APA
Annual Report 2011

Plain-text annual report

annual RepoRt 2011 What’s in the pipeline? austraLian pipeLine trust Contents Directors’ report Corporate governance statement statement of comprehensive income statement of financial position statement of changes in equity statement of cash flows notes to the financial statements Declaration by the Directors of australian pipeline Limited auditor’s independence declaration independent auditor’s report apt investment trust Contents Directors’ report statement of comprehensive income statement of financial position statement of changes in equity statement of cash flows notes to the financial statements Declaration by the Directors of australian pipeline Limited auditor’s independence declaration independent auditor’s report 2 21 27 28 30 32 33 85 86 87 90 92 93 94 95 96 112 113 114 australian pipeline trust and its controlled entities arsn 091 678 778 auS tR alIa n pIp elIn e t R uS t anD It S C ontRolleD entItIeS Directors’ report the directors of australian pipeline limited (“Responsible entity”) submit their report and the annual financial report of australian pipeline trust (“apt”) and its controlled entities (together “apa” or “Consolidated entity”) for the financial year ended 30 June 2011. this report refers to the consolidated results of apt and apt Investment trust (“aptIt”). company secretary mark Knapman Details of the Company Secretary, his qualifications and experience are set out on page 11. Directors the names of the directors of the Responsible entity during the year and since principal activities the principal activities of apa during the course of the year were the ownership the year end are: Leonard Bleasel am Chairman and operation of energy infrastructure assets and businesses, including: – energy infrastructure, primarily gas transmission and distribution businesses steven Crane John Fletcher russell Higgins ao appointed 1 January 2011 located across australia; – energy investments in listed and unlisted entities; and – asset management and operations services for the majority of apa’s patricia mcKenzie appointed 1 January 2011 energy investments and third parties. muri muhammad George ratilal robert Wright Resigned 26 august 2010 to maintain or increase revenue from its portfolio of gas transmission and During the year apa acquired the emu Downs wind farm as part of its strategy michael mcCormack Managing Director Details of the directors, their qualifications, experience, special responsibilities and directorships of other listed entities are set out on pages 10 to 12. George Ratilal was appointed as alternate director for Muri Muhammad on 26 august 2010. Distributions Distributions paid to securityholders during the year were: apt profit distribution apt capital distribution aptIt profit distribution aptIt capital distribution total distribution assets. Consequently, apa has changed the name of the segment previously known as ‘Gas transmission and Distribution’ to ‘energy Infrastructure’ which includes the emu Downs wind farm as well as the gas transmission and distribution assets. significant changes in state of affairs no significant change in the state of affairs of apa occurred during the year. FinaL FY 2010 DistriBution paiD 15 septemBer 2010 semi-annuaL FY 2011 DistriBution paiD 17 marCH 2011 Cents per security total distribution $000 Cents per security total distribution $000 1.73 8.58 3.67 3.02 17.0 9,364 46,552 19,928 16,350 92,194 9.55 2.46 3.75 0.75 16.5 52,681 13,592 20,629 4,127 91,029 on 24 august 2011, the directors declared a final distribution for apa for the year of 17.9 cents per security payable 15 September 2011, made up of: apt profit distribution apt capital distribution aptIt profit distribution aptIt capital distribution total FinaL FY 2011 DistriBution paYaBLe 15 septemBer 2011 Cents per security total distribution $000 3.42 8.41 3.41 2.66 17.9 19,054 46,761 18,951 14,793 99,559 total distribution for the financial year ended 30 June 2011 is 34.4 cents per security, an increase of 1.65 cents or 5.0% on last year. Distribution information is presented on an accounting classification basis. the apa Group annual tax Statement and annual tax Return Guide (released in September 2011) provides the classification of distribution components for the purposes of preparation of securityholder income tax returns. 2 APA AnnuAl REPORT 2011 financial anD operational review the following table provides a summary of key financial data for the year: Year enDeD 30 June operating results including significant items total revenue excluding pass-through (1) total revenue eBitDa Depreciation and amortisation expense eBit net interest expense pre-tax profit Income tax expense Minorities operating profit after tax and minorities, including significant items Significant items after income tax (2) profit after income tax and minorities, excluding significant items operating cash flow (3) (5) operating cash flow per security (cents) (5) earnings per security (cents) (5) Distribution per security (cents) Distribution payout ratio (4) net tangible asset per security 2011 $000 2010 $000 CHanGes $000 720,256 1,101,989 492,109 (100,350) 391,759 659,548 989,490 459,975 (91,426) 368,549 (247,072) (229,369) 144,687 (35,862) (316) 108,508 (432) 108,940 290,029 52.6 19.7 34.4 65.7 $1.51 139,180 (38,672) (150) 100,358 - 100,358 267,761 51.9 19.4 32.75 64.4 $1.28 60,708 112,499 32,134 (8,924) 23,210 (17,704) 5,506 2,810 (166) 8,150 (432) 8,582 22,268 0.7 0.2 1.65 % 9.2 11.4 7.0 (9.8) 6.3 (7.7) 4.0 7.3 (110.8) 8.1 - 8.6 8.3 1.4 1.3 5.0 $0.23 18.0 Weighted average number of securities (000) 551,222 516,243 (1) pass-through revenue is revenue on which no margin is earned. It arises in the nt Gas business and the asset management operations in respect of costs incurred in, and passed on to envestra limited in respect of, the operation of the envestra limited assets (2) Significant items in the 12 months to 30 June 2011 include apa’s equity share of the eII2 investment allowance concession benefit ($6.9 million), profit on the sale of apa’s investment in CaMS ($1.7 million) offset by transaction costs of the emu Downs wind farm acquisition ($9.0 million). Refer to note 8 of the financial statements (3) operating cash flow = net cash from operations after interest and tax payments, adjusted for significant items (4) Distribution payout ratio = total distribution payments as a percentage of operating cash flow (5) adjusted for significant items apa reported operating profit after tax and minorities of $108.5 million, an apa’s distributions for the financial year total 34.4 cents per security, an increase of 8.1% compared with $100.4 million last year. apa’s profit contained increase of 5.0%, or 1.65 cents on last year. apa achieved its guidance of at three significant items with an overall net negative impact of $0.4 million. least 5% growth in distributions for the 2011 financial year while maintaining a Revenue (excluding pass-through) increased by $60.7 million to $720.3 million, an increase of 9.2% on last year, while earnings before interest, tax, depreciation and amortisation (“eBItDa”) increased by $32.1 million to $492.1 million, an increase of 7.0%. the main factors driving the increase in operating profit and eBItDa include: prudent payout ratio. the distribution payout ratio for the year was 65.7%, further demonstrating apa’s ability to fully fund its distributions out of operating cash flows. CapitaL manaGement During the year, apa undertook capital raising activities to assist in the funding of the continuing strong growth of the business. this involved issuance of new – growth in Queensland and Victorian transmission pipeline revenue, offset securities under the operation of the Distribution Reinvestment plan and an somewhat by flood damage repair costs in Queensland and reduced institutional placement. revenue from Western australian pipelines; – growth in asset Management third party work and revenue for managing envestra limited’s assets; apa issued the following two tranches of new securities under its Distribution Reinvestment plan: – increase in energy Investments revenue due to an increase in apa’s – on 15 September 2010, 9,370,489 securities at $3.69 per security raising investment in Hastings Diversified utilities Fund and envestra limited; and $34.6 million; and – increase in debt costs due to an increase in debt margins which have been – on 17 March 2011, 4,504,833 securities at $3.95 per security raising experienced globally. $17.8 million. operating cash flow increased by 8.3% to $290.0 million (2010: $267.8 million), on 23 June 2011, apa announced an institutional placement to fund the emu while operating cash flow per security increased by 1.4% or 0.7 cents to 52.6 Downs wind farm acquisition and to partially fund organic expansion of apa’s cents per security (2010: 51.9 cents per security). energy infrastructure over the period to June 2012. on 29 June 2011, apa 3 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDissued 77,922,078 new securities at $3.85 per security through this institutional BorroWinGs anD FinanCe Costs placement, raising $300.0 million. the securities issued were not entitled to the as at 30 June 2011, apa had borrowings of $3,239.9 million ($3,156.8 million at final distribution for the year which will be paid on 15 September 2011. 30 June 2010), principally from syndicated bank debt facilities, bilateral debt as at 30 June 2011, there were 634,116,029 securities on issue (30 June 2010: 542,318,629). apa continued to use the Distribution Reinvestment plan in providing equity support to its ongoing strong organic growth and investment projects. on 22 July 2010, apa continued to lengthen the average tenure of its debt position of its balance sheet with the issue of $300 million of 10 year fixed rate a$ Medium term notes to australian and international institutional investors, the proceeds of which were used to repay $102 million of uS private placement facilities, uS private placement notes and australian Medium term notes. Following the $300 million australian Medium term note issue in July 2010, significant additional debt facility headroom was created. this headroom was reduced in December to a more normalised position by cancelling $412 million of syndicated bank facilities which were otherwise due to mature on 1 July 2011. the increase in borrowings compared with last year is primarily due to the additional funds drawn ($83 million) to support equity and operating cash flows retained to fund apa’s strong organic growth and investments ($498 million). notes which matured in September 2010 and also to refinance bank facilities net underlying finance costs increased by $17.7 million, or 7.7%, to $247.1 million ahead of maturity. this had the effect of extending the average maturity of (2010: $229.4 million) over last year primarily as a result of increased floating apa’s debt portfolio and reducing long term borrowing costs. on 30 June 2011, apa successfully refinanced $165 million of bilateral debt facilities (drawn to $145.3 million) which were due to mature in July 2011. apa interest rates and borrowing margins, amortisation of borrowing costs related to bank debt facilities and increased commitment fees associated with maintaining a higher level of debt facility headroom during the first half of the year. the average interest rate (including credit margins) applying to drawn replaced these three bilateral bank facilities with three new facilities, each debt was 7.47% for the year. providing a commitment of $75 million, totalling $225 million. the new facilities have a term of just over three years, maturing in mid July 2014, and will be used for general corporate purposes. at 30 June 2011, apa’s debt portfolio has a broad spread of maturities extending out to 2022, with an average maturity of 4.5 years. apa has gearing of 66.2%1 at 30 June 2011, down from 69.8% at 30 June 2010. at 30 June 2011, apa had in excess of $320 million in cash and committed undrawn facilities available to meet the continued capital growth needs of the business. apa’s interest cover ratio for the year decreased to 2.03 times from 2.11 times last year, while remaining well in excess of its debt covenant default ratio of 1.1 times, and distribution lock up ratio of 1.3 times. CreDit ratinG apt pipelines limited, the borrowing entity of apa, maintained its two investment grade credit ratings: – BBB long term corporate credit rating (outlook Stable) assigned by Standard & poor’s in June 2009, and – Baa2 long term corporate credit rating (outlook Stable) assigned by apa has a prudent treasury policy which requires conservative levels of Moody’s Investors Service in april 2010. hedging of interest rate exposures to minimise the potential impacts from inCome tax adverse movements in rates. all interest rates and foreign currency exposures the effective income tax rate before significant items is 24.8%, down from on uS private placement notes have been hedged. apa also enters into interest 27.8% last year. the decrease has arisen predominantly as a result of rate hedges for a proportion of the interest rate exposure on its other floating amendments to prior year tax returns following changes to tax consolidation rate borrowings. at 30 June 2011, 73.5% of interest obligations were either rules dealing with “rights to future income” and recognition of deductions for hedged or at fixed interest rates for varying periods extending out for 11 years. previous equity raising costs, plus the impact of investment allowances credits a level of interest rate protection is also provided through Consumer price for the current year. Index (“CpI”) indexing in most revenue contracts and the regulatory revenue CapitaL anD investment expenDiture setting process operating on a number of apa’s assets. Capital and investment expenditure totalled $516.0 million, $163.9 million or 47% higher than last year (2010: $352.1 million). this includes stay in business at 30 June 2011, current liabilities exceed current assets by $888.6 million due or maintenance capex of $18.0 million. primarily to the fact that $900.0 million of syndicated facilities are due for repayment in June 2012. apa has a number of Debt Capital Market programs in place and underway which, along with the local bank syndication market, will provide sources from which apa will undertake refinancing of this facility in coming months. expenditure was generally either fully underwritten through long-term revenue arrangements or had regulatory approval through the relevant access arrangement. 1 Gearing ratio determined in accordance with covenants in all debt facilities as net debt to net debt plus book equity 4 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011Capital and investment expenditure for the year is detailed in the table below. CapitaL anD investment expenDiture (1) DesCription oF 2011 maJor proJeCts 2011 $ miLLion 2010 $ MIllIon Growth expenditure Regulated Victorian transmission System northern augmentation project apa Gas networks (Qld) Includes southern network expansion Major projects Queensland new South Wales Roma Brisbane pipeline expansion and lateral Moomba Sydney pipeline expansion; Young to Wagga looping project; Young Marsden compression project Western australia Mondarra Gas Storage Facility other Corporate financial and Customer Management systems Acquisitions energy Infrastructure amadeus Gas pipeline; emu Downs wind farm Increased interest in Sea Gas pipeline, envestra limited and Hastings Diversified utilities Fund; eII2 equity energy Investments total growth capex stay in business capex total capex 33.4 16.1 49.5 19.6 34.3 39.8 12.2 105.8 228.8 113.9 342.6 498.0 18.0 516.0 32.3 21.2 53.5 11.6 31.1 14.4 10.0 67.1 83.3 137.2 220.5 341.1 14.7 355.8 (1) the capital expenditure shown in this table represents actual cash payments as disclosed in the cash flow statement; it excludes accruals brought forward from the prior year and carried forward to next year 5 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDBusiness seGment perFormanCes apa’s operations and financial result for the year reflects strong growth across all business segments. Statutory reported revenue and eBItDa performance of apa’s business segments is set out in the following table: Year enDeD 30 June revenue Energy Infrastructure Queensland new South Wales Victoria South australia Western australia northern territory energy Infrastructure total asset Management energy Investments total segment revenue pass-through revenue unallocated revenue Significant items (1) total revenue eBitDa Energy Infrastructure Queensland new South Wales Victoria South australia Western australia northern territory energy Infrastructure total asset Management energy Investments total segment eBitDa Significant items (1) total eBitDa 2011 $000 2010 $000 CHanGes $000 % 164,308 126,657 151,209 2,049 143,643 13,850 601,716 68,647 27,121 697,484 381,733 12,932 9,839 151,204 120,773 136,852 2,005 144,145 11,242 566,221 60,053 19,408 645,682 329,942 13,866 - 13,104 5,884 14,357 44 (502) 2,608 35,495 8,594 7,713 51,802 51,791 (934) 1,101,989 989,490 112,498 106,799 101,266 114,263 1,618 94,223 5,578 423,747 38,740 27,102 489,588 2,521 492,109 103,302 96,841 103,987 1,720 100,800 1,938 408,588 32,317 19,070 459,975 - 459,975 3,497 4,425 10,276 (102) (6,577) 3,640 15,159 6,423 8,032 29,614 2,521 32,134 8.7 4.9 10.5 2.2 (0.3) 23.2 6.3 14.3 39.7 8.0 15.7 (6.7) 11.4 3.4 4.6 9.9 (5.9) (6.5) 187.8 3.7 19.9 42.1 6.4 7.0 (1) eBItDa contribution of significant items in the 12 months to 30 June 2011 (net $2.5 million) includes apa’s equity share of the eII2 Investment allowance Concession benefit ($9.8 million in revenue and eBItDa), profit on the sale of apa’s investment in CaMS ($1.7 million) offset by transaction costs of the emu Downs wind farm acquisition ($9.0 million) 6 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011enerGY inFrastruCture – Berwyndale Wallumbilla Pipeline apa has changed the name of the segment previously known as ‘Gas In the first full 12 months of apa ownership, the pipeline is performing in line transmission and Distribution’ to ‘energy Infrastructure’. the segment includes with acquisition expectations. apa and aGl entered into commercial the emu Downs wind farm acquired in June 2011, as well as the gas transmission agreements to build a lateral between the Berwyndale Wallumbilla pipeline and distribution assets. and the Silver Springs pipeline owned by aGl. this work was completed in the energy Infrastructure segment contributed 86% of revenue and 87% of July 2011. eBItDa. Revenue (excluding pass-through revenue) was $601.7 million, an – Carpentaria Gas Pipeline increase of 6.3% on the $566.2 million reported last year. eBItDa increased by In December 2010, in response to the Queensland Government’s ‘northwest 3.7% to $423.7 million (2010: $408.6 million). the following key factors contributed to this result: Region energy Review’, apa submitted a proposal to supply gas-fired electricity to major energy users in the Mt Isa region, which is competing with alternative electricity options. the proposal is for a 240 MW gas-fired – Victorian revenue and eBItDa contributed the greatest increase, with power station to commence generation in 2013, with gas volumes higher gas volumes through the Victorian transmission System due to underpinning pipeline capacity on the Carpentaria Gas pipeline. the gas colder weather, together with the annual increase in tariffs; fired-power station proposal is being jointly developed by apa and aGl, – Queensland revenue increase was due to the increased use of the pipeline and is currently the preferred gas generation proposal for the two major asset (gas volume and peak capacity) and general tariff increases across all energy users within the Mt Isa region. the competing non-gas option is assets, and a full year of earnings from the Berwyndale Wallumbilla pipeline known as “Copper String” which is the construction of an electricity (2010: 3 months). eBItDa was impacted by the repair costs on the Roma transmission line between townsville and Mt Isa. Copper String’s viability is Brisbane pipeline and apa Gas network following the summer flood events; heavily reliant on both state and federal government financial support. – new South Wales revenue and eBItDa was boosted by the new revenues for additional capacity and services on the Young to Wagga lateral, offset by the loss of short term contract revenue on the Moomba Sydney pipeline system; and – Western australian earnings were lower primarily due to the regulatory tariff reduction on the Goldfields Gas pipeline and lower gas volumes transported through the parmelia Gas pipeline. apa continues to focus on the operation and development of its energy Infrastructure assets across mainland australia. Queensland – Roma Brisbane Pipeline new south Wales – Moomba Sydney Pipeline Work continued on the $100 million five-year capacity expansion program of the Moomba Sydney pipeline. Capital expenditure for this year, the third year of the program, was $9 million, bringing the total spent thus far to $56 million. the first stage of the Young Wagga looping project was completed in november 2010, with partial capacity available to customers a month earlier. the storage capacity of the southern section of the Moomba Sydney pipeline system was increased by looping a 61 km section of the Young to Wagga lateral. the additional capacity is fully underwritten by long-term transportation and storage agreements. During the year apa entered into commercial agreements that underpin a $50 million expansion of the pipeline. the additional capacity has been During the year compressors at Young and Marsden were reconfigured to increase pipeline capacity on the Moomba Sydney pipeline and the Central substantially contracted under long term transportation agreements with West pipeline. an energy retailer and a major industrial gas user. the pipeline’s capacity will be increased by approximately 10% by means of additional compression, pipeline pressure upgrades and augmentation of the pipeline in the Brisbane metropolitan area. Design and procurement activities for the expansion project commenced with the expansion scheduled to be completed in the second half of 2012. apa completed the construction of a 6 km lateral from the Roma Brisbane victoria and south australia – Victorian Transmission System total gas volume transported through the Victorian transmission System this year was the highest recorded at 245.7 pJ, up 7.6% on last year’s volume of 228.4 pJ and 0.4% above the previous record volume (244.6 pJ in FY09). Colder than normal winters in 2010 and 2011 contributed to the increased volume of gas used by residential and commercial users and broadly pipeline to the Caltex oil refinery in Brisbane in September 2010. the lateral improved economic activity lead to higher gas consumption by base load and associated infrastructure increases the capacity of natural gas supply to industrial customers. the refinery. – APA Gas Network, Queensland apa completed the northern section expansion of the Victorian transmission System in March 2011. the work included the upgrade of the Wollert network meter connections in the year increased by 2,837, taking Compressor Station and an increase in the working pressure for a section of connections to 84,799 at 30 June 2011 (81,962 at 30 June 2010). Gas volume the pipeline, which has resulted in increased capacity for gas transmission transported through the network and to large customers was 12.9 pJ, 0.8 pJ between nSW and Victoria. the expansion is included in the system’s or 6% below the 13.7 pJ last year, mainly due to a large gas user connecting regulatory arrangement. directly to the Roma Brisbane pipeline and ceasing to be a network customer. apa is constructing the first stage of the Western outer Ring Main expansion at Sunbury to satisfy organic and future growth on the Victorian expansion of the gas network continued, including reticulation into new transmission System, and will also maintain uninterrupted gas supply to the housing developments in the Gold Coast area. Gas mains laid for the year Sunbury and Ballarat regions. totalled 38 km, reaching over 2,500 new and existing home sites. – Dandenong LNG facility, Victoria on 17 June 2011, the australian energy Regulator released its final decision During the year, the use of the lnG facility for trucking transport fuel on apa’s access arrangement proposal for apa Gas network, Queensland increased, contributing to increased earnings. Contracts were renegotiated (allgas). Further information on the submission and process is found on with customers using the facility for gas supply ‘peak shaving’ storage, page 9 under ‘Regulatory matters’. which also contributed to the increase. 7 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDWestern australia – Goldfields Gas Pipeline on 5 august 2010, the economic Regulatory authority of Western australia issued its further final decision on apa’s proposed access arrangement. Refer to ‘Regulatory matters’ on page 9 of this report for additional information. – Mondarra Gas Storage Facility on apa’s access arrangement proposal for the amadeus Gas pipeline. Further information is found on page 9 under ‘Regulatory matters’. asset manaGement apa provides asset management and operational services to the majority of its energy investments and a number of third parties. Its main customers are envestra limited, ethane pipeline Income Fund, Sea Gas pipeline and energy Infrastructure Investments. asset management and operational services are In May 2011, apa entered into commercial agreements that will lead to the provided to these customers under long term contracts. further development and expansion of its Mondarra Gas Storage Facility. the foundation contract is with Verve energy, Western australia’s government-owned electricity generator, for a substantial part of the increased capacity of the facility. apa is in discussions with other potential customers for further gas storage services. During the year, apa progressed the initial stages of expansion, including reservoir analysis, engineering and design, and procurement work. over the next two years apa will construct further surface facilities, pipeline interconnects and treatment plants, with expected capital expenditure of up to $140 million. Completion of the expanded capacity is scheduled for 2013. the facility will continue to operate its existing contracted storage services during the expansion period. the expansion is expected to result in commercial storage capacity of 15 pJ and a significant increase in daily injection and withdrawal rates. the Revenue (excluding pass-through revenue) from such services increased by 14.3% to $68.6 million (2010: $60.1 million) and eBItDa increased by 19.9% to $38.7 million (2010: $32.3 million), mainly due to increased envestra limited revenue and additional third party work. During the year, envestra limited acquired the Wagga Wagga Gas network. the operation and asset management of this network has been added to apa’s asset management of envestra limited’s networks, under the same terms and conditions. Consequently, apa employed 14 existing Wagga Wagga network operations personnel and integrated operations into apa’s management of envestra limited’s assets. enerGY investments apa has an interest in a number of energy investments across australia, including envestra limited, Sea Gas pipeline, energy Infrastructure Investments, ethane pipeline Income Fund, eII2 and Hastings Diversified utilities Fund. apa holds a number of roles in respect of these vehicles in expanded facility will provide apa’s customers with supply options and addition to its ownership interest. flexibility to better manage their gas supply and demand portfolios. the Mondarra expansion project has been welcomed by the Western australian Government, which recognises the major role the expanded facility will play in enhancing future gas supply security for the state. – Emu Downs In June 2011, apa acquired the emu Downs wind farm and development site in Western australia. the 80 MW wind farm has been in operation since 2006 and is located 200 km north of perth, 10 kilometres from apa’s existing parmelia Gas pipeline. apa secured long term revenue agreements for the total output of the 80 MW wind farm - both the electricity and Renewable energy Certificates (ReCs) - for the remaining operating life of this asset of approximately 20  years. these agreements are with large, highly creditworthy energy retailers, including the Western australian government owned energy all investments are equity accounted, with the exception of apa’s interests in ethane pipeline Income Fund and Hastings Diversified utilities Fund. – envestra Limited apa increased its interest in envestra limited from 31.7% to 33.0% by participating in envestra limited’s Distribution Reinvestment plan in october 2010 and March 2011. the total value of distributions reinvested during the year was $24.8 million. – sea Gas pipeline In november 2010, apa acquired a further 16.7% of the Sea Gas pipeline from International power for $46.3 million. apa exercised its pre-emptive right over part of International power’s interest, and with this acquisition apa’s overall interest in the pipeline increased to 50%. In august 2011, Sea Gas successfully refinanced its non-recourse debt retailer Synergy. operations and maintenance services are provided by the facility for a further five years. wind turbine manufacturer under a comprehensive service and availability agreement for the medium term. – eii2 In october 2009, apa (20.2%), together with Marubeni Corporation and the acquisition price of $171.9 million includes the 80 MW wind farm and the osaka Gas, acquired the north Brown Hill Wind Farm from aGl. wind farm development rights for a further 130 MW on adjacent land. this excludes stamp duty and transaction costs which total $8.6 million. northern territory – Amadeus Gas Pipeline all turbines on the wind farm were constructed and the wind farm connected to the grid by December 2010, ahead of schedule. as a result of the commencement of generation from the wind farm, accounting profits were generated within eII2 (apa share: $9.6 million) primarily due to an apa acquired the amadeus Gas pipeline and associated infrastructure for investment allowance concession benefit recognised on commencement of $63 million in June 2011. Since 1986, the amadeus Gas trust has leased the generation (included as a significant item). Final handover from the epC pipeline from a consortium of financial institutions, and nt Gas as trustee (engineering procurement and construction) constructor occurred in June for the amadeus Gas trust has managed and operated the pipeline. apa 2011. apa’s funding commitment for equity arose in June 2011, at which time holds a 96% interest in nt Gas and the amadeus Gas trust. apa acquired apa provided $19.7 million for its eII2 investment. the pipeline and associated assets at the end of that lease. the investment is secured by a long term off-take agreement with aGl the acquisition is supported by a new long term gas transportation energy, covering both the electricity generated and the Renewable energy agreement between apa and power and Water Corporation, the northern Credits produced from the wind farm. territory’s government-owned electricity provider. on 20 July 2011, the australian energy Regulator released its final decision – – 8 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011 – Hastings Diversified utilities Fund access arrangement. eRa did not accept apa’s proposed access arrangement, During the year, apa increased its interest in Hastings Diversified utilities and installed an access arrangement it had prepared which reflected the Fund from 16.8% to 19.4% at a cost of $22.5 million. this investment is requirements and tariffs specified in its final decision. these tariffs came into consistent with apa’s strategy of long term investment in gas transmission effect on 20 august 2010 and apply to approximately 40% of the annual pipelines. revenue apa receives from the Goldfields Gas pipeline. apa flooD anD weather impact eastern australia was subjected to a number of extreme weather events during the year which had an impact on both apa’s assets and people. these weather events included heavy rain, flooding and a cyclone (Cyclone Yasi). assets affected by the flood and weather included the Roma Brisbane pipeline and apa Gas network in Queensland, and the Central Ranges pipeline in new South Wales. the impact on apa’s assets and operations from these events has been managed safely and efficiently by local and interstate apa staff, in accordance with apa’s sound and well developed emergency response and asset management plans, with the result that there was minimal disruption of gas transportation services. Repairs to apa assets were substantially completed within the year. there was minimal impact on apa operations and the costs associated with these events have been fully provided for. regulatory matters Key regulatory matters addressed during the year included: apa Gas networks access arrangement on 30 September 2010, apa submitted the access arrangement proposal for its Gas network (allgas) in Queensland to the australian energy Regulatory (“aeR”). the proposal establishes the basis for the terms and conditions of apa has pursued the merits review process available within the regulatory framework. short-term trading market in gas a short-term trading market (“SttM”) in natural gas was introduced by the australian energy Market operator (“aeMo”) into new South Wales and South australia on 1 September 2010, and operates alongside Victoria’s established wholesale gas market. the SttM facilitates the trading of natural gas at defined hubs of Sydney and adelaide and consequently has an impact on pipelines which deliver gas to these hubs, including the Moomba Sydney pipeline. apa has implemented a program to ensure that systems and procedures are compliant with SttM requirements. apa is working with aeMo and market participants to introduce the SttM in Queensland, with a natural gas trading hub in Brisbane. trials will commence on 1 September 2011, and market operations are scheduled to commence on 1 December 2011. health, safety anD environment Health and safety reporting the lost time Injury Frequency Rate (“ltIFR”) for apa employees was 6.2 for this year, up from 4.9 last year. there were 13 reportable lost time injuries during the year, compared with 10 last year. access for users and prospective users of the gas distribution network for the apa remains committed to a ‘zero harm’ environment and is developing a period 1 July 2011 to 30 June 2016. aeR released its draft decision on 16 February national apa Group Health Safety & environment Management System, 2011 and its final decision on 17 June 2011. integrating the various legacy systems and adopting best practice across the aeR’s final decision on 17 June 2011 did not approve apa’s proposed revised access arrangement and instead aeR has issued its own revised access Group. the system, known as SaFeGuaRD, will be launched on 1 September 2011. arrangement and access arrangement information for apa Gas network. environmental regulations the final decision accepted apa’s forecast operating and capital expenditure for the period. However, apa does not agree with aeR’s approach in respect of some key elements of the weighted average cost of capital and has sought a merits review by the australian Competition tribunal of aeR’s decision in respect of the debt risk premium. amadeus Gas pipeline access arrangement all pipeline, distribution and gas processing assets owned and/or operated by apa are designed, constructed, tested, operated and maintained in accordance with pipeline and distribution licences issued by the relevant state and territory technical regulators. all licences require compliance with relevant federal, state and territory environmental legislation and australian standards. the pipeline licences also require compliance with the australian Standard aS on 23 December 2010, apa submitted the access arrangement proposal for the 2885 “pipelines – Gas and liquid petroleum”, which has specific requirements amadeus Gas pipeline to aeR. the access arrangement proposal outlines the for the management of environmental matters associated with all aspects of proposed terms and conditions of access for the transmission pipeline for the the high pressure pipeline industry. period 1 July 2011 to 30 June 2016. Following the release of aeR’s draft decision in March 2011, apa submitted a revised access arrangement proposal. aeR released its final decision on 20 July 2011, which did not approve apa’s revised access arrangement proposal. Instead, the final decision outlined the revisions required to the access arrangement, including the reference tariffs and terms and conditions. aeR approved and published its own access arrangement and access arrangement information for the amadeus Gas pipeline on 27 July 2011. environmental management plans satisfying part a of the australian pipeline Industry association Code of environmental practice are prepared and independently audited for construction activities. In accordance with part 3 of aS 2885, environmental management plans satisfying part B of the Code are in place for all operating pipelines and are managed in accordance with apa’s contracts and the terms and conditions of the licences that apa has been the gas transportation agreement between apa and power and Water issued. Corporation is not impacted by this access arrangement. Goldfields Gas pipeline access arrangement the Safety and operating plan for apa’s distribution networks have been audited in accordance with the Queensland and new South Wales technical Following the release of the economic Regulation authority of Western regulator requirements. australia (“eRa”) final decision on 13 May 2010, apa, on behalf of the Goldfields Gas pipeline owners, submitted an access arrangement which sought to address elements of the final decision. the board reviews external audit reports and, on a monthly basis, the internal reports prepared relating to environmental issues. no breaches have been reported during the year and apa has managed the assets in accordance with on 5 august 2010, eRa released its further final decision on the proposed the environmental management plans that are in place. 9 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDenvironmental reporting In october 2010 apa complied with australia’s national Greenhouse and energy Reporting obligations for financial year 2010. energy reporting for financial year 2011 will be submitted in october 2011. apa’s performance on two key measures is set out in the following table: FinanCiaL Year Scope 1 Co2 emissions (tonnes) energy consumption (GJ) 2010 305,076 2009 298,906 3,248,069 3,260,347 CHanGe 6,170 -12,278 +2.1% -0.4% impact of carbon policy the impact of the currently proposed federal carbon policy, Clean energy subsequent events except as disclosed elsewhere in this report, the directors are unaware of any Future, will depend on its final form. However, apa expects its costs will be matter or circumstance that has occurred since the current period end that has immaterial. apa expects to recover all carbon related costs from its regulated significantly affected or may significantly affect the operations of the assets under the access arrangement review process. For non-regulated assets, Consolidated entity, the results of those operations or the state of affairs of the apa has implemented changes to its contracts with carbon pass-through Consolidated entity in future years. clauses included in all new contracts. apa’s financial exposure is limited to some legacy contracts that do not contain the pass-through of carbon costs to customers. apa will have virtually no carbon costs if the proposed carbon policy is deemed a change in tax law. future Developments Disclosure of information regarding likely developments in the operation of the Consolidated entity in future years and the expected results of those operations, other than information disclosed elsewhere in this report, is likely to result in unreasonable prejudice to the Consolidated entity. accordingly, this information has not been disclosed in this report. information on Directors anD company secretary Information relating to the qualifications and experience of the directors and Company Secretary is set out below: Leonard Bleasel am FaiCD Faim leonard (len) Bleasel is a non-executive director of QBe Insurance Group limited and a director of o’Connell Street associates pty limited. He is Chairman of the taronga Conservation Society australia and Chairman of the advisory Council Independent Chairman for RBS Group (australia) pty limited. appointed 28 august 2007 Appointed Chairman 30 october 2007 len had a long career in the energy industry before retiring from management in 2001. He started his career in aGl in 1958 and worked in a variety of roles, culminating in the position of Managing Director and Chief executive officer from 1990 to 2001. steven Crane BComm FaiCD sFFin Independent Director appointed 1 January 2011 len’s past appointments have included Chairman of Foodland associated limited, aBn aMRo australia Holdings pty limited, Solaris power, the australian Gas association, natural Gas Corporation Holdings ltd (new  Zealand), elgas ltd, auscom Holdings pty ltd, Industrial pipe Systems pty ltd and east australian pipeline ltd, a director of St George Bank limited and Gas Valpo (Chile) and Vice president of the Royal Blind Society. len was awarded an aM in the General Division of the order of australia for services to the australian gas and energy industries and the community. Steven Crane has over 30 years experience in the financial services industry. Steven’s background is in investment banking, having previously been Chief executive officer of aBn aMRo australia (now RBS Group australia) and BZW australia. Steven has considerable experience as a non-executive director of listed entities. He is currently a director of Bank of Queensland limited, transfield Services limited and nIB Holdings limited, and was formerly Chairman of adelaide Managed Funds limited, Investa property Group limited and formerly a director of adelaide Bank limited, Foodland associated limited and apa ethane limited, the responsible entity of ethane pipeline Income Fund. Steven is a member of the audit and Risk Management Committee and the Remuneration Committee. John Fletcher Bsc mBa FaiCD John Fletcher has over 35 years experience in the energy industry, having held a number of executive positions in aGl prior to his retirement in 2003, including Chief Financial officer. John has previously been a director of Integral energy, natural Independent Director Gas Corporation Holdings ltd (new Zealand), Foodland associated limited and alinta energy Group. He brings a wide appointed 27 February 2008 commercial and financial practical knowledge to the board. John was previously an aGl appointed director of australian pipeline limited from 2000 to 2005. He is also a director of Sydney Water. John is the Chairman of the Remuneration Committee and a member of the audit and Risk Management Committee. 