strong> <strong>Limited</strong>'s corporate structure consists of A class and B class shares. A class shares can only be owned by current wheat growers<br />
and specifically exclude dividends. However, they confer on A class shareholders a number of rights, including the ability to elect the<br />
majority of the board of directors. In contrast, B class shares can be owned by either wheat growers or non–wheat growers. B class<br />
shares carry rights to receive dividends and the right to elect a minority of the board of directors.<br />
19. RESERVES AND RETAINED PROFITS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
(a) Reserves<br />
Underwriting loss reserve 15,000 15,000 15,000 15,000<br />
Legal reserve 65 65 – –<br />
Foreign currency translation reserve (13,348) (373) – –<br />
Movement in foreign currency translation reserve:<br />
1,717 14,692 15,000 15,000<br />
Balance at the beginning of the year (373) (37) – –<br />
Net translation adjustment (12,975) (336) – –<br />
Balance at the end of the year (13,348) (373) – –<br />
(b) Retained profits<br />
Balance at the beginning of the year 72,815 33,978 29,712 20,115<br />
Net profit attributable to members of <strong>AWB</strong> <strong>Limited</strong> 43,891 107,192 61,297 77,952<br />
Dividend provided for or paid 22 (38,369) (68,355) (38,369) (68,355)<br />
Balance at the end of the year 78,337 72,815 52,640 29,712<br />
68
20. OUTSIDE EQUITY INTERESTS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Outside equity interests in controlled entities comprise:<br />
Interests in retained profits at the beginning of the financial<br />
year adjusted for outside equity interests in entities acquired<br />
during the financial year 2,984 964 – –<br />
Interests in profit from ordinary activities after income tax 259 637 – –<br />
Interests in dividends paid (91) – – –<br />
Interests in retained profits at the end of the financial year 3,152 1,601 – –<br />
Interests in share capital 185 185 – –<br />
Interests in reserves (329) (142) – –<br />
Total outside equity interests 3,008 1,644 – –<br />
21. TOTAL EQUITY RECONCILIATION<br />
Balance at the beginning of the year 789,463 751,019 745,024 735,951<br />
Total changes in equity recognised in the statement of<br />
financial performance 30,916 106,856 61,297 77,952<br />
Transactions with owners as owners:<br />
Contributions of equity, net of transaction costs 18(b) 148,646 (524) 148,646 (524)<br />
Dividend provided for or paid 22 (38,369) (68,355) (38,369) (68,355)<br />
Total changes in outside equity interests 20 1,364 467 – –<br />
Balance at the end of the year 932,020 789,463 916,598 745,024<br />
22. DIVIDENDS<br />
Dividends recognised in the current year by <strong>AWB</strong> <strong>Limited</strong> are as follows. All dividends are fully franked:<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Dividend proposed<br />
– Final: (2002: 11 cents per share) – 30,075<br />
Dividends paid during the year<br />
– Interim: (14 cents per share) (2002: 14 cents) 38,369 38,280<br />
38,369 68,355<br />
– Final: (11 cents per share) (2002: 8 cents) 30,075 21,865<br />
Subsequent events<br />
On 26 November <strong>2003</strong>, the directors declared a final dividend of 11 cents per share resulting in a dividend payable of $35.97 million.<br />
The financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 September <strong>2003</strong><br />
and will be recognised in subsequent reports.<br />
Franking credit balance<br />
30% franking credits available to shareholders of <strong>AWB</strong> <strong>Limited</strong> for subsequent financial years 26,476 17,667<br />
Notional fully franked dividend based on available franking credits 61,777 41,223<br />
The above available amounts are based on the balance of the dividend franking account at year end adjusted for:<br />
(a) franking credits that will arise from the payment of the current tax liability;<br />
(b) franking debits that will arise from the payment of dividends recognised as a liability at the year end;<br />
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the year end; and<br />
(d) franking credits that the entity may be prevented from distributing in subsequent years.<br />
The ability to use the franking credits is dependent upon there being sufficient available profits to declare dividends.<br />
69
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
22. DIVIDENDS (continued)<br />
Change in measurement of dividend franking account<br />
In accordance with the New Business Tax System (Imputation) Act 2002, the measurement basis of the dividend franking account<br />
changed on 1 July 2002 from an after tax profits basis to an income tax paid basis.<br />
The amount of franking credits available to shareholders has been measured under the new legislation and represents income tax paid<br />
amounts available to frank distributions. Comparative information has been restated for this change in measurement.<br />
The change in the basis of measurement does not change the underlying value of franking credits or tax offsets available to shareholders<br />
from the dividend franking account.<br />
23. NOTES TO THE STATEMENT OF CASH FLOWS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
(a) Reconciliation of net profit from ordinary activities after income<br />
tax expense to the net cash flows from operations<br />
Profit from ordinary activities after income tax 44,150 107,829 61,297 77,952<br />
Add/(less) non–cash items:<br />
Net loss/(gain) on disposal of property, plant and equipment (21) 1,531 23 1,531<br />
Depreciation 27,415 14,467 14,279 9,422<br />
Amortisation 2,467 16 26 15<br />
Share of profits of associates' net of dividends received (1,941) (764) – –<br />
Write down in the value of property plant and equipment to<br />
recoverable amount 7,182 – 7,182 –<br />
Increase/(decrease) in income tax payable (26,518) (6,350) 13,056 (13,459)<br />
Increase/(decrease) in deferred income tax liability (11,388) (8,092) (470) (2,125)<br />
Decrease/(increase) future income tax benefit (1,678) (7,718) (732) 5,150<br />
Changes in assets and liabilities adjusted for the effects of<br />
purchasing a controlled entity during the financial year:<br />
Trade receivables 342,716 (237,475) – (90,118)<br />
Grower loan receivables 1,063,445 (360,730) – –<br />
Inventories 66,914 9,622 – –<br />
Prepayments and other debtors 5,354 8,555 873 2,406<br />
Trade and other creditors 20,323 (72,939) (26,495) (23,059)<br />
Provisions 5,874 549 5,568 786<br />
Net cash flow from/(used in) operating activities 1,544,294 (551,499) 74,607 (31,499)<br />
(b) Reconciliation of cash<br />
Cash balance comprises:<br />
– cash at bank and on hand 25,066 39,335 2,328 23,996<br />
– cash on deposit 29,719 30,586 – –<br />
Closing cash balance 54,785 69,921 2,328 23,996<br />
70
24. REMUNERATION OF DIRECTORS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$ $ $ $<br />
Total income paid or payable, or otherwise made available, to all<br />
directors of the <strong>AWB</strong> <strong>Limited</strong> and controlled entities from<br />
<strong>AWB</strong> <strong>Limited</strong> or any related party:<br />
3,349,407 2,599,042 1,609,272 1,807,123<br />
The number of directors of <strong>AWB</strong> <strong>Limited</strong> whose income (including superannuation contributions) falls within the following bands is:<br />
Number<br />
<strong>2003</strong> 2002<br />
$30,000 – $39,999 6 –<br />
$50,000 – $59,999 – 7<br />
$60,000 – $69,999 7 3<br />
$120,000 – $129,999 – 1<br />
$140,000 – $149,999 – 1<br />
$160,000 – $169,999 1 –<br />
$810,000 – $819,999 1 –<br />
$970,000 – $979,999 – 1<br />
15 13<br />
25. REMUNERATION OF EXECUTIVES<br />
Consolidated<br />
<strong>2003</strong> 2002<br />
$ $<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002<br />
$ $<br />
Remuneration received or due and receivable by executive officers of the<br />
consolidated entity whose remuneration is $100,000 or more, from<br />
<strong>AWB</strong> <strong>Limited</strong> or any related party, in connection with the management of the<br />
affairs of <strong>AWB</strong> <strong>Limited</strong> or any related party, whether as an executive<br />
officer or otherwise:<br />
4,658,085 4,009,967 4,658,085 4,009,967<br />
The number of executives of the consolidated entity and <strong>AWB</strong> <strong>Limited</strong><br />
whose remuneration falls within the following bands:<br />
Number<br />
Number<br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$240,000 – $249,999 1 – 1 –<br />
$260,000 – $269,999 – 1 – 1<br />
$350,000 – $359,999 1 – 1 –<br />
$370,000 – $379,999 – 1 – 1<br />
$380,000 – $389,999 1 – 1 –<br />
$420,000 – $429,999 1 – 1 –<br />
$430,000 – $439,999 1 1 1 1<br />
$440,000 – $449,999 – 3 – 3<br />
$450,000 – $459,999 1 – 1 –<br />
$480,000 – $480,999 1 – 1 –<br />
$510,000 – $519,999 1 – 1 –<br />
$550,000 – $559,999 1 – 1 –<br />
$630,000 – $639,999 – 1 – 1<br />
$810,000 – $819,999 1 – 1 –<br />
$970,000 – $979,999 – 1 – 1<br />
10 8 10 8<br />
For the purposes of Australian Accounting Standard AASB 1034: Financial <strong>Report</strong> Presentation and Disclosures, the company has<br />
interpreted executive officers as being those persons who are members of the Executive Leadership Group which determines the<br />
operational and strategic direction of the <strong>AWB</strong> Group.<br />
71
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
26. AUDITORS' REMUNERATION<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$ $ $ $<br />
Amounts received or due and receivable by the auditors of the company for:<br />
