Annual Report - AWB Limited

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Notes to and forming part of the financial statements for the year ended 30 September 2008 AWB LIMITED30. Share-Based PaymentsEmployee Share PlanDuring the year, an offer was made under the Employee Share Plan which was established in 2002, under which all permanent employees of thegroup are entitled to be issued with ordinary shares. Each employee who participated received shares to the value of $1,000 (based on the shareprice $2.92 at the issue date (4 January 2008)) for nil consideration. A total of 579,348 shares were provided under the plan to 1,694 employees.Performance Rights PlanA Performance Rights Plan exists, whereby selected senior employees (including key management personnel) of the group are given theopportunity to acquire rights over unissued ordinary shares in AWB Limited by participating in the plan.The terms and valuation of performance rights granted are consistent with those granted to key management personnel and disclosed withinthe remuneration report.Recognised share based payments expenseThe expense recognised for employee services received during the year is shown in the table below:ConsolidatedAWB Limited2008 2007 2008 2007$’000 $’000 $’000 $’000Expense arising from equity-settled share based payment transactions 1,646 923 1,646 923Expense arising from cash-settled share based payment transactions 443 123 443 123Total expense arising from share based transactions 2,089 1,046 2,089 1,046Summary of performance rights grantedThe following table illustrates the number (No.) and weighted average exercise price (WAEP) of, and movements in, performance rights issuedduring the year:2008 2008 2007 2007No. WAEP No. WAEPEquity settledOutstanding at the beginning of the period 1,915,982 nil 1,718,587 nilGranted during the year 2,209,261 nil 1,342,329 nilForfeited during the year (677,086) nil (1,026,880) nilExercised during the year - nil - nilExpired during the year (86,683) nil (118,054) nilOutstanding at the end of the year 3,361,474 nil 1,915,982 nilCash settledOutstanding at the beginning of the period 258,875 nil - nilGranted during the year 369,649 nil 258,875 nilOutstanding at the end of the year 628,524 nil 258,875 nilAs the exercise price is $1 for the exercise of large parcels of performance rights, combined with certain tranches which have a nil exercise price,the effective weighted average exercise price is nil.Weighted average remaining contractual lifeThe weighted average remaining contractual life for equity settled performance rights outstanding as at 30 September 2008 is 2.39 years(2007: 2.64 years). The weighted average remaining contractual life for cash settled performance rights outstanding as at 30 September 2008is 2.59 years (2007: 3 years).Range of exercise priceThe range of exercise prices for performance rights outstanding at the end of the year was $nil to $1 (2007: $nil to $1).Weighted average fair valueThe weighted average fair value of cash settled performance rights granted during the year was $2.03 (2007: $1.42). The weighted averagefair value of equity settled performance rights granted during the year was $1.77 (2007: $1.90).Recognised cash settled share based payment liabilityThe carrying amount of the liability relating to the cash settled share based payment at 30 September 2008 is $565,956 (2007: $122,966).No cash settled awards vested during the period ended 30 September 2008 (2007: nil).Option pricing modelThe equity and cash settled rights have been valued using market data as at the grant date. A Monte-Carlo simulation-based valuation modelwas developed to simulate the date of vesting, the percentage vesting, the share price and its associated TSR. Once the simulated date ofvesting and share prices were determined, the fair value obtained at each vesting date was discounted back to the grant date. Refer to theremuneration report for a listing of inputs to the valuation model.www.awb.com.au 99
AWB LIMITED Notes to and forming part of the financial statements for the year ended 30 September 200831. Financial Risk Management Objectives and PoliciesThis note presents information about the Company’s and Group’s exposure to each of the risk factors set out below and the Group’s relatedobjectives, policies and processes for measuring and managing these risks.Financial risk factorsDue to the diversity of its business in Australia and abroad, AWB is exposed to market risk from a variety of activities such as:• The purchase and sale of commodities, including the chartering of ships to manage actual and anticipated transport commitments;• Hedging and proprietary trading in commodity products and related derivative instruments; and• Foreign exchange and interest rate risk associated with commodity trading, the provision of financial services and Group funding.The Group’s risk appetite is reviewed annually by the management team and is approved by the Board of Directors (‘the Board’).The Board has overall responsibility for the establishment and oversight of the risk management framework. The Board