10 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011russell Higgins ao Bec FaiCD Independent Director appointed 7 December 2004 Russell Higgins has extensive experience both locally and internationally in the energy sector and in economic and fiscal policy. He was Secretary and Chief executive officer of the Department of Industry, Science and Resources from 1997 to 2002 and Chairman of the australian Government’s energy task Force from 2003 to 2004. Russell is a director of telstra Corporation limited. He is the Chairman of the Global Carbon Capture and Storage Institute and the CSIRo energy transformed Flagship advisory Committee, and a director of Ricegrowers limited (trading as SunRice) and the St James ethics Foundation. He is a former Chairman of the Snowy Mountains Council and the australian Government’s Management Improvement advisory Committee and a former director of australian Biodiesel Group limited, eFIC (export Finance and Insurance Corporation), CSIRo, austrade, the australian Industry and Development Corporation as well as a former member of the australian Government’s Joint economic Forecasting Group. In 2006-07, he was a member of the prime Ministerial task Group on emissions trading. Russell is Chairman of the Health Safety and environment Committee and a member of the audit and Risk Management Committee. patricia mcKenzie LLB maiCD Independent Director patricia McKenzie has considerable expertise and experience in energy market regulation and, as a qualified solicitor, extensive corporate legal experience. She was formerly a director of australian energy Market operator limited (aeMo), the national energy market operator for electricity and gas, and the Chief executive officer of Gas Market Company limited, the appointed 1 January 2011 market administrator for retail competition in the gas industry in new South Wales and the australian Capital territory. patricia is also Chair of Diabetes australia limited. patricia is a member of the Health Safety and environment Committee and the Remuneration Committee. muri muhammad Muri Muhammad retired from petronas in august 2002 and was reappointed as petronas’ adviser, Gas Business in the msc Director president’s office until 30 March 2005. He brings 30 years experience in the chemicals and petroleum industry as well as expertise in the domestic and international gas transmission and distribution, gas utilisation, cogeneration and conversion appointed 8 March 2000 businesses where he has held various senior executive positions. Muri was petronas’ Vice president for Gas Business from 1998 until his retirement and held several directorships, some as Chairman, of a number of petronas’ subsidiaries and associate companies in Malaysia and abroad. He currently sits on the boards of gas transmission companies transportadora de Gas Del norte of argentina, petronas Gas Berhad of Malaysia, and papua new Guinea’s national petroleum and minerals corporation, petromin pnG Holdings limited. He was also a member of the Malaysian energy Commission, a Malaysian Government regulatory body. Muri is a member of the Remuneration Committee and the Health Safety and environment Committee. George ratilal mBa Director Manharlal (George) Ratilal is executive Vice president (Finance) of petronas. He is a member of petronas’ board and executive Committee. prior to joining petronas in 2003, he was employed by a local Malaysian merchant bank for 18 years. During that time, George specialised in corporate finance where he advised on mergers and acquisitions and the capital appointed 31 July 2007 markets. Resigned 26 august 2010 Alternate Director appointed 26 august 2010 robert Wright BComm FCpa Robert Wright has over 30 years financial management experience, having held a number of Chief Financial officer positions, including Finance Director of David Jones limited. He is currently the Chairman of SaI Global limited, Super Cheap auto Independent Director Group limited, RCl Group limited and apa ethane limited, the responsible entity of ethane pipeline Income Fund and was appointed 11 February 2000 previously Chairman of Dexion limited. michael mcCormack Bsurv GradDipeng mBa FaiCD Managing Director appointed Managing Director 1 July 2006 mark Knapman BComm LLB FCis Company Secretary appointed 16 July 2008 Robert is the Chairman of the audit and Risk Management Committee and a member of the Health Safety and environment Committee. Michael (Mick) McCormack has been Chief executive officer of apa since 1 July 2005 and Managing Director since 1 July 2006. Mick has over 25 years experience in the energy infrastructure sector in australia, with particular focus on gas pipeline and distribution infrastructure, where he has worked on the development, construction and operation of new and existing pipelines and distribution networks across australia. Mick is Chairman of nt Gas pty ltd and a director of envestra limited and the australian pipeline Industry association. In addition to being responsible for the secretariat function, Mark Knapman oversees corporate governance and the legal, risk management and financial services compliance functions. Mark has extensive experience as a Company Secretary. He was Company Secretary and General Counsel of an aSX-listed company and asia pacific legal Counsel and Company Secretary for a uS multinational company prior to joining apa. prior to those roles, he was a partner of an australian law firm. Mark is a Fellow of the Chartered Institute of Company Secretaries and is admitted to practice as a solicitor. 11 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDDirectorships of other listeD companies Directorships of other listed companies held by directors at any time in the three years immediately before the end of the year are as follows: name CompanY leonard Bleasel aM Steven Crane John Fletcher Russell Higgins ao patricia McKenzie Muri Muhammad George Ratilal (2) Robert Wright Michael McCormack QBe Insurance Group limited transfield Services limited Bank of Queensland limited nIB Holdings limited apa ethane limited (1) alinta energy Group telstra Corporation limited Ricegrowers limited - - - SaI Global limited Super Cheap auto Group limited RCl Group limited apa ethane limited (1) Dexion limited envestra limited perioD oF DireCtorsHip Since January 2001 Since February 2008 Since December 2008 Since September 2010 July 2008 to June 2011 october 2006 to april 2010 Since September 2009 Since December 2005 - - - Since october 2003 Since May 2004 Since May 2006 Since 10 July 2008 March 2005 to august 2010 Since July 2007 (1) apa ethane limited is the responsible entity of the registered investment schemes that comprise ethane pipeline Income Fund, the securities in which are quoted on the aSX (2) George Ratilal resigned as a director and was appointed an alternate director for Muri Muhammad on 26 august 2010 options granteD In this report, the term “apa securities” refers to the stapled securities each comprising a unit in australian pipeline trust stapled to a unit in apt Investment inDemnification of officers anD external auDitor During the year, the Responsible entity paid a premium in respect of a contract trust and traded on the australian Securities exchange (“aSX”) under the insuring the directors of the Responsible entity, the Responsible entity’s ticker symbol “apa”. no options over unissued apa securities were granted during or since the end of the year. Company Secretary, and all executive officers of the Responsible entity and any related body corporate of apa against any liability incurred in performing those roles to the extent permitted by the Corporations act 2001. the contract of insurance prohibits disclosure of the nature of the liability and the amount of no unissued apa securities were under option as at the date of this report. the premium. no apa securities were issued during or since the end of the year as a result of australian pipeline limited, in its capacity as Responsible entity of australian the exercise of an option over unissued apa securities. pipeline trust and apt Investment trust, indemnifies each person who is or has been a director or Company Secretary of the Responsible entity or of any related body corporate of apa under a range of deed polls and indemnity agreements which have been in place since 1 July 2000. this indemnity may extend to such other officers or former officers of apa as the board in each case determines. the indemnity operates to the full extent allowed by law but only to the extent not covered by insurance and is on terms the board considers usual for arrangements of this type. under its constitution, australian pipeline limited (in its personal capacity) indemnifies each person who is or has been a director, Company Secretary or executive officer of that company. the indemnity operates to the full extent allowed by law but only to the extent not covered by insurance. the Responsible entity has not otherwise, during or since the end of the year, indemnified or agreed to indemnify an officer or external auditor of the Responsible entity or of any related body corporate of apa against a liability incurred as such an officer or auditor. 12 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011Directors’ meetings During the year, 16 board meetings, three Remuneration Committee meetings, four audit and Risk Management Committee meetings and three Health Safety and environment Committee meetings were held. the following table sets out the number of meetings attended by each director while they were a director or a committee member: DireCtors leonard Bleasel aM (1) Steven Crane (2) John Fletcher Russell Higgins ao patricia McKenzie (2) Muri Muhammad Robert Wright Michael McCormack George Ratilal (3) BoarD remuneration Committee auDit anD risK manaGement Committee HeaLtH saFetY anD environment Committee a 16 8 16 16 8 16 16 16 2 B 16 8 16 16 8 15 15 16 1 a - 1 3 2 1 3 - - - B - 1 3 2 1 3 - - - a - 1 4 4 - - 4 - - B - 1 4 4 - - 4 - - a - - - 3 1 3 3 - - B - - - 3 1 2 3 - - a: number of meetings held during the time the director held office or was a member of the committee during the year B: number of meetings attended (1) the Chairman also attends all committee meetings ex officio (2) appointed 1 January 2011 (3) George Ratilal resigned as director and was appointed as alternate director for Muri Muhammad on 26 august 2010 Directors’ securityholDings the aggregate number of apa securities held directly, indirectly or beneficially by directors or their director related entities at the 30 June 2011 is 862,422 (2010: 710,620). the following table sets out directors’ relevant interests in apa securities as at 30 June 2011: DireCtors leonard Bleasel aM Steven Crane John Fletcher Russell Higgins ao patricia McKenzie Muri Muhammad Robert Wright Michael McCormack George Ratilal (2) FuLLY paiD seCurities as at 1 JuLY 2010 seCurities aCQuireD seCurities DisposeD FuLLY paiD seCurities as at 30 June 2011 359,771 100,000(1) 56,807 72,954 - 42,818 31,265 147,005 - 810,620 15,634 - 3,219 6,549 - - 2,806 23,614 - 51,882 - - - - - - - - - - 375,405 100,000 60,026 79,503 - 42,818 34,071 170,619 - 862,442 (1) these securities were held by Steven Crane at the date of his appointment during the year (2) George Ratilal resigned as a director and was appointed an alternate director for Muri Muhammad on 26 august 2010 the directors hold no other rights or options over apa securities. there are no contracts to which a director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver apa securities. the Company Secretary holds 4,484 apa securities. 13 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDremuneration report introduction at apa, we are committed to disclosing a clear and transparent summary of our remuneration arrangements. this report explains our approach to remuneration and sets out key 2011 remuneration details for the directors of the Responsible entity and key management personnel of apa. the people currently in these positions are listed below: DireCtors oF tHe responsiBLe entitY Leonard Bleasel am steven Crane John Fletcher russell Higgins ao patricia mcKenzie muri muhammad robert Wright michael mcCormack KeY manaGement personneL michael mcCormack peter Fredricson ross Gersbach stephen ohl mark Knapman peter Wallace Chairman apa Group Chairman Remuneration Committee Chairman Health Safety and environment Committee Chairman audit and Risk Management Committee Chief executive officer and Managing Director Chief executive officer and Managing Director Chief Financial officer Group Manager Commercial Group Manager operations Company Secretary Group Manager Human Resources Have there been any changes to the executive remuneration the Remuneration Committee may seek external professional advice on any structure during FY 2011? matter within its terms of reference. there have been no changes to the remuneration structure during the year. However, the remuneration structure remains continuously under review to ensure that that the organisation maintains appropriate pay structures to attract and retain suitably qualified staff. remuneration Committee What is the role of the Remuneration Committee? the Remuneration Committee has been established by the board to govern our approach to non-executive director remuneration We seek to attract and retain a high calibre of directors who are equipped with diverse skills to oversee all functions of apa in an increasingly complex environment. We aim to fairly remunerate directors for their services relative to similar sized organisations. and oversee executive remuneration. the role of the Remuneration Committee non-executive director remuneration comprises: is to: – a base board fee; – ensure the provision of a robust remuneration and reward system that – an additional fee for serving on a committee of the board; and provides for the alignment of employee and securityholder interests; – superannuation guarantee levy contributions. – consider and make recommendations to the board on remuneration policies and packages applicable to directors and to senior executives of apa; – facilitate effective attraction, retention and development of talented employees; and – ensure compliance with relevant legislation and corporate governance the board determines base board fees and committee fees annually. the board acts on advice from the Remuneration Committee which obtains external professional advice from independent remuneration specialists. Such advice includes market comparisons paid by comparable companies in the aSX 200. principles on remuneration practices and employment policies. non-executive directors do not receive incentive payments of any type. one off the members of the Remuneration Committee, all of whom are non-executive directors, are: – John Fletcher (Chairman); – Steven Crane; – patricia McKenzie; and – Muri Muhammad. the Chairman of the board attends all meetings of the Remuneration Committee and the Managing Director attends by invitation. the Remuneration Committee met three times during the year. ‘per diems’ may be paid in exceptional circumstances. no payments have been made under this arrangement in this reporting period. In 2003, the board terminated the non-executive directors’ retirement benefit plan so that the benefits to participating directors that had accrued up to that termination date were then quantified and preserved for payment on retirement of those directors. Robert Wright is the only current director entitled to benefits under the plan on his retirement from the board. 14 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011Board approved fees and committee fees Following external benchmarking and a review of apa’s performance relative to other companies, base board fees and fees for serving on a committee of the board were increased effective 1 January 2011. Base board fees and committee fees excluding superannuation guarantee levy are outlined below: Effective 1 January 2011 Board fees Remuneration Committee fees audit and Risk Management Committee fees Health Safety and environment Committee fees Board fees Effective 1 January 2010 to Remuneration Committee fees 31 December 2010 audit and Risk Management Committee fees Health Safety and environment Committee fees CHairman $000/pa memBer $000/pa 280 23 32 23 265 22 30 22 102 11.5 16 11.5 96 11 15 11 Actual payments for period actual remuneration received by non-executive directors during the year is outlined in the table below: non-exeCutive DireCtors (1) FeeS $ SupeRannuatIon $ totaL paiD 2011 $ total paID 2010 $ leonard Bleasel aM Steven Crane (2) John Fletcher Russell Higgins ao patricia McKenzie (2) Muri Muhammad Robert Wright George Ratilal (3) total 272,500 57,875 107,000 145,375 56,750 121,500 141,250 16,000(4) 918,250 20,750 5,209 42,335 13,077 5,108 - 12,715 - 99,194 293,250 63,084 149,335 158,452 61,858 121,500 153,965 16,000 1,017,444 271,300 - 135,937 149,320 - 113,000 143,875 93,000 906,432 (1) the remuneration for the Chief executive officer and Managing Director, Michael McCormack, is included with the actual remuneration disclosures for key management personnel for FY 2011 on page 18 (2) appointed 1 January 2011 (3) George Ratilal resigned as a director and was appointed an alternate director for M Muhammad on 26 august 2010 (4) George Ratilal’s board fees were paid to petronas australia pty ltd 15 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDAustrAliA n PiP el in e t rust A nd its co ntro lled e nti ti es Directors’ report continueD our approach to executive remuneration our approach to executive remuneration What is our executive remuneration strategy? What is our executive remuneration strategy? our executive remuneration strategy is to: our executive remuneration strategy is to: – attract and retain key executives who will create long-term sustainable value for securityholders; – attract and retain key executives who will create long-term sustainable value for securityholders; – motivate and reward executives having regard to the overall performance of apa, the performance of the executive measured against pre-determined – motivate and reward executives having regard to the overall performance of apa, the performance of the executive measured against pre-determined objectives and the external compensation environment; objectives and the external compensation environment; – target at least the market median using external benchmark data; – target at least the market median using external benchmark data; – appropriately align the interests of executives with those of securityholders; and – appropriately align the interests of executives with those of securityholders; and – comply with applicable legal requirements and appropriate standards of governance. – comply with applicable legal requirements and appropriate standards of governance. We aim to pay competitive remuneration and this is communicated as total Remuneration opportunity (“tRo”). We aim to pay competitive remuneration and this is communicated as total Remuneration opportunity (“tRo”). Total Total Remuneration Remuneration Opportunity Opportunity = = Total Fixed Total Fixed Remuneration Remuneration (TFR) (TFR) + + Short-term Short-term Incentive Incentive (STI) (STI) + + Long-term Long-term Incentive Incentive (LTI) (LTI) Performance based ‘at risk’ remuneration Performance based ‘at risk’ remuneration each individual’s tRo is dependent on their level in the organisation and their capacity to influence outcomes. each individual’s tRo is dependent on their level in the organisation and their capacity to influence outcomes. What is the remuneration mix? What is the remuneration mix? apa’s remuneration mix for senior executives is structured as a mix of fixed remuneration and ‘at risk’ short and long-term incentive components. the proportion apa’s remuneration mix for senior executives is structured as a mix of fixed remuneration and ‘at risk’ short and long-term incentive components. the proportion of fixed versus ‘at risk’ remuneration varies at different levels within apa, reflecting the varying capacity of employees to influence apa’s operational performance of fixed versus ‘at risk’ remuneration varies at different levels within apa, reflecting the varying capacity of employees to influence apa’s operational performance and returns to securityholders. and returns to securityholders. For the Chief executive officer and Managing Director and other key management personnel, the remuneration mix is: For the Chief executive officer and Managing Director and other key management personnel, the remuneration mix is: Managing Director Managing Director other key management Other key management personnel 2 personnel 2 40% 40% 30% 30% 30% 30% ‘at risk’ components ‘at risk’ components 50% 50% 25% 25% 25% 25% ‘at risk’ components ‘at risk’ components TFR TFR STI L STI L ltI TI TI An overview of remuneration components An overview of remuneration components each remuneration component has a different purpose: each remuneration component has a different purpose: remuneration Component remuneration Component purpose purpose HoW reWarD is DeLivereD HoW reWarD is DeLivereD total Fixed Remuneration (“tFR”) total Fixed Remuneration (“tFR”) to reflect the market value of the role and the to reflect the market value of the role and the the total of base salary (which includes cash, the total of base salary (which includes cash, individual’s skills and experience. individual’s skills and experience. superannuation guarantee levy, vehicles and superannuation guarantee levy, vehicles and parking) and incidental benefits paid in monthly parking) and incidental benefits paid in monthly instalments. instalments. ‘at risK’ Components ‘at risK’ Components Short-term incentive (“StI”) Short-term incentive (“StI”) to reward strong performance against the to reward strong performance against the Cash-based incentive based on a mix of financial Cash-based incentive based on a mix of financial achievement of specific business objectives. achievement of specific business objectives. and non-financial key performance indicators and non-financial key performance indicators paid annually after the audited accounts are paid annually after the audited accounts are approved. approved. long-term incentive (“ltI”) long-term incentive (“ltI”) to link executive reward with securityholder to link executive reward with securityholder Cash-settled incentive based on achievement of Cash-settled incentive based on achievement of value. value. an annual board mandated key financial hurdle an annual board mandated key financial hurdle paid in three equal annual instalments starting paid in three equal annual instalments starting one year after the year of allocation. one year after the year of allocation. 2 other than the Company Secretary who has a mix of 58%, 21% and 21% 2 other than the Company Secretary who has a mix of 58%, 21% and 21% APA AnnuAl REPORT 2011 16 16 APA002 Annual Report 2011_v3C.indd 16 7/09/11 11:47 AM AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011Au strAliA n PiP eline t rust A nd its controlled entities Directors’ report continueD our approach to executive remuneration What is our executive remuneration strategy? our executive remuneration strategy is to: – attract and retain key executives who will create long-term sustainable value for securityholders; – motivate and reward executives having regard to the overall performance of apa, the performance of the executive measured against pre-determined objectives and the external compensation environment; – target at least the market median using external benchmark data; – appropriately align the interests of executives with those of securityholders; and – comply with applicable legal requirements and appropriate standards of governance. We aim to pay competitive remuneration and this is communicated as total Remuneration opportunity (“tRo”). Total Remuneration Opportunity = Total Fixed Remuneration (TFR) + + Short-term Incentive (STI) Long-term Incentive (LTI) each individual’s tRo is dependent on their level in the organisation and their capacity to influence outcomes. Performance based ‘at risk’ remuneration apa’s remuneration mix for senior executives is structured as a mix of fixed remuneration and ‘at risk’ short and long-term incentive components. the proportion of fixed versus ‘at risk’ remuneration varies at different levels within apa, reflecting the varying capacity of employees to influence apa’s operational performance For the Chief executive officer and Managing Director and other key management personnel, the remuneration mix is: 40% 30% 30% ‘at risk’ components 50% 25% 25% What is the remuneration mix? and returns to securityholders. Managing Director Other key management personnel 2 An overview of remuneration components each remuneration component has a different purpose: TFR STI L TI remuneration Component purpose HoW reWarD is DeLivereD total Fixed Remuneration (“tFR”) to reflect the market value of the role and the the total of base salary (which includes cash, individual’s skills and experience. superannuation guarantee levy, vehicles and ‘at risK’ Components Short-term incentive (“StI”) to reward strong performance against the Cash-based incentive based on a mix of financial achievement of specific business objectives. and non-financial key performance indicators long-term incentive (“ltI”) to link executive reward with securityholder Cash-settled incentive based on achievement of value. parking) and incidental benefits paid in monthly instalments. paid annually after the audited accounts are approved. an annual board mandated key financial hurdle paid in three equal annual instalments starting one year after the year of allocation. total Fixed remuneration (“tFr”) – various financial measures such as cost control, revenue and cash generation The total of base salary, including cash, superannuation guarantee levy, vehicles and capital expenditure management. this reflects apa’s strategic goal of and parking and incidental benefits. tFR is reviewed annually and is determined by reference to independent external remuneration benchmarking information, taking into account an individual’s responsibilities, performance, qualifications and experience. ‘at risk’ remuneration ’at risk’ remuneration is made up of two elements, StI and ltI. Before any StI payments or ltI allocations are made the organisation must achieve at least the board approved performance hurdle. each of these components is discussed in more detail below. increasing oCFpS over the medium term, thereby increasing securityholder returns and aligning the interests of StI participants with those of securityholders; and – non-financial targets through the delivery of individual KpIs linked to long- term strategic measures including health, safety and environment targets, and reinforcement of an ethical and values based culture. at least 50% of the key management personnels’ KpIs are linked to financial measures. How is performance measured? What is the key performance hurdle for ‘at risk’ remuneration? operating cash flow per security (”oCFpS”) has been chosen by the board as the current key performance hurdle for ‘at risk’ remuneration. this is directly linked to apa’s strategic goal of increasing operating cash flows over the medium term, thereby improving total securityholder value. at the beginning of the financial year, the board, at the recommendation of the Remuneration Committee, determines the appropriate financial and non- financial KpIs for the Chief executive officer. the board also reviews the KpIs the Chief executive officer will use to assess the performance of his direct reports. using oCFpS as the key performance hurdle ensures the interests of executives and securityholders are aligned. If the security price rises over the period of allocation, both parties benefit and likewise if it falls, both are similarly affected. at the end of the financial year, after the audited financial results are available and provided that the performance hurdle is met, the board determines the performance against KpIs of the Chief executive officer and the Chief executive at the start of the year, the board, having regard to the longer term strategy officer’s direct reports and approves the StI amounts to be paid. and annual budget, established the oCFpS gateway that needs to be achieved before any StI and ltI was triggered. the oCFpS gateway was not changed over the course of the year. Short-term incentive (“STI”) What is the performance hurdle? StI payments are made from the general operating budget. executives participating in the StI will not receive any incentive payments unless the performance hurdle for the financial year is reached and individual KpIs have A cash-based incentive used to reward strong performance against the been achieved. achievement of financial and non-financial targets or key performance indicators. What is the purpose of the STI plan? the StI plan is designed to put a proportion of executive remuneration ’at risk’ against meeting key performance indicators (“KpIs”) linked to: What is the value of the STI opportunity? the StI amount payable is capped at the StI target amount. that is, the Chief executive officer’s StI is capped at 30% of tRo and for his direct reports at 25% of tRo3. ‘at risk’ components all StI payments are made in cash and paid in September of the new financial year following the completion of audit of the annual accounts. How is the STI reward delivered? For FY 2011, the StI outcomes are shown in the table below for all key management personnel: KeY manaGement personneL sti earneD ($) sti earneD (%) sti ForFeiteD ($) sti ForFeiteD (%) Michael McCormack peter Fredricson Ross Gersbach Stephen ohl Mark Knapman peter Wallace (1) (1) appointed 4 april 2011. StI has been prorated 621,000 270,750 308,750 201,375 130,706 34,356 90.00 95.00 95.00 89.50 90.25 95.00 69,000 14,250 16,250 23,625 14,122 1,808 10.00 5.00 5.00 10.50 9.75 5.00 2 other than the Company Secretary who has a mix of 58%, 21% and 21% 3 other than for the Company Secretary whose StI is capped at 21% of tRo APA002 Annual Report 2011_v3C.indd 16 7/09/11 11:47 AM APA AnnuAl REPORT 2011 16 17 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDLong-term incentive (“LTI”) vesting dates. However, participants must remain employed by apa to access A cash-settled incentive used to link executive reward to securityholder value the vested benefit. based on the achievement of key financial measures. What is the purpose of the LTI? upon vesting, the ltI is delivered in cash. the cash payment is equal to the number of reference units vesting on the vesting date multiplied by the 30 day the ltI plan is designed to put a proportion of executive remuneration at risk VWap of apa securities immediately prior to the opening of the apa security against meeting financial targets linked to oCFpS. this reflects apa’s strategic goal of increasing oCFpS over the medium term, trading window, following the announcement of apa’s annual financial results to the aSX. apa provides fully in its accounts for the obligations of the ltI in thereby increasing total securityholder value and aligning the interests of ltI the year in which the ltI allocation is made. participants with those of securityholders. What form does the LTI take? What rights are attached to an LTI reference unit? the ltI is a cash-settled plan and participants are not allocated apa securities. eligible participants are entitled to an ltI allocation in the form of reference ltI allocations do not entitle participants to vote at securityholders meetings units which exactly mirror the value of apa securities. the reference units or to be paid distributions. allocated under the ltI plan are not actual apa securities, but notional securities with a value equivalent to the ltI allocation. each reference unit is valued at the equivalent of the 30 day volume weighted average market price (“VWap”) of an apa security immediately prior to the opening of the apa security trading window, following the announcement of apa’s annual financial results to the aSX. What is the value of the LTI opportunity? no options or other equity instruments are issued to apa employees or directors under the ltI plan. actual remuneration received during FY 2011 actual remuneration received by the Chief executive officer and Managing Director and other key management personnel is defined as the ‘take home’ pay received by them in the relevant year. ltI participants are advised of their maximum ltI opportunity, expressed as a actual ltI payments represent the amount of reference units that vested and percentage of their tRo. the actual individual ltI allocation is determined at were converted to cash payments to the individual during the year, regardless the completion of the financial year and is based on oCFpS performance of when the ltI was initially allocated. relative to the achievement of the performance target. What amounts are excluded? the maximum ltI allocation is capped at 120% of the participant’s maximum the table below does not show ltI allocations in FY 2011 or previous years that ltI opportunity. What is the performance target? are still subject to performance or employment conditions because those ltI allocations are still at-risk of forfeiture. no ltI allocations are made unless apa achieves the target oCFpS and the the table below sets out actual cash payments made to the relevant key oCFpS result determines the size of participants’ ltI allocations up to their management personnel during FY 2011. this table differs from the information maximum ltI allocation. How are the LTI allocations delivered? an ltI allocation vests in three equal instalments over the three financial years disclosed in note 44 of the financial report for australian pipeline trust and note 18 of the financial report for apt Investment trust that reflects the total remuneration earned by key management personnel in FY 2011, but not yet following the allocation, with the initial one-third vesting at the end of the first fully paid due to future vesting of ltI earned. financial year, one-third at the end of the second financial year, and one-third at the end of the third financial year. the major differences are in respect of StI entitlements for which the amount paid in FY 2011 represents the amount earned in FY 2010, and ltI allocations for as ltI allocations are subject to the achievement of a pre-allocation which the amounts paid in FY 2011 relate to allocations made in prior years that performance hurdle, they are not subject to further performance tests at the have vested in FY 2011. the following table outlines the actual remuneration received by key management personnel during FY 2011: KeY manaGement personneL Michael McCormack (1) peter Fredricson (2) Ross Gersbach Stephen ohl Mark Knapman peter Wallace (3) total totaL FixeD remuneration $ 920,000 570,000 650,000 450,000 400,000 73,809 sti $ 538,130 228,125 260,062 181,562 121,180 - Lti $ 521,984 - 192,660 168,122 67,901 - 3,063,809 1,329,059 950,667 otHer $ totaL paiD 2011 $ totaL paiD 2010 $ - - - - - - - 1,980,114 798,125 1,102,722 799,684 589,081 73,809 2,146,533 501,800 921,883 642,809 489,600 - 5,343,535 4,702,625 (1) 2010 included a retention payment paid to the Chief executive officer as agreed by the board in 2006 when the organisation was under threat of takeover by the then alinta energy (2) peter Fredricson joined apa as CFo in June 2009. ltI earned for FY 2010 and FY 2011 but not paid until future years are disclosed in the financial report (3) peter Wallace joined apa as Group Manager Human Resources on 4 april 2011. StI and ltI earned for FY 2011 but not paid until future years are disclosed in the financial report 18 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011Current Lti reference units outstanding the following table sets out the number of reference units that have been allocated to key management personnel but have not yet vested or been paid, and the years in which they will vest, based on an estimated VWap of $3.9760: KeY manaGement personneL Michael McCormack peter Fredricson Ross Gersbach Stephen ohl Mark Knapman peter Wallace (3) BaLanCe oF reFerenCe units  (1) 615,599 166,780 282,241 204,260 124,135 10,920 (2) 2011 189,901 26,921 82,558 62,419 32,901 - vestinG Year 2012 220,638 55,593 103,598 74,224 47,471 3,640 2013 135,643 55,595 63,388 44,981 29,192 3,640 2014 69,417 28,671 32,697 22,636 14,571 3,640 (1) Includes reference units subject to allocation by the board in august 2011 (2) Reference units multiplied by 30 day VWap to be paid as cash in September 2011 (3) peter Wallace joined apa as Group Manager Human Resources in april 2011 executive contracts the terms of the contractual arrangements for each of the key management personnel are set out below: name anD titLe anD CommenCement Date term anD termination provisions/BeneFits no defined term. on termination with cause or following long-term illness or incapacity, apa will pay any tFR due and owing at the date of termination and any accrued leave entitlements. on termination without cause, apa will pay 52 weeks tFR, any incentives earned but not paid on their due date and any accrued leave entitlement. apa will also pay any tRo due and owing at the date of termination. Mr McCormack is required to give apa one months notice. no defined term. on termination with cause or following long-term illness or incapacity, apa will pay any tFR due and owing at the date of termination and any accrued leave entitlements. on termination without cause, apa will pay 26 weeks tFR, any incentives earned but not paid on their due date and any accrued leave entitlement. apa will also pay any tRo due and owing at the date of termination. Mr Fredricson is required to give apa three months notice. no defined term. on termination with cause or following long-term illness or incapacity, apa will pay any tFR due and owing at the date of termination and any accrued leave entitlements. on termination without cause, apa will pay 26 weeks tFR, any incentives earned but not paid on their due date and any accrued leave entitlement. apa will also pay any tRo due and owing at the date of termination. If Mr Gersbach gives notice to terminate his employment, apa may (after consulting with the board) at its discretion agree to make a termination payment of an amount up to 26 weeks tFR. Mr Gersbach is required to give apa three months notice. no defined term. on termination with cause or following long-term illness or incapacity, apa will pay any tFR due and owing at the date of termination and any accrued leave entitlements. on termination without cause, apa will pay 26 weeks tFR, any incentives earned but not paid on their due date and any accrued leave entitlement. apa will also pay any tRo due and owing at the date of termination. If Mr ohl gives notice to terminate his employment, apa may (after consulting with the board) at its discretion agree to make a termination payment of an amount up to 26 weeks tFR. Mr ohl is required to give apa six months notice. michael mcCormack Managing Director since 1 July 2006 Chief Executive Officer 1 July 2005 to 30 June 2006 Commenced 1 March 2000. peter Fredricson Chief Financial Officer Commenced 1 June 2009. ross Gersbach Group Manager Commercial Commenced 1 February 2008. stephen ohl Group Manager Operations Commenced 2 May 2005. 