Audit services 679,805 491,000 260,000 260,000 <br />
Other services <br />
– internal audit services 23,000 174,201 23,000 174,201<br />
– other services 49,895 32,500 15,495 32,500<br />
752,700 697,701 298,495 466,701<br />
Internal audit services were outsourced to Andersen in 2002. The amount disclosed in this Note comprises payments made subsequent<br />
to the merger of Andersen with Ernst & Young.<br />
27. RELATED PARTY DISCLOSURES<br />
(a) The directors of <strong>AWB</strong> <strong>Limited</strong> at any time during the financial year are as follows:<br />
– Brendan Stewart (Chairman)<br />
– Robert Barry (Deputy Chairman)<br />
– Andrew Lindberg (Managing Director)<br />
– Ian Cush (not re–elected at <strong>2003</strong> <strong>Annual</strong> General Meeting)<br />
– Brendan Fitzgerald (elected at <strong>2003</strong> <strong>Annual</strong> General Meeting)<br />
– Laurie Marshall<br />
– Xavier Martin (elected at <strong>2003</strong> <strong>Annual</strong> General Meeting)<br />
– Warrick McClelland<br />
– Christopher Moffet<br />
– Peter Polson (appointed 31 March <strong>2003</strong>)<br />
– Kerry Sanderson<br />
– Brenda Shanahan (resigned 31 March <strong>2003</strong>)<br />
– Michael Shanahan (not re–elected at <strong>2003</strong> <strong>Annual</strong> General Meeting)<br />
– John Simpson<br />
– John Thame.<br />
(b) The following related party transactions occurred during the period:<br />
Borrowing costs expensed<br />
– wholly owned group – – 901 3,895<br />
– related party (<strong>AWB</strong> National Pools) 10,353 21,987 – –<br />
Revenue from sale of goods<br />
– related party (<strong>AWB</strong> National Pools) 409,720 1,033,154 8,991 206,128<br />
Management fee revenue<br />
– wholly owned group – – 50,877 54,451<br />
– related party (<strong>AWB</strong> National Pools) 77,091 68,305 77,091 68,305<br />
Dividends<br />
– wholly owned group – – 41,600 62,430<br />
– other subsidiaries – – 53 42<br />
– associates – – 155 224<br />
Interest revenue<br />
– wholly owned group – – 32,193 31,638<br />
– related party (<strong>AWB</strong> National Pools) 2,426 8,932 – –<br />
– associates – 40 – 40<br />
72
27. RELATED PARTY DISCLOSURES (continued)<br />
(b) The following related party transactions occurred during the period (continued):<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Loans advanced to / receivable from:<br />
– wholly owned group – – 839,385 733,551<br />
– related party (<strong>AWB</strong> National Pools) 162,100 597,064 – –<br />
Non–current advanced to / receivable from:<br />
– wholly owned group – subordinated loan – – 50,000 –<br />
Loans advanced from / payable to:<br />
– related party (<strong>AWB</strong> National Pools) 315,795 550,739 9,752 5,961<br />
Terms and conditions<br />
Interest is charged or credited on amounts with <strong>AWB</strong> <strong>Limited</strong> at prevailing commercial interest rates. All other transactions within the <strong>AWB</strong><br />
<strong>Limited</strong> consolidated entity are based on actual amounts incurred or received and are conducted on commercial terms and conditions.<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$ $ $ $<br />
(c) Transactions with the directors of <strong>AWB</strong> <strong>Limited</strong> and the consolidated entity<br />
The remuneration of directors is set out in Note 24.<br />
Harvest payment loans made to directors 578,808 1,353,919 – – <br />
(d) Transactions with director related entities<br />
Purchases<br />
Messrs Barry, Moffet, Cush, Gibson, Marshall, McClelland, Donges,<br />
Simpson, M. Shanahan, Stewart (2002 only) 4,195,914 4,912,400 – – <br />
The above transactions were conducted with director related entities under normal commercial terms with conditions no more favourable<br />
than those available to other suppliers and customers.<br />
Mrs Kerry Sanderson is Chief Executive and General Manager of Fremantle Ports Authority in Western Australia. A major portion of the<br />
Western Australian harvest was shipped through the Port of Fremantle. All transactions with this Authority were in the ordinary course of<br />
business on normal commercial terms and conditions.<br />
(e) <strong>AWB</strong> <strong>Limited</strong> is the ultimate parent entity.<br />
(f) Equity instruments of directors<br />
The interests of directors of the reporting entity and their director related entities in shares of entities within the consolidated entity at year<br />
end are set out below:<br />
<strong>2003</strong> 2002<br />
Director <strong>AWB</strong> <strong>Limited</strong> <strong>AWB</strong> <strong>Limited</strong><br />
A class B class A class B class<br />
Brendan Stewart 1 15,425 1 15,425<br />
Robert Barry 1 40,579 1 40,579<br />
Andrew Lindberg – 71,574 – 70,000<br />
Ian Cush 1 86,591 1 86,591<br />
Brendan Fitzgerald 1 12,000 – –<br />
Laurie Marshall 1 16,090 1 16,090<br />
Xavier Martin 1 70,695 – –<br />
Warrick McClelland 1 68,035 1 68,035<br />
Christopher Moffet 1 100,577 1 100,577<br />
Peter Polson – – – –<br />
Kerry Sanderson – 5,000 – 5,000<br />
Brenda Shanahan – – – –<br />
Michael Shanahan 1 4,823 1 4,823<br />
John Simpson 1 99,672 1 99,672<br />
John Thame – 5,000 – 5,000<br />
10 596,061 8 511,792<br />
(e) All financial benefits provided by <strong>AWB</strong> <strong>Limited</strong> or its controlled entities to related parties (other than benefits approved at a general<br />
meeting) were provided on arm's length terms. Transactions relating to shares and options of <strong>AWB</strong> <strong>Limited</strong>, including the payment and<br />
receipt of dividends, were on the same basis as similar transactions with other shareholders.<br />
73
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
28. SEGMENT INFORMATION<br />
Business segments<br />
Intersegment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to a<br />
segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the<br />
period to acquire segment assets that are expected to be used for more than one period.<br />
The consolidated entity comprises the following main business segments, based on the consolidated entity’s management reporting system:<br />
Finance & Risk Pool Rural Grain Supply Chain<br />
Management Management Services Acquisition Grain & Other Other/ Intersegment<br />
Products Services (Landmark) & Trading Technology Investments Corporate eliminations Consolidated<br />
2002 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000<br />
Revenue<br />
External segment revenue 276,389 77,091 118,592 1,500,731 5,463 229,794 3,830 – 2,211,890<br />
Intersegment revenue 60,443 – 667 311,250 9,139 3,639 60,728 (445,866) –<br />
Total consolidated revenue 336,832 77,091 119,259 1,811,981 14,602 233,433 64,558 (445,866) 2,211,890<br />
Results<br />
Consolidated entity profit from<br />
ordinary activities before<br />
income tax expense 64,148 23,331 5,045 8,525 (5,792) (4,244) (32,106) – 58,907<br />
Income tax expense (14,757)<br />
Net profit attributable to<br />
outside equity interests – – (14) – – (245) – – (259)<br />
Net profit attributable to members of <strong>AWB</strong> <strong>Limited</strong> 43,891<br />
Assets<br />
Segment assets 1,313,329 – 635,269 344,225 10,439 213,186 1,565,062 (1,722,055) 2,359,455<br />
Unallocated corporate assets 56,488<br />
Total assets 2,415,943<br />
Liabilities<br />
Segment liabilities 1,034,131 – 518,332 329,420 10,601 206,891 126,960 (752,966) 1,473,369<br />
Unallocated corporate liabilities 10,554<br />
Total liabilities 1,483,923<br />
Other segment information<br />
Equity method investments<br />
included in segment assets – – 2,603 – – 10,307 – – 12,910<br />
Acquisition of<br />
non–current assets 3,216 – – 301 – 72,038 17,612 – 93,167<br />
Depreciation & amortisation – – 1,468 77 – 11,600 16,737 – 29,882<br />
Non–cash expenses other<br />
than depreciation & amortisation – – – 2,769 – 9,915 11,852 – 24,536<br />
Geographical segments<br />
<strong>AWB</strong> <strong>Limited</strong> and its controlled entities operate predominantly in one geographical segment, being Australia.<br />
74
28. SEGMENT INFORMATION (continued)<br />
Finance & Risk Pool Grain Supply Chain<br />
Management Management Acquisition Grain & Other Other/ Intersegment<br />
Products Services & Trading Technology Investments Corporate eliminations Consolidated<br />
2002 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000<br />
Revenue<br />
External segment revenue 349,712 68,305 1,545,065 8,114 320,937 21,254 6,163 2,319,550<br />
Intersegment revenue 48,649 – 2,736 6,548 2,072 62,870 (122,875) –<br />
Total consolidated revenue 398,361 68,305 1,547,801 14,662 323,009 84,124 (116,712) 2,319,550<br />
Results<br />
Consolidated entity profit from<br />
ordinary activities before<br />
income tax expense<br />
Income tax expense<br />
88,450 17,350 49,239 (3,660) 26,815 (25,022) – 153,172<br />
(45,343)<br />
Net profit attributable to<br />
outside equity interests – – – – (637) – – (637)<br />
Net profit attributable to members of <strong>AWB</strong> <strong>Limited</strong> 107,192<br />
Assets<br />
Segment assets 2,799,136 – 1,132,941 10,450 164,733 695,756 (2,189,977)<br />
2,613,039<br />
Unallocated corporate assets<br />
28,039<br />
Total assets 2,641,078<br />
Liabilities<br />
Segment liabilities 2,712,485 – 1,084,899 2,089 118,255 63,915 (2,159,591) 1,822,052<br />
Unallocated corporate liabilities 29,563<br />
Total liabilities 1,851,615<br />
Other segment information:<br />
Equity method investments<br />
included in segment assets – – – – 16,958 – – 16,958<br />