has established theBoard Risk Committee (BRC), which is responsible for developing and monitoring risk management policies. The BRC reports regularly tothe Board on its activities. The BRC monitors AWB’s risk management profile principally via the Chief Risk Officer’s (CRO’s) report.The Group’s risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effectson the financial performance of the Group. The Group uses derivative financial instruments to economically hedge certain risk exposures.Derivatives are used to manage foreign currency, commodity, freight and interest rate exposures. Group Treasury and the divisions may onlydeal in authorised markets, exchanges, products and instruments. Limits on the size and nature of transactions permitted have been establishedby the BRC and are subject to strict internal controls. Changes to limits must be approved by the CRO.Markets, products and instrumentsApproved markets, exchanges and products are defined in the Group’s risk management policy. All authorised products and instrumentsare listed in a register of approved products and instruments maintained by the CRO. Before entering into any contract, the authority toact is verified. All new products must be approved by the CRO and notified to the BRC. When significant new product approvals are sought(or significant changes to existing products), the CRO consults with the BRC prior to approving.AWB uses a combination of limits and operational thresholds to ensure that exposures remain within acceptable limits. Operational thresholdsare found in the register of limits and authorisations and they are approved by the Managing Director in consultation with the ManagementRisk Committee.AWB’s business and operating environment requires management to undertake a broad variety of trading, particularly in relation tocommodities, in addition, a strictly controlled amount of strategic proprietary trading is undertaken. Controlled proprietary trading isundertaken in accordance with the risk management policy which includes strict levels of authorisation and control which are monitoredby the CRO and Group Treasury.The accounting classifications of each category of financial instruments, and their carrying amounts are set out below:Loans andreceivablesAvailable-forsalefinancialassetsAt fair valuethrough profitand loss(designated)At fair valuethrough profitand loss (heldfor trading)Financialliabilitiesmeasured atamortised costTotal carryingamount$’000 $’000 $’000 $’000 $’000 $’000Consolidated30 September 2008Financial assetsCash and cash equivalents 551,656 - - - - 551,656Loans and advances 2,142,045 - 445,914 - - 2,587,959Trade and other receivables 1,458,781 - - - - 1,458,781Investments - listed securities - 4,395 - - - 4,395Investments - unlisted securities - 1,291 - - - 1,291Derivative financial instruments - - - 388,123 - 388,123Other assets - 1,627 - - - 1,627Financial liabilitiesTrade and other payables - - - - (789,884) (789,884)Derivative financial instruments - - - (352,596) - (352,596)Interest bearing loans and borrowings - - - - (4,153,314) (4,153,314)4,152,482 7,313 445,914 35,527 (4,943,198) (301,962)100 www.awb.com.au
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6 www.awb.com.auFrom Peter Polson,C
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From Gordon Davis,Managing Director
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AWB todayOur client base extends to
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Landmark Rural ServicesRural Servic
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Financial Services (EBITDA)2004 44.
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Commodity ManagementCommodity Manag
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CorporateCredit ratingsAWB maintain
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People and communityPeopleThe busin
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22 www.awb.com.auManagement team
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24 www.awb.com.au
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Governance at AWBAWB’s Board and
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process was conducted within the co
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Information is regularly communicat
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Recommendation 9.3 - Clearly distin
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AWB Limited BoardPeter Polson Non-e
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36 www.awb.com.au
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AWB LIMITED Directors’ reportYour
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AWB LIMITED Directors’ reportDire
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AWB LIMITED Directors’ reportNon-
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AWB LIMITED Directors’ reportFixe
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AWB LIMITED Directors’ reportTabl
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Annual Report - AWB Limited

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