19 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsDirectors’ report continueDname anD titLe anD CommenCement Date term anD termination provisions/BeneFits mark Knapman Company Secretary Commenced 16 July 2008. no defined term. on termination with cause or following long-term illness or incapacity, apa will pay any tFR due and owing at the date of termination and any accrued leave entitlements. on termination without cause, apa will pay 26 weeks tFR, any incentives earned but not paid on their due date and any accrued leave entitlement. apa will also pay any tRo due and owing at the date of termination. Mr Knapman is required to give apa three months notice. peter Wallace no defined term. General Manager Human Resources Commenced 4 april 2011 on termination with cause or following long-term illness or incapacity, apa will pay any tFR due and owing at the date of termination and any accrued leave entitlements. on termination without cause, apa will pay 26 weeks tFR, any incentives earned but not paid on their due date and any accrued leave entitlement. apa will also pay any tRo due and owing at the date of termination. Mr Wallace is required to give apa three months notice. remuneration advisers During FY 2011, the following remuneration information was sought: – egan & associates were appointed by the Chairman of the Remuneration Committee to provide remuneration benchmarking information for all directors; – ernst & Young were appointed by the Chairman of the Remuneration Committee to provide benchmarking information for the Chief executive auDitor’s inDepenDence Declaration a copy of the auditor’s independence declaration as required under section 307C of the Corporations act 2001 is included on page 86. rounDing of amounts apa is an entity of the kind referred to in aSIC Class order 98/0100 dated 10 July 1998 and, in accordance with that Class order, amounts in the directors’ report and the financial report are rounded to the nearest thousand dollars, officer and Managing Director and key management personnel; and unless otherwise indicated. Signed in accordance with a resolution of the directors of the Responsible entity made pursuant to section 298(2) of the Corporations act 2001. on behalf of the directors – both those advisers were engaged directly on instruction by the committee, reported directly to the committee and were independent and free from influence by key management personnel. information requireD for registereD schemes Fees paid to the Responsible entity and its associates (including directors and secretaries of the Responsible entity, related bodies corporate and directors and secretaries of related bodies corporate) out of apa scheme property during the year are disclosed in note 45 to the financial statements. Leonard Bleasel am except as disclosed in this report, neither the Responsible entity nor any of its Chairman associates holds any apa securities. SYDneY, 24 august 2011 the number of apa securities issued during the year, and the number of apa securities at the end of the year, are disclosed in note 28 to the financial statements. the value of apa’s assets as at the end of the year is disclosed in the balance sheet in total assets, and the basis of valuation is included in note 3 to the financial statements. robert Wright Director 20 AustrAliAn PiPeline trust And its controlled entitiesDirectors’ report continueD APA AnnuAl REPORT 2011corporate governance statement apa Group (“apa”) comprises two registered investment schemes, australian the board annually, and were last reviewed in July 2011. pipeline trust and apt Investment trust, the securities in which are “stapled” together, and their controlled entities. the board delegates responsibility for implementing the strategic direction and managing the day-to-day operations of apa to the Managing Director. the australian pipeline limited (“Responsible entity”) is the responsible entity of Managing Director consults with the Chairman, in the first instance, on matters those trusts and is responsible for apa’s corporate governance practices. that are sensitive, extraordinary or of a strategic nature. the aSX Corporate Governance Council’s Corporate Governance principles and non-executive directors’ letter of appointment Recommendations articulate eight core principles of good corporate the current non-executive directors have each received a letter of appointment governance and, for each of those principles, recommendations as to their documenting, among other issues: implementation. adoption of the Council’s recommendations is not compulsory. However, under the listing Rules of aSX limited (“aSX”) companies are required to provide a statement in their annual report disclosing the extent to which they have followed the recommendations in the reporting period and, where companies have not followed all the recommendations, they must identify which ones they have not followed and give reasons for not following them. – the roles and responsibilities of the board and each of its committees; – expectations of the time commitment to be made by directors in serving on the board and its committees, and of their participation in an annual review of the board, its committees and individual directors; – requirements with respect to the disclosure of directors’ interests; – the fees payable to the directors; and – key policies that directors are required to comply with, such as apa’s In 2010, the aSX Corporate Governance Council released amendments to the securities trading policy. Corporate Governance principles and Recommendations relating to diversity (in particular, gender diversity on boards and with respect to senior management and other employees), share trading policies, shareholder communications and remuneration committees. those amendments will apply to companies with a July/June financial year from and including the year management: service contracts, induction and performance evaluations the Managing Director, Chief Financial officer and other senior management have service contracts setting out their responsibilities, conditions of service and termination entitlements. ending 30 June 2012 with appropriate disclosures to be made in the 2012 newly appointed senior executives complete an induction program on the annual report, but apa has decided to report against those amendments in this management of the business covering topics that include financial matters, statement. each of the principles of good corporate governance has been responded to in turn in this statement and the table at the rear of this statement provides a checklist of apa’s adoption of the aSX Corporate Governance Council’s strategic direction, operations, risk management, health and safety, environmental issues and governance matters. apa also conducts annual processes relating to talent and succession management, and the development of leadership capabilities. recommendations. explanations for departures from the recommendations are apa has processes in place to review the performance of senior management. set out in this statement. Various references are made below to apa’s website as a source of information on corporate governance practices and documentation. the home page for apa’s website is www.apa.com.au, and the link entitled “about apa” leads to the corporate governance material. Securityholders who do not have internet each senior executive, including the Managing Director, has personal objectives as well as objectives related to the performance of business or functional units and apa as a whole. they are reviewed against those objectives at least annually. a performance review of senior management has been conducted during the Reporting period. access but wish to read that material should telephone 1800 992 312 (or +61 2 performance evaluation of the Managing Director is handled by the Chairman 8280 7132, if calling from outside australia) and ask for a copy of the relevant with the assistance of the Remuneration Committee and a report is provided to material to be sent to them. In this statement the term “Reporting period” means the period of 12 months to 30 June 2011. prinCipLe 1: LaY soLiD FounDations For manaGement anD oversiGHt Board and its committees the board of directors of the Responsible entity (“board”) is accountable to securityholders for the proper management of apa’s business and affairs. It and reviewed by the board. assessment and monitoring of the performance of other senior executives are handled by the Managing Director who reports on those matters to the Chairman and the Remuneration Committee. prinCipLe 2: struCture tHe BoarD to aDD vaLue Board membership the board determines its size and composition, subject to limits imposed by the Responsible entity’s constitution. the constitution provides for a minimum of three directors and a maximum of 12. operates in accordance with a charter, which is published on apa’s web site. the names of the current directors and their experience, terms of office and the board normally meets 11 times each year, with additional meetings being held as required. the number of times it met during the Reporting period and membership of board committees are set out in the directors’ report for the Reporting period. directors’ attendance at those meetings are set out in the directors’ report for the composition of the board is determined in accordance with the following that period. principles: to assist the board in carrying out its responsibilities, the following standing – a majority of the board will be comprised of independent directors; committees of its members have been established: – the Chairman will be an independent director; and – audit and Risk Management Committee; – Remuneration Committee; and – Health Safety and environment Committee. each committee has its own charter that describes the roles and responsibilities delegated to the committee by the board, and those charters are published on – a person cannot hold the positions of both Chairman and Chief executive officer. under the Responsible entity’s constitution, petronas australia pty limited is entitled to appoint one director of the Responsible entity while the petronas Group holds not less than 10% of the issued securities in apa. apa’s web site. the charters for the board and its committees are reviewed by the Responsible entity’s constitution requires one-third of its directors 21 APA AnnuAl REPORT 2011(excluding the Managing Director, the petronas-appointed director and any candidates from diverse backgrounds. director who is standing for re-election after having been appointed as an additional director or to fill a vacancy) to retire from office at the annual general meeting of the Responsible entity each year. If the calculation of that one-third is not a whole number, the number of directors required to retire by this “rotation” process is rounded to the nearest whole number. Retiring directors are eligible for re-election. the Responsible entity’s constitution also provides that if the board appoints a director to fill a vacancy or as an addition to the board, the new director will hold office until the end of the next annual general meeting of the Responsible entity and is eligible for re-election. securityholders’ right to nominate a director and to vote on nominees the Deed poll executed by the Responsible entity in 2004 (a copy of which is available on apa’s web site) affords apa securityholders certain rights in respect to nominees for the position of director on the board. at least 60 days before annual general meetings of the Responsible entity, securityholders are notified by an announcement to aSX that they may nominate a person to fill a vacancy on the board that arises on retirement of either a director under the “rotation” process or a director appointed by the board since the last annual general meeting. If securityholders wish to exercise that right, at least 45 days before the annual general meeting they must send the Responsible entity a signed nomination form and the nominee’s signed consent to act as a director. the Responsible entity advises securityholders of all candidates who have been validly nominated and presents its nominations to the annual meeting of securityholders. independence of directors the board assesses the independence of non-executive directors on appointment and annually having regard to the independence of directors policy (published on apa’s web site). the directors’ report for the Reporting period identifies which directors are considered to be independent at the date of the report. a majority of the current directors are independent. selection and appointment of directors the former nominations and Remuneration Committee of the board became the Remuneration Committee in early 2008 so that the functions with respect to selection and appointment of new directors and related matters previously handled by that committee then reverted to the board. ultimate responsibility the Chairman conducts an initial interview of the short-listed candidates and, subject to them being available for and interested in the position, they are then interviewed by the board. the board assesses potential candidates against the predefined requirements and also considers their qualifications, backgrounds and personal qualities before the new director is appointed. In the interest of gender diversity, the board has determined that the short- listed candidates for an available board position must include at least one qualified female candidate and, where a search firm is engaged, the board will instruct them accordingly. annual review of performance of the board, its committee and directors a review process to assess the performance of the board, its committees and individual directors is undertaken each year. the last review was conducted in September 2010 and the review for the Reporting period will be completed in october 2011. each director completes a questionnaire, the responses are collated and the board then meets to discuss and consider the results of that process and to determine any actions arising from the review. the Chairman also meets with each director to discuss the review and the director’s own performance. Matters covered by the review include the role and performance of the board and its committees, directors’ understanding of apa’s long-term objectives and key risks to the business and achievement of those objectives, succession planning and the effectiveness of the Chairman in leading the board. Directors’ access to records and information, management and professional advice Subject to normal privacy requirements, directors have access to apa’s records and information, and to the Company Secretary and other relevant senior management personnel. they receive regular detailed reports on financial and operational aspects of apa’s business and may request elaboration or explanation of those reports. While most board meetings are held in Sydney, where apa’s head office is located, some are held in other locations where apa has a presence, providing directors with the opportunity to receive presentations from and speak to local apa employees about the business and to inspect apa’s assets and facilities. the board collectively, and each director individually, may seek independent professional advice at apa’s expense. prior approval of the Chairman is required, but this may not be unreasonably withheld. for such matters rests with the full board and the board considers the efficient Directors and senior management are encouraged to broaden their knowledge handling of those matters is not diminished by the absence of a nominations of apa’s business and to keep abreast of developments in business more Committee. generally by attending relevant courses, seminars and conferences. Where appropriate, apa will meet expenses involved in such activities. the board considers that a diverse range of skills, experience and backgrounds is required on the board to effectively govern the business. It determines and prinCipLe 3: promote etHiCaL anD responsiBLe DeCision-maKinG reviews from time to time the mix of skills and diversity that it looks to achieve Code of conduct and policies in its membership. Having regard to the nature of apa’s business, that mix the board and senior management are firmly committed to ensuring that they includes financial, strategic, operational, legal, regulatory and general and all employees observe high standards of ethical behaviour and conduct. commercial expertise. apa’s code of conduct sets out the behaviour required of directors and When looking to appoint a new director, the board predefines the skills and employees and recognises the responsibilities of apa and its personnel to experience required of candidates for the role to ensure that the required mix securityholders, customers, suppliers, employees and the community. It also of skills and experience will be represented on the board and, based on that requires that breaches of the code are reported and provides a mechanism to work, seeks a list of potential candidates believed to satisfy those requirements. enable breaches to be reported without fear of retribution. the code is If the board is not satisfied with the quality or diversity of the candidates published on apa’s web site. identified in that process, it may consider it appropriate to instruct a search a number of apa’s policies aim to foster a culture of compliance and ethical firm to identify additional suitable candidates. the board recognises that an and responsible decision-making. apa’s whistleblower policy encourages the experienced search firm with a clear brief from the board as to the required reporting of matters of concern and suspected wrongdoing, such as dishonest characteristics of candidates can assist in identifying potentially suitable or fraudulent conduct, breaches of legislation and other conduct that may 22 corporate governance statement continued APA AnnuAl REPORT 2011cause financial loss to apa or be otherwise detrimental to its reputation or the following table sets out the proportion of women on the board and in interests, and describes the protection to be afforded to whistleblowers who senior management positions, and the proportion of women employees across report such conduct against reprisals, discrimination, harassment or other apa: disadvantage resulting from their reports. apa’s securities trading policy, published on its web site, provides that directors directors and designated management personnel may buy or sell apa securities only Women in senior management positions (General Manager and during: above), as a percentage of the total number of those roles Women on the board, as a percentage of the total number of 12.5% 9% – the periods, each of one calendar month, starting on the second business Women employees across apa, as a percentage of total employees 25% day after each of three events, namely the release to aSX of the half year and full year results and apa’s annual meeting of securityholders; and – at such other times as the board permits, prinCipLe 4: saFeGuarD inteGritY in FinanCiaL reportinG unless exceptional circumstances apply. Directors and employees are precluded from buying or selling securities at any time if they are aware of any price- sensitive information which has not been made public. Diversity Changes made to the aSX Corporate Governance Council’s principles and Recommendation in 2010 include the recommendation that companies establish a diversity policy that includes requirements for the board to establish audit and risk management Committee the board has established an audit and Risk Management Committee, the composition of which is determined in accordance with the following principles: – the committee will have at least three members; – all members of the committee will be independent, non-executive directors; and – the committee Chairman cannot also be the Chairman of the board. measureable objectives for achieving gender diversity and to assess annually the directors’ report for the Reporting period identifies the current members of both the objectives and progress in achieving them. apa values diversity and recognises that to continue to be a relevant and innovative organisation, it must leverage the full potential of its people. the committee and their qualifications and experience. the Chairman of the board, although not a member of the committee, usually attends committee meetings. embracing individual diversity encourages diversity of thought, which is the roles and responsibilities delegated to the committee are set out in the conducive to better decision-making and opportunity for innovation. It is also committee’s charter which is published on apa’s web site. about taking advantage of all available talent for the benefit of the organisation. Diversity in this context refers to all characteristics that distinguish individuals from each other, and includes ethnicity, religion, gender and age. the Managing Director, Chief Financial officer, Company Secretary, Business Risk Manager, other senior management personnel, as required, and the external and internal auditors attend committee meetings at the discretion of Historically, the industry in which apa operates has been dominated by men, to the committee. the external and internal auditors receive all committee papers a greater degree than some other industries. today, approximately 75% of and regularly meet with the committee, without management present, at apa’s employees are involved in operating and maintaining apa’s and third committee meetings. parties’ gas and pipeline and infrastructure assets and that many of those roles require physical, field-based work has meant they have been predominantly filled by men. the minutes of each meeting of the audit and Risk Management Committee are reviewed at the subsequent meeting of the board and the committee Chairman reports to the board on the committee’s activities and apa is nevertheless committed to increasing the number of women in its recommendations. workforce and the pool of talented women from which managers are drawn. the committee is required by its charter to meet at least four times each year. under apa’s equal employment opportunity policy, employment-related the number of times it met during the Reporting period and the committee decisions are based on merit, with an additional emphasis towards proactively members’ attendance at those meetings are set out in the directors’ report for seeking to increase the female participation rate in senior management. With that period. respect to the board, it is apa’s intention, when looking to fill a board position, to always have at least one qualified female candidate on the short-list of candidates. audit functions and independence of external auditor apart from reviewing the integrity of apa’s financial reporting, the committee receives reports from the external and internal auditors, monitors their apa operates a talent program through which future leaders, both men and effectiveness and the independence of the external auditor, and makes women, are identified and developed with a range of training programs with a recommendations to the board on the appointment or replacement (subject to view to them moving into leadership roles in the future. securityholders’ approval, if applicable) of the external auditor. apa respects that employees may have domestic responsibilities and seeks to the external auditor appointment and independence policy (published on retain such employees in the workforce, for example through its paid parental apa’s web site) documents the process for appointment of the auditor and for leave policy and flexible workplace practices policy. the latter provides a monitoring the auditor’s independence. pursuant to that policy, the lead process where managers and employees can discuss and assess suitable partner and the review or concurring partner of the external auditor must be workplace practices that enable employees to balance personal commitments, rotated at least every five years, followed by a two year minimum time-out while also ensuring their work commitments are not negatively impacted, period during which they may not take part in the audit. apa’s auditor is through options such as permanent part-time work, job share arrangements, Deloitte touche tohmatsu and Greg Couttas of that firm was appointed the working from home and flexible working hours. lead audit partner for the apa audit in December 2009. apa is considering what, if any, measurable objectives may be appropriate with the external auditor’s independence could be impaired or compromised, or be respect to the achievement of gender diversity on the board and within apa, interpreted as being impaired or compromised, through the provision of some and expects to resolve that issue, and to develop a diversity policy, over the non-audit services or by the quantum of fees paid to the auditor for such course of the current financial year. services. accordingly, the audit and Risk Management Committee has 23 APA AnnuAl REPORT 2011corporate governance statement continuedapproved a list of non-audit services that the external auditor may perform and at the annual meeting the Chairman encourages questions and comments the process for those services being approved, identified a list of prohibited from securityholders and seeks to ensure the meeting is managed to give services and determined a maximum dollar limit on any non-audit services securityholders an opportunity to participate. In the interests of clarity, provided by the auditor in any financial year. reimbursement of responsible entity’s costs the Responsible entity’s costs incurred in acting as responsible entity of australian pipeline trust and apt Investment trust are reimbursed by apa. the actual cost recovery in the Reporting period was $2,238,000. the Responsible entity does not make a profit, nor seek performance fees. the constitutions of australian pipeline trust and apt Investment trust enable the Responsible entity to charge fees up to 0.5% per annum of the value of gross assets; however, the right to charge such fees has been waived to the extent it exceeds the Responsible entity’s costs. prinCipLe 5: maKe timeLY anD BaLanCeD DisCLosure questions on operational matters may be answered by the Managing Director or another appropriate member of senior management. Securityholders are also invited to send written questions ahead of the meeting and, where there is a common theme to a number of questions, either the Chairman or the Managing Director will commonly seek to provide an answer in their address. the external auditor attends the annual meetings and is available to respond to questions from securityholders about the conduct of the audit and the preparation and content of the independent audit report. the 2011 annual meeting of securityholders will be held in Sydney on 27 october 2011. a notice of that meeting and a proxy form will be sent to securityholders some weeks before the meeting, and details of the meeting are also available apa’s market disclosure policy, published on apa’s web site, aims to ensure from apa’s web site. that information that a person could reasonably expect to have a material effect on the apa security price, whether the information is positive or negative, is announced to the market by release to aSX in accordance with the aSX listing Rules and the Corporations act 2001. the Company Secretary is the nominated continuous disclosure officer. prinCipLe 7: reCoGnise anD manaGe risK the identification and effective management of risk, including calculated risk- taking, are viewed as an essential part of apa’s approach to creating long-term securityholder value. the board is responsible for adopting and reviewing apa’s approach to the all aSX announcements are posted on apa’s web site as soon as reasonably identification, evaluation and management of business risks that are material to possible after notification to aSX. the fulfilment of apa’s business objectives. prinCipLe 6: respeCt tHe riGHts oF sHareHoLDers the board has delegated certain activities to its audit and Risk Management Communications with securityholders Committee, the charter for which is published on apa’s web site. With respect apa aims to ensure its securityholders are informed of all significant to business risk, the committee’s primary function is to maintain and oversee a developments affecting apa’s state of affairs and business. Information is sound system of internal risk management controls based on the board’s communicated to securityholders by a number of means, including the adopted risk management approach. following: Specific risk management responsibilities of the audit and Risk Management – an annual statutory report (comprising the financial report, directors’ report Committee include: and audit report) sent to securityholders who have elected to receive the report; – reviewing and approving apa’s updated risk profile, and risk management – an annual review sent to securityholders who elect to receive either the policy and framework; statutory report or the annual review alone; – reviewing at least annually apa’s implementation of the risk management – a biannual newsletter sent to securityholders who have not elected to policy and framework; and receive the annual report, and to all securityholders on the announcement – receiving and reviewing management’s report on the effectiveness of risk of the half year results; management and internal control systems and otherwise monitoring the – the interim (half yearly) report and directors’ commentary on that report; effectiveness of the risk management framework and the system of internal – announcements to aSX and media releases; control, and progress against agreed risk management plans. – “open Briefings” prepared from time to time to provide an update to investors, and released to aSX; – analyst briefings and investor presentations released to aSX; – the Investor Centre section of apa’s web site on which the reports, aSX and the Managing Director is accountable for ensuring that a risk management system is established, implemented and maintained in accordance with apa’s risk management policy and framework. media releases, presentations and other documents referred to above are Senior management is accountable for risk management within the areas posted; – the annual meeting of securityholders; and – webcasting of half year and full year results presentations, the annual meeting and announcements of major events. under their control, including devolution of the risk management process to operational managers, and is responsible for: – reviewing the measures of risk impact severity that underlies the identification of material business risks, to ensure the measures remain Securityholders and others may elect on apa’s web site to receive aSX and current to apa’s context; media announcements and newsletters by email. annual meeting of securityholders apa encourages securityholders to participate in its annual meetings. a notice – identifying material business risks that may impact on apa’s business plans and objectives and the development, implementation, performance and review of risk management plans. In doing so, senior management considers of annual meeting setting out the agenda for the meeting and explaining both financial risk and non-financial risk, including operational, resolutions on which securityholders may vote is sent to all securityholders and environmental, strategic, market related, compliance and reputation risk; to aSX prior to the meeting. Securityholders who cannot attend a meeting in – aggregating operational risk data across apa, and monitoring external person may appoint a proxy and may also read the Chairman and Managing factors, to facilitate monitoring of apa’s risk profile; and Directors’ addresses that are sent to aSX and posted on apa’s web site, and – contributing advice, leadership and facilitation in the development of listen to a web cast of the meeting available through the web site. group-wide risk control solutions. 24 corporate governance statement continued APA AnnuAl REPORT 2011the Business Risk Manager, who reports to the Company Secretary and usually the roles and responsibilities delegated to the Remuneration Committee are attends meetings of the audit and Risk Management Committee, is responsible set out in the committee’s charter which is published on apa’s web site. for: the Managing Director attends meetings of the committee by invitation when – overseeing and facilitating the co-ordination of the risk management required to report on and discuss senior management performance and other activities of senior management; remuneration matters. – reporting regularly to the audit and Risk Management Committee on apa’s risk profile and the implementation and effectiveness of risk management plans; the committee Chairman reports to the board on the committee’s activities and recommendations. – contributing leadership and facilitation of the implementation of group- the committee is required by its charter to meet at least twice each year. the wide risk control solutions; and number of times it met during the Reporting period and the committee members’ – working with senior management to design and develop risk education and attendance at those meetings are set out in the directors’ report for that period. communication forums. external advice apa’s management has reported to the audit and Risk Management Committee the committee can seek external professional advice on any matter within its as to its assessment of the effectiveness of management by apa of its material terms of reference. as stated in apa’s remuneration report referred to below, risks. In the course of approving the financial statements for the Reporting period, the board considered a written statement from the Chief executive officer and independent remuneration consultants were engaged by the Chairman of the Remuneration Committee to review non-executive director and executive compensation during the Reporting period. the Chief Financial officer to the effect that, to the best of their knowledge and remuneration report belief, their declaration pursuant to section 295a of the Corporations act 2001 (broadly, that the financial statements give a true and fair view in all material respects of apa’s financial position and comply in all material respects with relevant accounting standards) is founded on a sound system of risk management and internal control and that system is operating effectively in all material respects in relation to financial reporting risks, based on the management framework adopted by apa. prinCipLe 8: remunerate FairLY anD responsiBLY remuneration Committee the Corporations act 2001 does not require registered investment schemes like australian pipeline trust and apt Investment trust to include a remuneration report as part of the annual directors’ report, but apa has chosen to do so for the Reporting period and prior periods. the remuneration report sets out details of apa’s policies with respect to remuneration of non-executive directors, the Managing Director and other key management personnel, together with details of the components of remuneration and total remuneration paid to those individuals over the Reporting period. the board has established a Remuneration Committee to consider and make recommendations to the board on, among other things, remuneration policies retirement benefits applicable to board members and senior management. the composition of the Remuneration Committee is determined in accordance with the following principles: – the committee will have at least three members; In 2003 the board terminated the non-executive directors’ retirement benefit plan so that the benefits to participating directors that had accrued up to termination were then quantified and preserved for payment on retirement of those directors. under the plan, after three years service a director was entitled to the equivalent of the emoluments received over the most recent 12 months. – all members of the committee will be non-executive directors and a majority after 10 years service, the entitlement increased to the equivalent of of them will be independent directors; and emoluments received during the most recent three years. no additional – the committee Chairman will be an independent director. entitlement accrued after 10 years. For periods between three and 10 years, the the directors’ report for the Reporting period identifies the current members of entitlement was calculated on a pro-rata basis. the committee and their qualifications and experience. the Chairman of the board, Robert Wright is the only current director entitled to benefit under the plan on although not a member of the committee, usually attends committee meetings. retirement from the board. Corporate GovernanCe prinCipLes anD reCommenDations issueD BY asx Corporate GovernanCe CounCiL CompLY Yes/no prinCipLe 1: LaY soLiD FounDations For manaGement anD oversiGHt Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions Yes 1.1 1.2 1.3 Companies should disclose the process for evaluating the performance of senior executives Companies should provide the information indicated in the Guide to reporting on principle 1 prinCipLe 2: struCture tHe BoarD to aDD vaLue a majority of the board should be independent directors the chair should be an independent director the roles of chair and chief executive officer should not be exercised by the same individual the board should establish a nomination committee Companies should disclose the process for evaluating the performance of the board, its committees and individual directors Companies should provide the information indicated in the Guide to reporting on principle 2 2.1 2.2 2.3 2.4 2.5 2.6 note 1. the board has chosen not to have a separate nomination committee, as explained in the section of this statement entitled “principle 2: Structure the board to add value” under the heading “Selection and appointment of directors” 25 Yes Yes Yes Yes Yes no (note 1) Yes Yes APA AnnuAl REPORT 2011corporate governance statement continuedprinCipLe 3: promote etHiCaL anD responsiBLe DeCision-maKinG 3.1 Companies should establish a code of conduct and disclose the code or a summary of that code as to: – the practices necessary to maintain confidence in the company’s integrity – the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders – the responsibility and accountability of individuals for reporting and investigating reports of unethical practices CompLY Yes/no Yes 3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. the policy should include no (note 2) requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them 3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in no (note 2) accordance with the diversity policy and progress towards achieving them 3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior Yes management positions and women on the board. 3.3 Companies should provide the information indicated in the Guide to reporting on principle 3 prinCipLe 4: saFeGuarD inteGritY in FinanCiaL reportinG 4.1 4.2 4.3 4.4 the board should establish an audit committee the audit committee should be structured so that it: – consists only of non-executive directors – consists of a majority of independent directors – is chaired by an independent chair, who is not chair of the board – has at least three members the audit committee should have a formal charter Companies should provide the information indicated in the Guide to reporting on principle 4 Yes Yes Yes Yes Yes prinCipLe 5: maKe timeLY anD BaLanCeD DisCLosure 5.1 Companies should establish written policies designed to ensure compliance with aSX listing Rule disclosure requirements and to Yes ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies 5.2 Companies should provide the information indicated in the Guide to reporting on principle 5 Yes prinCipLe 6: respeCt tHe riGHts oF sHareHoLDers 6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their Yes participation at general meetings and disclose their policy or a summary of that policy 6.2 Companies should provide the information indicated in the Guide to reporting on principle 6 Yes prinCipLe 7: reCoGnise anD manaGe risK 7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those Yes policies 7.2 the board should require management to design and implement the risk management and internal control system to manage the Yes company’s material business risks and report to it on whether those risks are being managed effectively. the board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks 7.3 the board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial Yes officer (or equivalent) that the declaration provided in accordance with section 295a of the Corporations act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks 7.4 Companies should provide the information indicated in the Guide to reporting on principle 7 prinCipLe 8: remunerate FairLY anD responsiBLY 8.1 8.2 the board should establish a remuneration committee the remuneration committee should be structured so that it: – consists of a majority of independent directors – is chaired by an independent director – has at least three members Yes Yes Yes 8.3 Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior Yes executives Companies should provide the information indicated in the Guide to reporting on principle 8 Yes 8.4 note 2. Refer to the section of this statement entitled “principle 3: promote ethical and responsible decision-making” under the heading “Diversity” 26 corporate governance statement continued APA AnnuAl REPORT 2011auS tR a lIa n p Ipe lIne tR uS t anD It S C ontRolleD entItIeS statement of comprehensive income For the financial year ended 30 June 2011 ContinuinG operations Revenue Share of net profits of associates and jointly controlled entities accounted for using the equity method asset operation and management expenses Depreciation and amortisation expense other operating costs - pass-through Finance costs employee benefit expense other expenses profit before tax Income tax expense profit for the year other comprehensive income (loss)/gain on available-for-sale investments taken to equity (loss)/gain on cash flow hedges Gain/(loss) on associate hedges taken to equity actuarial gain/(loss) on defined benefit plan Income tax relating to other comprehensive income components other comprehensive income/(expense) in the year (net of tax) ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 note 6 6 7 7 7 7 7 9 1,078,113 975,803 63,019 50,295 23,876 1,101,989 (82,190) (100,350) (381,733) (260,004) (114,923) (18,102) 144,687 (35,862) 108,825 29,643 (35,492) (2,100) 3,072 2,606 (2,271) 13,687 989,490 (75,959) (91,426) (329,942) (243,235) (97,859) (11,889) 139,180 (38,672) 100,508 (389) 294 13,622 (8,153) (16,651) 34,471 - 63,019 - 50,295 - - - (45) - (31) 62,943 (3,555) 59,388 - - - - - (4,965) 45,330 (5,236) 40,094 880 1,444 - - - (263) 617 - - - (62) 1,382 total comprehensive income for the year 106,554 134,979 60,005 41,476 profit attributable to: equityholders of the parent Minority interest - apt Investment trust equityholders apa stapled securityholders Minority interest - other total comprehensive income attributable to: equityholders of the parent Minority interest - apt Investment trust equityholders apa stapled securityholders Minority interest - other 69,585 38,924 108,509 316 62,584 37,774 100,358 150 59,388 40,094 - - 59,388 40,094 - - 108,825 100,508 59,388 40,094 67,314 38,924 106,238 316 106,554 95,710 39,119 134,829 150 134,979 60,005 - 60,005 - 60,005 41,476 - 41,476 - 41,476 earninGs per seCuritY Basic and diluted (cents per security) 35 19.7 19.4 Diluted earnings per security is exactly the same as basic earnings per security. The above statement of comprehensive income should be read in conjunction with the accompanying notes. 27 APA AnnuAl REPORT 2011auS tR alIa n pIp elIn e t R uS t anD It S C ontRolleD entItIeS statement of financial position as at 30 June 2011 ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 note Current assets Cash and cash equivalents trade and other receivables Inventories other total current assets non-Current assets Receivables other financial assets Investments accounted for using the equity method property, plant and equipment Goodwill other intangible assets Deferred tax assets other total non-current assets total assets Current LiaBiLities trade and other payables Borrowings other financial liabilities provisions other total current liabilities non-Current LiaBiLities Borrowings other financial liabilities Deferred tax liabilities provisions other 36 11 12 13 14 15 16 17 18 19 9 20 21 22 23 24 25 26 27 9 24 25 95,368 145,698 11,076 3,357 255,499 25,860 182,282 479,409 80,940 142,529 10,698 3,757 237,924 21,402 129,185 403,528 3,768,342 3,483,328 515,344 192,903 - 7,966 520,779 179,282 - 7,008 2010 $000 293 485 - - 778 49 485 - - 534 536,161 665,507 355,751 639,815 - - - - - - - - 148,242 136,823 192 - 1,132,389 1,133,167 5,172,106 4,744,512 1,350,103 5,427,605 4,982,436 1,350,637 135,651 900,000 44,986 54,731 2,347 131,839 103,883 8,738 42,957 10,874 148,490 136,823 - - - - - - - - 1,137,715 298,291 148,490 136,823 1,990,446 2,891,891 263,786 336,171 30,840 802 66,691 297,808 31,685 925 - - - - - - - - - - - - total non-current liabilities 2,622,045 3,289,000 total liabilities net assets 3,759,760 1,667,845 3,587,291 1,395,145 148,490 1,202,147 136,823 996,344 The above statement of financial position should be read in conjunction with the accompanying notes. 