Acquisition of non–current assets – – 238 769 52,988 27,745 – 81,740<br />
Depreciation & amortisation – – 4 406 5,046 9,027 – 14,483<br />
Non–cash expenses other<br />
than depreciation & amortisation – – 1,308 82 – 2,485 – 3,875<br />
Geographical segments<br />
<strong>AWB</strong> <strong>Limited</strong> and its controlled entities operate predominantly in one geographical segment, being Australia.<br />
75
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
29. EXPENDITURE COMMITMENTS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
At 30 September, the consolidated entity had contracted for<br />
but not provided in the financial report:<br />
(i) Grain sales<br />
Contracts for the sale of grain not later than one year but subject<br />
to variation of +/–10% outturn tolerance 50,045 71,559 – –<br />
(ii) Grain purchases<br />
Contracts for the purchase of grain not later than one year subject<br />
to variation for quality characteristics 47,593 76,419 – –<br />
(a) Capital expenditure commitments<br />
Estimated capital expenditure contracted for at balance date<br />
but not provided for:<br />
– payable not later than one year<br />
– joint venture operations 3,514 3,660 3,514 3,660<br />
– other 17,101 32,736 – –<br />
– payable later than one year but not later than five years<br />
– joint venture operations 9,283 11,760 9,283 11,760<br />
29,898 48,156 12,797 15,420<br />
(b) Lease expenditure commitments<br />
Operating leases (non–cancellable)<br />
– payable not later than one year 3,997 2,387 2,863 917<br />
– payable later than one year but not later than five years 17,624 2,875 16,935 1,298<br />
– payable later than five years 26,590 – 26,565 –<br />
48,211 5,262 46,363 2,215<br />
These lease commitments represent payments due for the head office, regional and overseas offices and motor vehicles under operating<br />
leases. The head office lease is for 12 years commencing in the 2004 financial year. The remaining operating leases have an average<br />
lease term of three years.<br />
Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on the contract terms.<br />
(c) Other expenditure commitments<br />
– Payable not later than one year<br />
– Payable later than one year but not later than five years<br />
600<br />
–<br />
1,400<br />
–<br />
600<br />
–<br />
1,400<br />
–<br />
600 1,400 600 1,400<br />
30. CONTINGENT LIABILITIES<br />
Litigation claims<br />
Several claims for damages and costs were lodged against <strong>AWB</strong><br />
<strong>Limited</strong> and its controlled entities which denied liability and<br />
defended the claims. The maximum damages/costs claimed<br />
but not otherwise recognised in the statement of financial<br />
position were estimated to amount to:<br />
Consolidated<br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
4,393<br />
–<br />
76
31. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Notes <strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Employee benefits $'000 $'000 $'000 $'000<br />
The aggregate employee benefits liability is comprised of:<br />
– Provisions 28,390 8,801 8,471 7,903<br />
Number<br />
Number<br />
Number of full time equivalent employees at the end of the year 2,778 573 593 556<br />
Employee share offer<br />
An employee share offer was made to employees of <strong>AWB</strong> <strong>Limited</strong><br />
who were eligible employees as at December 2002. <strong>AWB</strong> <strong>Limited</strong><br />
offered eligible employees an interest free loan (fully repayable at<br />
the end of five years or upon resignation). 222 permanent<br />
employees participated in this offer with 486,418 shares being<br />
allocated, with a value of $1,897,030.<br />
Employee share plan<br />
In December 2002, a second offer was made under the employee<br />
share plan which was established in 2002, where all permanent<br />
employees (other than selected senior executives who may<br />
participate in the performance rights plan) of the consolidated<br />
entity were entitled to be issued with B class shares in <strong>AWB</strong><br />
<strong>Limited</strong>. Each permanent employee who participated received<br />
shares to the value of $1,000 (based on market value at issue<br />
date). Shares were provided under the scheme to a total of 446<br />
employees. The shares were issued for nil consideration in<br />
accordance with the performance guidelines established by the<br />
directors of <strong>AWB</strong> <strong>Limited</strong>. The shares are quoted on the Australian<br />
Stock Exchange (ASX).<br />
During the year, a total of 116,078 (2002: 102,134) B class<br />
shares were issued to employees under the plan. The total market<br />
value of the shares at the date of issue was $456,187. It is the<br />
policy of <strong>AWB</strong> not to charge the value of the shares issued as an<br />
employee benefits expense. In accordance with this policy, no<br />
amounts have been recognised in respect of the share issue during<br />
the year.<br />
Superannuation commitments<br />
All employees are able to choose where their superannuation<br />
contributions are directed, in line with <strong>AWB</strong> Packaging Policy and<br />
Australian Taxation Office rules. <strong>AWB</strong> <strong>Limited</strong> also offers a default<br />
fund, <strong>AWB</strong> Staff Superannuation Plan, which is a subset of the<br />
Mercer Retirement Trust for all other employees. As all schemes<br />
are accumulation schemes, <strong>AWB</strong> <strong>Limited</strong> has no future<br />
superannuation liabilities to report.<br />
Performance rights plan<br />
A performance rights plan exists, whereby selected senior<br />
employees of the consolidated entity are given the opportunity to<br />
acquire rights over unissued B class shares in <strong>AWB</strong> <strong>Limited</strong> by<br />
participating in the plan.<br />
Each performance right is over one unissued B class share in <strong>AWB</strong><br />
<strong>Limited</strong>. The performance rights are issued at no cost and become<br />
exercisable depending on the performance of <strong>AWB</strong> <strong>Limited</strong> (based<br />
on total shareholder return) relative to the performance of the<br />
S&P/ASX200.<br />
The number of performance rights which become exercisable<br />
depends on the company’s ranking relative to companies comprised<br />
in the S&P/ASX200 on total shareholder return in the performance<br />
period. This ranking is calculated at the end of each quarter and<br />
expressed as a percentile. The rights may become exercisable on a<br />
progressive basis once the company’s ranking for the quarter reaches<br />
50. Fifty percent of the rights become exercisable when the<br />
company’s ranking reaches 50. All the rights become exercisable if<br />
the company’s ranking for the quarter exceeds 75. The percentage<br />
of rights which become exercisable increases proportionately if the<br />
company ranks between 50 and 75 for the quarter. Participants<br />
must pay a nominal exercise price to exercise the performance rights.<br />
The total exercise price payable on the exercise of any performance<br />
rights on a particular day will be one dollar in total (irrespective of the<br />
number of rights exercised on that day).<br />
As at 30 September 2002, a total of 183,758 performance rights had<br />
been issued to senior employees. The performance period for these<br />
rights commences on 1 October 2004 and ends on 1 October 2006.<br />
On 31 January <strong>2003</strong>, a further 224,593 performance rights were<br />
issued to senior employees. The performance period for these rights<br />
commences on 1 October 2005 and ends on 1 October 2007.<br />
On 30 June <strong>2003</strong>, the performance rights plan was extended to a<br />
limited number of high potential, business critical senior employees.<br />
A further 168,369 performance rights were issued under the terms<br />
of the 2002 offer.<br />
Should the relative performance of the company to date continue<br />
for the remainder of the performance period, the value of the<br />
shares that would be issued amounts to $1,537,458.<br />
Long term incentive plan<br />
A long term incentive plan for the Managing Director was<br />
established in the prior financial year, where the Managing Director<br />
was given the opportunity to receive cash bonuses by participating<br />
in the plan. Under the plan, notional performance rights are issued<br />
to the Managing Director. The terms and conditions of the plan are<br />
consistent with the performance rights plan except that the benefit<br />
is delivered in cash.<br />
On 30 May 2002, a total of 108,000 notional performance rights<br />
were issued. The performance period for these rights commences<br />
on 1 October 2004 and ends on 1 October 2006. Should the<br />
relative performance of the company to date continue for the<br />
remainder of this performance period, the cash bonus payable<br />
would be $307,828.<br />
On 1 October 2002, a further 124,000 notional performance rights<br />
were issued. The performance period for these rights commences<br />
on 1 October 2005 and ends on 1 October 2007. Should the<br />
relative performance of the company to date continue for the<br />
remainder of this performance period, the cash bonus payable<br />
would be $354,256.<br />
77
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
31. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (continued)<br />
Equity share plan<br />
The equity share plan was established during the year. It provides<br />
the company with the flexibility to provide selected employees with<br />
part of any short term incentive in the form of B class shares in the<br />
company. Selected senior employees were invited to participate in<br />
the equity share plan and acquire a fixed proportion of their short<br />
term incentive in B class shares in the company.<br />
The number of shares allocated under the equity share plan was<br />
based on the weighted average of the prices at which B class<br />
shares in the company were traded on the ASX in the 20 trading<br />
days prior to the issue date, and the value of the remuneration or<br />
short term incentive to be provided.<br />
Under the equity share plan offer made on 31 January <strong>2003</strong>,<br />
51,034 shares were offered to eligible senior employees.<br />
32. FINANCIAL INSTRUMENTS<br />
(a) Interest rate risk<br />
The consolidated entity's exposure to interest rate risks and the effective weighted average interest rates of financial assets and financial<br />
liabilities are as follows:<br />
FIXED INTEREST RATE MATURING IN<br />
Floating 1 year Over 1 More than Non–interest<br />
Weighted average interest rate % interest rate or less to 5 years 5 years bearing Total<br />
Notes CAD USD AUD $'000 $'000 $'000 $'000 $'000 $'000<br />
<strong>2003</strong><br />
Financial assets<br />
Cash assets 5 n/a 1.18<br />
Receivables 6 n/a n/a<br />
Short term deposits 11 n/a n/a<br />
Initial margin deposits 11 1.10 0.45<br />
Financial assets – other 11 n/a n/a<br />
1.34 54,785 – – – – 54,785<br />
7.07 413,236 – – – 593,246 1,006,482<br />
4.77 36,005 – – – – 36,005<br />
5.78 5,387 – – – – 5,387<br />
n/a – – – – 26,427 26,427<br />
509,413 – – – 619,673 1,129,086<br />
Financial liabilities<br />
Payables 14 n/a n/a n/a – – – – 336,066 336,066<br />
Interest bearing liabilities 15 n/a 1.65 4.93 963,805 92,595 4,678 – 1,806 1,062,884<br />
963,805 92,595 4,678 – 337,872 1,398,950<br />
Unrecognised financial derivatives – face value<br />
Assets<br />
Interest rate swaps n/a n/a<br />
Interest rate options n/a n/a<br />
Interest rate futures n/a n/a<br />
n/a 90,000 – – – – 90,000<br />
4.90 – 340,000 – – – 340,000<br />
4.98 – 30,000 – – – 30,000<br />
90,000 370,000 – – – 460,000<br />
Liabilities<br />
Interest rate swaps n/a n/a<br />
Interest rate options n/a n/a<br />
Interest rate futures n/a n/a<br />
5.75 – – 90,000 – – 90,000<br />
4.09 – 295,000 – – – 295,000<br />
4.96 – 15,000 – – – 15,000<br />
– 310,000 90,000 – – 400,000<br />
78
32. FINANCIAL INSTRUMENTS (continued)<br />
(a) Interest rate risk (continued)<br />
FIXED INTEREST RATE MATURING IN<br />
Floating 1 year Over 1 More than Non–interest<br />
Weighted average interest rate % interest rate or less to 5 years 5 years bearing Total<br />
Notes CAD USD AUD $'000 $'000 $'000 $'000 $'000 $'000<br />
2002<br />
Financial assets<br />
Cash assets 5 1.76 1.25<br />
Receivables 6 n/a 3.90<br />
Short term deposits 11 n/a n/a<br />
Initial margin deposits 11 1.76 1.46<br />
Financial assets – other 11 n/a n/a<br />
4.45 69,921 – – – – 69,921<br />
6.64 1,476,681 – – – 660,360 2,137,041<br />
4.93 10,718 – – – – 10,718<br />
n/a 14,198 – – – – 14,198<br />
n/a – – – – 37,682 37,682<br />
1,571,518 – – – 698,042 2,269,560<br />
Financial liabilities<br />
Payables 14 n/a n/a n/a – – – – 122,681 122,681<br />
Interest bearing liabilities 15 n/a 2.06 4.53 1,637,518 – – – – 1,637,518<br />
1,637,518 – – – 122,681 1,760,199<br />
Unrecognised financial derivatives – face value<br />
Assets<br />
Interest rate swaps n/a n/a n/a 90,000 – – – – 90,000<br />
Interest rate options n/a n/a 5.19 – 240,000 15,000 – – 255,000<br />
90,000 240,000 15,000 – – 345,000<br />
Liabilities<br />
Interest rate swaps n/a n/a<br />
Interest rate options n/a n/a<br />
Interest rate futures n/a n/a<br />
5.75 – – 90,000 – – 90,000<br />
5.16 – 265,000 40,000 – – 305,000<br />
5.08 – 50,000 – – – 50,000<br />
– 315,000 130,000 – – 445,000<br />
79
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
32. FINANCIAL INSTRUMENTS (continued)<br />
(b) Foreign exchange risk<br />
The consolidated entity enters into forward exchange contracts and options to hedge (or hedge a proportion) of sale and purchase<br />
commitments denominated in foreign currencies subject to board approved limits.<br />
The following table sets out the gross value to be received under foreign currency contracts, the weighted average exchange rates and<br />
the settlement periods of outstanding contracts for the consolidated entity relating to future anticipated sales and purchases:<br />
Forward exchange contracts:<br />
Consolidated<br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Weighted average rate $'000 $'000<br />
Buy US dollars<br />
Not later than one year<br />
Later than one year but not later than two years<br />
Sell US dollars<br />
Not later than one year<br />
Later than one year but not later than two years<br />
Buy Canadian dollars<br />
Not later than one year<br />
Later than one year but not later than two years<br />
Sell Canadian dollars<br />
Not later than one year<br />
Later than one year but not later than two years<br />
0.6384 0.5377<br />
n/a 0.5236<br />
0.6146 0.5215<br />
n/a 0.5255<br />
0.8977 0.8325<br />
0.8849 0.8328<br />
0.8706 0.8340<br />
0.8823 0.8361<br />
176,336 521,077<br />
– 4,037<br />
(163,869) (788,517)<br />
– (34,839)<br />
43,822 87,774<br />
1,729 873<br />
(51,205) (108,065)<br />
(1,678) (13,862)<br />
5,135 (331,522)<br />
Currency options:<br />
Buy US dollar put<br />
Not later than one year<br />
Sell US dollar call<br />
Not later than one year<br />
Sell US dollar put<br />
Not later than one year<br />
Buy US dollar call<br />
Not later than one year<br />
0.6481 0.5269 (12,344) (75,921)<br />
0.6760 0.5600 (7,402) (71,432)<br />
0.6452 0.4900 23,256 16,327<br />
0.6938 – 11,532 –<br />
15,042 (131,026)<br />
The net deferred costs and exchange gains and losses on foreign exchange hedges of anticipated foreign currency sales and purchases<br />
recognised in the statement of financial position and the timing of their anticipated recognition as part of sales and purchases are:<br />
Consolidated<br />
Net deferred gains/(losses)<br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Not later than one year 2,117 24,804<br />
Later than one year but not later than two years – 38<br />
2,117 24,842<br />
80
32. FINANCIAL INSTRUMENTS (continued)<br />
(c) Commodity price risk<br />
The consolidated entity enters into commodity futures contracts and options to hedge (or hedge a proportion) of commodity selling prices<br />
on anticipated specific future sales and purchases of agricultural products. Major sales and purchases being hedged include wheat,<br />
sorghum and canola.<br />
At year end, the consolidated entity has the following commodity hedges against future anticipated sales and purchases:<br />
Consolidated<br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
Futures AUD per tonne $'000 $'000<br />
Buy<br />
Not later than one year 270.06 256.95 77,907 105,349<br />
Sell<br />
Not later than one year 367.29 284.35 (24,006) (232,474)<br />
Later than one year but not later than two years 382.90 269.26 (1,256) (33,128)<br />
Options<br />
52,645 (160,253)<br />
Buy call option<br />
Not later than one year 204.61 309.27 323,547 179,487<br />
Sell put option<br />
Not later than one year 165.90 292.66 97,054 246,437<br />
Buy put option<br />
Not later than one year 176.43 254.29 (42,623) (221,762)<br />
Sell call option<br />
Not later than one year 217.44 305.09 (244,350) (490,561)<br />
133,628 (286,399)<br />
The net deferred costs and gains and losses on commodity hedges of anticipated sales and purchases recognised in the statement of<br />
financial position and the timing of their anticipated recognition as part of sales and purchases are:<br />
Consolidated<br />
Net deferred gains/(losses)<br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Not later than one year 1,567 (4,533)<br />
Later than one year but not later than two years – (353)<br />
1,567 (4,886)<br />
81
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
32. FINANCIAL INSTRUMENTS (continued)<br />
(d) Credit risk exposure<br />
Credit risk reports the loss that would be recognised if counterparties failed to perform as contracted.<br />
Recognised financial instruments<br />
The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the statement of<br />
financial position, is the carrying amount net of any provision for doubtful debts or counterparty risk.<br />
The consolidated entity minimises concentration of credit risk by undertaking transactions with a large number of customers and obtaining<br />
credit insurance for certain customers.<br />
Under the terms of the grower loan contracts, any distributions from the <strong>AWB</strong> National Pools are applied as repayments of the<br />
outstanding loan balance. The loans are advanced on a non-recourse basis; any shortfall on repayment is underwritten by <strong>AWB</strong><br />
Finance <strong>Limited</strong>.<br />
Unrecognised financial instruments<br />
Credit risk on derivative contracts which have not been recognised on the statement of financial position is minimised as counterparties<br />
are recognised financial intermediaries with acceptable credit ratings.<br />
(e) Net fair values<br />
Recognised financial instruments<br />
The carrying amounts and net fair values of financial assets and financial liabilities, at balance date are as follows:<br />
Carrying amount<br />
Net fair value<br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Financial assets<br />