28 APA AnnuAl REPORT 2011auS tR a lIa n p Ipe lIne tR uS t anD It S C ontRolleD entItIeS statement of financial position continueD as at 30 June 2011 eQuitY australian pipeline trust equity: Issued capital Reserves Retained earnings equity attributable to securityholders of the parent Minority interests: apt Investment trust: Issued capital Reserves Retained earnings equity attributable to securityholders of apt Investment trust other minority interest total minority interests total equity note 28 29 30 31 31 31 31 ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 1,192,779 984,936 1,192,779 984,936 54,899 19,054 59,955 9,364 762 8,606 145 11,263 1,266,732 1,054,255 1,202,147 996,344 382,001 320,931 534 18,295 (101) 19,928 400,830 340,758 283 401,113 1,667,845 132 340,890 1,395,145 - - - - - - - - - - - - 1,202,147 996,344 The above statement of financial position should be read in conjunction with the accompanying notes. 29 APA AnnuAl REPORT 2011D e t a D i L o s n o C t s e r e t n i i Y t i r o n m r e H t o t s u r t t n e m t s e v n i t p a t s u r t e n i L e p i p n a i L a r t s u a 0 0 0 $ I D e n a t e R I S G n n R a e 0 0 0 $ R e H t o 0 0 0 $ D e u S S I I l a t p a C t S u R t 0 0 0 $ t p a t n e M t S e V n I 0 0 0 $ I D e n a t e R I S G n n R a e 0 0 0 $ e V R e S e R e l a S - R o F - e l B a l a V a I t n e M t S e V n I I n o t a u l a V e R 0 0 0 $ D e u S S I I l a t p a C 0 0 0 $ t n e R a p e H t e l B a t u B R t t a I F o R e n W o o t 0 0 0 $ I D e n a t e R I S G n n R a e 0 0 0 $ I G n G D e H e V R e S e R 0 0 0 $ e V R e S e R e l a S - R o F - e l B a l a V a I t n e M t S e V n I I n o t a u l a V e R 0 0 0 $ e V R e S e R t e S S a I n o t a u l a V e R 0 0 0 $ D e u S S I I l a t p a C i y t u q e n i s e g n a h c f o t n e m e t a t s 1 1 0 2 e n u J 0 3 d e d n e r a e y l i a c n a n fi e h t r o F I I S e t t n e D e l l o R t n o C S t I D n a t S u R t I e n l e p I p I n a l a R t S u a ) 6 4 4 , 1 ( 0 5 4 8 5 3 , 0 6 5 0 1 9 , ) 8 9 9 4 ( , 0 9 6 3 1 , ) 6 3 2 , 1 ( 9 6 6 8 , , 5 3 4 4 9 8 , 5 5 4 8 7 2 , 1 1 8 7 0 5 0 0 1 , 0 5 1 1 7 4 4 3 , - ) 1 7 2 , 1 7 ( 9 7 9 4 3 1 , 0 5 1 ) 9 9 ( - 4 5 8 6 5 , ) 4 0 3 ( 6 8 1 , 5 8 ) 4 5 7 8 8 ( , - - - - - 0 0 0 $ l a t o t 0 0 0 $ t S e R e t n I R e H t o I Y t R o n M I 6 7 0 5 1 - 0 5 1 ) 9 9 ( - - - - - 5 4 1 , 5 9 3 , 1 2 3 1 7 2 1 ) 1 7 2 2 ( , 5 4 1 , 5 9 3 , 1 5 2 8 8 0 1 , 2 3 1 6 1 3 - 4 5 5 6 0 1 , 6 1 3 7 2 1 6 1 3 - 6 1 3 ) 7 6 7 2 0 1 ( , ) 5 6 1 ( ) 5 6 1 ( 2 7 3 2 5 , ) 1 6 6 3 ( , 4 2 8 ) 2 2 6 0 8 ( , 0 0 0 0 0 3 , - - - - - - - - - - , 5 4 8 7 6 6 , 1 3 8 2 8 7 2 1 - - - - - - - - - 1 1 - - - - - - - - - 1 4 - - - - - - - - - 4 4 - - - - - - - - - 4 , 8 5 7 0 4 3 8 2 9 9 1 , ) 1 0 1 ( , 1 3 9 0 2 3 , 5 5 2 4 5 0 , 1 4 6 3 9 , 8 1 3 4 5 , ) 2 3 0 3 ( , 9 6 6 8 , , 4 1 8 7 6 3 4 7 7 7 3 , 5 4 3 , 1 9 1 1 , 9 3 0 1 8 0 1 , 4 7 7 7 3 , - 4 7 7 7 3 , ) 6 5 6 8 2 ( , ) 6 5 6 8 2 ( , 4 3 1 , 5 1 ) 8 6 8 9 ( , ) 4 7 ( 3 2 7 0 2 , ) 4 3 4 3 6 ( , - - - - - - 5 4 3 , 1 5 4 3 , 1 - - - - - - 4 2 9 8 3 , 4 2 9 8 3 , - 0 9 5 2 1 , 2 7 8 9 6 , - ) 5 1 9 ( ) 7 7 4 0 2 ( , - - - - - 5 3 6 - 9 5 5 9 3 , 4 2 9 8 3 , ) 7 5 5 0 4 ( , ) 7 5 5 0 4 ( , 5 3 6 5 3 6 - - - - - - - - - - - - - - 4 3 1 , 5 1 0 2 7 , 1 4 ) 8 6 8 9 ( , 8 6 8 9 , ) 4 7 ( ) 0 3 2 ( 3 2 7 0 2 , 3 6 4 4 6 , ) 4 3 4 3 6 ( , ) 0 2 3 5 2 ( , - - - - - ) 6 1 5 2 4 ( , ) 6 1 5 2 4 ( , 4 8 5 2 6 , 6 2 1 , 3 3 0 1 7 5 9 , 4 8 5 2 6 , - - ) 6 0 7 5 ( , 8 2 6 0 4 , ) 6 9 7 , 1 ( 8 7 8 6 5 , 8 2 6 0 4 , ) 6 9 7 , 1 ( 0 9 5 2 1 , 2 8 7 9 3 , ) 5 1 9 ( ) 6 4 7 2 ( , 2 7 8 9 6 , 8 2 1 , 0 3 2 - 4 2 8 ) 7 7 4 0 2 ( , ) 5 4 1 , 0 6 ( - - - - - ) 5 4 0 2 6 ( , ) 5 4 0 2 6 ( , 5 8 5 9 6 , ) 6 0 9 2 ( , 5 8 5 9 6 , - - 0 5 1 , 2 ) 5 1 3 6 2 ( , 9 5 2 , 1 2 9 7 6 6 6 , 5 3 7 , 1 7 ) 5 1 3 6 2 ( , 9 5 2 , 1 2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0 2 7 , 1 4 8 6 8 9 , ) 0 3 2 ( 3 6 4 4 6 , ) 0 2 3 5 2 ( , , 6 3 9 4 8 9 r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o t s n o i t u b i r t s i d f o t n e m y a p n o i t u b i r t s i d r e d n u d e u s s I e m o c n i e v i s n e h e r p m o c r e h t o 9 0 0 2 y l u J 1 t a e c n a l a B r a e y e h t r o f t fi o r p l n a p t n e m t s e v n e r i n e e w t e b t n e m t s u d a j s e u a v l y t i u q e l n a p e s a h c r u p y t i r u c e S s e i t i r u c e s f o t s o c e u s s I s e i t i t n e d e p a t s l l s r e d o h y t i r u c e s o t n r u t e r l a t i p a C 0 1 0 2 e n u J 0 3 t a e c n a l a B apa annual RepoRt 2011 - - - - - - - - - - - - - 2 8 7 9 3 , ) 6 4 7 2 ( , 8 2 1 , 0 3 2 4 2 8 r a e y e h t r o f e m o c n i e v i s n e h e r p m o c l a t o t i t n e m t s e v n e r n o i t u b i r t s i d r e d n u d e u s s I s n o i t u b i r t s i d f o t n e m y a p e m o c n i e v i s n e h e r p m o c r e h t o r a e y e h t r o f t fi o r p s t s o c e u s s i y t i r u c e s o t g n i t a e r l x a t t n e m e c a p l l a n o i t u t i t s n I s e i t i r u c e s f o t s o c e u s s I n a p l ) 5 4 1 , 0 6 ( l s r e d o h y t i r u c e s o t n r u t e r l a t i p a C 30 , 8 5 7 0 4 3 8 2 9 9 1 , ) 1 0 1 ( , 1 3 9 0 2 3 , 5 5 2 4 5 0 , 1 4 6 3 9 , 8 1 3 4 5 , ) 2 3 0 3 ( , 9 6 6 8 , , 6 3 9 4 8 9 0 1 0 2 y l u J 1 t a e c n a l a B , 0 3 8 0 0 4 5 9 2 8 1 , 4 3 5 , 1 0 0 2 8 3 , 3 3 7 6 6 2 , 1 4 5 0 9 1 , 3 0 0 8 2 , 7 2 2 8 1 , 9 6 6 8 , , 9 7 7 2 9 1 , 1 1 1 0 2 e n u J 0 3 t a e c n a l a B i . s e t o n g n y n a p m o c c a e h t h t i w n o i t c n u n o c n j i l d a e r e b d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s e v o b a e h T auS tR a lIa n p Ipe lIne tR uS t anD It S C ontRolleD entItIeS statement of changes in equity continueD For the financial year ended 30 June 2011 Balance at 1 July 2009 profit for the year other comprehensive income total comprehensive income for the year payment of distributions Issued under distribution reinvestment plan equity values adjustment between stapled entities Security purchase plan Issue cost of securities Capital return to securityholders Balance at 30 June 2010 Balance at 1 July 2010 profit for the year other comprehensive income total comprehensive income for the year payment of distributions Issued under distribution reinvestment plan Institutional placement Issue cost of securities tax relating to security issue costs Capital return to securityholders Balance at 30 June 2011 trust aVaIlaBle-FoR-Sale InVeStMent ReValuatIon ReSeRVe $000 (1,237) - 1,382 1,382 - - - - - - 145 145 - 617 617 - - - - - - RetaIneD eaRnInGS $000 attRIButaBle to oWneR oF tHe paRent $000 13,685 40,094 - 40,094 (42,516) - - - - - 11,263 11,263 59,388 - 59,388 (62,045) - - - - - 906,883 40,094 1,382 41,476 (42,516) 41,720 9,868 64,463 (230) (25,320) 996,344 996,344 59,388 617 60,005 (62,045) 39,782 230,128 (2,746) 824 (60,145) 762 8,606 1,202,147 ISSueD CapItal $000 894,435 - - - - 41,720 9,868 64,463 (230) (25,320) 984,936 984,936 - - - - 39,782 230,128 (2,746) 824 (60,145) 1,192,779 The above statement of changes in equity should be read in conjunction with the accompanying notes. 31 apa annual RepoRt 2011 auS tR alIa n pIp elIn e t R uS t anD It S C ontRolleD entItIeS statement of cash flows For the financial year ended 30 June 2011 CasH FLoWs From operatinG aCtivities Receipts from customers payments to suppliers and employees Dividends received proceeds from repayment of finance leases Interest received Interest and other costs of finance paid Income tax paid ConsoLiDateD 2011 $000 2010 $000 note 1,165,338 (704,597) 45,890 6,748 6,162 1,055,107 (615,697) 38,143 2,875 18,003 (229,954) (230,670) 442 - trust 2011 $000 217 - 2010 $000 97 - 62,842 49,955 - 177 (45) - - 339 - - net cash provided by operating activities 36(c) 290,029 267,761 63,191 50,391 CasH FLoWs From investinG aCtivities payments for property, plant and equipment proceeds from sale of property, plant and equipment payments for available-for-sale investments payments for equity accounted investments payments for controlled entities net of cash acquired proceeds from controlled entities payments for intangible assets proceeds from sale of businesses proceeds from sale of equity accounted investments 36(b) 36(b) 40 (231,051) (135,426) 265 (22,481) (91,392) (171,077) - (8,000) 3,145 4,500 - (114,498) (22,706) (83,328) - - 8,190 - - - - - - - (24,812) (22,379) - - - - - - 939,496 - 7,265 - net cash (used in)/provided by investing activities (516,091) (347,768) (24,812) 924,382 700,100 1,275,050 - - (620,633) (1,175,000) (183,598) (1,022,570) 352,372 142,040 269,910 CasH FLoWs From FinanCinG aCtivities proceeds from borrowings Repayments of borrowings proceeds from issue of securities equity values adjustment between stapled entities payment of debt issue costs payments of security issue costs Distributions paid to: Securityholders of apt Securityholders of minority interests - aptIt other minority interest net cash provided by/(used in) by financing activities net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 36(a) The above statement of cash flows should be read in conjunction with the accompanying notes. - (4,300) (3,661) (122,189) (61,034) (165) 240,490 14,428 80,940 95,368 - (29,629) (304) (67,836) (92,090) (99) 52,132 (27,875) 108,815 80,940 - - (2,746) 106,183 9,868 - (229) (122,189) (67,836) - - - - (38,623) (974,584) (244) 293 49 189 104 293 32 APA AnnuAl REPORT 2011auS tR a lIa n p Ipe lIne tR uS t anD It S C ontRolleD entItIeS notes to the financial statements For the financial year ended 30 June 2011 1. GeneraL inFormation australian pipeline trust (“apt”) is one of two stapled entities of apa Group (“apa”). the other stapled entity is apt Investment trust (“aptIt”). apa is listed on the australian Securities exchange (trading under the symbol ‘apa’), registered in australia and operating in australia. the financial statements represent the consolidated financial results of the two stapled entities australian pipeline trust and apt Investment trust, together “apa”. apt’s registered office and principal place of business are as follows: registered office and principal place of business level 19, HSBC Building 580 George Street, SYDneY nSW 2000 tel: (02) 9693 0000. the principal activities of the Consolidated entity during the course of the year were the ownership and operation of energy infrastructure, including: – energy Infrastructure businesses located across australia; – energy investments, including envestra limited (“envestra”), Sea Gas pipeline, ethane pipeline Income Fund (“epX”), energy Infrastructure Investments pty limited (“eII”), energy Infrastructure Investments 2 pty limited (“eII2”); and – asset management and operations services for apa’s energy investments and other third parties. 2. aDoption oF neW anD reviseD aCCountinG stanDarDs (a) standards and interpretations affecting amounts reported in the current period (and/or prior periods) the following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported in these financial statements. Details of other Standards and Interpretations adopted in these financial statements but that have had no effect on the amounts reported are set out in part b. Standards affecting presentation disclosure stanDarD impaCt – amendments to aaSB 107 ‘Statement of Cash Flows’ the amendments (part of aaSB 2009-5 ‘Further amendments to australian accounting Standards arising from the annual Improvements project’) specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows. (b) standards and interpretations adopted with no effect on financial statements the following new and revised Standards have also been adopted in these financial statements. their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions and arrangements. stanDarD impaCt – aaSB 2009-5 ‘Further amendments to australian accounting Standards except for the amendments to aaSB 107 described above, the application of arising from the annual Improvements project’. aaSB 2009-6 has not had any material effect on amounts reported in the financial statements. – aaSB 2009-8 ‘amendments to australian accounting Standards Group aaSB 2009-8 makes amendments to aaSB 2 ‘Share-based payment’ to Cash-Settled Share-based payment transactions. clarify the scope of aaSB 2 and the accounting for group cash-settled share-based payment transactions in the separate financial statements of an entity receiving the goods or service when another group entity has the obligation to settle the award. – aaSB 2009-10 ‘amendments to australian accounting Standards aaSB 2009-10 makes amendments to aaSB 132 ‘Financial Instruments: Classification of Rights Issue’. presentation’ to address the classification of certain right issues denominated in foreign currency either as an equity instrument or as a financial liability. to date, there are no arrangements that would fall within the scope of the amendments. – aaSB 2010-3 ‘amendments to australian accounting Standards arising aaSB 2010-3 makes amendments to aaSB 3 (2008) Business Combinations’ from the annual Improvements project’ to clarify that the measurement choice regarding non-controlling interest at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. all other types of non-controlling are measured at their acquisition date fair value, unless another measurement basis is required by other Standards. – aaSB 2010-4 ‘amendments to australian accounting Standards arising the application of aaSB 2010-4 has not had any material effect on amounts from the annual Improvements project’ reported in the financial statements. 33 APA AnnuAl REPORT 20112. aDoption oF neW anD reviseD aCCountinG stanDarDs (ContinueD) (c) standards and interpretations issued not yet adopted at the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. stanDarD/interpretation eFFeCtive For annuaL reportinG perioDs BeGinninG on or aFter expeCteD to Be initiaLLY appLieD in tHe FinanCiaL Year enDinG – aaSB 124 ‘Related party Disclosures (revised December 2009)’ aaSB 1 January 2011 30 June 2012 2009-12 ‘amendments to australian accounting Standards’. – aaSB 9 ‘Financial Instruments’, aaSB 2009-11 ‘amendments to australian 1 January 2013 30 June 2014 accounting Standards arising from aaSB 9 and aaSB 2010-7 ‘amendments to australian accounting Standards arising from aaSB 9 (December 2010)’ – aaSB 2009-14 ‘amendments to australian Interpretation - prepayments of 1 January 2011 30 June 2012 minimum Funding Requirement – aaSB 2010-5 ‘amendments to australian accounting Standards’ – aaSB 2010-6 ‘amendments to australian accounting Standards - Disclosures on transfers of Financial assets’ 1 January 2011 1 July 2011 30 June 2012 30 June 2012 – aaSB 2010-8 ‘amendments to australian accounting Standards - Deferred 1 January 2012 30 June 2013 tax: Recovery of underlying assets’ – IFRS 10 Consolidated Financial Statements – IFRS 11 Joint arrangements – IFRS 12 Disclosure of Interest in other entities – IFRS 13 Fair Value measurement – IaS 27 Separate Financial statements – IaS 28 Investments in associates and Joint Ventures – IaS 19 employee Benefits the potential impact of the initial application of the above Standards has not yet been determined. 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 30 June 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014 3. siGniFiCant aCCountinG poLiCies statement of compliance $60.4 million) primarily as a result of syndicated facilities of $900 million due the financial report is a general purpose financial report which has been to mature on 8 June 2012. apa’s refinancing strategies have ensured that the prepared in accordance with the Corporations act 2001, accounting Standards Group has access to a broad cross section of global debt capital markets out of and Interpretations, and complies with other requirements of the law. which to achieve a refinancing of this and other debt facilities. the financial report includes the separate financial statements of the trust and the Directors continually monitor the Group’s working capital position, the consolidated financial statements of the Group. accounting Standards include australian equivalents to International Financial Reporting Standards (“a-IFRS”). Compliance with a-IFRS ensures that the including forecast working capital requirements and have ensured that there are appropriate refinancing strategies and adequate committed funding facilities in place to accommodate debt repayments as and when they fall due. financial report and notes of the trust and the Consolidated entity comply with (b) Basis of consolidation International Financial Reporting Standards (“IFRS”). the financial report was authorised for issue by the Directors on 24 august 2011. Basis of preparation the financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is the financial report incorporates the financial statements of the trust and entities (including special purpose entities) controlled by the trust (its controlled entities) (referred to as the “Consolidated entity”, “Group” or “apa Group” in this financial report). Control is achieved where the trust has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. the results of controlled entities acquired during the financial year are included based on the fair values of the consideration given in exchange for assets. the in the statement of comprehensive income from the effective date of financial report is presented in australian dollars and all values are rounded to acquisition. the nearest thousand dollars ($000) unless otherwise stated under the option available to apa under aSIC Class order 98/0100. apa is an entity to which the class order applies. the following significant accounting policies have been adopted in the preparation and presentation of the financial report: (a) Working capital position Where necessary, adjustments are made to the financial reports of controlled entities to bring their accounting policies into line with those used by other members of the Group. all intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial report of the trust, the intra- group transactions (“common control transactions”) are generally accounted the working capital position as at 30 June 2011 for the Consolidated entity is a for by reference to the existing (consolidated) book value of the items. Where surplus of current liabilities over current assets of $888.6 million (2010: the transaction value of common control transactions differs from their 34 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20113. siGniFiCant aCCountinG poLiCies (ContinueD) (b) Basis of consolidation (continued) consolidated book value, the difference is recognised as a contribution by or circumstances that existed as of the acquisition date - and is subject to a distribution to equity participants by the transaction entities. maximum of one year. Minority interests in the net assets (excluding goodwill) of consolidated (d) Joint venture arrangements controlled entities are identified separately from the Consolidated entity’s Jointly controlled operations equity therein. Minority interests consist of the amount of those interests at the Interests in jointly controlled operations are reported in the financial report by date of the original business combination and the minority’s share of changes including the Consolidated entity’s share of assets employed in the joint in equity since the date of the combination. losses applicable to the minority ventures, the share of liabilities incurred in relation to joint ventures and the in excess of the minority’s interest in the controlled entity’s equity are allocated share of any expenses incurred in relation to joint ventures in their respective against the interests of the Consolidated entity except to the extent that the classification categories. minority has a binding obligation and is able to make an additional investment to cover the losses. (c) Business combinations Jointly controlled entities Interests in jointly controlled entities are accounted for under the equity method in the consolidated financial report and the cost method in apt’s acquisitions of subsidiaries and businesses are accounted for using the financial report. acquisition method. the consideration for each acquisition is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Consolidated entity in exchange for control of the acquiree. acquisition costs directly attributable to the business combination are recognised in profit or loss as incurred. (e) investments in associates an associate is an entity over which the Consolidated entity has significant influence and that is neither a subsidiary nor a joint venture. the results and assets and liabilities of associates are accounted for using the equity method of accounting. under the equity method, investments in associates are carried in Where applicable, the consideration for the acquisition includes any asset of the consolidated statement of financial position at cost as adjusted for post- liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. all other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant standards. Changes in the fair value of contingent consideration classified as equity are not recognised. Where a business combination is achieved in stages, the Consolidated entity’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date and the resulting gains or losses, if any, are recognised in profit or loss. amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. acquisition changes in the Consolidated entity’s share of the net assets of the associate, less any impairment in the value of individual investments. losses of an associate in excess of the Consolidated entity’s interest are recognised only to the extent that there is a legal or constructive obligation or the Consolidated entity has made payments on behalf of the associate. any excess of the cost of acquisition over the Consolidated entity’s share of the net fair value of identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. this is included within the carrying amount of the investment and is assessed for impairment as part of that investment. any excess of the Consolidated entity’s share of the net fair value of assets and liabilities over the cost of acquisition after reassessment is recognised immediately in profit or loss. (f) Financial assets and liabilities Available-for-sale financial assets the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under aaSB 3 are recognised at their fair value at the acquisition date, except that: Certain shares and redeemable notes held by the Group are classified as being available-for-sale and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in the available-for-sale investment – deferred tax assets or liabilities and liabilities or assets related to employee revaluation reserve with the exception of impairment losses, interest calculated benefit arrangements are recognised in accordance with aaSB 112 ‘Income using the effective interest method and foreign exchange gains and losses on taxes’ and aaSB ‘119 employee Benefits’ respectively; monetary assets which are recognised directly in profit or loss. Where the – liabilities or equity instruments related to the replacement by the investment is disposed of or is determined to be impaired, the cumulative gain consolidated entity of an acquiree’s share-based payment awards are or loss previously recognised in the available-for-sale investment revaluation measured in accordance with aaSB 2 ‘Share-based payment’; and reserve is included in profit or loss for the period. Dividends on available-for- – assets (or disposal groups) that are classified as held for sale in accordance sale equity instruments are recognised in profit or loss when the Group’s right with aaSB 5 ‘non-current assets Held for Sale and Discontinued operations’ to receive the dividends is established. the change in fair value attributable to are measured in accordance with that standard. If the initial accounting for a business combination is incomplete by the end of translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in equity. the reporting period in which the combination occurs, the Consolidated entity Loans and receivables reports provisional amounts for the items for which the accounting is trade receivables, loans, and other receivables that have fixed or determinable incomplete. those provisional amounts are adjusted for during the payments that are not quoted in an active market are classified as ‘loans and measurement period, or additional assets or liabilities are recognised, to reflect receivables’. trade and other receivables are stated at their amortised cost less new information obtained about facts and circumstances that existed as of the impairment. acquisition date, that, if known, would have affected the amounts recognised as at that date. Trade and other payables trade and other payables are recognised when the Consolidated entity the measurement period is the period from the date of acquisition to the date becomes obliged to make future payments resulting from the purchase of the Consolidated entity obtains complete information about facts and goods and services. trade and other payables are stated at amortised cost. 35 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20113. siGniFiCant aCCountinG poLiCies (ContinueD) (f) Financial assets and liabilities (continued) Impairment of financial assets leasehold improvements and plant and equipment are stated at cost less Financial assets, other than those at fair value through profit or loss, are accumulated depreciation and impairment. assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial Work in progress is stated at cost. Cost includes expenditure that is directly attributable to the acquisition or construction of the item. asset the estimated future cash flows of the investments have been impacted. (l) Depreciation For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. the carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed, does not exceed what the amortised cost would have been had the Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on either a straight-line or throughput basis depending on the nature of the asset so as to write off the net cost of each asset over its estimated useful life. leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight-line method. the estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes recognised on a prospective basis. the following estimated useful lives are used in the calculation of depreciation: – buildings – compressors 30 - 50 years; up to 50 years; – gas transportation systems up to 80 years; – meters 25 - 50 years; and – other plant and equipment 3 - 20 years. impairment not been recognised. (m) employee benefits In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised in other comprehensive income. (g) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to insignificant risk of changes in values. (h) acquisition of assets assets acquired are recorded at the cost of acquisition, being the purchase provision is made for benefits accruing to employees in respect of wages and salaries, incentives, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably. provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rates expected to apply at the time of settlement. provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Consolidated entity in respect of services provided by employees consideration determined as at the date of acquisition. Cost includes expenditure up to reporting date. that is directly attributable to the acquisition or construction of the asset. Defined contribution plans In the event that settlement of all or part of the cash consideration given in the acquisition of an asset is deferred, the fair value of the purchase consideration is determined by discounting the amounts payable in the future to their present values as at the date of acquisition. (i) Borrowings Contributions to defined contribution plans are expensed when incurred. Defined benefit plans For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each reporting date. actuarial gains and losses are recognised directly to Borrowings are recorded initially at fair value, net of transaction costs. retained earnings in the period in which they occur. Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the statement of comprehensive income over the period of the borrowing using the effective interest method. (j) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise amortised on a straight-line basis over the average period until the benefits become vested. the defined benefit obligation recognised in the consolidated statement of financial position represents the present value of the defined benefit obligation, adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, net of the fair value of the plan assets. any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan. assets is deducted from the borrowing costs eligible for capitalisation. (n) intangible assets all other borrowing costs are recognised in profit or loss in the period in which they are incurred. (k) property, plant and equipment Intangible assets acquired separately Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. amortisation is recognised on a straight-line basis over their estimated useful lives. the estimated useful land and buildings held for use are carried in the consolidated statement of life and amortisation method are reviewed at the and of the each annual financial position at cost, less any subsequent accumulated depreciation and reporting period, with the effects of any changes in estimate being accounted impairment losses. for on a prospective basis. 36 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20113. siGniFiCant aCCountinG poLiCies (ContinueD) (n) intangible assets (continued) Intangible assets acquired in a business combination adjustment to the carrying amount of the hedged item arising from the hedged Intangible assets acquired in a business combination are identified and risk is amortised to profit or loss from that date. recognised separately from goodwill and are initially recognised at their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. (o) Derivative financial instruments the Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial instruments are disclosed in note 37. Cash flow hedges the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred in equity. the gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income. amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the statement of comprehensive income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in Derivatives are initially recognised at fair value at the date a derivatives contract equity are transferred from equity and included in the initial measurement of is entered into and subsequently remeasured to their fair value at each reporting the cost of the asset or liability. period. the resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. the Consolidated entity designates certain derivatives as hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges) or, hedges of highly probable forecast transactions or of foreign currency risk of firm commitments (cash flow hedges). the fair value of hedging derivatives is classified as a non-current asset or a non-current liability if the remaining maturity of the hedge relationship is more than 12 months and as a current asset or a current liability if the remaining maturity of the hedge relationship is less than 12 months. Derivatives not designated into an effective hedge relationship are classified as a current asset or a current liability. Embedded derivatives Hedge accounting is discontinued when the Consolidated entity revokes the hedging relationship or the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss. (p) Financial instruments issued by the Consolidated entity Debt and equity instruments Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement. an equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. equity instruments issued by the Consolidated entity are recorded at the proceeds received, net of direct Derivatives embedded in other financial instruments or other host contracts issue costs. are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss. Hedge accounting Financial guarantee contract liabilities Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount recognised as a provision and the amount initially recognised less cumulative amortisation in accordance the Consolidated entity designates certain hedging instruments, which include with the revenue recognition policies. derivatives, embedded derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges. Transaction costs arising on the issue of equity instruments transaction costs arising on the issue of equity instruments are recognised Hedges of foreign exchange and interest rate risk on firm commitments are directly in equity as a reduction of the proceeds of the equity instruments to accounted for as cash flow hedges. at the inception of the hedge relationship, the Consolidated entity documents the relationship between the hedging instrument and hedged item, along with which the costs relate. transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. its risk management objectives and its strategy for undertaking various hedge Interest and distributions transactions. Furthermore, at the inception of the hedge and on an ongoing Interest and distributions are classified as expenses or as distributions of profit basis, the Consolidated entity documents whether the hedging instrument that consistent with the consolidated statement of financial position classification is used in the hedging relationship is highly effective in offsetting changes in of the related debt or equity instruments or component parts of compound fair values or cash flows of the hedged item. instruments. note 37 contains details of the fair values of the derivative instruments used for (q) Foreign currency transactions hedging purposes. Movements in the hedging reserve in equity are also Both the functional and presentation currency of the Consolidated entity and detailed in note 29. Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged the trust is australian dollars (a$). all foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date and resulting exchange differences are recognised in profit or loss in the period in which they arise. risk. Hedge accounting is discontinued when the Consolidated entity revokes (r) Goods and services tax the hedging relationship or the hedging instrument expires or is sold, Revenues, expenses and assets are recognised net of the amount of goods and terminated, or exercised, or no longer qualifies for hedge accounting. the services tax (“GSt”), except: 37 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20113. siGniFiCant aCCountinG poLiCies (ContinueD) (r) Goods and services tax (continued) – where the amount of GSt incurred is not recoverable from the taxation (x) income tax authority, it is recognised as part of the cost of acquisition of an asset or as Income tax on the profit or loss for the financial year comprises current and part of an item of expense; or deferred tax. Income tax is recognised in the statement of comprehensive – for receivables and payables which are recognised inclusive of GSt, except for income except to the extent that it relates to items recognised directly in accrued revenue and accrued expense at balance dates which exclude GSt. equity, in which case it is recognised in equity. Current tax is the expected tax the net amount of GSt recoverable from, or payable to, the taxation authority is included as part of receivables or payables. GSt receivable or GSt payable is only recognised once a tax invoice has been issued or received. payable on the taxable income for the financial year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid Cash flows are included in the statement of cash flows on a gross basis. the (or refundable). GSt component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. (s) Goodwill Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. the following temporary differences are not provided for: initial recognition of Goodwill arising in a business combination is recognised as an asset at the goodwill, initial recognition of assets or liabilities that affect neither accounting acquisition date. Goodwill is measured as the excess of the sum of the nor taxable profit, and differences relating to investments in wholly-owned consideration transferred, the amount of any non-controlling interests in the entities to the extent that they will probably not reverse in the foreseeable acquiree, and the fair value of the acquirer’s previously held equity interest in future. the amount of deferred tax provided is based on the expected manner the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. of realisation or settlement of the carrying amount of assets and liabilities, using the tax rates enacted or substantively enacted by the end of the reporting period. If, after reassessment, the Consolidated entity’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration, the amount of any non-controlling interests in the acquiree and the fair value of the a deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that acquirer’s previously held equity interest, the excess is recognised immediately the related tax benefit will be realised. in the profit or loss as a bargain purchase gain. on disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. (t) impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. the recoverable amount is the higher of an asset’s fair value less costs to sell, and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there Tax consolidation the trust and its wholly-owned australian tax resident entities are part of a tax-consolidated group under australian taxation law. the head entity within the tax-consolidated group is australian pipeline trust. tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial reports of the members of the tax- consolidated group using the ‘separate taxpayer within group’ approach, by reference to the carrying amounts in the separate financial reports of each entity and the tax values applying under tax consolidation. any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the wholly-owned entities are assumed by the head entity are separately identifiable cash inflows which are largely independent of the in the tax-consolidated group and are recognised as amounts payable cash inflows from other assets or groups of assets (cash-generating units). (receivable) to (from) other entities in the tax-consolidated group in conjunction assets other than goodwill that suffered an impairment are reviewed for with any tax funding arrangement amounts. possible reversal of the impairment at each reporting period. (u) Distributions the head entity recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future a provision is recognised for distributions only when they have been declared, taxable profits of the tax-consolidated group will be available against which the determined or publicly recommended by the Directors. (v) inventories assets can be utilised. (y) Leased assets Inventories are stated at the lower of cost and net realisable value. Costs, leases are classified as finance leases when the terms of the lease transfer including an appropriate portion of fixed and variable overhead expenses, are substantially all the risks and rewards incidental to the ownership of the leased assigned to inventories by the method most appropriate to each particular asset to the lessee. all other leases are classified as operating leases. class of inventory, with the majority being valued on a first-in, first-out basis. net realisable value represents the estimated selling price for the inventories less all estimated costs of completion and costs necessary to make the sale. (w) security-based payments Group as lessor amounts due from a lessee under finance leases are recorded as receivables. Finance lease receivables are initially recognised at amounts equal to the present value of the minimum lease payments receivable plus the present value the Group provides benefits to certain employees in the form of cash settled of any unguaranteed residual value expected to accrue at the end of the lease security-based payments. For cash settled security-based payments, a liability term. Finance lease income is allocated to accounting periods so as to reflect a equal to the portion of services received is recognised at the current fair value constant periodic rate of return on the net investment outstanding in respect of determined at each reporting date. the leases. 38 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20113. siGniFiCant aCCountinG poLiCies (ContinueD) (y) Leased assets (continued) Group as lessee Finance lease income assets held under finance leases are initially recognised at their fair value or, if Finance lease income is allocated to accounting periods so as to reflect a lower, at amounts equal to the present value of the minimum lease payments, constant periodic rate of return on the Group’s net investment outstanding in each determined at the inception of the lease. the corresponding liability to the respect of the leases. lessor is included in the consolidated statement of financial position as a finance lease obligation. 