Cash assets 54,785 69,921 54,785 69,921<br />
Receivables 1,006,482 2,137,041 1,006,482 2,137,041<br />
Short term deposits 36,005 10,718 36,005 10,718<br />
Financial assets – other 23,446 51,880 23,446 51,880<br />
Shares 138,066 14,419 138,066 14,419<br />
Total financial assets 1,258,784 2,283,979 1,258,784 2,283,979<br />
Financial liabilities<br />
Payables 336,066 122,681 336,066 122,681<br />
Borrowings 1,062,884 1,637,518 1,062,884 1,637,518<br />
Financial liabilities 8,907 – 8,907 –<br />
Unearned income 9,458 120 9,458 120<br />
Net deferred gains and losses 3,684 19,956 3,684 19,956<br />
Total financial liabilities 1,420,999 1,780,275 1,420,999 1,780,275<br />
Unrecognised financial instruments<br />
The net fair values of financial instruments not recognised in the statement of financial position held as at the reporting date are:<br />
Consolidated<br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Forward rate agreements – (32)<br />
Interest rate swaps (905) (1,295)<br />
Interest rate options 151 (62)<br />
Interest rate futures – –<br />
(754) (1,389)<br />
Interest rate futures and exchange traded options: The net fair value for interest rate futures and exchange traded options is calculated<br />
as the value of the variation margin on the last business day of the period.<br />
Interest rate swaps, over the counter options and forward rate agreements: The net fair value of these instruments represents the value<br />
that would be obtained in a liquid market if these positions were liquidated.<br />
82
33. DEED OF CROSS GUARANTEE<br />
Pursuant to Australian Securities and Investments Commission Class Order 98/1418 (as amended) dated August 1998, the following<br />
wholly owned subsidiaries are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial<br />
reports and directors’ report: <strong>AWB</strong> Finance <strong>Limited</strong>, <strong>AWB</strong> (Australia) <strong>Limited</strong> and <strong>AWB</strong> Investments <strong>Limited</strong>.<br />
It is a condition of the Class Order that <strong>AWB</strong> <strong>Limited</strong> and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the<br />
Deed is that <strong>AWB</strong> <strong>Limited</strong> guarantees to pay any deficiency in the event of winding up any of the wholly owned subsidiaries listed below.<br />
The subsidiaries that are parties to the Deed are:<br />
<strong>AWB</strong> Finance <strong>Limited</strong> <br />
<strong>AWB</strong> (Australia) <strong>Limited</strong> <br />
<strong>AWB</strong> GrainFlow Pty Ltd (formerly <strong>AWB</strong> Grain Centres Pty Ltd)<br />
<strong>AWB</strong> Investments <strong>Limited</strong>. <br />
<strong>AWB</strong> Investments <strong>Limited</strong> became a party to the Deed on 26 August <strong>2003</strong>, by virtue of a Deed of Assumption.<br />
A consolidated statement of financial performance and a consolidated statement of financial position, comprising <strong>AWB</strong> <strong>Limited</strong> and<br />
controlled entities which are parties to the Deed after eliminating all transactions between parties to the Deed of Cross Guarantee, at 30<br />
September <strong>2003</strong> are set out below:<br />
Consolidated<br />
<strong>2003</strong> 2002<br />
$'000 $'000<br />
Summarised statement of financial performance<br />
Profit from ordinary activities before income tax expense 51,377 148,705<br />
Income tax expense relating to ordinary activities (11,432) (42,787)<br />
Net profit from ordinary activities after income tax expense 39,945 105,918<br />
Retained profits at the beginning of the year 68,639 31,076<br />
Dividends recognised during the year (38,369) (68,355)<br />
Retained profits at the end of the year 70,215 68,639<br />
Statement of financial position<br />
Current assets<br />
Cash assets 2,337 24,003<br />
Receivables 631,273 3,242,114<br />
Inventories 62,111 134,062<br />
Other financial assets 49,616 50,111<br />
Current tax assets 19,562 –<br />
Other assets 767 1,650<br />
Total current assets 765,666 3,451,940<br />
Non–current assets<br />
Receivables 54,711 4,085<br />
Investments accounted for using the equity method 10,307 16,958<br />
Other financial assets 862,734 33,923<br />
Intangible assets 172 115<br />
Property, plant and equipment 210,514 153,327<br />
Deferred tax assets 26,501 26,468<br />
Total non–current assets 1,164,939 234,876<br />
Total assets 1,930,605 3,686,816<br />
Current liabilities<br />
Payables 111,353 104,266<br />
Interest bearing liabilities 863,437 2,710,288<br />
Current tax liabilities – 9,070<br />
Provisions 16,198 39,654<br />
Other liabilities 5,517 19,956<br />
Total current liabilities 996,505 2,883,234<br />
83
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
33. DEED OF CROSS GUARANTEE (continued)<br />
Non–current liabilities<br />
Provisions<br />
Deferred tax liabilities<br />
Total non–current liabilities<br />
Total liabilities<br />
Net assets<br />
<strong>2003</strong><br />
$'000<br />
1,721<br />
6,329<br />
8,050<br />
1,004,555<br />
926,050<br />
Consolidated<br />
2002<br />
$'000<br />
1,513<br />
18,118<br />
19,631<br />
2,902,865<br />
783,951<br />
Equity<br />
Contributed equity<br />
Reserves<br />
Retained profits<br />
Total equity<br />
848,958<br />
6,877<br />
70,215<br />
926,050<br />
700,312<br />
15,000<br />
68,639<br />
783,951<br />
34. CONTROLLED ENTITIES<br />
Percentage of equity interest held<br />
by the consolidated entity<br />
<strong>2003</strong> 2002<br />
(a) Particulars in relation to controlled entities % %<br />
Name<br />
Country of<br />
incorporation<br />
Parent<br />
<strong>AWB</strong> <strong>Limited</strong><br />
Australia<br />
Controlled entities<br />
ACN 005 144 445 Pty Ltd Australia 100 –<br />
ACN 089 443 407 Pty Ltd Australia 100 100<br />
Agrifood Technology Pty Ltd Australia 100 100<br />
Aussigold Produce Pty Ltd Australia 100 –<br />
Australian Seed Inoculants Pty Ltd Australia 100 –<br />
Australian Wheat Board Pty <strong>Limited</strong> Australia 100 100<br />
<strong>AWB</strong> (Australia) <strong>Limited</strong> Australia 100 100<br />
<strong>AWB</strong> (Geneva) SA Switzerland 100 100<br />
<strong>AWB</strong> (International) <strong>Limited</strong> Australia 100 100<br />
<strong>AWB</strong> (USA) <strong>Limited</strong> USA 100 100<br />
<strong>AWB</strong> Asia <strong>Limited</strong> Hong Kong 100 100<br />
<strong>AWB</strong> Commercial Funding Ltd Australia 100 –<br />
<strong>AWB</strong> Custodians Pty Ltd (formerly United Grain Pty Ltd) Australia 100 100<br />
<strong>AWB</strong> Finance <strong>Limited</strong> Australia 100 100<br />
<strong>AWB</strong> GrainFlow Pty Ltd (formerly <strong>AWB</strong> Grain Centres Pty Ltd) Australia 100 100<br />
<strong>AWB</strong> Harvest Finance <strong>Limited</strong> Australia 100 –<br />
<strong>AWB</strong> Investments <strong>Limited</strong> Australia 100 100<br />
<strong>AWB</strong> Japan Pty Ltd Australia 100 100<br />
<strong>AWB</strong> MPT Pty Ltd Australia 100 100<br />
<strong>AWB</strong> Plant Breeding Pty Ltd Australia 100 100<br />
<strong>AWB</strong> Research Pty Ltd Australia 100 100<br />
<strong>AWB</strong> Riskassist <strong>Limited</strong> Australia 100 100<br />
<strong>AWB</strong> Services <strong>Limited</strong> Australia 100 –<br />
<strong>AWB</strong>–Zen-noh <strong>Limited</strong> Japan 51 51<br />
Barrobook Pty <strong>Limited</strong> Australia 100 –<br />
Berriwillock Nominees Pty Ltd Australia 100 –<br />
84
34. CONTROLLED ENTITIES (continued)<br />
Percentage of equity interest held<br />
by the consolidated entity<br />
<strong>2003</strong> 2002<br />
(a) Particulars in relation to controlled entities (continued) % %<br />
Name<br />
Country of<br />
incorporation<br />
Big N Distributors Pty Ltd Australia 100 –<br />
Bushridge Pty Ltd Australia 100 –<br />
Dairy Rural Pty Ltd Australia 100 –<br />
Farmland Pty Ltd Australia 100 –<br />
Frank Sauer and Sons Pty Ltd Australia 100 –<br />
Franklin Smith IAMA Pty Ltd Australia 100 –<br />
Glencoe Distributors Pty Ltd Australia 100 –<br />
Goldref Pty Ltd Australia 100 –<br />
IAMA (Qld) Pty Ltd Australia 100 –<br />
IAMA (SA) Pty Ltd Australia 100 –<br />
IAMA Agribusiness Pty Ltd Australia 100 –<br />
IAMA Insurance Brokers Holdings Pty Ltd Australia 100 –<br />
IAMA Insurance Brokers Pty Ltd Australia 100 –<br />
IAMA Irritech Pty Ltd Australia 60 –<br />
IAMA Superannuation Fund Pty Ltd Australia 100 –<br />
ISP Nominees Pty Ltd Australia 100 –<br />
Johnstone River Transport Pty Ltd Australia 100 –<br />
J O'Malley & Co Pty Ltd Australia 100 –<br />
Kelly & Co Rural Centre Pty <strong>Limited</strong> Australia 67 –<br />
Kerin Lange Rural Pty <strong>Limited</strong> Australia 50 –<br />
Landmark (Qld) <strong>Limited</strong><br />
(formerly Wesfarmers Landmark (Qld) <strong>Limited</strong>) Australia 100 –<br />
Landmark Operations <strong>Limited</strong><br />
(formerly Wesfarmers Landmark <strong>Limited</strong>) Australia 100 –<br />
Landmark Realty (Qld) Pty Ltd<br />
(formerly Wesfarmers Landmark Realty (Qld) Pty Ltd) Australia 100 –<br />
Landmark Realty (WA) Pty Ltd<br />
(formerly Wesfarmers Landmark Realty (WA) Pty Ltd) Australia 100 –<br />
Landmark Risk Management Pty Ltd<br />
(formerly Wesfarmers Landmark Risk Management Pty Ltd) Australia 100 –<br />
Landmark Rural Holdings <strong>Limited</strong><br />
(formerly Wesfarmers Rural Holdings <strong>Limited</strong>) Australia 100 –<br />
Landmark Tenderland Pty Ltd<br />
(formerly Wesfarmers Landmark Tenderland Pty Ltd) Australia 100 –<br />
Landmark Wool Pty Ltd<br />
(formerly Wesfarmers Landmark Wool Pty Ltd) Australia 100 –<br />
Langes Agribusiness Pty Ltd Australia 100 –<br />
Laxstone Pty Ltd Australia 100 –<br />
Lenmost Pty Ltd Australia 100 –<br />
Macquarie Valley Distributors Pty Ltd Australia 100 –<br />
Mallee Chemicals Pty Ltd Australia 100 –<br />
North Central Nominees Pty Ltd Australia 100 –<br />
O'Malley Distribution Group Pty Ltd Australia 100 –<br />
Presoval Pty Ltd Australia 100 –<br />
Rangal Holdings Pty Ltd Australia 100 –<br />
Riverland IAMA Pty Ltd Australia 100 –<br />
R.V.L. Distribution Pty Ltd Australia 100 –<br />
SBS IAMA Real Estate Pty Ltd Australia 100 –<br />
Seed & Grain Sales Pty <strong>Limited</strong> Australia 100 –<br />
Seedtech Pty <strong>Limited</strong> Australia 56 –<br />
Vivco Rural Supplies Pty Ltd Australia 100 –<br />
Wimmal Distributors Pty Ltd Australia 100 –<br />
85
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS<br />
FOR THE YEAR ENDED 30 SEPTEMBER <strong>2003</strong><br />
34. CONTROLLED ENTITIES (continued)<br />
(b) Acquisition of controlled entities<br />
On 29 August <strong>2003</strong>, the consolidated entity purchased 100% of Landmark Rural Holdings <strong>Limited</strong> and Johnstone River Transport Pty<br />
<strong>Limited</strong>, and the operating result of these entities was included in the consolidated operating profit from that date. Details of the<br />
acquisitions are as follows:<br />
Consolidated<br />
<strong>AWB</strong> <strong>Limited</strong><br />
<strong>2003</strong> 2002 <strong>2003</strong> 2002<br />
$'000 $'000 $'000 $'000<br />
Consideration 718,400 – – –<br />
Associated costs of acquisition 11,660 – – –<br />
730,060 – – –<br />
Less: – third instalment payable after balance date (38,400) – – –<br />
– cash acquired in Landmark (148,895) – – –<br />
Outflow of cash 542,765 – – –<br />
Fair value of net assets of entity acquired<br />
Cash assets 148,895 – – –<br />
Receivables 281,664 – – –<br />
Inventories 120,975 – – –<br />
Other assets 2,738 – – –<br />
Investments accounted for using the equity method 2,134 – – –<br />
Other financial assets 1,048 – – –<br />
Intangible assets 156 – – –<br />
Property, plant and equipment 71,939 – – –<br />
Future income tax benefit 13,327 – – –<br />
Payables (166,272) – – –<br />
Interest bearing deposits (281,613) – – –<br />
Current tax liabilities (2,652) – – –<br />
Provisions (29,482) – – –<br />
Provision for restructure (5,317)<br />
Other liabilities (8,954) – – –<br />
Deferred tax liabilities (2,801) – – –<br />
Outside equity interests at acquisition (1,383) – – –<br />
144,402 – – –<br />
Goodwill on acquisition 585,658 – – –<br />
Consideration (including associated costs) 730,060 – – –<br />
86
35. EARNINGS PER SHARE<br />
Consolidated<br />
<strong>2003</strong> 2002<br />
Basic earnings per share (cents) 15.9 39.2<br />
Diluted earnings per share (cents) 15.9 39.2<br />
Reconciliation of earnings used in calculating earnings per share:<br />
$'000<br />
$'000<br />
Net profit from ordinary activities after income tax expense 44,150 107,829<br />
Net profit attributable to outside equity interests (259) (637)<br />
43,891 107,192<br />
Number<br />
Number<br />
Weighted average number of ordinary shares used in calculating basic earnings per share 276,470,797 273,340,738<br />
Effect of dilutive securities – performance rights 258,306 32,404<br />
Weighted average number of ordinary shares used in calculating dilutive earnings per share 276,729,103 273,373,142<br />
36. SUBSEQUENT EVENTS<br />
(a) <strong>2003</strong><br />
There are no subsequent events which are likely to have a material effect on the consolidated entity's financial statements. For dividends<br />
declared after 30 September <strong>2003</strong>, refer to Note 22.<br />
(b) 2002<br />
There were no subsequent events which were likely to have a material effect on the consolidated entity's financial statements.<br />
87
DIRECTORS' DECLARATION<br />
In accordance with a resolution of the directors of <strong>AWB</strong> <strong>Limited</strong>, we state that:<br />
(1) In the opinion of the directors:<br />
(a) the financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001,<br />
including:<br />
– giving a true and fair view of the company's and consolidated entity's financial position as at 30 September <strong>2003</strong> and of their<br />
performance for the year ended on that date; and<br />
– complying with Accounting Standards and the Corporations Regulations 2001; and<br />
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.<br />
(2) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the companies and<br />
parent entity which are party to the Deed of Cross Guarantee identified in Note 33 will be able to meet any obligations or liabilities to<br />
which they are or may become subject, by virtue of the Deed of Cross Guarantee.<br />
This declaration is made in accordance with a resolution of the directors on behalf of the board.<br />
Brendan Stewart<br />
Chairman<br />
Andrew Lindberg<br />
Managing Director<br />
Sydney<br />
26 November <strong>2003</strong><br />
88
INDEPENDENT AUDIT REPORT TO MEMBERS OF <strong>AWB</strong> LIMITED<br />
120 Collins Street Tel 61 3 9288 8000<br />
Melbourne VIC 3000 Fax 61 3 96546166<br />
Australia<br />
DX 293 Melbourne<br />
GPO Box 67B<br />
Melbourne VIC 3001<br />
Scope<br />
The financial report and directors’ responsibility<br />
The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows,<br />
accompanying notes to the financial statements, and the directors’ declaration for <strong>AWB</strong> <strong>Limited</strong> (the company) and the consolidated entity,<br />
for the year ended 30 September <strong>2003</strong>. The consolidated entity comprises both the company and the entities it controlled during that year.<br />
The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and<br />
performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the<br />
Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are<br />
designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.<br />
Audit approach<br />
We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit<br />
was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial<br />
report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement,<br />
selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an<br />
audit cannot guarantee that all material misstatements have been detected.<br />
We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the<br />
Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting<br />
requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s financial<br />
position, and of their performance as represented by the results of their operations and cash flows.<br />
We formed our audit opinion on the basis of these procedures, which included:<br />
• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and<br />
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting<br />
estimates made by the directors.<br />
While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent<br />
of our procedures, our audit was not designed to provide assurance on internal controls.<br />
We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report.<br />
These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business<br />
plans or strategies adopted by the directors and management of the company.<br />
Independence<br />
We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and<br />
the Corporations Act 2001.<br />
Audit opinion<br />
In our opinion, the financial report of <strong>AWB</strong> <strong>Limited</strong> is in accordance with:<br />
(a) the Corporations Act 2001, including:<br />
(i) giving a true and fair view of the financial position of <strong>AWB</strong> <strong>Limited</strong> and the consolidated entity at 30 September <strong>2003</strong> and of their<br />
performance for the year ended on that date; and<br />
(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and<br />
(b) other mandatory financial reporting requirements in Australia.<br />
Ernst & Young<br />
Melbourne<br />
26 November <strong>2003</strong><br />
I. H. Miller<br />
Partner<br />
Liability limited by the Accountants Scheme, approved under the Professional Standards Act 1994 (NSW).<br />
89
ASX ADDITIONAL INFORMATION<br />
SHAREHOLDER INFORMATION<br />
Additional information required by the Australian Stock Exchange and not shown elsewhere in this report is as follows. The information is<br />
current as at 12 December <strong>2003</strong>.<br />
a) Distribution of equity securities<br />
The number of shareholders, by size of holding, in each class of share are:<br />
Ordinary shares<br />
Number of holders<br />
Number of shares<br />
1 – 1,000 26,575 9,892,822<br />
1,001 – 5,000 23,810 61,305,213<br />
5,001 – 10,000 7,760 55,017,211<br />
10,001 – 100,000 6,290 124,847,541<br />
100,001 and over 76 75,940,105<br />
64,511 327,002,892<br />
The number of shareholders holding less than a marketable<br />
parcel of shares are: 7,542 463,545<br />
b) Twenty largest shareholders<br />
The names of the twenty largest holders of quoted shares are:<br />
Listed ordinary shares<br />
Number of shares<br />
Percentage of<br />
ordinary shares<br />
1 J P Morgan Nominees Australia <strong>Limited</strong> 18,346,522 5.61<br />
2 Westpac Custodian Nominees <strong>Limited</strong> 13,131,129 4.02<br />
3 National Nominees <strong>Limited</strong> 11,095,671 3.39<br />
4 Citicorp Nominees Pty <strong>Limited</strong> 3,672,251 1.12<br />
5 RBC Global Services Australia Nominees Pty <strong>Limited</strong> 3,171,269 0.97<br />