4. CritiCaL aCCountinG JuDGements anD KeY sourCes oF estimation unCertaintY lease payments are allocated between finance charges and reduction of the In the application of the Consolidated entity’s accounting policies, management lease obligation so as to achieve a constant rate of interest on the remaining is required to make judgements, estimates and assumptions about the carrying balance of the liability. Finance lease assets are amortised on a straight-line basis over the estimated useful life of the asset. operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time patterns in which economic benefits from the leased asset are consumed. (z) provisions a provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event, it is probable that a future sacrifice of economic benefits will be required to settle the obligation and the amount of the provision can be measured reliably. values of assets and liabilities that are not readily apparent from other sources. the estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. actual results may differ from estimates. the estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. impairment of assets Determining whether property, plant and equipment, identifiable intangible assets and goodwill are impaired requires an estimation of the value-in-use or fair value of the cash-generating units. the calculations require the Consolidated entity to estimate the future cash flows expected to arise from cash-generating the amount recognised as a provision is the best estimate of the consideration units and suitable discount rates in order to calculate the present value of cash- required to settle the present obligation at the end of the financial year, taking generating units. into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present estimates and assumptions used are reviewed on an ongoing basis. obligation, its carrying amount is the present value of those cash flows. Determining whether available-for-sale investments are impaired requires an assessment as to whether declines in value are significant or prolonged. Management has taken into account a number of qualitative and quantitative factors in making this assessment. any assessment of whether a decline in value represents an impairment would result in the transfer of the decrement from reserves to the statement of comprehensive income. useful lives of non-current assets the Consolidated entity reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period. any reassessment of useful lives in a particular year will affect the depreciation or amortisation expense. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is probable that recovery will be received and the amount of the receivable can be measured reliably. (aa) revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated entity and the revenue can be reliably measured. amounts disclosed as revenue are net of duties and taxes paid. Revenue is recognised for the major business activities as follows: Sales revenue Sales revenue represents revenue earned for the transportation of gas, transmission of electricity and other related services and is recognised when the services are provided. Pass-through revenue pass-through revenue is revenue on which no margin is earned and is offset by corresponding pass-through costs. Interest revenue Interest revenue is recognised as it accrues using the effective interest method. Sale of non-current assets the net gain or loss on sale of non-current assets is included as income at the date control of the assets passes to the buyer. this is usually when an unconditional contract of sale is signed. the gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal (including incidental costs). Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established. 39 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20115. seGment inFormation the Consolidated entity operates in one geographical segment, being australia. (a) Description of reportable segments the Consolidated entity comprises the following reportable segments: – energy infrastructure (formerly gas transmission and distribution); – asset management; and – energy investments. (b) reportable segments 2011 seGment revenue (b) external sales revenue equity accounted net profits pass-through revenue Finance lease and investment interest income Distribution - other entities total segment revenue other interest income Consolidated revenue seGment resuLt enerGY inFrastruCture (a) $000 asset manaGement $000 enerGY investments $000 ConsoLiDateD $000 599,085 170,024 2,630 - - 68,647 - 211,709 - - 549 23,876 - 1,520 11,017 668,281 23,876 381,733 4,150 11,017 771,739 280,356 36,962 1,089,057 12,932 1,101,989 earnings before interest, tax, depreciation and amortisation (“eBItDa”) 412,146 38,740 13,197 464,083 Share of net profits of associates and jointly controlled entities accounted for using the equity method Finance lease and investment interest income total eBItDa Depreciation and amortisation earnings before interest and tax (“eBIt”) net finance costs (c) profit before tax Income tax expense profit for the year seGment assets anD LiaBiLities Segment assets - 2,630 414,776 (95,779) 318,997 - - 38,740 (4,571) 34,169 23,876 1,520 38,593 23,876 4,150 492,109 - (100,350) 38,593 391,759 (247,072) 144,687 (35,862) 108,825 4,430,652 235,219 186,957 4,852,828 Carrying value of investments accounted for using the equity method 479,409 479,409 unallocated assets (d) total assets acquisition of segment assets Segment liabilities unallocated liabilities (e) total liabilities 186,781 172,194 - 52,101 - 75 (a) Gas transmission & distribution has been renamed as energy infrastructure, the acquisition of emu Downs Wind Farm is included in energy Infrastructure (b) the revenue reported above represents revenue generated from external customers, any intersegment sales were immaterial (c) excluding finance lease income and any gains or losses on revaluation of derivatives included as part of eBIt for segment reporting purposes (d) unallocated assets consist of cash and cash equivalents, current tax assets, fair value of interest rate swaps and foreign exchange contracts (e) unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts 95,368 5,427,605 186,781 224,370 3,535,390 3,759,760 40 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20115. seGment inFormation (ContinueD) (b) reportable segments (continued) 2010 seGment revenue (a) external sales revenue equity accounted net profits pass-through revenue Finance lease and investment interest income Distribution - other entities total segment revenue other interest income Consolidated revenue seGment resuLt eneRGY InFRaStRuCtuRe $000 aSSet ManaGeMent $000 eneRGY InVeStMentS $000 ConSolIDateD $000 563,800 60,053 - - 152,501 177,441 2,421 - - - 718,722 237,494 320 13,687 - 1,350 4,051 19,408 624,173 13,687 329,942 3,771 4,051 975,624 13,866 989,490 earnings before interest, tax, depreciation and amortisation (“eBItDa”) 406,167 32,317 4,033 442,517 Share of net profits of jointly controlled entities accounted for using the equity method Finance lease and investment interest income total eBItDa Depreciation and amortisation earnings before interest and tax (“eBIt”) net finance costs (b) profit before tax Income tax expense profit for the year - 2,421 408,588 (85,798) 322,790 - - 32,317 (5,628) 26,689 13,687 1,350 19,070 - 19,070 seGment assets anD LiaBiLities Segment assets Carrying value of investments accounted for using the equity method 4,126,963 222,039 148,966 403,528 unallocated assets (c) total assets acquisition of segment assets Segment liabilities unallocated liabilities (d) total liabilities 103,026 148,216 - 69,499 - 565 13,687 3,771 459,975 (91,426) 368,549 (229,369) 139,180 (38,672) 100,508 4,497,968 403,528 80,940 4,982,436 103,026 218,280 3,369,011 3,587,291 (a) the revenue reported above represents revenue generated from external customers, any intersegment sales were immaterial (b) excluding finance lease income and any gains or losses on revaluation of derivatives included as part of eBIt for segment reporting purposes (c) unallocated assets consist of cash and cash equivalents, current tax assets, fair value of interest rate swaps and foreign exchange contracts (d) unallocated liabilities consist of current and non-current borrowings, deferred tax liabilities, fair value of interest rate swaps and foreign exchange contracts (c) other segment information Revenue from major products and services the revenue from major products and services is shown by the reportable segments. no further analysis is required. Information about major customers Included in revenues arising from energy infrastructure of $599.1 million (2010: $563.8 million) are revenues of approximately $250.9 million (2010: $236.6 million) which arose from sales to the Consolidated entity’s top three customers. 41 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20116. revenue an analysis of the Consolidated entity’s revenue for the year is as follows: Continuing operations ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 operatinG revenue energy infrastructure revenue: – energy infrastucture revenue – pass-through revenue asset management revenue: – asset management revenue – pass-through revenue energy investments 598,562 170,024 768,586 68,647 211,709 280,356 549 1,049,491 563,378 152,501 715,879 59,393 177,441 236,834 320 953,033 Share of net profits of associates and jointly controlled entities accounted for using the equity method 23,876 13,687 FinanCe inCome Interest Redeemable ordinary shares (eII) interest income Finance lease income DiviDenDs Wholly-owned controlled entities other entities otHer inCome Rental income 12,932 1,520 2,630 17,082 - 11,017 11,017 523 523 13,866 1,350 2,421 17,637 - 4,051 4,051 1,082 1,082 - - - - - - - - - 177 - - 177 37,752 25,090 62,842 - - - - - - - - - - - 340 - - 340 25,673 24,282 49,955 - - 1,101,989 989,490 63,019 50,295 42 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20117. expenses profit before tax includes the following expenses: DepreCiation anD amortisation expense Depreciation of non-current assets amortisation of non-current assets otHer operatinG Costs - pass-tHrouGH operating lease rental expenses Gas pipeline costs Management, operating and maintenance costs FinanCe Costs Interest on bank overdrafts and borrowings amortisation of deferred borrowing costs Finance lease charges other finance costs less: amounts included in the cost of qualifying assets loss on fair value of other derivatives unwinding of discount on non-current liabilities ConsoLiDateD 2011 $000 94,458 5,892 100,350 24,678 145,346 170,024 211,709 381,733 241,619 11,883 70 10,023 263,595 (5,842) 257,753 - 2,251 2010 $000 86,387 5,039 91,426 16,909 135,592 152,501 177,441 329,942 223,223 10,749 55 11,279 245,306 (2,512) 242,794 - 441 260,004 243,235 - - - - - - - - 45 - - - 45 - 45 - - 45 the average capitalisation rate on funds borrowed generally is 8.11% p.a. (2010: 7.86% p.a.) including amortisation of borrowing costs and other finance costs empLoYee BeneFit expense post-employment benefits: Defined contribution plans Defined benefit plans termination benefits Cash settled share-based payments other employee benefits otHer expenses Impairment of trade receivables Goodwill write-off loss on disposal of property, plant and equipment other 43 5,994 1,622 7,616 738 18,434 88,135 114,923 - 5,435 1,068 11,599 18,102 6,296 1,876 8,172 781 9,518 79,388 97,859 2,211 - 1,452 8,226 11,889 - - - - - - - - - - 31 31 trust 2011 $000 2010 $000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4,965 4,965 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20118. siGniFiCant items Individually significant revenue/(expenses) included in profit after related income tax expense are as follows: ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 siGniFiCant (expense)/inCome items equity accounted share of eII2 investment allowance benefit profit on sale of investment in CaMS transaction costs on acquisition of emu Downs Wind farm profit from significant items before related income tax Income tax related to significant items above loss from significant items after related income tax 9. inCome tax income tax recognised in profit or loss tax expense/(inCome) Comprises: 9,839 1,652 (8,970) 2,521 (2,953) (432) - - - - - - - - - - - - Current tax expense/(income) in respect of the current year 6,354 (2,678) 3,143 adjustments recognised in the current year in relation to current tax of prior years Deferred tax expense relating to the origination and reversal of temporary differences total tax expense attriButaBLe to: (6,995) (641) 36,503 35,862 2,678 - 38,672 38,672 (3,336) (193) 3,748 3,555 - - - - - - 296 (296) - 5,236 5,236 profit from continuing operations 35,862 38,672 3,555 5,236 the prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows: profit before tax Income tax expense calculated at 30% non deductible interest non-assessable trust distribution transactions within the tax-consolidated group that are exempt from taxation non deductible expenses non assessable income unfranked dividends from associates Investment allowance other adjustment recognised in the current year in relation to the current tax of prior years 144,687 43,406 2,777 (11,677) - 7,198 (4,781) 7,615 (1,009) (672) 42,857 (6,995) 35,862 139,180 41,754 2,660 (11,331) - 3,635 (8,028) 7,994 (690) - 35,994 2,678 38,672 62,943 18,883 - - (11,326) 6 - - - (672) 6,891 (3,336) 3,555 45,330 13,599 - - (6,187) - (2,686) 806 - - 5,532 (296) 5,236 the tax rate used in the above reconciliation is the corporate tax rate of 30% payable by australian corporate entities on taxable profits under the australian tax law. there has been no change in the corporate tax rate when compared with the previous reporting period. 44 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20119. inCome tax (ContinueD) income tax recognised directly in equity the following deferred amounts were charged/(credited) directly to equity during the period: ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 (11,278) 922 7,750 (824) (3,430) 19,035 (2,446) 62 - 16,651 (515,582) (515,582) (467,804) (467,804) - - 264 (824) (560) (471) (471) 31,357 148,054 179,411 32,667 137,329 169,996 (336,171) (297,808) 659 148,054 148,713 148,242 2010 $000 - - 62 - 62 (207) (207) - 137,030 137,030 136,823 openinG BaLanCe $000 CHarGeD to inCome $000 ConsoLiDateD CHarGeD to eQuitY $000 aCQuisitions/ DisposaLs $000 CLosinG BaLanCe $000 (5,056) 316 (408,180) (28,486) 5,511 (30,688) (18,034) (4,725) (62) (1,059) (462,293) 21,668 5,488 - 137,329 164,485 (6,396) (10,555) (1) (2,926) - (3,239) (51,287) 5,020 (796) (165) 10,725 14,784 - - - - 10,160 1,118 (7,750) - 3,528 - (922) 824 - (98) - (4,740) (5,523) (442,189) (7) - - - - - (892) (41,243) (7,875) (6,533) (7,812) (4,298) (5,530) (515,582) 240 - - - 240 26,928 3,770 659 148,054 179,411 (297,808) (36,503) 3,430 (5,290) (336,171) DeFerreD inCome tax Revaluation of financial instruments treated as cash flow hedges actuarial movements on defined benefit plans Revaluation of available-for-sale financial assets Security issue costs Income tax (benefit)/expense reported in equity DeFerreD tax BaLanCes Deferred tax liabilities temporary differences Deferred tax assets temporary differences tax losses Deferred tax balances Deferred tax (liabilities)/assets arise from the following: 2011 Gross DeFerreD tax LiaBiLities Intangible assets property, plant and equipment Deferred revenue Deferred expenses Cash flow hedges Investments equity accounted available for sale investments other Gross DeFerreD tax assets provisions Defined benefit obligation Security issue costs tax losses 45 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20119. inCome tax (ContinueD) Deferred tax balances (continued) presented in the statement of financial position as follows: Deferred tax liabilities attributable to: Continuing operations Deferred tax assets attributable to: Continuing operations Deferred tax (liabilities)/assets arise from the following: 2010 Gross DeFerreD tax LiaBiLities Intangible assets property, plant and equipment Deferred expenses Cash flow hedges Investments equity accounted available for sale investments other Gross DeFerreD tax assets provisions Deferred revenue Defined benefit obligation tax losses ConsoLiDateD 2011 $000 2010 $000 (336,171) (336,171) (297,808) (297,808) - - - - (336,171) (297,808) ConsoLiDateD openInG BalanCe $000 CHaRGeD to InCoMe $000 CHaRGeD to eQuItY $000 aCQuISItIonS/ DISpoSalS $000 CloSInG BalanCe $000 (526) (392,632) (20,142) (3,505) 201 - (49) (4,530) (15,536) (10,546) (736) 316 - (1,010) - - - (13,793) (5,242) (62) - - (12) - - - - - (5,056) (408,180) (30,688) (18,034) (4,725) (62) (1,059) (416,653) (32,042) (19,097) (12) (467,804) 14,493 4,721 4,397 150,557 174,168 (242,485) 7,163 790 (1,355) (13,228) (6,630) (38,672) - - 2,446 - 2,446 (16,651) 12 - - - 12 - 21,668 5,511 5,488 137,329 169,996 (297,808) 46 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 9. inCome tax (ContinueD) Deferred tax balances (continued) 2011 Gross DeFerreD tax LiaBiLities available for sale investments other Gross DeFerreD tax assets Security issue costs tax losses 2010 Gross DeFerreD tax LiaBiLities available for sale investments other Gross DeFerreD tax assets Investments equity accounted tax losses unrecognised deferred tax assets the following deferred tax assets have not been brought to account as assets: tax losses - capital tax consolidation Relevance of tax consolidation to the Group openInG BalanCe $000 CHaRGeD to InCoMe $000 trust CHaRGeD to eQuItY $000 tRanSFeRS $000 CloSInG BalanCe $000 (62) (145) (207) - 137,030 137,030 136,823 - (156) (156) - 150,557 150,557 150,401 - - - (165) (3,583) (3,748) (3,748) - 11 11 - (5,247) (5,247) (5,236) (264) - (264) 824 - 824 560 (62) - (62) - - - (62) - - - - 14,607 14,607 14,607 - - - - (8,280) (8,280) (8,280) (326) (145) (471) 659 148,054 148,713 148,242 (62) (145) (207) - 137,030 137,030 136,823 ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 10,863 11,898 10,863 11,898 the trust and its wholly-owned australian resident entities formed a tax- payment to or from the head entity, based on the current tax liability or current consolidated group with effect from 1 July 2003 and are therefore taxed as a tax asset of the entity. Such amounts are reflected in amounts receivable from single entity from that date. the head entity within the tax-consolidated group or payable to other entities in the tax-consolidated group. is australian pipeline trust. the members of the tax-consolidated group are identified at note 39. the tax sharing agreement entered into between members of the tax- consolidated group provides for the determination of the allocation of income Nature of tax funding arrangement and tax sharing agreement tax liabilities between the entities should the head entity default on its tax entities within the tax-consolidated group have entered into a tax funding payment obligations or if an entity should leave the tax-consolidated group. arrangement and a tax sharing agreement with the head entity. under the the effect of the tax sharing agreement is that each member’s liability for the terms of the tax funding arrangement, australian pipeline trust and each of the tax payable by the tax-consolidated group is limited to the amount payable to entities in the tax-consolidated group have agreed to pay a tax equivalent the head entity under the tax funding arrangement. 47 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201110. DistriButions (a) recognised amounts Final distribution paid on 15 september 2010 (2010: 15 September 2009) profit distribution (a) Capital distribution semi-annual distribution paid on 17 march 2011 (2010: 17 March 2010) profit distribution (a) Capital distribution unreCoGniseD amounts Final distribution payable on 15 september 2011 (2010: 15 September 2010) profit distribution (a) Capital distribution (b) recognised amounts Final distribution paid on 15 september 2010 (2010: 15 September 2009) profit distribution - apt (a) profit distribution - aptIt (a) (note 31) Capital distribution - apt (note 28) Capital distribution - aptIt (note 31) semi-annual distribution paid on 17 march 2011 (2010: 17 March 2010) profit distribution - apt (a) profit distribution - aptIt (a) (note 31) Capital distribution - apt (note 28) Capital distribution - aptIt (note 31) (a) profit distributions were unfranked (2010: unfranked) 2011 Cents per seCuritY trust 2011 totaL $000 2010 CentS peR SeCuRItY 1.73 8.58 9.55 2.46 22.32 3.42 8.41 11.83 9,364 46,552 52,681 13,592 122,189 19,054 46,761 65,815 2.74 - 5.67 4.97 13.38 1.73 8.58 10.31 2011 Cents per seCuritY apt anD aptit 2011 totaL $000 2010 CentS peR SeCuRItY 1.73 3.67 8.58 3.01 9.55 3.74 2.46 0.75 33.50 9,364 19,928 46,552 16,350 52,681 20,629 13,592 4,127 183,223 2.74 2.17 - 11.09 5.67 3.51 4.97 1.60 31.75 2010 total $000 13,684 - 28,832 25,320 67,836 9,364 46,552 55,916 2010 total $000 13,684 10,809 - 55,293 28,832 17,847 25,320 8,141 159,926 48 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 10. DistriButions (ContinueD) unreCoGniseD amounts Final distribution payable on 15 september 2011 (2010: 15 September 2010) profit distribution - apt (a) profit distribution - aptIt (a) Capital distribution - apt Capital distribution - aptIt (a) profit distributions were unfranked (2010: unfranked) 2011 Cents per seCuritY apt anD aptit 2011 totaL $000 2010 CentS peR SeCuRItY 3.42 3.41 8.41 2.66 17.90 19,054 18,951 46,761 14,793 99,559 1.73 3.67 8.58 3.01 17.00 2010 total $000 9,364 19,928 46,552 16,350 92,194 the final distribution in respect of the financial year has not been recognised in this financial report because the final distribution was not declared, determined or publicly confirmed prior to the end of the financial year. adjusted franking account balance (tax paid basis) 11. traDe anD otHer reCeivaBLes trade receivables allowance for doubtful debts Receivables from associates and related parties Finance lease receivables (note 32) Interest receivable other debtors trade receivables are non-interest bearing and are generally on 30 day terms. ageing of past due but not impaired 30 - 60 days 60 - 90 days 90 - 120 days total movement in the allowance for doubtful debts Balance at beginning of year (Credited)/charged to statement of comprehensive income Balance at end of year ConsoLiDateD trust 2011 $000 3,522 103,520 - 103,520 38,429 3,252 262 235 2010 $000 3,350 104,382 (2,211) 102,171 36,976 3,181 148 53 2011 $000 3,522 - - - 2010 $000 3,350 - - - 482 482 - 3 - - 3 - 145,698 142,529 485 485 5,304 194 2,648 8,146 2,211 (2,211) - 2,856 284 3,076 6,216 2,414 (203) 2,211 - - - - - - - - - - - - - - In determining the recoverability of a trade receivable, the Consolidated entity considers any change in the credit quality of the trade receivable from the date the credit was initially granted up to the reporting date. the concentration of credit risk is limited due to the customer base being large and unrelated. Included in the allowance for doubtful debts is an individual trade receivable with a balance of $nil (2010: $2.205 million) which has been placed into receivership. In 2011 an amount of $2.1 million was recovered in respect of this receivable. the balance has been written off. ageing of impaired receivables 90 - 120 days total 49 - - 2,205 2,205 - - - - APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201112. inventories Spare parts - at cost Gas stock 13. otHer Current assets prepayments 14. non-Current reCeivaBLes Finance lease receivables (note 32) loans to controlled entities loan receivable - related party 15. otHer non-Current FinanCiaL assets Investments carried at cost: Investments in controlled entities envestra limited energy Infrastructure Investment available-for-sale investments carried at fair value: ethane pipeline Income Fund Hastings Diversified utilities Fund other Financial assets carried at amortised cost: Redeemable ordinary shares ConsoLiDateD 2011 $000 10,605 471 11,076 2010 $000 10,385 313 10,698 3,357 3,757 25,860 21,344 trust 2011 $000 2010 $000 - - - - - - - - - - - - - 58 536,161 355,751 - - 25,860 21,402 536,161 355,751 - - - 6,720 161,929 5 13,628 182,282 - - - 5,751 111,321 4 12,109 129,185 371,551 290,009 329 371,551 265,197 329 3,618 2,738 - - - - - - 665,507 639,815 available-for-sale investments consist of investments in ordinary securities, and therefore have no fixed maturity date or coupon rate. the fair value of listed available-for-sale investments has been determined directly by reference to published price quotations in an active market. Financial assets carried at amortised cost relate to apa Group’s 19.9% investment in energy Infrastructure Investments pty ltd where apl, as responsible entity for aptIt, acquired the redeemable ordinary shares, which include a debt component. this debt component amortises over ten years from December 2008 at 12% per annum. 50 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201116. investments aCCounteD For usinG tHe eQuitY metHoD name oF entitY prinCipaL aCtivitY CountrY oF inCorporation 2011 2010 oWneRSHIp InteReSt % Jointly Controlled enties: Sea Gas (a) CaMS (b) Gas transmission Water management energy Infrastructure Investments unlisted energy vehicle energy Infrastructure Investments 2 unlisted energy vehicle australia australia australia australia 50.00 - 19.90 20.20 33.33 50.00 19.90 20.20 associates: envestra limited (c) Gas transmission australia 33.01 31.66 ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 Investments in jointly controlled entities and associates 479,409 403,528 Reconciliation of movements in investments accounted for using the equity method: Balance at 1 July acquisitions during the year Share of net profit for the year Disposal Movement in reserves Dividends Balance at 30 June 403,528 91,191 23,876 (2,848) (2,099) 513,648 (34,239) 479,409 388,416 22,396 13,687 - 13,622 438,121 (34,593) 403,528 Summarised financial information in respect of the jointly controlled entities is set out below: FinanCiaL position total assets total liabilities net assets Consolidated entity’s share of jointly controlled entities and associates net assets FinanCiaL perFormanCe total revenue total profit for the year Consolidated entity’s share of jointly controlled entities and associates profit - - - - - - - - - - - - - - - - - - ConsoLiDateD 2011 $000 2010 $000 4,532,327 3,792,793 739,534 215,770 475,880 104,262 23,876 4,449,597 3,568,440 881,157 281,585 343,575 56,011 13,687 (a) In november 2010, apa acquired a further 16.7% of the Sea Gas pipeline from International power for $46.3 million. apa exercised its pre-emptive right over part of International power’s interest, and with this acquisition apa’s overall interest in the pipeline increased to 50% (b) apa sold its investment in CaMS on 30 June 2011 (c) apa participated in envestra limited’s Distribution Reinvestment plan under envestra limited’s october and april Distribution, increasing its interest in envestra limited from 31.66% to 33.01% Contingent liabilities and capital commitments the Consolidated entity’s share of the contingent liabilities, capital commitments and other expenditure commitments of joint venture entities is disclosed in notes 46 and 41 respectively. 51 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 17. propertY, pLant anD eQuipment Gross CarrYinG amount Balance at 1 July 2009 additions Disposals acquisitions through business combinations transfer to assets classified as finance leases transfers Balance at 1 July 2010 additions Disposals acquisitions through business combinations transfer to assets classified as finance leases transfers Balance at 30 June 2011 aCCumuLateD DepreCiation Balance at 1 July 2009 Disposals Depreciation expense transfers Balance at 1 July 2010 Disposals Depreciation expense Balance at 30 June 2011 net BooK vaLue as at 30 June 2010 as at 30 June 2011 the trust has no property, plant and equipment. FReeHolD lanD anD BuIlDInGS - at CoSt $000 leaSeHolD IMpRoVeMentS - at CoSt $000 ConSolIDateD plant anD eQuIpMent - at CoSt $000 108,281 2,213 3,443,775 37 (6,959) 87,058 - 146,209 3,670,120 57,838 (4,911) 156,460 - - 70 - 5,165 113,516 - (173) 1,556 - 4,352 119,251 - - - - 692 2,905 - (59) - - (415) 2,431 WoRK In pRoGReSS - at CoSt $000 154,298 126,636 - - (3,495) (152,303) total $000 3,708,567 126,673 (6,959) 87,128 (3,495) (237) 125,136 3,911,677 171,269 - 4,934 229,107 (5,143) 162,950 (10,878) (639) - (10,878) 160,053 (164,629) 4,039,560 125,832 4,287,074 (10,702) (1,198) (334,222) - (1,657) - (12,359) 13 (3,191) - (342) (32) (1,572) 59 (327) 4,160 (84,388) 32 (414,418) 4,003 (90,940) (15,537) (1,840) (501,355) - - - - - - - - (346,122) 4,160 (86,387) - (428,349) 4,075 (94,458) (518,732) 101,157 103,714 1,333 591 3,255,702 3,538,205 125,136 125,832 3,483,328 3,768,342 52 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201118. GooDWiLL Gross CarrYinG amount Balance at beginning of financial year Goodwill write-off Finalisation of provisional purchase price accounting Balance at end of financial year ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 520,779 (5,435) - 520,774 - 5 515,344 520,779 - - - - 2010 $000 - - - - allocation of goodwill to cash-generating units Goodwill has been allocated for impairment testing purposes to the following individual cash-generating units: Individual cash-generating units – asset management business; – Gas transmission pipelines in new South Wales, Queensland and Western australia; – Victorian transmission system; and – apa Gas networks. the carrying amount of goodwill allocated to cash-generating units that are significant individually or in aggregate is as follows: asset management business Gas transmission pipelines in new South Wales, Queensland and Western australia Victorian transmission system apa Gas networks other ConsoLiDateD 2011 $000 33,328 272,692 105,061 104,263 - 515,344 2010 $000 37,828 272,692 105,061 104,263 935 520,779 the recoverable amounts of cash-generating units are determined based on asset management cash flow projections reflect long term agreements with value-in-use calculations. these calculations use cash flow projections based assumptions of renewal on similar terms and conditions based on management on a five year financial business plan and thereafter a further 15 year financial expectations. model, being the basis of the Group’s forecasting and planning processes. Cash flow projections are estimated for a period of up to 20 years, with a For fully regulated assets, cash flows have been extrapolated on the basis of terminal value, recognising the long term nature of the assets. the pre-tax existing transportation contracts and government policy settings, and expected discount rates used are 9.25% p.a. (2010: 9.0% p.a.) for energy infrastructure contract renewals with resulting average annual growth rates of between 1.0% assets and 9.25% p.a. (2010: 9.0% p.a.) for asset management. and 3.6% p.a. these expected cash flows are factored into the regulated asset base and do not exceed management’s expectations of the long-term average growth rate for the market in which the CGu operates. For non-regulated assets, apa has assumed no capacity expansion beyond installed and committed levels; utilisation of capacity is based on existing contracts, government policy settings and expected market outcomes. these assumptions have been determined with reference to historic information, current performance and expected changes taking into account external information. 53 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 19. otHer intanGiBLe assets Right to receive pipeline tariff Contract intangibles riGHt to reCeive pipeLine tariFF Gross carrying amount Balance at 1 July 2010 Balance at 30 June 2011 accumulated amortisation and impairment Balance at 1 July 2010 amortisation expense Balance at 30 June 2011 net book value ContraCt anD otHer intanGiBLes Gross carrying amount Balance at 1 July 2010 Reclassed from other non current assets acquisitions Balance at 30 June 2011 accumulated amortisation and impairment Balance at 1 July 2010 amortisation expense Balance at 30 June 2011 net book value ConsoLiDateD 2011 $000 - 192,903 192,903 15,677 15,677 (14,624) (1,053) (15,677) - 190,875 2,805 16,709 210,389 (12,646) (4,840) (17,486) 192,903 2010 $000 1,053 178,229 179,282 15,677 15,677 (13,924) (700) (14,624) 1,053 175,075 - 15,800 190,875 (8,307) (4,339) (12,646) 178,229 trust 2011 $000 2010 $000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - the Consolidated entity holds various third party operating and maintenance contracts. the combined gross carrying amount of $210.389 million amortises over terms ranging from one to 60 years. useful life is determined based on the underlying contractual terms plus estimations of renewal of up to two terms where considered probable by management. amortisation expense is included in the line item of depreciation and amortisation expense in the statement of comprehensive income. 20. otHer non-Current assets line pack gas Gas held in storage other assets 4,356 2,229 1,381 7,966 2,354 2,361 2,293 7,008 - - 192 192 - - - - 54 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201121. traDe anD otHer paYaBLes trade payables (a) other payables (b) payables to associates non-trade payables to: Wholly-owned controlled entities (c) ConsoLiDateD 2011 $000 15,270 120,381 - - 2010 $000 18,872 112,967 - - 135,651 131,839 trust 2011 $000 - 248 - 2010 $000 - - - 148,242 148,490 136,823 136,823 (a) trade payables are non-interest bearing and are normally settled on 15 - 30 day terms (b) predominantly consists of creditor capital expenditure accruals and external interest payable accruals (c) Includes amounts arising from apa’s tax sharing agreement between apa and each of the entities in the tax-consolidated group (note 9) 22. Current BorroWinGs unseCureD - at amortiseD Cost Bank borrowings (a) Guaranteed Senior notes seCureD - at amortiseD Cost Bank Borrowings Finance lease liabilities (note 32) 900,000 - - - - - 102,000 1,645 238 1,883 900,000 103,883 (a) Relates to the current portion of long-term borrowings (Refer to note 37 for details of interest rates) 23. otHer Current FinanCiaL LiaBiLities Derivatives Derivatives that are designated and effective as hedging instruments carried at fair value: Forward foreign exchange contracts Interest rate swaps – cash flow hedges Foreign exchange hedges – cash flow hedges 1,172 11,899 31,915 44,986 152 8,586 - 8,738 - - - - - - - - - - - - - - - - - - - - 55 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 24. provisions Current employee benefits (a) other (note 33) non-Current employee benefits (a) other (note 33) ConsoLiDateD 2011 $000 48,279 6,452 54,731 26,825 4,015 30,840 2010 $000 39,497 3,460 42,957 28,645 3,040 31,685 5,922 1,969 355 31,251 39,497 7,271 18,294 3,080 28,645 9,260 1,614 10,874 925 925 (a) the aggregate employee benefit liability recognised and included in the financial statements is as follows: Current Incentives Cash settled security-based payments Restructuring costs leave balances non-Current Cash settled security-based payments Retirement benefit obligation (note 34) leave balances 25. otHer LiaBiLities Current unearned revenue - interest unearned revenue - other non-Current unearned revenue - other 11,441 3,976 - 32,862 48,279 10,498 12,567 3,760 26,825 - 2,347 2,347 802 802 trust 2011 $000 2010 $000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 56 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201126. non-Current BorroWinGs unseCureD - at amortiseD Cost Bank borrowings (a) Guaranteed Senior notes (b) Medium term notes (c) less: amortised borrowing costs seCureD - at amortiseD Cost Finance lease liabilities (note 32) (d) ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 655,500 1,059,681 294,947 (19,682) 1,990,446 1,665,324 1,253,596 - (27,409) 2,891,511 - - 380 380 1,990,446 2,891,891 - - - - - - - - - - - - - - - - (a) Relates to the non-current portion of long-term borrowings. (Refer to note 37 for details of interest rates) (b) Represents uS denominated notes of uS$799 million (2010: uS$659 million) measured at the exchange rate at reporting date, and a$314.9 million of a$ denominated notes (2010: a$416.9  million) (c) Represents 10 year fixed rate australian Medium term notes issued to institutional investors 27. otHer non-Current FinanCiaL LiaBiLities Derivatives - at fair value: Interest rate swaps - cash flow hedges Foreign exchange hedges - cash flow hedges 16,902 246,884 263,786 41,335 25,356 66,691 - - - - - - 57 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 28. issueD CapitaL securities ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 634,116,029 securities, fully paid (2010: 542,318,629 securities, fully paid) (a) 1,192,779 984,936 1,192,779 984,936 movements Balance at beginning of financial year Issue of securities under Distribution Reinvestment plan Issue of securities under Security purchase plan Capital return to securityholders (note 10(b)) Institutional placement of units equity values adjustment between stapled entities Issue cost of securities tax relating to security issue costs Balance at end of financial year 2011 no. oF seCurities 000 542,319 13,875 - - 77,922 - - - ConsoLiDateD anD trust 2011 $000 984,936 39,782 - (60,145) 230,128 - (2,746) 824 2010 no. oF SeCuRItIeS 000 2010 $000 498,664 894,435 18,377 25,278 - - - - - 41,720 64,463 (25,320) - 9,868 (230) - 634,116 1,192,779 542,319 984,936 (a) Fully paid securities carry one vote per security and carry the right to distributions Changes to the then Corporations law abolished the authorised capital and par value concept in relation to issued capital from 1 July 1998. therefore, the trust does not have a limited amount of authorised capital and issued securities do not have a par value. 58 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201129. reserves Hedging asset revaluation available-for-sale investment revaluation HeDGinG reserve Balance at beginning of financial year Gain/(loss) recognised: Interest rate swaps/currency swaps Deferred tax related to gains/losses recognised transferred to profit or loss: Interest rate swaps/currency swaps Deferred tax related to amounts transferred to profit or loss Share of hedge reserve of associate Deferred tax related to share of hedge reserve Balance at end of financial year ConsoLiDateD 2011 $000 28,003 8,669 18,227 54,899 2010 $000 54,318 8,669 (3,032) 59,955 54,318 13,690 (228,392) 68,517 192,900 (57,870) (2,100) 630 28,003 294 (87) 45,749 (13,725) 13,622 (5,225) 54,318 trust 2011 $000 - - 762 762 - - - - - - - - 2010 $000 - - 145 145 - - - - - - - - the hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. the cumulative deferred gain or loss on the hedge is recognised in profit or loss when the hedged transaction impacts profit or loss, or is included as a basis adjustment to the non-financial hedge item, consistent with the applicable accounting policy. asset revaLuation reserve Balance at beginning of financial year Balance at end of financial year 8,669 8,669 8,669 8,669 - - - - the asset revaluation reserve arose on the revaluation of the existing interest in a pipeline as a result of a business combination. Where revalued pipelines are sold, that portion of the asset revaluation reserve which relates to that asset and is effectively realised, is transferred directly to retained earnings. the reserve can be used to pay distributions only in limited circumstances. avaiLaBLe-For-saLe investment revaLuation reserve Balance at beginning of financial year Revaluation gain/(loss) recognised Deferred tax related to gains/losses recognised Balance at end of financial year (3,032) 29,008 (7,749) 18,227 (1,236) (1,734) (62) (3,032) 145 880 (263) 762 (1,237) 1,444 (62) 145 the available-for-sale investment revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset and is effectively realised, is recognised in profit or loss. Where a revalued financial asset is impaired, that portion of the reserve which relates to that financial asset is recognised in profit or loss. 59 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201130. retaineD earninGs Balance at beginning of financial year net profit attributable to securityholders Distributions paid (note 10) actuarial gain/(loss) on defined benefit plans recognised directly to retained earnings after tax (note 34) Balance at end of financial year ConsoLiDateD 2011 $000 9,364 69,585 (62,045) 2,150 19,054 2010 $000 (4,998) 62,584 (42,516) (5,706) 9,364 trust 2011 $000 11,263 59,388 (62,045) - 8,606 2010 $000 13,685 40,094 (42,516) - 11,263 31. minoritY interests apt Investment trust other minority interest apt investment trust issued capital 400,830 283 401,113 340,758 132 340,890 Balance at beginning of financial year 320,931 358,450 equity values adjustment between stapled entities Issue of securities under distribution reinvestment plan Issue of securities under security purchase plan Institutional placement of units Distribution - capital return (note 10(b)) Issue cost of securities tax relating to security issue costs Balance at end of financial year reserves available for sale investment revaluation reserve: Balance at beginning of financial year Valuation loss recognised retained earnings Balance at beginning of financial year net profit attributable to aptIt equityholders Distributions paid (note 10(b)) Balance at end of financial year otHer minoritY interest Issued capital Reserves Retained earnings - 12,590 - 69,872 (20,477) (915) - (9,868) 15,134 20,723 - (63,434) (74) - 382,001 320,931 (101) 635 534 19,928 38,924 (40,557) 18,295 4 1 278 283 (1,446) 1,345 (101) 10,810 37,774 (28,656) 19,928 4 1 127 132 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 60 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 32. Leases (a) Leasing arrangements - receivables Finance lease receivables relate to the lease of a metering station, a natural gas vehicle facility and X41 expansion. FinanCe Lease reCeivaBLes not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years Minimum future lease payments receivable (a) Gross finance lease receivables less: unearned finance lease receivables present value of lease receivables Included in the financial statements as part of: Current trade and other receivables (note 11) non-current receivables (note 14) ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 5,957 22,649 14,278 42,884 42,884 (13,772) 29,112 3,252 25,860 29,112 5,416 19,535 8,889 33,840 33,840 (9,315) 24,525 3,181 21,344 24,525 - - - - - - - - - - - - - - - - - - - - (a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual (b) Leasing arrangements - liabilities Finance lease liabilities relate to leases of general property, plant and equipment. there are no contingent rental payments due or payable. there are no renewal or purchase options and escalation clauses or restrictions imposed by the lease arrangements concerning distributions, additional debt and further leasing. FinanCe Lease LiaBiLities not longer than 1 year longer than 1 year and not longer than 5 years Minimum future finance lease payments (b) less: future finance charges present value of minimum lease payments Included in the financial statements as part of: Current borrowings (note 22) non-current borrowings (note 26) - - - - - - - - 280 414 694 (76) 618 238 380 618 - - - - - - - - - - - - - - - - (b) Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual 61 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 32. Leases (ContinueD) (b) Leasing arrangements - liabilities (continued) non-CanCeLLaBLe operatinG Leases – transmission pipeLines not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years non-CanCeLLaBLe operatinG Leases – otHer not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years 33. provisions Balance at 30 June 2010 additional provisions recognised (b) unwinding of discount Reductions arising from payments/other sacrifices of future economic benefits Balance at 30 June 2011 Current (note 24) non-current (note 24) Balance at 30 June 2009 additional provisions recognised unwinding of discount Reductions arising from payments/other sacrifices of future economic benefits Balance at 30 June 2010 Current (note 24) non-current (note 24) ConsoLiDateD 2011 $000 - - - - 5,938 8,832 1,159 15,929 2010 $000 82,620 - - 82,620 6,579 12,883 1,317 20,779 aBanDonMent (a) $000 3,040 801 174 - 4,015 - 4,015 4,015 2,830 40 170 - 3,040 - 3,040 3,040 trust 2011 $000 2010 $000 - - - - - - - - ConsoLiDateD otHeR $000 3,460 3,568 - (576) 6,452 6,452 - 6,452 957 2,960 - (457) 3,460 3,460 - 3,460 - - - - - - - - total $000 6,500 4,369 174 (576) 10,467 6,452 4,015 10,467 3,787 3,000 170 (457) 6,500 3,460 3,040 6,500 (a) Costs of dismantling pipelines and restoring the sites on which the pipelines are located is to be included in the cost of the asset at inception and required to be accounted for in accordance with aaSB 137 ‘provisions, Contingent liabilities and Contingent assets’ (b) Includes rectification works due to Queensland floods 62 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201134. empLoYee superannuation pLans all employees of the Consolidated entity are entitled to benefits on retirement, the most recent actuarial valuations of plan assets and the present value of the disability or death from an industry sponsored fund, or an alternative fund of defined benefit obligation were carried out at 30 June 2011 by Mercer their choice. the Consolidated entity has three plans with defined benefit sections (due to the acquisition of businesses) and plans with defined contribution sections. the defined benefit sections provide lump sum benefits upon retirement based on years of service. the defined contribution sections receive fixed contributions from the Consolidated entity and the Consolidated (australia) pty ltd and Russell Investments (2010: Mercer (australia) pty ltd and Russell Investments). the present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method. entity’s legal and constructive obligations are limited to these amounts. the following sets out details in respect of the defined benefit plans only: ConsoLiDateD 2011 $000 3,133 4,601 (6,112) 1,622 9,823 3,071 98,758 (111,325) (12,567) (18,294) (1,622) 3,072 4,278 2010 $000 2,970 4,559 (5,653) 1,876 7,140 (8,153) 91,346 (109,640) (18,294) (14,656) (1,876) (8,153) 6,391 (12,566) (18,294) 109,640 98,679 3,133 4,601 1,419 640 (7,315) (793) 111,325 2,970 4,559 1,650 9,640 (6,718) (1,140) 109,640 amounts reCoGniseD in tHe statement oF CompreHensive inCome Current service cost Interest cost on benefit obligation expected return on plan assets total included in superannuation costs which form part of employee benefit expense actual return on plan assets actuarial gains/(losses) incurred during the year and recognised in the statement of comprehensive income amounts reCoGniseD in tHe statement oF FinanCiaL position Fair value of plan assets present value of benefit obligation net liability - non-current (note 24) movements in LiaBiLitY DurinG tHe Year Balance at beginning of year expense recognised in statement of comprehensive income amount recognised in retained earnings Contributions from employer Balance at end of year (a) (a) the above balances are recorded within the provisions section of the statement of financial position; refer to note 24 Movements in the present value of the defined benefit obligations in the current period were as follows: opening defined benefit obligation Current service cost Interest cost Contributions from plan participants actuarial (gains)/losses Benefits paid taxes and premiums paid Closing defined benefit obligation 63 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201134. empLoYee superannuation pLans (ContinueD) Movements in the present value of the plan assets in the current period were as follows: opening fair value of plan assets expected return on plan assets actuarial gains/(losses) Contributions from employer Contributions from plan participants Benefits paid taxes and premiums paid Closing fair value of plan assets ConsoLiDateD 2011 $000 91,346 6,112 3,711 4,278 1,419 (7,315) (793) 98,758 2010 $000 84,023 5,653 1,487 6,391 1,650 (6,718) (1,140) 91,346 the average principal actuarial assumptions used in determining post-employment obligations for the Consolidated entity’s plans are shown below (expressed as weighted averages): Discount rate (p.a.) expected return on plan assets (p.a.) expected salary rate increase (p.a.) the invested defined benefit assets were held in the following classes: australian equities International equities Fixed income property alternatives Cash the history of experience adjustments is as follows: Fair value of plan assets present value of defined benefit obligation (Deficit)/surplus experience adjustments on plan liabilities experience adjustments on plan assets ConsoLiDateD 2011 % 4.6 7.0 4.5 33.7 27.2 11.8 8.5 13.8 5.0 2011 $000 98,758 111,325 (12,567) 3,090 (3,167) 2010 $000 91,346 109,640 2009 $000 84,023 98,679 (18,294) (14,656) 4,739 (821) (6,753) 8,450 the Consolidated entity expects $4,076,000 in contributions to be paid to the defined benefit plans during the year ending 30 June 2012. 2010 % 4.7 7.0 4.5 34.3 25.3 12.3 8.5 13.3 6.3 2008 $000 90,227 97,042 (6,815) (1,515) 8,533 64 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201135. earninGs per seCuritY Basic and diluted earnings per security (cents) ConsoLiDateD 2011 19.7 2010 19.4 the earnings and weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security are as follows: net profit attributable to securityholders for calculating basic and diluted earnings per security ($000) 108,509 100,358 adjusted weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security (000) no. oF seCurities 551,222 516,243 36. notes to tHe statement oF CasH FLoWs (a) reconciliation of cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash at bank and on hand (a) Short-term deposits Restricted cash ConsoLiDateD 2011 $000 90,706 4,662 95,368 2010 $000 76,867 4,073 80,940 trust 2011 $000 49 - 49 2010 $000 293 - 293 (a) as at 30 June 2011, australian pipeline limited held $5.0 million (2010: $5.0 million) on deposit to meet its financial requirements as the holder of an australian Financial Services licence (b) Businesses acquired and disposed of Consolidated During the financial year, the Consolidated entity acquired the emu Downs In the prior year, the Consolidated entity acquired the Berwyndale to Wind Farm (“eDWF”), net cash outflow on this acquisition was $167,219,000. Wallumbilla pipeline (“BWp”) and a 20.2% interest in the eII2 (owner of the Refer to note 40 for further details of the eDWF acquisition. In addition a Hallet 4 Wind Farm project). the net cash outflow on these acquisitions was further 16.7% interest was acquired in the Sea Gas pipeline for $46,904,000 $83,328,000 for the controlled entity and $327,000 for the share of the increasing apa’s overall interest to 50% and the $19,676,000 equity contribution associate. Refer to note 40 for further details of the BWp acquisition. payable upon construction completion was made to eII2 (owner of the Hallett 4 Wind Farm project). $24,812,000 (2010: $22,379,000) has been reinvested in envestra limited through the Dividend Reinvestment plan and $22,481,000 (2010: $114,498,000) has been invested in the purchase of shares in Hastings Diversified utilities Fund. Trust During the financial year, the trust has reinvested $24,812,000 (2010: $22,379,000) in envestra limited through the Dividend Reinvestment plan. 65 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201136. notes to tHe statement oF CasH FLoWs (ContinueD) (c) reconciliation of profit for the year to the net cash provided by operating activities ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 108,825 100,508 59,388 profit for the year loss on disposal of investments Impairment of goodwill (Gain)/loss on disposal of property, plant and equipment Gain from sale of equity accounted investments Discount on business acquisition Share of net profits of jointly controlled entities accounted for using the equity method Dividends/distributions received Depreciation and amortisation expense Finance costs Changes in assets and liabilities: trade and other receivables Inventories other assets trade and other payables provisions other liabilities Income tax balances net cash provided by operating activities (d) Financing facilities unseCureD FaCiLities Bank borrowings (a) amounts used amounts unused Guaranteed senior notes (b) amounts used amounts unused Medium term notes (c) seCureD FaCiLities Bank borrowings amounts used amounts unused - 5,435 1,068 (1,652) - (23,876) 34,239 100,350 12,895 (5,158) (2,381) 7,458 1,205 12,351 (2,331) 41,601 290,029 1,510 - 2,799 - (4,586) (13,687) 35,087 91,426 11,019 (5,819) 3,460 3,796 8,568 669 (5,661) 38,672 267,761 1,555,500 234,500 1,790,000 1,665,324 560,000 2,225,324 1,059,681 1,355,596 - 294,947 1,354,628 - - 1,355,596 - - - 1,645 - 1,645 2010 $000 40,094 5,050 - - - - - - - - - - - 24,812 22,391 - - - - - - - 36 - - (20,147) (22,416) - - (862) 63,191 - - 5,236 50,391 - - - - - - - - - - - - - - - - - - - - (a) apt pipelines limited entered into syndicated bank facilities in June 2007 and September 2009, and bilateral bank facilities in July 2008 and august 2009 (b) apt pipelines limited issued notes in the uS private placement market in September 2003, May 2007 and July 2009. the issues include australian dollar and uS dollar denominated notes. the disclosed amount represents the australian dollar equivalent of notes issued as measured at the reporting date. the maturity date and interest rates payable are disclosed in note 37 (c) Represents 10 year fixed rate australian Medium term notes issued to institutional investors 66 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 37. FinanCiaL instruments (a) Capital risk management the Consolidated entity manages its capital structure to ensure that entities in the Group will be able to continue as a going concern while maximising the return to security holders through the optimisation of the debt to equity structure. entity. these risks include market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. the Consolidated entity seeks to minimise the effects of these risks through natural hedges and by using derivative instruments to directly hedge the exposures. the use of financial derivatives is governed by the Consolidated entity’s, board approved treasury policy, which provides written principles on the Consolidated entity’s overall capital management strategy is to continue to foreign exchange risk, interest rate risk, credit risk, the use of financial target strong BBB/Baa2 investment grade ratings through maintaining sufficient flexibility to fund organic growth and investment from internally generated and retained cash flows, equity and, where appropriate, additional derivatives and non-derivative financial instruments, and the investment of excess liquidity. the Consolidated entity does not enter into or trade financial instruments, including derivative financial instruments for speculative debt funding. purposes. the capital structure of the Consolidated entity consists of debt, which includes borrowings disclosed in notes 22 and 26, cash and cash equivalents, and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 28, 29 and 30 respectively. the Consolidated entity’s operations are conducted primarily through its subsidiaries. the Corporate treasury function reports monthly to the Consolidated entity’s board of Directors, which monitors risks and policies implemented to mitigate risk exposures. (c) market risk management the Consolidated entity’s activities exposure is primarily to the financial risk of changes in interest rates and foreign currency exchange rates. the Consolidated operating cash flows are used to maintain and expand the Consolidated entity enters in to a variety of derivative financial instruments to manage its entity’s assets, as well as to make distributions to security holders and to repay exposure to interest rate and foreign currency risk, including: maturing debt. – foreign exchange forward contracts to hedge the exchange rate risk the Consolidated entity’s policy is to borrow from overseas and locally, using a arising on the importation of equipment from the united States and other variety of capital markets and bank loan facilities, to meet anticipated funding international suppliers; requirements. – currency swaps to manage the foreign currency risk associated with foreign Controlled entities are subject to externally imposed capital requirements. these relate to the australian Financial Services licence held by australian pipeline limited, the Responsible entity of the Consolidated entity and were adhered to for the entirety of the 2010 and 2011 periods. Gearing ratio the Consolidated entity’s board of Directors reviews the capital structure on a regular basis. as part of the review, the board considers the cost of capital and the state of the markets. the Consolidated entity continues to target strong BBB/Baa2 investment grade ratings through maintaining sufficient flexibility to fund organic growth and investment from internally generated and retained currency denominated borrowings; – interest rate forward contracts to manage interest rate risk; and – interest rate swaps to mitigate the risk of rising interest rates. there has been no change to the Consolidated entity’s exposure to market risks or the manner to which it manages and measures the risk from the previous period. the Consolidated entity is also exposed to price risk from its investments in listed equities. the majority of the shareholdings are in two companies that are publicly traded on the australian Stock exchange (aSX). cashflows and where appropriate, additional debt and equity funding. Based (d) Foreign currency risk management on recommendations of the board, the Consolidated entity balances its overall the Consolidated entity undertakes certain transactions denominated in capital structure through new equity issues, through the issue of new debt or foreign currencies and hence exposures to exchange rate fluctuations arise. the redemption of existing debt, and through a disciplined distribution exchange rate exposures are managed within approved policy parameters payment policy. (b) Financial risk management objectives utilising foreign exchange contracts, including forward contracts and cross currency contracts. there was no unmanaged exposure in either 2010 or 2011. apa’s Corporate treasury function provides services to the business, co- the carrying value amount of the Consolidated entity’s foreign currency ordinates access to domestic and international financial markets, and monitors denominated monetary assets and monetary liabilities at the reporting date is and manages the financial risks relating to the operations of the Consolidated as follows: ConsoLiDateD LiaBiLities 2011 $000 744,815 (744,815) - 1,172 1,172 2010 $000 938,730 (938,730) - 157 157 assets 2011 $000 2010 $000 - - - - - - - - - - uS dollar borrowings Cross currency swaps Foreign exchange contracts the Consolidated entity is mainly exposed to uS dollars (uS$). 67 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201137. FinanCiaL instruments (ContinueD) (d) Foreign currency risk management (continued) Forward foreign exchange contracts It is the policy of the Consolidated entity to enter into various foreign exchange contracts to cover 100% of all foreign currency exposures in excess of uS$1million that are certain. Basis adjustments are made to the carrying amounts of non-financial hedged items when the anticipated purchase takes place. the following table details the forward foreign currency contracts outstanding at reporting date: 2011 outstanDinG ContraCts Buy us dollars less than 3 months 3 to 6 months 6 to 12 months 1 to 2 years 2010 outstanDinG ContraCts Buy us dollars less than 3 months 3 to 6 months 6 to 12 months 1 to 2 years averaGe exCHanGe rate ConsoLiDateD ForeiGn CurrenCY 2011 us$000 ContraCt vaLue 2011 $000 Fair vaLue 2011 $000 0.9583 0.9694 0.9721 0.0000 0.8340 0.8190 0.8236 0.8009 4,179 3,672 6,343 - 14,195 2010 uS$000 3,096 3,318 1,880 2,302 10,596 4,361 3,789 6,525 - 14,675 2010 $000 3,712 4,051 2,282 2,874 12,920 (441) (308) (423) - (1,172) 2010 $000 (54) (95) (3) (5) (157) the Consolidated entity has entered into contracts to purchase equipment in Cross currency swap contracts uSD from overseas suppliers. the Consolidated entity has entered into forward under cross currency swap contracts, the Consolidated entity agrees to foreign exchange contracts to hedge the exchange rate risk arising from these exchange specified principal and interest foreign currency amounts at agreed anticipated future transactions, which are designated as cash flow hedges. future dates at a specified exchange rate. Such contracts enable the as at reporting date, the aggregate amount of unrealised losses under forward foreign exchange contracts deferred in the hedging reserve relating to these anticipated future transactions is $1,172,000 (2010: $157,000). It is anticipated Consolidated entity to mitigate the risk of adverse movements in foreign exchange rates in relation to principal and interest payments arising under the 2003, 2007 and 2009 uS dollar note issues. that the capital purchases will take place within the next two financial years at the Consolidated entity receives fixed amounts in uS$ and pays both variable which stage unrealised mark to market amounts in equity will be included in interest rates (based on australian BBSW) and fixed interest rates based on the carrying amount of the asset being purchased. agreed interest rate swap rates. the following table details the swap contracts principal balances over various durations as at the reporting date: 2003 note issue Buy us dollars - interest less than 1 year 1 year to 2 years 2 years to 5 years 5 years and more exCHanGe rate prinCipaL amount 2011 $ 2010 $ 2011 $000 2010 $000 0.6573 0.6573 0.6573 0.6573 0.6573 0.6573 0.6573 0.6573 (22,863) (22,863) (47,276) (14,425) (22,863) (22,863) (59,014) (25,550) (107,427) (130,290) 68 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 37. FinanCiaL instruments (ContinueD) (d) Foreign currency risk management (continued) Buy us dollars - principal 2 years to 5 years 5 years and more 2007 note issue Buy us dollars - interest less than 1 year 1 year to 2 years 2 years to 5 years 5 years and more Buy us dollars - principal 5 years and more 2009 note issue Buy us dollars - interest less than 1 year 1 year to 2 years 2 years to 5 years 5 years and more Buy us dollars - principal 5 years and more exCHanGe rate prinCipaL amount 2011 $ 2010 $ 2011 $000 2010 $000 0.6573 0.6573 0.6573 0.6573 (298,190) (95,847) (112,582) (281,455) (394,037) (394,037) 0.8068 0.8068 0.8068 0.8068 0.8068 0.8068 0.8068 0.8068 (29,737) (29,737) (89,212) (95,037) (29,737) (29,737) (89,212) (124,774) (243,723) (273,460) 0.8068 0.8068 (495,786) (495,786) 0.7576 0.7576 0.7576 0.7576 0.7576 0.7576 0.7576 0.7576 (15,934) (15,934) (47,803) (34,279) (113,951) (15,934) (15,934) (47,803) (50,213) (129,885) 0.7576 0.7576 (184,784) (184,784) Foreign currency sensitivity analysis foreign exchange contracts. the following table details the Consolidated the Consolidated entity is mostly exposed to movements in the uS$ through entity’s sensitivity to a 10% decrease and increase in the australian dollar its fully hedged borrowings via the uS private placement market and its current against the relevant foreign currencies. the sensitivity rate used is 10% and obligations to future purchases of capital equipment. the entire uS$ cash flows represents management’s assessment of the possible change in foreign arising from the 2003, 2007 and 2009 note issues have been swapped; as such, exchange rates. the sensitivity analysis includes only outstanding foreign the Consolidated entity has no currency risk associated with those note issues. currency denominated monetary items and adjusts their translation at the therefore, the sensitivity analysis has only been performed on the forward period end for a 10% change in foreign currency rates. a$ depreciating by 10% profit other equity (a) a$ appreciating by 10% profit other equity (a) ConsoLiDateD 2011 $000 - (1,201) - 1,468 2010 $000 - (1,377) - 1,127 (a) this is as a result of the changes to the fair value of forward foreign exchange contracts designated as cash flow hedges. negative amounts denote a credit to equity 69 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 37. FinanCiaL instruments (ContinueD) (e) interest rate risk management the Consolidated entity is exposed to interest rate risk as it borrows funds at Interest rate swap contracts both fixed and floating interest rates. this risk is managed by the Consolidated under interest rate swap contracts, the Consolidated entity agrees to exchange entity by maintaining an appropriate mix between fixed and floating rate borrowings, through the use of interest rate swap contracts and forward interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined policy, ensuring appropriate hedging strategies are applied. Hedging activity is complemented by “natural hedges” from regulatory resets and CpI adjusted revenues. the trust and the Consolidated entity’s exposures to interest rate risk on the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Consolidated entity to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt held and cash flow exposures on the issued variable rate debt held. the fair value of interest rate swaps at the reporting date is determined by discounting the future cash flows using the yield curves at reporting date. the average interest rate is based on the outstanding balances at the end of the financial liabilities are detailed in the liquidity risk management section of this note. exposure to financial assets is limited to cash and cash equivalents financial year. amounting to $95.4 million as at 30 June 2011 (2010: $80.9 million). the following table details the notional principal amounts and remaining terms of the cross currency and interest rate swap contracts outstanding as at the end of the financial year: WeiGHteD averaGe interest rate 2011 % p.a. 2010 % p.a. notionaL prinCipaL amount Fair vaLue 2011 $000 2010 $000 2011 $000 2010 $000 CasH FLoW HeDGes pay fixed interest/receive floating interest Consolidated less than 1 year 1 year to 2 years 2 years to 5 years 5 years and more 7.10 5.39 6.50 6.69 6.03 7.10 6.59 8.08 200,000 200,000 598,190 776,416 250,000 200,000 487,582 1,087,024 1,774,606 2,024,606 trust - - - - (31,474) (37,637) (147,510) (78,640) (295,261) - (2,888) (5,783) (30,886) (35,715) (75,271) - the Consolidated entity had no fair value hedges in 2011 or 2010. current period due to the overall increase in the level of the Consolidated the interest rate swaps settle on a quarterly or semi-annual basis. the floating rate benchmark on the interest rate swaps is australian BBSW. the Consolidated entity will settle the difference between the fixed and floating interest rate on a net basis. entity’s unhedged floating rate borrowings. the valuation of the increase/ decrease in equity reserves is based on 1.00% p.a. increase/decrease in the yield curve at the reporting date. the 2010 increase/decrease in equity reserves adjusts to $29,774,000/$33,336,000 when the uSD component of the cross all interest rate swap contracts exchanging floating rate interest amounts for currency interest rate swaps is converted at current year FX rates. the decrease fixed rate interest amounts are designated as cash flow hedges in order to in sensitivity in equity which relates to interest rates is due to a lower level of reduce the Consolidated entity’s cash flow exposure resulting from variable interest rate swaps held. interest rates on borrowings. Interest rate sensitivity analysis the sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non-derivative instruments held. a 100 (f) price risk management the Consolidated entity is exposed to equity price risks arising from equity investments. equity investments are held for strategic rather than trading purposes. the Consolidated entity does not actively trade these investments. basis point increase or decrease is used and represents management’s Equity price sensitivity assessment of the possible change in interest rates. at reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the Consolidated entity’s: the sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date. at the reporting date, if the prices of the Consolidated entity’s equity investments had been 5% p.a. higher or lower: – net profit would decrease by $7,555,000 or increase by $7,555,000 (2010: – net profit would have been unaffected as the equity investments are decrease by $7,153,000 or increase by $7,153,000). this is mainly attributable classified as available-for-sale and no investments were disposed of or to the Consolidated entity’s exposure to interest rates on its variable rate impaired (2010: $nil); and borrowings; and – equity reserves would decrease/increase by $6,601,144 (2010: $4,508,228), – equity reserves would increase by $23,873,000 or decrease by $24,909,000 due to the changes in the fair value of available-for-sale shares. (2010: increase by $14,761,000 or decrease by $17,021,000). this is due to the changes in the fair value of derivative interest instruments. the Consolidated entity’s sensitivity to equity prices has increased during the current period due to the acquisition of shares in Hastings Diversified utilities the Consolidated entity’s sensitivity to interest rates has increased during the Fund held as an available-for-sale investment. 70 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 37. FinanCiaL instruments (ContinueD) (g) Credit risk management net of any allowances, represents the Consolidated entity’s maximum exposure Credit risk refers to the risk that a counterparty will default on its contractual to credit risk in relation to those assets. obligations resulting in financial loss to the Consolidated entity. the Consolidated entity has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral or bank guarantees where appropriate as a means of mitigating any risk of loss. For financial investments or market risk hedging, the Consolidated entity’s policy is to deal with highly rated counterparties. as at the reporting date, all counterparties of this type were a- (Standard & poor’s)/a3 (Moody’s) or higher. the Consolidated entity’s exposure to financial instrument and deposit credit risk is closely monitored Cross guarantee In accordance with a deed of cross guarantee, apt pipelines limited, a subsidiary of apa Group, has agreed to provide financial support, when and as required, to all wholly-owned controlled entities with either a deficit in shareholders’ funds or an excess of current liabilities over current assets. the fair value of the financial guarantee as at 30 June 2011 has been determined to be immaterial and no liability has been recorded (2010: $nil). against counterparty credit limits imposed by the treasury policy approved by (h) Liquidity risk management the board. these limits are regularly reviewed by the board. the Consolidated entity has a policy dealing with liquidity risk which requires trade receivables consist of mainly corporate customers which are diverse and geographically spread. Most significant customers have an investment grade rating from either Standard & poor’s or Moody’s. ongoing credit monitoring of the financial position of customers is maintained. an appropriate liquidity risk management framework for the management of the Consolidated entity’s short, medium and long-term funding and liquidity management requirements. liquidity risk is managed by maintaining adequate cash reserves and banking facilities, by monitoring and forecasting cash flow and where possible arranging liabilities with longer maturities to more closely the carrying amount of financial assets recorded in the financial statements, match the underlying assets of the Consolidated entity. Details of undrawn facilities available to the Consolidated entity are shown in the table below: FinanCinG FaCiLities unsecured bank facilities with various maturity dates through to 2013 – amount used – amount unused ConsoLiDateD 2011 $000 2010 $000 1,555,500 234,500 1,665,324 560,000 1,790,000 2,225,324 unsecured long term private placement notes with various maturity dates through to 2022 – amount used (determined at foreign exchange rates implicit in the associated cross currency hedges) 1,389,472 1,491,472 – amount unused unsecured australian Dollar medium term note with maturity in 2020 – amount used – amount unused Secured bank facility with maturity date in 2011 – amount used – amount unused - - 1,389,472 1,491,472 300,000 - 300,000 - - - - - - 1,645 - 1,645 Liquidity and interest risk table Detailed below are the Consolidated entity’s remaining contractual maturities all uS dollar note exposures (both principal and interest) have been fully for its non-derivative financial liabilities. the table has been drawn up based on hedged back into australian dollars at fixed interest rates for the entire duration the undiscounted cash flows of financial liabilities taking account of the earliest of the note exposure. therefore the table below shows the undiscounted date on which the Consolidated entity can be required to pay. the table australian dollar cash flows associated with the uS dollar notes, cross currency includes both interest and principal cash flows. interest rate swaps and fixed interest rate swaps in aggregate. 71 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201137. FinanCiaL instruments (ContinueD) (h) Liquidity risk management (continued) 2011 Financial liabilities trade and other payables unsecured bank borrowings (a) Interest Rate Swaps (net Settled) Guaranteed Senior notes: Denominated in a$ 2007 Series a (b) 2007 Series C (b) 2007 Series e (c) 2007 Series G (d) 2007 Series H (d) 2010 Medium term note (j) Denominated in uS$ (rates shown are the coupon rate of the uS dollar notes) 2003 Series B (e) 2003 Series C (f) 2003 Series D (g) 2007 Series B (b) 2007 Series D (c) 2007 Series F (d) 2009 Series a (h) 2009 Series B (i) Financial lease liabilities other: unearned revenue - interest unearned revenue - other ConsoLiDateD aVeRaGe InteReSt Rate % p.a. leSS tHan 1 YeaR $000 MoRe tHan 1 - 5 YeaRS $000 5 YeaRS $000 - 6.59 6.20 7.33 7.38 7.40 7.45 7.45 7.75 5.67 5.77 6.02 5.89 5.99 6.14 8.35 8.86 - - - 134,890 1,111,875 12,173 367 7,318 5,045 6,002 4,617 23,250 11,434 14,976 9,036 13,986 11,111 11,354 9,725 11,729 - - - 167,721 18,686 1,466 29,271 20,178 24,008 18,468 93,000 173,590 250,323 38,430 55,946 44,442 45,416 39,061 47,108 - - 2,347 802 - - 184 5,367 106,475 83,304 116,595 89,688 404,625 - - 158,680 204,864 184,546 221,850 90,569 140,047 - - - (a) Matures on 1 July 2011 ($103 million limit, undrawn at year end), 8 June 2012 ($900 million limit), 1 July 2013 ($515 million limit), 15 July 2014 ($225 million limit) and 24 august 2014 1,401,235 1,067,916 1,806,794 ($150 million limit) (b) Matures on 15 May 2017 (c) Matures on 15 May 2019 (d) Matures on 15 May 2022 (e) Matures on 9 September 2013 (f) Matures on 9 September 2015 (g) Matures on 9 September 2018 (h) Matures on 1 July 2016 (i) Matures on 1 July 2019 (j) Matures on 22 July 2020 72 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201137. FinanCiaL instruments (ContinueD) (h) Liquidity risk management (continued) 2010 Financial liabilities trade and other payables unsecured bank borrowings (a) Secured bank borrowings (b) Interest Rate Swaps (net Settled) Guaranteed Senior notes: Denominated in a$ 2003 Series a (c) 2007 Series a (d) 2007 Series C (d) 2007 Series e (e) 2007 Series G (f) 2007 Series H (f) Denominated in uS$ (rates shown are the coupon rate of the uS dollar notes) payment payment payment payment payment payment payment payment 2003 Series B (g) 2003 Series C (h) 2003 Series D (i) 2007 Series B (d) 2007 Series D (e) 2007 Series F (f) 2009 Series a (j) 2009 Series B (k) Financial lease liabilities other: unearned revenue - interest unearned revenue - other ConsoLiDateD aVeRaGe InteReSt Rate % p.a. leSS tHan 1 YeaR $000 MoRe tHan 1 - 5 YeaRS $000 5 YeaRS $000 - 6.12 - 6.16 6.66 7.33 7.38 7.40 7.45 7.45 5.67 5.77 6.02 5.89 5.99 6.14 8.35 8.86 8.01 - - 131,839 104,626 1,645 13,196 105,397 367 7,318 5,045 6,002 4,617 8,485 14,214 6,930 13,986 11,111 11,354 9,752 11,761 280 9,260 1,614 - 1,794,453 - 11,956 - 1,466 29,271 20,178 24,008 18,468 133,853 56,894 27,740 55,946 44,442 45,416 38,981 47,011 414 - 925 - - - 440 - 5,733 113,793 88,349 122,597 94,305 - 192,773 120,169 218,851 195,657 233,204 100,375 151,872 - - - (a) Matures on 1 July 2011 ($515 million limit), 15 July 2011 ($145 million limit), 8 June 2012 ($900 million limit), 1 July 2013 ($515 million limit) and 31 august 2014 ($150 million limit) (b) Residual payment due to financiers on expiration of lease of property 478,797 2,351,423 1,638,117 (c) Matures on 9 September 2010 (d) Matures on 15 May 2017 (e) Matures on 15 May 2019 (f) Matures on 15 May 2022 (g) Matures on 9 September 2013 (h) Matures on 9 September 2015 (i) Matures on 9 September 2018 (j) Matures on 1 July 2016 (k) Matures on 1 July 2019 73 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201137. FinanCiaL instruments (ContinueD) (i) Fair value of financial instruments pricing models where the main assumptions are the probability of default Fair value of financial instruments carried at amortised cost by the specified counterparty extrapolated from market-based credit the fair values of financial assets and financial liabilities are determined as information and the amount of loss, given the default. follows: Fair value measurements recognised in the statement of financial position – the fair values of financial assets and financial liabilities with standard terms the following table provides an analysis of financial instruments that are and conditions and traded on active liquid markets are determined with measured subsequent to initial recognition at fair value, grouped into levels 1 reference to quoted market prices; – the fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current markets; to 3 based on the degree to which the fair value is observable. – level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. – level 2 fair value measurements are those derived from inputs other than – the fair values of derivative instruments, included in hedging assets and quoted prices included within level 1 that are observable for the asset or liabilities, are calculated using quoted prices. Where such prices are not liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). available, use is made of discounted cash flow analysis using the applicable – level 3 fair value measurements are those derived from valuation techniques yield curve for the duration of the instruments; and that include inputs for the asset or liability that are not based on observable – the fair value of financial guarantee contracts is determined using option market data (unobservable inputs). ConsoLiDateD Financial assets measured at fair value available-for-sale listed equity securities Hastings Diversified utilities Fund ethane pipeline Income Fund other total Financial liabilities measured at fair value Interest rate swaps used for hedging Cross Currency Interest Rate Swaps used for hedging Forward foreign exchange contracts used for hedging total ConsoLiDateD Financial assets measured at fair value available-for-sale listed equity securities Hastings Diversified utilities Fund ethane pipeline Income Fund other total Financial liabilities measured at fair value Interest rate swaps used for hedging Cross Currency Interest Rate Swaps used for hedging Forward foreign exchange contracts used for hedging total 2011 LeveL 1 $000 LeveL 2 $000 LeveL 3 $000 totaL $000 161,929 6,720 5 168,654 - - - - - - - - 10,168 285,093 1,172 296,433 - - - - - - - - 161,929 6,720 5 168,654 10,168 285,093 1,172 296,433 2010 leVel 1 $000 leVel 2 $000 leVel 3 $000 total $000 111,321 5,751 4 117,076 - - - - - - - - 47,701 27,570 157 75,428 - - - - - - - - 111,321 5,751 4 117,076 47,701 27,570 157 75,428 74 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201137. FinanCiaL instruments (ContinueD) (i) Fair value of financial instruments (continued) Derivatives the carrying value of financial assets and liabilities recorded at amortised cost Foreign currency forward contracts are measured using quoted forward in the financial statements approximate their fair value having regard to the exchange rates and yield curves derived from quoted interest rates matching specific terms of the agreements underlying those assets and liabilities. maturities of the contracts. Fair Value measurements of financial instruments measured at amortised cost Interest rate swaps are measured at the present value of future cash flows except as detailed in the following table, the directors consider that the estimated and discounted based on the applicable yield curves derived from carrying amounts of financial assets and financial liabilities recognised at quoted interest rates. amortised cost in the financial statements approximate their fair values. FinanCiaL LiaBiLities unsecured long term private placement notes unsecured australian Dollar medium term note total CarrYinG amount Fair vaLue 2011 $000 2010 $000 2011 $000 2010 $000 1,389,472 300,000 1,689,472 1,491,472 - 1,491,472 1,266,551 340,582 1,607,133 1,650,585 - 1,650,585 the financial liabilities included in the table above are fixed rate borrowings. the unsecured bank debt held by the Consolidated entity is floating rate and therefore its amortised cost approximates its fair value. 38. JointLY ControLLeD operations anD assets the Consolidated entity is a venturer in the following jointly controlled operations and assets: name oF venture prinCipaL aCtivitY Goldfields Gas transmission Gas pipeline operation - Western australia Mid West pipeline Gas pipeline operation - Western australia output interest 2011 % 88.2 (a) 50.0 (b) 2010 % 88.2 (a) 50.0 (b) (a) on 17 august 2004, apa acquired a direct interest in the Goldfields Gas transmission jointly controlled operations as part of the SCp Gas Business acquisition (b) pursuant to the joint venture agreement, the Consolidated entity receives a 70.8% share of operating income and expenses the Consolidated entity’s interest, as a venturer, in assets employed in the above jointly controlled operations and assets is detailed below. the amounts are included in the consolidated financial statements under their respective asset categories: Current assets Cash and cash equivalents trade and other receivables Inventories other total current assets non-Current assets property, plant and equipment other total non-current assets total assets ConsoLiDateD 2011 $000 3,397 204 2,389 1,106 7,096 525,541 1,783 527,324 534,420 2010 $000 2,598 280 2,354 1,049 6,281 526,320 2,212 528,532 534,813 Contingent liabilities and capital commitments Contingent liabilities and capital commitments arising from the Consolidated entity’s interest in jointly controlled operations are disclosed in notes 46 and 41 respectively. 