6 Westpac Financial Services 2,584,499 0.79<br />
7 HSBC Custody Nominees (Australia) <strong>Limited</strong> 2,115,461 0.65<br />
8 AMP Life <strong>Limited</strong> 2,056,498 0.63<br />
9 UBS Private Clients Australia Nominees Pty <strong>Limited</strong> 1,177,469 0.36<br />
10 RBC Global Services Australia Nominees Pty <strong>Limited</strong> 932,861 0.29<br />
11 Cogent Nominees Pty <strong>Limited</strong> 924,642 0.28<br />
12 ANZ Nominees <strong>Limited</strong> 888,796 0.27<br />
13 Queensland Investment Corporation 776,208 0.24<br />
14 ANZ Nominees <strong>Limited</strong> 772,994 0.24<br />
15 Government Superannuation Office 612,425 0.19<br />
16 Permanent Trustee Australia <strong>Limited</strong> 551,351 0.17<br />
17 Australian United Investment Company <strong>Limited</strong> 550,000 0.17<br />
18 RBC Global Services Australia Nominees Pty <strong>Limited</strong> 463,384 0.14<br />
19 <strong>AWB</strong> Custodians Pty <strong>Limited</strong> 460,900 0.14<br />
20 Transport Accident Commission 458,354 0.14<br />
64,742,684 19.81<br />
c) Substantial shareholders<br />
The only substantial shareholder as at 12 December <strong>2003</strong> was J P Morgan Nominees Australia <strong>Limited</strong> with 18,346,522 <strong>AWB</strong> B class<br />
shares representing 5.61% of issued capital.<br />
90
FINANCIAL CALENDAR – 2004<br />
<strong>Annual</strong> General Meeting<br />
Half year end<br />
Half year results and interim dividend announcement<br />
Payment of interim dividend<br />
Full year end<br />
Full year results and final dividend announcement<br />
Payment of final dividend<br />
11 Mar<br />
31 Mar<br />
26 May<br />
2 Jul<br />
30 Sep<br />
24 Nov<br />
17 Dec<br />
DUAL CLASS SHARE STRUCTURE<br />
<strong>AWB</strong> <strong>Limited</strong> has two classes of shares:<br />
A class shares – can only be issued to current wheat growers<br />
(that meet the definition of Grower in the constitution). These<br />
cannot be transferred and must be redeemed when the A class<br />
shareholder ceases to be a Grower. A class shares are not<br />
entitled to receive any dividend; however, they do carry other<br />
important rights giving A class shareholders control of <strong>AWB</strong>,<br />
including giving A class shareholders the ability to elect a<br />
majority of the board of directors; and<br />
B class shares – the only class of shares that are quoted on the<br />
Australian Stock Exchange (ASX). B class shares carry rights to<br />
receive dividends and the right to elect a minority of the board of<br />
directors. They can be freely traded by anyone, subject to no<br />
shareholder owning more than 10% of the B class shares<br />
on issue.<br />
VOTING RIGHTS<br />
The voting rights for holders of each <strong>AWB</strong> share class are as<br />
follows:<br />
A class shares – on a show of hands, the holder of an A class<br />
share has one vote and on a poll the holder has the number of<br />
votes determined by their average annual tonnage of wheat<br />
delivered as follows:<br />
one vote; plus<br />
an additional vote if their average annual tonnage of wheat<br />
delivered to the <strong>AWB</strong> Group is more than 33 1/3 tonnes per<br />
year for the three years ending at the prior financial year; plus<br />
an additional vote for each 500 tonnes, or part thereof, per year<br />
of average annual tonnage delivered by the A class shareholder<br />
to the <strong>AWB</strong> Group above 500 tonnes per year for the three<br />
years ending at the prior financial year.<br />
At 30 September <strong>2003</strong>, there were 33.502 A class shares; and<br />
B class shares – on a show of hands, the holder of a B class<br />
share has one vote and on a poll the holder has one vote for each<br />
B class share held.<br />
At 30 September <strong>2003</strong>, there were 63,522 B class shareholders.<br />
ANNUAL GENERAL MEETING<br />
<strong>AWB</strong>’s <strong>Annual</strong> General Meeting will be held at 12 noon (Melbourne<br />
time) on Thursday 11 March 2004 at the Auditorium, Level 2,<br />
Melbourne Exhibition Centre, 2 Clarendon Street, Southbank,<br />
Melbourne, Victoria. Details of the business of the meeting are<br />
contained in the separate Notice of Meetings.<br />
DIVIDEND PAYMENT<br />
A fully franked final dividend of 11 cents per share was paid on 19<br />
December <strong>2003</strong> to B class shareholders registered on the <strong>AWB</strong><br />
share register at 5 December <strong>2003</strong>. For Australian tax purposes,<br />
the dividend was fully franked at the company tax rate of 30%.<br />
<strong>AWB</strong> has introduced a Dividend Reinvestment Plan (DRP) effective<br />
from the <strong>2003</strong> final dividend. The DRP is fully underwritten for the<br />
<strong>2003</strong> final dividend and 2004 interim dividend. Eligible<br />
shareholders can have all or part of the dividend reinvested in<br />
additional shares at a 5% discount. Participation is entirely<br />
voluntary. The discount is applicable only for the two dividends<br />
mentioned above and may be changed or removed by the board of<br />
<strong>AWB</strong> <strong>Limited</strong>. Further details on the terms and conditions of the<br />
DRP can be found on <strong>AWB</strong>’s website at www.awb.com.au or by<br />
contacting the company’s share registry.<br />
STOCK EXCHANGE LISTING<br />
<strong>AWB</strong> B class shares are listed on the ASX and reported in the<br />
industrial section of daily newspapers under the code <strong>AWB</strong>.<br />
SHARE REGISTRY<br />
Computershare Investor Services Pty Ltd<br />
PO Box 14061 Melbourne City MC VIC 8001<br />
Tel: 1800 810 032<br />
Fax: 1800 800 053<br />
Please quote your current address together with your<br />
Securityholder Reference Number (SRN) or Holder Identification<br />
Number (HIN) as shown on your Issuer Sponsored/CHESS<br />
statements.<br />
CHANGE OF ADDRESS OR BANKING<br />
DETAILS<br />
Shareholders should notify the share registry in writing immediately<br />
of changes of address, or banking details for dividends<br />
electronically credited to a bank account.<br />
REMOVAL FROM ANNUAL REPORT<br />
MAILING LIST<br />
Shareholders who no longer want to receive the annual report<br />
should call the <strong>AWB</strong> share registry on 1800 810 032 to register<br />
their choice. Shareholders will continue to receive all other<br />
information including the notice of the <strong>Annual</strong> General Meeting and<br />
proxy form. The annual report can also be viewed on <strong>AWB</strong>’s<br />
website at www.awb.com.au<br />
INVESTOR RELATIONS<br />
Investors with questions regarding <strong>AWB</strong> financial information are<br />
invited to contact:<br />
Investor Relations<br />
<strong>AWB</strong> <strong>Limited</strong><br />
380 La Trobe Street<br />
Melbourne VIC 3000<br />
Email: investor.relations@awb.com.au<br />
91
MAJOR ANNOUNCEMENTS TO THE AUSTRALIAN STOCK EXCHANGE<br />
2002<br />
4 October 2002<br />
<strong>AWB</strong> announces the <strong>AWB</strong> National Pool has<br />
paid a third distribution payment from the<br />
2001/02 season, with more than $715<br />
million paid to wheat growers across Australia.<br />
15 October 2002<br />
<strong>AWB</strong> revises down its crop forecast for<br />
2002/03 to between 11–13 million tonnes.<br />
20 November 2002<br />
<strong>AWB</strong> announces a record profit of $107.2<br />
million after tax for the 12 months to 30th<br />
September 2002. The result represents a<br />
28% increase on the 2001 reported after<br />
tax profit of $83.7 million.<br />
19 December 2002<br />
<strong>AWB</strong> discloses a substantial shareholding in<br />
Futuris Corporation <strong>Limited</strong> (Futuris) of 5%.<br />
<strong>2003</strong><br />
6 January <strong>2003</strong><br />
<strong>AWB</strong> announces the <strong>AWB</strong> National Pool<br />
has paid its fourth distribution payment<br />
from the 2001/02 season with more than<br />
$766 million paid to wheat growers across<br />
Australia.<br />
13 January <strong>2003</strong><br />
<strong>AWB</strong> revises down its crop forecast for<br />
2001/02 to between 9.5–10.5 million<br />
tonnes.<br />
14 February <strong>2003</strong><br />
<strong>AWB</strong> announces it has acquired a further<br />
60.2 million Futuris ordinary shares bringing<br />
its interest in Futuris to 14.9%.<br />
13 March <strong>2003</strong><br />
Brenda Shanahan resigns as a B class<br />
director of <strong>AWB</strong> <strong>Limited</strong>, and Peter Polson<br />
is appointed as a B class director, effective<br />
from 31 March <strong>2003</strong>.<br />
20 March <strong>2003</strong><br />
<strong>AWB</strong> suspends a discharge of wheat in Iraq<br />
following the United Nations Oil-for-Food<br />
program being temporarily suspended.<br />
7 April <strong>2003</strong><br />
<strong>AWB</strong> National Pool made its first<br />
distribution payment from <strong>AWB</strong>’s 2002/03<br />
National Pool of more than $127 million to<br />
Australian wheat growers.<br />
<strong>AWB</strong> National Pool announced its fifth<br />
distribution payment from the 2001/02<br />
harvest with more than $1.2 billion paid to<br />
wheat growers across Australia<br />
7 May <strong>2003</strong><br />
<strong>AWB</strong> introduces its New Grower Incentive<br />
Program for new A class shareholders who<br />
have never owned B class shares to obtain<br />
shares at a discount.<br />
21 May <strong>2003</strong><br />
<strong>AWB</strong> announces an after tax profit of<br />
$29.9 million for the half year ended 31<br />
March <strong>2003</strong>, and declares an interim<br />
dividend of 14 cents per share.<br />
19 June <strong>2003</strong><br />
<strong>AWB</strong> was successful in defending an appeal<br />
by NEAT Domestic Trading Pty Ltd to the<br />
High Court of Australia, in relation to the<br />
refusal by <strong>AWB</strong> (International) <strong>Limited</strong> to<br />
approve a number of bulk permit<br />
applications to export durum.<br />
1 July <strong>2003</strong><br />
<strong>AWB</strong> revises down its crop forecast for<br />
<strong>2003</strong>/04 to between 20–22 million tonnes.<br />
7 July <strong>2003</strong><br />
<strong>AWB</strong> announces its second distribution<br />
from the No. 1 2002/03 <strong>AWB</strong> National<br />
Pool, distributing more than $185 million to<br />
Australian wheat growers.<br />
31 July <strong>2003</strong><br />
<strong>AWB</strong> finalises its highest returning <strong>AWB</strong><br />
National Pool with $511 million distributed<br />
bringing the total Pool value for 2001/02<br />
to more than $5.3 billion.<br />
29 August <strong>2003</strong><br />
<strong>AWB</strong> announces its acquisition of<br />
Landmark from Wesfarmers for a net<br />
purchase consideration of $718 million. A<br />
capital raising will be undertaken including<br />
an Institutional Placement, Share Purchase<br />
Plan and Dividend Reinvestment Plan.<br />
3 September <strong>2003</strong><br />
<strong>AWB</strong> announces that the Institutional<br />
Placement component of its capital raising<br />
has closed with the offer successful, having<br />
been heavily oversubscribed at a final price<br />
of $3.70 per share.<br />
7 September <strong>2003</strong><br />
<strong>AWB</strong> announces the outstanding 800,000<br />
tonne contracts to Iraq have been honoured<br />
for immediate shipment, completing the 1.2<br />
million tonne contracts with <strong>AWB</strong> struck<br />
with Iraq prior to hostilities.<br />
GLOSSARY<br />
<strong>AWB</strong> Basis Pool is a multi-varietal pool<br />
contract. It takes advantage of the<br />
professionally managed “basis” premium<br />
achieved in the <strong>AWB</strong> National Pool and<br />
provides growers with an opportunity to<br />
establish specific international wheat prices<br />
using the Chicago Board of Trade wheat<br />
futures contracts and prevailing foreign<br />
exchange rates.<br />
<strong>AWB</strong> Golden Rewards is a<br />
comprehensive payment and binning<br />
system for wheat marketed through the<br />
<strong>AWB</strong> National Pool and selected cash<br />
options. Golden Rewards is designed to<br />
provide pricing accuracy and market signals<br />
for Australia’s grain growers, ensuring that<br />
growers are rewarded for delivering the<br />
types of wheat demanded by <strong>AWB</strong>’s<br />
international customers. Growers have<br />
better defined financial targets to aim for in<br />
terms of higher protein content and lower<br />
screenings levels, and are no longer<br />
severely penalised if their wheat narrowly<br />
misses a minimum binning standard for one<br />
of these quality attributes.<br />
<strong>AWB</strong> Group <strong>AWB</strong> <strong>Limited</strong> and its<br />
controlled entities.<br />
<strong>AWB</strong> Multi V cash contracts incorporate<br />
<strong>AWB</strong> Golden Rewards. It is based on multi<br />
varietal classification, with continuous<br />
quality payment scales for protein and<br />
screenings to improve pricing accuracy and<br />
better reflect the market value consistent<br />
with wheat quality.<br />
<strong>AWB</strong> RiskAssist is a specialised risk<br />
management business service designed to<br />
help growers manage commodity futures<br />
and foreign exchange hedging with an<br />
<strong>AWB</strong> Basis Pool contract.<br />
Cost and Freight (CFR) is a freight<br />
option whereby the seller delivers when the<br />
goods pass the ship’s rail in the port of<br />
shipment. The seller must pay the costs and<br />
freight necessary to bring the goods to port,<br />
but the risk of loss or damage to the goods<br />
is transferred from the seller to the buyer.<br />
Forward Freight Agreement (FFA) is a<br />
principal to principal contract where one<br />
counterparty takes the view that the prices<br />
of an agreed freight route, at an agreed<br />
time, will be higher than the agreed level.<br />
The other party contracts to differ.<br />
Free On Board (FOB) means that the<br />
seller delivers when the goods pass the<br />
ship’s rail at the named port of shipment.<br />
The buyer has to bear all costs and risk of<br />
loss or damage to the goods from that point.<br />
Gross Pool Value (GPV) is the sum of all<br />
export revenue and other value added by<br />
<strong>AWB</strong>. It represents the gross return to<br />
growers, and equates to the sum of pool<br />
returns prior to storage, handling, rail and<br />
fobbing deductions.<br />
92
<strong>AWB</strong> GROUP LOCATIONS<br />
ROYCE DESIGN <strong>AWB</strong> 5291<br />
Head Office<br />
Melbourne<br />
380 La Trobe Street<br />
Melbourne, Victoria 3000<br />
(03) 9209 2000<br />
International<br />
Cairo<br />
Tokyo<br />
Hong Kong<br />
Geneva<br />
Portland, Oregon<br />
Australia<br />
New South Wales<br />
Albury<br />
Ardlethan<br />
Ariah Park<br />
Armidale<br />
Barraba<br />
Bathurst<br />
Batlow<br />
Beanbri<br />
Bellata<br />
Bogan Gate<br />
Boggabilla<br />
Bourke<br />
Broken Hill<br />
Collarenebri<br />
Cooma<br />
Coonamble<br />
Cootamundra<br />
Corowa<br />
Cowra<br />
Crookwell<br />
Deniliquin<br />
Dubbo<br />
Forbes<br />
Gilgandra<br />
Glen Innes<br />
Goulburn<br />
Griffith<br />
Grong Grong<br />
Gunnedah<br />
Hay<br />
Hillston<br />
Junee<br />
Maitland<br />
Moree<br />
Moss Vale<br />
Mudgee<br />
Mungindi<br />
Narrabri<br />
Narromine<br />
Newcastle<br />
Nyngan<br />
Oaklands<br />
Orange<br />
Parramatta<br />
Rocklea<br />
Singleton<br />
Stockinbingal<br />
Sydney<br />
Tamworth<br />
Temora<br />
Wagga Wagga<br />
Walcha<br />
Walgett<br />
Walla Walla<br />
Warialda<br />
Warren<br />
Wee Waa<br />
West Wyalong<br />
Yennora<br />
Young<br />
Northern Territory<br />
Darwin<br />
Katherine<br />
Alice Springs<br />
Queensland<br />
Applethorpe<br />
Ayr<br />
Ballandean<br />
Blackall<br />
Bowen<br />
Brisbane<br />
Bundaberg<br />
Cairns<br />
Charleville<br />
Charters Towers<br />
Chinchilla<br />
Clermont<br />
Cloncurry<br />
Colonsay<br />
Croppa Creek<br />
Cunnamulla<br />
Dalby<br />
Dirranbandi<br />
El Arish<br />
Emerald<br />
Gatton<br />
Goondiwindi<br />
Gympie<br />
Home Hill<br />
Hughenden<br />
Injune<br />
Jondaryan<br />
Longreach<br />
Mackay<br />
Mareeba<br />
Maryborough<br />
Meandarra<br />
Mitchell<br />
Mourilyan<br />
Mundubbera<br />
Oakey<br />
Pittsworth<br />
Quilpie<br />
Richmond<br />
Rockhampton<br />
Rocklea<br />
Roma<br />
St George<br />
Talwood<br />
Tambo<br />
Taroom<br />
The Gums<br />
Toowong<br />
Toowoomba<br />
Townsville<br />
Tully<br />
Wallaville<br />
Wandoan<br />
Winton<br />
Yandina<br />
South Australia<br />
Adelaide<br />
Arthurton<br />
Berri<br />
Bordertown<br />
Burra<br />
Bute<br />
Ceduna<br />
Clare<br />
Cleve<br />
Crystal Brook<br />
Gawler<br />
Gepps Cross<br />
Jamestown<br />
Kadina<br />
Kapunda<br />
Keith<br />
Kingston<br />
Lameroo<br />
Lock<br />
Loxton<br />
Lucindale<br />
Maitland<br />
Mallala<br />
Mclaren Vale<br />
Meningie<br />
Millicent<br />
Minalton<br />
Mount Compass<br />
Mount Gambier<br />
Murray Bridge<br />
Naracoorte<br />
Padthaway<br />
Penola<br />
Port Adelaide<br />
Port Lincoln<br />
Renmark<br />
Riverton<br />
Sheaoak Log<br />
Strathalbyn<br />
Streaky Bay<br />
Tintinara<br />
Tumby Bay<br />
Warooka<br />
Tasmania<br />
Launceston<br />
Victoria<br />
Alexandra<br />
Ararat<br />
Ballarat<br />
Benalla<br />
Bendigo<br />
Berriwillock<br />
Birchip<br />
Brooklyn<br />
Camperdown<br />
Casterton<br />
Charlton<br />
Cobden<br />
Colac<br />
Dimboola<br />
Donald<br />
Echuca<br />
Euroa<br />
Foster<br />
Geelong<br />
Hamilton<br />
Heathcote<br />
Heywood<br />
Horsham<br />
Inverleigh<br />
Kaniva<br />
Korumburra<br />
Leongatha<br />
Melbourne<br />
Mortlake<br />
Nhill<br />
Numurkah<br />
Ouyen<br />
Pinnaroo<br />
Poowong<br />
Sale<br />
Sea Lake<br />
Shepparton<br />
Skipton<br />
Stawell<br />
Swan Hill<br />
Timboon<br />
Traralgon<br />
Tullamarine<br />
Wandin<br />
Wangaratta<br />
Warracknabeal<br />
Warragal<br />
Warrnambool<br />
Wonthaggi<br />
Wycheproof<br />
Yarram<br />
Yarrawonga<br />
Yea<br />
Western Australia<br />
Albany<br />
Ballidu<br />
Bassendean<br />
Boyup Brook<br />
Broome<br />
Bunbury<br />
Carnamah<br />
Carnarvon<br />
Coorow<br />
Corrigin<br />
Dalwallinu<br />
Dandaragan<br />
Dowerin<br />
Esperance<br />
Geraldton<br />
Gnowangerup<br />
Hyden<br />
Kalannie<br />
Katanning<br />
Kojonup<br />
Kununurra<br />
Lake Grace<br />
Lake King<br />
Manjimup<br />
Merredin<br />
Midvale<br />
Mingenew<br />
Moora<br />
Morowa<br />
Mullewa<br />
Narrogin<br />
Northam<br />
Perenjori<br />
Perth<br />
Pingrup<br />
Ravensthorpe<br />
Spearwood<br />
Three Springs<br />
Wongan Hills<br />
Wyalkatchem<br />
93
Back Cover: Claire and Craig Prescott, Growers<br />
Front Cover: Adele Prescott<br />
Head Office<br />
380 La Trobe Street<br />
Melbourne, Victoria 3000<br />
Tel: (03) 9209 2000<br />
1800 054 333 (Toll Free)<br />
Fax: (03) 9670 2782<br />
Web: www.awb.com.au<br />
ABN: 99 081 890 459