75 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 39. suBsiDiaries name oF entitY parent entitY australian pipeline trust (a) suBsiDiaries apt pipelines limited (b),(c) agex pty ltd (b),(c) amadeus Gas trust apt Goldfields pty ltd (b),(c) apt Management Services pty limited (b),(c) apt parmelia Gas pty ltd (b),(c) apt parmelia Holdings pty ltd (b),(c) apt parmelia pty ltd (b),(c) apt parmelia trust (b) apt petroleum pipelines Holdings pty limited (b),(c) apt petroleum pipelines pty limited (b),(c) apt pipelines (nSW) pty limited (b),(c) apt pipelines (nt) pty limited (b),(c) apt pipelines (Qld) pty limited (b),(c) apt pipelines (Wa) pty limited (b),(c) apt pipelines Investments (nSW) pty ltd (b),(c) apt pipelines Investments (Wa) pty ltd (b),(c) east australian pipeline pty limited (b),(c) Gasinvest australia pty limited (b),(c) Goldfields Gas transmission pty ltd (b) nt Gas Distribution pty limited nt Gas easements pty limited (b),(c) nt Gas pty limited Roverton pty ltd (b),(c) SCp Investments (no 1) pty limited (b),(c) SCp Investments (no 2) pty limited (b),(c) SCp Investments (no 3) pty limited (b),(c) Sopic pty ltd (b),(c) Southern Cross pipelines (npl) australia pty ltd (b),(c) Southern Cross pipelines australia pty limited (b),(c) trans australia pipeline pty limited (b),(c) Western australia Gas transmission Company 1 (b),(c) Gasnet australia trust (b) apa Gasnet australia (Holdings) pty ltd (b),(c) apa Gasnet australia (operations) pty ltd (b),(c) apa Gasnet a pty ltd (b),(c) Gasnet a trust (b) apa Gasnet australia (nSW) pty ltd (b),(c) apa Gasnet B pty ltd (b),(c) apa Gasnet australia pty limited (b),(c) CountrY oF reGistration/ inCorporation oWnersHip interest 2011 % 2010 % australia australia australia australia australia australia australia australia Cayman Islands australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia 100 100 96 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 96 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 96 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 96 100 96 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 76 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201139. suBsiDiaries (ContinueD) name oF entitY Gasnet B trust (b) Gasnet australia Investments trust (b) apt allgas energy pty limited (b),(c) apt allgas pipelines operations pty limited (b),(c) apt allgas toowoomba pty limited (b),(c) apt operations pty limited (b),(c) apt aM Holdings pty limited (b),(c) apt o&M Holdings pty ltd (b),(c)   apt o&M Services pty ltd (b),(c)   apt o&M Services (QlD) pty ltd (b),(c)   apt Water Management pty ltd (b),(c)   apt Water Management Holdings pty ltd (b),(c)   apt aM Stratus pty ltd (b),(c)   apt Facility Management pty ltd (b),(c)     apt aM employment pty ltd (b),(c)   apt SeaGas (Holdings) pty limited (b),(c) apt SpV2 pty ltd (b),(c)   apt SpV3 pty ltd (b),(c)   apt pipelines (Sa) pty ltd (b),(c)   apt (MIt) Services pty limited (b) apa operations (eII) pty limited (b),(c) apa pipelines (QnSW) pty limited (b),(c) Central Ranges pipeline pty ltd (b),(c) apa Country pipelines pty ltd (b),(c) north Western natural Gas Company pty limited (b),(c) apa Facilities Management pty limited (b),(c) apa (nBH) pty limited (b),(c) apa pipelines Investments (BWp) pty limited (b),(c) apa power Holdings pty ltd (b),(c) apa power pty ltd apa DpS pty ltd apa (eDWF HolDCo) ptY ltD (b),(c) apa (BWF HolDCo) ptY ltD (b),(c) eDWF Holdings 1 pty ltd eDWF Holdings 2 pty ltd eDWF Manager pty ltd Wind portfolio pty ltd Griffin Windfarm 2 pty ltd CountrY oF reGistration/ inCorporation australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia australia oWnersHip interest 2011 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 2010 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - - - - - - - - - - (a) australian pipeline trust is the head entity within the tax-consolidated group (b) these entities are members of the tax-consolidated group (c) these wholly-owned subsidiaries have entered into a deed of cross guarantee with apt pipelines limited pursuant to aSIC Class order 98/1418 and are relieved from the requirement to prepare and lodge an audited financial report 77 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201140. aCQuisition oF Businesses names oF Business aCQuireD prinCipaL aCtivitY Date oF aCQuisition During the financial year ended 30 June 2011 emu Downs Wind farm power Generation 30 June 2011 During the financial year ended 30 June 2010 Berwyndale to Wallumbilla pipeline Gas transmission 22 april 2010 net assets aCQuireD Current assets Cash and cash equivalents trade and other receivables other non-current assets Receivables property, plant and equipment Deferred tax assets Intangible assets other Current liabilities trade and other payables non-current liabilities Deferred tax liabilities provisions provisions on acquisition Fair value of net assets acquired Discount on acquisition Cost of acquisition Cash balances acquired Consideration not yet paid transaction costs - paid net cash outflow on acquisition - prior year net cash outflow on acquisition - current year total cash outflow on acquisition proportion aCQuireD Cost oF aCQuisition % $000 100 100 179,332 82,600 emu DoWns WinD Farm FaIR Value on aCQuISItIon $000 BerWYnDaLe - WaLLumBiLLa pipeLine FaIR Value on aCQuISItIon $000 7,416 5,759 197 1,189 162,950 561 8,709 - (801) (5,848) (800) - - - - 87,139 - 15,800 98 - (11) (39) - (15,800) 179,332 - 87,187 (4,587) 179,332 82,600 (7,416) (5,533) 836 - 167,219 167,219 - - 728 83,328 3,858 87,186 In June 2011, apa Group acquired the emu Downs Wind Farm and development the acquisition was paid for in cash. site for $171,916,000 (net of cash acquired). the purpose of this transaction was to provide wind generation and support gas generation and complement other apa gas infrastructure assets in delivering energy solutions to the Western australian market. as the acquisition was completed on 30 June 2011, no results have been included in the consolidated net profit for the year. acquisition-related costs amounting to $8,970,000 and have been recognised the accounting for the acquisition of the emu Downs Wind Farm acquired as an expense in the period, within the other expenses line in the statement of during the year has been provisionally determined at reporting date. comprehensive income. 78 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011ConsoLiDateD 2011 $000 41,101 - - 41,101 - - - - $ 578,500 20,000 19,700 87,015 705,215 2010 $000 62,062 12,960 - 75,022 41 - - 41 $ 516,260 19,375 17,500 30,000 583,135 trust 2011 $000 2010 $000 - - - - - - - - $ 5,500 - - - - - - - - - - - $ 5,000 - - - 5,500 5,000 41. Commitments For expenDiture Capital expenditure commitments pLant anD eQuipment not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years ConsoLiDateD entitY’s sHare oF JointLY ControLLeD operation’s Commitments not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years 42. remuneration oF externaL auDitor amounts received or due and receivable by Deloitte touche tohmatsu for: auditing the financial report Compliance plan audit tax compliance and advice (a) other accounting and assurance services (a) (a) Services provided were in accordance with the external auditor independence policy 43. DireCtor Compensation (a) Details of directors the Directors of the apa group of entities during the financial year were: L F Bleasel AM (Independent, non-executive Chairman) S Crane (Independent non-executive Director, appointed on 1 January 2011) J A Fletcher (Independent non-executive Director) R A Higgins AO (Independent non-executive Director) P M McKenzie (Independent non-executive Director, appointed on 1 January 2011) M Muhammad (non-executive Director) M (George) Ratilal (non-executive Director, retired effective 26 august 2010) R J Wright (Independent non-executive Director) M J McCormack (Managing Director/Chief executive officer) (b) Director compensation the aggregate compensation made to directors of the Consolidated entity and the trust is set out below: Short-term employment benefits post-employment benefits Cash settled share-based payments Retention award 79 ConsoLiDateD anD trust 2011 $ 2010 $ 2,409,250 2,174,099 149,194 773,281 - 91,963 574,166 18,056 3,331,725 2,858,284 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 43. DireCtor Compensation (ContinueD) (b) Director compensation (continued) the compensation of each director of the Consolidated entity is set out below. sHort-term empLoYment BeneFits post- empLoYment LonG-term inCentive pLans SHoRt-teRM SalaRY/FeeS $ InCentIVe SCHeMe $ SupeRannuatIon $ SHaRe-BaSeD paYMentS(a) $ otHeR(b) $ total $ non-exeCutive DireCtors l F Bleasel aM 2011 2010 S Crane (c) 2011 2010 J a Fletcher 2011 2010 R a Higgins ao 2011 2010 p M McKenzie (d) 2011 2010 M Muhammad 2011 2010 M (George) Ratilal (e) 2011 2010 R J Wright 2011 2010 272,500 254,319 57,875 - 107,000 110,150 145,375 137,000 56,750 - 121,500 113,000 16,000 93,000 141,250 132,000 totaL remuneration: non-exeCutive DireCtors 918,250 839,469 870,000 796,500 1,788,250 1,635,969 2011 2010 exeCutive DireCtors M J McCormack 2011 2010 totaL remuneration: DireCtors 2011 2010 (a) Cash settled share-based payments (b) Includes retention payment (c) appointed on 1 January 2011 (d) appointed on 1 January 2011 (e) Directors fees paid to petronas australia pty ltd, retired 26 august 2010 - - - - - - - - - - - - - - - - - - 621,000 538,130 621,000 538,130 20,750 16,981 5,209 - 42,335 25,787 13,077 12,320 5,108 - - - - - 12,715 11,875 99,194 66,963 50,000 25,000 149,194 91,963 - - - - - - - - - - - - - - - - - - 773,281 574,166 773,281 574,166 - - - - - - - - - - - - - - - - - - - 18,056 293,250 271,300 63,084 - 149,335 135,937 158,452 149,320 61,858 - 121,500 113,000 16,000 93,000 153,965 143,875 1,017,444 906,432 2,314,281 1,951,852 - 3,331,725 18,056 2,858,284 80 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201144. KeY manaGement personneL Compensation (a) Details of key management personnel the members of key management personnel of the apa group of entities during the financial year were: M J McCormack (Managing Director/Chief executive officer) P J Fredricson (Chief Financial officer) R M Gersbach (Group Manager Commercial) S P Ohl (Group Manager operations) M T Knapman (Company Secretary) P J Wallace (Group Manager Human Resources, appointed on 4 april 2011) (b) Key management personnel compensation the aggregate compensation made to key management personnel of the Consolidated entity and the trust is set out below: Short-term employment benefits post-employment benefits Cash settled share-based payments Retention award the executive remuneration strategy is to: ConsoLiDateD anD trust 2011 $ 4,449,055 181,691 1,688,799 - 6,319,545 2010 $ 3,886,759 119,208 1,157,664 18,056 5,181,687 – attract and retain key executives who will create long-term sustainable apa’s remuneration mix is structured as a mix of base pay and ‘at risk’ short value for securityholders; and long-term incentive components. – motivate and reward executives having regard to the overall performance of apa, the performance of the executive measured against pre-determined objectives and the external compensation environment; – appropriately align the interests of executives with those of securityholders; total fixed remuneration is reviewed annually and is determined by reference to appropriate remuneration benchmarking information, taking into account an individual’s responsibilities, performance, qualifications and experience. and operating cash flow per security has been chosen by the board as the key – comply with applicable legal requirements and appropriate standards performance measure for ‘at risk’ remuneration. this is directly linked to the of governance. strategic goal of increasing operating cash flows over the medium term, thereby improving returns to securityholders. 81 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 44. KeY manaGement personneL Compensation (ContinueD) (b) Key management personnel compensation (continued) the compensation of each member of the key management personnel of the Consolidated entity is set out below. sHort-term empLoYment BeneFits post- empLoYment LonG-term inCentive pLans SalaRY/FeeS $ SHoRt-teRM InCentIVe SCHeMe $ non-MonetaRY $ SupeRannuatIon $ SHaRe-BaSeD paYMentS(a) $ otHeR paYMentS $ total $ KeY manaGement personneL M J McCormack (b) 2011 2010 p J Fredricson 2011 2010 R M Gersbach 2011 2010 S p ohl 2011 2010 M t Knapman 2011 2010 p J Wallace (c) 2011 2010 870,000 796,500 554,801 485,539 622,879 543,617 376,069 372,214 350,000 319,176 67,715 - 621,000 538,130 270,750 228,125 308,750 260,062 201,375 181,562 130,706 121,180 34,356 - - - - - 11,922 11,922 28,732 28,732 - - - - 50,000 25,000 15,199 14,461 15,199 14,461 45,199 14,461 50,000 50,825 6,094 - 773,281 574,166 165,780 75,000 343,688 229,323 253,636 187,754 141,560 91,421 10,854 - totaL remuneration 2011 2010 2,841,464 1,566,937 2,517,046 1,329,059 40,654 40,654 181,691 119,208 1,688,799 1,157,664 (a) Cash settled share-based payments (b) Chief executive officer has also been included in note 43 as the Managing Director (c) Group Manager Human Resources, appointed 4 april 2011 - 2,314,281 18,056 1,951,852 - - - - - - - - - - - 1,006,530 803,125 1,302,438 1,059,385 905,011 784,723 672,266 582,602 119,019 - 6,319,545 18,056 5,181,687 45. reLateD partY transaCtions (a) equity interest in related parties (c) transactions with key management personnel Details of the percentage of ordinary securities held in subsidiaries are Details of directors and key management personnel compensation are disclosed disclosed in note 39 and the details of the percentage held in jointly controlled in note 43 and 44 respectively. operations are disclosed in note 38. Details of interests in jointly controlled entities and associates are disclosed in note 16. (i) Loans to key management personnel no loans have been made to key management personnel. (b) responsible entity – australian pipeline Limited the Responsible entity is wholly owned by apt pipelines limited. 82 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201145. reLateD partY transaCtions (ContinueD) (c) transactions with key management personnel (continued) (ii) Key management personnel equity holdings 2011 l F Bleasel aM S Crane (appointed 1 January 2011) J a Fletcher R a Higgins ao p M McKenzie (appointed 1 January 2011) M Muhammad M (George) Ratilal R J Wright M J McCormack p J Fredricson R M Gersbach S p ohl M t Knapman p J Wallace 2010 l F Bleasel aM J a Fletcher R a Higgins ao M Muhammad M (George) Ratilal R J Wright M J McCormack p J Fredricson R M Gersbach S p ohl M t Knapman FullY paID SeCuRItIeS openInG BalanCe SeCuRItIeS aCQuIReD DuRInG tHe FInanCIal YeaR SeCuRItIeS DISpoSeD DuRInG tHe FInanCIal YeaR FullY paID SeCuRItIeS CloSInG BalanCe 359,771 100,000 56,807 72,954 - 42,818 - 31,265 147,005 3,000 24,569 14,896 4,484 - 335,153 44,917 52,021 42,818 - 24,263 115,000 - 22,232 11,928 3,000 15,634 - 3,219 6,549 - - - 2,806 23,614 269 1,525 - - - 24,618 11,890 20,933 - - 7,002 32,005 3,000 2,337 2,968 1,484 - - - - - - - - - - 16,298 - - - - - - - - - - - - - - 375,405 100,000 60,026 79,503 - 42,818 - 34,071 170,619 3,269 9,796 14,896 4,484 - 359,771 56,807 72,954 42,818 - 31,265 147,005 3,000 24,569 14,896 4,484 (iii) Other transactions with key management personnel of the Group and the Responsible Entity other than directors compensation (note 43) and key management personnel the above transactions were made on normal commercial terms and conditions. compensation (note 44) and equity holdings (note 45(c)(ii)), there are no the Group charges interest on inter-entity loans from time to time. other transactions with key management personnel of the Group and the Responsible entity. (d) transactions with related parties within apa Group transactions between the entities that comprise apa Group during the financial year consisted of: – dividends; – system lease rentals; – loans advanced and payments received on long-term inter-entity loans; – management fees; all transactions between the entities that comprise apa Group have been eliminated on consolidation. Refer to note 39 for details of the entities that comprise apa Group. Australian Pipeline Limited Management fees of $2,238,000 (2010: $2,546,000) were paid to the Responsible entity as reimbursement of costs incurred on behalf of apa. no amounts were paid directly by apa to the Directors of the Responsible entity, except as disclosed at note 45(e). – operational services provided between entities; australian pipeline limited, in its capacity as trustee and Responsible entity of – payments of distributions; the trust, has guaranteed the payment of principal, interest and other amounts – payments of capital distributions (returns of capital); and as provided in the note and Guarantee agreement relating to the issue of – equity issues. Guaranteed Senior notes. 83 APA AnnuAl REPORT 2011AusTRAliAn PiPElinE TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 45. reLateD partY transaCtions (ContinueD) (e) transactions with other related parties Transactions with associates the following transactions occurred with the apa Group’s associates on normal market terms and conditions: SaleS to RelateD paRtIeS $ puRCHaSeS FRoM RelateD paRtIeS $ aMount oWeD BY RelateD paRtIeS $ aMount oWeD to RelateD paRtIeS $ 2011 Sea Gas energy Infrastructure Investments pty limited eII 2 pty limited CaMS (a) envestra limited (a) apa disposed of its 50% interest in CaMS on 30 June 2011 at the year end, apa had receivables with related parties of $4,276,866. 3,752,891 23,002,158 3,428,097 348,881 539 256,438 - - - 4,528,545 55,783 66,712 228,323,940 187,980 29,244,768 258,855,967 188,519 34,152,246 2010 Sea Gas 2,131,780 - 151,122 energy Infrastructure Investments pty limited 20,447,004 84,919 6,654,819 eII 2 pty limited CaMS envestra limited 296,176 422,696 192,577,749 215,875,404 - - 105,526 190,445 31,198 61,397 25,892,376 32,790,912 transactions with all related parties have taken place at arm’s length and in the ordinary course of business. - - - - - - - - - - - - Transactions between the Trust and its related parties During the financial year ended 30 June 2011, the following transactions – total payables of $145,548,000 are repayable to subsidiaries (2010: occurred between the trust and its other related parties: $136,823,000) for deferred tax losses transferred up to the trust, as head of – the trust received dividends from its wholly-owned controlled entities (see the tax-consolidated group. note 6). the following balances arising from transactions between the trust and its other related parties are outstanding at reporting date: – net receivables of $481,974 (2010: $481,974) are owing from associates; and no guarantees have been given or received. no expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties. transactions and balances between the trust and its subsidiaries were eliminated in the preparation of the consolidated financial statements of the apa Group. 46. ContinGenCies ContinGent LiaBiLities Bank guarantees ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 8,051 28,586 2010 $000 - - - - ContinGent assets - - 47. events oCCurrinG aFter reportinG Date on 24 august 2011, the Directors declared a final distribution of 17.9 cents per security ($99.6 million) for the apa Group (comprising a distribution of 11.83 cents per security from apt and a distribution of 6.07 cents per security from aptIt), made up of 3.41 cents per security profit distribution (unfranked) and 2.66 cents per security capital distribution. the distribution will be paid on 15 September 2011. 84 AustrAliAn PiPeline trust And its controlled entitiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 auS tR a lIa n p Ipe lIne tR uS t anD It S C ontRolleD entItIeS Declaration by the Directors For the financial year ended 30 June 2011 the Directors declare that: (a) in the Directors’ opinion, there are reasonable grounds to believe that australian pipeline trust will be able to pay its debts as and when they become due and payable; (b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations act 2001, including compliance with accounting Standards and giving a true and fair view of the financial position and performance of australian pipeline trust and the Consolidated entity; (c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards as stated in note 3 to the financial statements; and (d) the Directors have been given the declarations by the Managing Director and Chief Financial officer required by section 295a of the Corporations act 2001. Signed in accordance with a resolution of the Directors of the Responsible entity made pursuant to section 295(5) of the Corporations act 2001. on behalf of the Directors Leonard Bleasel am Chairman SYDneY, 24 august 2011 robert Wright Director 85 APA AnnuAl REPORT 2011 auS tR alIa n pIp elIn e t R uS t anD It S C ontRolleD entItIeS auDitor’s inDepenDence Declaration For the financial year ended 30 June 2011 Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au The Directors Australian Pipeline Limited as responsible entity for Australian Pipeline Trust HSBC Building Level 19, 580 George Street Sydney NSW 2000 24 August 2011 Dear Directors Auditors Independence Declaration to Australian Pipeline Limited as responsible entity for Australian Pipeline Trust In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Australian Pipeline Limited as responsible entity for Australian Pipeline Trust. As lead audit partner for the audit of the financial statements of Australian Pipeline Trust for the financial year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU G Couttas Partner Chartered Accountants Member of Deloitte Touche Tohmatsu Limited Liability limited by a scheme approved under Professional Standards Legislation. 86 APA AnnuAl REPORT 2011auS tR a lIa n p Ipe lIne tR uS t anD It S C ontRolleD entItIeS inDepenDent auDitor’s report For the financial year ended 30 June 2011 Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1219 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au Independent Auditor’s Report to the Unitholders of Australian Pipeline Trust We have audited the accompanying financial report of Australian Pipeline Trust, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the Trust and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 27 to 85. Directors’ Responsibility for the Financial Report The directors of Australian Pipeline Limited are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 3, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the entity’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 87 APA AnnuAl REPORT 2011 auS tR alIa n pIp elIn e t R uS t anD It S C ontRolleD entItIeS inDepenDent auDitor’s report continueD For the financial year ended 30 June 2011 Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Australian Pipeline Limited as responsible entity for Australian Pipeline Trust would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Australian Pipeline Trust is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Trust’s and consolidated entity’s financial position as at 30 June 2011 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 3. DELOITTE TOUCHE TOHMATSU G Couttas Partner Chartered Accountants Sydney, 24 August 2011 88 APA AnnuAl REPORT 2011apt investment trust and its controlled entities arsn 115 585 441 apt InVeS tMe nt tR uS t a nD It S C ontRolleD e ntItIeS Directors’ report the directors of australian pipeline limited (“Responsible entity” or “apl”) Details of the directors, their qualifications, experience, special responsibilities submit the annual financial report of apt Investment trust (“aptIt”) and its and directorships of other listed entities are set out on pages 10 to 12. controlled entities (together “Consolidated entity”) for the year ended 30 June 2011. this report and the financial statements attached refer to the consolidated results of aptIt, one of the two stapled entities of apa Group, with the other stapled entity being australian pipeline trust (together “apa”). Directors the names of the directors of the Responsible entity during the year and since the year end are: Leonard Bleasel am Chairman George Ratilal was appointed as alternate director for Muri Muhammad on 26 august 2010. company secretary mark Knapman Details of the Company Secretary, his qualifications and experience are set out on page 11. principal activities aptIt operates as an investment and financing entity within the australian steven Crane John Fletcher russell Higgins ao appointed 1 January 2011 pipeline trust stapled group. significant changes in state of affairs In the opinion of the directors of the Responsible entity, no significant changes patricia mcKenzie appointed 1 January 2011 in the state of affairs of aptIt occurred during the year. muri muhammad George ratilal robert Wright Resigned 26 august 2010 michael mcCormack Managing Director review anD results of operations aptIt reported net profit after tax of $38.9 million (2010: $37.8 million) for the year ended 30 June 2011 on total revenue of $38.9 million (2010: $37.8 million). Distributions Distributions paid to securityholders during the financial year were: aptIt profit distribution aptIt capital distribution total FinaL FY 2010 DistriBution paiD 15 septemBer 2010 semi-annuaL FY 2011 DistriBution paiD 17 marCH 2011 Cents per security total distribution $000 Cents per security total distribution $000 3.7 3.0 6.7 19,928 16,350 36,278 3.7 0.8 4.5 20,629 4,127 24,756 on 24 august 2011, the directors declared a final distribution for aptIt for the current financial year of 6.0 cents per security payable 15 September 2011, made up of: aptIt profit distribution aptIt capital distribution total FinaL FY 2011 DistriBution paYaBLe 15 septemBer 2011 Cents per security total distribution $000 3.4 2.6 6.0 18,951 14,793 33,744 Distribution information is presented on an accounting classification basis. the apa Group annual tax Statement and annual tax Return Guide (released in September 2011) provides the classification of distribution components for the purposes of preparation of securityholder income tax returns. as at 30 June 2011, 634,116,000 securities were on issue (2010: 542,319,000). apa annual RepoRt 2011 90 a pt InVeS tMent tR uS t anD It S C ontRolleD entItIeS Directors’ report continueD SubSequent eventS except as disclosed elsewhere in this report, the directors are unaware of any auditor’S independence declaration a copy of the auditor’s independence declaration as required under section matter or circumstance occurring since the end of the financial year that has 307C of the Corporations act 2001 is included on page 113. significantly affected or may significantly affect the operations of the Consolidated entity, the results of those operations or the state of affairs of the Consolidated entity in future financial years. Future developmentS Disclosure of information regarding likely developments in the operation of the Consolidated entity in future financial years and the expected results of those operations, other than information disclosed elsewhere in this report, is likely to result in unreasonable prejudice to the Consolidated entity. accordingly, this rounding oFF oF amountS apa Group is an entity of the kind referred to in aSIC Class order 98/0100 dated 10 July 1998, and in accordance with that Class order, amounts in the directors’ report and the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. Signed in accordance with a resolution of the directors of the Responsible entity made pursuant to section 298(2) of the Corporations act 2001. information has not been disclosed in this report. on behalf of the directors Leonard Bleasel am Chairman SYDneY, 24 august 2011 robert Wright Director other inFormation Details of directors and the Company Secretary are on pages 10 and 11. Further information on directorships, attendance at meetings, security holdings, remuneration, options granted and indemnification of officers and external auditors are found in the apt directors’ report, pages 12 to 20. inFormation required For regiStered SchemeS Fees paid to the Responsible entity and its associates (including directors and secretaries of the Responsible entity, related bodies corporate and directors and secretaries of related bodies corporate) out of apa scheme property during the year are disclosed in note 19 to the financial statements. except as disclosed in this report, neither the Responsible entity nor any of its associates holds any apa securities. the number of apa securities issued during the year, and the number of apa securities at the end of the year, are disclosed in note 10 to the financial statements. the value of apa’s assets as at the end of the year is disclosed in the balance sheet in total assets, and the basis of valuation is included in note 2 to the financial statements. 91 APA AnnuAl REPORT 2011apt InVeS tMe nt tR uS t a nD It S C ontRolleD e ntItIeS statement of comprehensive income For the financial year ended 30 June 2011 ContinuinG operations Revenue expenses profit before tax Income tax expense profit for the year other comprehensive income Gain on available-for-sale investments taken to equity other comprehensive income for the year (net of tax) note 4 4 ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 38,936 (12) 38,924 - 38,924 635 635 37,784 (10) 37,774 - 37,774 1,345 1,345 38,936 (12) 38,924 - 38,924 635 635 2010 $000 37,784 (10) 37,774 - 37,774 1,345 1,345 total comprehensive income for the year 39,559 39,119 39,559 39,119 profit attributable to: equityholders of the parent total comprehensive income attributable to: equityholders of the parent earninGs per seCuritY 38,924 38,924 37,774 37,774 38,924 38,924 37,774 37,774 39,559 39,119 39,559 39,119 Basic and diluted earnings per security (cents) 12 7.1 7.3 Diluted earnings per security is exactly the same as basic earnings per security. The above statement of comprehensive income should be read in conjunction with the accompanying notes. 92 APA AnnuAl REPORT 2011a pt InVeS tMent tR uS t anD It S C ontRolleD entItIeS statement of financial position as at 30 June 2011 Current assets Receivables non-Current assets Receivables other financial assets total non-current assets total assets Current LiaBiLities trade and other payables total liabilities net assets eQuitY Issued capital Reserves Retained earnings total equity ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 note 6 7 8 9 10 11 720 714 720 714 12,448 387,671 400,119 400,839 13,001 327,054 340,055 340,769 12,448 387,671 400,119 400,839 13,001 327,054 340,055 340,769 9 9 11 11 9 9 11 11 400,830 340,758 400,830 340,758 382,001 320,931 382,001 320,931 534 18,295 (101) 19,928 534 18,295 (101) 19,928 400,830 340,758 400,830 340,758 The above statement of financial position should be read in conjunction with the accompanying notes. 93 APA AnnuAl REPORT 2011apt InVeS tMe nt tR uS t a nD It S C ontRolleD e ntItIeS statement of changes in equity For the financial year ended 30 June 2011 Balance at 1 July 2009 profit for the year Valuation gain recognised total comprehensive income for the year Issue of capital (net of issue costs) equity values adjustment between stapled entities Distributions to securityholders Balance at 30 June 2010 Balance at 1 July 2010 profit for the year Valuation gain recognised total comprehensive income for the year Issue of capital (net of issue costs) Distributions to securityholders Balance at 30 June 2011 note 11 10 10 5 11 10 5 ISSueD CapItal $000 358,450 - - - 35,782 (9,868) (63,433) 320,931 320,931 - - - 81,547 (20,477) 382,001 ConsoLiDateD anD trust ReSeRVeS $000 (1,446) - 1,345 1,345 - - - (101) (101) - 635 635 - - RetaIneD eaRnInGS $000 10,810 37,774 - 37,774 - - (28,656) 19,928 19,928 38,924 - 38,924 - total $000 367,814 37,774 1,345 39,119 35,782 (9,868) (92,089) 340,758 340,758 38,924 635 39,559 81,547 (40,557) (61,034) 534 18,295 400,830 The above statement of changes in equity should be read in conjunction with the accompanying notes. 94 APA AnnuAl REPORT 2011a pt InVeS tMent tR uS t anD It S C ontRolleD entItIeS statement of cash flows For the financial year ended 30 June 2011 CasH FLoWs From operatinG aCtivities trust distribution - related party trust distribution - subsidiary Capital distribution received - external Dividends received Distribution and interest received - related parties Finance lease receivable repayments Receipts from customers payments to suppliers Interest paid ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 32,641 27,613 - 518 161 6,615 1,167 111 (12) - - 482 107 9,798 1,167 66 (21) - - 32,641 518 161 6,615 1,167 111 (12) - 2010 $000 - 27,613 482 107 9,798 1,167 66 (21) - net cash provided by operating activities 41,201 39,213 41,201 39,213 CasH FLoWs From investinG aCtivities Repayment received from/(advances to) related parties net cash provided by/(used in) investing activities CasH FLoWs From FinanCinG aCtivities proceeds from issue of securities equity values adjustment between stapled entities Distributions to securityholders net cash provided by/(used in) financing activities net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year The above statement of cash flows should be read in conjunction with the accompanying notes. (61,714) (61,714) 26,962 26,962 (61,714) (61,714) 26,962 26,962 81,548 - (61,034) 20,514 - - - 35,782 (9,868) (92,089) (66,175) - - - 81,548 - (61,034) 20,514 - - - 35,782 (9,868) (92,089) (66,175) - - - 95 APA AnnuAl REPORT 2011apt InVeS tMe nt tR uS t a nD It S C ontRolleD e ntItIeS notes to the financial statements For the financial year ended 30 June 2011 1. GeneraL inFormation Basis of preparation apt Investment trust (“aptIt” or “trust”) is one of the two stapled entities of the financial report has been prepared on the basis of historical cost, except for apa Group (“apa”), the other stapled entity being australian pipeline trust the revaluation of certain non-current assets and financial instruments. Cost is (“apt”), listed on the australian Securities exchange (trading under the symbol based on the fair values of the consideration given in exchange for assets. ‘apa’), registered in australia and operating in australia. the financial report is presented in australian dollars and all values are rounded aptIt’s registered office and its principal place of business are as follows: to the nearest thousand dollars ($000) unless otherwise stated under the registered office and principal place of business level 19, HSBC Building 580 George Street, SYDneY nSW 2000 tel: (02) 9693 0000. aptIt operates as an investment and financing entity within the apa stapled group. 2. siGniFiCant aCCountinG poLiCies statement of compliance the financial report is a general purpose financial report which has been option available to aptIt under aSIC Class order 98/0100. aptIt is an entity to which the class order applies. Critical accounting judgements and key sources of estimation uncertainty In the application of the Consolidated entity’s accounting policies, management is required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. the estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. actual results may differ from these estimates. prepared in accordance with the Corporations act 2001, accounting Standards the estimates and underlying assumptions are reviewed on an ongoing basis. and Interpretations, and complies with other requirements of the law. Revisions to accounting estimates are recognised in the period in which the the financial report includes the separate financial statements of the trust and the consolidated financial statements of the Consolidated entity. accounting Standards include australian equivalents to International Financial Reporting Standards (“a-IFRS”). Compliance with a-IFRS ensures that the financial estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Refer to note 3 for a discussion of critical judgements in applying the entity’s accounting policies, and key sources of estimation uncertainty. statements and notes of the trust and the Consolidated entity comply with adoption of new and revised accounting standards International Financial Reporting Standards (“IFRS”). In the current year, the Consolidated entity has adopted all of the new and the financial statements were authorised for issue by the directors on 24 august 2011. revised Standards and Interpretations issued by the australian accounting Standards Board (“aaSB”) that are relevant to its operations and effective for the current annual reporting period. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below: (i) Standards and Interpretations affecting amounts reported in the current period (and/or prior periods) the following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported in these financial statements. Details of other Standards and Interpretations adopted in these financial statements but that have had no effect on the amounts reported are set out in part (ii). Standards affecting presentation disclosure stanDarD impaCt – amendments to aaSB 107 ‘Statement of Cash Flows’ the amendments (part of aaSB 2009-5 ‘Further amendments to australian accounting Standards arising from the annual Improvements project’) specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows. (ii) Standards and Interpretations adopted with no effect on financial statements the following new and revised Standards have also been adopted in these financial statements. their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions and arrangements. stanDarD impaCt – aaSB 2009-5 ‘Further amendments to australian accounting Standards except for the amendments to aaSB 107 described above, the application of arising from the annual Improvements project’. aaSB 2009-5 has not had any material effect on amounts reported in the financial statements. 96 APA AnnuAl REPORT 20112. siGniFiCant aCCountinG poLiCies (ContinueD) (ii) Standards and Interpretations adopted with no effect on financial statements (continued) stanDarD impaCt – aaSB 2009-8 ‘amendments to australian accounting Standards Group aaSB 2009-8 makes amendments to aaSB 2 ‘Share-based payment’ to clarify the Cash-Settled Share-based payment transactions. scope of aaSB 2 and the accounting for group cash-settled share-based payment transactions in the separate financial statements of an entity receiving the goods or service when another group entity has the obligation to settle the award. – aaSB 2009-10 ‘amendments to australian accounting Standards aaSB 2009-10 makes amendments to aaSB 132 ‘Financial Instruments: Classification of Rights Issue’. presentation’ to address the classification of certain right issues denominated in foreign currency either as an equity instrument or as a financial liability. to date, there are no arrangements that would fall within the scope of the amendments. – aaSB 2010-3 ‘amendments to australian accounting Standards arising aaSB 2010-3 makes amendments to aaSB 3 (2008) Business Combinations’ to from the annual Improvements project’ clarify that the measurement choice regarding non-controlling interest at the date of acquisition is only available in respect of non-controlling interests that are present ownership interests and that entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. all other types of non- controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by other Standards. – aaSB 2010-4 ‘amendments to australian accounting Standards arising the application of aaSB 2010-4 has not had any material effect on amounts from the annual Improvements project’ reported in the financial statements. (iii) Standards and Interpretations issued not yet adopted at the date of authorisation of the financial report, the Standards and Interpretations listed below were in issue but not yet effective. stanDarD/interpretation eFFeCtive For annuaL reportinG perioDs BeGinninG on or aFter expeCteD to Be initiaLLY appLieD in tHe FinanCiaL Year enDinG – aaSB 124 ‘Related party Disclosures (revised December 2009)’ aaSB 1 January 2011 30 June 2012 2009-12 ‘amendments to australian accounting Standards’. – aaSB 9 ‘Financial Instruments’, aaSB 2009-11 ‘amendments to 1 January 2013 30 June 2014 australian accounting Standards arising from aaSB 9 and aaSB 2010-7 ‘amendments to australian accounting Standards arising from aaSB 9 (December 2010)’ – aaSB 2009-14 ‘amendments to australian Interpretation - prepayments 1 January 2011 30 June 2012 of minimum Funding Requirement – aaSB 2010-5 ‘amendments to australian accounting Standards’ – aaSB 2010-6 ‘amendments to australian accounting Standards - Disclosures on transfers of Financial assets’ 1 January 2011 1 July 2011 30 June 2012 30 June 2012 – aaSB 2010-8 ‘amendments to australian accounting Standards - 1 January 2012 30 June 2013 Deferred tax: Recovery of underlying assets’ – IFRS 10 Consolidated Financial Statements – IFRS 11 Joint arrangements – IFRS 12 Disclosure of Interest in other entities – IFRS 13 Fair Value measurement – IaS 27 Separate Financial statements – IaS 28 Investments in associates and Joint Ventures – IaS 19 employee Benefits 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 1 January 2013 30 June 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014 30 June 2014 the potential impact of the initial application of the above Standards and Interpretations has not yet been determined. 97 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20112. siGniFiCant aCCountinG poLiCies (ContinueD) (a) Basis of consolidation consideration classified as an asset or liability are accounted for in accordance the consolidated financial statements incorporate the financial statements of with relevant standards. Changes in the fair value of contingent consideration the trust and entities controlled by the trust (its subsidiaries) (referred to as classified as equity are not recognised. the Consolidated entity in these financial statements). Control is achieved where the trust has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. the results of subsidiaries acquired during the financial year are included in the statement of comprehensive income from the effective date of acquisition. Where necessary, adjustments are made to financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Consolidated entity. all intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial statements of the trust, the intra- group transactions (“common control transactions”) are generally accounted Where a business combination is achieved in stages, the consolidated entity’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date and the resulting gains or losses, if any, are recognised in profit or loss. amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under aaSB 3 are recognised at their fair value at the acquisition date, except that: for by reference to the existing (consolidated) book value of the items. Where – deferred tax assets or liabilities and liabilities or assets related to employee the transaction value of common control transactions differs from their benefit arrangements are recognised in accordance with aaSB 112 ‘Income consolidated book value, the difference is recognised as a contribution by or taxes’ and aaSB ‘119 employee Benefits’ respectively; distribution to equity participants by the transaction entities. Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Consolidated entity’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Consolidated entity except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. (b) Cash and cash equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known – liabilities or equity instruments related to the replacement by the Consolidated entity of an acquiree’s share-based payment awards are measured in accordance with aaSB 2 ‘Share-based payments’; and – assets (or disposal groups) that are classified as held for sale in accordance with aaSB 5 ‘non-current assets Held for Sale and Discontinued operations’ are measured in accordance with that standard. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Consolidated entity reports provisional amounts for the items for which the accounting is incomplete. those provisional amounts are adjusted for during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date, that, if known, would have affected the amounts recognised amounts of cash, which are subject to insignificant risk of changes in values. as at that date. (c) trade and other payables trade and other payables are recognised when the Consolidated entity becomes obliged to make future payments resulting from the purchase of the measurement period is the period from the date of acquisition to the date the Consolidated entity obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a goods and services. trade and other payables are stated at amortised cost. maximum of one year. (d) acquisition of assets (f) Financial instruments issued by the Consolidated entity assets acquired are recorded at the cost of acquisition, being the purchase Debt and equity instruments consideration determined as at the date of acquisition. Cost includes Debt and equity instruments are classified as either liabilities or equity in expenditure that is directly attributable to the acquisition or construction of the accordance with the substance of the contractual arrangement. an equity asset. In the event that settlement of all or part of the cash consideration given in the acquisition of an asset is deferred, the fair value of the purchase consideration is determined by discounting the amounts payable in the future to their present values as at the date of acquisition. (e) Business combinations acquisitions of subsidiaries and businesses are accounted for using the acquisition method. the consideration for each acquisition is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Consolidated entity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. equity instruments issued by the Consolidated entity are recorded at the proceeds received, net of direct issue costs. Transaction costs arising on the issue of equity instruments transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. in exchange for control of the acquiree. acquisition costs directly attributable Interest and distributions to the business combination are recognised in profit or loss as incurred. Interest and distributions are classified as expenses or as distributions of profit Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its consistent with the statement of financial position classification of the related debt or equity instruments or component parts of compound instruments. acquisition-date fair value. Subsequent changes in fair values are adjusted (g) Goods and services tax against the cost of acquisition where they qualify as measurement period Revenues, expenses and assets are recognised net of the amount of goods and adjustments. all other subsequent changes in the fair value of contingent services tax (“GSt”), except: 98 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20112. siGniFiCant aCCountinG poLiCies (ContinueD) (g) Goods and services tax (continued) – where the amount of GSt incurred is not recoverable from the taxation receivables’. trade and other receivables are stated at their amortised cost less authority, it is recognised as part of the cost of acquisition of an asset or as impairment. part of an item of expense; or – for receivables and payables which are recognised inclusive of GSt, except for accrued revenue and accrued expenses at balance dates which exclude GSt. Impairment of financial assets Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that the net amount of GSt recoverable from, or payable to, the taxation authority as a result of one or more events that occurred after initial recognition of the is included as part of receivables or payables. financial asset, the estimated future cash flows of the investment have been GSt receivable or GSt payable is only recognised once a tax invoice has been issued or received. impacted. (k) revenue recognition Cash flows are included in the statement of cash flows on a gross basis. the GSt component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. (h) impairment of assets assets are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. the recoverable amount is the higher of an asset’s fair value less costs to sell, and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets: (cash- Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated entity and the revenue can be reliably measured. amounts disclosed as revenue are net of duties and taxes paid. Revenue is recognised for the major business activities as follows: Interest revenue Interest is recognised by applying the effective interest method, agreed between the parties at the end of each month and is determined by reference to market rates. Distribution revenue Distribution revenue is recognised when the right to receive a distribution has been established. Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been generating units). assets other than goodwill that have previously suffered an established. impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (i) income tax Income tax expense is not brought to account in respect of aptIt as, pursuant to the australian taxation laws aptIt is not liable for income tax provided that its realised taxable income (including any assessable realised capital gains) is fully distributed to its securityholders each year. (j) Financial assets and liabilities Investments in subsidiaries are measured at cost. other financial assets are classified into the following specified categories: financial assets ‘held-to- maturity investments’, ‘available-for-sale’ financial assets, and ‘loans and receivables’. the classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Effective interest method Finance lease income Finance lease income is recognised when receivable. (l) Leased assets leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to the ownership of the leased asset to the lessee. all other leases are classified as operating leases. Consolidated Entity as lessor amounts due from a lessee under a finance lease are recorded as receivables. Finance lease receivables are initially recognised at the amount equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease receipts are allocated between interest revenue and reduction of the lease receivable over the term of the lease in order to reflect a constant periodic rate of return on the net investment outstanding in respect of the effective interest method is a method of calculating the amortised cost of the lease. a financial asset and of allocating interest income over the relevant period. the effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or where appropriate, a shorter period. Fair value through profit or loss (m) segment information aptIt operates in one geographical segment being australia and one business segment, being energy infrastructure investment and operation. aptIt is an investing and financing entity within the apa stapled group. as the trust only operates in one segment, it has not disclosed segment information Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. the net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the separately. financial asset. Available-for-sale financial assets Financial assets classified as being available-for-sale are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in the available-for-sale investment revaluation reserve. Receivables and loans trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and 99 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20113. CritiCaL aCCountinG JuDGements anD KeY sourCes oF estimation unCertaintY In the application of the Consolidated entity’s accounting policies, management entity to estimate the future cash flows expected to arise from cash-generating is required to make judgements, estimates and assumptions about the carrying units and suitable discount rates in order to calculate the present value of cash- values of assets and liabilities that are not readily apparent from other sources. generating units. the estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. actual results may differ from estimates. the estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the estimates and assumptions used are reviewed on an ongoing basis. Determining whether available-for-sale investments are impaired requires an assessment as to whether declines in value are significant or prolonged. Management has taken into account a number of qualitative and quantitative factors in making this assessment. any assessment of whether a decline in value represents an impairment would result in the transfer of the decrement revision and future periods if the revision affects both current and future from reserves to the statement of comprehensive income. periods. impairment of assets useful lives of non-current assets the Consolidated entity reviews the estimated useful lives of property, plant Determining whether property, plant and equipment, identifiable intangible and equipment at the end of each annual reporting period. any reassessment assets and goodwill are impaired requires an estimation of the value-in-use or of useful lives in a particular year will affect the depreciation or amortisation fair value of the cash-generating units. the calculations require the Consolidated expense. 4. proFit From operations profit before income tax includes the following items of income and expense: revenue Distributions trust distribution - related party trust distribution - subsidiary other entities FinanCe inCome Interest - related parties Gain/(loss) on financial asset held at fair value through profit and loss Finance lease income - related party otHer revenue other total revenue expenses audit fees legal fees total expenses ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 32,641 27,613 - 113 - 121 32,754 27,734 6,838 (1,398) 640 6,080 8,631 687 732 10,050 - 32,641 113 32,754 6,838 (1,398) 640 6,080 2010 $000 - 27,613 121 27,734 8,631 687 732 10,050 102 38,936 - 37,784 102 38,936 - 37,784 (12) - (12) (10) - (10) (12) - (12) (10) - (10) 100 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 20115. DistriButions reCoGniseD amounts Final distribution paid on 15 september 2010 (2010: 15 September 2009) profit distribution (a) Capital distribution semi-annual distribution paid on 17 march 2011 (2010: 17 March 2010) profit distribution (a) Capital distribution unreCoGniseD amounts Final distribution payable on 15 september 2011 (b) (2010: 15 September 2010) profit distribution (a) Capital distribution (a) profit distributions unfranked (2010: unfranked) (b) Record date 30 June 2011 ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 19,928 16,350 36,278 20,629 4,127 24,756 10,809 55,293 66,102 17,847 8,140 25,987 19,928 16,350 36,278 20,629 4,127 24,756 10,809 55,293 66,102 17,847 8,140 25,987 18,951 14,793 33,744 19,928 16,350 36,278 18,951 14,793 33,744 19,928 16,350 36,278 the final distribution in respect of the financial year has not been recognised in this financial report because the final distribution was not declared, determined or publicly confirmed prior to the end of the financial year. 6. Current reCeivaBLes other debtors Finance lease receivable - related party (note 14) 167 553 720 187 527 714 167 553 720 187 527 714 In determining the recoverability of a receivable, the Consolidated entity considers any change in the credit quality of the receivable from the date the credit was initially granted up to the reporting date. the directors believe that there is no credit provision required. none of the above receivables is past due. 7. non-Current reCeivaBLes Finance lease receivable - related party (note 14) 12,448 13,001 12,448 13,001 101 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 20118. non-Current otHer FinanCiaL assets Receivable from subsidiary advance to related party Investments carried at cost: Investment in subsidiary Investment in related party (a) Financial assets carried at fair value: Redeemable ordinary shares (b) available-for-sale investments carried at fair value (c) ConsoLiDateD 2011 $000 - 2010 $000 - 244,429 182,725 trust 2011 $000 81,541 121,079 2010 $000 65,258 75,659 - 107,379 351,808 32,761 3,102 387,671 - 149,188 149,188 107,380 290,105 33,936 3,013 327,054 - - 351,808 290,105 32,761 3,102 387,671 33,936 3,013 327,054 (a) the investment in related party reflects Gasnet australia Investments trust’s (“GaIt”) investment in 100% of the B Class units in Gasnet a trust. the B Class units give GaIt rights to the income and capital of Gasnet a trust, but hold no voting rights. as such, GaIt neither controls nor has a significant influence over Gasnet a trust. Gasnet australia trust, a related party wholly owned by apa, owns 100% of the a Class units in Gasnet a trust and, accordingly, Gasnet a trust is included in the consolidation of the apa entities (b) Financial assets carried at fair value relate to apa Group’s 19.9% investment in energy Infrastructure Investments pty ltd where apl, as Responsible entity for aptIt, acquired the redeemable ordinary shares (c) available-for-sale investments reflect a 6% unitholding in ethane pipeline Income Fund. ethane pipeline Income Fund paid capital distributions of $406,000 during the year and declared a $140,000 capital distribution as part of its June 2011 quarter distribution 9. traDe anD otHer paYaBLes other payables 10. issueD CapitaL 9 11 9 11 634,116,029 securities, fully paid (2010: 542,318,629 securities, fully paid) (a) 382,001 320,931 382,001 320,931 ConsoLiDateD anD trust 2011 no. oF seCurities 000 2011 $000 2010 no. oF SeCuRItIeS 000 2010 $000 movements Balance at beginning of financial year Issue of securities under Distribution Reinvestment plan Issue of securities under Security purchase plan 542,319 13,875 - 320,931 12,590 - Issue of securities under Institutional placement 77,922 69,872 equity values adjustment between stapled entities Issue cost of securities Capital distributions paid (note 5) Balance at end of financial year - - - 634,116 - (915) (20,477) 382,001 (a) Fully paid securities carry one vote per security and carry the right to distributions 498,664 358,450 18,377 25,278 - - - - 542,319 15,134 20,723 - (9,868) (75) (63,433) 320,931 Changes to the then Corporations law abolished the authorised capital and par value concept in relation to issued capital from 1 July 1998. therefore, the trust does not have a limited amount of authorised capital and issued securities do not have a par value. 102 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 11. reserves available-for-sale investment revaluation reserve Balance at beginning of financial year Valuation gain recognised Balance at end of financial year ConsoLiDateD 2011 $000 (101) 635 534 2010 $000 (1,446) 1,345 (101) trust 2011 $000 (101) 635 534 2010 $000 (1,446) 1,345 (101) the available-for-sale investment revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset and is effectively realised, is recognised in profit or loss. Where a revalued financial asset is impaired, that portion of the reserve which relates to that financial asset is recognised in profit or loss. 12. earninGs per seCuritY Basic and diluted earnings per security (cents) ConsoLiDateD 2011 7.1 2010 7.3 the earnings and weighted average number of ordinary securities used in the calculation of basic and diluted earnings per security are as follows: net profit attributable to securityholders for calculating basic and diluted earnings per security ($000) 38,924 37,774 no. oF seCurities 2011 2010 Weighted average number of ordinary securities on issue used in the calculation (000) 551,222 516,243 13. remuneration oF externaL auDitor amounts received or due and receivable by Deloitte touche tohmatsu for: ConsoLiDateD 2011 $ 2010 $ trust 2011 $ 2010 $ auditing the financial report 11,555 10,125 11,555 10,125 103 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 14. Leases FinanCe Leases Leasing arrangements - receivables Finance lease receivables relate to the lease of a pipeline lateral. there are no contingent rental payments due. Finance lease receivables not longer than 1 year longer than 1 year and not longer than 5 years longer than 5 years Minimum future lease payments receivable (a) Gross finance lease receivables less: unearned finance lease receivables present value of lease receivables Included in the financial statements as part of: Current receivables (note 6) non-current receivables (note 7) ConsoLiDateD 2011 $000 2010 $000 trust 2011 $000 2010 $000 1,167 4,669 12,840 18,676 18,676 (5,675) 13,001 553 12,448 13,001 1,167 4,669 14,007 19,843 19,843 (6,315) 13,528 527 13,001 13,528 1,167 4,669 12,840 18,676 18,676 (5,675) 13,001 553 12,448 13,001 1,167 4,669 14,007 19,843 19,843 (6,315) 13,528 527 13,001 13,528 (a) Minimum future lease payments receivable include the aggregate of all lease payments receivable and any guaranteed residual 15. FinanCiaL instruments (a) Financial risk management objectives (c) Credit risk management apa’s Corporate treasury function provides services to the business, co- Credit risk refers to the risk that a counterparty will default on its contractual ordinates access to domestic and international financial markets, and monitors obligations resulting in financial loss to the Consolidated entity. the and manages the financial risks relating to the operations of the Consolidated Consolidated entity has adopted the policy of only dealing with creditworthy entity. these risks include liquidity risk, credit risk and market risk (including counterparties and obtaining sufficient collateral or bank guarantees where currency risk, price risk and interest rate risk). appropriate as a means of mitigating the risk of any loss. the carrying amount the Consolidated entity seeks to minimise the effects of these risks through natural hedges and by using derivative instruments to directly hedge the exposures. the use of financial derivatives is governed by apa Group’s treasury of financial assets recorded in the statement of financial position, net of any allowances, represents the Consolidated entity’s maximum exposure to credit risk in relation to those assets. policy approved by the board of directors, which provides written principles on (d) market risk management foreign exchange risk, interest rate risk, credit risk, the use of financial the Consolidated entity’s activities exposure is primarily to the financial risk of derivatives and non-derivative financial instruments, and the investment of changes in interest rates. there has been no change to the Consolidated entity’s excess liquidity. aptIt does not enter into or trade financial instruments, exposure to market risk or the manner in which it manages and measures the including derivative financial instruments for speculative purposes. risk from the previous period. the Consolidated entity is also exposed to price the Corporate treasury function reports at least six monthly to apa Group’s audit and Risk Management Committee, an independent body that monitors risk from its investments in listed equities. the majority of the shareholdings rest with one company that is publicly traded in the major financial markets. risks and policies implemented to mitigate risk exposures. (e) Fair values of financial instruments (b) Liquidity risk management the Consolidated entity has a policy dealing with liquidity risk which requires an appropriate liquidity risk management framework for the management of the Consolidated entity’s short, medium and long-term funding and liquidity Fair value measurements recognised in the statement of financial position the following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable. management requirements. liquidity risk is managed by maintaining adequate – level 1 fair value measurements are those derived from quoted prices cash reserves and banking facilities, by monitoring and forecasting cash flow (unadjusted) in active markets for identical assets or liabilities. and where possible arranging liabilities with longer maturities to more closely – level 2 fair value measurements are those derived from inputs other than match the underlying assets and revenue streams of the Consolidated entity. quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). – level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or that are not based on observable market data (unobservable inputs). 104 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201115. FinanCiaL instruments (ContinueD) (e) Fair values of financial instruments (continued) ConsoLiDateD anD trust Financial assets measured at fair value available-for-sale listed equity securities ethane pipeline Income Fund unlisted Redeemable ordinary Shares energy Infrastructure Investments pty limited total Reconciliation of Level 3 fair value measurements of financial assets opening balance total gains or losses: – – in profit or loss: Interest - related parties in profit or loss: loss on financial asset held at fair value through profit and loss Distributions Closing balance Level 1 $000 3,102 - 3,102 2011 Level 2 $000 Level 3 $000 total $000 - - - - 3,102 32,761 32,761 32,761 35,863 Fair vaLue tHrouGH proFit or Loss 2011 $000 2010 $000 33,936 34,415 3,500 (1,398) (3,277) 32,761 3,875 687 (5,042) 33,936 Significant assumptions used in determining fair value of financial assets and liabilities Redeemable ordinary shares – the risk free rate of return is 5.33% per annum and is based upon an the financial statements include redeemable ordinary shares (“RoS”) held in interpolation of the five and ten year Government bond rates at the an unlisted entity which are measured at fair value (note 8). the fair market valuation date; and value of the RoS is derived from a binomial tree model, which includes some assumptions that are not able to be supported by observable market prices or rates. the model maps different possible valuation paths of three distinct components: – value of the debt component; – value of the RoS discretionary dividends; and – value of the option to convert to ordinary shares. In determining the fair value, the following assumptions were used: – the volatility of the ordinary shares (beta) is estimated from obtaining the average industry beta of peers and then imputing the volatility relative to market. (f) interest rate sensitivity analysis the sensitivity analysis below has been determined based on the exposure to interest rates on loans with related parties. a 10% increase or decrease is used and represents management’s assessment of the possible change in interest rates. at reporting date, if interest rates had been 10% higher or lower and all – the risk adjusted rate for the RoS is estimated as the required rate of return other variables were held constant, the Consolidated entity’s net profit would based on projected cash flows to equity at issuance assuming the RoS price decrease by $345,000 or increase by $345,000 (2010: $466,000). this is at issuance ($0.99) and the ordinary price at issuance ($0.01) are at their mainly attributable to the Consolidated entity’s exposure to interest rates on its fair value; variable rate inter-entity balances. 105 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 16. suBsiDiaries name oF entitY parent entity apt Investment trust Controlled entity Country of registration oWnersHip interest 2011 % 2010 % Gasnet australia Investments trust australia 100 100 17. DireCtor Compensation (a) Details of directors the Directors of the apa group of entities during the financial year were: L F Bleasel AM (Independent, non-executive Chairman) S Crane (Independent non-executive Director, appointed on 1 January 2011) J A Fletcher (Independent non-executive Director) R A Higgins AO (Independent non-executive Director) P M McKenzie (Independent non-executive Director, appointed on 1 January 2011) M Muhammad (non-executive Director) M (George) Ratilal (non-executive Director, retired effective 26 august 2010) R J Wright (Independent non-executive Director) M J McCormack (Managing Director/Chief executive officer) (b) Director compensation the aggregate compensation made to directors of the Consolidated entity and the trust is set out below: Short-term employment benefits post-employment benefits Cash settled share-based payments Retention award ConsoLiDateD anD trust 2011 $ 2010 $ 2,409,250 2,174,099 149,194 773,281 - 91,963 574,166 18,056 3,331,725 2,858,284 106 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 17. DireCtor Compensation (ContinueD) (b) Director compensation (continued) the compensation of each director of the Consolidated entity is set out below. sHort-term empLoYment BeneFits post- empLoYment LonG-term inCentive pLans SalaRY/FeeS $ SHoRt-teRM InCentIVe SCHeMe $ SupeRannuatIon $ SHaRe-BaSeD paYMentS(a) $ otHeR(b) $ total $ 20,750 16,981 5,209 - 42,335 25,787 13,077 12,320 5,108 - - - - - 12,715 11,875 99,194 66,963 50,000 25,000 149,194 91,963 - - - - - - - - - - - - - - - - - - 773,281 574,166 773,281 574,166 - - - - - - - - - - - - - - - - - - - 18,056 293,250 271,300 63,084 - 149,335 135,937 158,452 149,320 61,858 - 121,500 113,000 16,000 93,000 153,965 143,875 1,017,444 906,432 2,314,281 1,951,852 - 3,331,725 18,056 2,858,284 - - - - - - - - - - - - - - - - - - non-exeCutive DireCtors l F Bleasel aM 2011 2010 S Crane (c) 2011 2010 J a Fletcher 2011 2010 R a Higgins ao 2011 2010 p M McKenzie (d) 2011 2010 M Muhammad 2011 2010 M (George) Ratilal (e) 2011 2010 R J Wright 2011 2010 272,500 254,319 57,875 - 107,000 110,150 145,375 137,000 56,750 - 121,500 113,000 16,000 93,000 141,250 132,000 totaL remuneration: non-exeCutive DireCtors 918,250 839,469 2011 2010 exeCutive DireCtor M J McCormack 2011 2010 totaL remuneration: DireCtors 2011 2010 (a) Cash settled share-based payments (b) Includes retention payment (c) appointed on 1 January 2011 (d) appointed on 1 January 2011 (e) Directors fees paid to petronas australia pty ltd, retired 26 august 2010 107 870,000 796,500 621,000 538,130 1,788,250 1,635,969 621,000 538,130 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201118. KeY manaGement personneL Compensation (a) Details of key management personnel the members of key management personnel of the apa group of entities during the financial year were: M J McCormack (Managing Director/Chief executive officer) P J Fredricson (Chief Financial officer) R M Gersbach (Group Manager Commercial) S P Ohl (Group Manager operations) M T Knapman (Company Secretary) P J Wallace (Group Manager Human Resources, appointed 4 april 2011) (b) Key management personnel compensation the aggregate compensation made to key management personnel of the Consolidated entity and the trust is set out below: Short-term employment benefits post-employment benefits Cash settled share-based payments Retention award the executive remuneration strategy is to: ConsoLiDateD anD trust 2011 $ 4,449,055 181,691 1,688,799 - 6,319,545 2010 $ 3,886,759 119,208 1,157,664 18,056 5,181,687 – attract and retain key executives who will create long-term sustainable apa’s remuneration mix is structured as a mix of base pay and ‘at risk’ short value for securityholders; and long-term incentive components. – motivate and reward executives having regard to the overall performance of apa, the performance of the executives measured against pre-determined objectives and the external compensation environment; – appropriately align the interests of executives with those of securityholders; total fixed remuneration is reviewed annually and is determined by reference to appropriate remuneration benchmarking information, taking into account an individual’s responsibilities, performance, qualifications and experience. and operating cash flow per security has been chosen by the board as the key – comply with applicable legal requirements and appropriate standards of performance measure for ‘at risk’ remuneration. this is directly linked to the governance. strategic goal of increasing operating cash flows over the medium term, thereby improving returns to securityholders. 108 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 201118. KeY manaGement personneL Compensation (ContinueD) (b) Key management personnel compensation (continued) the compensation of each member of the key management personnel of the Consolidated entity is set out below. sHort-term empLoYment BeneFits post- empLoYment LonG-term inCentive pLans SalaRY/FeeS $ SHoRt-teRM InCentIVe SCHeMe $ non- MonetaRY $ SupeRannuatIon $ SHaRe-BaSeD paYMentS(a) $ otHeR paYMentS $ total $ KeY manaGement personneL M J McCormack (b) 2011 2010 p J Fredricson 2011 2010 R M Gersbach 2011 2010 S p ohl 2011 2010 M t Knapman 2011 2010 p J Wallace (c) 2011 2010 870,000 621,000 796,500 538,130 554,801 485,539 270,750 228,125 622,879 308,750 543,617 260,062 376,069 372,214 350,000 319,176 201,375 181,562 130,706 121,180 67,715 34,356 - - - - - - 11,922 11,922 28,732 28,732 - - - - 50,000 25,000 15,199 14,461 15,199 14,461 45,199 14,461 50,000 50,825 773,281 574,166 165,780 75,000 343,688 229,323 253,636 187,754 141,560 91,421 6,094 10,854 - - totaL remuneration 2011 2010 2,841,464 1,566,937 2,517,046 1,329,059 40,654 40,654 181,691 119,208 1,688,799 1,157,664 (a) Cash settled share-based payments (b) Chief executive officer has also been included in note 17 as the Managing Director (c) Group Manager Human Resources, appointed 4 april 2011 - 2,314,281 18,056 1,951,852 - - - - - - - - - - - 1,006,530 803,125 1,302,438 1,059,385 905,011 784,723 672,266 582,602 119,019 - 6,319,545 18,056 5,181,687 109 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 201119. reLateD partY transaCtions (a) responsible entity – australian pipeline Limited the Responsible entity is wholly owned by apt pipelines limited (2010: 100% owned by apt pipelines limited). (b) equity interest in related parties Details of the percentage of ordinary securities held in subsidiaries are disclosed in note 16. (c) transactions with key management personnel Details of directors and key management personnel compensation are disclosed in note 17 and 18 respectively. (i) Loans to key management personnel no loans have been made to key management personnel. (ii) Key management personnel equity holdings in APTIT FullY paID SeCuRItIeS openInG BalanCe SeCuRItIeS aCQuIReD DuRInG tHe FInanCIal YeaR SeCuRItIeS DISpoSeD DuRInG tHe FInanCIal YeaR FullY paID SeCuRItIeS CloSInG BalanCe 2011 l F Bleasel aM S Crane J a Fletcher R a Higgins ao p M McKenzie M Muhammad M (George) Ratilal R J Wright M J McCormack p J Fredricson R M Gersbach S p ohl M t Knapman p J Wallace (appointed 4 april 2011) 2010 l F Bleasel aM J a Fletcher R a Higgins ao M Muhammad M (George) Ratilal R J Wright M J McCormack p J Fredricson R M Gersbach S p ohl M t Knapman 359,771 100,000 56,807 72,954 - 42,818 - 31,265 147,005 3,000 24,569 14,896 4,484 - 335,153 44,917 52,021 42,818 - 24,263 115,000 - 22,232 11,928 3,000 15,634 - 3,219 6,549 - - - 2,806 23,614 269 1,525 - - - 24,618 11,890 20,933 - - 7,002 32,005 3,000 2,337 2,968 1,484 - - - - - - - - - - 16,298 - - - - - - - - - - - - - - 375,405 100,000 60,026 79,503 - 42,818 - 34,071 170,619 3,269 9,796 14,896 4,484 - 359,771 56,807 72,954 42,818 - 31,265 147,005 3,000 24,569 14,896 4,484 110 APT invesTmenT TrusT And iTs conTrolled enTiTiesNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011 APA AnnuAl REPORT 2011 19. reLateD partY transaCtions (ContinueD) (d) transaction with related parties within the Consolidated entity – non-current receivables totalling $12,448,336 are owing from a subsidiary During the financial year, the following transactions occurred between the trust of apt for amounts due under a finance lease arrangement (2010: and its other related parties: $13,001,830); and – loans advanced and payments received on long-term inter-entity loans; and – non-current receivables totalling $244,428,764 (2010: $187,725,785) are – payments of distributions. owing from subsidiaries of apt. all transactions between the entities that comprise the Consolidated entity Australian Pipeline Limited have been eliminated on consolidation. Refer to note 16 for details of the entities that comprise the Consolidated entity. (e) transactions with other related parties aptIt and its controlled entity have a number of loan receivable balances with Management fees of $536,021 (2010: $642,332) were paid to the Responsible entity as reimbursement of costs incurred on behalf of aptIt. no amounts were paid directly by aptIt to the Directors of the Responsible entity. Australian Pipeline Trust Management fees of $536,021 (2010: $642,332) were reimbursed by apt. other entities in apa. these loans have various terms; however, they can be 20. ContinGent LiaBiLities anD ContinGent assets repayable on agreement of the parties. Interest is recognised by applying the at 30 June 2011, there are no material contingent liabilities or contingent assets effective interest method, agreed between the parties at the end of each (2010: $nil). month and is determined by reference to market rates. 21. suBseQuent events the following balances arising from transactions between the trust and its other related parties are outstanding at reporting date: on 24 august 2011, the Directors declared a final distribution for the 2011 financial year, of 6.07 cents per security ($33.7 million). the distribution represents a – current receivables totalling $552,828 are owing from a subsidiary of apt 3.41 cents per security unfranked profit distribution and 2.66 cents per security for amounts due under a finance lease arrangement (2010: $526,869); capital distribution. the distribution will be paid on 15 September 2011. 111 APA AnnuAl REPORT 2011APT invEsTmEnT TRusT And iTs cOnTROllEd EnTiTiEsNotes to the fiNaNcial statemeNts coNtiNuedFor the financial year ended 30 June 2011apt InVeS tMe nt tR uS t a nD It S C ontRolleD e ntItIeS Declaration by the Directors For the financial year ended 30 June 2011 the Directors declare that: (a) in the Directors’ opinion, there are reasonable grounds to believe that apt Investment trust will be able to pay its debts as and when they become due and payable; (b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations act 2001, including compliance with accounting Standards and giving a true and fair view of the financial position and performance of apt Investment trust and the Consolidated entity; (c) in the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards as stated in note 2 to the financial statements; and (d) the Directors have been given the declarations by the Managing Director and Chief Financial officer required by section 295a of the Corporations act 2001. Signed in accordance with a resolution of the Directors of the Responsible entity made pursuant to section 295(5) of the Corporations act 2001. on behalf of the directors Leonard Bleasel am Chairman SYDneY, 24 august 2011 robert Wright Director 112 APA AnnuAl REPORT 2011 a pt InVeS tMent tR uS t anD It S C ontRolleD entItIeS auDitor’s inDepenDence Declaration For the financial year ended 30 June 2011 Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1220 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au The Directors Australian Pipeline Limited as responsible entity for APT Investment Trust HSBC Building Level 19, 580 George Street Sydney NSW 2000 24 August 2011 Dear Directors Auditors Independence Declaration to Australian Pipeline Limited as responsible entity for APT Investment Trust In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Australian Pipeline Limited as responsible entity for APT Investment Trust. As lead audit partner for the audit of the financial statements of APT Investment Trust for the financial year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU G Couttas Partner Chartered Accountants Member of Deloitte Touche Tohmatsu Limited Liability limited by a scheme approved under Professional Standards Legislation. 113 APA AnnuAl REPORT 2011apt InVeS tMe nt tR uS t a nD It S C ontRolleD e ntItIeS inDepenDent auDitor’s report For the financial year ended 30 June 2011 Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 PO Box N250 Grosvenor Place Sydney NSW 1219 Australia DX 10307SSE Tel: +61 (0) 2 9322 7000 Fax: +61 (0) 2 9322 7001 www.deloitte.com.au Independent Auditor’s Report to the Unitholders of APT Investment Trust We have audited the accompanying financial report of APT Investment Trust, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the Trust and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 92 to 112. Directors’ Responsibility for the Financial Report The directors of Australian Pipeline Limited are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the entity’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 114 APA AnnuAl REPORT 2011 a pt InVeS tMent tR uS t anD It S C ontRolleD entItIeS inDepenDent auDitor’s report continueD For the financial year ended 30 June 2011 Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Australian Pipeline Limited as responsible entity for APT Investment Trust would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of APT Investment Trust is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Trust’s and consolidated entity’s financial position as at 30 June 2011 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 2. DELOITTE TOUCHE TOHMATSU G Couttas Partner Chartered Accountants Sydney, 24 August 2011 115 APA AnnuAl REPORT 2011aDDitional information additional information required by the aSX listing Rules and not provided elsewhere in this report (the information is applicable as at 1 September 2011). tWentY LarGest HoLDers petronas australia pty ltd national nominees limited HSBC Custody nominees (australia) limited J p Morgan nominees australia limited Citicorp nominees pty limited Custodial Services limited RBC Dexia Investor Services australia nominees pty limited aMp life limited argo Investments limited Queensland Investment Corporation J p Morgan nominees australia limited Questor Financial Services limited Cogent nominees pty limited Cogent nominees pty limited M F Custodians ltd Marich nominees no 2 pty ltd Citicorp nominees pty limited RBC Dexia Investor Services australia nominees pty limited Sandhurst trustees ltd BKI Investment Company limited total For top 20 DistriBution oF HoLDers ranGes 1 – 1,000 1,001 - 5,000 5,001 – 10,000 10,001 - 100,000 100,001 and over total no. oF seCurities 111,292,297 38,483,561 33,909,575 33,496,841 13,208,654 12,758,808 6,296,152 5,786,630 5,350,000 4,700,085 3,989,312 1,918,135 1,823,757 1,602,699 1,558,322 1,494,670 1,329,586 1,261,333 1,139,967 1,024,452 % 17.55 6.07 5.35 5.28 2.08 2.01 0.99 0.91 0.84 0.74 0.63 0.30 0.29 0.25 0.25 0.24 0.21 0.20 0.18 0.16 282,424,836 44.54 no. oF HoLDers % no. oF seCurities 28,992 27,250 11,218 8,289 146 75,895 38.20 35.90 14.78 10.92 0.19 10,603,859 72,775,259 81,034,982 158,773,263 310,928,666 % 1.67 11.48 12.78 25.04 49.03 100.00 634,116,029 100.00 3,016 holders hold less than a marketable parcel of securities (market value less than $500 or 123 securities based on a market price on 1 September 2011 of $4.07). suBstantiaL HoLDers By notice dated 22 august 2007, petronas australia pty limited advised that it had an interest in 72,102,351 ordinary securities. votinG riGHts on a show of hands, each holder has one vote. on a poll, each holder has one vote for each dollar of the value of the total interests they have in the scheme. on-marKet BuY-BaCK there is no current on-market buy-back. 116 APA AnnuAl REPORT 2011DistriBution paYments Distributions will be paid semi-annually in March and September. Securityholders will receive annual tax statements with the final distribution in September. Direct payment can be made to an australian bank, building society or credit union account. If you would like to arrange direct payment, please contact the apa Group registry. onLine annuaL revieW, annuaL report anD sustainaBiLitY report apa Group’s 2011 annual Review, annual Report and Sustainability Report are available at www.apa.com.au. onLine inFormation Further information on apa is available at www.apa.com.au, including: • Company history, results, market releases and news • Asset and business information • Corporate responsibility and sustainability reporting • Securityholder information such as the current APA security price, distribution and tax information. eLeCtroniC CommuniCation Securityholders can elect to receive communication from apa electronically by registering their email address with the apa Group registry. electing to receive the report electronically will reduce the adverse impact we have on the environment. aDDitional information continueD CaLenDar oF events Final distribution FY2011 record date Final distribution FY2011 payment date annual meeting Interim result announcement Interim distribution FY2012 record date Interim distribution FY2012 payment date *Subject to change 30 June 2011 15 September 2011 27 october 2011 23 February 2012* 31 December 2011* 16 March 2012* annuaL meetinG DetaiLs Date: 27 october 2011 venue: state room, Level 2, Hilton Hotel sydney 488 George street, sydney nsW time: 10.30am registration commences at 10.00am asx ListinG an apa Group security comprises a unit in australian pipeline trust and a unit in apt Investment trust. these units are stapled together to form an apa Group stapled security which is listed on the aSX (aSX Code: apa). australian pipeline limited is the Responsible entity of those trusts. apa Group responsiBLe entitY anD reGistereD oFFiCe australian pipeline limited aCn 091 344 704 level 19, 580 George Street, Sydney nSW 2000 po Box R41, Royal exchange nSW 1225 telephone: +61 2 9693 0000 Facsimile: +61 2 9693 0093 Website: www.apa.com.au seCuritYHoLDer DetaiLs It is important that securityholders notify the registry immediately if there is a change to their address or banking arrangements. Securityholders with enquiries should also contact the apa Group registry. apa Group reGistrY link Market Services limited level 12, 680 George Street, Sydney nSW 200 locked Bag a14, Sydney South nSW 1235 toll Free: 1800 992 312 telephone: +61 2 8280 7132 Facsimile: +61 2 9287 0303 email: apagroup@linkmarketservices.com.au Website: www.linkmarketservices.com.au DisCLaimer australian pipeline limited (aCn 091 344 704) is the responsible entity of australian pipeline trust (aRSn 091 678 778) and apt Investment trust (aRSn 115 585 441) (apa Group). please note that australian pipeline limited is not licensed to provide financial product advice in relation to securities in the apa Group. this publication does not constitute financial product advice and has been prepared without taking into account your objectives, financial situation or particular needs. Before relying on any statements contained in this publication, you should consider the appropriateness of the information, having regard to your own objectives, financial situations and needs and consult an investment adviser if necessary. Whilst due care and attention have been used in preparing this publication, certain forward looking statements (including forecasts or projections) are made in this publication which are not based on historical fact and necessarily involve assumptions as to future events and analysis, which may or may not be correct. these forward looking statements should not be relied upon as an indication or guarantee of future performance. 117 APA AnnuAl REPORT 2011WWW.apa.com.au 

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